Kodak 2005 Annual Report Download - page 120

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impairment charge of $19 million related to the investment in Lucky Film. The impairment was recognized as a result of an other-than-temporary
decline in the market value of Lucky Film’s stock. As a result, the value allocated to the 20 percent interest in Lucky Film has been adjusted to
$23 million and the corresponding value of the 13 percent interest has been adjusted to $14 million. The Company will record the $9 million of value
associated with the additional 7 percent interest in Lucky Film when it completes the acquisition of those shares in 2007. The Company’s interest in
Lucky Film is accounted for under the equity method of accounting, as the Company has the ability to exercise signifi cant infl uence over Lucky Film’s
operating and fi nancial policies.
Scitex Digital Printing (Renamed Versamark)
On January 5, 2004, the Company completed its acquisition of Scitex Digital Printing (SDP) from its parent for $252 million, inclusive of cash on hand
at closing which totaled approximately $13 million. This resulted in a net cash price of approximately $239 million, inclusive of transaction costs.
SDP is the leading supplier of high-speed, continuous inkjet printing systems, primarily serving the commercial and transactional printing sectors.
Customers use SDP’s products to print utility bills, banking and credit card statements, direct mail materials, as well as invoices, fi nancial statements
and other transactional documents. SDP now operates under the name Kodak Versamark, Inc. The acquisition will provide the Company with
additional capabilities in the transactional printing and direct mail sectors while creating another path to commercialize proprietary inkjet technology.
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. The fi nal purchase
price allocation is as follows:
At January 5, 2004 — (in millions)
Current assets $ 125
Intangible assets (including in-process R&D) 95
Other non-current assets (including PP&E) 47
Goodwill 17
Total assets acquired $ 284
Current liabilities $ 23
Other non-current liabilities 9
Total liabilities assumed $ 32
Net assets acquired $ 252
Of the $95 million of acquired intangible assets, $9 million was assigned to research and development assets that were written off at the date of
acquisition. This amount was determined by identifying research and development projects that had not yet reached technological feasibility and for
which no alternative future uses exist. The value of the projects identifi ed to be in progress was determined by estimating the future cash fl ows from
the projects once commercialized, less costs to complete development and discounting these net cash fl ows back to their present value. The discount
rate used for these three research and development projects was 17%. The charges for the write-off were included as research and development
costs in the Company’s Consolidated Statement of Operations for the year ended December 31, 2004.
The remaining $86 million of intangible assets, which relate to developed technology, customer relationships, and trade names, have useful lives
ranging from two to fourteen years. The $17 million of goodwill will be assigned to the Graphic Communications Group segment and is expected to be
deductible for tax purposes.
2003
PracticeWorks, Inc.
On October 7, 2003, Kodak acquired all of the outstanding shares of PracticeWorks, Inc. (PracticeWorks), a leading provider of dental practice
management software (DPMS) and digital radiographic imaging systems, for approximately $475 million in cash, inclusive of transaction costs.
Accordingly, Kodak also became the 100% owner of Paris-based subsidiary, Trophy Radiologie, S.A., a developer and manufacturer of dental digital
radiography equipment, which PracticeWorks acquired in December 2002. This acquisition will enable Kodak’s Health Group to offer its customers a
full spectrum of dental imaging products and services from traditional fi lm to digital radiography and photography. Earnings from continuing
operations for 2003 include the results of PracticeWorks from the date of acquisition.