Kodak 2002 Annual Report Download - page 21

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Financials
21
2001
The Company’s results from continuing operations for the year
included the following one-time items:
Charges of $830 million ($583 million after tax) related to
the restructuring programs implemented in the second, third and
fourth quarters and other asset impairments. See further
discussion in MD&A and Note 14, “Restructuring Costs and Other.”
A charge of $41 million ($28 million after tax) for
environmental exposures. See MD&A and Note 10, “Commitments
and Contingencies.”
A charge of $20 million ($14 million after tax) for the Kmart
bankruptcy. See MD&A and Note 2, “Receivables, Net.”
Income tax benefits of $31 million, including a favorable tax
settlement of $11 million and a $20 million benefit relating to the
decline in the year-over-year operational effective tax rate.
Excluding the above items, net earnings from continuing
operations were $675 million, or $2.32 per basic and diluted share.
2000
The Company’s results from continuing operations for the year
included the following one-time items:
Charges of approximately $50 million ($33 million after tax)
associated with the sale and exit of one of the Company’s
equipment manufacturing facilities. The costs for this effort,
which began in 1999, related to accelerated depreciation of
assets still in use prior to the sale of the facility in the second
quarter, and costs for relocation of the operations.
Excluding the above, net earnings from continuing operations
were $1,440 million. Basic earnings per share were $4.73 and
diluted earnings per share were $4.70.
RESTRUCTURING COSTS AND OTHER
Fourth Quarter, 2002 Restructuring Plan
During the fourth quarter of 2002, the Company announced a
number of focused cost reductions designed to apply
manufacturing assets more effectively in order to provide
competitive products to the global market. Specifically, the
operations in Rochester, New York that assemble
one-time-use cameras and the operations in Mexico that perform
sensitizing for graphic arts and x-ray films, will be relocated to
other Kodak locations. In addition, as a result of declining
photofinishing volumes, the Company will close certain central
photofinishing labs in the U.S. and EAMER. The Company will
also reduce research and development and selling, general and
administrative positions on a worldwide basis and exit certain
non-strategic businesses. The total restructuring charges recorded
in the fourth quarter of 2002 for these actions were $116
million.
The following table summarizes the activity with respect to
the restructuring and asset impairment charges recorded during
the fourth quarter of 2002 for continuing operations and the
remaining balance in the related restructuring reserves at
December 31, 2002:
The total restructuring charge of $116 million for the fourth
quarter of 2002 was composed of severance, inventory write-
downs, long-lived asset impairments and exit costs of $55 million,
$7 million, $37 million and $17 million, respectively, with $109
million of those charges reported in restructuring costs (credits)
and other in the accompanying Consolidated Statement of
Earnings. The $7 million charge for inventory write-downs for
product discontinuances was reported in cost of goods sold in the
accompanying Consolidated Statement of Earnings. The severance
and exit costs require the outlay of cash, while the inventory
write-downs and long-lived asset impairments represent non-cash
items.
The severance charge related to the termination of 1,150
employees, including approximately 525 manufacturing and
logistics, 300 service and photofinishing, 175 administrative and
150 research and development positions. The geographic
composition of the employees terminated included approximately
775 in the United States and Canada and 375 throughout the rest
of the world. The charge for the long-lived asset impairments
includes the write-off of $13 million relating to equipment used in
the manufacture of cameras and printers, $13 million for
sensitized manufacturing equipment, $5 million for lab equipment
used in photofinishing and $6 million for other assets that were
scrapped or abandoned immediately. In addition, charges of $9
Long-lived Exit
Number of Severance Inventory Asset Costs
(dollars in millions) Employees Reserve Write-downs Impairments Reserve Total
4th Quarter, 2002 charges 1,150 $ 55 $ 7 $ 37 $ 17 $ 116
4th Quarter, 2002 utilization (250) (2) (7) (37) — (46)
Balance at 12/31/02 900 $ 53 $ — $ — $ 17 $ 70