NOTES TO FINANCIAL STATEMENTS
NOTE 1: BANKRUPTCY PROCEEDINGS
On January 19, 2012 (the Petition Date), Eastman Kodak Company and its U.S. subsidiaries (collectively, the Debtors) filed voluntary petitions for relief (the
Bankruptcy Filing) under chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) case number
12-10202. The Companys foreign subsidiaries (collectively, the Non-Filing Entities) were not part of the Bankruptcy Filing.
The Debtors continue to operate their businesses as debtors-in-possession
under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Non-Filing Entities continue to operate in the ordinary course of business.
The Bankruptcy Filing is intended to permit Kodak to reorganize and increase liquidity in the U.S. and abroad, monetize non-strategic
intellectual property and businesses, fairly resolve legacy liabilities, and focus on the most valuable business lines to enable sustainable profitability. The Debtors goal is to develop and implement a reorganization plan that meets the
standards for confirmation under the Bankruptcy Code. Confirmation of a reorganization plan could materially alter the classifications and amounts reported in Kodaks consolidated financial statements, which do not give effect to any
adjustments to the carrying values of assets or amounts of liabilities that might be necessary as a consequence of a confirmation of a reorganization plan or other arrangement or the effect of any operational changes that may be implemented.
OPERATION AND IMPLICATION OF THE BANKRUPTCY FILING
Under Section 362 of the Bankruptcy Code, the filing of voluntary bankruptcy petitions by the Debtors automatically stayed most actions against the Debtors, including most actions to collect
indebtedness incurred prior to the Petition Date or to exercise control over Kodaks property. Accordingly, although the Bankruptcy Filing triggered defaults for certain of the Debtors debt obligations, creditors are stayed from taking
any actions as a result of such defaults. Absent an order of the Bankruptcy Court, substantially all of the Debtors pre-petition liabilities are subject to compromise under a reorganization plan. As a result of the Bankruptcy Filing the
realization of assets and the satisfaction of liabilities are subject to uncertainty. The Debtors, operating as debtors-in-possession under the Bankruptcy Code, may, subject to approval of the Bankruptcy Court, sell or otherwise dispose of assets
and liquidate or compromise liabilities for amounts other than those reflected in the consolidated financial statements. Further, a confirmed reorganization plan or other arrangement may materially change the amounts and classifications in the
Companys consolidated financial statements.
The Debtors may assume, assume and assign, or reject certain executory contracts and
unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. In general, rejection of an executory contract or unexpired lease is treated as a pre-petition breach of the executory contract or unexpired lease in
question and, subject to certain exceptions, relieves the Debtors from performing their future obligations under such executory contract or unexpired lease but entitles the contract counter-party or lessor to a pre-petition general unsecured claim
for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure any existing defaults under such executory contract or unexpired lease.
Subsequent to the Petition Date, the Debtors received approval, but not direction, from the Bankruptcy Court to pay or otherwise honor certain
pre-petition obligations generally designed to stabilize Kodaks operations. These obligations related to certain employee wages, salaries and benefits, certain customer program obligations, and the payment of vendors and other providers in the
ordinary course for goods and services received after the Petition Date. The Debtors have retained, pursuant to Bankruptcy Court approval, legal and financial professionals to advise the Company in connection with the Bankruptcy Filing and certain
other professionals to provide services and advice in the ordinary course of business. From time to time, the Debtors may seek Bankruptcy Court approval to retain additional professionals.
The U.S. Trustee for the Southern District of New York (the U.S. Trustee) has appointed an official committee of unsecured creditors (the UCC) as well as an official committee of
retired employees (Retiree Committee). The UCC, the Retiree Committee and their legal representatives have a right to be heard on all matters affecting the Debtors that come before the Bankruptcy Court. There can be no assurance that the
UCC will support the Debtors positions on matters to be presented to the Bankruptcy Court in the future or on any reorganization plan, once proposed.
REORGANIZATION PLAN
In order for the Debtors to emerge successfully from chapter
11, the Debtors must obtain the Bankruptcy Courts approval of a reorganization plan, which will enable the Debtors to emerge from chapter 11 as a reorganized entity operating in the ordinary course of business outside of bankruptcy. In
connection with a reorganization plan, the Company also may require a new credit facility, or exit financing. The Companys ability to obtain such approval and exit financing will depend on, among other things, the timing and
outcome
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of various ongoing matters related to the Bankruptcy Filing. A reorganization plan determines the rights and satisfaction of claims of various creditors and security holders, and is subject to
the ultimate outcome of negotiations, events and Bankruptcy Court decisions.
On February 22, 2013, the Bankruptcy Court entered an order
extending the period of time that the Debtors have the exclusive right to file a reorganization plan and disclosure statement with the Bankruptcy Court through and including April 18, 2013. The extension concerns only the length of time in
which the Debtors have the sole right to file a reorganization plan, not the duration of the case.
The Debtor-In-Possession Credit Agreement
(DIP Credit Agreement or DIP) stipulates that a draft of an acceptable reorganization plan and disclosure statement is to be provided to the DIP agent on or prior to January 15, 2013 and filed with the court on or prior
to February 15, 2013. On January 15, 2013, the Company provided to the DIP agent a draft reorganization plan and disclosure statement. On February 6, 2013, the Company entered into an amendment of the DIP Credit Agreement to extend
the requirement to file a plan of reorganization and disclosure statement with the Bankruptcy Court to April 30, 2013.
Under section
1125 of the Bankruptcy Code, the disclosure statement must be approved by the Bankruptcy Court before the Debtors may solicit acceptance of the proposed reorganization plan. To be approved by the Bankruptcy Court, the disclosure statement must
contain adequate information that would enable a hypothetical holder to make an informed judgment about the plan. Once the disclosure statement is approved, the Debtors may send the proposed reorganization plan, the disclosure statement
and ballots to all creditors entitled to vote.
Kodak presently expects that any proposed reorganization plan will provide, among other
things, settlement of the obligations under the DIP Credit agreement, mechanisms for settlement of claims against the Debtors estates, treatment of the Companys existing equity and debt holders, and certain corporate governance and
administrative matters pertaining to the reorganized Company. Any proposed reorganization plan will be subject to revision prior to submission to the Bankruptcy Court based upon discussions with the Debtors creditors and other interested
parties, and thereafter in response to creditor claims and objections and the requirements of the Bankruptcy Code or the Bankruptcy Court. There can be no assurance that the Debtors will be able to secure approval for the Debtors
proposed reorganization plan from creditors or confirmation from the Bankruptcy Court. In the event the Debtors do not secure approval or confirmation of the reorganization plan, any outstanding DIP Credit Agreement principal and interest
could become immediately due and payable.
DEBTOR-IN-POSSESSION FINANCING
In connection with the Bankruptcy Filing, on January 20, 2012, the Company and Kodak Canada Inc. (the Canadian Borrower and, together
with the Company, the Borrowers) entered into a Debtor-in-Possession Credit Agreement, as amended on January 25, 2012, March 5, 2012, April 26, 2012, December 19, 2012, and February 6, 2013 (the
DIP Credit Agreement). Pursuant to the terms of the DIP Credit Agreement, the lenders agreed to lend to the Borrowers an aggregate principal amount of up to $950 million, consisting of up to $250 million super-priority senior secured
asset-based revolving credit facilities and an up to $700 million super-priority senior secured term loan facility (collectively, the Loans). The DIP Credit Agreement was approved on February 15, 2012 by the Bankruptcy Court. The
DIP Credit Agreement terminates and all outstanding obligations must be repaid on the earliest to occur of (i) July 20, 2013, (ii) the date of the substantial consummation of certain reorganization plans, or (iii) certain other
events, including Events of Default (as defined in the DIP Credit Agreement) and repayment in full of the obligations pursuant to a mandatory prepayment.
On March 1, 2013, the Company and the DIP Credit Agreement agent agreed on terms for the solicitation of consents from the ABL lenders under the existing DIP Credit Agreement which would consent to
the incurrence of the Junior DIP Facility and among other related changes and conforming changes to the Junior DIP Facility, would extend the maturity date of the DIP Credit Agreement from July 20, 2013 to September 30, 2013, to match the
maturity of the Junior DIP Facility. Refer to Note 11, Short-Term Borrowings and Long-Term Debt for additional information on the DIP Credit Agreement amendments.
On February 28, 2013, the Company and members of the Steering Committee of the Second Lien Noteholders (the Commitment Parties) agreed to structure and arrange a Junior DIP Facility with
an aggregate principal amount of up to $848 million of term loans. The term loans would consist of first lien term loans in the aggregate principal amount of $455 million (the New Money Loans) and junior lien term loans in the aggregate
principal amount of up to $375 million consisting of a dollar-for-dollar roll-up (such loans, the Rolled-Up Loans) for a portion of the amounts outstanding under the Companys 2019 Senior Secured Notes issued
March 15, 2011 and 2018 Senior Secured Notes issued March 5, 2010 (the Second Lien Notes). The Bankruptcy Filing created an event of default under the Second Lien Notes. The Junior DIP Facility will allow for payment of certain
fees in cash or additional New Money Loans. The Junior DIP Facility would also contain provisions allowing for a conversion of up to $654 million of the Junior DIP Facility loans upon emergence from chapter 11 into permanent exit financing with a
five year term, provided that Kodak meets certain conditions and milestones, including Bankruptcy Court approval of a reorganization plan by September 15, 2013 with an effective date of no later than September 30, 2013; repayment of $200
million of principal amount of New Money Loans; the resolution of all obligations owing in respect of the KPP on terms reasonably satisfactory to the Required Lead Lenders (as defined in the agreement with the Commitment Parties); there
shall have been an additional prepayment of loans in an amount equal to 75% of U.S. Liquidity (as defined in the agreement with the Commitment Parties) above $200 million; and receiving at least $600 million in cash proceeds through the disposition
of certain specified assets that are not part of the Commercial Imaging business, including any combination of the Document Imaging and Personalized Imaging businesses and trademarks and related rights provided that, consent of the Required Lead
Lenders
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would be necessary to exclude the assets of the Document Imaging and Personalized Imaging businesses from the disposition. Closing of the Junior DIP Facility is subject to certain conditions,
including approval by the Bankruptcy Court of the Junior DIP Facility, repayment in full of the term loans under the DIP Credit Agreement, and consent of the ABL lenders under the existing DIP Credit Agreement. On March 1, 2013, the Debtors
filed a motion with the Bankruptcy Court seeking approval of the Junior DIP Facility. The Bankruptcy Court approved the Debtors motion on March 8, 2013. The agreement with the Commitment Parties expires on April 5, 2013.
Refer to Note 11, Short-Term Borrowings and Long-Term Debt for additional information on the Junior DIP Facility.
PRE-PETITION CLAIMS
On
April 18, 2012, as amended on May 16, 2012 and February 1, 2013, the Debtors filed schedules of assets and liabilities and statements of financial affairs with the Bankruptcy Court. On May 10, 2012, the Bankruptcy Court entered
an order establishing July 17, 2012 as the bar date for potential creditors to file proofs of claims and established the required procedures with respect to filing such claims. A bar date is the date by which pre-petition claims against the
Debtors must be filed if the claimants wish to receive any distribution in the chapter 11 proceedings.
As of February 22, 2013, the
Debtors have received approximately 6,100 proofs of claim, a portion of which assert, in part or in whole, unliquidated claims. In the aggregate, total liquidated proofs of claim of approximately $21.4 billion have been filed against the Debtors.
New and amended claims may be filed in the future, including claims amended to assign values to claims originally filed with no designated value. The Debtors are now in the process of reconciling such claims to the amounts listed by the Debtors in
their schedule of assets and liabilities (as amended). Differences in liability amounts estimated by the Debtors and claims filed by creditors will be investigated and resolved, including through the filing of objections with the Bankruptcy Court,
where appropriate. Approximately 1,100 claims totaling approximately $1.1 billion have been expunged or withdrawn and the Debtors have filed additional claim objections with the Bankruptcy Court for approximately 200 claims totaling approximately
$30 million in additional reductions. The Debtors may continue to ask the Bankruptcy Court to disallow claims that the Debtors believe are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed
for other reasons. In addition, as a result of this process, the Debtors may identify additional liabilities that will need to be recorded or reclassified to liabilities subject to compromise. In light of the substantial number of claims filed, the
claims resolution process may take considerable time to complete. The resolution of such claims could result in material adjustments to Kodaks financial statements. The determination of how liabilities will ultimately be treated cannot be made
until the Bankruptcy Court approves a plan of reorganization. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.
FINANCIAL REPORTING IN REORGANIZATION
Expenses, gains and losses directly
associated with reorganization proceedings are reported as Reorganization items, net in the accompanying Consolidated Statement of Operations. In addition, liabilities subject to compromise in the chapter 11 proceedings are distinguished from
liabilities of Non-Filing Entities, fully secured liabilities not expected to be compromised and from post-petition liabilities in the accompanying Consolidated Statement of Financial Position as of December 31, 2012. Where there is uncertainty
about whether a secured claim will be paid or impaired under the chapter 11 proceedings, Kodak has classified the entire amount of the claim as a liability subject to compromise. The amount of liabilities subject to compromise represents
Kodaks estimate, where an estimate is determinable, of known or potential pre-petition claims to be addressed in connection with the bankruptcy proceedings. Such liabilities are reported at Kodaks current estimate, where an estimate is
determinable, of the allowed claim amounts, even though the claims may be settled for lesser amounts. These claims remain subject to future adjustments, which may result from: negotiations; actions of the Bankruptcy Court; disputed claims; rejection
of contracts and unexpired leases; the determination as to the value of any collateral securing claims; proofs of claims; or other events.
Effective as of January 19, 2012, Kodak ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to
compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise. For the period from January 19, 2012 through December 31, 2012 contractual interest
expense related to liabilities subject to compromise of approximately $45 million has not been recorded, as it is not expected to be an allowed claim under the chapter 11 case.
SECTION 363 ASSET SALES
On May 2, 2012, Kodak sold certain assets of Kodak
Gallery on-line photo services business for $23.8 million to Shutterfly, Inc. Approximately 75% of the net proceeds from the sale were used to repay term debt under the DIP Credit Agreement.
On August 23, 2012, Kodak announced the decision to initiate sale processes for its Personalized Imaging and Document Imaging businesses. The Personalized Imaging business consists of retail systems
solutions, paper & output systems, and event imaging solutions. The Document Imaging business consists of scanners, as well as capture software, and services for enterprise customers.
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On February 1, 2013, Kodak entered into a series of agreements related to the monetization of certain
of its intellectual property assets, including the sale of its digital imaging patents. Under these agreements, Kodak received approximately $530 million, a portion of which was paid by twelve licensees that received a license to the digital imaging
patent portfolio and other patents owned by Kodak. Another portion was paid by Intellectual Ventures Fund 83 LLC (Intellectual Ventures) and Apple, Inc., each of which acquired a portion of the digital imaging patent portfolio, subject
to the licenses granted to the twelve new licensees, and previously existing licenses. In addition, Kodak retained a license to the digital imaging patents for its own use. In connection with this transaction, the Company entered into a separate
agreement with FUJIFILM Corporation (Fuji) whereby, among other things, Fuji granted Kodak the right to sub-license certain Fuji Patents to businesses Kodak intends to sell as part of the Companys emergence efforts. The Debtors
also agreed to allow Fuji a general unsecured pre-petition claim against the Debtors in the amount of $70 million.
OTHER POSTEMPLOYMENT
BENEFITS
On November 7, 2012, the Bankruptcy Court entered an order approving a settlement agreement between the Debtors and the
Official Committee of Retired Employees appointed by the U.S. Trustee under the chapter 11 proceedings (the Retiree Committee). The Retiree Committee was appointed to negotiate with the Debtors on behalf of eligible retirees, long-term
disability recipients, and their spouses, dependents and survivors (Retirees), concerning the future of U.S. retiree medical, dental, life insurance, and survivor income benefits.
Under the settlement agreement, the Debtors will no longer provide retiree medical, dental, life insurance and survivor income benefits to current and future Retirees after December 31, 2012 (other
than COBRA continuation coverage of medical and/or dental benefits or conversion coverage as required by the plans or applicable law), and the Retiree Committee will set up a trust or account from which some limited benefits for some retirees may be
provided after December 31, 2012. The trust or account will be funded by the following contributions from the Debtors: $7.5 million in cash paid by the Company in the fourth quarter of 2012, an administrative claim against the Debtors in the
amount of $15 million, and a general unsecured claim against the Debtors in the amount of $635 million. As part of the settlement, all other claims arising from or based on the termination or modification of retiree medical, dental, life insurance
and survivor income benefits will be deemed settled and disallowed.
The $650 million in claims against the Debtors and the $7.5 million cash
payment are reflected in Reorganization items, net in the accompanying Consolidated Statement of Operations.
EASTMAN KODAK COMPANY
GUARANTEE
Eastman Kodak Company (EKC) has previously issued (pre-petition) a guarantee to Kodak Limited (the
Subsidiary) and the Trustee (Trustee) of the Kodak Pension Plan (the KPP) in the United Kingdom. Under that arrangement, EKC guaranteed to the Subsidiary and the Trustee the ability of the Subsidiary, only to the
extent it becomes necessary to do so, to (1) make contributions to the KPP to ensure sufficient assets exist to make plan benefit payments, as they become due, if the KPP otherwise would not have sufficient assets and (2) make
contributions to the KPP such that it will achieve fully funded status by the funding valuation for the period ending December 31, 2022.
The Subsidiary agreed to make certain contributions to the KPP as determined by a funding plan agreed to by the Trustee. Under the terms of this
agreement, the Subsidiary is obligated to pay a minimum amount of $50 million to the KPP in each of the years 2011 through 2014, and a minimum amount of $90 million to the KPP in each of the years 2015 through 2022. The Subsidiary has not paid the
annual contribution due for 2012 and payment of this amount may be demanded at any time. Future funding beyond 2022 would be required if the KPP is still not fully funded as determined by the funding valuation for the period ending December 31,
2022. These payment amounts for the years 2015 through 2022 could be lower, and the payment amounts for all years noted could be higher by up to $5 million each year, based on the exchange rate between the U.S. dollar and British pound. These
minimum amounts do not include potential contributions related to tax benefits received by the Subsidiary.
The underfunded position of the
KPP of approximately $1.5 billion (calculated in accordance with U.S. GAAP) is included in Pension and other postretirement liabilities presented in the Consolidated Statement of Financial Position as of December 31, 2012. The underfunded
obligation relates to a non-debtor entity. The Trustee has asserted an unsecured claim of approximately $2.8 billion under the guarantee. The Subsidiary has also asserted an unsecured claim under the guarantee for an unliquidated amount. The
ultimate treatment of the Trustees and the Subsidiarys claims is not determinable at this time.
EKC has proposed that the
Subsidiarys 2012 and future contributions be considered part of the overall resolution of the claims of the Trustee and Subsidiary.
GOING CONCERN
Kodak incurred a
net loss for the years ended 2012, 2011 and 2010 and had a shareholders deficit as of December 31, 2012 and 2011. To improve Kodaks performance and address competitive challenges, Kodak is developing a strategic plan for the ongoing
operation of
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its business. Successful implementation of Kodaks plan, however, is subject to numerous risks and uncertainties. In addition, the increasingly competitive industry conditions under which
Kodak operates have negatively impacted Kodaks results of operations and cash flows and may continue to do so in the future. These factors raise substantial doubt about Kodaks ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared assuming that Kodak will continue as a going concern and contemplate the
realization of assets and the satisfaction of liabilities in the normal course of business. Kodaks ability to continue as a going concern is contingent upon Kodaks ability to comply with the financial and other covenants contained in the
DIP Credit Agreement, the Bankruptcy Courts approval of the Companys reorganization plan and the Companys ability to successfully implement the Companys plan and obtain exit financing, and maintain sufficient liquidity, among
other factors. As a result of the Bankruptcy Filing, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under chapter 11, the Company may sell or otherwise dispose of or
liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions contained in the DIP Credit Agreement), for amounts other than those
reflected in the accompanying consolidated financial statements. Further, the reorganization plan could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements. The accompanying
consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should Kodak be unable to
continue as a going concern or as a consequence of the Bankruptcy Filing.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PRINCIPLES
The consolidated
financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America. The following is a description of the significant accounting policies of Kodak.
BASIS OF CONSOLIDATION
The consolidated
financial statements include the accounts of Eastman Kodak Company (EKC or the Company), its wholly owned subsidiaries, and its majority owned subsidiaries (collectively Kodak). Kodak consolidates variable
interest entities if Kodak has a controlling financial interest and is determined to be the primary beneficiary of the entity. Kodak accounts for investments in companies over which it has the ability to exercise significant influence, but does not
hold a controlling interest, under the equity method of accounting, and Kodak records its proportionate share of income or losses in Other income (charges), net in the accompanying Consolidated Statements of Operations. Kodak accounts for
investments in companies over which it does not have the ability to exercise significant influence under the cost method of accounting. These investments are carried at cost and are adjusted only for other-than-temporary declines in fair value.
Kodak has eliminated all significant intercompany accounts and transactions, and net earnings are reduced by the portion of the net earnings of subsidiaries applicable to non-controlling interests.
Certain amounts for prior periods have been reclassified to conform to the current period classification due to changes in Kodaks segment reporting
structure and the presentation of discontinued operations. Refer to Note 26, Segment Information and Note 25, Discontinued Operations for additional information.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at year end, and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CHANGE IN
ESTIMATE
In conjunction with Kodaks goodwill impairment analysis in the fourth quarter of 2010, Kodak reviewed its estimates of the
remaining useful lives of its then Film, Photofinishing and Entertainment Group segments long-lived assets. This analysis indicated that overall these assets will continue to be used in these businesses for a longer period than anticipated in
2008, the last time that depreciable lives were adjusted for these assets. As a result, Kodak revised the useful lives of certain existing production machinery and equipment, and manufacturing-related buildings effective January 1, 2011. These
assets, many of which were previously set to fully depreciate by 2012 to 2013, were changed to depreciate with estimated useful lives ending from 2012 to
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2017. This change in useful lives reflects Kodaks current estimate of future periods to be benefited from the use of the property, plant, and equipment.
The effect of this change in estimate for the year ended December 31, 2011 was a reduction in depreciation expense of $38 million, $32 million of
which would have been recognized in Cost of sales, and $6 million of which would have been capitalized as inventories at December 31, 2011. The net impact of this change is an increase in earnings from continuing operations for the year ended
December 31, 2011 of $32 million, or $.12 on a fully-diluted earnings per share basis.
FOREIGN CURRENCY
For most subsidiaries and branches outside the U.S., the local currency is the functional currency. The financial statements of these subsidiaries and
branches are translated into U.S. dollars as follows: assets and liabilities at year-end exchange rates; income, expenses and cash flows at average exchange rates; and shareholders equity at historical exchange rates. For those subsidiaries
for which the local currency is the functional currency, the resulting translation adjustment is recorded as a component of Accumulated other comprehensive (loss) income in the accompanying Consolidated Statement of Financial Position. Translation
adjustments related to investments that are permanent in nature are not tax-effected.
For certain other subsidiaries and branches, operations
are conducted primarily in U.S. dollars, which is therefore the functional currency. Monetary assets and liabilities of these foreign subsidiaries and branches, which are recorded in local currency, are remeasured at year-end exchange rates, while
the related revenue, expense, and gain and loss accounts, which are recorded in local currency, are remeasured at average exchange rates. Non-monetary assets and liabilities, and the related revenue, expense, and gain and loss accounts, are
remeasured at historical rates. Adjustments that result from the remeasurement of the assets and liabilities of these subsidiaries are included in Net (loss) earnings in the accompanying Consolidated Statement of Operations.
The effects of foreign currency transactions, including related hedging activities, are included in Other income (charges), net, in the accompanying
Consolidated Statement of Operations.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject Kodak to significant concentrations of credit risk consist principally of cash and cash equivalents, receivables, and derivative instruments. Kodak places
its cash and cash equivalents with high-quality financial institutions and limits the amount of credit exposure to any one institution. With respect to receivables, such receivables arise from sales to numerous customers in a variety of industries,
markets, and geographies around the world. Receivables arising from these sales are generally not collateralized. Kodak performs ongoing credit evaluations of its customers financial conditions, and maintains reserves for potential credit
losses and such losses, in the aggregate, have not exceeded managements expectations. With respect to the derivative instruments, the counterparties to these contracts are major financial institutions. Kodak has not experienced non-performance
by any of its derivative instruments counterparties.
DERIVATIVE FINANCIAL INSTRUMENTS
All derivative instruments are recognized as either assets or liabilities and are measured at fair value. Certain derivatives are designated and accounted
for as hedges. Kodak does not use derivatives for trading or other speculative purposes. See Note 15, Financial Instruments.
