Kodak 2004 Annual Report Download - page 65

Financials
63
2 0 0 4 ฀ S U M M A R Y ฀ A N N U A L ฀ R E P O R T
NOTE฀5:฀GOODWILL฀AND฀OTHER฀฀
INTANGIBLE฀ASSETS
Goodwill฀was฀$1,446฀million฀and฀$1,349฀million฀at฀December฀31,฀2004฀
and฀2003,฀respectively.฀The฀changes฀in฀the฀carrying฀amount฀of฀goodwill฀by฀
reportable฀segment฀for฀2003฀and฀2004฀were฀as฀follows:
฀ ฀ ฀ Commer-฀฀ Graphic฀฀฀฀฀฀฀฀
฀฀ ฀ ฀ cial฀ Commun-฀ Consolidated
(in฀millions)฀฀฀฀ D&FIS฀ Health฀฀฀฀฀฀Imaging฀ ications฀ Total
Balance฀at฀
฀฀ December฀31,฀2002฀ $฀705฀ $฀ 174฀ $฀ 86฀ $฀ (4)฀ $฀ 961
Goodwill฀related฀to฀
฀฀ acquisitions฀฀฀฀฀฀฀฀฀฀฀ ฀ 26฀ ฀ 350฀ ฀ —฀ ฀ 2฀ ฀ 378฀
Goodwill฀written฀off฀฀฀
฀฀ related฀to฀disposals/
฀฀ divestitures฀฀฀฀฀฀฀ ฀ (21)฀ ฀ —฀ ฀ —฀ ฀ (6)฀ ฀ (27)฀ ฀฀
Finalization฀of฀purchase฀
฀฀ accounting฀฀฀฀฀฀฀฀฀ ฀ 15฀ ฀ 1฀ ฀ —฀ ฀ —฀ ฀ 16฀
Correction฀of฀purchase
฀ accounting฀ ฀ (6)฀ ฀ (15)฀ ฀ —฀ ฀ 4฀ ฀ (17)
Goodwill฀amortization฀ ฀ —฀ ฀ —฀ ฀ —฀ ฀ 3฀ ฀ 3
Currency฀translation฀
฀฀ adjustments฀฀ ฀ 13฀ ฀ 15฀ ฀ 7฀ ฀ —฀ ฀ 35
Balance฀at
฀ December฀31,฀2003
฀(Restated)฀฀ $฀732฀ $฀525฀ $฀ 93฀ $฀ (1)฀ $฀1,349
Goodwill฀related฀to฀
฀฀ acquisitions฀฀฀฀฀ ฀ 13฀ ฀ —฀ ฀ —฀ ฀ 17฀ ฀ 30฀
Goodwill฀written฀off฀฀฀
฀฀ related฀to฀disposals/
฀฀ divestitures฀฀฀ ฀ (21)฀ ฀ —฀ ฀ —฀ ฀ —฀ ฀ (21)฀ ฀฀
Finalization฀of฀purchase฀
฀฀ accounting฀฀฀฀฀฀฀ ฀ 2฀ ฀ 45฀ ฀ —฀ ฀ 7฀ ฀ 54฀
Goodwill฀amortization฀ ฀ —฀ ฀ —฀ ฀ —฀ ฀ 1฀ ฀ 1
Currency฀translation฀
฀฀ adjustments฀฀ ฀ 13฀ ฀ 18฀ ฀ 1฀ ฀ 1฀ ฀ 33฀ ฀฀฀
Balance฀at฀
฀฀ December฀31,฀2004฀฀฀$฀฀739฀ $฀588฀ $฀ 94฀ $฀ 25฀ $฀1,446฀
The฀aggregate฀amount฀of฀goodwill฀acquired฀during฀2004฀of฀$30฀
million฀was฀primarily฀attributable฀to฀$17฀million฀for฀the฀purchase฀of฀Kodak฀
Versamark฀within฀the฀Graphic฀Communications฀segment฀and฀$13฀million฀
for฀the฀purchase฀of฀Chinon฀within฀the฀D&FIS฀segment.฀The฀$21฀million฀
of฀goodwill฀written฀off฀in฀relation฀to฀disposals฀during฀2004฀in฀the฀D&FIS฀
segment฀was฀attributable฀to฀the฀divestiture฀of฀Consumer฀Imaging฀Services฀
in฀Austria฀($5฀million)฀and฀the฀write-off฀of฀Applied฀Science฀Fiction฀($16฀
million),฀as฀the฀Company฀has฀canceled฀its฀program฀to฀market฀an฀automatic฀
film฀processing฀station฀due฀to฀diminishing฀market฀opportunity.฀฀
The฀aggregate฀amount฀of฀goodwill฀added฀through฀the฀finalization฀of฀
purchase฀accounting฀during฀2004฀of฀$54฀million฀was฀primarily฀attributable฀
to฀$36฀million฀for฀the฀November฀2003฀purchase฀of฀Algotec฀Systems฀Ltd.,฀
$8฀million฀related฀to฀the฀October฀2003฀purchase฀of฀PracticeWorks,฀Inc.,฀
both฀of฀which฀are฀within฀the฀Health฀segment,฀$6฀million฀for฀the฀May฀2004฀
purchase฀of฀the฀NexPress฀related฀entities,฀which฀are฀within฀the฀Graphic฀
Communications฀segment,฀and฀$4฀million฀for฀an฀adjustment฀of฀a฀deferred฀
tax฀asset฀relating฀to฀the฀purchase฀of฀Chinon฀within฀the฀D&FIS฀segment.฀฀฀
The฀correction฀of฀purchase฀accounting฀relates฀to฀the฀following฀correc-
