Kodak 2002 Annual Report Download - page 23

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Financials
23
The total restructuring charge of $329 million for the fourth
quarter of 2001 was composed of severance, inventory write-
downs, long-lived asset impairments and exit costs of $217
million, $7 million, $78 million and $27 million, respectively, with
$308 million of those charges reported in restructuring costs
(credits) and other in the accompanying Consolidated Statement
of Earnings. The balance of the charge of $21 million, comprised
of $7 million for inventory write-downs relating to the product
discontinuances and $14 million relating to accelerated
depreciation on the long-lived assets accounted for under the held
for use model of SFAS No. 121, 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
represented non-cash items.
The severance charge related to the termination of 4,500
employees, including approximately 1,650 manufacturing, 1,385
administrative, 1,190 service and photofinishing and 275 research
and development positions. The geographic composition of the
employees terminated included approximately 3,190 in the United
States and Canada and 1,310 throughout the rest of the world.
The charge for the long-lived asset impairments included the
write-off of $22 million relating to sensitized manufacturing
equipment, lab equipment and leasehold improvements, and other
assets that were scrapped or abandoned immediately and
accelerated depreciation of $17 million relating to sensitized
manufacturing equipment, lab equipment and leasehold
improvements, and other assets that were to be used until their
abandonment in the first three months of 2002. The balance of
the long-lived asset impairment charge of $39 million included
charges of $30 million relating to the Company’s exit of three
non-core businesses, and $9 million for the write-off of long-lived
assets in connection with the reorganization of certain of the
Company’s digital camera manufacturing operations.
In the third quarter of 2002, the Company reversed $12
million of the $217 million in severance charges due primarily to
higher rates of attrition than originally expected, lower utilization
of training and outplacement services by terminated employees
than originally expected and termination actions being completed
at an actual cost per employee that was lower than originally
estimated. As a result, approximately 275 fewer people will be
terminated, including approximately 200 service and
photofinishing, 50 manufacturing and 25 administrative. Total
employee terminations from the Fourth Quarter, 2001
restructuring actions are now expected to be approximately 4,225.
During the fourth quarter of 2002, the Company recorded $5
million of credits associated with the Fourth Quarter, 2001
Restructuring Plan in restructuring costs (credits) and other in
the accompanying Consolidated Statement of Earnings. The credits
were the result of higher proceeds and lower costs associated
with the exit from non-core businesses.
These restructuring actions as they relate to the
Photography, Health Imaging and Commercial Imaging segments
amounted to $113 million, $34 million and $30 million,
respectively. The remaining $140 million were for actions
associated with the manufacturing, research and development, and
administrative functions, which are shared across all segments.
Long-lived Exit
Number of Severance Inventory Asset Costs
(dollars in millions) Employees Reserve Write-downs Impairments Reserve Total
2001 charges 4,500 $ 217 $ 7 $ 78 $ 27 $ 329
2001 utilization (1,300) (16) (7) (78) — (101)
Balance at 12/31/01 3,200 201 — — 27 228
1st Quarter, 2002 utilization (1,725) (32) — — — (32)
Balance at 3/31/02 1,475 169 — — 27 196
2nd Quarter, 2002 utilization (550) (43) — — (10) (53)
Balance at 6/30/02 925 126 — — 17 143
3rd Quarter, 2002 reversal (275) (12) — — — (12)
3rd Quarter, 2002 utilization (125) (37) — — — (37)
Balance at 9/30/02 525 77 — — 17 94
4th Quarter, 2002 utilization (325) (21) — — (4) (25)
Balance at 12/31/02 200 $ 56 $ — $ — $ 13 $ 69
The following table summarizes the activity with respect to the restructuring and asset impairment charges recorded during the
fourth quarter of 2001 and the remaining balance in the related restructuring reserves at December 31, 2002: