The Coca-Cola Company and PepsiCo, Inc. The financial statements of Coca-Cola an
ID: 2567173 • Letter: T
Question
The Coca-Cola Company and PepsiCo, Inc.
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies' complete annual reports, including the notes to the financial statements, are available online.
Instructions
Use the companies' financial information to answer the following questions.
(a)
What are the amounts of Coca-Cola's and PepsiCo's provision for income taxes for the year 2014? Of each company's 2014 provision for income taxes, what portion is current expense and what portion is deferred expense?
(b)
What amount of cash was paid in 2014 for income taxes by Coca-Cola and by PepsiCo?
(c)
What was the U.S. federal constitutional tax rate in 2014? What was the effective tax rate in 2014 for Coca-Cola and PepsiCo? Why might their effective tax rates differ?
(d)
For year-end 2014, what amounts were reported by Coca-Cola and PepsiCo as (1) gross deferred tax assets and (2) gross deferred tax liabilities?
(e)
Do either Coca-Cola or PepsiCo disclose any net operating loss carrybacks and/or carryforwards at year-end 2014? What are the amounts, and when do the carryforwards expire?
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2014
2013
2012
(In millions except per share data)
NET OPERATING REVENUES
$45,998
$46,854
$48,017
Cost of goods sold
17,889
18,421
19,053
GROSS PROFIT
28,109
28,433
28,964
Selling, general and administrative expenses
17,218
17,310
17,738
Other operating charges
1,183
895
447
OPERATING INCOME
9,708
10,228
10,779
Interest income
594
534
471
Interest expense
483
463
397
Equity income (loss) — net
769
602
819
Other income (loss) — net
(1,263)
576
137
INCOME BEFORE INCOME TAXES
9,325
11,477
11,809
Income taxes
2,201
2,851
2,723
CONSOLIDATED NET INCOME
7,124
8,626
9,086
Less: Net income attributable to noncontrolling interests
26
42
67
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
$7,098
$8,584
$9,019
BASIC NET INCOME PER SHARE*
$1.62
$1.94
$2.00
DILUTED NET INCOME PER SHARE*
$1.60
$1.90
$1.97
AVERAGE SHARES OUTSTANDING
4,387
4,434
4,504
Effect of dilutive securities
63
75
80
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION
4,450
4,509
4,584
*Calculated based on net income attributable to shareowners of The Coca-Cola Company.
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31,
2014
2013
2012
(In millions)
CONSOLIDATED NET INCOME
$7,124
$8,626
$9,086
Other comprehensive income:
Net foreign currency translation adjustment
(2,382)
(1,187)
(182)
Net gain (loss) on derivatives
357
151
99
Net unrealized gain (loss) on available-for-sale securities
714
(80)
178
Net change in pension and other benefit liabilities
(1,039)
1,066
(668)
TOTAL COMPREHENSIVE INCOME
4,774
8,576
8,513
Less: Comprehensive income (loss) attributable to noncontrolling interests
21
39
105
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
$4,753
$8,537
$8,408
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2014
2013
(In millions except par value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$8,958
$10,414
Short-term investments
9,052
6,707
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
18,010
17,121
Marketable securities
3,665
3,147
Trade accounts receivable, less allowances of $331 and $61, respectively
4,466
4,873
Inventories
3,100
3,277
Prepaid expenses and other assets
3,066
2,886
Assets held for sale
679
—
TOTAL CURRENT ASSETS
32,986
31,304
EQUITY METHOD INVESTMENTS
9,947
10,393
OTHER INVESTMENTS
3,678
1,119
OTHER ASSETS
4,407
4,661
PROPERTY, PLANT AND EQUIPMENT — net
14,633
14,967
TRADEMARKS WITH INDEFINITE LIVES
6,533
6,744
BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES
6,689
7,415
GOODWILL
12,100
12,312
OTHER INTANGIBLE ASSETS
1,050
1,140
TOTAL ASSETS
$92,023
$90,055
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses
$9,234
$9,577
Loans and notes payable
19,130
16,901
Current maturities of long-term debt
3,552
1,024
Accrued income taxes
