Note 11: Restructuring Liabilities

6 Months Ended

Jun. 30, 2012

Restructuring and Related Activities Disclosure [Text Block]

NOTE 11:  RESTRUCTURING LIABILITIES

Charges for restructuring activities are recorded in the period in which the Company commits to a formalized restructuring plan, or executes the specific actions contemplated by the plan, and all criteria for liability recognition under the applicable accounting guidance have been met.  Restructuring actions taken in the first six months of 2012 were initiated to reduce the Company’s cost structure as part of its commitment to drive sustainable profitability.  Year to date actions included the dedicated capture devices business exit, traditional product manufacturing capacity reductions in the U.S. and Mexico, workforce reductions triggered by the Kodak Gallery sale, consolidation of thermal media manufacturing in the U.S. and various targeted reductions in research and development, sales, service, and other administrative functions.

Restructuring Reserve Activity

The activity in the accrued balances and the non-cash charges and credits incurred in relation to restructuring activities for the three and six months ended June 30, 2012 were as follows:

(in millions)	Severance Reserve			Exit Costs Reserve			Long-lived Asset Impairments and Inventory Write-downs			Accelerated Depreciation			Total
Balance as of December 31, 2011	$	38		$	22		$	-		$	-			60
Q1 2012 charges		92			2			-			1			95
Q1 2012 utilization/cash payments		(20	)		(3	)		-			(1	)		(24	)
Q1 2012 other adjustments & reclasses  (1)		(55	)		(8	)		-			-			(63	)
Balance as of March 31, 2012	$	55		$	13		$	-		$	-		$	68
Q2 2012 charges		13			2			5			1			21
Q2 2012 utilization/cash payments		(24	)		(3	)		(5	)		(1	)		(33	)
Q2 2012 other adjustments & reclasses  (2)		(4	)		7			-			-			3
Balance as of June 30, 2012	$	40		$	19		$	-		$	-		$	59

(1)   The $(63) million includes $(55) million for severance-related charges for special termination benefits, which are reflected in Pension and other postretirement liabilities in the Consolidated Statement of Financial Position.  The remaining $(8) million reflects amounts reclassified as Liabilities subject to compromise.

(2)   The $3 million includes $(2) million for severance-related charges for special termination benefits, which are reflected in Pension and other postretirement liabilities in the Consolidated Statement of Financial Position, and $7 million of reserves reclassified from Liabilities subject to compromise.  The remaining $(2) million reflects foreign currency translation adjustments.

For the three months ended June 30, 2012, the $21 million of charges include $1 million for accelerated depreciation and $1 million for inventory write-downs, which were reported in Cost of sales in the accompanying Consolidated Statement of Operations.  The remaining costs incurred of $19 million were reported as Restructuring costs and other in the accompanying Consolidated Statement of Operations for the three months ended June 30, 2012.  The severance and exit costs reserves require the outlay of cash, while long-lived asset impairments, accelerated depreciation and inventory write-downs represent non-cash items.

The second quarter 2012 severance costs related to the elimination of approximately 350 positions, including approximately 175 manufacturing/service positions and 175 administrative positions.  The geographic composition of these positions includes approximately 175 in the United States and Canada, and 175 throughout the rest of the world.

The charges of $21 million recorded in the second quarter of 2012 included $14 million applicable to the Consumer Segment, $3 million applicable to the Commercial Segment, and $4 million that was applicable to manufacturing, research and development, and administrative functions, which are shared across all segments.

For the six months ended June 30, 2012, the $116 million of charges include $2 million of charges for accelerated depreciation and $1 million of charges for inventory write-downs, which were reported in Cost of sales in the accompanying Consolidated Statement of Operations.  The remaining costs incurred of $113 million were reported as Restructuring costs, rationalization and other in the accompanying Consolidated Statement of Operations for the six months ended June 30, 2012.  The severance and exit costs reserves require the outlay of cash, while long-lived asset impairments, accelerated depreciation and inventory write-downs represent non-cash items.

The severance costs for the six months ended June 30, 2012 related to the elimination of approximately 2,050 positions, including approximately 1,375 manufacturing/service positions, 425 administrative positions, and 250 research and development positions.  The geographic composition of these positions includes approximately 1,200 in the United States and Canada, and 850 throughout the rest of the world.

The charges of $116 million recorded in the second quarter of 2012 included $41 million applicable to the Consumer Segment, $29 million applicable to the Commercial Segment, and $46 million that was applicable to manufacturing, research and development, and administrative functions, which are shared across both segments.

As a result of these initiatives, the majority of the severance will be paid during periods through the end of 2012 since, in some instances; the employees whose positions were eliminated can elect or are required to receive their payments over an extended period of time.  In addition, certain exit costs, such as long-term lease payments, will be paid over periods throughout 2012 and beyond.