CASH EQUIVALENTS
All highly liquid
investments with a remaining maturity of three months or less at date of purchase are considered to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of all of Kodaks inventories is determined by either the first
in, first out (FIFO) or average cost method, which approximates current cost. Kodak provides inventory reserves for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other
economic factors.
PROPERTIES
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Properties are recorded at cost, net of accumulated depreciation. Kodak capitalizes additions and
improvements. Maintenance and repairs are charged to expense as incurred. Kodak calculates depreciation expense using the straight-line method over the assets estimated useful lives, which are as follows:
|
|
|
|
|
Years
|
Buildings and building improvements
|
|
5-40
|
Land improvements
|
|
20
|
Leasehold improvements
|
|
3-20
|
Equipment
|
|
3-15
|
Tooling
|
|
1-3
|
Furniture and fixtures
|
|
5-10
|
Kodak depreciates leasehold improvements over the shorter of the lease term or the assets estimated useful life.
Upon sale or other disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount, less proceeds from disposal, is charged or credited to net (loss) earnings.
GOODWILL
Goodwill represents the excess
of purchase price of an acquisition over the fair value of net assets acquired. Goodwill is not amortized, but is required to be assessed for impairment at least annually. Kodak has elected September 30 as the annual impairment assessment date
for all of its goodwill reporting units, and will perform additional impairment tests when events or changes in circumstances occur that would more likely than not reduce the fair value of the reporting unit below its carrying amount. A reporting
unit is defined as an operating segment or one level below an operating segment. Kodak estimates the fair value of its reporting units using income and market approaches, through the application of discounted cash flow and market comparable methods,
respectively. The assessment is required to be performed in two steps, step one to test for a potential impairment of goodwill and, if potential losses are identified, step two to measure the impairment loss. Determining the fair value of a
reporting unit involves the use of significant estimates and assumptions. Refer to Note 8, Goodwill and Other Intangible Assets.
REVENUE
Kodaks revenue
transactions include sales of the following: products; equipment; software; services; integrated solutions; and intellectual property licensing. Kodak recognizes revenue when realized or realizable and earned, which is when the following criteria
are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the sales price is fixed or determinable; and (4) collectability is reasonably assured. If Kodak determines that collection of a fee is not
reasonably assured, the fee is deferred and revenue is recognized at the time collection becomes reasonably assured, which is generally upon receipt of payment. At the time revenue is recognized, Kodak provides for the estimated costs of customer
incentive programs, warranties and estimated returns and reduces revenue accordingly. Kodak accrues the estimated cost of post-sale obligations, including basic product warranties, based on historical experience at the time Kodak recognizes revenue.
For product sales, the revenue recognition criteria are generally met when title and risk of loss have transferred from Kodak to the buyer,
which may be upon shipment or upon delivery to the customer site, based on contract terms or legal requirements in certain jurisdictions.
For
equipment sales, the recognition criteria are generally met when the equipment is delivered and installed at the customer site. Revenue is recognized for equipment upon delivery as opposed to upon installation when the equipment has stand-alone
value to the customer, and the amount of revenue allocable to the equipment is not legally contingent upon the completion of the installation. In instances in which the agreement with the customer contains a customer acceptance clause, revenue is
deferred until customer acceptance is obtained, provided the customer acceptance clause is considered to be substantive. For certain agreements, Kodak does not consider these customer acceptance clauses to be substantive because Kodak can and does
replicate the customer acceptance test environment and performs the agreed upon product testing prior to shipment. In these instances, revenue is recognized upon installation of the equipment.
Revenue from the sale of software licenses is recognized when; (1) Kodak enters into a legally binding arrangement with a customer for the license
of software; (2) Kodak delivers the software; (3) customer payment is deemed fixed or determinable and free of contingencies or significant uncertainties; and (4) collection from the customer is probable. Software maintenance and
support revenue is recognized ratably over the term of the related maintenance contract.
Revenue from services includes extended warranty,
customer support and maintenance agreements, consulting, business process services, training and education. Service revenue is recognized over the contractual period or as services are performed. In
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service arrangements where final acceptance of a system or solution by the customer is required, revenue is deferred until all acceptance criteria have been met.
The timing and the amount of revenue recognized from the licensing of intellectual property depend upon a variety of factors, including the specific
terms of each agreement and the nature of the deliverables and obligations. Revenue is only recognized after all of the following criteria are met: (1) Kodak enters into a legally binding arrangement with a licensee of Kodaks intellectual
property, (2) Kodak delivers the technology or intellectual property rights, (3) licensee payment is deemed fixed or determinable and free of contingencies or significant uncertainties, and (4) collection from the licensee is
reasonably assured.
When Kodak has continuing obligations related to a licensing arrangement, including extending the rights to currently
undeveloped intellectual property, Kodak applies the multiple element revenue guidance described below to determine the separation, allocation and recognition of revenue.
Kodaks transactions may involve the sale of equipment, software, and related services under multiple element arrangements. Kodak allocates revenue to the various elements based on available vendor
specific objective evidence (VSOE), third party evidence (TPE), or best estimated selling price (BESP). Revenue allocated to an individual element is recognized when all other revenue recognition criteria are met
for that element. Kodak limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations or subject to customer-specified return or
refund privileges.
Kodak evaluates each deliverable in an arrangement to determine whether they represent separate units of accounting. A
deliverable constitutes a separate unit of accounting when it has stand-alone value to the customer, and if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is
considered probable and substantially in our control. If these criteria are not met, the arrangement is accounted for as one unit of accounting and the recognition of revenue generally occurs upon delivery/completion or ratably as a single unit of
accounting over the contractual service period.
Consideration in a multiple element arrangement is allocated at the inception of the
arrangement to all deliverables on the basis of the relative selling price. When applying the relative selling price method, the selling price for each deliverable is based on its VSOE if available, TPE if VSOE is not available, or BESP if neither
VSOE nor TPE is available. Kodak establishes VSOE of selling price using the price charged for a deliverable when sold separately. TPE of selling price is established by evaluating largely similar and interchangeable competitor products or services
in standalone sales to similarly situated customers. The best estimate of selling price is established by considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product
life cycle. Consideration is also given to geographies, market conditions such as competitor pricing strategies and industry technology life cycles. Kodak regularly reviews VSOE, TPE and BESP and maintains internal controls over the establishment
and updates of these estimates.
Most of Kodaks equipment has both software and non-software components that function together to
deliver the equipments essential functionality and therefore they are accounted for together as non-software deliverables. Non-essential software sold in connection with Kodaks equipment sales is off-the-shelf and accounted for as
separate deliverables or elements. In most cases these software products sold as part of a multiple element arrangement include software maintenance agreements as well as unspecified upgrades or enhancements on a when-and-if-available basis. In
those multiple element arrangements where non-essential software deliverables are included, revenue is allocated to non-software and to software deliverables each as a group based on relative selling prices of each of the deliverables in the
arrangement. The software deliverables are subject to software accounting whereby revenue is allocated based on relative VSOE or based on the residual method when VSOE exists for all undelivered software elements such as post-contract support.
Revenue allocated to the software deliverables is deferred and amortized over the contract period if VSOE does not exist for the undelivered elements. Revenue allocated to software licenses is recognized when all other revenue criteria have been
met. Revenue generated from maintenance and unspecified upgrades or updates on a when-and-if-available basis is recognized over the contract period.
At the time revenue is recognized, Kodak also records reductions to revenue for customer incentive programs. Such incentive programs include cash and volume discounts, price protection, promotional,
cooperative and other advertising allowances, and coupons. For those incentives that require the estimation of sales volumes or redemption rates, such as for volume rebates or coupons, Kodak uses historical experience and internal and customer data
to estimate the sales incentive at the time revenue is recognized.
In instances where Kodak provides slotting fees or similar arrangements,
this incentive is recognized as a reduction in revenue when payment is made to the customer (or at the time Kodak has incurred the obligation, if earlier) unless Kodak receives a benefit over a period of time, in which case the incentive is recorded
as an asset and is amortized as a reduction of revenue over the period in which the benefit is realized. Arrangements in which Kodak receives an identifiable benefit include arrangements that
66
have enforceable exclusivity provisions and include claw-back provisions entitling Kodak to a pro rata reimbursement if the customer does not fulfill its obligations under the contract.
Kodak may offer customer financing to assist customers in their acquisition of Kodaks products. At the time a financing transaction is
consummated, which qualifies as a sales-type lease, Kodak records equipment revenue equal to the total lease receivable net of unearned income. Unearned income is recognized as finance income using the effective interest method over the term of the
lease. Leases not qualifying as sales-type leases are accounted for as operating leases. Kodak recognizes revenue from operating leases as earned.
RESEARCH AND DEVELOPMENT COSTS
Research and development (R&D) costs, which
include costs incurred in connection with new product development, fundamental and exploratory research, process improvement, product use technology and product accreditation, are expensed in the period in which they are incurred. The
acquisition-date fair value of R&D assets acquired in a business combination is capitalized.
ADVERTISING
Advertising costs are expensed as incurred and are included in Selling, general and administrative expenses in the accompanying Consolidated Statement of
Operations. Advertising expenses amounted to $88 million, $162 million, and $194 million for the years ended December 31, 2012, 2011, and 2010, respectively.
SHIPPING AND HANDLING COSTS
Amounts charged to customers and costs incurred by Kodak
related to shipping and handling are included in net sales and cost of sales, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
Kodak reviews the carrying values of its long-lived assets, other than goodwill and purchased intangible assets with indefinite useful
lives, for impairment whenever events or changes in circumstances indicate that the carrying values may not be recoverable. Kodak assesses the recoverability of the carrying values of long-lived assets by first grouping its long-lived assets with
other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the asset group) and, secondly, by estimating the undiscounted future cash flows that are
directly associated with and that are expected to arise from the use of and eventual disposition of such asset group. Kodak estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the
carrying value of the asset group exceeds the estimated undiscounted cash flows, Kodak records an impairment charge to the extent the carrying value of the long-lived asset exceeds its fair value. Kodak determines fair value through quoted market
prices in active markets or, if quoted market prices are unavailable, through the performance of internal analyses of discounted cash flows.
In connection with its assessment of recoverability of its long-lived assets and its ongoing strategic review of the business and its operations, Kodak
continually reviews the remaining useful lives of its long-lived assets. If this review indicates that the remaining useful life of the long-lived asset has changed significantly, Kodak adjusts the depreciation on that asset to facilitate full cost
recovery over its revised estimated remaining useful life.
INCOME TAXES
Kodak recognizes deferred tax liabilities and assets for the expected future tax consequences of operating losses, credit carry-forwards and temporary differences between the carrying amounts and tax
basis of Kodaks assets and liabilities. Kodak records a valuation allowance to reduce its net deferred tax assets to the amount that is more likely than not to be realized. For discussion of the amounts and components of the valuation
allowances as of December 31, 2012 and 2011, see Note 18, Income Taxes.
EARNINGS PER SHARE
Basic earnings per share computations are based on the weighted-average number of shares of common stock outstanding during the year. As a result of the
net loss from continuing operations presented for the years ended December 31, 2012, 2011, and 2010, Kodak calculated diluted earnings per share using weighted-average basic shares outstanding for each period, as utilizing diluted shares would
be anti-dilutive to loss per share. Weighted-average basic shares outstanding for the years ended December 31, 2012, 2011, and 2010 were 271.8 million, 269.1 million, and 268.5 million shares, respectively.
67
If Kodak had reported earnings from continuing operations for the years ended December 31, 2012, 2011,
and 2010, the following potential shares of Kodaks common stock would have been dilutive in the computation of diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions of shares)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Unvested share-based awards
|
|
|
0.0
|
|
|
|
0.4
|
|
|
|
2.7
|
|
The computation of diluted earnings per share for the years ended December 31, 2012, 2011, and 2010 also excluded
the assumed conversion of outstanding employee stock options and detachable warrants to purchase common shares, because the effects would be anti-dilutive. The following table sets forth the total amount of outstanding employee stock options and
detachable warrants to purchase common shares as of December 31 for each reporting period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions of shares)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Employee stock options
|
|
|
7.9
|
|
|
|
13.6
|
|
|
|
18.0
|
|
Detachable warrants to purchase common shares
|
|
|
40.0
|
|
|
|
40.0
|
|
|
|
40.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
47.9
|
|
|
|
53.6
|
|
|
|
58.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share calculations could also reflect shares related to the assumed conversion of approximately $400
million of convertible senior notes due 2017, if dilutive. Kodaks diluted (loss) earnings per share excludes the effect of these convertible securities, as they were anti-dilutive for all periods presented. Refer to Note 11, Short-Term
Borrowings and Long-Term Debt.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles-Goodwill
and Other (Accounting Standards Codification (ASC) Topic 350) Testing Goodwill for Impairment. ASU No. 2011-08 amends the impairment test for goodwill by allowing companies to first assess qualitative factors to determine if it is
more likely than not that goodwill might be impaired and whether it is necessary to perform the current two-step goodwill impairment test. The changes to the ASC as a result of this update were effective prospectively for interim and annual periods
beginning after December 15, 2011 (January 1, 2012 for Kodak). The adoption of this guidance did not impact Kodaks Consolidated Financial Statements.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (ASC Topic 220)Presentation of Comprehensive Income. ASU No. 2011-05 eliminates the option to present the
components of other comprehensive income as part of the statement of equity and requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. Subsequently, the FASB issued ASU No. 2011-12, Comprehensive Income (ASC Topic 220) Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 deferred the provision within ASU 2011-05 requiring entities to present reclassification
adjustments out of accumulated other comprehensive income by component in both the income statement and the statement in which other comprehensive income is presented. ASU 2011-12 does not change the other provisions instituted within ASU 2011-05.
The amendments of both ASUs were effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011 (January 1, 2012 for Kodak). The adoption of this guidance required changes in presentation
only and did not have an impact on Kodaks Consolidated Financial Statements.
In May 2011, the FASB issued ASU No. 2011-04,
Fair Value Measurement (ASC Topic 820)Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU No. 2011-04 amends current fair value measurement and disclosure guidance to
include increased transparency around valuation inputs and investment categorization. The changes to the ASC as a result of this update were effective prospectively for interim and annual periods beginning after December 15, 2011 (January 1,
2012 for Kodak). The adoption of this guidance did not have a significant impact on Kodaks Consolidated Financial Statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU
No. 2013-02 requires presentation of reclassification adjustments from each component of accumulated other comprehensive income either in a single note or parenthetically on the face of the financial statements, for those amounts required to be
reclassified into Net income in their entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety in the same reporting period, cross-reference to other disclosures is required. This update is
effective for Kodak beginning
68
January 1, 2013. The adoption of this guidance requires changes in presentation only and will have no impact on Kodaks Consolidated Financial Statements.
In July 2012, the FASB issued ASU No. 2012-02, Intangibles-Goodwill and Other (ASC Topic 350) Testing Indefinite-Lived Intangible
Assets for Impairment. ASU No. 2012-02 amends the impairment test for indefinite-lived intangible assets by allowing companies to first assess the qualitative factors to determine if it is more likely than not that an indefinite-lived
intangible asset might be impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. The changes to the ASC as a result of this update are effective prospectively for annual and interim impairment tests
performed for fiscal years beginning after September 15, 2012 (January 1, 2013 for Kodak). Kodak does not expect that the adoption of this guidance will have a material impact on its Consolidated Financial Statements.
In December 2011, the FASB issued ASU No. 2011-10, Derecognition of in Substance Real Estate a Scope Clarification, which amends
ASC Topic 360, Property, Plant and Equipment. ASU No. 2011-10 states that when an investor ceases to have a controlling financial interest in an entity that is in-substance real estate as a result of a default on the entitys
nonrecourse debt, the investor should apply the guidance under ASC Subtopic 360-20, Property, Plant and Equipment Real Estate Sales to determine whether to derecognize the entitys assets (including real estate) and liabilities
(including the nonrecourse debt). The changes to the ASC as a result of this update are effective prospectively for deconsolidation events occurring during fiscal years, and interim periods within those years, beginning on or after June 15,
2012 (January 1, 2013 for Kodak). Adoption of this guidance will not impact Kodaks Consolidated Financial Statements.
NOTE
3:
LIABILITIES SUBJECT TO COMPROMISE
The following table reflects pre-petition liabilities that are subject to
compromise.
|
|
|
|
|
(in millions)
|
|
As of
December 31,
2012
|
|
Accounts payable
|
|
$
|
283
|
|
Debt
|
|
|
683
|
|
Pension and other postemployment obligations
|
|
|
785
|
|
Settlements
|
|
|
710
|
|
Other liabilities subject to compromise
|
|
|
255
|
|
|
|
|
|
|
Liabilities subject to compromise
|
|
$
|
2,716
|
|
|
|
|
|
|
The Bankruptcy Filing constituted an event of default with respect to certain of the Companys debt instruments.
Refer to Note 11, Short-Term Borrowings and Long-Term Debt for additional information. Settlements relate to allowed claims under agreements reached with various creditors, including $650 million related to the settlement agreement
reached with the Retiree Committee. Refer to Note 1, Bankruptcy Proceedings for additional information. Other liabilities subject to compromise include accrued liabilities for customer programs, deferred compensation, environmental,
taxes, and contract and lease rejections.
The amount of liabilities subject to compromise represents the Debtors estimate, where an
estimate is determinable, of known or potential pre-petition claims to be addressed in connection with the bankruptcy proceedings. Such liabilities are reported at the Debtors current estimate, where an estimate is determinable, of the allowed
claim amount, even though they may settle for lesser amounts. These claims remain subject to future adjustments, which may result from: negotiations; actions of the Bankruptcy Court; disputed claims; rejection of contracts and unexpired leases; the
determination as to the value of any collateral securing claims; proofs of claims; or other events. Refer to Note 1, Bankruptcy Proceedings for additional information.
69
NOTE 4: REORGANIZATION ITEMS, NET
A summary of reorganization items, net for the year ended December 31, 2012 is presented in the following table:
|
|
|
|
|
(in millions)
|
|
For the Year Ended
December 31, 2012
|
|
Professional fees
|
|
$
|
178
|
|
DIP credit agreement financing costs
|
|
|
47
|
|
Gain on settlement of other postemployment liabilities
|
|
|
(238
|
)
|
Provision for expected allowed claims
|
|
|
856
|
|
|
|
|
|
|
Reorganization items, net
|
|
$
|
843
|
|
|
|
|
|
|
For the year ended December 31, 2012, Kodak paid approximately $167 million for reorganization items.
NOTE 5: RECEIVABLES, NET
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Trade receivables
|
|
$
|
684
|
|
|
$
|
996
|
|
Miscellaneous receivables
|
|
|
106
|
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
Total (net of allowances of $56 and $51 as of December 31, 2012 and 2011, respectively)
|
|
$
|
790
|
|
|
$
|
1,103
|
|
|
|
|
|
|
|
|
|
|
Approximately $99 million and $191 million of the total trade receivable amounts as of December 31, 2012 and 2011,
respectively, will potentially be settled through customer deductions in lieu of cash payments. Such deductions represent rebates owed to customers and are included in Other current liabilities as of December 31, 2011 and Other current
liabilities and Liabilities subject to compromise as of December 31, 2012 in the accompanying Consolidated Statement of Financial Position.
NOTE 6: INVENTORIES, NET
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Finished goods
|
|
$
|
306
|
|
|
$
|
379
|
|
Work in process
|
|
|
119
|
|
|
|
123
|
|
Raw materials
|
|
|
118
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
543
|
|
|
$
|
607
|
|
|
|
|
|
|
|
|
|
|
NOTE 7: PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Land
|
|
$
|
41
|
|
|
$
|
44
|
|
Buildings and building improvements
|
|
|
1,314
|
|
|
|
1,339
|
|
Machinery and equipment
|
|
|
3,716
|
|
|
|
4,042
|
|
Construction in progress
|
|
|
34
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,105
|
|
|
|
5,485
|
|
Accumulated depreciation
|
|
|
(4,412
|
)
|
|
|
(4,590
|
)
|
|
|
|
|
|
|
|
|
|
Net properties
|
|
$
|
693
|
|
|
$
|
895
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $218 million, $253 million, and $318 million for the years 2012, 2011, and 2010, respectively,
of which approximately $13 million, $10 million, and $6 million, respectively, represented accelerated depreciation in connection with restructuring actions.
70
NOTE 8: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill was $278 million and $277 million as of December 31, 2012 and 2011, respectively. The carrying value of goodwill by reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Graphics,
Entertainment and
Commercial Films
Segment
|
|
|
Digital Printing
and Enterprise
Segment
|
|
|
Personalized and
Document Imaging
Segment
|
|
|
Consolidated
Total
|
|
Balance as of December 31, 2010
|
|
$
|
9
|
|
|
$
|
17
|
|
|
$
|
268
|
|
|
$
|
294
|
|
Impairment
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Divestiture
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2011:
|
|
$
|
1
|
|
|
$
|
17
|
|
|
$
|
259
|
|
|
$
|
277
|
|
Currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012:
|
|
$
|
1
|
|
|
$
|
17
|
|
|
$
|
260
|
|
|
$
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross goodwill and accumulated impairment losses were $1.697 billion and $1.403 billion, respectively, as of
December 31, 2010, $1.688 billion and $1.411 billion, respectively, as of December 31, 2011, and $1.689 billion and $1.411 billion, respectively, as of December 31, 2012.
As of December 31, 2010, the net goodwill balance of $294 million, under the prior year segment reporting structure, was comprised of $201 million for the Consumer Digital Imaging Group and $93
million for the Graphic Communications Group.
As of December 31, 2011, the net goodwill balance of $277 million, under the prior year
segment reporting structure, was comprised of $197 million for the Consumer Digital Imaging Group and $80 million for the Graphic Communications Group.
As a result of the change in segments that became effective as of September 30, 2012, Kodaks reporting units changed. The Personalized and Document Imaging segment has three reporting units:
Personalized Imaging, Document Imaging and Intellectual Property. The Graphics, Entertainment and Commercial Films segment has two reporting units: Graphics and Entertainment Imaging and Commercial Films. The Digital Printing and Enterprise Segment
has four reporting units: Digital Printing, Packaging and Functional Printing, Enterprise Services and Solutions, and Consumer Inkjet Systems.
Prior to the September 30, 2012 change in reporting units, the only reporting units with goodwill remaining were the Consumer Digital Imaging Group
(CDG) and the Business Services and Solutions Group (BSSG). Consumer Inkjet Systems which was part of the CDG reporting unit was transferred to the Digital Printing and Enterprise segment. Personalized Imaging and
Intellectual Property, which were part of the CDG reporting unit, are now included in the Personalized and Document Imaging Segment. Document Imaging, which was part of the BSSG reporting unit, was transferred to the Personalized and Document
Imaging segment. Workflow software which was part of BSSG was transferred to the Graphics, Entertainment and Commercial Films segment. Enterprise Services and Solutions which was part of BSSG is included in the Digital Printing and Enterprise
Segment. Goodwill was reassigned to affected reporting units using a relative fair value allocation.
Based upon the results of Kodaks
September 30, 2012 annual impairment test analysis, no impairment of goodwill was indicated.
On February 1, 2013, Kodak sold its
digital imaging patents. The cash flows related to the Intellectual Property reporting unit from patent licensing activity will significantly change and the fair value may be materially impacted as a result of the sale. The goodwill assigned to the
Intellectual Property reporting unit as of December 31, 2012 approximated $113 million.
During 2011, due to the impact of continued
pricing pressures and higher commodity costs within prepress solutions, as well as higher start-up costs associated with the commercialization and placement of PROSPER printing systems, Kodak concluded that the carrying value of goodwill for its
Commercial Printing reporting unit exceeded the implied fair value of goodwill. Kodak recorded a pre-tax impairment charge of $8 million in 2011 that was included in Other operating (income) expenses, net in the Consolidated Statement of Operations.
During 2010, due to continuing challenging business conditions driven, in part, by rising commodity prices and a continuation of significant
declines in the FPEG business caused by digital substitution, Kodak concluded there was an indication of a possible goodwill impairment related to the FPEG segment. Based on its analysis, Kodak concluded that there was an impairment of
71
goodwill related to the FPEG segment. Kodak recorded a pre-tax impairment charge of $626 million in the fourth quarter of 2010 that was included in Other operating expenses (income), net in
the Consolidated Statement of Operations.
