Kodak 2004 Annual Report Download - page 82

Financials
80
EASTMAN KODAK COMPANY
During 2004, the Company made severance payments of $15 million
and exit cost payments of $4 million related to the First Quarter, 2003
Restructuring Program. In addition, the Company reversed $1 million of
severance reserves during 2004, as severance payments were less than
originally estimated. This reversal was included in restructuring costs and
other in the accompanying Consolidated Statement of Earnings for the year
ended December 31, 2004. The remaining severance payments relating to
initiatives already implemented under the First Quarter, 2003 Restructuring
Program will be paid during 2005 since, in many instances, the employees
whose positions were eliminated can elect or are required to receive their
severance payments over an extended period of time.
As a result of initiatives implemented under the First Quarter, 2003
Restructuring Program, the Company recorded $7 million of accelerated
depreciation on long-lived assets in cost of goods sold in the accompanying
Consolidated Statement of Earnings for the year ended December 31, 2004.
The accelerated depreciation relates to long-lived assets accounted for
under the held and used model of SFAS No. 144. The year-to-date amount
of $7 million relates to lab equipment used in photofi nishing that was used
until its abandonment.
The charges of $7 million recorded during 2004 were applicable to
the D&FIS segment. The program-to-date charges of $112 million included
$92 million applicable to the D&FIS segment, $4 million applicable to the
Commercial Imaging segment and $1 million applicable to the Graphic
Communications segment. The balance of $15 million was applicable to
manufacturing and administrative functions, which are shared across all
segments.
As of the end of the third quarter of 2003, the Company had commit-
ted to all of the initiatives originally contemplated under the First Quarter,
2003 Restructuring Program. A total of 1,850 positions were eliminated
as a result of the initiatives implemented under the First Quarter, 2003
Restructuring Program.
NOTE 17: RETIREMENT PLANS
Substantially all U.S. employees are covered by a noncontributory defi ned
benefi t plan, the Kodak Retirement Income Plan (KRIP), which is funded by
Company contributions to an irrevocable trust fund. The funding policy for
KRIP is to contribute amounts suffi cient to meet minimum funding require-
ments as determined by employee benefi t and tax laws plus additional
amounts the Company determines to be appropriate. Generally, benefi ts are
based on a formula recognizing length of service and fi nal average earn-
ings. Assets in the trust fund are held for the sole benefi t of participating
employees and retirees. They are comprised of corporate equity and debt
securities, U.S. government securities, partnership and joint venture invest-
ments, interests in pooled funds, and various types of interest rate, foreign
currency and equity market fi nancial instruments.
On March 25, 1999, the Company amended this plan to include a
separate cash balance formula for all U.S. employees hired after February
1999. All U.S. employees hired prior to that date were granted the option to
choose the KRIP plan or the Cash Balance Plus plan. Written elections were
made by employees in 1999, and were effective January 1, 2000. The Cash
Balance Plus plan credits employees’ accounts with an amount equal to 4%
of their pay, plus interest based on the 30-year treasury bond rate. In ad-
dition, for employees participating in this plan and the Company’s defi ned
contribution plan, the Savings and Investment Plan (SIP), the Company
will match SIP contributions for an amount up to 3% of pay, for employee
contributions of up to 5% of pay. Company contributions to SIP were $15
million, $15 million and $14 million for 2004, 2003 and 2002, respectively.
As a result of employee elections to the Cash Balance Plus plan, the reduc-
tions in future pension expense will be almost entirely offset by the cost of
matching employee contributions to SIP. The impact of the Cash Balance
Plus plan is shown as a plan amendment.
The Company also sponsors unfunded defi ned benefi t plans for
certain U.S. employees, primarily executives. The benefi ts of these plans
are obtained by applying KRIP provisions to all compensation, including
amounts being deferred, and without regard to the legislated qualifi ed plan
maximums, reduced by benefi ts under KRIP.
Most subsidiaries and branches operating outside the U.S. have
defi ned benefi t retirement plans covering substantially all employees.
Contributions by the Company for these plans are typically deposited under
government or other fi duciary-type arrangements. Retirement benefi ts are
generally based on contractual agreements that provide for benefi t formu-
las using years of service and/or compensation prior to retirement. The
actuarial assumptions used for these plans refl ect the diverse economic
environments within the various countries in which the Company operates.
The measurement date used to determine the pension obligation for
all major funded and unfunded U.S. and Non-U.S. defi ned benefi t plans
comprising a majority of the plan assets and benefi t obligations is Decem-
ber 31.