Kodak 2004 Annual Report Download - page 92

Financials
90
EASTMAN KODAK COMPANY
The unaudited pro forma combined historical results, as if Practice-
Works had been acquired at the beginning of 2003 and 2002, respectively,
are estimated to be:
2003 2002
(in millions, except per share data) (Restated)
Net sales $ 13,039 $ 12,636
Earnings from continuing operations $ 185 $ 735
Basic earnings per share from
continuing operations $ .65 $ 2.52
Diluted earnings per share from
continuing operations $ .65 $ 2.52
Number of common shares used in:
Basic earnings per share 286.5 291.5
Diluted earnings per share 290.8 291.7
The pro forma results include amortization of the intangible assets
presented above and interest expense on debt assumed to fi nance the
purchase. The interest expense was calculated based on the assumption
that approximately $450 million of the purchase price was fi nanced through
debt with an annual interest rate of approximately 5%. The pro forma
results exclude the write-off of research and development assets that were
acquired from the acquisition. The pro forma results are not necessarily
indicative of what actually would have occurred if the acquisition had been
completed as of the beginning of each fi scal period presented, nor are they
necessarily indicative of future consolidated results.
Laser-Pacific Media Corporation On October 31, 2003, the Company
announced that it had completed the acquisition of Laser-Pacifi c Media
Corporation (Laser-Pacifi c), a leading Hollywood-based post-production
company for approximately $31 million or $4.22 per share. At the time of
the closing, Laser-Pacifi c had approximately $6 million of net debt. The
acquisition will allow the Company to establish a major presence in televi-
sion post-production and further extends Kodak’s current digital services
capabilities in the feature fi lm market. Approximately $2 million of the pur-
chase price was allocated to customer-related intangible assets that have
a useful life of four years. Approximately $10 million of the purchase price
was allocated to goodwill, which is reported in the Company’s Photography
segment. The goodwill is not expected to be deductible for tax purposes.
Earnings from continuing operations for 2003 include the results of Laser-
Pacifi c from the date of acquisition.
Algotec Systems Ltd. On November 26, 2003, the Company announced
that it had completed the acquisition of Algotec Systems Ltd. (Algotec),
a leading developer of advanced picture-archiving-and-communications
systems (PACS) in Raanana, Israel, for approximately $43 million in cash.
The acquisition improves the Company’s position in the growing mar-
ket for Healthcare Information Systems (HCIS), which enable radiology
departments worldwide to digitally manage and store medical images and
information.
Kodak Wuxi China Limited On December 26, 2003, an unaffi liated in-
vestor in Kodak Wuxi China Limited (KWCL) exercised its rights under a put
option arrangement, which required Kodak to repurchase a 30% outstand-
ing minority equity interest in this subsidiary for approximately $15 million
in cash. The purchase price allocation was completed in 2004, at which
time the approximately $3 million excess purchase price was allocated to
goodwill and other identifi able assets.
Kodak China Company Limited On December 31, 2003, an unaffi liated
investor in Kodak China Company Limited (KCCL) exercised its rights under
a put option arrangement, which required Kodak to repurchase a 10%
outstanding minority equity interest in this subsidiary for approximately
$42 million in cash. The purchase price allocation was completed in the
third quarter of 2004, at which time the approximately $3 million excess
purchase price was allocated to goodwill and other identifi able assets.
Other During the fi rst quarter, the Company paid approximately $21 mil-
lion for the rights to certain technology. As this technology was still in the
development phase and not yet ready for commercialization, it qualifi ed as
in-process research and development. Additionally, management deter-
mined that there are no alternative future uses for this technology beyond
its initial intended application. Accordingly, the entire purchase price was
expensed in the year ended December 31, 2003 as research and develop-
ment costs in the accompanying Consolidated Statement of Earnings.
During 2003, the Company completed a number of additional acquisi-
tions with an aggregate purchase price of approximately $3 million, which
were individually immaterial to the Company’s fi nancial position, results of
operations or cash fl ows.
2002
ENCAD, Inc. On January 24, 2002, the Company completed the acquisi-
tion of 100% of the voting common stock of ENCAD, Inc., (ENCAD) for a
total purchase price of approximately $25 million. The purchase price was
paid almost entirely in Kodak common stock. The purchase price in excess
of the fair value of the net assets acquired of approximately $6 million has
been allocated to goodwill. Earnings from continuing operations for 2002
include the results of ENCAD from the date of acquisition.
Kodak India Limited On September 11, 2002, the Company initiated an
offer to acquire all of the outstanding minority equity interests in Kodak
India Limited (Kodak India), a majority owned subsidiary of the Company.
The voluntary offer to the minority equity interest holders of Kodak India
was for the acquisition of approximately 2.8 million shares representing
the full 25.24% minority ownership in the subsidiary. In the fourth quarter
of 2002, the Company purchased 2.1 million shares for approximately $16
million in cash. Upon completion of the purchase price allocation in 2003,
the Company recorded essentially all of the excess purchase price of $8
million as goodwill. In December 2002, the Company also made an offer to
purchase the remaining 6.04% outstanding minority interest in Kodak India
for approximately $4.9 million. This additional repurchase was completed
during 2004. Kodak India operates in each of the Company’s reportable
segments and is engaged in the manufacture, trading and marketing of
cameras, fi lms, photo chemicals and other imaging products.
Kodak China Company Limited On December 31, 2002, an unaffi liated
investor in KCCL exercised its rights under a put option arrangement, which
required Kodak to repurchase a 10% outstanding minority equity interest