The gross carrying amount and accumulated amortization by major intangible asset category as of
December 31, 2012 and 2011 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
(in millions)
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted-Average
Amortization Period
|
|
Technology-based
|
|
$
|
51
|
|
|
$
|
47
|
|
|
$
|
4
|
|
|
|
8 years
|
|
Customer-related
|
|
|
222
|
|
|
|
172
|
|
|
|
50
|
|
|
|
10 years
|
|
Other
|
|
|
16
|
|
|
|
9
|
|
|
|
7
|
|
|
|
18 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
289
|
|
|
$
|
228
|
|
|
$
|
61
|
|
|
|
10 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011
|
|
(in millions)
|
|
Gross Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Weighted-Average
Amortization Period
|
|
Technology-based
|
|
$
|
146
|
|
|
$
|
133
|
|
|
$
|
13
|
|
|
|
7 years
|
|
Customer-related
|
|
|
223
|
|
|
|
157
|
|
|
|
66
|
|
|
|
10 years
|
|
Other
|
|
|
16
|
|
|
|
8
|
|
|
|
8
|
|
|
|
18 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
385
|
|
|
$
|
298
|
|
|
$
|
87
|
|
|
|
9 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to intangible assets was $27 million, $41 million, and $60 million for the years ended
December 31, 2012, 2011, and 2010, respectively.
Estimated future amortization expense related to purchased intangible assets as of
December 31, 2012 was as follows (in millions):
|
|
|
|
|
2013
|
|
$
|
14
|
|
2014
|
|
|
11
|
|
2015
|
|
|
10
|
|
2016
|
|
|
10
|
|
2017
|
|
|
9
|
|
2018+
|
|
|
7
|
|
|
|
|
|
|
Total
|
|
$
|
61
|
|
|
|
|
|
|
NOTE 9: OTHER LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Deferred income taxes, net of valuation allowance
|
|
$
|
470
|
|
|
$
|
429
|
|
Intangible assets
|
|
|
61
|
|
|
|
87
|
|
Other
|
|
|
206
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
737
|
|
|
$
|
779
|
|
|
|
|
|
|
|
|
|
|
The Other component above consists of other miscellaneous long-term assets that, individually, were less than 5% of
Kodaks total assets in the accompanying Consolidated Statement of Financial Position, and therefore, have been aggregated in accordance with Regulation S-X.
72
NOTE 10: OTHER CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Accrued employment-related liabilities
|
|
$
|
253
|
|
|
$
|
359
|
|
Accrued customer rebates, advertising and promotional expenses
|
|
|
106
|
|
|
|
245
|
|
Deferred revenue
|
|
|
125
|
|
|
|
169
|
|
Accrued interest
|
|
|
107
|
|
|
|
35
|
|
Accrued restructuring liabilities
|
|
|
83
|
|
|
|
60
|
|
Other
|
|
|
286
|
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
960
|
|
|
$
|
1,252
|
|
|
|
|
|
|
|
|
|
|
The Other component above consists of other miscellaneous current liabilities that, individually, were less than 5% of
the total current liabilities component within the Consolidated Statement of Financial Position, and therefore, have been aggregated in accordance with Regulation S-X.
NOTE 11: SHORT-TERM BORROWINGS AND LONG-TERM DEBT
SHORT-TERM BORROWINGS AND CURRENT
PORTION OF LONG-TERM DEBT
Kodaks current portion of long-term debt was $699 million and $152 million as of December 31, 2012
and 2011, respectively. There was $100 million outstanding under short-term bank borrowings as of December 31, 2011.
LONG-TERM DEBT,
INCLUDING LINES OF CREDIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
Weighted-
|
|
|
As of
|
|
|
|
|
|
|
|
|
|
Average
Effective
|
|
|
December 31,
2012
|
|
|
December 31,
2011
|
|
|
|
Country
|
|
Type
|
|
Maturity
|
|
Interest
Rate
|
|
|
Carrying
Value
|
|
|
Carrying
Value
|
|
Current portion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
DIP Credit Agreement
|
|
2013
|
|
|
8.63
|
%
|
|
|
659
|
|
|
|
|
|
|
|
U.S.
|
|
Revolver
|
|
2013
|
|
|
4.75
|
%
|
|
|
|
|
|
|
100
|
|
|
|
Germany
|
|
Term note
|
|
2013
|
|
|
6.16
|
%
|
|
|
38
|
|
|
|
40
|
|
|
|
Brazil
|
|
Term note
|
|
2013
|
|
|
19.80
|
%
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
699
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
Term note
|
|
2013
|
|
|
6.16
|
%
|
|
|
|
|
|
|
35
|
|
|
|
Brazil
|
|
Term note
|
|
2013
|
|
|
19.80
|
%
|
|
|
|
|
|
|
3
|
|
|
|
U.S.
|
|
Secured term note
|
|
2018
|
|
|
10.11
|
%
|
|
|
493
|
|
|
|
491
|
|
|
|
U.S
|
|
Secured term note
|
|
2019
|
|
|
10.87
|
%
|
|
|
247
|
|
|
|
247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
740
|
|
|
|
776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities subject to compromise:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
Term note
|
|
2013
|
|
|
7.25
|
%
|
|
|
20
|
|
|
|
19
|
|
|
|
U.S.
|
|
Term note
|
|
2013
|
|
|
7.25
|
%
|
|
|
250
|
|
|
|
250
|
|
|
|
U.S.
|
|
Convertible
|
|
2017
|
|
|
7.00
|
%
|
|
|
400
|
|
|
|
315
|
|
|
|
U.S.
|
|
Term note
|
|
2018
|
|
|
9.75
|
%
|
|
|
3
|
|
|
|
3
|
|
|
|
U.S.
|
|
Term note
|
|
2021
|
|
|
9.20
|
%
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
683
|
|
|
|
597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,122
|
|
|
$
|
1,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying value of the 2017 Convertible Senior Notes was increased during the quarter ended June 30, 2012 to
reflect the stated principal amount of the notes. When the notes were initially issued, $107 million of the principal amount of the debt was allocated to reflect the equity component of the notes. The remaining carrying value of the debt was
originally being accreted to the $400 million stated principal amount using the effective interest method. The increase, in the second quarter of 2012, in the carrying value of the
73
debt resulted in a $90 million provision for expected allowed claims reflected in Reorganization items, net in the accompanying Consolidated Statement of Operations.
No portion of the carrying value of Kodaks debt was considered Liabilities subject to compromise in the Statement of Financial Position as of
December 31, 2011, as the Debtors filed for chapter 11 bankruptcy protection on January 19, 2012. The amounts shown as Liabilities subject to compromise as of December 31, 2011 in the table above were classified as long-term debt as
of December 31, 2011 and are reflected as liabilities subject to compromise above only for presentation purposes.
Annual maturities of
debt outstanding at December 31, 2012, excluding debt classified as liabilities subject to compromise, were as follows:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Carrying
Value
|
|
|
Maturity
Value
|
|
2013
|
|
$
|
699
|
|
|
$
|
706
|
|
2014
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
2018 and thereafter
|
|
|
740
|
|
|
|
750
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,439
|
|
|
$
|
1,456
|
|
|
|
|
|
|
|
|
|
|
DEBTOR-IN-POSSESSION CREDIT AGREEMENT
In connection with the Bankruptcy Filing, on January 20, 2012, the Company and Kodak Canada Inc. (the Canadian Borrower and, together with the Company, the Borrowers) entered
into a Debtor-in-Possession Credit Agreement, as amended on January 25, 2012, March 5, 2012, April 26, 2012, December 19, 2012, and February 6, 2013 (the DIP Credit Agreement), with certain
subsidiaries of the Company and the Canadian Borrower signatory thereto (Subsidiary Guarantors), the lenders signatory thereto (the Lenders), Citigroup Global Markets Inc., as sole lead arranger and bookrunner, and Citicorp
North America, Inc., as syndication agent, administration agent and co-collateral agent (the Agent). Pursuant to the terms of the DIP Credit Agreement, the Lenders agreed to lend in an aggregate principal amount of up to $950 million,
consisting of up to $250 million super-priority senior secured asset-based revolving credit facilities and an up to $700 million super-priority senior secured term loan facility (collectively, the Loans). A portion of the revolving
credit facility is available to the Canadian Borrower and may be borrowed in Canadian Dollars. The DIP Credit Agreement was approved on February 15, 2012 by the Bankruptcy Court. The DIP Credit Agreement terminates and all outstanding
obligations must be repaid on the earliest to occur of (i) July 20, 2013, (ii) the date of the substantial consummation of certain reorganization plans, or (iii) certain other events, including Events of Default and repayment in
full of the obligations pursuant to a mandatory prepayment.
The Company and each existing and future direct or indirect U.S. subsidiary of
the Company (other than indirect U.S. subsidiaries held through foreign subsidiaries and certain immaterial subsidiaries (if any)) (the U.S. Guarantors) have agreed to provide unconditional guarantees of the obligations of the Borrowers
under the DIP Credit Agreement. In addition, the U.S. Guarantors, the Canadian Borrower and each existing and future direct and indirect Canadian subsidiary of the Canadian Borrower (other than certain immaterial subsidiaries (if any)) (the
Canadian Guarantors and, together with the U.S. Guarantors, the Guarantors) have agreed to provide unconditional guarantees of the obligations of the Canadian Borrower under the DIP Credit Agreement. Under the terms of the
DIP Credit Agreement, the Company has the option to have interest on the loans provided thereunder accrue at a base rate or the then applicable LIBOR Rate (subject to certain adjustments and, in the case of the term loan facility, a floor of 1.00%),
plus a margin, (x) in the case of the revolving loan facility, of 2.25% for a base rate revolving loan or 3.25% for a LIBOR rate revolving loan, and (y) in the case of the term loan facility, of 6.50% for a base rate loan and 7.50% for a
LIBOR Rate loan. The obligations of the Borrowers and the Guarantors under the DIP Credit Agreement are secured by a first-priority security interest in and lien upon all of the existing and after-acquired personal property of the Company and the
U.S. Guarantors, including pledges of all stock or other equity interest in direct subsidiaries owned by the Company or the U.S. Guarantors (but only up to 65% of the voting stock of each direct foreign subsidiary owned by the Company or any U.S.
Guarantor in the case of pledges securing the Companys and the U.S. Guarantors obligations under the DIP Credit Agreement). Assets of the type described in the preceding sentence of the Canadian Borrower or any Canadian subsidiary of the
Canadian Borrower are similarly pledged to secure the obligations of the Canadian Borrower and Canadian Guarantor under the DIP Credit Agreement. The security and pledges are subject to certain exceptions.
The DIP Credit Agreement limits, among other things, the Borrowers and the Subsidiary Guarantors ability to (i) incur indebtedness,
(ii) incur or create liens, (iii) dispose of assets, (iv) prepay subordinated indebtedness and make other restricted payments, (v) enter into sale and leaseback transactions and (vi) modify the terms of any organizational
documents and certain material contracts of the Borrowers and the Subsidiary Guarantors. In addition to standard obligations, the DIP Credit Agreement provides for specific milestones that Kodak must achieve by specific target dates. In addition,
the Company and its subsidiaries are required to maintain consolidated
74
Adjusted EBITDA (as defined in the DIP Credit Agreement) of not less than a specified level for certain periods, with the specified levels ranging from $(130) million to $175 million depending on
the applicable period. The Company and its subsidiaries must also maintain minimum U.S. Liquidity (as defined in the DIP Credit Agreement) ranging from $100 million to $250 million depending on the applicable period. The Company was required to
maintain U.S. Liquidity of $125 million, $250 million, and $150 million for the periods from January 20, 2012 to February 15, 2012; February 16, 2012 to March 31, 2012; and April 1, 2012 to September 30, 2012,
respectively. From October 1, 2012 through the termination of the DIP Credit Agreement, the Company must maintain minimum U.S. Liquidity of $100 million, subject to increase under certain circumstances as described in the DIP Credit Agreement.
Kodak was in compliance with all covenants under the DIP credit agreement as of December 31, 2012.
The Company must prepay the DIP
Credit Agreement with all net cash proceeds from sales of or casualty events relating to certain types of collateral consisting of accounts, inventory, equipment or machinery (as defined in the DIP Credit Agreement). In addition, all net cash
proceeds from any sale in respect of Kodaks digital imaging patent portfolio must be used to prepay the DIP Credit Agreement. With respect to all other asset sales or casualty events, or intellectual property licensing or settlement
agreements, 75% of the net cash proceeds must be used to prepay the DIP Credit Agreement and 25% may be retained by Kodak (retained proceeds were $12 million as of December 31, 2012). However, once Kodaks share of these retained proceeds
totals $150 million, all remaining and future net cash proceeds must be used to prepay the DIP Credit Agreement.
The Borrowers drew $700
million in term loans under the DIP Credit Agreement during the first quarter of 2012 and have issued approximately $126 million of letters of credit under the revolving credit facilities as of December 31, 2012. Under the DIP Credit Agreement
borrowing base calculation the Borrowers had approximately $45 million available under the revolving credit facilities as of December 31, 2012. Availability under the DIP Credit Agreement is subject to borrowing base availability, reserves and
other limitations.
On February 1, 2013, Kodak entered into a series of agreements under which it received approximately $530 million of
proceeds, net of withholding taxes, a portion of which was paid by intellectual property licensees and a portion of which was paid by the acquirers of Kodaks digital imaging patent portfolio. Approximately $419 million of the proceeds was used
to prepay the term loan under the DIP Credit Agreement.
On February 6, 2013, the Company received consents for an amendment from the
lenders under its DIP Credit Agreement to extend the covenant requirement to file a plan of reorganization and disclosure statement from February 15, 2013 to April 30, 2013. The Company also sought consent for an additional amendment to
permit the incurrence of the Junior DIP Facility and to (i) extend the maturity date of the DIP Credit Agreement facility from July 20, 2013 to September 30, 2013, to match the maturity of the Junior DIP Facility, (ii) eliminate
the Canadian revolving facility, which is not being used by Kodak, and reduce the aggregate amount of the U.S. revolving credit commitments from $225 million to $200 million, (iii) remove machinery and equipment from the borrowing base of the
revolving facility and (iv) revise the existing financial covenants and modify other covenants to match the terms proposed for the Junior DIP Facility. This additional amendment did not become effective because a condition to effectiveness was
closing the Junior DIP Facility on or before February 28, 2013. The Company has engaged the DIP Credit Agreement agent to solicit the ABL DIP Credit Agreement lenders to re-consent for this amendment with a new expiration date of April 5,
2013.
JUNIOR DIP FACILITY
On February 28, 2013, the Company and members of the Steering Committee of the Second Lien Noteholders (the Commitment Parties) agreed to
structure and arrange a junior secured priming super-priority debtor-in-possession term loan facility (the Junior DIP Facility) in an aggregate amount of up to $848 million consisting of (i) first lien term loans in the aggregate
principal amount of $455 million (the New Money Loans) and (ii) junior lien term loans in the aggregate principal amount of up to $375 million consisting of a dollar-for-dollar roll-up (such loans, the Rolled-Up
Loans) for a portion of the amounts outstanding under the Second Lien Notes. The Bankruptcy Filing created an event of default under the Second Lien Notes. The Junior DIP Facility will allow for payment of certain fees in cash or additional
New Money Loans. Closing of the Junior DIP Facility is subject to certain conditions, including approval by the Bankruptcy Court of the Junior DIP Facility, repayment in full of the term loans under the DIP Credit Agreement, and consent of the ABL
Lenders under the existing DIP Credit Agreement and related order of the Bankruptcy Court permitting the incurrence of the Junior DIP Facility, in a form reasonably satisfactory to the Required Lead Lenders (as defined in the agreement with the
Commitment Parties). On March 1, 2013, the Debtors filed a motion with the Bankruptcy Court seeking approval of the Junior DIP Facility. The Bankruptcy Court approved the Debtors motion on March 8, 2013. The agreement with the
Commitment Parties expires on April 5, 2013.
The Junior DIP Facility would mature upon the earliest to occur of
(i) September 30, 2013, (ii) the effective date (the Effective Date) of the chapter 11 plan for the reorganization of the Company (the Chapter 11 Plan), to the extent amounts outstanding under the Junior DIP
Facility are not converted into exit term loans as described below, and (iii) the acceleration of the loans in accordance with the terms of the agreement. The Company would have the ability to convert the Junior DIP Facility into an up to $654
million exit facility with an additional five year term provided that Kodak meets certain conditions and milestones, including Bankruptcy Court approval of a plan of reorganization by September 15, 2013, with an effective date no later than
September 30, 2013; repayment of $200 million of principal amount of New Money Loans; and receiving at least $600 million in cash proceeds through the disposition of certain specified assets, including any combination of the Document Imaging
and Personalized Imaging businesses and trademarks and related rights provided
75
that consent of the Required Lead Lenders would be necessary to exclude the assets of the Document Imaging and Personalized Imaging businesses from the disposition; the resolution of all
obligations owing in respect of the KPP on terms reasonably satisfactory to the Required Lead Lenders (as defined in the agreement with the Commitment Parties); and there shall have been an additional prepayment of loans in an amount equal to 75% of
U.S. Liquidity (as defined in the agreement with the Commitment Parties) above $200 million.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
On April 26, 2011, the Company and its subsidiary, Kodak Canada, Inc., together with the Companys U.S. subsidiaries as
guarantors entered into a Second Amended and Restated Credit Agreement (Second Amended Credit Agreement), with the named lenders and Bank of America, N.A. as administrative agent, in order to amend and extend its Amended and Restated
Credit Agreement dated as of March 31, 2009, as amended (Amended Credit Agreement).
On January 20, 2012, the Company
repaid all obligations and terminated all commitments under the Second Amended Credit Agreement in connection with entering into and drawing funds from the DIP Credit Agreement. The repayment resulted in a loss on early extinguishment of debt of $7
million.
SENIOR SECURED NOTES DUE 2019
On March 15, 2011, the Company issued $250 million of aggregate principal amount of 10.625% senior secured notes due March 15, 2019 (2019 Senior Secured Notes). Terms of the notes require
interest at an annual rate of 10.625% of the principal amount at issuance, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2011.
Upon issuance of the 2019 Senior Secured Notes, the Company received proceeds of approximately $247 million ($250 million aggregate principal less $3
million stated discount). The proceeds were used to repurchase $50 million of the 7.25% senior notes due 2013 with the remaining amount being used for other general corporate purposes.
In connection with the issuance of the 2019 Senior Secured Notes, the Company and the subsidiary guarantors entered into an indenture, dated as of March 15, 2011, with Bank of New York Mellon as
trustee and second lien collateral agent (Indenture). Wilmington Trust, National Association replaced and succeeded Bank of New York Mellon as Trustee and second-lien collateral agent on January 26, 2012.
The 2019 Senior Secured Notes are fully and unconditionally guaranteed (Guarantees) on a senior secured basis by each of the Companys existing and
future direct or indirect 100% owned domestic subsidiaries, subject to certain exceptions (Subsidiary Guarantors). The 2019 Senior Secured Notes and Guarantees are secured by second-priority liens, subject to permitted liens, on substantially
all of the Companys domestic assets and substantially all of the domestic assets of the Subsidiary Guarantors pursuant to a supplement, dated March 15, 2011, to the security agreement, dated March 5, 2010, entered into with Bank of
New York Mellon as second lien collateral agent. The carrying value of the assets pledged as collateral at December 31, 2012 was approximately $1 billion.
The 2019 Senior Secured Notes are the Companys senior secured obligations and rank senior in right of payment to any future subordinated indebtedness; rank equally in right of payment with all of
the Companys existing and future senior indebtedness; are effectively senior in right of payment to the Companys existing and future unsecured indebtedness, are effectively subordinated in right of payment to indebtedness under the
Companys DIP Credit Agreement to the extent of the collateral securing such indebtedness on a first- (or, upon closing of the Junior DIP Facility, second-) priority basis and will be effectively subordinated in right of payment to indebtedness
under the Junior DIP Facility to the extent of the collateral that will secure such indebtedness on a first- or second-priority basis; and effectively are subordinated in right of payment to all existing and future indebtedness and other liabilities
of the Companys non-guarantor subsidiaries.
The Bankruptcy Filing constituted an event of default under the 2019 Senior Secured
Notes. The creditors are, however, stayed from taking any action as a result of the default under Section 362 of the Bankruptcy Code. See Junior DIP Facility and Second Lien Note Holders Agreement for discussion of the potential
conversion of up to $375 million of Second Lien Notes into Junior Loans under the Junior DIP Facility and an adequate protection agreement.
SENIOR SECURED NOTES DUE 2018
On
March 5, 2010, the Company issued $500 million of aggregate principal amount of 9.75% senior secured notes due March 1, 2018 (the 2018 Senior Secured Notes). Terms of the Notes require interest at an annual rate of 9.75%
of the principal amount at issuance, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2010.
Upon issuance of the 2018 Senior Secured Notes, the Company received net proceeds of approximately $490 million ($500 million aggregate principal less $10 million stated discount). The proceeds were
used to repurchase all of the Senior Secured Notes due 2017 and to fund the tender of $200 million of the 7.25% Senior Notes due 2013.
76
In connection with the 2018 Senior Secured Notes, the Company and the subsidiary guarantors entered into an
indenture, dated as of March 5, 2010, with Bank of New York Mellon as trustee and collateral agent (the Indenture). Wilmington Trust, National Association replaced and succeeded Bank of New York Mellon as Trustee and second-lien
collateral agent on January 26, 2012.
The 2018 Senior Secured Notes are fully and unconditionally guaranteed (the guarantees) on
a senior secured basis by each of the Companys existing and future direct or indirect 100% owned domestic subsidiaries, subject to certain exceptions (the Subsidiary Guarantors). The 2018 Senior Secured Notes and guarantees
are secured by second-priority liens, subject to permitted liens, on substantially all of the Companys domestic assets and substantially all of the domestic assets of the Subsidiary Guarantors pursuant to a security agreement entered into with
Bank of New York Mellon as second lien collateral agent on March 5, 2010. Wilmington Trust, National Association replaced and succeeded Bank of New York Mellon as Trustee and second-lien collateral agent on January XX, 2012. The carrying
value of the assets pledged as collateral at December 31, 2012 was approximately $1 billion.
The 2018 Senior Secured Notes are the
Companys senior secured obligations and rank senior in right of payment to any future subordinated indebtedness; rank equally in right of payment with all of the Companys existing and future senior indebtedness; are effectively senior in
right of payment to the Companys existing and future unsecured indebtedness, are effectively subordinated in right of payment to indebtedness under the Companys DIP Credit Agreement to the extent of the collateral securing such
indebtedness on a first- (or, upon closing of the Junior DIP Facility, second-) priority basis and will be effectively subordinated in right of payment to indebtedness under the Junior DIP Facility to the extent of the collateral that will secure
such indebtedness on a first- or second-priority basis; and effectively are subordinated in right of payment to all existing and future indebtedness and other liabilities of the Companys non-guarantor subsidiaries.
The Bankruptcy Filing constituted an event of default under the 2018 Senior Secured Notes. The creditors are, however, stayed from taking any action
as a result of the default under Section 362 of the Bankruptcy Code. See Junior DIP Facility and Second Lien Note Holders Agreement for discussion of the potential conversion of up to $375 million of 2018 Second Lien Notes into Junior Loans
under the Junior DIP Facility and an adequate protection agreement.
SECOND LIEN NOTE HOLDERS AGREEMENT
On February 14, 2012, the Company reached an adequate protection agreement with a group representing at least 50.1% of the Second Lien Note Holders
which was reflected in the final DIP Credit Agreement order (the Final DIP Order). The Company agreed, among other things, to provide all Second Lien Note Holders with a portion of the proceeds received from certain sales and settlements
in respect of the Companys digital imaging patent portfolio subject to the following waterfall and the Companys right to retain a percentage of certain proceeds under the DIP Credit Agreement: first, to repay any outstanding obligations
under the DIP Credit Agreement, including cash collateralizing letters of credit (unless certain parties otherwise agree); second, to pay 50% of accrued second lien interest at the non-default rate; third, the Company retains $250 million; fourth,
to repay the remaining accrued and unpaid second lien interest at the non-default rate; fifth, any remaining proceeds after conditions one through four up to $2,250 million to be split 60% to the Company and 40% to repay outstanding second lien debt
at par; and sixth, the Company agreed that any proceeds above $2,250 million will be split 50% to the Company and 50% to Second Lien Note Holders until second lien debt is fully paid. The Company also agreed to pay current interest to Second Lien
Note Holders upon the receipt of $250 million noted above. Subject to the satisfaction of certain conditions, the Company also agreed to pay reasonable fees of certain advisors to the Second Lien Note Holders. On February 1, 2013, the Company
received approximately $530 million in net proceeds from the sale and other settlements related to the digital imaging patent portfolio and therefore no payments were made to the Second Lien Note Holders.
