Kodak 2002 Annual Report Download - page 74

Financials
74
2000
During the second quarter of 2000, the Company acquired the
remaining ownership interest in PictureVision, Inc. for cash and
assumed liabilities with a total transaction value of approximately
$90 million. In relation to this acquisition, the Company’s second
quarter, 2000 results included $10 million in charges for acquired
in-process R&D and approximately $15 million for other
acquisition-related charges. The Company used independent
professional appraisal consultants to assess and allocate values to
the in-process R&D.
During 2000, the Company also completed additional
acquisitions with an aggregate purchase price of approximately
$79 million in cash, none of which were individually material to the
Company’s financial position, results of operations or cash flows.
NOTE 21: DISCONTINUED OPERATIONS
In March 2001, the Company acquired Citipix from Groupe Hauts
Monts along with two related subsidiaries involved in mapping
services. Citipix was involved in the aerial photography of large
cities in the United States, scanning of this imagery and hosting
the imagery on the Internet for government, commercial and
private sectors. The acquired companies were formed into Kodak
Global Imaging, Inc. (KGII), a wholly owned subsidiary, which was
reported in the commercial and government products and services
business in the Commercial Imaging segment. Due to a
combination of factors, including the collapse of the
telecommunications market, limitations on flying imposed by the
events of September 11th, delays and losses of key contracts and
the global economic downturn, KGII did not achieve the financial
results expected by management during both 2001 and 2002. In
November 2002, the Company approved a plan to dispose of the
operations of KGII. The disposal plan consisted of the shutdown of
the Citipix business in December 2002 and the sale of the
remaining mapping business and imagery assets of the Citipix
business.
The Company incurred charges of approximately $44 million
in the fourth quarter of 2002 in relation to the disposal of KGII.
The Company recognized an impairment loss of approximately $25
million resulting from the write-down of the carrying value of
goodwill, intangibles and fixed assets to fair value. A loss of
approximately $9 million was recognized on the sale of the
mapping business and imagery assets of Citipix in December
2002. The Company also recognized a charge of approximately
$10 million to accrue various costs associated with the shutdown
of KGII, such as severance costs related to the termination of
150 employees, lease cancellation costs, and claims owed under
the original purchase agreement to the former owners of the
mapping business. In addition to these disposal costs, the
Company incurred losses from operations for the years ended
December 31, 2002 and 2001 amounting to $13 million and $7
million, respectively. The KGII operational losses and loss from
the disposal of KGII were recorded in loss from discontinued
operations in the Consolidated Statement of Earnings for the
years ended December 31, 2002 and 2001.
During the fourth quarter of 2002, the Company recognized
income of $19 million related to the favorable outcome of
litigation associated with the 1994 sale of Sterling Winthrop Inc.
The gain recognized on the favorable settlement was recorded in
loss from discontinued operations in the Consolidated Statement
of Earnings for the year ended December 31, 2002. In January
2003, the Company received the cash related to this settlement.
At December 31, 2002 and 2001, total assets related to the
discontinued operations of KGII and Sterling Winthrop Inc.
amounted to $28 million and $39 million, respectively, and were
reported in the Company’s Consolidated Statement of Financial
Position. Of the total assets related to discontinued operations at
December 31, 2002 and 2001, receivables, net amounted to $27
million and $3 million, goodwill, net was $0 and $16 million, and
other long-term assets was $0 and $17 million. The remaining
asset amounts were immaterial. At December 31, 2002 and 2001,
total liabilities related to discontinued operations of $12 million
and $4 million, respectively, were included in the Company’s
Consolidated Statement of Financial Position. These liabilities
were primarily related to the accrual of various costs associated
with the KGII shutdown as noted above.
Net sales resulting from discontinued operations for the
years ended December 31, 2002 and 2001 amounted to $6 million
and $5 million, respectively. The loss from discontinued
operations before income tax benefits for the years ended
December 31, 2002 and 2001 of $38 million and $7 million,
respectively, was taxed at an effective tax rate of 38% and 31%,
respectively, resulting in the loss from discontinued operations,
net of income tax benefits, in the Consolidated Statement of
Earnings of $23 million and $5 million, respectively.