| Income Taxes |
INCOME TAXES
Our effective tax rate reflects the benefits of having significant operations outside the United States, which are generally taxed at rates lower than the U.S. statutory rate of 35 percent. As a result of employment actions and capital investments made by the Company, certain tax jurisdictions provide income tax incentive grants, including Brazil, Costa Rica, Singapore and Swaziland. The terms of these grants expire from 2016 to 2023. We anticipate that we will be able to extend or renew the grants in these locations. In addition, our effective tax rate reflects the benefits of having significant earnings generated in investments accounted for under the equity method of accounting, which are generally taxed at rates lower than the U.S. statutory rate.
At the end of each interim period, we make our best estimate of the effective tax rate expected to be applicable for the full fiscal year. This estimate reflects, among other items, our best estimate of operating results and foreign currency exchange rates. Based on current tax laws, the Company's estimated effective tax rate for 2015 is 22.5 percent. However, in arriving at this estimate we do not include the estimated impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax expense and income before income taxes.
The Company recorded income tax expense of $1,250 million (28.7 percent effective tax rate) and $779 million (23.0 percent effective tax rate) during the three months ended July 3, 2015 and June 27, 2014, respectively. The Company recorded income tax expense of $1,665 million (26.3 percent effective tax rate) and $1,358 million (24.3 percent effective tax rate) during the six months ended July 3, 2015 and June 27, 2014, respectively.
The following table illustrates the tax expense (benefit) associated with unusual and/or infrequent items for the interim periods presented (in millions):
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Three Months Ended |
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Six Months Ended |
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July 3,
2015 |
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June 27,
2014 |
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July 3,
2015 |
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June 27,
2014 |
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Productivity and reinvestment program |
$ |
(33 |
) |
1 |
$ |
(34 |
) |
8 |
$ |
(75 |
) |
1 |
$ |
(66 |
) |
8 |
Other productivity, integration and restructuring initiatives |
— |
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2 |
— |
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9 |
— |
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2 |
— |
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9 |
Transaction gains and losses |
474 |
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3 |
(51 |
) |
10 |
464 |
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4 |
(51 |
) |
10 |
Certain tax matters |
16 |
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5 |
26 |
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11 |
— |
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5 |
31 |
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11 |
Other — net |
(38 |
) |
6 |
3 |
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12 |
(168 |
) |
7 |
8 |
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13 |
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1 |
Related to charges of $92 million and $182 million during the three and six months ended July 3, 2015, respectively. These charges were due to the Company's productivity and reinvestment program. Refer to Note 10 and Note 11.
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2 |
Related to charges of $94 million and $129 million during the three and six months ended July 3, 2015, respectively. These charges were due to the integration of our German bottling and distribution operations. Refer to Note 10 and Note 11.
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3 |
Related to a net gain of $1,007 million that primarily consisted of a $1,402 million net gain related to the Monster Transaction, partially offset by a $380 million charge due to the impairment of certain trademark assets and $12 million of charges due to the refranchising of certain territories in North America. Refer to Note 2 and Note 10.
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4 |
Related to a net gain of $961 million that primarily consisted of a $1,402 million net gain related to the Monster Transaction, partially offset by a $380 million charge due to the impairment of certain trademark assets, $33 million of charges due to the refranchising of certain territories in North America, a $6 million additional charge related to the sale of a portion of our equity investment in a Brazilian bottling entity, and a $19 million charge related to the remeasurement of our equity interest in a South African bottler to fair value. Refer to Note 2 and Note 10.
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5 |
Primarily related to the settlement of certain prior year audit matters and amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. The components of the net change in uncertain tax positions were individually insignificant. |
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6 |
Related to charges of $110 million that primarily included a $100 million cash donation to The Coca-Cola Foundation and a $9 million charge due to our proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 10.
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7 |
Related to charges of $638 million that primarily consisted of a $100 million cash donation to The Coca-Cola Foundation, $320 million associated with the early extinguishment of long-term debt, $27 million due to the remeasurement of the net monetary assets of our Venezeulan subsidiary into U.S. dollars using the SIMADI exchange rate, $108 million due to the write-down we recorded related to receivables from our bottling partner in Venezuela and an impairment of a Venezuelan trademark, and $82 million due to our proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 1, Note 6 and Note 10.
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8 |
Related to charges of $89 million and $175 million during the three and six months ended June 27, 2014, respectively. These charges were due to the Company's productivity and reinvestment program. Refer to Note 10 and Note 11.
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9 |
Related to charges of $66 million and $108 million during the three and six months ended June 27, 2014, respectively. These charges were due to the integration of our German bottling and distribution operations. Refer to Note 10 and Note 11.
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10 |
Related to a charge of $140 million during the three and six months ended June 27, 2014, which was primarily due to the refranchising of certain North America territories. Refer to Note 2.
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11 |
Related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties. The components of the net change in uncertain tax positions were individually insignificant. |
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12 |
Related to charges of $52 million that consisted of $21 million due to a write-down of receivables from our bottling partner in Venezuela, $25 million due to the restructuring and transition of the Company's Russian juice operations to an existing joint venture with an unconsolidated bottling partner, and $6 million due to our proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 1 and Note 10.
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13 |
Related to charges of $305 million that consisted of $268 million due to the expansion of the Venezuelan government's currency conversion markets, including a write-down of receivables from our bottling partner in Venezuela, $25 million due to the restructuring and transition of the Company's Russian juice operations to an existing joint venture with an unconsolidated bottling partner, and $12 million due to our proportionate share of unusual or infrequent items recorded by certain of our equity method investees. Refer to Note 1 and Note 10.
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