In connection with the Junior DIP Facility, holders of the Companys Second Lien Notes would be entitled to receive accrued non-default interest on
the Second Lien Notes. Second Lien Notes outstanding after the Bankruptcy Court approval of the Junior DIP Facility, would be entitled to receive as additional adequate protection (i) replacement liens on Junior DIP collateral that are junior
to the liens securing the existing DIP Credit Agreement and the Junior DIP Facility, (ii) guarantees from all entities that guarantee the existing DIP Credit Agreement and the Junior DIP Facility that are subordinate to the guarantee in respect
of the existing DIP Credit Agreement and the Junior DIP Facility, and (iii) administrative claims as provided for in section 507(b) of the Bankruptcy Code, junior to the super-priority administrative expense claims that would be granted to the
lenders under the Junior DIP Facility and DIP Credit Agreement (in each case of clauses (i), (ii) and (iii), to the extent of any diminution of the value of the applicable pre-petition collateral from and after January 19, 2012). The
Second Lien Notes are considered fully secured and have not been reported as liabilities subject to compromise.
2017 CONVERTIBLE SENIOR
NOTES
On September 23, 2009, the Company issued $400 million of aggregate principal amount of 7% convertible senior notes due
April 1, 2017 (the 2017 Convertible Notes). Terms of the Notes require interest at an annual rate of 7% of the principal amount at issuance, payable semi-annually in arrears on April 1 and October 1 of each year,
beginning on April 1, 2010.
The 2017 Convertible Notes are convertible at an initial conversion rate of 134.9528 shares of the
Companys common stock per $1,000 principal amount of convertible notes (representing an initial conversion price of approximately $7.41 per share of common stock) subject to adjustment in certain circumstances. Holders may surrender their
2017 Convertible Notes for conversion at any time prior to
77
the close of business on the business day immediately preceding the maturity date for the notes. Upon conversion, the Company shall deliver or pay, at its election, solely shares of its
common stock or solely cash. Holders of the 2017 Convertible Notes may require the Company to purchase all or a portion of the convertible notes at a price equal to 100% of the principal amount of the convertible notes to be purchased, plus
accrued and unpaid interest, in cash, upon occurrence of certain fundamental changes involving the Company including, but not limited to, a change in ownership, consolidation or merger, plan of dissolution, or common stock delisting from a U.S.
national securities exchange.
The 2017 Convertible Notes are the Companys senior unsecured obligations and rank: (i) senior in
right of payment to the Companys existing and future indebtedness that is expressly subordinated in right of payment to the 2017 Convertible Notes; (ii) equal in right of payment to the Companys existing and future unsecured
indebtedness that is not so subordinated; (iii) effectively subordinated in right of payment to any of the Companys secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally
subordinated to all existing and future indebtedness and obligations incurred by the Companys subsidiaries including guarantees of the Companys obligations by such subsidiaries. U.S. Bank, National Association replaced and succeeded Bank
of New York Mellon as Trustee on January 24, 2012.
The Bankruptcy Filing constituted an event of default under the 2017 Convertible
Notes. The creditors are, however, stayed from taking any action as a result of the default under Section 362 of the Bankruptcy Code.
SENIOR NOTES DUE 2013
On
October 10, 2003, the Company completed the offering and sale of $500 million aggregate principal amount of Senior Notes due 2013 (the 2013 Notes), which was made pursuant to the Companys shelf registration statement on Form
S-3 effective September 19, 2003. Interest on the 2013 Notes will accrue at the rate of 7.25% per annum and is payable semiannually. The 2013 Notes are not redeemable at the Companys option or repayable at the option of any
holder prior to maturity. The 2013 Notes are unsecured and unsubordinated obligations, and rank equally with all of the Companys other unsecured and unsubordinated indebtedness.
On March 10, 2010, the Company accepted for purchase $200 million aggregate principal amount of the 2013 Notes pursuant to the terms of a tender offer that commenced on February 3, 2010. The
tender offer was funded with proceeds from the issuance of the 2018 Senior Secured Notes.
On March 15, 2011, the Company repurchased $50
million aggregate principal amount of the 2013 Notes at par using proceeds from the issuance of the 2019 Senior Secured Notes. As of December 31, 2012, $250 million of the 2013 Notes remain outstanding. U.S. Bank, National Association
replaced and succeeded Bank of New York Mellon as Trustee on January 24, 2012.
The Bankruptcy Filing constituted an event of default
under the 2013 Notes. The creditors are, however, stayed from taking any action as a result of the default under Section 362 of the Bankruptcy Code.
NOTE 12: OTHER LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Non-current tax-related liabilities
|
|
$
|
36
|
|
|
$
|
57
|
|
Environmental liabilities
|
|
|
72
|
|
|
|
96
|
|
Asset retirement obligations
|
|
|
70
|
|
|
|
66
|
|
Other
|
|
|
194
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
372
|
|
|
$
|
462
|
|
|
|
|
|
|
|
|
|
|
The Other component above consists of other miscellaneous long-term liabilities that, individually, were less than 5% of
the total liabilities component in the accompanying Consolidated Statement of Financial Position, and therefore, have been aggregated in accordance with Regulation S-X.
NOTE 13: COMMITMENTS AND CONTINGENCIES
78
Environmental
Cash expenditures for pollution prevention and waste treatment for Kodaks current facilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Recurring costs for pollution prevention and waste treatment
|
|
$
|
28
|
|
|
$
|
33
|
|
|
$
|
34
|
|
Capital expenditures for pollution prevention and waste treatment
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Site remediation costs
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30
|
|
|
$
|
36
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental expenditures that relate to an existing condition caused by past operations and that do not provide future
benefits are expensed as incurred. Costs that are capital in nature and that provide future benefits are capitalized. Liabilities are recorded when environmental assessments are made or the requirement for remedial efforts is probable, and the costs
can be reasonably estimated. The timing of accruing for these remediation liabilities is generally no later than the completion of feasibility studies. Kodak has an ongoing monitoring and identification process to assess how the activities, with
respect to the known exposures, are progressing against the accrued cost estimates.
At December 31, 2012 and 2011, Kodaks
undiscounted accrued liabilities for environmental remediation costs amounted to $116 million and $96 million, respectively. These amounts are reported in Other long-term liabilities as of December 31, 2011 and Other long-term liabilities and
Liabilities subject to compromise as of December 31, 2012 in the accompanying Consolidated Statement of Financial Position.
The Company
is currently implementing a Corrective Action Program required by the Resource Conservation and Recovery Act (RCRA) at Eastman Business Park (formerly known as Kodak Park) in Rochester, NY. The Company is currently in the process of
completing, and in many cases has completed, RCRA Facility Investigations (RFI), Corrective Measures Studies (CMS) and Corrective Measures Implementation (CMI) for areas at the site. At December 31, 2012,
estimated future investigation and remediation costs of $49 million were accrued for this site, the majority of which relates to long-term operation, maintenance of remediation systems and monitoring costs.
In addition, Kodak has accrued for obligations with estimated future investigation, remediation and monitoring costs of $9 million relating to other
operating sites, $17 million at sites associated with former operations, and $41 million of retained obligations for environmental remediation and Superfund matters related to certain sites associated with the non-imaging health businesses sold in
1994.
Cash expenditures for the aforementioned investigation, remediation and monitoring activities are expected to be incurred over the next
thirty years for most of the sites. For these known environmental liabilities, the accrual reflects Kodaks best estimate of the amount it will incur under the agreed-upon or proposed work plans. Kodaks cost estimates were determined
using the ASTM Standard E 2137-06, Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters, and have not been reduced by possible recoveries from third parties. The overall method includes the use of a
probabilistic model which forecasts a range of cost estimates for the remediation required at individual sites. The projects are closely monitored and the models are reviewed as significant events occur or at least once per year. Kodaks
estimate includes investigations, equipment and operating costs for remediation and long-term monitoring of the sites. Accrued liabilities of Debtor entities related to sites subject to the bankruptcy proceedings have been classified as liabilities
subject to compromise as of December 31, 2012. Liabilities subject to compromise are reported at Kodaks current estimate, where an estimate is determinable, of the allowed claim amount.
Kodak is presently designated as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (the Superfund Law), or under similar state laws, for environmental assessment and cleanup costs as the result of Kodaks alleged arrangements for disposal of hazardous substances at eight Superfund
sites. In connection with the chapter 11 filing, the Debtors have provided withdrawal notifications or entered into settlement negotiations with involved regulatory agencies.
Among these matters is a case in which the Company and Sterling Drug were named by the U.S. Environmental Protection Agency (EPA) as a PRP with potential liability for the study and remediation of the
Lower Passaic River Study Area (LPRSA) portion of the Diamond Alkali Superfund Site, based on the Companys ownership of Sterling Drug from 1988 to 1994 and retention of certain
79
Sterling Drug liabilities and a defense and indemnification agreement between the Company and Bayer, which purchased all stock in Sterling Drug (now STWB). Bayer and STWB have filed proofs of
claim against the Debtors in this matter.
Estimates of the amount and timing of future costs of environmental remediation requirements are by
their nature imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among
the potentially responsible parties. Based on information presently available, Kodak does not believe it is reasonably possible that losses for known exposures could exceed current accruals by material amounts, although costs could be material to a
particular quarter or year.
Asset Retirement Obligations
Kodaks asset retirement obligations primarily relate to asbestos contained in buildings that Kodak owns. In many of the countries in which Kodak operates, environmental regulations exist that
require Kodak to handle and dispose of asbestos in a special manner if a building undergoes major renovations or is demolished. Otherwise, Kodak is not required to remove the asbestos from its buildings. Kodak records a liability equal to the
estimated fair value of its obligation to perform asset retirement activities related to the asbestos, computed using an expected present value technique, when sufficient information exists to calculate the fair value. Kodak does not have a
liability recorded related to every building that contains asbestos because Kodak cannot estimate the fair value of its obligation for certain buildings due to a lack of sufficient information about the range of time over which the obligation may be
settled through demolition, renovation or sale of the building.
The following table provides asset retirement obligation activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Asset retirement obligations as of January 1
|
|
$
|
66
|
|
|
$
|
57
|
|
|
$
|
62
|
|
Liabilities incurred in the current period
|
|
|
6
|
|
|
|
15
|
|
|
|
|
|
Liabilities settled in the current period
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
(8
|
)
|
Accretion expense
|
|
|
3
|
|
|
|
4
|
|
|
|
3
|
|
Revisions in estimated cash flows
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations as of December 31
|
|
$
|
70
|
|
|
$
|
66
|
|
|
$
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Commitments and Contingencies
Kodak has entered into non-cancelable agreements with several companies which provide Kodak with products and services to be used in its normal operations. These agreements are related to raw materials,
supplies, production and administrative services, as well as marketing and advertising. The terms of these agreements cover the next one to five years. The minimum payments for obligations under these agreements are approximately $67 million in
2013, $36 million in 2014, $28 million in 2015, $17 million in 2016, and $15 million in 2017.
Rental expense, net of minor sublease income,
amounted to $68 million, $87 million, and $96 million in 2012, 2011, and 2010, respectively. The amounts of non-cancelable lease commitments with terms of more than one year, principally for the rental of real property, reduced by minor sublease
income, are $43 million in 2013, $31 million in 2014, $24 million in 2015, $18 million in 2016, $15 million in 2017 and $26 million in 2018 and thereafter.
As of December 31, 2012, the Company had outstanding letters of credit of $126 million issued under the DIP Credit Agreement, as well as bank guarantees and letters of credit of $12 million, surety
bonds in the amount of $26 million, and cash and investments in trust of $33 million, primarily to ensure the payment of possible casualty and workers compensation claims, environmental liabilities, legal contingencies, rental payments, and to
support various customs, tax and trade activities. The restricted cash and investment in trust amounts are recorded within Other long-term assets in the Consolidated Statement of Financial Position.
In March 2012, Kodak sold a property in Mexico for approximately $41 million and leased back the property for a one-year term. The pre-tax gain on the
property sale of approximately $35 million was deferred and no gain was recognizable upon the closing of the sale as Kodak has continuing involvement in the property for the remainder of the lease term. The deferred pre-tax gain is reported in Other
current liabilities in the Consolidated Statement of Financial Position as of December 31, 2012.
Kodaks Brazilian operations are
involved in governmental assessments of indirect and other taxes in various stages of litigation, primarily related to federal and state value-added taxes. Kodak is disputing these matters and intends to vigorously defend its position.
80
Based on the opinion of legal counsel and current reserves already recorded for those matters deemed probable of loss, management does not believe that the ultimate resolution of these matters
will materially impact Kodaks results of operations or financial position. Kodak routinely assesses all these matters as to the probability of ultimately incurring a liability in its Brazilian operations and records its best estimate of the
ultimate loss in situations where it assesses the likelihood of loss as probable. As of December 31, 2012, the unreserved portion of these contingencies, inclusive of any related interest and penalties, for which there was at least a reasonable
possibility that a loss may be incurred, amounted to approximately $66 million.
Kodak is involved in various lawsuits, claims, investigations
and proceedings, including commercial, customs, employment, environmental, and health and safety matters, which are being handled and defended in the ordinary course of business. Kodak is also subject to various assertions, claims, proceedings and
requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in a broad spectrum of Kodaks products. These matters are in various stages of investigation and
litigation, and are being vigorously defended. Much of the pending litigation against the Debtors has been stayed as a result of the chapter 11 filing and will be subject to resolution in accordance with the Bankruptcy Code and the orders of the
Bankruptcy Court. Although Kodak does not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations, litigation is inherently unpredictable.
Therefore, judgments could be rendered or settlements entered that could adversely affect Kodaks operating results or cash flows in a particular period. Kodak routinely assesses all of its litigation and threatened litigation as to the
probability of ultimately incurring a liability, and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.
NOTE 14: GUARANTEES
Kodak guarantees debt and other obligations of certain customers. The
debt and other obligations are primarily due to banks and leasing companies in connection with financing of customers purchases of equipment and product from Kodak. At December 31, 2012, the maximum potential amount of future payments
(undiscounted) that Kodak could be required to make under these customer-related guarantees was $19 million. At December 31, 2012, the carrying amount of any liability related to these customer guarantees was not material.
The customer financing agreements and related guarantees, which mature between 2013 and 2016, typically have a term of 90 days for product and short-term
equipment financing arrangements, and up to five years for long-term equipment financing arrangements. These guarantees would require payment from Kodak only in the event of default on payment by the respective customer. In some cases, particularly
for guarantees related to equipment financing, Kodak has collateral or recourse provisions to recover and sell the equipment to reduce any losses that might be incurred in connection with the guarantees. However, any proceeds received from the
liquidation of these assets would not cover the maximum potential loss under these guarantees.
EKC also guarantees potential indebtedness to
banks and other third parties for some of its consolidated subsidiaries. The maximum amount guaranteed is $100 million, and the outstanding amount for those guarantees is $83 million with $38 million recorded within the Short-term borrowings and
current portion of long-term debt in the accompanying Consolidated Statement of Financial Position. The remaining $45 million of outstanding guarantees represent parent guarantees providing financial assurance to third parties that the
Companys subsidiaries will fulfill their future performance or financial obligations under various contracts, which do not necessarily have corresponding liabilities reported in Kodaks financial statements. These guarantees expire in
2013 through 2019.
Pursuant to the terms of the Companys DIP Credit Agreement, obligations of the Borrowers to the Lenders under the
DIP Credit Agreement, as well as secured agreements in an amount not to exceed $75 million, are guaranteed by the Company and the Companys U.S. subsidiaries and included in the above amounts. Secured agreements under the DIP Credit Agreement
for the Debtors totaled $20 million as of December 31, 2012.
EKC has previously issued (pre-petition) a guarantee to Kodak Limited (the
Subsidiary) and the Trustee of the Kodak Pension Plan (the KPP) in the United Kingdom. Under that arrangement, EKC guaranteed to the Subsidiary and the Trustee the ability of the Subsidiary, only to the extent it becomes
necessary to do so, to (1) make contributions to the KPP to ensure sufficient assets exist to make plan benefit payments, as they become due, if the KPP otherwise would not have sufficient assets and (2) make contributions to the KPP such
that it will achieve fully funded status by the funding valuation for the period ending December 31, 2022. See Note 1, Bankruptcy Proceedings for additional information.
Indemnifications
Kodak issues indemnifications in certain instances when it sells
businesses and real estate, and in the ordinary course of business with its customers, suppliers, service providers and business partners. Further, Kodak indemnifies officers and directors who are, or were, serving in such capacity at the request of
Kodak or the entity for which they serve. Historically, costs incurred to settle claims related to these indemnifications have not been material to Kodaks financial position, results of operations or cash flows.
81
Additionally, the fair value of the indemnifications that Kodak issued during the year ended
December 31, 2012 was not material to Kodaks financial position, results of operations or cash flows.
Warranty Costs
Kodak has warranty obligations in connection with the sale of its products and equipment. The original warranty period is generally one
year or less. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. Kodak estimates its warranty cost at the point of sale for a given product based on historical failure
rates and related costs to repair. The change in Kodaks accrued warranty obligations balance, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:
|
|
|
|
|
(in millions)
|
|
|
|
Accrued warranty obligations as of December 31, 2010
|
|
$
|
43
|
|
Actual warranty experience during 2011
|
|
|
(92
|
)
|
2011 warranty provisions
|
|
|
95
|
|
|
|
|
|
|
Accrued warranty obligations as of December 31, 2011
|
|
$
|
46
|
|
Actual warranty experience during 2012
|
|
|
(72
|
)
|
2012 warranty provisions
|
|
|
60
|
|
|
|
|
|
|
Accrued warranty obligations as of December 31, 2012
|
|
$
|
34
|
|
|
|
|
|
|
Kodak also offers its customers extended warranty arrangements that are generally one year, but may range from three
months to three years after the original warranty period. Kodak provides repair services and routine maintenance under these arrangements. Kodak has not separated the extended warranty revenues and costs from the routine maintenance service revenues
and costs, as it is not practicable to do so. Therefore, these revenues and costs have been aggregated in the discussion that follows. The change in Kodaks deferred revenue balance in relation to these extended warranty and maintenance
arrangements, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:
|
|
|
|
|
(in millions)
|
|
|
|
Deferred revenue as of December 31, 2010
|
|
$
|
130
|
|
New extended warranty and maintenance arrangements in 2011
|
|
|
428
|
|
Recognition of extended warranty and maintenance arrangement revenue in 2011
|
|
|
(438
|
)
|
|
|
|
|
|
Deferred revenue as of December 31, 2011
|
|
$
|
120
|
|
New extended warranty and maintenance arrangements in 2012
|
|
|
384
|
|
Recognition of extended warranty and maintenance arrangement revenue in 2012
|
|
|
(397
|
)
|
|
|
|
|
|
Deferred revenue as of December 31, 2012
|
|
$
|
107
|
|
|
|
|
|
|
Costs incurred under these extended warranty and maintenance arrangements for the years ended December 31, 2012 and
2011 amounted to $280 million and $305 million, respectively.
NOTE 15: FINANCIAL INSTRUMENTS
The following table presents the carrying amounts, estimated fair values, and location in the Consolidated Statement of Financial Position for
Kodaks financial instruments:
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Of Items Recorded At Fair Value
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
(in millions)
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term available-for-sale
|
|
Other current assets
|
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
|
|
Long-term available-for-sale
|
|
Other long-term assets
|
|
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term foreign exchange contracts
|
|
Receivables, net
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term foreign exchange contracts
|
|
Other current liabilities
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Of Items Not Recorded At Fair Value
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term held-to-maturity
|
|
Other long-term assets
|
|
Carrying value
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
Fair value
|
|
|
23
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
Short-term borrowings and current portion of long-term debt
|
|
Carrying value
|
|
|
699
|
|
|
|
|
|
|
|
699
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
27
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
Long-term debt
|
|
Long-term debt, net of current portion
|
|
Carrying value
|
|
|
740
|
|
|
|
|
|
|
|
740
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
1,265
|
|
|
|
|
|
|
|
1,265
|
|
|
|
|
|
Debt subject to compromise
|
|
Liabilities subject to compromise
|
|
Carrying value
|
|
|
683
|
|
|
|
|
|
|
|
683
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
72
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
Kodak does not utilize financial instruments for trading or other speculative purposes.
Fair Value
The fair values of
marketable securities are determined using quoted prices in active markets for identical assets (Level 1 fair value measurements). Fair values of Kodaks forward contracts are determined using other observable inputs (Level 2 fair value
measurements), and are based on the present value of expected future cash flows (an income approach valuation technique) considering the risks involved and using discount rates appropriate for the duration of the contracts. Transfers between levels
of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. There were no transfers between levels of the fair value hierarchy during the year ended December 31, 2012.
Fair values of long-term borrowings are determined by reference to quoted market prices, if available, or by pricing models based on the
value of related cash flows discounted at current market interest rates. The carrying values of cash and cash equivalents and trade receivables (which are not shown in the table above) approximate their fair values.
Foreign Exchange
Foreign
exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in Other income (charges), net in the accompanying Consolidated Statement of Operations. The net
effects of foreign currency transactions, including changes in the fair value of foreign exchange contracts, are shown below:
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Net loss
|
|
$
|
(16
|
)
|
|
$
|
(14
|
)
|
|
$
|
(5
|
)
|
Derivative Financial Instruments
Kodak, as a result of its global operating and financing activities, is exposed to changes in foreign currency exchange rates, commodity prices, and interest rates, which may adversely affect its results
of operations and financial position. Kodak manages such exposures, in part, with derivative financial instruments.
Foreign currency forward
contracts are used to mitigate currency risk related to foreign currency denominated assets and liabilities. Silver forward contracts are used to mitigate Kodaks risk to fluctuating silver prices. Kodaks exposure to changes in interest
rates results from its investing and borrowing activities used to meet its liquidity needs.
Kodaks financial instrument counterparties
are high-quality investment or commercial banks with significant experience with such instruments. Kodak manages exposure to counterparty credit risk by requiring specific minimum credit standards and diversification of counterparties. Kodak has
procedures to monitor the credit exposure amounts. The maximum credit exposure at December 31, 2012 was not significant to Kodak.
In the
event of a default under the Companys DIP Credit Agreement, or a default under any derivative contract or similar obligation of Kodak, subject to certain minimum thresholds, the derivative counterparties would have the right, although not the
obligation, to require immediate settlement of some or all open derivative contracts at their then-current fair value, but with liability positions netted against asset positions with the same counterparty. In addition, the Company has provided
credit support through letters of credit or as part of secured arrangements under the DIP Credit Agreement for its derivative contract obligations. At December 31, 2012, Kodak had open derivative contracts in liability positions with a total
fair value of $1 million.
84
The location and amounts of gains and losses related to derivatives reported in the Consolidated Statement
of Operations are shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in Cash Flow Hedging
Relationships
|
|
Gain (Loss) Recognized in OCI on
Derivative (Effective Portion)
|
|
|
Gain (Loss) Reclassified from
Accumulated OCI Into Cost of
Sales (Effective Portion)
|
|
|
Gain (Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded
from
Effectiveness Testing)
|
|
|
|
For the Year Ended ended December 31,
|
|
|
For the Year Ended December 31,
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
(6
|
)
|
|
$
|
14
|
|
|
$
|
10
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated
as Hedging Instruments
|
|
Location of Gain or (Loss)
Recognized in Income
on
Derivative
|
|
Gain (Loss) Recognized in
Income on Derivative
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Foreign exchange contracts
|
|
Other income (charges), net
|
|
$
|
|
|
|
$
|
11
|
|
|
$
|
32
|
|
Foreign Currency Forward Contracts
Kodaks foreign currency forward contracts used to mitigate currency risk related to existing foreign currency denominated assets and liabilities are not designated as hedges, and are marked to
market through net (loss) earnings at the same time that the exposed assets and liabilities are re-measured through net (loss) earnings (both in Other income (charges), net in the Consolidated Statement of Operations). The notional amount of such
contracts open at December 31, 2012 was approximately $651 million. The majority of the contracts of this type held by Kodak are denominated in euros and Swiss francs.
Silver Forward Contracts
Kodak may enter into silver forward contracts that are
designated as cash flow hedges of commodity price risk related to forecasted purchases of silver. Kodak had no open hedges as of December 31, 2012.
In January 2012, Kodak terminated all its existing hedges at a loss of $5 million. These hedges were designated as secured agreements under the Second Amended and Restated Credit Agreement and needed to
be settled prior to the termination of that facility in conjunction with the Companys DIP Credit Agreement. Hedge gains and losses related to these silver forward contracts were reclassified into Cost of sales in the Consolidated Statement of
Operations as the related silver containing products were sold to third parties. These gains or losses transferred to Cost of sales are generally offset by increased or decreased costs of silver purchased in the open market. At December 31,
2012, there were no existing gains or losses to be reclassified to Cost of sales within the next twelve months.
