Kodak 2004 Annual Report Download - page 11

Financials
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2 0 0 4 ฀ S U M M A R Y ฀ A N N U A L ฀ R E P O R T
STOCK-BASED฀COMPENSATION
The฀Company฀accounts฀for฀its฀employee฀stock฀incentive฀plans฀under฀
Accounting฀Principles฀Board฀(APB)฀Opinion฀No.฀25,฀“Accounting฀for฀Stock฀
Issued฀to฀Employees”฀and฀the฀related฀interpretations฀under฀Financial฀Ac-
counting฀Standards฀Board฀(FASB)฀Interpretation฀No.฀44,฀“Accounting฀for฀
Certain฀Transactions฀Involving฀Stock฀Compensation.”฀Accordingly,฀no฀stock-
based฀employee฀compensation฀cost฀is฀reflected฀in฀net฀earnings฀for฀the฀
years฀ended฀December฀31,฀2004,฀2003฀and฀2002,฀as฀all฀options฀granted฀
had฀an฀exercise฀price฀equal฀to฀the฀market฀value฀of฀the฀underlying฀common฀
stock฀on฀the฀date฀of฀grant.฀On฀February฀18,฀2004,฀the฀Company฀announced฀
that฀it฀would฀begin฀expensing฀stock฀options฀starting฀January฀1,฀2005฀using฀
the฀fair฀value฀recognition฀provisions฀of฀SFAS฀No.฀123,฀“Accounting฀for฀
Stock-Based฀Compensation.”฀In฀December฀2004,฀the฀FASB฀issued฀SFAS฀
No.฀123R,฀a฀new฀accounting฀standard฀that฀will฀require฀the฀expensing฀of฀
stock฀options฀and฀affect฀the฀accounting฀for฀the฀Company’s฀restricted฀stock฀
and฀stock฀appreciations฀rights฀as฀of฀the฀beginning฀of฀interim฀or฀annual฀re-
porting฀periods฀that฀begin฀after฀June฀15,฀2005.฀Early฀adoption฀is฀permitted฀
for฀all฀companies;฀consequently,฀on฀January฀1,฀2005,฀the฀Company฀early฀
adopted฀the฀stock฀option฀expensing฀rules฀of฀the฀new฀standard.฀฀฀฀
KODAK฀OPERATING฀MODEL฀AND฀฀฀
REPORTING฀STRUCTURE
The฀Company฀has฀four฀reportable฀segments:฀Digital฀&฀Film฀Imaging฀Sys-
tems฀(D&FIS),฀Health,฀Commercial฀Imaging,฀and฀Graphic฀Communications.฀฀
The฀balance฀of฀the฀Company’s฀operations,฀which฀individually฀and฀in฀the฀
aggregate฀do฀not฀meet฀the฀criteria฀of฀a฀reportable฀segment,฀are฀reported฀in฀
All฀Other.฀A฀description฀of฀the฀segments฀is฀as฀follows:฀฀฀
Digital฀&฀Film฀Imaging฀Systems฀Segment:฀The฀D&FIS฀
segment฀derives฀revenues฀from฀consumer฀film฀products,฀sales฀of฀origina-
tion฀and฀print฀film฀to฀the฀entertainment฀industry,฀sales฀of฀professional฀film฀
products,฀thermal,฀traditional฀and฀inkjet฀photo฀paper,฀chemicals,฀traditional฀
and฀digital฀cameras,฀digital฀printers,฀photoprocessing฀equipment฀and฀
services,฀and฀digitization฀services,฀including฀online฀services.฀฀
Health฀Segment:฀The฀Health฀segment฀derives฀revenues฀from฀the฀
sale฀of฀digital฀products,฀including฀laser฀imagers,฀media,฀computed฀and฀
direct฀radiography฀equipment฀and฀healthcare฀information฀systems,฀as฀well฀
as฀traditional฀medical฀products,฀including฀analog฀film,฀equipment,฀chemis-
try,฀services฀and฀specialty฀products฀for฀the฀mammography,฀oncology,฀and฀
dental฀fields.฀฀
Commercial฀Imaging฀Segment:฀The฀Commercial฀Imaging฀
segment฀is฀composed฀of฀document฀imaging฀products฀and฀services,฀com-
mercial฀and฀government฀systems฀products฀and฀services,฀and฀optics.฀The฀
Remote฀Sensing฀Systems฀business,฀which฀was฀sold฀to฀ITT฀Industries฀in฀
August฀2004,฀is฀accounted฀for฀as฀a฀discontinued฀operation฀in฀prior฀periods฀
and฀the฀current฀period฀up฀through฀the฀date฀of฀sale.฀฀
Graphic฀Communications฀Segment:฀The฀Graphic฀Com-
munications฀segment฀is฀composed฀of฀the฀Company’s฀equity฀investments฀
in฀Kodak฀Polychrome฀Graphics฀(Kodak’s฀50/50฀joint฀venture฀with฀Sun฀
Chemical)฀and฀NexPress฀(Kodak’s฀50/50฀joint฀venture฀with฀Heidelberg)฀
prior฀to฀its฀acquisition฀in฀May฀2004,฀and฀the฀graphics฀and฀wide-format฀
inkjet฀businesses.฀This฀segment฀also฀includes฀the฀results฀of฀Scitex฀Digital฀
Printing,฀which฀was฀acquired฀in฀January฀2004฀and฀has฀since฀been฀renamed฀
Kodak฀Versamark,฀as฀well฀as฀the฀results฀of฀the฀NexPress-related฀entities฀
subsequent฀to฀the฀acquisition฀in฀May฀2004.฀฀
All฀Other:฀All฀Other฀is฀composed฀of฀Kodak’s฀display฀and฀components฀
business฀for฀image฀sensors฀and฀other฀small,฀miscellaneous฀businesses.฀It฀
also฀includes฀development฀initiatives฀in฀consumer฀inkjet฀technologies.