400
309
Liabilities held for sale
58
—
TOTAL CURRENT LIABILITIES
32,374
27,811
LONG-TERM DEBT
19,063
19,154
OTHER LIABILITIES
4,389
3,498
DEFERRED INCOME TAXES
5,636
6,152
THE COCA-COLA COMPANY SHAREOWNERS' EQUITY
Common stock, $0.25 par value; Authorized — 11,200 shares;
Issued — 7,040 and 7,040 shares, respectively
1,760
1,760
Capital surplus
13,154
12,276
Reinvested earnings
63,408
61,660
Accumulated other comprehensive income (loss)
(5,777)
(3,432)
Treasury stock, at cost — 2,674 and 2,638 shares, respectively
(42,225)
(39,091)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
30,320
33,173
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS
241
267
TOTAL EQUITY
30,561
33,440
TOTAL LIABILITIES AND EQUITY
$92,023
$90,055
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2014
2013
2012
(In millions)
OPERATING ACTIVITIES
Consolidated net income
$7,124
$8,626
$9,086
Depreciation and amortization
1,976
1,977
1,982
Stock-based compensation expense
209
227
259
Deferred income taxes
(40)
648
632
Equity (income) loss — net of dividends
(371)
(201)
(426)
Foreign currency adjustments
415
168
(130)
Significant (gains) losses on sales of assets — net
831
(670)
(98)
Other operating charges
761
465
166
Other items
149
234
254
Net change in operating assets and liabilities
(439)
(932)
(1,080)
Net cash provided by operating activities
10,615
10,542
10,645
INVESTING ACTIVITIES
Purchases of investments
(17,800)
(14,782)
(14,824)
Proceeds from disposals of investments
12,986
12,791
7,791
Acquisitions of businesses, equity method investments and nonmarketable securities
(389)
(353)
(1,486)
Proceeds from disposals of businesses, equity method investments and nonmarketable securities
148
872
20
Purchases of property, plant and equipment
(2,406)
(2,550)
(2,780)
Proceeds from disposals of property, plant and equipment
223
111
143
Other investing activities
(268)
(303)
(268)
Net cash provided by (used in) investing activities
(7,506)
(4,214)
(11,404)
FINANCING ACTIVITIES
Issuances of debt
41,674
43,425
42,791
Payments of debt
(36,962)
(38,714)
(38,573)
Issuances of stock
1,532
1,328
1,489
Purchases of stock for treasury
(4,162)
(4,832)
(4,559)
Dividends
(5,350)
(4,969)
(4,595)
Other financing activities
(363)
17
100
Net cash provided by (used in) financing activities
(3,631)
(3,745)
(3,347)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
(934)
(611)
(255)
CASH AND CASH EQUIVALENTS
Net increase (decrease) during the year
(1,456)
1,972
(4,361)
Balance at beginning of year
10,414
8,442
12,803
Balance at end of year
$8,958
$10,414
$8,442
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
Year Ended December 31,
2014
2013
2012
(In millions except per share data)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY NUMBER OF COMMON SHARES OUTSTANDING
Balance at beginning of year
4,402
4,469
4,526
Purchases of treasury stock
(98)
(121)
(121)
Treasury stock issued to employees related to stock compensation plans
62
54
64
Balance at end of year
4,366
4,402
4,469
COMMON STOCK
$1,760
$1,760
$1,760
CAPITAL SURPLUS
Balance at beginning of year
12,276
11,379
10,332
Stock issued to employees related to stock compensation plans
526
569
640
Tax benefit (charge) from stock compensation plans
169
144
144
Stock-based compensation
209
227
259
Other activities
(26)
(43)
4
Balance at end of year
13,154
12,276
11,379
REINVESTED EARNINGS
Balance at beginning of year
61,660
58,045
53,621
Net income attributable to shareowners of The Coca-Cola Company
7,098
8,584
9,019
Dividends (per share — $1.22, $1.12 and $1.02 in 2014, 2013 and 2012, respectively)
(5,350)
(4,969)
(4,595)
Balance at end of year
63,408
61,660
58,045
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance at beginning of year
(3,432)
(3,385)
(2,774)
Net other comprehensive income (loss)
(2,345)
(47)
(611)
Balance at end of year
(5,777)
(3,432)
(3,385)
TREASURY STOCK
Balance at beginning of year
(39,091)
(35,009)
(31,304)