85
NOTE 16: OTHER OPERATING (INCOME) EXPENSES, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
(Income) expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairments (1)
|
|
$
|
|
|
|
$
|
8
|
|
|
$
|
626
|
|
Supply arrangement termination payment (2)
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
Gains related to the sales of assets and businesses (3) (4)
|
|
|
(58
|
)
|
|
|
(78
|
)
|
|
|
(8
|
)
|
Other
|
|
|
(2
|
)
|
|
|
5
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(95
|
)
|
|
$
|
(65
|
)
|
|
$
|
619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Refer to Note 8 Goodwill and Other Intangible Assets, in the Notes to Financial Statements.
|
(2)
|
In the fourth quarter of 2012, Kodak received cash proceeds of approximately $35 million associated with the termination of a supply arrangement.
|
(3)
|
In December 2003, Kodak sold a property in France for approximately $65 million, net of direct selling costs, and then leased back a portion of this property for a
nine-year term. The entire gain on the property sale was deferred due to Kodaks significant continuing involvement in the property. In the fourth quarter of 2012, the lease term expired and Kodaks continuing involvement in the property
ended. As a result, Kodak recognized a gain of approximately $50 million.
|
(4)
|
On March 31, 2011, Kodak sold patents and patent applications related to CMOS image sensors to OmniVision Technologies Inc. for $65 million. Kodak recognized a
gain, net of transaction costs, of $62 million from this transaction.
|
NOTE 17: OTHER INCOME (CHARGES), NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Income (charges):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
11
|
|
|
$
|
10
|
|
|
$
|
11
|
|
Gain on sale of investment
|
|
|
23
|
|
|
|
|
|
|
|
10
|
|
Loss on foreign exchange transactions
|
|
|
(16
|
)
|
|
|
(14
|
)
|
|
|
(5
|
)
|
Dividend income
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
21
|
|
|
$
|
(4
|
)
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
NOTE 18: INCOME TAXES
The components of earnings (loss) from continuing operations before income taxes and the related provision (benefit) for U.S. and other income taxes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
(Loss) earnings from continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
(1,760
|
)
|
|
$
|
(703
|
)
|
|
$
|
(343
|
)
|
Outside the U.S.
|
|
|
200
|
|
|
|
4
|
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,560
|
)
|
|
$
|
(699
|
)
|
|
$
|
(425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current benefit
|
|
$
|
(393
|
)
|
|
$
|
(378
|
)
|
|
$
|
(2
|
)
|
Deferred provision
|
|
|
13
|
|
|
|
241
|
|
|
|
2
|
|
Income taxes outside the U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current provision
|
|
|
58
|
|
|
|
54
|
|
|
|
188
|
|
Deferred provision (benefit)
|
|
|
65
|
|
|
|
106
|
|
|
|
(76
|
)
|
State and other income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current benefit
|
|
|
|
|
|
|
(22
|
)
|
|
|
(2
|
)
|
Deferred provision
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (benefit) provision
|
|
$
|
(257
|
)
|
|
$
|
8
|
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The differences between income taxes computed using the U.S. federal income tax rate and the provision (benefit) for
income taxes for continuing operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Amount computed using the statutory rate
|
|
$
|
(546
|
)
|
|
$
|
(245
|
)
|
|
$
|
(149
|
)
|
Increase (reduction) in taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State and other income taxes, net of federal
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Unremitted foreign earnings
|
|
|
35
|
|
|
|
393
|
|
|
|
|
|
Impact of goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
217
|
|
Operations outside the U.S.
|
|
|
(129
|
)
|
|
|
41
|
|
|
|
131
|
|
Legislative rate changes
|
|
|
23
|
|
|
|
20
|
|
|
|
10
|
|
Valuation allowance
|
|
|
350
|
|
|
|
(57
|
)
|
|
|
(98
|
)
|
Tax settlements and adjustments, including interest
|
|
|
(11
|
)
|
|
|
(149
|
)
|
|
|
3
|
|
Other, net
|
|
|
20
|
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for income taxes
|
|
$
|
(257
|
)
|
|
$
|
8
|
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In March 2011, Kodak filed a Request for Competent Authority Assistance with the United States Internal Revenue Service
(IRS). The request related to a potential double taxation issue with respect to certain patent licensing royalty payments received by Kodak in 2012 and 2011. In the twelve months ended December 31, 2012, Kodak received notification that the IRS
had reached agreement with the Korean National Tax Service (NTS) with regards to Kodaks March 2011 request. As a result of the agreement reached by the IRS and NTS, Kodak was due a partial refund of Korean withholding taxes in the amount of
$123 million. Kodak had previously agreed with the licensees that made the royalty payments that any refunds of the related Korean withholding taxes would be shared equally between Kodak and the licensees. The licensees share ($61 million) of
the Korean withholding tax refund has therefore been reported as a licensing revenue reduction in Licensing & royalties in the Consolidated Statement of Operations.
During 2012 and 2011, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would not be realized due to reduced manufacturing volumes negatively
impacting profitability in a location outside the U.S. and accordingly,
87
recorded a provision of $30 million and $53 million, respectively, associated with the establishment of a valuation allowance on those deferred tax assets.
During 2010, based on additional positive evidence regarding past earnings and projected future taxable income from operating activities, Kodak
determined that it is more likely than not that a portion of the deferred tax assets outside the U.S. would be realized and accordingly, recorded a tax benefit of $154 million associated with the release of the valuation allowance on those deferred
tax assets.
Deferred Tax Assets and Liabilities
The significant components of deferred tax assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Pension and postretirement obligations
|
|
$
|
689
|
|
|
$
|
925
|
|
Allowed Claims
|
|
|
272
|
|
|
|
|
|
Restructuring programs
|
|
|
10
|
|
|
|
5
|
|
Foreign tax credit
|
|
|
577
|
|
|
|
661
|
|
Inventories
|
|
|
26
|
|
|
|
33
|
|
Investment tax credit
|
|
|
153
|
|
|
|
172
|
|
Employee deferred compensation
|
|
|
113
|
|
|
|
69
|
|
Depreciation
|
|
|
57
|
|
|
|
30
|
|
Research and development costs
|
|
|
308
|
|
|
|
232
|
|
Tax loss carryforwards
|
|
|
1,409
|
|
|
|
1,178
|
|
Other
|
|
|
415
|
|
|
|
406
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
4,029
|
|
|
$
|
3,711
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Leasing
|
|
$
|
43
|
|
|
$
|
37
|
|
Other deferred debt
|
|
|
11
|
|
|
|
16
|
|
Unremitted foreign earnings
|
|
|
417
|
|
|
|
430
|
|
Other
|
|
|
181
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
652
|
|
|
|
651
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
|
3,377
|
|
|
|
3,060
|
|
Valuation allowance
|
|
|
2,838
|
|
|
|
2,560
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
539
|
|
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
88
Deferred tax assets (liabilities) are reported in the following components within the Consolidated Statement
of Financial Position:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Deferred income taxes (current)
|
|
$
|
75
|
|
|
$
|
81
|
|
Other long-term assets
|
|
|
470
|
|
|
|
429
|
|
Accrued income taxes
|
|
|
(5
|
)
|
|
|
(3
|
)
|
Other long-term liabilities
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
539
|
|
|
$
|
500
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012, Kodak had available domestic and foreign net operating loss carry-forwards for income tax
purposes of approximately $4,396 million, of which approximately $519 million have an indefinite carry-forward period. The remaining $3,877 million expire between the years 2013 and 2032. As of December 31, 2012, Kodak had unused foreign tax
credits and investment tax credits of $577 million and $153 million, respectively, with various expiration dates through 2027. Utilization of these net operating losses and tax credits may be subject to limitations in the event of significant
changes in stock ownership of the Company.
Kodak has been granted a tax holiday in certain jurisdictions in China. Kodak is eligible for a
50% reduction of the income tax rate as a tax holiday incentive. The tax rate currently varies by jurisdiction, due to the tax holiday, and will be 25% in all jurisdictions within China in 2013.
During 2011, Kodak concluded that the undistributed earnings of its foreign subsidiaries would no longer be considered permanently reinvested. After
assessing the assets of the subsidiaries relative to specific opportunities for reinvestment, as well as the forecasted uses of cash for both its domestic and foreign operations, Kodak concluded that it was prudent to change its indefinite
reinvestment assertion to allow greater flexibility in its cash management. As a result of the change in its assertion Kodak recorded a deferred tax liability (net of related foreign tax credits) of $374 million and $396 million on the foreign
subsidiaries undistributed earnings during the year ended December 31, 2012 and 2011, respectively. This deferred tax liability was fully offset by a corresponding decrease in Kodaks U.S. valuation allowance, which resulted in no
net tax provision. Kodak also recorded a provision of $6 million and $34 million for the potential foreign withholding taxes on the undistributed earnings during the year ended December 31, 2012 and 2011, respectively.
Kodaks valuation allowance as of December 31, 2012 was $2,838 million. Of this amount, $403 million was attributable to Kodaks net
deferred tax assets outside the U.S. of $1,001 million, and $2,435 million related to Kodaks net deferred tax assets in the U.S. of $2,376 million, for which Kodak believes it is not more likely than not that the assets will be realized. The
net deferred tax assets in excess of the valuation allowance of approximately $539 million relate primarily to net operating loss carry-forwards, certain tax credits, and pension related tax benefits for which Kodak believes it is more likely than
not that the assets will be realized.
Kodaks valuation allowance as of December 31, 2011 was $2,560 million. Of this amount, $417
million was attributable to Kodaks net deferred tax assets outside the U.S. of $964 million, and $2,143 million related to Kodaks net deferred tax assets in the U.S. of $2,096 million, for which Kodak believes it is not more likely than
not that the assets will be realized. The net deferred tax assets in excess of the valuation allowance of $500 million relate primarily to net operating loss carry-forwards, certain tax credits, and pension related tax benefits for which Kodak
believes it is more likely than not that the assets will be realized.
89
Accounting for Uncertainty in Income Taxes
A reconciliation of the beginning and ending amount of Kodaks liability for income taxes associated with unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Balance as of January 1
|
|
$
|
76
|
|
|
$
|
245
|
|
|
$
|
256
|
|
Tax positions related to the current year:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
4
|
|
|
|
12
|
|
|
|
1
|
|
Tax positions related to prior years:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
Reductions
|
|
|
(17
|
)
|
|
|
(183
|
)
|
|
|
(11
|
)
|
Settlements with taxing authorities
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Lapses in statutes of limitations
|
|
|
(6
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31
|
|
$
|
57
|
|
|
$
|
76
|
|
|
$
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kodaks policy regarding interest and/or penalties related to income tax matters is to recognize such items as a
component of income tax (benefit) expense. During the years ended December 31, 2012, 2011 and 2010, Kodak recognized interest and penalties of approximately $2 million, $(60) million and $5 million, respectively, in income tax (benefit)
expense. Additionally, Kodak had approximately $16 million and $14 million of interest and penalties associated with uncertain tax benefits accrued as of December 31, 2012 and 2011, respectively.
If the unrecognized tax benefits were recognized, they would favorably affect the effective income tax rate in the period recognized. Kodak has
classified certain income tax liabilities as current or noncurrent based on managements estimate of when these liabilities will be settled. The current liabilities are recorded in Accrued income and other taxes in the Consolidated Statement of
Financial Position. Noncurrent income tax liabilities are recorded in Other long-term liabilities in the Consolidated Statement of Financial Position.
It is reasonably possible that the liability associated with Kodaks unrecognized tax benefits will increase or decrease within the next twelve months. These changes may be the result of settling
ongoing audits or the expiration of statutes of limitations. Such changes to the unrecognized tax benefits could range from $0 to $40 million based on current estimates. Audit outcomes and the timing of audit settlements are subject to significant
uncertainty. Although management believes that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on the earnings of Kodak. Conversely, if these issues
are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.
During 2012, Kodak
agreed to terms with a tax authority outside of the U.S. and settled audits for calendar years 2002 through 2007. For these years, Kodak originally recorded liabilities for uncertain tax positions (UTPs) totaling $12 million (plus
interest of approximately $4 million). The settlement resulted in a reduction in Accrued income and other taxes and the recognition of a $16 million tax benefit.
During 2011, Kodak agreed to terms with the U.S. Internal Revenue Service and settled the federal audits for calendar years 2001 through 2005. For these years, Kodak originally recorded federal and
related state liabilities for UTPs totaling $115 million (plus interest of approximately $25 million). The settlement resulted in a reduction in Accrued income and other taxes of $296 million, the recognition of a $50 million tax benefit, and a
reduction in net deferred tax assets of $246 million.
During 2011, Kodak agreed to terms with a tax authority outside of the U.S. and settled
audits for calendar years 2001 and 2002. For these years, Kodak originally recorded liabilities for UTPs totaling $56 million (plus interest of approximately $43 million). The settlement resulted in a reduction in Accrued income and other taxes and
the recognition of a $94 million tax benefit.
Kodak files numerous consolidated and separate income tax returns in the U.S. federal
jurisdiction and in many state and foreign jurisdictions. Kodak has substantially concluded all U.S. federal income tax matters for years through 2006. Kodaks U.S. tax matters for the years 2007 through 2012 remain subject to examination by
the IRS. Substantially all material state, local, and foreign income tax matters have been concluded for years through 2006. Kodaks tax matters for the years 2007 through 2012 remain subject to examination by the respective state, local, and
foreign tax jurisdiction authorities.
90
Net Operating Loss Rights Agreement
On August 1, 2011, the Company entered into a Net Operating Loss (NOL) Rights Agreement (NOL Rights Agreement) designed to preserve stockholder value and tax assets. The Companys ability to use
its tax attributes to offset tax on U.S. taxable income would be substantially limited if there were an ownership change as defined under Section 382 of the U.S. Internal Revenue Code. In general, an ownership change would occur if
5-percent shareholders, as defined under Section 382, collectively increase their ownership in the Company by more than 50 percentage points over a rolling three-year period.
In connection with the adoption of the NOL Rights Agreement, the Companys Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of the
Companys common stock. The preferred share purchase rights were distributed to stockholders of record as of August 11, 2011, but would only be activated if triggered by the NOL Rights Agreement.
Under the NOL Rights Agreement, preferred share purchase rights will work to impose significant dilution upon any person or group which acquires
beneficial ownership of 4.9% or more of the outstanding common stock, without the approval of the Companys Board of Directors, from and after August 1, 2011. Stockholders that own 4.9% or more of the outstanding common stock as of the
opening of business on August 1, 2011, will not trigger the preferred share purchase rights so long as they do not (i) acquire additional shares of common stock representing one one-thousandth of one percent (0.001%) or more of the shares
of common stock then outstanding or (ii) fall under 4.9% ownership of common stock and then re-acquire shares that in the aggregate equal 4.9% or more of the common stock.
The NOL Rights Agreement has a three-year term, although the Companys Board of Directors will review the plan periodically.
NOTE 19: 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 and ongoing rationalization initiatives are recorded in the period in which Kodak commits to a formalized
restructuring or ongoing rationalization plan, or executes the specific actions contemplated by the plans and all criteria for liability recognition under the applicable accounting guidance have been met.
91
Restructuring Reserve Activity
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, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived Asset
|
|
|
|
|
|
|
|
|
|
|
|
|
Exit
|
|
|
Impairments
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Costs
|
|
|
and Inventory
|
|
|
Accelerated
|
|
|
|
|
(in millions)
|
|
Reserve
|
|
|
Reserve
|
|
|
Write-downs
|
|
|
Depreciation
|
|
|
Total
|
|
Balance at December 31, 2009
|
|
$
|
68
|
|
|
$
|
27
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
95
|
|
2010 chargescontinuing operations (1)
|
|
|
48
|
|
|
|
14
|
|
|
|
9
|
|
|
|
6
|
|
|
|
77
|
|
2010 chargesdiscontinued operations (1)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
2010 cash payments/utilization
|
|
|
(67
|
)
|
|
|
(21
|
)
|
|
|
(9
|
)
|
|
|
(6
|
)
|
|
|
(103
|
)
|
2010 other adjustments & reclasses (2)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
22
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
2011 chargescontinuing operations (3)
|
|
|
102
|
|
|
|
15
|
|
|
|
3
|
|
|
|
10
|
|
|
|
130
|
|
2011 chargesdiscontinued operations (3)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
2011 cash payments/utilization
|
|
|
(58
|
)
|
|
|
(13
|
)
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(84
|
)
|
2011 other adjustments & reclasses (4)
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2011
|
|
|
38
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
2012 chargescontinuing operations (5)
|
|
|
167
|
|
|
|
35
|
|
|
|
30
|
|
|
|
13
|
|
|
|
245
|
|
2012 chargesdiscontinued operations (5)
|
|
|
20
|
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
26
|
|
2012 cash payments/utilization
|
|
|
(86
|
)
|
|
|
(13
|
)
|
|
|
(34
|
)
|
|
|
(13
|
)
|
|
|
(146
|
)
|
2012 other adjustments & reclasses (6)
|
|
|
(101
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2012 (7)
|
|
$
|
38
|
|
|
$
|
45
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Severance reserve activity includes termination benefit charges of $49 million.
|
(2)
|
Includes $28 million of severance related charges for pension plan curtailments, settlements, and special termination benefits, which are reflected in Pension and other
postretirement liabilities and Other long-term assets in the Consolidated Statement of Financial Position.
|
(3)
|
Severance reserve activity includes termination benefit charges of $101 million, and net curtailment and settlement losses related to these actions of $4 million.
|
(4)
|
Includes $32 million of severance related charges for pension plan curtailments, settlements, and special termination benefits, which are reflected in Pension and other
postretirement liabilities and Other long-term assets in the Consolidated Statement of Financial Position, offset by $1 million of foreign currency translation adjustments.
|
(5)
|
Severance reserve activity includes termination benefit charges of $186 million, and net curtailment and settlement losses related to these actions of $1 million.
|
(6)
|
Includes $100 million of severance related charges for pension plan curtailments, settlements, and special termination benefits, which are reflected in Pension and
other postretirement liabilities and Other long-term assets in the Consolidated Statement of Financial Position, and $2 million for amounts reclassified as Liabilities subject to compromise.
|
(7)
|
Kodak expects to utilize the majority of the December 31, 2012 accrual balance in 2013.
|
2010 Activity
The $78 million of charges for the year 2010 includes $6 million of charges
for accelerated depreciation and $2 million for inventory write-downs, which were reported in Cost of sales in the accompanying Consolidated Statement of Operations, and $1 million which was reported in discontinued operations. The remaining costs
incurred of $69 million,
92
including $48 million of severance costs, $14 million of exit costs, and $7 million of long-lived asset impairments, were reported as Restructuring costs and other in the accompanying
Consolidated Statement of Operations. 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 2010 severance costs related to the elimination of approximately 800 positions, including approximately 550 manufacturing/service, 225 administrative
and 25 research and development positions. The geographic composition of these positions includes approximately 475 in the United States and Canada, and 325 throughout the rest of the world.
The charges of $78 million recorded in 2010 included $9 million applicable to the Graphics, Entertainment and Commercial Films Segment, $1 million applicable to the Digital Printing and Enterprise
Segment, $7 million applicable to the Personalized and Document Imaging Segment, and $60 million that was applicable to manufacturing/service, research and development, and administrative functions, which are shared across all segments. The
remaining $1 million was applicable to discontinued operations.
As a result of these initiatives, severance payments will be paid during
periods through 2011 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
be paid over periods throughout 2011 and beyond.
2011 Activity
The $133 million of charges for the year 2011 includes $10 million of charges for accelerated depreciation and $2 million for inventory write-downs, which were reported in Cost of sales in the
accompanying Consolidated Statement of Operations, and $3 million which was reported in discontinued operations. The remaining costs incurred of $118 million, including $102 million of severance costs, $15 million of exit costs, and $1 million of
long-lived asset impairments, were reported as Restructuring costs and other in the accompanying Consolidated Statement of Operations. 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 2011 severance costs related to the elimination of approximately 1,225
positions, including approximately 575 manufacturing/service, 550 administrative and 100 research and development positions. The geographic composition of these positions includes approximately 725 in the United States and Canada, and 500 throughout
the rest of the world.
The charges of $133 million recorded in 2011 included $23 million applicable to the Graphics, Entertainment and
Commercial Films Segment, $6 million applicable to the Digital Printing and Enterprise Segment, $6 million applicable to the Personalized and Document Imaging Segment, and $95 million that was applicable to manufacturing/service, research and
development, and administrative functions, which are shared across all segments. The remaining $3 million was applicable to discontinued operations.
As a result of these initiatives, severance payments will be paid during periods through 2012 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 be paid over periods throughout 2012 and beyond.
2012 Activity
Restructuring actions taken in 2012 were initiated to reduce Kodaks
cost structure as part of its commitment to drive sustainable profitability. Actions included the winding down of sales of consumer inkjet printers, the digital capture and devices business exit, traditional product manufacturing capacity reductions
in the U.S. and Mexico, workforce reductions triggered by the Kodak Gallery wind-down, consolidation of thermal media manufacturing in the U.S. and various targeted reductions in research and development, sales, service, and other administrative
functions.
The $271 million of charges for the year 2012 includes $13 million of charges for accelerated depreciation and $4 million for
inventory write-downs, which were reported in Cost of sales in the accompanying Consolidated Statement of Operations, and $26 million which was reported as discontinued operations. The remaining costs incurred of $228 million, including $167 million
of severance costs, $35 million of exit costs, and $26 million of long-lived asset impairments, were reported as Restructuring costs and other in the accompanying Consolidated Statement of
93
Operations. 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 2012 severance costs related to the elimination of approximately 3,225 positions, including approximately 1,775 manufacturing/service,
1,050 administrative, and 400 research and development positions. The geographic composition of these positions includes approximately 1,925 in the United States and Canada, and 1,300 throughout the rest of the world.
The charges of $271 million recorded in 2012 included $20 million applicable to the Graphics, Entertainment and Commercial Films Segment, $93 million
applicable to the Digital Printing and Enterprise Segment, $24 million applicable to the Personalized and Document Imaging Segment, and $108 million that was applicable to manufacturing/service, research and development, and administrative
functions, which are shared across all segments. The remaining $26 million was applicable to discontinued operations.
As a result of these
initiatives, severance payments will be paid during periods through 2013 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 be paid over periods throughout 2013 and beyond.
NOTE 20: RETIREMENT PLANS
Substantially all U.S. employees are covered by a noncontributory defined benefit plan, the Kodak Retirement Income Plan
(KRIP), which is funded by the Company contributions to an irrevocable trust fund. The funding policy for KRIP is to contribute amounts sufficient to meet minimum funding requirements as determined by employee benefit and tax laws plus
any additional amounts the Company determines to be appropriate. Generally, benefits are based on a formula recognizing length of service and final average earnings. Assets in the trust fund are held for the sole benefit of participating employees
and retirees. They are composed of corporate equity and debt securities, U.S. government securities, partnership investments, interests in pooled funds, commodities, real estate, and various types of interest rate, foreign currency, debt, and equity
market financial instruments.
In March 1999, the Company amended KRIP to include a separate cash balance formula for all U.S. employees hired
after February 1999 (the Cash Balance Plan). All U.S. employees hired prior to that date were granted the option to choose the traditional KRIP plan or the Cash Balance Plan. Written elections were made by employees in 1999, and were
effective January 1, 2000. The Cash Balance Plan credits employees hypothetical accounts with an amount equal to 4% of their pay, plus interest based on the 30-year treasury bond rate. In addition, for employees participating in the Cash
Balance Plan and the Companys defined contribution plan, the Savings and Investment Plan (SIP), the Company matches dollar-for-dollar on the first 1% contributed to SIP and $.50 for each dollar on the next 4% contributed. The
Company contributions to SIP were $8 million and $10 million for 2012 and 2011, respectively.
The Company also sponsors unfunded defined
benefit plans for certain U.S. employees, primarily executives. The benefits of these plans are obtained by applying KRIP provisions to all compensation, including amounts being deferred, and without regard to the legislated qualified plan maximums,
reduced by benefits under KRIP. Employees covered by the Cash Balance Plan also receive an additional benefit equal to 3% of their annual pensionable earnings.
Many subsidiaries and branches operating outside the U.S. have defined benefit retirement plans covering substantially all employees. Contributions by Kodak for these plans are typically deposited under
government or other fiduciary-type arrangements. Retirement benefits are generally based on contractual agreements that provide for benefit formulas using years of service and/or compensation prior to retirement. The actuarial assumptions used for
these plans reflect the diverse economic environments within the various countries in which Kodak operates.
The measurement date used to
determine the pension obligation for all funded and unfunded U.S. and Non-U.S. defined benefit plans is December 31.
