Kodak 2003 Annual Report Download - page 51

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Financials
51
payable and other current liabilities in the accompanying Consolidated
Statement of Financial Position at each respective balance sheet date.
NOTE 3: INVENTORIES, NET
(in millions) 2003 2002
At FIFO or average cost
(approximates current cost)
Finished goods $ 818 $ 831
Work in process 302 322
Raw materials 317 301
1,437 1,454
LIFO reserve (362) (392)
Total $ 1,075 $ 1,062
Inventories valued on the LIFO method are approximately 41% and
47% of total inventories in 2003 and 2002, respectively. During 2003 and
2002, inventory usage resulted in liquidations of LIFO inventory quantities.
In the aggregate, these inventories were carried at the lower costs prevail-
ing in prior years as compared with the cost of current purchases. The
effect of these LIFO liquidations was to reduce cost of goods sold by $53
million and $31 million in 2003 and 2002, respectively.
The Company reduces the carrying value of inventories to a lower of
cost or market basis for those items that are potentially excess, obsolete
or slow-moving based on management’s analysis of inventory levels and
future sales forecasts. The Company also reduces the carrying value of
inventories whose net book value is in excess of market. Aggregate reduc-
tions in the carrying value with respect to inventories that were still on
hand at December 31, 2003 and 2002, and that were deemed to be
excess, obsolete, slow-moving or that had a carrying value in excess of
market, were $75 million and $65 million, respectively.
NOTE 4: PROPERTY, PLANT AND
EQUIPMENT, NET
(in millions) 2003 2002
Land $ 116 $ 123
Buildings and building improvements 2,680 2,658
Machinery and equipment 10,211 10,182
Construction in progress 270 325
13,277 13,288
Accumulated depreciation (8,183) (7,868)
Net properties $5,094 $5,420
Depreciation expense was $830 million, $818 million and $765 mil-
lion for the years 2003, 2002 and 2001, respectively, of which approxi-
mately $70 million, $19 million and $52 million, respectively, represented
accelerated depreciation in connection with restructuring actions.
NOTE 5: GOODWILL AND OTHER
INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted the provisions of SFAS
No. 142, “Goodwill and Other Intangible Assets,” under which goodwill is
no longer amortized, but is required to be assessed for impairment at
least annually. Goodwill was $1,384 million and $981 million at December
31, 2003 and 2002, respectively. The changes in the carrying amount of
goodwill by reportable segment for 2003 and 2002 were as follows:
Photo- Health Commercial Consolidated
(in millions) graphy Imaging Imaging Total
Balance at December 31, 2001 $ 669 $ 169 $ 110 $ 948
Goodwill related to acquisitions 19 1 6 26
Goodwill written off
related to disposals — — (17) (17)
Finalization of purchase accounting (1) 4 3 6
Currency translation adjustments 15 2 1 18
Balance at December 31, 2002 702 176 103 981
Goodwill related to acquisitions 30 350 — 380
Goodwill written off
related to disposals/divestitures (21) — (6) (27)
Finalization of purchase accounting 13 (2) — 11
Currency translation adjustments 17 15 7 39
Balance at December 31, 2003 $ 741 $ 539 $ 104 $1,384
The aggregate amount of goodwill acquired during 2003 of $380
million was attributable to $350 million for the purchase of PracticeWorks
within the Health Imaging segment, $16 million for the purchase of
Applied Science Fiction within the Photography segment and $14 million
related to additional acquisitions within the Photography segment. The
$21 million of goodwill written off in relation to disposals/divestitures dur-
ing 2003 for the Photography segment was attributable to the divesture of
Consumer Imaging Services (CIS) in Germany.
The aggregate amount of goodwill acquired during 2002 of $26 mil-
lion was attributable to acquisitions that are all individually immaterial.
The goodwill written off related to disposals during 2002 of $17 million
was attributable to the disposal of Kodak Global Imaging, Inc. within the
Commercial Imaging segment. The $17 million charge to earnings relating
to the write-off of goodwill is included in the loss from discontinued oper-
ations in the Consolidated Statement of Earnings. See Note 22,
“Discontinued Operations.”
The gross carrying amount and accumulated amortization by major
intangible asset category for 2003 and 2002 were as follows:
As of December 31, 2003
Gross Carrying Accumulated
(in millions) Amount Amortization Net
Technology-based $ 201 $ 76 $ 125
Customer-related 176 17 159
Other 14 4 10
Total $ 391 $ 97 $ 294
As of December 31, 2002
Gross Carrying Accumulated
Amount Amortization Net
Technology-based $ 132 $ 58 $ 74
Customer-related 47 9 38
Other 8 2 6
Total $ 187 $ 69 $ 118