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Financials
28
E A S T M A N฀ K OD A K ฀ C O M PA N Y
The฀costs฀incurred,฀net฀of฀reversals,฀which฀total฀$889฀million฀for฀the฀
year฀ended฀December฀31,฀2004,฀include฀$183฀million฀and฀$21฀million฀of฀
charges฀related฀to฀accelerated฀depreciation฀and฀inventory฀write-downs,฀
respectively,฀which฀were฀reported฀in฀cost฀of฀goods฀sold฀in฀the฀accompany-
ing฀Consolidated฀Statement฀of฀Earnings฀for฀the฀year฀ended฀December฀31,฀
2004.฀The฀remaining฀costs฀incurred,฀net฀of฀reversals,฀of฀$685฀million,฀were฀
reported฀as฀restructuring฀costs฀and฀other฀in฀the฀accompanying฀Consoli-
dated฀Statement฀of฀Earnings฀for฀the฀year฀ended฀December฀31,฀2004.฀The฀
severance฀costs฀and฀exit฀costs฀require฀the฀outlay฀of฀cash,฀while฀long-lived฀
asset฀impairments,฀accelerated฀depreciation฀and฀inventory฀write-downs฀
represent฀non-cash฀items.฀
2004-2006฀Restructuring฀Program
In฀addition฀to฀completing฀the฀remaining฀initiatives฀under฀the฀Third฀Quarter,฀
2003฀Restructuring฀Program,฀the฀Company฀announced฀on฀January฀22,฀
2004฀that฀it฀planned฀to฀develop฀and฀execute฀a฀comprehensive฀cost฀reduc-
tion฀program฀throughout฀the฀2004฀to฀2006฀timeframe.฀The฀objective฀of฀
these฀actions฀is฀to฀achieve฀a฀business฀model฀appropriate฀for฀the฀Company’s฀
traditional฀businesses,฀and฀to฀sharpen฀the฀Company’s฀competitiveness฀in฀
digital฀markets.฀As฀a฀result฀of฀the฀actions,฀the฀Company฀expects฀cost฀sav-
ings฀in฀the฀range฀of฀$800฀million฀to฀$1฀billion฀for฀full฀year฀2007.฀฀
The฀Program฀is฀expected฀to฀result฀in฀total฀charges฀of฀$1.3฀billion฀
to฀$1.7฀billion฀over฀the฀three-year฀period,฀of฀which฀$700฀million฀to฀$900฀
million฀are฀related฀to฀severance,฀with฀the฀remainder฀relating฀to฀the฀disposal฀
of฀buildings฀and฀equipment.฀Overall,฀Kodak’s฀worldwide฀facility฀square฀
footage฀is฀expected฀to฀be฀reduced฀by฀approximately฀one-third.฀Approxi-
mately฀12,000฀to฀15,000฀positions฀worldwide฀are฀expected฀to฀be฀eliminated฀
through฀these฀actions฀primarily฀in฀global฀manufacturing,฀selected฀traditional฀
businesses฀and฀corporate฀administration.฀Maximum฀single฀year฀cash฀usage฀
under฀the฀new฀program฀is฀expected฀to฀be฀approximately฀$250฀million.฀฀฀฀฀฀฀
The฀Company฀implemented฀certain฀actions฀under฀this฀program฀during฀
2004.฀As฀a฀result฀of฀these฀actions,฀the฀Company฀recorded฀charges฀of฀$674฀
million฀in฀2004,฀which฀was฀composed฀of฀severance,฀long-lived฀asset฀im-
pairments,฀exit฀costs฀and฀inventory฀write-downs฀of฀$418฀million,฀$138฀mil-
lion,฀$99฀million฀and฀$19฀million,฀respectively.฀The฀severance฀costs฀related฀
to฀the฀elimination฀of฀approximately฀9,625฀positions,฀including฀approximately฀
4,700฀photofinishing,฀3,575฀manufacturing,฀425฀research฀and฀development฀
and฀925฀administrative฀positions.฀The฀geographic฀composition฀of฀the฀posi-
tions฀to฀be฀eliminated฀includes฀approximately฀5,075฀in฀the฀United฀States฀
and฀Canada฀and฀4,550฀throughout฀the฀rest฀of฀the฀world.฀The฀reduction฀of฀
the฀9,625฀positions฀and฀the฀$517฀million฀charges฀for฀severance฀and฀exit฀
costs฀are฀reflected฀in฀the฀2004-2006฀Restructuring฀Program฀table฀below.฀฀
The฀$138฀million฀charge฀for฀long-lived฀asset฀impairments฀was฀included฀in฀
restructuring฀costs฀and฀other฀in฀the฀accompanying฀Consolidated฀Statement฀
of฀Earnings฀for฀the฀year฀ended฀December฀31,฀2004.฀The฀charges฀taken฀for฀
inventory฀write-downs฀of฀$19฀million฀were฀reported฀in฀cost฀of฀goods฀sold฀in฀
the฀accompanying฀Consolidated฀Statement฀of฀Earnings฀for฀the฀year฀ended฀
December฀31,฀2004.฀฀฀฀฀฀
The฀following฀table฀summarizes฀the฀activity฀with฀respect฀to฀the฀
charges฀recorded฀in฀connection฀with฀the฀focused฀cost฀reduction฀actions฀
that฀the฀Company฀has฀committed฀to฀under฀the฀2004-2006฀Restructuring฀
Program฀and฀the฀remaining฀balances฀in฀the฀related฀reserves฀at฀December฀
31,฀2004:฀฀
฀ ฀ ฀ ฀ ฀ Long-lived฀Asset
฀ ฀ ฀ Exit฀ ฀ Impairments
฀ Number฀of฀ Severance฀ Costs฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ and฀Inventory฀฀฀฀฀฀ Accelerated
(dollars฀in฀millions)฀ Employees฀ Reserve฀ Reserve฀ Total฀ Write-downs฀ Depreciation
