NOTE 11: 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 quarters 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, completion of 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 has completed the exit of the facility.

Under this program, on a life-to-date basis as of September 30, 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 and nine months ended September 30, 2016 were as follows:

(in millions)	Severance Reserve ⁽¹⁾			Exit Costs Reserve ⁽¹⁾			Long-lived Asset Impairments and Inventory Write-downs ⁽¹⁾			Total
Balance as of December 31, 2015	$	7		$	4		$	-		$	11
Q1 charges - continuing operations		4			-			1			5
Q1 utilization/cash payments		(5	)		(1	)		(1	)		(7	)
Q1 other adjustments and reclasses ⁽²⁾		(1	)		-			-			(1	)
Balance as of March 31, 2016	$	5		$	3		$	—		$	8
Q2 charges - continuing operations	$	6		$	1		$	-		$	7
Q2 charges - discontinued operations		1			-			-			1
Q2 utilization/cash payments		(3	)		(1	)		-			(4	)
Q2 other adjustments and reclasses ⁽³⁾		(1	)		-			-			(1	)
Balance as of June 30, 2016	$	8		$	3		$	—		$	11
Q3 charges - continuing operations	$	1		$	-		$	-		$	1
Q3 utilization/cash payments		(4	)		-			-			(4	)
Balance as of September 30, 2016	$	5		$	3		$	—		$	8

⁽¹⁾	The severance and exit costs reserves require the outlay of cash, while long-lived asset impairments 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.

⁽³⁾	The $(1) million represents severance related charges for pension plan curtailments and special termination benefits, which are reflected in Pension and other retirement liabilities in the Consolidated Statement of Financial Position.

For the three months ended September 30, 2016 the $1 million of charges were reported as Restructuring costs and other.

The severance costs for the three months ended September 30, 2016 related to the elimination of approximately 25 administrative positions located primarily outside of the United States and Canada.

For the nine months ended September 30, 2016, the $14 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 and $1 million which was reported in discontinued operations. The remaining $12 million was reported as Restructuring costs and other.

The severance costs for the nine months ended September 30, 2016 related to the elimination of approximately 175 positions, including approximately 50 manufacturing/service positions, 25 research and development positions and 100 administrative positions. The geographic composition of these positions includes approximately 75 in the United States and Canada and 100 throughout the rest of the world.

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