Kodak 2008 Annual Report Download - page 99

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NOTE 22: DISCONTINUED OPERATIONS
The significant components of earnings from discontinued operations, net of income taxes, are as follows:
For the Year Ended December 31,
(in millions) 2008 2007 2006
Revenues from Health Group operations $ - $ 754 $ 2,551
Revenues from HPA operations - 148 155
Total revenues from discontinued operations $ - $ 902 $ 2,706
Pre-tax income from Health Group operations $ - $ 27 $ 225
Pre-tax gain on sale of Health Group segment - 986 -
Pre-tax income from HPA operations - 8 12
Pre-tax gain on sale of HPA - 123 -
Benefit (provision) for income taxes related to discontinued operations 288 (262) (33)
All other items, net (3)(1)(1)
Earnings from discontinued operations, net of income taxes $ 285 $ 881 $ 203
2008
Tax Refund
In the second quarter of 2008, the Company received a tax refund from the U.S. Internal Revenue Service. The refund was related
to the audit of certain claims filed for tax years 1993-1998. A portion of the refund related to past federal income taxes paid in
relation to the 1994 sale of a subsidiary, Sterling Winthrop Inc., which was reported in discontinued operations. The refund had a
positive impact on the Company’s earnings from discontinued operations, net of income taxes, for the year ended December 31,
2008 of $295 million. See Note 15, “Income Taxes,” for further discussion of the tax refund.
2007
Health Group segment
On April 30, 2007, the Company sold all of the assets and business operations of its Health Group segment to Onex Healthcare
Holdings, Inc. (“Onex”) (now known as Carestream Health, Inc.), a subsidiary of Onex Corporation, for up to $2.55 billion. The price
was composed of $2.35 billion in cash at closing and $200 million in additional future payments if Onex achieves certain returns with
respect to its investment.
The Company recognized a pre-tax gain of $986 million on the sale of the Health Group segment during 2007. This pre-tax gain
excludes the following: up to $200 million of potential future payments related to Onex's return on its investment as noted above;
potential charges related to settling pension obligations with Onex in future periods; and any adjustments that may be made in the
future that are currently under review.
The Company was required to use a portion of the initial $2.35 billion cash proceeds to fully repay its approximately $1.15 billion of
Secured Term Debt. In accordance with EITF No 87-24, “Allocation of Interest to Discontinued Operations,” the Company allocated
to discontinued operations the interest expense related to the Secured Term Debt because it was required to be repaid as a result of
the sale. Interest expense allocated to discontinued operations totaled $30 million for the year ended December 31, 2007.
HPA
On October 17, 2007, the shareholders of Hermes Precisa Pty. Ltd. (“HPA”), a majority owned subsidiary of Kodak (Australasia) Pty.
Ltd., a wholly owned subsidiary of the Company, approved an agreement to sell all of the shares of HPA to Salmat Limited. The sale
was approved by the Federal Court of Australia on October 18, 2007, and closed on November 2, 2007. Kodak received $139 million
in cash at closing for its shares of HPA, and recognized a pre-tax gain on the sale of $123 million.
2006
Earnings from discontinued operations for the year ended December 31, 2006 were primarily related to the operations of the Health
Group segment. Interest expense allocated to discontinued operations totaled $90 million for the year.