tion฀of฀errors:฀deferred฀tax฀assets฀should฀have฀been฀recorded฀as฀a฀part฀of฀
the฀1998฀acquisition฀of฀the฀Imation฀Medical฀Imaging฀business,฀in฀the฀Health฀
segment,฀and฀goodwill฀should฀have฀been฀reduced฀accordingly;฀deferred฀tax฀
liabilities฀should฀have฀been฀recorded฀as฀a฀part฀of฀the฀1999฀formation฀of฀the฀
NexPress฀joint฀venture,฀part฀of฀the฀Graphic฀Communications฀segment,฀and฀
the฀deferred฀credit฀related฀to฀the฀excess฀of฀basis฀in฀the฀investment฀over฀the฀
value฀of฀contributed฀amounts฀should฀have฀been฀reduced฀accordingly;฀and฀
goodwill฀related฀to฀the฀acquisition฀of฀Spector฀should฀have฀been฀reduced฀in฀
the฀fourth฀quarter฀of฀2003฀when฀the฀Company฀reduced฀a฀deferred฀tax฀asset฀
valuation฀allowance฀that฀had฀been฀recorded฀in฀purchase฀accounting.
The฀gross฀carrying฀amount฀and฀accumulated฀amortization฀by฀major฀
intangible฀asset฀category฀for฀2004฀and฀2003฀were฀as฀follows:
(in฀millions)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀As฀of฀December฀31,฀2004
฀ ฀ ฀ ฀ Weighted-
฀ ฀ ฀ ฀ Average
฀ Gross฀Carrying฀ Accumulated฀฀฀฀฀ ฀ Amortization฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀ Amount฀ Amortization฀ Net฀ Period
Technology-based฀฀ $฀264฀ $฀106฀ $฀158฀ 8฀years฀
Customer-related฀฀฀ ฀ 206฀ ฀ 34฀ ฀ 172฀ 15฀years
Other฀฀฀฀฀฀฀฀฀฀฀ ฀ 168฀ ฀ 20฀ ฀ 148฀ 13฀years
Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀638฀ $฀160฀ $฀478฀ 11฀years฀฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀As฀of฀December฀31,฀2003
฀ ฀ ฀ ฀ Weighted-
฀ ฀ ฀ ฀ Average
฀ Gross฀Carrying฀ Accumulated฀฀฀฀฀ ฀ Amortization฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀ Amount฀ Amortization฀ Net฀ Period฀
Technology-based฀ $฀201฀ $฀ 76฀ $฀125฀ 8฀years
Customer-related฀฀฀฀฀฀฀฀฀฀ ฀ 176฀ ฀ 17฀ ฀ 159฀ 15฀years฀฀
Other฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 14฀ ฀ 4฀ ฀ 10฀ 12฀years
Total฀฀฀฀฀฀฀฀฀฀฀ $฀391฀ $฀ 97฀ $฀294฀ 12฀years
The฀aggregate฀amount฀of฀intangible฀assets฀acquired฀during฀2004฀of฀
$258฀million฀was฀primarily฀attributable฀to฀$139฀million฀of฀manufacturing฀
exclusivity฀intangible฀assets฀for฀the฀purchase฀of฀Lucky฀Film;฀$86฀million฀
related฀to฀the฀purchase฀of฀Kodak฀Versamark,฀consisting฀of฀$26฀million฀
in฀customer-related฀intangible฀assets,฀$54฀million฀of฀technology-based฀
intangible฀assets,฀and฀$6฀million฀of฀other฀intangible฀assets;฀and฀$15฀million฀
of฀technology-based฀intangible฀assets฀related฀to฀the฀finalization฀of฀purchase฀
accounting฀for฀the฀purchase฀of฀Algotec฀Systems฀Ltd.฀as฀described฀in฀Note฀
21฀“Acquisitions.”฀In฀addition,฀in฀December฀2004,฀the฀Company฀wrote฀off฀
approximately฀$11฀million฀of฀net฀technology-based฀intangible฀assets฀related฀
to฀Applied฀Science฀Fiction,฀as฀the฀Company฀has฀canceled฀it’s฀program฀to฀
market฀an฀automatic฀film฀processing฀station฀due฀to฀diminishing฀market฀
opportunity.฀
Amortization฀expense฀related฀to฀intangible฀assets฀was฀$67฀million,฀
$28฀million฀and฀$21฀million฀in฀2004,฀2003฀and฀2002,฀respectively.