94
Information regarding the major funded and unfunded U.S. and Non-U.S. defined benefit plans follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Change in Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at January 1
|
|
$
|
5,259
|
|
|
$
|
3,652
|
|
|
$
|
5,071
|
|
|
$
|
3,636
|
|
Acquisitions/divestitures/other transfers
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
2
|
|
Service cost
|
|
|
48
|
|
|
|
10
|
|
|
|
50
|
|
|
|
16
|
|
Interest cost
|
|
|
206
|
|
|
|
156
|
|
|
|
254
|
|
|
|
180
|
|
Participant contributions
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
4
|
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Benefit payments
|
|
|
(422
|
)
|
|
|
(226
|
)
|
|
|
(535
|
)
|
|
|
(226
|
)
|
Actuarial loss
|
|
|
385
|
|
|
|
560
|
|
|
|
392
|
|
|
|
160
|
|
Curtailments
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(86
|
)
|
Special termination benefits
|
|
|
99
|
|
|
|
|
|
|
|
28
|
|
|
|
1
|
|
Currency adjustments
|
|
|
|
|
|
|
152
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at December 31
|
|
$
|
5,575
|
|
|
$
|
4,264
|
|
|
$
|
5,259
|
|
|
$
|
3,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
|
$
|
4,763
|
|
|
$
|
2,436
|
|
|
$
|
4,861
|
|
|
$
|
2,634
|
|
Acquisitions/divestitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Actual gain on plan assets
|
|
|
500
|
|
|
|
157
|
|
|
|
412
|
|
|
|
47
|
|
Employer contributions
|
|
|
7
|
|
|
|
29
|
|
|
|
25
|
|
|
|
78
|
|
Participant contributions
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
4
|
|
Settlements
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
(86
|
)
|
Benefit payments
|
|
|
(422
|
)
|
|
|
(226
|
)
|
|
|
(535
|
)
|
|
|
(226
|
)
|
Currency adjustments
|
|
|
|
|
|
|
89
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
|
$
|
4,848
|
|
|
$
|
2,479
|
|
|
$
|
4,763
|
|
|
$
|
2,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under Funded Status at December 31
|
|
$
|
(727
|
)
|
|
$
|
(1,785
|
)
|
|
$
|
(496
|
)
|
|
$
|
(1,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation at December 31
|
|
$
|
5,497
|
|
|
$
|
4,233
|
|
|
$
|
5,112
|
|
|
$
|
3,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the Consolidated Statement of Financial Position for all major funded and unfunded U.S. and
Non-U.S. defined benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Other long-term assests
|
|
$
|
|
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
Pension and other postretirement liabilities
|
|
|
|
|
|
|
(1,787
|
)
|
|
|
(478
|
)
|
|
|
(1,216
|
)
|
Liabilities subject to compromise
|
|
|
(727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(727
|
)
|
|
$
|
(1,785
|
)
|
|
$
|
(496
|
)
|
|
$
|
(1,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
Information with respect to the major funded and unfunded U.S. and Non-U.S. defined benefit plans with an
accumulated benefit obligation in excess of plan assets follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Projected benefit obligation
|
|
$
|
5,575
|
|
|
$
|
4,229
|
|
|
$
|
5,259
|
|
|
$
|
3,652
|
|
Accumulated benefit obligation
|
|
|
5,497
|
|
|
|
4,198
|
|
|
|
5,112
|
|
|
|
3,584
|
|
Fair value of plan assets
|
|
|
4,848
|
|
|
|
2,441
|
|
|
|
4,763
|
|
|
|
2,436
|
|
Amounts recognized in Accumulated other comprehensive loss for all major funded and unfunded U.S. and Non-U.S. defined
benefit plans consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Prior service cost
|
|
$
|
(5
|
)
|
|
$
|
(25
|
)
|
|
$
|
(6
|
)
|
|
$
|
(26
|
)
|
Net actuarial loss
|
|
|
(2,237
|
)
|
|
|
(2,202
|
)
|
|
|
(2,135
|
)
|
|
|
(1,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,242
|
)
|
|
$
|
(2,227
|
)
|
|
$
|
(2,141
|
)
|
|
$
|
(1,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for all major funded and
unfunded U.S. and Non-U.S. defined benefit plans follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Newly established loss
|
|
$
|
(275
|
)
|
|
$
|
(567
|
)
|
|
$
|
(414
|
)
|
|
$
|
(322
|
)
|
Newly established prior service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
4
|
|
Net actuarial loss
|
|
|
173
|
|
|
|
66
|
|
|
|
69
|
|
|
|
52
|
|
Prior service cost recognized due to curtailment
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
4
|
|
Net curtailment gain not recognized in expense
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
Net loss recognized in expense due to settlements
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
10
|
|
Acquisitions, divestitures and other transfers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in Other comprehensive loss
|
|
$
|
(101
|
)
|
|
$
|
(462
|
)
|
|
$
|
(344
|
)
|
|
$
|
(249
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The actuarial loss and prior service cost estimated to be amortized from Accumulated other comprehensive loss into net
periodic pension cost over the next year for all major plans is $284 million and $3 million, respectively.
96
Pension (income) expense from continuing operations for all defined benefit plans included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Major defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
48
|
|
|
$
|
10
|
|
|
$
|
50
|
|
|
$
|
16
|
|
|
$
|
48
|
|
|
$
|
14
|
|
Interest cost
|
|
|
206
|
|
|
|
156
|
|
|
|
254
|
|
|
|
180
|
|
|
|
263
|
|
|
|
177
|
|
Expected return on plan assets
|
|
|
(389
|
)
|
|
|
(164
|
)
|
|
|
(435
|
)
|
|
|
(209
|
)
|
|
|
(475
|
)
|
|
|
(210
|
)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
|
1
|
|
|
|
3
|
|
|
|
1
|
|
|
|
4
|
|
|
|
1
|
|
|
|
1
|
|
Actuarial loss
|
|
|
173
|
|
|
|
66
|
|
|
|
69
|
|
|
|
52
|
|
|
|
5
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension (income) expense before special termination benefits, curtailments and settlements
|
|
|
39
|
|
|
|
71
|
|
|
|
(61
|
)
|
|
|
43
|
|
|
|
(158
|
)
|
|
|
19
|
|
Special termination benefits
|
|
|
99
|
|
|
|
|
|
|
|
28
|
|
|
|
1
|
|
|
|
27
|
|
|
|
1
|
|
Curtailment (gains) losses
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
(7
|
)
|
Settlement losses
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension (income) expense for major defined benefit plans
|
|
|
138
|
|
|
|
73
|
|
|
|
(33
|
)
|
|
|
58
|
|
|
|
(131
|
)
|
|
|
14
|
|
Other plans including unfunded plans
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension (income) expense from continuing operations
|
|
$
|
138
|
|
|
$
|
84
|
|
|
$
|
(33
|
)
|
|
$
|
70
|
|
|
$
|
(131
|
)
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The special termination benefits of $99 million, $29 million, and $28 million for the years ended December 31, 2012,
2011, and 2010, respectively, were incurred as a result of Kodaks restructuring actions and, therefore, have been included in Restructuring costs and other in the Consolidated Statement of Operations for those respective periods.
For 2011, $3 million of the curtailment losses and $1 million of the settlement losses were incurred as a result of Kodaks restructuring actions
and, therefore, have been included in Restructuring costs and other in the Consolidate Statement of Operations for 2011. For 2012, $1 million of the settlement losses were incurred as a result of Kodaks restructuring actions and, therefore,
have been included in Restructuring costs and other in the Consolidated Statement of Operations for 2012.
The weighted-average assumptions
used to determine the benefit obligation amounts as of the end of the year for all major funded and unfunded U.S. and Non-U.S. defined benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Discount rate
|
|
|
3.50
|
%
|
|
|
3.55
|
%
|
|
|
4.25
|
%
|
|
|
4.37
|
%
|
Salary increase rate
|
|
|
3.40
|
%
|
|
|
2.84
|
%
|
|
|
3.45
|
%
|
|
|
2.99
|
%
|
The weighted-average assumptions used to determine net pension (income) expense for all the major funded and unfunded
U.S. and Non-U.S. defined benefit plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
Discount rate
|
|
|
4.25
|
%
|
|
|
4.41
|
%
|
|
|
5.24
|
%
|
|
|
4.95
|
%
|
|
|
5.75
|
%
|
|
|
5.39
|
%
|
Salary increase rate
|
|
|
3.45
|
%
|
|
|
2.98
|
%
|
|
|
3.99
|
%
|
|
|
3.89
|
%
|
|
|
4.05
|
%
|
|
|
3.87
|
%
|
Expected long-term rate of return on plan assets
|
|
|
8.52
|
%
|
|
|
7.02
|
%
|
|
|
8.43
|
%
|
|
|
7.64
|
%
|
|
|
8.73
|
%
|
|
|
7.76
|
%
|
97
Plan Asset Investment Strategy
The investment strategy underlying the asset allocation for the pension assets is to achieve an optimal return on assets with an acceptable level of risk while providing for the long-term liabilities, and
maintaining sufficient liquidity to pay current benefits and other cash obligations of the plans. This is primarily achieved by investing in a broad portfolio constructed of various asset classes including equity and equity-like investments, debt
and debt-like investments, real estate, private equity and other assets and instruments. Long duration bonds and treasury bond futures are used to partially match the long-term nature of plan liabilities. Other investment objectives include
maintaining broad diversification between and within asset classes and fund managers, and managing asset volatility relative to plan liabilities.
Every three years, or when market conditions have changed materially, each of Kodaks major pension plans will undertake an asset allocation or asset and liability modeling study. The asset
allocation and expected return on the plans assets are individually set to provide for benefits and other cash obligations and within each countrys legal investment constraints.
Actual allocations may vary from the target asset allocations due to market value fluctuations, the length of time it takes to implement changes in strategy, and the timing of cash contributions and cash
requirements of the plans. The asset allocations are monitored, and are rebalanced in accordance with the policy set forth for each plan.
Of
the total plan assets attributable to the major U.S. defined benefit plans at December 31, 2012, 96% relate to KRIP. The expected long-term rate of return on plan assets assumption (EROA) is based on a combination of formal asset
and liability studies that include forward-looking return expectations given the current asset allocation. A review of the EROA as of December 31, 2012, based upon the current asset allocation and forward-looking expected returns for the
various asset classes in which KRIP invests, resulted in an EROA of 8.20%.
As with KRIP, the EROA assumptions for certain of Kodaks
other pension plans were reassessed as of December 31, 2012. The annual expected return on plan assets for the major non-U.S. pension plans range from 3.70% to 7.30% based on the plans respective asset allocations as of December 31,
2012.
Plan Asset Risk Management
Kodak evaluates its defined benefit plans asset portfolios for the existence of significant concentrations of risk. Types of concentrations that are evaluated include, but are not limited to,
investment concentrations in a single entity, type of industry, foreign country, and individual fund. As of December 31, 2012 and 2011, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in
Kodaks defined benefit plan assets.
Kodaks weighted-average asset allocations for its major U.S. defined benefit pension plans,
by asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
Asset Category
|
|
2012
|
|
|
2011
|
|
|
2012 Target
|
Equity securities
|
|
|
25
|
%
|
|
|
17
|
%
|
|
13%-27%
|
Debt securities
|
|
|
38
|
%
|
|
|
38
|
%
|
|
35%-47%
|
Real estate
|
|
|
4
|
%
|
|
|
4
|
%
|
|
2%-10%
|
Cash
|
|
|
2
|
%
|
|
|
7
|
%
|
|
0%-6%
|
Global balanced asset allocation funds
|
|
|
11
|
%
|
|
|
6
|
%
|
|
5%-12%
|
Other
|
|
|
20
|
%
|
|
|
28
|
%
|
|
19%-29%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
Kodaks weighted-average asset allocations for its major non-U.S. defined benefit pension plans, by
asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
Asset Category
|
|
2012
|
|
|
2011
|
|
|
2012 Target
|
Equity securities
|
|
|
13
|
%
|
|
|
16
|
%
|
|
11%-18%
|
Debt securities
|
|
|
40
|
%
|
|
|
44
|
%
|
|
40%-48%
|
Real estate
|
|
|
2
|
%
|
|
|
3
|
%
|
|
0%-9%
|
Cash
|
|
|
2
|
%
|
|
|
4
|
%
|
|
0%-6%
|
Global balance asset allocation funds
|
|
|
3
|
%
|
|
|
0
|
%
|
|
0%-6%
|
Other
|
|
|
40
|
%
|
|
|
33
|
%
|
|
33%-43%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Other asset category in the tables above is primarily composed of private equity, venture capital, and other
investments.
Fair Value Measurements
Kodaks asset allocations by level within the fair value hierarchy at December 31, 2012 and 2011 are presented in the tables below for Kodaks major defined benefit plans. Kodaks plan
assets were accounted for at fair value and are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Kodaks assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of fair value of assets and their placement within the fair value hierarchy levels.
Major U.S. Plans
December 31,
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
83
|
|
|
$
|
|
|
|
$
|
83
|
|
Equity Securities
|
|
|
221
|
|
|
|
804
|
|
|
|
163
|
|
|
|
1,188
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Bonds
|
|
|
|
|
|
|
538
|
|
|
|
201
|
|
|
|
739
|
|
Inflation-Linked Bonds
|
|
|
|
|
|
|
111
|
|
|
|
104
|
|
|
|
215
|
|
Investment Grade Bonds
|
|
|
|
|
|
|
386
|
|
|
|
|
|
|
|
386
|
|
Global High Yield & Emerging Market Debt
|
|
|
|
|
|
|
324
|
|
|
|
201
|
|
|
|
525
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
198
|
|
|
|
198
|
|
Private Equity
|
|
|
|
|
|
|
|
|
|
|
1,002
|
|
|
|
1,002
|
|
Insurance Contracts
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Global Balanced Asset Allocation Funds
|
|
|
|
|
|
|
530
|
|
|
|
|
|
|
|
530
|
|
Derivatives with unrealized gains
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Derivatives with unrealized losses
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
202
|
|
|
$
|
2,777
|
|
|
$
|
1,869
|
|
|
$
|
4,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
Major U.S. Plans
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
321
|
|
|
$
|
|
|
|
$
|
321
|
|
Equity Securities
|
|
|
192
|
|
|
|
488
|
|
|
|
136
|
|
|
|
816
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Bonds
|
|
|
|
|
|
|
487
|
|
|
|
237
|
|
|
|
724
|
|
Inflation-Linked Bonds
|
|
|
|
|
|
|
231
|
|
|
|
260
|
|
|
|
491
|
|
Investment Grade Bonds
|
|
|
|
|
|
|
449
|
|
|
|
|
|
|
|
449
|
|
Global High Yield & Emerging Market Debt
|
|
|
|
|
|
|
132
|
|
|
|
|
|
|
|
132
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute Return
|
|
|
|
|
|
|
210
|
|
|
|
135
|
|
|
|
345
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
213
|
|
|
|
213
|
|
Private Equity
|
|
|
|
|
|
|
|
|
|
|
971
|
|
|
|
971
|
|
Insurance Contracts
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Global Balanced Asset Allocation Funds
|
|
|
|
|
|
|
288
|
|
|
|
|
|
|
|
288
|
|
Derivatives with unrealized gains
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
204
|
|
|
$
|
2,607
|
|
|
$
|
1,952
|
|
|
$
|
4,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Kodaks major U.S. defined benefit pension plans, equity investments are invested broadly in U.S. equity,
developed international equity, and emerging markets. Fixed income investments are comprised primarily of long duration U.S. Treasuries and global government bonds, U.S. below investment-grade corporate bonds, as well as U.S. and emerging market
companies debt securities diversified by sector, geography, and through a wide range of market capitalizations. Real estate investments include investments in office, industrial, retail and apartment properties. Other investments include
private equity, hedge funds and natural resource investments. Private equity investments are primarily comprised of limited partnerships and fund-of-fund investments that invest in distressed investments, venture capital, leveraged buyout and
special situation funds. Natural resource investments in oil and gas partnerships and timber funds are also included in this category.
100
Major Non-U.S. Plans
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
57
|
|
|
$
|
|
|
|
$
|
57
|
|
Equity Securities
|
|
|
43
|
|
|
|
276
|
|
|
|
13
|
|
|
|
332
|
|
Debt Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Bonds
|
|
|
|
|
|
|
145
|
|
|
|
7
|
|
|
|
152
|
|
Inflation-Linked Bonds
|
|
|
|
|
|
|
275
|
|
|
|
251
|
|
|
|
526
|
|
Investment Grade Bonds
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
74
|
|
Global High Yield & Emerging Market Debt
|
|
|
|
|
|
|
229
|
|
|
|
|
|
|
|
229
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute Return
|
|
|
|
|
|
|
324
|
|
|
|
|
|
|
|
324
|
|
Real Estate
|
|
|
|
|
|
|
5
|
|
|
|
44
|
|
|
|
49
|
|
Private Equity
|
|
|
|
|
|
|
2
|
|
|
|
322
|
|
|
|
324
|
|
Insurance Contracts
|
|
|
|
|
|
|
338
|
|
|
|
|
|
|
|
338
|
|
Global Balanced Asset Allocation Funds
|
|
|
|
|
|
|
71
|
|
|
|
|
|
|
|
71
|
|
Derivatives with unrealized gains
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Derivatives with unrealized losses
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46
|
|
|
$
|
1,796
|
|
|
$
|
637
|
|
|
$
|
2,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
Major Non-U.S. Plans
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Observable
Inputs
(Level
2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
101
|
|
|
$
|
|
|
|
$
|
101
|
|
Equity securities
|
|
|
58
|
|
|
|
330
|
|
|
|
6
|
|
|
|
394
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Bonds
|
|
|
|
|
|
|
151
|
|
|
|
6
|
|
|
|
157
|
|
Inflation-Linked Bonds
|
|
|
|
|
|
|
356
|
|
|
|
251
|
|
|
|
607
|
|
Investment Grade Bonds
|
|
|
|
|
|
|
97
|
|
|
|
|
|
|
|
97
|
|
Global High Yield & Emerging Market Debt
|
|
|
|
|
|
|
223
|
|
|
|
|
|
|
|
223
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute Return
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
145
|
|
Real Estate
|
|
|
|
|
|
|
4
|
|
|
|
55
|
|
|
|
59
|
|
Private Equity
|
|
|
|
|
|
|
2
|
|
|
|
312
|
|
|
|
314
|
|
Insurance Contracts
|
|
|
|
|
|
|
339
|
|
|
|
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
58
|
|
|
$
|
1,748
|
|
|
$
|
630
|
|
|
$
|
2,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Kodaks major non-U.S. defined benefit pension plans, equity investments are invested broadly in local equity,
developed international and emerging markets. Fixed income investments are comprised primarily of long duration government and corporate bonds with some emerging market debt. Real estate investments include investments in primarily office,
industrial, and retail properties. Other investments include private equity, hedge funds, and insurance contracts. Private equity investments are comprised of limited partnerships and fund-of-fund investments that invest in distressed investments,
venture capital and leveraged buyout funds.
Cash and cash equivalents are valued utilizing cost approach valuation techniques. Equity
securities and debt securities are valued using a market approach based on the closing price on the last business day of the year (if the securities are traded on an active market), or based on the proportionate share of the estimated fair value of
the underlying assets (net asset value). Other investments are valued using a combination of market, income, and cost approaches, based on the nature of the investment. Absolute return investments are primarily valued based on net asset value
derived from observable market inputs. Real estate investments are valued primarily based on independent appraisals and discounted cash flow models, taking into consideration discount rates and local market conditions. Private equity investments are
valued primarily based on independent appraisals, discounted cash flow models, cost, and comparable market transactions, which include inputs such as discount rates and pricing data from the most recent equity financing. Insurance contracts are
primarily valued based on contract values, which approximate fair value.
Some of the plans assets, primarily absolute return, real
estate, and private equity, do not have readily determinable market values due to the nature of these investments. For these investments, fund manager or general partner estimates were used where available. The estimates for the absolute return
assets are derived from observable inputs, based on the fair value of the underlying positions, which have readily available market prices. For investments with lagged pricing, Kodak used the available net asset values, and also considered expected
return, subsequent cash flows and material events.
For all of Kodaks major defined benefit pension plans, investment managers are
selected that are expected to provide best-in-class asset management for their particular asset class, and expected returns greater than those expected from existing salable assets, especially if this would maintain the aggregate volatility desired
for each plans portfolio. Investment managers are retained for the purpose of managing specific investment strategies within contractual investment guidelines. Certain investment managers are authorized to invest in derivatives such as
futures, swaps, and currency forward contracts. Investments in futures and swaps are used to obtain targeted exposure to a particular asset, index or bond duration and only require a portion of the cash to gain exposure to the notional value of the
underlying investment. The remaining cash is available to be deployed and in some cases is invested in a
102
diversified portfolio of various uncorrelated hedge fund strategies that provide added returns at a lower level of risk. Of the investments shown in the major U.S. plans table as of
December 31, 2012 above, 11%, 15% and 4% of the total U.S. assets reported within equity securities, government bonds, and inflation-linked bonds, respectively, are reflective of the exposures gained from the use of derivatives, and are
invested in a diversified portfolio of hedge funds using equity, debt, commodity, and currency strategies. Of the investments shown in the major U.S. plans table as of December 31, 2011 above, 9% and 15% of the total U.S. assets reported within
equity securities and government bonds, respectively, are reflective of the exposures gained from the use of derivatives, and are invested in a diversified portfolio of hedge funds using equity, debt, commodity, and currency strategies. Of the
investments shown in the major Non-U.S. plans table as of December 31, 2012 above, 3%, 4% and 20% of the total Non-U.S. assets reported within equity securities, government bonds, and inflation-linked bonds, respectively, are reflective of the
exposures gained from the use of derivatives, and are invested in a diversified portfolio of hedge funds using equity, debt, commodity, and currency strategies. Of the investments shown in the major Non-U.S. plans table as of December 31, 2011
above, 5%, 3%, and 19% of the total Non-U.S. assets reported within equity securities, government bonds, and inflation-linked bonds, respectively, are reflective of the exposures gained from the use of derivatives, and are invested in a diversified
portfolio of hedge funds using equity, debt, commodity, and currency strategies. Foreign currency contracts and swaps are used to partially hedge foreign currency risk. Additionally, Kodaks major defined benefit pension plans invest in
government bond futures or local government bonds to partially hedge the liability risk of the plans.
The following is a reconciliation of
the beginning and ending balances of level 3 assets of Kodaks major U.S. defined benefit pension plans (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
Balance at
January 1, 2012
|
|
|
Net Realized and
Unrealized
Gains/(Losses)
|
|
|
Net Purchases
and Sales
|
|
|
Net Transfer
Into/(Out of)
Level 3
|
|
|
Balance at
December 31, 2012
|
|
Equity Securities
|
|
$
|
136
|
|
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
|
|
|
$
|
163
|
|
Government Bonds
|
|
|
231
|
|
|
|
27
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
201
|
|
Inflation-Linked Bonds
|
|
|
260
|
|
|
|
21
|
|
|
|
(177
|
)
|
|
|
|
|
|
|
104
|
|
Global High Yield & Emerging Market Debt
|
|
|
|
|
|
|
24
|
|
|
|
177
|
|
|
|
|
|
|
|
201
|
|
Absolute Return
|
|
|
135
|
|
|
|
10
|
|
|
|
20
|
|
|
|
(165
|
)
|
|
|
|
|
Real Estate
|
|
|
213
|
|
|
|
(9
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
198
|
|
Private Equity
|
|
|
971
|
|
|
|
126
|
|
|
|
(95
|
)
|
|
|
|
|
|
|
1,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,952
|
|
|
$
|
215
|
|
|
$
|
(133
|
)
|
|
$
|
(165
|
)
|
|
$
|
1,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
|
Balance at
January 1, 2011
|
|
|
Net Realized and
Unrealized
Gains/(Losses)
|
|
|
Net Purchases
and Sales
|
|
|
Net Transfer
Into/(Out of)
Level 3
|
|
|
Balance at
December 31, 2011
|
|
Equity Securities
|
|
$
|
162
|
|
|
$
|
3
|
|
|
$
|
(29
|
)
|
|
$
|
|
|
|
$
|
136
|
|
Government Bonds
|
|
|
292
|
|
|
|
8
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
237
|
|
Inflations-Linked Bonds
|
|
|
221
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
260
|
|
Absolute Return
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
|
|
|
|
|
135
|
|
Real Estate
|
|
|
240
|
|
|
|
18
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
213
|
|
Private Equity
|
|
|
1,063
|
|
|
|
139
|
|
|
|
(231
|
)
|
|
|
|
|
|
|
971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,978
|
|
|
$
|
207
|
|
|
$
|
(233
|
)
|
|
$
|
|
|
|
$
|
1,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
The following is a reconciliation of the beginning and ending balances of level 3 assets of Kodaks
major Non-U.S. defined benefit pension plans (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
January 1, 2012
|
|
|
Net Realized and
Unrealized
Gains/(Losses)
|
|
|
Net Purchases
and Sales
|
|
|
Net Transfer
Into/(Out of)
Level 3
|
|
|
Balance at
December 31, 2012
|
|
Equity Securities
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
13
|
|
Government Bonds
|
|
|
6
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Inflation-Linked Bonds
|
|
|
251
|
|
|
|
21
|
|
|
|
13
|
|
|
|
(34
|
)
|
|
|
251
|
|
Real Estate
|
|
|
55
|
|
|
|
2
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
44
|
|
Private Equity
|
|
|
312
|
|
|
|
28
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
630
|
|
|
$
|
53
|
|
|
$
|
(12
|
)
|
|
$
|
(34
|
)
|
|
$
|
637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
|
|
|
|
Balance at
January 1, 2011
|
|
|
Net Realized and
Unrealized
Gains/(Losses)
|
|
|
Net Purchases
and Sales
|
|
|
Net Transfer
Into/(Out of)
Level 3
|
|
|
Balance at
December 31, 2011
|
|
Equity Securities
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6
|
|
Government Bonds
|
|
|
208
|
|
|
|
(3
|
)
|
|
|
(199
|
)
|
|
|
|
|
|
|
6
|
|
Inflation-Linked Bonds
|
|
|
65
|
|
|
|
6
|
|
|
|
180
|
|
|
|
|
|
|
|
251
|
|
Real Estate
|
|
|
81
|
|
|
|
(12
|
)
|
|
|
(14
|
)
|
|
|
|
|
|
|
55
|
|
Private Equity
|
|
|
307
|
|
|
|
37
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
667
|
|
|
$
|
28
|
|
|
$
|
(65
|
)
|
|
$
|
|
|
|
$
|
630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kodak expects to contribute approximately $1 million and $34 million in 2013 for U.S. and Non-U.S. defined benefit
pension plans, respectively. These estimates exclude any payments to be determined through the Bankruptcy Proceedings for the U.S. non-qualified pension plans, as well as payments subject to negotiation for the KPP.
