Kodak 2001 Annual Report Download - page 39

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The decrease in worldwide net sales was primarily attributable to a
decrease in revenues due to the divestment of the Eastman Software
business in 2000, the sale of the Company’s Office Imaging business in
1999 and a decrease in the sale of semi-finished equipment and
products to third parties, which was partially offset by an increase in
optics revenues.
Earnings from operations increased $98 million from a loss of $109
million in 1999 to a loss of $11 million in 2000. The decrease in the loss
from 1999 to 2000 is primarily attributable to a reduction in operating
losses from the Eastman Software and the Office Imaging businesses
due to the sale of these businesses in 2000 and 1999, respectively.
Restructuring Costs and Other
The following table summarizes the activity with respect to the restructuring charges and reversals recorded in 2001, 2000 and 1999 and the
remaining balance in the related restructuring and asset impairment reserves at December 31, 2001:
(in millions)
Long-term Exit
Number of Severance Inventory Assets Costs
Employees Reserve Reserve Reserve Reserve Total
1999 charges 3,400 $ 250 $ – $ 90 $ 10 $ 350
1999 utilization (400) (21) – (90) – (111)
Ending balance at
December 31, 1999 3,000 229 – – 10 239
2000 reversal (500) (44) – – – (44)
2000 utilization (2,500) (185) – – (10) (195)
Ending balance at
December 31, 2000 – – – – – –
2001 charges 7,200 351 84 215 48 698
2001 reversal (275) (20) – – – (20)
2001 utilization (2,700) (56) (84) (215) (5) (360)
Ending balance at
December 31, 2001 4,225 $ 275 $ – $ – $ 43 $ 318
2001 Restructuring Programs and Other
During 2001, the Company recorded a total charge for its two separate
restructuring programs, the first of which was implemented in the
second and third quarters of 2001 and the second of which was
implemented in the fourth quarter of 2001, of $698 million, primarily for
the rationalization of the U.S. photofinishing operations, the elimination
of excess manufacturing capacity, the exit of certain operations and
reductions in research and development positions and selling, general
and administrative positions worldwide. The total restructuring amount
of $698 million was comprised of charges for severance, long-term
assets, inventory, and exit costs of $351 million, $215 million, $84
million, and $48 million, respectively. Additionally, during 2001, the
Company recorded asset impairments relating to the Wolf Camera
bankruptcy, its photofinishing operations, relocation costs in connection
with a closed manufacturing site and investments in strategic and
non-strategic ventures (See Note 6) of $77 million, $42 million, $18
million and $15 million, respectively.
Approximately $351 million of the charges of $698 million was for
employee severance covering 7,200 worldwide positions. The geographic
breakdown includes approximately 4,300 employees in the U.S. and
Canada and 2,900 throughout the rest of the world. The 7,200 personnel
were associated with the realignment of manufacturing (2,450), service
and photofinishing operations (1,950), R&D (425) and administrative
(2,375) functions in various locations of the Company’s worldwide
operations. Approximately 2,700 positions were eliminated by the end of
2001, with the majority of the remaining positions to be eliminated
during the early part of 2002. In the fourth quarter of 2001, the Company
reversed $20 million of the second quarter severance charge as certain
severance actions, primarily in the European, African and Middle Eastern
Region (EAMER) and Japan, will be completed at a total cost less than
originally estimated. This is the result of a lower actual severance cost
per employee as compared with the original amounts estimated.
In addition, approximately 275 (150 service and photofinishing, 100
administrative and 25 R&D) fewer employees will be separated. The
original severance accrual of $351 million and the $20 million reversal
were included in restructuring costs and other.