Kodak 2006 Annual Report Download - page 121

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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. Custom-
ers use SDP’s products to print utility bills, banking and credit card statements, direct mail materials, as well as invoices, financial 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 final 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 identified to be in progress was determined by estimating the future cash flows from
the projects once commercialized, less costs to complete development and discounting these net cash flows 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 rang-
ing from two to fourteen years. The $17 million of goodwill was assigned to the Graphic Communications Group segment.
NOTE 22: DISCONTINUED OPERATIONS
The significant components of earnings from discontinued operations, net of income taxes, for 2006, 2005 and 2004 are as follows:
(dollar amounts in millions) 2006 2005 2004
Remote Sensing Systems (RSS) earnings, net of tax $ — $ — $ 38
(Loss) gain on sale of RSS, net of tax — (55) 439
Tax reserve reversals related to audit settlement for tax years 1993–1998 — 203 —
All other items, net (1) 2 (2)
(Loss) earnings from discontinued operations, net of income taxes $ (1) $ 150 $ 475