NOTE 10: RESTRUCTURING LIABILITIES

Charges for restructuring activities are recorded in the period in which Kodak 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 three months of 2016 were initiated to reduce Kodak’s cost structure as part of its commitment to drive sustainable profitability and included actions associated with the exit of Kodak’s silver metal mesh touch screen development, continued progress toward the Leeds plate manufacturing facility exit, as well as various targeted reductions in manufacturing, service, sales, research and development and other administrative functions.

Leeds Plate Manufacturing Facility Exit

On March 3, 2014, Kodak announced a plan to exit its prepress plate manufacturing facility located in Leeds, England. This decision was pursuant to Kodak’s initiative to consolidate manufacturing operations globally, and is expected to result in a more efficient delivery of its products and solutions. Kodak began the exit of the facility in the second quarter of 2014, phased out production at the site in the third quarter of 2015 and expects to complete the exit of the facility by the end of the second quarter of 2016.

As a result of the decision, Kodak currently expects to incur total charges of $25 to $30 million, including $10 million of charges related to separation benefits, $13 to $15 million of non-cash related charges for accelerated depreciation and asset write-offs and $2 to $5 million in other cash related charges associated with this action.

Kodak incurred other exit costs of $1 million in the first three months of 2016 under this program.

Under this program, on a life-to-date basis as of March 31, 2016, Kodak has recorded severance charges of $10 million, long-lived asset impairment charges of $3 million, accelerated depreciation charges of $10 million, and other exit costs of $2 million.

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 months ended March 31, 2016 were as follows:

(in millions)	Severance Reserve (1)			Exit Costs Reserve (1)			Long-lived Asset Impairments and Inventory Write-downs (1)			Accelerated Depreciation (1)		Total
Balance as of December 31, 2015	$	7		$	4		$	-		$	-	$	11

Q1 2016 charges		4			-			1			-		5
Q1 utilization/cash payments		(5	)		(1	)		(1	)		-		(7	)
Q1 2016 other adjustments & reclasses (2)		(1	)		-			-			-		(1	)
Balance as of March 31, 2016	$	5		$	3		$	-		$	-	$	8

(1)

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.

(2)

The $(1) million represents severance related charges for pension plan special termination benefits, which are reflected in Pension and other postretirement liabilities in the Consolidated Statement of Financial Position.

For the three months ended March 31, 2016, the $5 million of charges includes $1 million of charges for inventory write-downs which were reported in Cost of revenues in the accompanying Consolidated Statement of Operations. The remaining $4 million was reported as Restructuring costs and other.

The severance costs related to the elimination of approximately 50 positions, including approximately 25 manufacturing/ service positions and 25 administrative positions. The geographic composition of these positions includes approximately 25 in the United States and Canada, and 25 throughout the rest of the world.

As a result of these initiatives, the majority of the severance will be paid during periods through the first half of 2016. However, 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 2016 and beyond.