Stock issued to employees related to stock compensation plans
891
745
786
Purchases of treasury stock
(4,025)
(4,827)
(4,491)
Balance at end of year
(42,225)
(39,091)
(35,009)
TOTAL EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
$30,320
$33,173
$32,790
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS
Balance at beginning of year
$267
$378
$286
Net income attributable to noncontrolling interests
26
42
67
Net foreign currency translation adjustment
(5)
(3)
38
Dividends paid to noncontrolling interests
(25)
(58)
(48)
Acquisition of interests held by noncontrolling owners
—
(34)
(15)
Contributions by noncontrolling interests
—
6
—
Business combinations
(22)
25
50
Deconsolidation of certain entities
—
(89)
—
TOTAL EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS
$241
$267
$378
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2014
2013
2012
(In millions except per share data)
NET OPERATING REVENUES
$45,998
$46,854
$48,017
Cost of goods sold
17,889
18,421
19,053
GROSS PROFIT
28,109
28,433
28,964
Selling, general and administrative expenses
17,218
17,310
17,738
Other operating charges
1,183
895
447
OPERATING INCOME
9,708
10,228
10,779
Interest income
594
534
471
Interest expense
483
463
397
Equity income (loss) — net
769
602
819
Other income (loss) — net
(1,263)
576
137
INCOME BEFORE INCOME TAXES
9,325
11,477
11,809
Income taxes
2,201
2,851
2,723
CONSOLIDATED NET INCOME
7,124
8,626
9,086
Less: Net income attributable to noncontrolling interests
26
42
67
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
$7,098
$8,584
$9,019
BASIC NET INCOME PER SHARE*
$1.62
$1.94
$2.00
DILUTED NET INCOME PER SHARE*
$1.60
$1.90
$1.97
AVERAGE SHARES OUTSTANDING
4,387
4,434
4,504
Effect of dilutive securities
63
75
80
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION
4,450
4,509
4,584
2014 2013 2012 S 66,683 S 66,415 S65,492 31,291 34,201 24,970 119 9,112 (899) Net Revenue Cost of sales Gross profit Selling, general and administrative expenses Amortization of intangible assets Operating Profit Interest expense Interest income and other Income before income taxes Provision for income taxes Net income Less: Net income attributable to noncontrolling interests Net Income Attributable to PepsiCo Net Income Attributable to PepsiCo per Common Share 30,884 35,799 26.126 92 9,581 31,243 35,172 25,357 110 9,705 (911) 97 (909) 85 8,757 2,199 6,558 45 8,304 2,090 6,214 36 6,178 8,891 2,104 6,787 47 6,513 $ 6,740 S Basic Diluted 4.31 $ 4.27 $ 4.37 S 4.32 S 3.96 3.92 Weighted-average common shares outstanding Basic Diluted 1,541 1,560 2.24 S 1,557 1,575 2.1275 1,509 1,527 Cash dividends declared per common share $ 2.5325 SExplanation / Answer
a.
The amount that is reported in BS as property , plant and equipment(net) of coca-cola on december 31, 2014 is $14,633 million.
the amount that is reported in the balance sheet as property, plant and equiment (net) of pepsi Co on December 2014 is 17,244 million.
B.
The amount of cash was paid in 2014 for income taxes by pepsi co is $371 Million.
C.
US fedral state Tax rate 35% 35%
annual tax rate 23.60% 25.10%
Pepsi Co affected tax rates can differ because lower tax on foreign results.
Coca-Cola effected tax rates may differ because on earnings in jurisdiction taxes at different rates.
D.
At the end of 2014, pepsiCo reported
Gross Deffered tax assets(net) = $2919 Million
Gross deffered Tax liabilities(net) = $7348 Million
At the end of 2014 coca cola reported
Gross Deffered tax assets(net) = $3791 Million
Gross deffered Tax liabilities(net) = $9398 Million
E.
Pepsi -Co
Operating loss carry forward totalling $10.40 billion of the end of 2014 year and these operating losses will expire as follows
$0.1 Billion in 2015
$ 9.8 billion in between 2016 and 2034
$0.5 billion is carry forward indefinetly
Coca -cola
As of Dec 31st 2014 we had $6408 million of loss carryforward available and loss of $497 million must be utilised in next 5 years remaining can be utilised more than 5 years.