NOTE 20: SEGMENT INFORMATION

Kodak has seven reportable segments: Print Systems, Enterprise Inkjet Systems, Flexographic Packaging, Software and Solutions, Consumer and Film, Advanced Materials and 3D Printing Technology and Eastman Business Park. A description of the reportable segments follows.

Print Systems: The Print Systems segment is comprised of two lines of business: Prepress Solutions and Electrophotographic Printing Solutions.

Enterprise Inkjet Systems: The Enterprise Inkjet Systems segment is comprised of two lines of business: the Prosper business and the Versamark business.

Flexographic Packaging: The Flexographic Packaging segment is comprised of the Packaging line of business.

Software and Solutions: The Software and Solutions segment is comprised of two lines of business: Unified Workflow Solutions and Kodak Technology Solutions.

Consumer and Film: The Consumer and Film segment is comprised of three lines of business: Industrial Film and Chemicals, Motion Picture and Consumer Products (which includes Consumer Inkjet Solutions).

Advanced Materials and 3D Printing Technology: The Advanced Materials and 3D Printing Technology segment includes the Kodak Research Laboratories and associated new business opportunities and intellectual property licensing not directly related to other business segments.

Eastman Business Park: The Eastman Business Park segment includes the operations of the Eastman Business Park, a more than 1,200-acre technology center and industrial complex.

Segment financial information is shown below:

Segment Revenues

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2018		2017		2018		2017
Print Systems	$	217	$	232	$	660	$	681
Enterprise Inkjet Systems		39		33		103		105
Flexographic Packaging		36		34		111		104
Software and Solutions		21		21		61		64
Consumer and Film		48		55		144		151
Advanced Materials and 3D Printing Technology		1		—		3		—
Eastman Business Park		4		4		13		12
Consolidated total	$	366	$	379	$	1,095	$	1,117

Segment Operational EBITDA and Consolidated Earnings (Loss) from Continuing Operations Before Income Taxes

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions)	2018			2017			2018			2017
Print Systems	$	12		$	12		$	24		$	39
Enterprise Inkjet Systems		2			—			3			1
Flexographic Packaging		8			7			24			21
Software and Solutions		—			—			(1	)		(1	)
Consumer and Film		(2	)		(2	)		(12	)		(11	)
Advanced Materials and 3D Printing Technology		(2	)		(6	)		(11	)		(21	)
Eastman Business Park		2			2			3			3
Total of reportable segments		20			13			30			31
Depreciation and amortization		(19	)		(21	)		(58	)		(62	)
Restructuring costs and other		(9	)		(5	)		(13	)		(29	)
Stock based compensation		(2	)		(2	)		(5	)		(7	)
Consulting and other costs ⁽¹⁾		(5	)		(2	)		(11	)		(3	)
Idle costs ⁽²⁾		(1	)		—			(3	)		(2	)
Manufacturing capacity non-recurring costs⁽³⁾		—			—			(1	)		—
Other operating income (expense), net ⁽⁴⁾		10			(20	)		12			(32	)
Goodwill impairment loss⁽⁴⁾		—			(56	)		—			(56	)
Interest expense ⁽⁴⁾		(9	)		(8	)		(26	)		(24	)
Pension income excluding service cost component ⁽⁴⁾		35			39			99			114
Other (charges) income, net ⁽⁴⁾		4			4			(13	)		33
Consolidated earnings (loss) from continuing operations before income taxes	$	24		$	(58	)	$	11		$	(37	)

⁽¹⁾	Consulting and other costs are primarily professional services and internal costs associated with certain corporate strategic initiatives.

⁽²⁾	Consists of third party costs such as security, maintenance and utilities required to maintain land and buildings in certain locations not used in any Kodak operations.

⁽³⁾	Consists of noncapitalizable costs incurred as a result of the Flexographic Packaging segment’s expansion at the manufacturing facility in Weatherford, Oklahoma.

⁽⁴⁾	As reported in the Consolidated Statement of Operations.

Kodak reduced workers’ compensation reserves by approximately $6 million in the third quarter of 2018 due to changes in discount rates and reduction in estimated ultimate losses. The reduction in reserves impacted gross profit by approximately $3 million, SG&A by approximately $2 million and R&D by approximately $1 million.

Segment Measure of Profit and Loss

Kodak’s segment measure of profit and loss is an adjusted earnings before interest, taxes, depreciation and amortization (“Operational EBITDA”). As demonstrated in the above table, Operational EBITDA represents the earnings (loss) from continuing operations excluding the provision for income taxes; non-service cost components of pension and OPEB income; depreciation and amortization expense; restructuring costs; stock-based compensation expense; consulting and other costs; idle costs; manufacturing capacity expansion non-recurring costs; other operating income (expense), net (unless otherwise indicated); goodwill impairment losses; interest expense; and other (charges) income, net.

Kodak’s segments are measured using Operational EBITDA both before and after allocation of corporate selling, general and administrative expenses (“SG&A”). The segment earnings measure reported is after allocation of corporate SG&A as this most closely aligns with U.S. GAAP. Research and Development activities not directly related to the other segments are reported within the Advanced Materials and 3D Printing Technology segment.

Change in Segment Measure of Profitability

During the first quarter of 2018 the segment measure was changed to exclude amortization of prior service costs and credits which, due to the adoption of ASU 2017-17, are no longer reported in the same line item as other compensation costs arising from services rendered during the period. Refer to the Recently Adopted Accounting Pronouncements section of Note 1, “Basis of Presentation and Recent Accounting Pronouncements.”

During the second quarter of 2018 the segment measure was changed to exclude manufacturing capacity expansion non-recurring costs for the expansion at the Flexographic Packaging segment’s Weatherford, Oklahoma manufacturing facility. These costs in the prior periods were de minimis and therefore no prior period reclassification is necessary.