NOTE 16: RESTRUCTURING COSTS AND OTHER

Kodak recognizes the need to continually rationalize its workforce and streamline its operations in the face of ongoing business and economic changes. Charges for restructuring initiatives 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.

The activity in the accrued balances and the non-cash charges and credits incurred in relation to restructuring programs during the three years ended December 31, 2017 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, 2014	$	22		$	5		$	—		$	—		$	27
Charges		33			4			1			8			46
Utilization/cash payments		(36	)		(5	)		(1	)		(8	)		(50	)
Other adjustments & reclasses ⁽²⁾		(12	)		—			—			—			(12	)
Balance as of December 31, 2015		7			4			—			—			11
Charges		14			1			1			—			16
Utilization/cash payments		(14	)		(2	)		(1	)		—			(17	)
Other adjustments & reclasses ⁽³⁾		(2	)		—			—			—			(2	)
Balance as of December 31, 2016		5			3			—			—			8
Charges		26			3			9			—			38
Utilization/cash payments		(13	)		(2	)		(9	)		—			(24	)
Other adjustments & reclasses ⁽⁴⁾		(12	)		—			—			—			(12	)
Balance as of December 31, 2017	$	6		$	4		$	—		$	—		$	10

⁽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 $(12) million includes $(9) million of severance related charges for pension plan special termination benefits, which were reclassified to Pension and other postretirement liabilities and $(3) million of foreign currency translation adjustments.

⁽³⁾	The $(2) million represents severance related charges for pension plan curtailments and special termination benefits, which were reclassified to Pension and other postretirement liabilities.

⁽⁴⁾	The $(12) million includes $(13) million of severance related charges for pension plan special termination benefits, which were reclassified to Pension and other postretirement liabilities, and $1 million of foreign currency translation adjustments.

2015 Activity

The $46 million of charges for the year ended December 31, 2015 included $8 million for accelerated depreciation which was reported in Cost of revenues, $38 million which was reported as Restructuring costs and other in the accompanying Consolidated Statement of Operations.

The 2015 severance costs related to the elimination of approximately 600 positions, including approximately 250 manufacturing/service, 250 administrative and 100 research and development positions. The geographic composition of these positions included approximately 275 in the U.S. and Canada, and 325 throughout the rest of the world.

Severance relating to these initiatives was paid in periods through 2016 since, in many 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 continue beyond 2017.

2016 Activity

The $16 million of charges for the year ended December 31, 2016 included $1 million for inventory write-downs which was reported in Cost of revenues and $15 million which was reported as Restructuring costs and other in the accompanying Consolidated Statement of Operations.

The 2016 severance costs related to the elimination of approximately 200 positions, including approximately 100 administrative, 75 manufacturing/service, and 25 research and development positions. The geographic composition of these positions included approximately 75 in the U.S. and Canada, and 125 throughout the rest of the world.

Severance relating to these initiatives was paid in periods through 2017 since, in many 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 continue beyond 2017.

2017 Activity

Restructuring actions taken in 2017 were initiated to reduce Kodak’s cost structure as part of its commitment to drive sustainable profitability and included actions associated with the Prosper business cost reduction, voluntary workforce transition plans in the U.S., an office closure in Switzerland, the cancellation of the copper touch screen program, as well as various targeted reductions in manufacturing, service, sales, research and development and other administrative functions.

As a result of these actions, for the year ended December 31, 2017 Kodak recorded $38 million of charges, including $7 million for inventory write-downs which was reported in Cost of revenues and $31 million which was reported as Restructuring costs and other in the accompanying Consolidated Statement of Operations.

The 2017 severance costs related to the elimination of approximately 475 positions, including approximately 225 administrative, 150 manufacturing/service, and 100 research and development positions. The geographic composition of these positions included approximately 325 in the U.S. and Canada, and 150 throughout the rest of the world.

As a result of these initiatives, the majority of severance payments will be completed by the end of the first half of 2018. 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 throughout 2017 and beyond.

Prosper Business Cost Reduction

On January 12, 2017, Kodak announced an action to streamline costs in its Prosper business. This action is pursuant to Kodak’s initiative to focus the Prosper business on developing next generation Ultrastream technology with solutions that place writing systems in original equipment manufacturer and hybrid applications and the continued placement of Prosper 6000 presses and components in suitable high volume applications. The action has been substantially completed as of December 31, 2017.

Under this program for the year ended December 31, 2017, Kodak recorded severance charges of $4 million, long-lived asset impairment charges of $2 million, and inventory write-downs of $6 million.