Kodak 2003 Annual Report Download - page 27

Financials
27
(dollars in millions) Number of Employees Severance Reserve Exit Costs Reserve Total
Q4, 2002 charges 1,150 $ 55 $ 17 $ 72
Q4, 2002 utilization (250) (2) — (2)
Balance at 12/31/02 900 53 17 70
Q1, 2003 charges 450 16 — 16
Q1, 2003 utilization (850) (24) (2) (26)
Balance at 3/31/03 500 45 15 60
Q2, 2003 charges 25 1 — 1
Q2, 2003 utilization (500) (11) (4) (15)
Balance at 6/30/03 25 35 11 46
Q3, 2003 charges 200 4 — 4
Q3, 2003 utilization (225) (8) (2) (10)
Balance at 9/30/03 031940
Q4, 2003 utilization 0 (19) (1) (20)
Balance at 12/31/03 0$12$8$20
The severance charges taken in 2003 of $21 million were reported in
restructuring costs and other in the accompanying Consolidated
Statement of Earnings for the year ended December 31, 2003. The sever-
ance and exit costs require the outlay of cash, while the inventory write-
downs and long-lived asset impairments represent non-cash items.
Severance payments will continue into 2004 since, in many instances, the
employees whose positions were eliminated can elect or are required to
receive their severance payments over an extended period of time. Most
exit costs are expected to be paid during 2004. However, certain costs,
such as long-term lease payments, will be paid over periods after 2004.
As a result of initiatives implemented under the Fourth Quarter, 2002
Restructuring Program, the Company recorded $24 million of accelerated
depreciation on long-lived assets in cost of goods sold in the accompany-
ing Consolidated Statement of Earnings for the year ended December 31,
2003. The accelerated depreciation relates to long-lived assets accounted
for under the held and used model of SFAS No. 144, and the full year
amount of $24 million was comprised of $15 million relating to equipment
used in the manufacture of cameras, $6 million for lab equipment used in
photofinishing and $3 million for sensitized manufacturing equipment that
was used until their abandonment in 2003.
Cost savings resulting from the implementation of all Fourth Quarter,
2002 Restructuring Program actions are in line with the original estimate
of approximately $90 million to $95 million in 2003 and $205 million to
$210 million on an annual basis thereafter.
The full year 2003 charges of $45 million included $31 million of
charges applicable to the Photography segment, $3 million relating to the
Commercial Imaging segment and $11 million associated with manufac-
turing, research and development, and administrative functions, which are
shared across all segments. The fourth quarter 2002 charges of $116 mil-
lion included $40 million of charges applicable to the Photography seg-
ment, $19 million applicable to the Commercial Imaging segment and $2
million applicable to the Health Imaging segment. The remaining $55 mil-
lion was associated with manufacturing, research and development, and
administrative functions, which are shared across all segments.
2001 Restructuring Programs
At December 31, 2002, the Company had remaining severance and exit
costs reserves of $67 million and $18 million, respectively, relating to the
restructuring plans it implemented during 2001. During the first quarter of
2003, the Company completed the severance actions associated with the
2001 Restructuring Programs and recorded a reversal of $12 million of
reserves through restructuring costs and other in the accompanying
Consolidated Statement of Earnings for the year ended December 31,
2003. The completion of the 2001 Restructuring Programs resulted in the
elimination of the remaining 200 positions included in the original plans.
A total of 6,425 positions were eliminated under the 2001 Restructuring
Programs.
The remaining severance reserve of $6 million as of December 31,
2003 has not been paid since, in many instances, the employees whose
positions were eliminated could elect or were required to receive their
severance payments over an extended period of time. However, these pay-
ments will be made by the end of 2004. Most of the remaining exit costs
reserves of $13 million as of December 31, 2003 represent long-term
lease payments, which will be paid over periods after 2004.
LIQUIDITY AND CAPITAL RESOURCES
2003
The Company’s cash and cash equivalents increased $681 million during
2003 to $1,250 million at December 31, 2003. The increase resulted pri-
marily from $1,645 million of cash flows from operating activities and
$270 million of cash provided by financing activities, partially offset by
$1,267 million of cash flows used in investing activities.
The net cash provided by operating activities of $1,645 million for
the year ended December 31, 2003 was partially attributable to net earn-
ings of $265 million which, when adjusted for earnings from discontinued
operations, equity in losses from unconsolidated affiliates, gain on sale of
assets, depreciation and goodwill amortization, purchased research and
development, benefit for deferred income taxes and restructuring costs,
asset impairments and other charges, provided $1,283 million of operat-
ing cash. Also contributing to net cash provided by operating activities