Q1,฀2004฀charges฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀ —฀ $฀ —฀ $฀ —฀ $฀ 1฀ $฀ 2
Q1,฀2004฀utilization฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (1)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (2)฀฀
Balance฀at฀3/31/04฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀
Q2,฀2004฀charges฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 2,700฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀ 98฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 17฀฀฀฀฀฀฀฀฀฀฀ ฀ 115฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 28฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 23฀
Q2,฀2004฀utilization฀฀฀฀฀฀฀฀฀฀฀฀฀฀ (800)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (12)฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (11)฀฀฀฀฀฀฀฀฀฀ ฀ (23)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (28)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (23)
Q2,฀2004฀other฀adj.฀
฀฀&฀reclasses฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (2)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (2)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀
Balance฀at฀6/30/04฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 1,900฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 84฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 6฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 90฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀
Q3,฀2004฀charges฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 3,200฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 186฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 20฀฀฀฀฀฀฀฀฀฀฀ ฀ 206฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 27฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 31
Q3,฀2004฀reversal฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (1)฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (1)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —
Q3,฀2004฀utilization฀฀฀฀฀฀฀฀฀฀฀ (2,075)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (32)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (14)฀฀฀฀฀฀฀฀฀฀ ฀ (46)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (27)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (31)฀
Q3,฀2004฀other฀adj.
฀฀&฀reclasses฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (5)฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (5)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀ —
Balance฀at฀9/30/04฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 3,025฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀ 238฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 6฀฀฀฀฀฀฀฀฀฀฀ ฀ 244฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —
Q4,฀2004฀charges฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 3,725฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 134฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 62฀฀฀฀฀฀฀฀฀฀฀ ฀ 196฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 101฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 96
Q4,฀2004฀reversal฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (6)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (6)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀
Q4,฀2004฀utilization฀฀฀฀฀฀฀฀฀฀ (2,300)฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (125)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (22)฀฀฀฀฀฀฀฀฀ ฀ (147)฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (101)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀ (96)
Q4,฀฀2004฀other฀adj.฀
฀฀&฀reclasses฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 26฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ (10)฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 16฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ —
Balance฀at฀12/31/04฀฀฀฀฀฀฀฀฀฀฀฀ 4,450฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀฀267฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀฀฀36฀฀฀฀฀฀฀฀฀฀ $฀303฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀฀฀฀฀—฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀฀ ฀—฀฀฀