The following pension benefit payments, which reflect expected future service, are expected to be paid from the plans:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
U.S.
|
|
|
Non-U.S.
|
|
2013
(1)
|
|
$
|
928
|
|
|
$
|
204
|
|
2014
|
|
|
359
|
|
|
|
200
|
|
2015
|
|
|
351
|
|
|
|
202
|
|
2016
|
|
|
341
|
|
|
|
195
|
|
2017
|
|
|
333
|
|
|
|
193
|
|
2018-2022
|
|
|
1,560
|
|
|
|
977
|
|
(1)
|
Assumes that the prohibited payment restriction currently in effect for the U.S. qualified pension plans will be lifted upon funding certification in 2013 and excludes
any payments to be determined through the Bankruptcy Proceedings for the U.S. non-qualified pension plans.
|
NOTE 21: OTHER
POSTRETIREMENT BENEFITS
The Company provided U.S. medical, dental, life insurance, and survivor income benefits to eligible retirees,
long-term disability recipients and their spouses, dependents and survivors. Generally, to be eligible for these benefits, former employees leaving the Company , prior to January 1, 1996 were required to be 55 years of age with ten years of
service or their age plus years of service must have equaled or exceeded 75. For those leaving the Company after December 31, 1995, former employees must be 55 years of age with ten years of service or have been eligible as of December 31,
1995. These benefits are paid from the general assets of the Company as they are incurred.
The Companys subsidiary in Canada offers
similar postretirement benefits.
On November 7, 2012, the Bankruptcy Court entered an order approving a settlement agreement between the
Debtors and the Retiree Committee appointed by the U.S. Trustee. Refer to Note 1, Bankruptcy Proceedings for additional information on the settlement agreement reached with the Retiree Committee.
As a result of the settlement agreement, the plans obligations were re-measured as of November 1, 2012. The re-measurement resulted in a
reduction of the accumulated postretirement benefit obligation (APBO) by approximately $1.2 billion. Approximately $739 million of the reduction in the APBO relates to benefits that have been eliminated. This settlement gain was reduced
by the recognition of net
104
actuarial losses from Accumulated other comprehensive loss, of approximately $510 million in the Consolidated Statement of Operations resulting in a net settlement gain of approximately $229
million. The net settlement gain was recorded as part of Reorganization items, net in the Consolidated Statement of Operations. While retiree medical and dental benefits have been significantly reduced, the Company expects to have some ongoing cost
associated with the COBRA continuation coverage of medical benefits. The reduction in medical benefits is a negative plan amendment resulting in an APBO reduction of approximately $460 million that was recognized as a component of Accumulated other
comprehensive loss and will be amortized in income over approximately 10 years.
The Company also eliminated all postretirement benefits for
active employees. As a result, Kodak recorded a curtailment gain of approximately $9 million. The gain was recorded as part of Reorganization items, net in the Consolidated Statement of Operations.
The measurement date used to determine the net benefit obligation for Kodaks other postretirement benefit plans is December 31.
Changes in Kodaks benefit obligation and funded status for the U.S. and Canada other postretirement benefit plans were as follows:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Net benefit obligation at beginning of year
|
|
$
|
1,294
|
|
|
$
|
1,348
|
|
Service cost
|
|
|
1
|
|
|
|
1
|
|
Interest cost
|
|
|
44
|
|
|
|
65
|
|
Plan participants contributions
|
|
|
17
|
|
|
|
20
|
|
Plan amendments
|
|
|
(460
|
)
|
|
|
|
|
Actuarial loss (gain)
|
|
|
117
|
|
|
|
(4
|
)
|
Settlements
|
|
|
(738
|
)
|
|
|
|
|
Benefit payments
|
|
|
(134
|
)
|
|
|
(134
|
)
|
Other
|
|
|
(6
|
)
|
|
|
|
|
Currency adjustments
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Net benefit obligation at end of year
|
|
$
|
137
|
|
|
$
|
1,294
|
|
|
|
|
|
|
|
|
|
|
Underfunded status at end of year
|
|
$
|
(137
|
)
|
|
$
|
(1,294
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the Consolidated Statement of Financial Position for Kodaks U.S. and Canada plans consisted
of:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Other current liabilities
|
|
$
|
(23
|
)
|
|
$
|
(122
|
)
|
Pension and other postretirement liabilities
|
|
|
(114
|
)
|
|
|
(1,172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(137
|
)
|
|
$
|
(1,294
|
)
|
|
|
|
|
|
|
|
|
|
105
Amounts recognized in Accumulated other comprehensive income (loss) for Kodaks U.S. and Canada plans
consisted of:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Prior service credit
|
|
$
|
1,118
|
|
|
$
|
751
|
|
Net actuarial loss
|
|
|
(73
|
)
|
|
|
(492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,045
|
|
|
$
|
259
|
|
|
|
|
|
|
|
|
|
|
Changes in benefit obligations recognized in Other comprehensive income (loss) for Kodaks U.S. and Canada plans
were as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
Newly established (loss) gain
|
|
$
|
(117
|
)
|
|
$
|
4
|
|
Newly established prior service credit
|
|
|
460
|
|
|
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
Prior service credit
|
|
|
(83
|
)
|
|
|
(77
|
)
|
Net actuarial loss
|
|
|
26
|
|
|
|
32
|
|
Prior service credit recognized due to curtailment
|
|
|
(9
|
)
|
|
|
|
|
Net loss recognized in expense due to settlement
|
|
|
510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount recognized in Other comprehensive loss
|
|
$
|
787
|
|
|
$
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
Other postretirement benefit cost from continuing operations for Kodaks U.S. and Canada plans included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Components of net postretirement benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
|
|
44
|
|
|
|
64
|
|
|
|
70
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service credit
|
|
|
(83
|
)
|
|
|
(77
|
)
|
|
|
(76
|
)
|
Actuarial loss
|
|
|
26
|
|
|
|
32
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other postretirment benefit cost (income) before curtailments and settlements
|
|
$
|
(12
|
)
|
|
$
|
20
|
|
|
$
|
23
|
|
Curtailment gains
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
Settlement gains
|
|
|
(228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other postretirement benefit cost (income) from continuing operations
|
|
$
|
(249
|
)
|
|
$
|
20
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The prior service credit and net actuarial loss estimated to be amortized from Accumulated other comprehensive loss into
net periodic benefit cost over the next year is $113 million and $5 million, respectively.
The weighted-average assumptions used to determine
the net benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Discount rate
|
|
|
2.97
|
%
|
|
|
4.25
|
%
|
Salary increase rate
|
|
|
2.50
|
%
|
|
|
3.41
|
%
|
The weighted-average assumptions used to determine the net postretirement benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Discount rate
|
|
|
4.25
|
%
|
|
|
5.03
|
%
|
|
|
5.53
|
%
|
Salary increase rate
|
|
|
3.09
|
%
|
|
|
4.05
|
%
|
|
|
3.90
|
%
|
106
The weighted-average assumed healthcare cost trend rates used to compute the other postretirement amounts
were as follows:
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
Healthcare cost trend
|
|
|
7.08
|
%
|
|
|
7.47
|
%
|
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
|
2019
|
|
|
|
2017
|
|
A one-percentage point change in assumed healthcare cost trend rates would have the following effects:
|
|
|
|
|
|
|
|
|
(in millions)
|
|
1% increase
|
|
|
1% decrease
|
|
Effect on total service and interest cost
|
|
$
|
|
|
|
$
|
|
|
Effect on postretirement benefit obligation
|
|
|
8
|
|
|
|
(7
|
)
|
Kodak expects to make $23 million of benefit payments for its unfunded other postretirement benefit plans in 2013.
The following other postretirement benefits, which reflect expected future service, are expected to be paid:
|
|
|
|
|
(in millions)
|
|
|
|
2013
|
|
$
|
23
|
|
2014
|
|
|
14
|
|
2015
|
|
|
12
|
|
2016
|
|
|
11
|
|
2017
|
|
|
10
|
|
2018-2021
|
|
|
34
|
|
107
NOTE 22: ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of Accumulated other comprehensive loss, net of tax, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Unrealized holdings gains related to available-for-sale securities
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
|
|
Realized and unrealized (losses) gains from hedging activity,net of tax
|
|
|
(2
|
)
|
|
|
(7
|
)
|
|
|
2
|
|
Currency translation adjustments
|
|
|
318
|
|
|
|
333
|
|
|
|
315
|
|
Pension and other postretirement benefit plan obligation changes, net of tax
|
|
|
(2,933
|
)
|
|
|
(2,993
|
)
|
|
|
(2,452
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2,616
|
)
|
|
$
|
(2,666
|
)
|
|
$
|
(2,135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 20, Retirement Plans, and Note 21, Other Postretirement Benefits, regarding the pension
and other postretirement plan obligation changes.
NOTE 23: STOCK OPTION AND COMPENSATION PLANS
Kodak recognized stock-based compensation expense in the amount of $7 million, $20 million and $21 million for the years ended December 31, 2012,
2011 and 2010, respectively. There were no proceeds from the issuance of common stock through stock option plans for the years ended December 31, 2012, 2011, or 2010.
Of the expense amounts noted above, compensation expense related to stock options during the years ended December 31, 2012, 2011 and 2010 was $2 million, $3 million and $4 million, respectively.
Compensation expense related to unvested stock and performance awards during the years ended December 31, 2012, 2011 and 2010 was $5 million, $17 million and $17 million, respectively.
Kodaks stock incentive plans consist of the 2005 Omnibus Long-Term Compensation Plan (the 2005 Plan), and the 2000 Omnibus Long-Term Compensation Plan (the 2000 Plan). The
Plans are administered by the Restructuring and Executive Compensation Committee of the Board of Directors. Stock options are generally non-qualified and are at exercise prices not less than 100% of the per share fair market value on the date of
grant. Stock-based compensation awards granted under Kodaks stock incentive plans are generally subject to a three-year vesting period from the date of grant.
Under the 2005 Plan, 11 million shares of the Companys common stock may be granted to employees between January 1, 2005 and December 31, 2014. This share reserve may be increased by:
shares that are forfeited pursuant to awards made under the 2000 and 2005 Plans; shares retained for payment of tax withholding; shares delivered for payment or satisfaction of tax withholding; shares reacquired on the open market using cash
proceeds from option exercises; and awards that otherwise do not result in the issuance of shares. The 2005 Plan is substantially similar to and is intended to replace the 2000 Plan, which expired on January 18, 2005. Options granted under the
2005 Plan generally expire seven years from the date of grant, but may be forfeited or canceled earlier if the optionees employment terminates prior to the end of the contractual term. The 2005 Plan provides for, but is not limited to, grants
of unvested stock, performance awards, and Stock Appreciation Rights (SARs), either in tandem with options or freestanding. SARs allow optionees to receive payment equal to the increase in the market price of the Companys stock
from the grant date to the exercise date. As of December 31, 2012, 10,000 freestanding SARs were outstanding under the 2005 Plan at an option price of $7.50. Compensation expense recognized for the years ended December 31, 2012, 2011, and
2010 on those freestanding SARs was not material.
Under the 2000 Plan, 22 million shares of the Companys common stock were
eligible for grant to a variety of employees between January 1, 2000 and December 31, 2004. The 2000 Plan was substantially similar to, and was intended to replace, the 1995 Plan, which expired on December 31, 1999. The options
generally expire ten years from the date of grant, but may expire sooner if the optionees employment terminates. The 2000 Plan provided for, but was not limited to, grants of unvested stock, performance awards, and SARs, either in tandem with
options or freestanding. As of December 31, 2012, 4,450 freestanding SARs were outstanding under the 2000 Plan at option prices ranging from $23.25 to $27.55. Compensation expense recognized for the years ended December 31, 2012, 2011, and
2010 on those freestanding SARs was not material.
108
Further information relating to stock options is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
Shares
Under
Option
|
|
|
Range of Price
Per
Share
|
|
|
Weighted-Average
Exercise
Price
Per Share
|
|
Outstanding on December 31, 2009
|
|
|
23,520
|
|
|
$
|
2.64 - $65.91
|
|
|
$
|
28.55
|
|
Granted
|
|
|
300
|
|
|
$
|
3.96 - $5.96
|
|
|
$
|
4.17
|
|
Exercised
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Terminated, Expired, Surrendered
|
|
|
5,790
|
|
|
$
|
7.41 - $65.91
|
|
|
$
|
37.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2010
|
|
|
18,030
|
|
|
$
|
2.64 - $48.34
|
|
|
$
|
25.22
|
|
Granted
|
|
|
2,179
|
|
|
$
|
2.82 - $5.22
|
|
|
$
|
3.41
|
|
Exercised
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Terminated, Expired, Surrendered
|
|
|
6,599
|
|
|
$
|
3.40 - $65.91
|
|
|
$
|
31.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2011
|
|
|
13,610
|
|
|
$
|
2.64 - $38.04
|
|
|
$
|
18.89
|
|
Granted
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Exercised
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Terminated, Expired, Surrendered
|
|
|
5,670
|
|
|
$
|
3.40 - $38.04
|
|
|
$
|
27.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding on December 31, 2012
|
|
|
7,940
|
|
|
$
|
2.64 - $36.66
|
|
|
$
|
12.40
|
|
Exercisable on December 31, 2010
|
|
|
16,036
|
|
|
$
|
2.64 - $48.34
|
|
|
$
|
27.64
|
|
Exercisable on December 31, 2011
|
|
|
10,568
|
|
|
$
|
2.64 - $38.04
|
|
|
$
|
23.25
|
|
Exercisable on December 31, 2012
|
|
|
6,456
|
|
|
$
|
2.64 - $36.66
|
|
|
$
|
14.38
|
|
The following table summarizes information about stock options as of December 31, 2012:
(Number of options in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
|
Prices
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
|
Less
|
|
|
|
|
Contractual
|
|
|
Weighted-Average
|
|
|
|
|
|
Weighted-Average
|
|
Least
|
|
|
|
Than
|
|
Options
|
|
|
Life (Years)
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
$2
|
|
-
|
|
$10
|
|
|
5,145
|
|
|
|
3.56
|
|
|
$
|
5.34
|
|
|
|
3,661
|
|
|
$
|
5.96
|
|
$10
|
|
-
|
|
$30
|
|
|
2,222
|
|
|
|
1.33
|
|
|
$
|
23.97
|
|
|
|
2,222
|
|
|
$
|
23.97
|
|
$30
|
|
-
|
|
$40
|
|
|
573
|
|
|
|
0.28
|
|
|
$
|
31.00
|
|
|
|
573
|
|
|
$
|
31.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,940
|
|
|
|
|
|
|
|
|
|
|
|
6,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012, the weighted-average remaining contractual term of all options outstanding and exercisable was
2.70 years and 2.38 years respectively. There was no intrinsic value of options outstanding and exercisable due to the fact that the market price of the Companys common stock as of December 31, 2012 was below the weighted-average exercise
price of options. There were no option exercises during 2010, 2011 or 2012.
The fair value of each option award is estimated on the date of
grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Companys stock, managements estimate of implied volatility of
the Companys stock, and other factors. The expected term of options granted is derived from the vesting period of the award, as well as historical exercise behavior, and represents the period of time that options granted are expected to be
outstanding. The risk-free rate is calculated using the U.S. Treasury yield curve, and is based on the expected term of the option. Kodak uses historical data to estimate forfeitures.
109
The Black-Scholes option pricing model was used with the following weighted-average assumptions for options
issued in each year:
|
|
|
|
|
|
|
For the Year Ended
|
|
|
2011
|
|
2010
|
Weighted-average risk-free interest rate
|
|
2.48%
|
|
1.50%
|
Risk-free interest rates
|
|
2.2%2.5%
|
|
1.5%2.9%
|
Weighted-average expected option lives
|
|
6 years
|
|
6 years
|
Expected option lives
|
|
6 years
|
|
6 years
|
Weighted-average volatility
|
|
59%
|
|
57%
|
Expected volatilities
|
|
59%60%
|
|
45%58%
|
Weighted-average expected dividend yield
|
|
0.0%
|
|
0.0%
|
Expected dividend yields
|
|
0.0%
|
|
0.0%
|
No options were granted in 2012.
The weighted-average fair value per option granted in 2011 and 2010 was $1.92 and $2.16, respectively.
As of December 31, 2012, there was $1 million of total unrecognized compensation cost related to unvested options. The cost is expected to be recognized over a weighted-average period of 0.9 years.
NOTE 24: ACQUISITIONS
There
were no significant acquisitions in 2012 and 2010.
In 2011, Kodak completed the acquisition of substantially all of the assets of the relief
plates business of Tokyo Ohka Kogyo Co., Ltd. for a purchase price of approximately $27 million, net of cash acquired. A gain of $5 million from a bargain purchase was recognized within Other income (charges), net in the Consolidated Statement of
Operations for the year ended December 31, 2011. This acquisition was immaterial to Kodaks financial position as of December 31, 2011, and its results of operations and cash flows for the year ended December 31, 2011. The relief
plates business is part of Kodaks Graphics, Entertainment and Commercial Films segment.
NOTE 25: DISCONTINUED OPERATIONS
Discontinued operations of Kodak include the digital capture and devices business, Kodak Gallery, and other miscellaneous businesses.
The significant components of revenues and earnings (loss) from discontinued operations, net of income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Revenues from Digital Capture and Devices operations
|
|
$
|
36
|
|
|
$
|
659
|
|
|
$
|
942
|
|
Revenues from Kodak Gallery operations
|
|
|
29
|
|
|
|
85
|
|
|
|
99
|
|
Revenues from other discontinued operations
|
|
|
6
|
|
|
|
130
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues from discontinued operations
|
|
$
|
71
|
|
|
$
|
874
|
|
|
$
|
1,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax loss from Digital Capture and Devices operations
|
|
$
|
(78
|
)
|
|
$
|
(54
|
)
|
|
$
|
(131
|
)
|
Pre-tax income (loss) from Kodak Gallery operations
|
|
|
4
|
|
|
|
(32
|
)
|
|
|
(45
|
)
|
Pre-tax (loss) income from other discontinued operations
|
|
|
(5
|
)
|
|
|
26
|
|
|
|
38
|
|
(Benefit) provision for income taxes related to discontinued operations
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
|
$
|
(76
|
)
|
|
$
|
(57
|
)
|
|
$
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
NOTE 26: SEGMENT INFORMATION
Current Segment Reporting Structure
Effective September 30, 2012, Kodak
changed its segment reporting structure to three reportable segments: the Graphics, Entertainment and Commercial Films Segment, the Digital Printing and Enterprise Segment, and the Personalized and Document Imaging Segment. Prior period segment
results have been revised to conform to the current period segment reporting structure. A description of the segments follows.
Graphics,
Entertainment and Commercial Films:
The Graphics, Entertainment and Commercial Films Segment encompasses Graphics and Entertainment Imaging & Commercial Films. Product and service offerings include; commercial print, direct mail, book
publishing, newspapers and magazines, packaging, motion picture entertainment, printed electronics, and the aerial and industrial products.
Digital Printing and Enterprise:
The Digital Printing and Enterprise Segment encompasses Digital Printing, including PROSPER equipment and STREAM
technology, Packaging and Functional Printing, Enterprise Services & Solutions, and Consumer Inkjet Systems. On September 28, 2012, Kodak announced a plan, starting in 2013, to focus its Consumer Inkjet business solely on the sale of
ink to its installed printer base.
Personalized and Document Imaging:
The Personalized and Document Imaging Segment encompasses
Kodaks patent and trademark licensing activities, as well as Personalized Imaging and Document Imaging Products and Services. On February 1, 2013, Kodak sold its digital imaging patents.
Segment financial information is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Net sales from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
1,742
|
|
|
$
|
2,251
|
|
|
$
|
2,407
|
|
Digital Printing and Enterprise
|
|
|
940
|
|
|
|
1,098
|
|
|
|
950
|
|
Personalized and Document Imaging
|
|
|
1,432
|
|
|
|
1,799
|
|
|
|
2,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
4,114
|
|
|
$
|
5,148
|
|
|
$
|
5,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before interest expense, other income (charges), net, reorganization items, net and
income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
(33
|
)
|
|
$
|
13
|
|
|
$
|
14
|
|
Digital Printing and Enterprise
|
|
|
(211
|
)
|
|
|
(535
|
)
|
|
|
(436
|
)
|
Personalized and Document Imaging
|
|
|
(56
|
)
|
|
|
75
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(300
|
)
|
|
|
(447
|
)
|
|
|
411
|
|
Restructuring costs and other
|
|
|
(245
|
)
|
|
|
(130
|
)
|
|
|
(77
|
)
|
Corporate components of pension and OPEB (expense) income (1)
|
|
|
(122
|
)
|
|
|
(28
|
)
|
|
|
95
|
|
Other operating income (expenses), net
|
|
|
95
|
|
|
|
65
|
|
|
|
(619
|
)
|
Legal contingencies, settlements and other
|
|
|
(1
|
)
|
|
|
|
|
|
|
(8
|
)
|
Loss on early extinguishment of debt
|
|
|
(7
|
)
|
|
|
|
|
|
|
(102
|
)
|
Interest expense
|
|
|
(158
|
)
|
|
|
(155
|
)
|
|
|
(148
|
)
|
Other income (charges), net
|
|
|
21
|
|
|
|
(4
|
)
|
|
|
23
|
|
Reorganization items, net
|
|
|
(843
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from continuing operations before income taxes
|
|
$
|
(1,560
|
)
|
|
$
|
(699
|
)
|
|
$
|
(425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Composed of interest cost, expected return on plan assets, amortization of actuarial gains and losses, and special termination benefits, curtailments and settlement
components of pension and other postretirement benefit expenses, except for settlements in connection with the chapter 11 bankruptcy proceedings that are recorded in Reorganization items, net in the Consolidated Statement of Operations.
