Kodak 2004 Annual Report Download - page 39

Financials
37
2 0 0 4 ฀ S U M M A R Y ฀ A N N U A L ฀ R E P O R T
The฀Company฀has฀a฀dividend฀policy฀whereby฀it฀makes฀semi-annual฀
payments฀which,฀when฀declared,฀will฀be฀paid฀on฀the฀Company’s฀10th฀busi-
ness฀day฀each฀July฀and฀December฀to฀shareholders฀of฀record฀on฀the฀close฀of฀
the฀first฀business฀day฀of฀the฀preceding฀month.฀On฀April฀15,฀2003,฀the฀Com-
pany’s฀Board฀of฀Directors฀declared฀a฀semi-annual฀cash฀dividend฀of฀$.90฀per฀
share฀on฀the฀outstanding฀common฀stock฀of฀the฀Company.฀This฀dividend฀was฀
paid฀on฀July฀16,฀2003฀to฀shareholders฀of฀record฀at฀the฀close฀of฀business฀on฀
June฀2,฀2003.฀On฀September฀24,฀2003,฀the฀Company’s฀Board฀of฀Directors฀
approved฀the฀reduction฀of฀the฀amount฀of฀the฀annual฀dividend฀to฀$.50฀per฀
share.฀On฀that฀same฀date,฀the฀Company’s฀Board฀of฀Directors฀declared฀a฀
semi-annual฀cash฀dividend฀of฀$.25฀per฀share฀on฀the฀outstanding฀common฀
stock฀of฀the฀Company.฀This฀dividend฀was฀paid฀on฀December฀12,฀2003฀to฀the฀
shareholders฀of฀record฀as฀of฀the฀close฀of฀business฀on฀November฀3,฀2003.฀฀฀
Capital฀additions฀were฀$497฀million฀in฀2003,฀with฀the฀majority฀of฀the฀
spending฀supporting฀new฀products,฀manufacturing฀productivity฀and฀quality฀
improvements,฀infrastructure฀improvements,฀and฀ongoing฀environmental฀
and฀safety฀initiatives.฀฀
During฀2003,฀the฀Company฀expended฀$250฀million฀against฀the฀related฀
restructuring฀reserves,฀primarily฀for฀the฀payment฀of฀severance฀benefits.฀฀
Employees฀whose฀positions฀were฀eliminated฀could฀elect฀to฀receive฀sever-
ance฀payments฀for฀up฀to฀two฀years฀following฀their฀date฀of฀termination.
2002
The฀Company’s฀cash฀and฀cash฀equivalents฀increased฀$121฀million฀during฀
2002฀to฀$569฀million฀at฀December฀31,฀2002.฀The฀increase฀resulted฀primar-
ily฀from฀$2,204฀million฀of฀cash฀flows฀from฀operating฀activities,฀partially฀
offset฀by฀$758฀million฀of฀cash฀flows฀used฀in฀investing฀activities฀and฀$1,331฀
million฀of฀cash฀used฀in฀financing฀activities.
฀The฀net฀cash฀provided฀by฀operating฀activities฀of฀$2,204฀million฀for฀the฀
year฀ended฀December฀31,฀2002฀was฀partially฀attributable฀to:฀(1)฀net฀earn-
ings฀of฀$770฀million฀which,฀when฀adjusted฀for฀earnings฀from฀discontinued฀
operations,฀equity฀in฀losses฀from฀unconsolidated฀affiliates,฀gain฀on฀sales฀
of฀assets,฀depreciation฀and฀amortization,฀and฀restructuring฀costs,฀asset฀
impairments฀and฀other฀charges,฀and฀benefit฀for฀deferred฀income฀taxes฀
provided฀$1,537฀million฀of฀operating฀cash,฀(2)฀a฀decrease฀in฀accounts฀re-
ceivable฀of฀$276฀million,฀(3)฀a฀decrease฀in฀inventories฀of฀$93฀million฀and฀(4)฀
proceeds฀from฀the฀surrender฀of฀its฀Company-owned฀life฀insurance฀policies฀
of฀$187฀million.฀The฀net฀cash฀used฀in฀investing฀activities฀of฀$758฀million฀
was฀utilized฀primarily฀for฀capital฀expenditures฀of฀$571฀million,฀investments฀
in฀unconsolidated฀affiliates฀of฀$123฀million,฀business฀acquisitions฀of฀$72฀
million,฀of฀which฀$60฀million฀related฀to฀the฀purchase฀of฀minority฀interests฀in฀
China฀and฀India,฀and฀net฀purchases฀of฀marketable฀securities฀of฀$13฀million.฀
These฀uses฀of฀cash฀were฀partially฀offset฀by฀proceeds฀from฀the฀sale฀of฀prop-
erties฀of฀$27฀million.฀The฀net฀cash฀used฀in฀financing฀activities฀of฀$1,331฀
million฀was฀primarily฀the฀result฀of฀net฀debt฀repayments฀of฀$597฀million,฀
dividend฀payments฀of฀$525฀million฀and฀the฀repurchase฀of฀7.4฀million฀Kodak฀
shares฀held฀by฀the฀Kodak฀Retirement฀Income฀Plan฀(KRIP),฀the฀Company’s฀
defined฀benefit฀plan,฀for฀$260฀million.฀Of฀the฀$260฀million฀expended,฀$205฀
million฀was฀repurchased฀under฀the฀1999฀stock฀repurchase฀program,฀which฀
is฀now฀completed.฀The฀balance฀of฀the฀amount฀expended฀of฀$55฀million฀was฀
repurchased฀under฀the฀2000฀stock฀repurchase฀program.
