Kodak 2002 Annual Report Download - page 24

Financials
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The remaining actions to be taken by the Company in
connection with the Fourth Quarter, 2001 Restructuring Plan
relate primarily to severance and exit costs. The Company has
approximately 200 positions remaining to be eliminated as of
December 31, 2002. These positions will be eliminated as the
Company completes the closure of photofinishing labs in the U.S.,
and completes the planned downsizing of manufacturing positions
in the U.S. and administrative positions outside the U.S. These
positions are expected to be eliminated by the end of the first
quarter of 2003. A significant portion of the severance had not
been paid as of December 31, 2002 since, in many instances, the
terminated employees could elect or were required to receive
their severance payments over an extended period of time. The
Company expects the actions contemplated by the reserve for exit
costs to be completed by the end of the first quarter of 2003.
Most exit costs are expected to be paid during 2003. However,
certain costs, such as long-term lease payments, will be paid over
periods after 2003.
Second and Third Quarter, 2001 Restructuring Plan
During the second and third quarters of 2001, as a result of a
number of factors, including the ongoing digital transformation,
declining photofinishing volumes, the discontinuance of certain
product lines, global economic conditions, and the growing
presence of business in certain geographies outside the United
States, the Company committed to a plan to reduce excess
manufacturing capacity, primarily with respect to the production
of sensitized goods, to close certain central photofinishing labs in
the U.S. and Japan, to reduce selling, general and administrative
positions on a worldwide basis and to exit certain businesses. The
total restructuring charges in connection with these actions were
$369 million and were recorded in the second and third quarters
of 2001 (the Second and Third Quarter, 2001 Restructuring Plan).
The following table summarizes the activity with respect to
the restructuring and asset impairment charges recorded during
the second and third quarters of 2001 and the remaining balance
in the related restructuring reserves at December 31, 2002:
Long-lived Exit
Number of Severance Inventory Asset Costs
(dollars in millions) Employees Reserve Write-downs Impairments Reserve Total
2nd Quarter, 2001 charges 2,400 $ 127 $ 57 $ 112 $ 20 $ 316
3rd Quarter, 2001 charges 300 7 20 25 1 53
Subtotal 2,700 134 77 137 21 369
2001 reversal (275) (20) — — — (20)
2001 utilization (1,400) (40) (77) (137) (5) (259)
Balance at 12/31/01 1,025 74 — — 16 90
1st Quarter, 2002 utilization (550) (23) — — (2) (25)
Balance at 3/31/02 475 51 — — 14 65
2nd Quarter, 2002 utilization (100) (11) — — (2) (13)
Balance at 6/30/02 375 40 — — 12 52
3rd Quarter, 2002 reversal (225) (14) — — (3) (17)
3rd Quarter, 2002 utilization (50) (7) — — — (7)
Balance at 9/30/02 100 19 — — 9 28
4th Quarter, 2002 utilization (100) (8) — — (4) (12)
Balance at 12/31/02 0$11$—$—$5$16
The total restructuring charge of $369 million for the Second
and Third Quarter, 2001 Restructuring Plan was composed of
severance, inventory write-downs, long-lived asset impairments
and exit costs of $134 million, $77 million, $137 million and $21
million, respectively, with $271 million of those charges reported
in restructuring costs (credits) and other in the accompanying
Consolidated Statement of Earnings. The balance of the charge of
$98 million, composed of $77 million for inventory write-downs
relating to product discontinuances and $21 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
represent non-cash items.
The severance charge related to the termination of 2,700
employees, including approximately 990 administrative, 800
manufacturing, 760 service and photofinishing and 150 research