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Segment total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
1,175
|
|
|
$
|
1,451
|
|
|
$
|
1,635
|
|
Digital Printing and Enterprise
|
|
|
493
|
|
|
|
549
|
|
|
|
525
|
|
Personalized and Document Imaging
|
|
|
934
|
|
|
|
1,301
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total of reportable segments
|
|
|
2,602
|
|
|
|
3,301
|
|
|
|
3,782
|
|
Cash and marketable securities
|
|
|
1,139
|
|
|
|
867
|
|
|
|
1,628
|
|
Net deferred income tax assets
|
|
|
545
|
|
|
|
510
|
|
|
|
815
|
|
All other/corporate items
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total assets
|
|
$
|
4,286
|
|
|
$
|
4,678
|
|
|
$
|
6,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Intangible asset amortization expense from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
21
|
|
|
$
|
34
|
|
|
$
|
42
|
|
Digital Printing and Enterprise
|
|
|
5
|
|
|
|
6
|
|
|
|
10
|
|
Personalized and Document Imaging
|
|
|
1
|
|
|
|
1
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
27
|
|
|
$
|
41
|
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
99
|
|
|
$
|
112
|
|
|
$
|
155
|
|
Digital Printing and Enterprise
|
|
|
41
|
|
|
|
46
|
|
|
|
41
|
|
Personalized and Document Imaging
|
|
|
62
|
|
|
|
64
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
202
|
|
|
|
222
|
|
|
|
279
|
|
Restructuring-related depreciation
|
|
|
13
|
|
|
|
10
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
215
|
|
|
$
|
232
|
|
|
$
|
285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital additions from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
16
|
|
|
$
|
43
|
|
|
$
|
57
|
|
Digital Printing and Enterprise
|
|
|
24
|
|
|
|
51
|
|
|
|
37
|
|
Personalized and Document Imaging
|
|
|
29
|
|
|
|
34
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
69
|
|
|
$
|
128
|
|
|
$
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers attributed to (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
The United States
|
|
$
|
1,306
|
|
|
$
|
1,554
|
|
|
$
|
2,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East and Africa
|
|
$
|
1,375
|
|
|
$
|
1,802
|
|
|
$
|
1,787
|
|
Asia Pacific
|
|
|
1,003
|
|
|
|
1,186
|
|
|
|
1,144
|
|
Canada and Latin America
|
|
|
430
|
|
|
|
606
|
|
|
|
600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign countries total
|
|
$
|
2,808
|
|
|
$
|
3,594
|
|
|
$
|
3,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
4,114
|
|
|
$
|
5,148
|
|
|
$
|
5,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Sales are reported based on the geographic area of destination.
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(in millions)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Property, plant and equipment, net located in:
|
|
|
|
|
|
|
|
|
|
|
|
|
The United States
|
|
$
|
425
|
|
|
$
|
554
|
|
|
$
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe, Middle East and Africa
|
|
$
|
125
|
|
|
$
|
158
|
|
|
$
|
189
|
|
Asia Pacific
|
|
|
104
|
|
|
|
143
|
|
|
|
144
|
|
Canada and Latin America
|
|
|
39
|
|
|
|
40
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign countries total
|
|
$
|
268
|
|
|
$
|
341
|
|
|
$
|
373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total
|
|
$
|
693
|
|
|
$
|
895
|
|
|
$
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
NOTE 27: CONDENSED COMBINED DEBTOR-IN-POSSESSION FINANCIAL INFORMATION
The financial statements below represent the condensed combined financial statements of the Debtors. Effective January 1, 2012, the Non-Filing
Entities are accounted for as non-consolidated subsidiaries in these financial statements and, as such, their net loss is included as Equity in loss of non-filing entities, net of tax in the Debtors Statement of Operations and
their net assets are included as Investment in non-filing entities in the Debtors Statement of Financial Position.
Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the
Debtors and the Non-Filing Entities have not been eliminated in the Debtors financial statements.
DEBTORS STATEMENT OF
OPERATIONS
|
|
|
|
|
|
|
For the Year Ended
|
|
(in millions)
|
|
December 31, 2012
|
|
Net sales
|
|
|
|
|
Products
|
|
$
|
1,558
|
|
Services
|
|
|
356
|
|
Licensing & royalties
|
|
|
(48
|
)
|
|
|
|
|
|
Total net sales
|
|
$
|
1,866
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
Products
|
|
$
|
1,627
|
|
Services
|
|
|
310
|
|
|
|
|
|
|
Total cost of sales
|
|
$
|
1,937
|
|
|
|
|
|
|
Gross profit (loss)
|
|
$
|
(71
|
)
|
Selling, general and administrative expenses
|
|
|
417
|
|
Research and development costs
|
|
|
172
|
|
Restructuring costs and other
|
|
|
143
|
|
Other operating (income) expenses, net
|
|
|
(38
|
)
|
|
|
|
|
|
Loss from continuing operations before interest expense, other income (charges), net, reorganization items, net and income
taxes
|
|
|
(765
|
)
|
Interest expense (contractual interest for the year ended December 31, 2012 of $193)
|
|
|
148
|
|
Loss on early extinguishment of debt, net
|
|
|
7
|
|
Other income (charges), net
|
|
|
34
|
|
Reorganization items, net
|
|
|
843
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(1,729
|
)
|
Benefit for income taxes
|
|
|
(369
|
)
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(1,360
|
)
|
Loss from discontinued operations, net of income taxes
|
|
|
(47
|
)
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO DEBTOR ENTITIES
|
|
|
(1,407
|
)
|
Equity in earnings of non-filing entities, net of tax
|
|
|
28
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO EASTMAN KODAK COMPANY
|
|
$
|
(1,379
|
)
|
|
|
|
|
|
114
DEBTORS STATEMENT OF COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
|
For the Year Ended
|
|
(in millions)
|
|
December 31, 2012
|
|
NET LOSS ATTRIBUTABLE TO DEBTOR ENTITIES
|
|
$
|
(1,407
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
Realized and unrealized losses from hedging activity, net of tax of $2
|
|
|
(1
|
)
|
Reclassification adjustment for hedging-related gains included in net earnings, net of tax of $1
|
|
|
5
|
|
Unrealized gain from investment, net of tax of $0 for the year ended December 31, 2012
|
|
|
|
|
Currency translation adjustments
|
|
|
1
|
|
Pension and other postretirement benefit plan obligation activity, net of tax of $255 for the year ended December 31,
2012
|
|
|
434
|
|
|
|
|
|
|
Total comprehensive loss, net of tax
|
|
$
|
(968
|
)
|
|
|
|
|
|
DEBTORS STATEMENT OF RETAINED EARNINGS
|
|
|
|
|
|
|
For the Year Ended
|
|
(in millions)
|
|
December 31, 2012
|
|
Retained earnings at beginning of period
|
|
$
|
4,849
|
|
Net loss
|
|
|
(1,379
|
)
|
Loss from issuance of treasury stock
|
|
|
(92
|
)
|
|
|
|
|
|
Retained earnings at end of period
|
|
$
|
3,378
|
|
|
|
|
|
|
115
DEBTORS STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
|
As of
|
|
(in millions)
|
|
December 31, 2012
|
|
ASSETS
|
|
|
|
|
Current Assets
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
337
|
|
Receivables, net
|
|
|
201
|
|
Receivables and advances from non-filing entities, net
|
|
|
159
|
|
Inventories, net
|
|
|
285
|
|
Deferred income taxes
|
|
|
34
|
|
Other current assets
|
|
|
19
|
|
|
|
|
|
|
Total current assets
|
|
|
1,035
|
|
Property, plant and equipment, net of accumulated depreciation of
$3,294
|
|
|
426
|
|
Goodwill
|
|
|
144
|
|
Investment in non-filing entities
|
|
|
1,964
|
|
Other long-term assets
|
|
|
17
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
3,586
|
|
|
|
|
|
|
LIABILITIES AND EQUITY (DEFICIT)
|
|
|
|
|
Current Liabilities
|
|
|
|
|
Accounts payable, trade
|
|
$
|
192
|
|
Short-term borrowings and current portion of long-term debt
|
|
|
659
|
|
Accrued income and other taxes
|
|
|
5
|
|
Other current liabilities
|
|
|
488
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,344
|
|
Long-term debt, net of current portion
|
|
|
740
|
|
Other long-term liabilities
|
|
|
293
|
|
Liabilities subject to compromise
|
|
|
2,909
|
|
|
|
|
|
|
Total Liabilities
|
|
|
5,286
|
|
Equity (Deficit)
|
|
|
|
|
Common stock, $2.50 par value
|
|
|
978
|
|
Additional paid in capital
|
|
|
1,105
|
|
Retained earnings
|
|
|
3,378
|
|
Accumulated other comprehensive loss
|
|
|
(1,415
|
)
|
|
|
|
|
|
|
|
|
4,046
|
|
Less: Treasury stock, at cost
|
|
|
(5,746
|
)
|
|
|
|
|
|
Total Eastman Kodak Company shareholders (deficit) equity
|
|
|
(1,700
|
)
|
Noncontrolling interests
|
|
|
|
|
|
|
|
|
|
Total (deficit) equity
|
|
|
(1,700
|
)
|
|
|
|
|
|
TOTAL LIABILITIES AND DEFICIT
|
|
$
|
3,586
|
|
|
|
|
|
|
116
DEBTORS STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
For the Year Ended
|
|
(in millions)
|
|
December 31, 2012
|
|
Cash flows from operating activities:
|
|
|
|
|
Net loss attributable to debtor entities
|
|
$
|
(1,407
|
)
|
Adjustments to reconcile to net cash used in operating activities:
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
47
|
|
Depreciation and amortization
|
|
|
150
|
|
Gain on sales of businesses/assets
|
|
|
(1
|
)
|
Loss on early extinguishment of debt
|
|
|
7
|
|
Non-cash restructuring costs, asset impairments and other charges
|
|
|
16
|
|
Non-cash reorganization items, net
|
|
|
717
|
|
Benefit for deferred income taxes
|
|
|
(18
|
)
|
Increase in receivables
|
|
|
(118
|
)
|
Decrease in inventories
|
|
|
12
|
|
Increase in liabilities excluding borrowings
|
|
|
120
|
|
Other items, net
|
|
|
101
|
|
|
|
|
|
|
Total adjustments
|
|
|
1,033
|
|
|
|
|
|
|
Net cash used in continuing operations
|
|
|
(374
|
)
|
|
|
|
|
|
Net cash provided by discontinued operations
|
|
|
8
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(366
|
)
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Additions to properties
|
|
|
(27
|
)
|
Proceeds from sales of businesses/assets
|
|
|
9
|
|
Marketable securitiessales
|
|
|
95
|
|
Marketable securitiespurchases
|
|
|
(91
|
)
|
|
|
|
|
|
Net cash used in continuing operations
|
|
|
(14
|
)
|
|
|
|
|
|
Net cash provided by discontinued operations
|
|
|
24
|
|
|
|
|
|
|
Net cash provided by investing activities
|
|
|
10
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from DIP credit agreement
|
|
|
686
|
|
Repayment of borrowings
|
|
|
(136
|
)
|
Reorganization items
|
|
|
(41
|
)
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
509
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
153
|
|
Cash and cash equivalents, beginning of period
|
|
|
184
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
337
|
|
|
|
|
|
|
The following table reflects pre-petition liabilities that are subject to compromise for the Debtors:
|
|
|
|
|
(in millions)
|
|
As of
December
31,
2012
|
|
Accounts payable
|
|
$
|
283
|
|
Debt
|
|
|
683
|
|
Pension obligations
|
|
|
785
|
|
Settlements
|
|
|
710
|
|
Payable and advances to non-filing entities
|
|
|
193
|
|
Other liabilities subject to compromise
|
|
|
255
|
|
|
|
|
|
|
Liabilities subject to compromise
|
|
$
|
2,909
|
|
|
|
|
|
|
NOTE 28: QUARTERLY SALES AND EARNINGS DATA UNAUDITED
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data)
|
|
4th Qtr.
|
|
|
3rd Qtr.
|
|
|
2nd Qtr.
|
|
|
1st Qtr.
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales from continuing operations
|
|
$
|
1,120
|
|
|
$
|
1,018
|
|
|
$
|
1,048
|
|
|
$
|
928
|
|
Gross profit from continuing operations
|
|
|
188
|
|
|
|
159
|
|
|
|
182
|
|
|
|
62
|
|
Loss from continuing operations
|
|
|
(400
|
)(4)
|
|
|
(307
|
)(3)
|
|
|
(290
|
)(2)
|
|
|
(306
|
)(1)
|
Loss from discontinued operations (9)
|
|
|
(2
|
)
|
|
|
(4
|
)
|
|
|
(9
|
)
|
|
|
(61
|
)
|
Net loss attributable to Eastman Kodak Company
|
|
|
(402
|
)
|
|
|
(311
|
)
|
|
|
(299
|
)
|
|
|
(367
|
)
|
Basic and diluted net loss per share attributable to Eastman Kodak Company common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.47
|
)
|
|
$
|
(1.13
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(1.13
|
)
|
Discontinued operations
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1.48
|
)
|
|
$
|
(1.15
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(1.35
|
)
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales from continuing operations
|
|
$
|
1,471
|
|
|
$
|
1,261
|
|
|
$
|
1,266
|
|
|
$
|
1,150
|
|
Gross profit from continuing operations
|
|
|
316
|
|
|
|
180
|
|
|
|
177
|
|
|
|
125
|
|
Loss from continuing operations
|
|
|
(118
|
)(8)
|
|
|
(213
|
)(7)
|
|
|
(159
|
)(6)
|
|
|
(217
|
)(5)
|
Loss from discontinued operations (9)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(20
|
)
|
|
|
(29
|
)
|
Net loss attributable to Eastman Kodak Company
|
|
|
(118
|
)
|
|
|
(221
|
)
|
|
|
(179
|
)
|
|
|
(246
|
)
|
Basic and diluted net loss per share attributable to Eastman Kodak Company common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(0.44
|
)
|
|
$
|
(0.79
|
)
|
|
$
|
(0.59
|
)
|
|
$
|
(0.81
|
)
|
Discontinued operations
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
(0.08
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(0.44
|
)
|
|
$
|
(0.82
|
)
|
|
$
|
(0.67
|
)
|
|
$
|
(0.91
|
)
|
|
|
|
|
|
(footnotes on next page)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
(1)
|
Includes pre-tax restructuring charges of $81 million ($1 million included in Cost of sales and $80 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $78 million; corporate components of pension and OPEB costs of $30 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $26 million; and $88
million of Reorganization items, net.
|
(2)
|
Includes pre-tax restructuring charges of $11 million ($2 million included in Cost of sales and $9 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $10 million; corporate components of pension and OPEB costs of $35 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $32 million; and
$160 million of Reorganization items, net.
|
(3)
|
Includes pre-tax restructuring charges of $126 million ($9 million included in Cost of sales and $117 million included in Restructuring costs and other), which
decreased net earnings from continuing operations by $119 million; corporate components of pension and OPEB costs of $35 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $28
million; and $56 million of Reorganization items, net.
|
(4)
|
Includes pre-tax restructuring charges of $27 million ($5 million included in Cost of sales and $22 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $30 million; corporate components of pension and OPEB costs of $23 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $18 million; and
$539 million, of Reorganization items, net.
|
(5)
|
Includes pre-tax restructuring charges of $33 million ($2 million included in Cost of sales and $31 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $32 million; and corporate components of pension and OPEB costs of $8 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $6 million.
|
(6)
|
Includes pre-tax restructuring charges of $35 million ($7 million included in Cost of sales and $28 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $32 million; and corporate components of pension and OPEB costs of $4 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $2 million.
|
(7)
|
Includes pre-tax restructuring charges of $18 million ($1 million included in Cost of sales and $17 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $18 million; corporate components of pension and OPEB costs of $13 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $9 million; and a
pre-tax impairment charge of $8 million (included in Other operating expenses (income), net), which decreased net earnings from continuing operations by $8 million.
|
(8)
|
Includes pre-tax restructuring charges of $44 million ($2 million included in Cost of sales and $42 million included in Restructuring costs and other), which decreased
net earnings from continuing operations by $42 million; corporate components of pension and OPEB costs of $4 million (included in Cost of sales, SG&A, and R&D), which decreased net earnings from continuing operations by $1 million.
|
(9)
|
Refer to Note 25, Discontinued Operations, in the Notes to Financial Statements for a discussion regarding loss from discontinued operations.
|
Corporate components of pension and OPEB include interest cost, expected return on plan assets, amortization of actuarial gains
and losses, and special termination benefits, curtailments and settlement components of pension and other postretirement benefit expenses, except for settlements in connection with the chapter 11 bankruptcy proceedings that are recorded in
Reorganization items, net in the Consolidated Statement of Operations.
Changes in Estimates Recorded During the Fourth Quarter Ended
December 31, 2012
During the fourth quarter ended December 31, 2012, Kodak recorded an increase of expense of approximately $35
million, net of tax, related to changes in estimates with respect to certain of its employee benefit and compensation accruals. These changes in estimates negatively impacted results for the quarter by $.13 per share.
119
EASTMAN KODAK COMPANY
(DEBTOR-IN-POSSESSION)
SUMMARY OF OPERATING DATA UNAUDITED*
(in millions, except per share data, shareholders, and employees)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Net sales from continuing operations (7)
|
|
$
|
4,114
|
|
|
$
|
5,148
|
|
|
$
|
5,993
|
|
|
$
|
6,248
|
|
|
$
|
7,535
|
|
Loss from continuing operations before interest expense, other income (charges), net, reorganization items, net, and income
taxes
|
|
|
(573
|
)
|
|
|
(540
|
)
|
|
|
(198
|
)
|
|
|
86
|
|
|
|
(686
|
)
|
(Loss) earnings from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(1,303
|
)(1)
|
|
|
(707
|
)(2)
|
|
|
(535
|
)(3)
|
|
|
(116
|
)(4)
|
|
|
(574
|
)(5)
|
Discontinued operations
|
|
|
(76
|
)(6)
|
|
|
(57
|
)(6)
|
|
|
(152
|
)(6)
|
|
|
(99
|
)
|
|
|
132
|
|
Extraordinary item, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Net Loss
|
|
|
(1,379
|
)
|
|
|
(764
|
)
|
|
|
(687
|
)
|
|
|
(209
|
)
|
|
|
(442
|
)
|
Less: Net earnings attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Net Loss Attributable to Eastman Kodak Company
|
|
|
(1,379
|
)
|
|
|
(764
|
)
|
|
|
(687
|
)
|
|
|
(210
|
)
|
|
|
(442
|
)
|
Earnings and Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of net sales from continuing operations
|
|
|
-31.7
|
%
|
|
|
-13.7
|
%
|
|
|
-8.9
|
%
|
|
|
-1.9
|
%
|
|
|
-7.6
|
%
|
Net (loss) earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% return on average equity
|
|
|
-45.8
|
%
|
|
|
-44.6
|
%
|
|
|
-124.0
|
%
|
|
|
-41.2
|
%
|
|
|
-21.7
|
%
|
Basic and diluted (loss) earnings per share attributable to Eastman Kodak Company common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(4.79
|
)
|
|
|
(2.63
|
)
|
|
|
(1.99
|
)
|
|
|
(0.43
|
)
|
|
|
(2.04
|
)
|
Discontinued operations
|
|
|
(0.28
|
)
|
|
|
(0.21
|
)
|
|
|
(0.57
|
)
|
|
|
(0.37
|
)
|
|
|
0.47
|
|
Extraordinary item, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.02
|
|
|
|
|
|
Total
|
|
|
(5.07
|
)
|
|
|
(2.84
|
)
|
|
|
(2.56
|
)
|
|
|
(0.78
|
)
|
|
|
(1.57
|
)
|
Cash dividends declared and paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
per comon share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.50
|
|
Weighted average common shares outstanding at year end
|
|
|
271.8
|
|
|
|
269.1
|
|
|
|
268.5
|
|
|
|
268.0
|
|
|
|
281.8
|
|
Shareholders at year end
|
|
|
48,656
|
|
|
|
49,760
|
|
|
|
51,802
|
|
|
|
54,078
|
|
|
|
56,115
|
|
Statement of Financial Position Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
|
474
|
|
|
|
577
|
|
|
|
966
|
|
|
|
1,407
|
|
|
|
1,566
|
|
Property, plant and equipment, net
|
|
|
693
|
|
|
|
895
|
|
|
|
1,037
|
|
|
|
1,254
|
|
|
|
1,551
|
|
Total assets
|
|
|
4,286
|
|
|
|
4,678
|
|
|
|
6,226
|
|
|
|
7,682
|
|
|
|
9,179
|
|
Short-term borrowings and current portion of long-term debt
|
|
|
699
|
|
|
|
152
|
|
|
|
50
|
|
|
|
62
|
|
|
|
51
|
|
Long-term debt, net of current portion
|
|
|
740
|
|
|
|
1,363
|
|
|
|
1,195
|
|
|
|
1,129
|
|
|
|
1,252
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graphics, Entertainment and Commercial Films
|
|
$
|
1,742
|
|
|
$
|
2,251
|
|
|
$
|
2,407
|
|
|
$
|
2,782
|
|
|
$
|
3,508
|
|
Digital Printing and Enterprise
|
|
|
940
|
|
|
|
1,098
|
|
|
|
950
|
|
|
|
854
|
|
|
|
886
|
|
Personalized and Document Imaging
|
|
|
1,432
|
|
|
|
1,799
|
|
|
|
2,636
|
|
|
|
2,607
|
|
|
|
3,134
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
7
|
|
Research and development costs
|
|
|
207
|
|
|
|
235
|
|
|
|
249
|
|
|
|
280
|
|
|
|
383
|
|
Depreciation
|
|
|
218
|
|
|
|
253
|
|
|
|
318
|
|
|
|
354
|
|
|
|
420
|
|
Taxes (excludes payroll, sales and excise taxes)
|
|
|
(229
|
)
|
|
|
38
|
|
|
|
142
|
|
|
|
145
|
|
|
|
(121
|
)
|
Wages, salaries and employee benefits
|
|
|
1,465
|
|
|
|
1,578
|
|
|
|
1,572
|
|
|
|
1,732
|
|
|
|
2,141
|
|
Employees as of year end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in the U.S.
|
|
|
5,980
|
|
|
|
8,350
|
|
|
|
9,600
|
|
|
|
10,630
|
|
|
|
12,800
|
|
worldwide
|
|
|
13,100
|
|
|
|
17,100
|
|
|
|
18,800
|
|
|
|
20,250
|
|
|
|
24,400
|
|
(footnotes on next page)
120
EASTMAN KODAK COMPANY
(DEBTOR-IN-POSSESSION)
SUMMARY OF OPERATING DATA
(footnotes for previous page)
*
|
Historical results are not indicative of future results.
|
(1)
|
Includes impairment charges of $2 million; pre-tax restructuring charges of $245 million; $843 million in pre-tax reorganization items, net; $62 million of income
related to gains on assets sales; $35 million associated with the termination of a supply agreement; corporate components of pension and OPEB costs of $122 million; $4 million of income related to reversals of value-added tax reserves; and a net
benefit of $320 million related to discrete tax items. These items increased net loss from continuing operations by $912 million.
|
(2)
|
Includes pre-tax goodwill and other impairment charges of $13 million; pre-tax restructuring charges of $130 million; $78 million of income related to gains and assets
sales; corporate components of pension and OPEB costs of $28 million; $3 million of income related to reversals of value-added tax reserves; and a net benefit of $38 million related to discrete tax items. These items increased net loss from
continuing operations by $31 million.
|
(3)
|
Includes a pre-tax goodwill impairment charge of $626 million; pre-tax restructuring charges of $77 million; a $102 million loss on early extinguishment of debt; $8
million of income related to gains on assets sales; $19 million of income related to legal contingencies and settlements; $6 million of charges related to foreign contingencies; and a net benefit of $109 million related to discrete tax items. These
items increased net loss from continuing operations by $698 million.
|
(4)
|
Includes pre-tax restructuring and rationalization charges of $245 million; a $5 million charge related to a legal settlement; $100 million of income related to gains
on asset sales; $7 million of income related to the reversal of negative goodwill; $10 million of income related to reversals of value-added tax reserves; and a $6 million asset impairment charge. These items increased net loss from continuing
operations by $131 million.
|
(5)
|
Includes a pre-tax goodwill impairment charge of $785 million; pre-tax restructuring and rationalization charges of $149 million, net of reversals; $22 million of
income related to gains on sales of assets and businesses; $3 million of charges related to asset impairments; $41 million of charges for legal contingencies and settlements; $10 million of charges for support of an educational institution; $94
million of income related to postemployment benefit plans; $3 million of income for a foreign export contingency; $270 million of income related to an IRS refund; and charges of $27 million related to discrete tax items. These items increased net
loss from continuing operations by $611 million.
|
(6)
|
Refer to Note 25, Discontinued Operations in the Notes to Financial Statements for a discussion regarding the earnings from discontinued operations.
|
(7)
|
Includes revenues from non-recurring intellectual property licensing agreements of $(61) million in 2012, $82 million in 2011, $838 million in 2010, $435 million in
2009, and $227 million in 2008.
|
Corporate components of pension and OPEB include cost, expected return on plan assets,
amortization of actuarial gains and losses, and special termination benefits, curtailments and settlement components of pension and other postretirement benefit expenses, except for settlement in connection with the chapter 11 bankruptcy proceedings
that are recorded in Reorganization items, net in the Consolidated Statement of Operations.
121