Capital฀additions฀were฀$571฀million฀in฀2002,฀with฀the฀majority฀of฀the฀
spending฀supporting฀new฀products,฀manufacturing฀productivity฀and฀quality฀
improvements,฀infrastructure฀improvements,฀and฀ongoing฀environmental฀
and฀safety฀initiatives.฀฀
The฀cash฀outflows฀for฀severance฀and฀exit฀costs฀associated฀with฀the฀
restructuring฀charges฀recorded฀in฀2002฀were฀more฀than฀offset฀by฀the฀tax฀
savings฀associated฀with฀the฀restructuring฀actions,฀primarily฀due฀to฀the฀
tax฀benefit฀of฀$46฀million฀relating฀to฀the฀consolidation฀of฀its฀photofinish-
ing฀operations฀in฀Japan฀recorded฀in฀the฀third฀quarter฀2002฀restructuring฀
charge.฀During฀2002,฀the฀Company฀expended฀$216฀million฀against฀the฀
related฀restructuring฀reserves,฀primarily฀for฀the฀payment฀of฀severance฀
benefits,฀which฀were฀mostly฀attributable฀to฀the฀2001฀restructuring฀actions.฀฀
The฀remaining฀severance-related฀actions฀associated฀with฀the฀total฀2001฀
restructuring฀charge฀were฀completed฀by฀the฀end฀of฀the฀first฀quarter฀of฀
2003,฀and฀the฀remaining฀severance฀payments฀of฀$6฀million฀at฀December฀
31,฀2003฀were฀made฀by฀the฀end฀of฀2004.฀Employees฀whose฀positions฀were฀
eliminated฀could฀elect฀to฀receive฀severance฀payments฀for฀up฀to฀two฀years฀
following฀their฀date฀of฀termination.
OTHER
Cash฀expenditures฀for฀pollution฀prevention฀and฀waste฀treatment฀for฀the฀
Company’s฀current฀facilities฀were฀as฀follows:฀
(in฀millions)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀2004฀฀฀฀฀฀฀฀2003฀฀฀฀฀฀฀฀2002
Recurring฀costs฀for฀pollution฀
฀ prevention฀and฀waste฀treatment฀ $฀฀75฀ $฀฀฀74฀ $฀฀67
Capital฀expenditures฀for฀pollution฀
฀ prevention฀and฀waste฀treatment฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 7฀฀฀฀฀฀฀฀฀฀฀฀฀฀8฀฀฀฀฀฀฀฀฀฀฀ 12
Site฀remediation฀costs฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 3฀฀฀฀฀฀฀฀฀฀฀฀฀฀2฀฀฀฀฀฀฀฀฀฀฀฀฀ 3
฀ ฀ Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀฀85฀฀฀฀ $฀฀฀84฀ $฀ 82
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
At฀December฀31,฀2004฀and฀2003,฀the฀Company’s฀undiscounted฀
accrued฀liabilities฀for฀environmental฀remediation฀costs฀amounted฀to฀$153฀
million฀and฀$141฀million,฀respectively.฀These฀amounts฀are฀reported฀in฀
other฀long-term฀liabilities฀in฀the฀accompanying฀Consolidated฀Statement฀of฀
Financial฀Position.
฀The฀Company฀is฀currently฀implementing฀a฀Corrective฀Action฀Program฀
required฀by฀the฀Resource฀Conservation฀and฀Recovery฀Act฀(RCRA)฀at฀the฀
Kodak฀Park฀site฀in฀Rochester,฀NY.฀As฀part฀of฀this฀program,฀the฀Company฀has฀
completed฀the฀RCRA฀Facility฀Assessment฀(RFA),฀a฀broad-based฀environ-
mental฀investigation฀of฀the฀site.฀The฀Company฀is฀currently฀in฀the฀process฀
of฀completing,฀and฀in฀some฀cases฀has฀completed,฀RCRA฀Facility฀Investiga-
tions฀(RFI)฀and฀Corrective฀Measures฀Studies฀(CMS)฀for฀areas฀at฀the฀site.฀At฀
December฀31,฀2004,฀estimated฀future฀investigation฀and฀remediation฀costs฀
of฀$67฀million฀are฀accrued฀for฀this฀site฀and฀are฀included฀in฀the฀$153฀million฀
reported฀in฀other฀long-term฀liabilities.
The฀Company฀announced฀the฀closing฀of฀three฀manufacturing฀facilities฀
outside฀the฀United฀States฀in฀2004.฀The฀Company฀has฀obligations฀with฀esti-
mated฀future฀investigation,฀remediation฀and฀monitoring฀costs฀of฀$21฀million฀
at฀two฀of฀these฀facilities.฀At฀December฀31,฀2004,฀these฀costs฀are฀accrued฀
and฀included฀in฀the฀$153฀million฀reported฀in฀other฀long-term฀liabilities.฀฀
The฀Company฀has฀obligations฀relating฀to฀other฀operating฀sites฀and฀for-
mer฀operations฀with฀estimated฀future฀investigation,฀remediation฀and฀moni-