Kodak 2001 Annual Report Download - page 64

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Additionally, the Company has retained certain obligations for
environmental remediation and Superfund matters related to certain sites
associated with the non-imaging health businesses sold in 1994. In
addition, the Company has been identified as a potentially responsible
party (PRP) in connection with the non-imaging health businesses in
five active Superfund sites. At December 31, 2001, estimated future
remediation costs of $51 million are accrued on an undiscounted basis
by the Company and are included in the environmental accruals reported
in other long-term liabilities.
The Company recorded a $41 million charge in the fourth quarter
of 2001 for additional environmental reserves. This amount has been
included in selling, general and administrative expenses. Approximately
$34 million has been provided for two former manufacturing sites
located outside the United States. Investigations were completed by an
external environmental consultant in the fourth quarter of 2001, which
facilitated the completion of cost estimates for the future remediation
and monitoring of these sites. In addition, the accrual incorporates the
Company’s estimate of its cost to repurchase one of the sites and
demolish the buildings in preparation for its possible conversion to a
public park. The establishment of these accruals is consistent with
Kodak’s policy to record accruals for environmental remediation
obligations generally no later than the completion of feasibility studies.
The additional $7 million recorded during the fourth quarter of 2001
represents the estimated increased costs associated with the site
remediation of the non-imaging health businesses sold in 1994
discussed above ($4 million) and increases in estimated costs ($3
million) associated with the remediation of other facilities which are not
material to the Company’s financial position, results of operations, cash
flows or competitive position. These aforementioned environmental
accruals have been established on an undiscounted basis.
Cash expenditures for the aforementioned remediation and
monitoring activities are expected to be incurred over the next thirty years
for each site. The accrual reflects the Company’s cost estimate of the
amount it will incur under the agreed-upon or proposed work plans. The
Company’s cost estimate is based upon existing technology and has not
been reduced by possible recoveries from third parties. The Company’s
estimate includes equipment and operating costs for remediation and
long-term monitoring of the sites.
A Consent Decree was signed in 1994 in settlement of a civil
complaint brought by the U.S. Environmental Protection Agency and the
U.S. Department of Justice under which the Company is subject to a
Compliance Schedule by which the Company improved its waste
characterization procedures, upgraded one of its incinerators, and is
evaluating and upgrading its industrial sewer system. The total
expenditures required to complete this program are currently estimated
to be approximately $24 million over the next nine years. These
expenditures are primarily capital in nature and, therefore, are not
included in the environmental accrual at December 31, 2001.
The Company is presently designated as a 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 the
Company’s alleged arrangements for disposal of hazardous substances at
six active Superfund sites. With respect to each of these sites, the
Company’s actual or potential allocated share of responsibility is small.
Furthermore, numerous other PRPs have also been designated at these
sites, and although the law imposes joint and several liability on PRPs,
the Company’s historical experience demonstrates that these costs are
shared with other PRPs. Settlements and costs paid by the Company in
Superfund matters to date have not been material. Future costs are also
not expected to be material to the Company’s financial position or results
of operations.
The Clean Air Act Amendments were enacted in 1990. Expenditures
to comply with the Clean Air Act implementing regulations issued to date
have not been material and have been primarily capital in nature. In
addition, future expenditures for existing regulations, which are primarily
capital in nature, are not expected to be material. Many of the
regulations to be promulgated pursuant to this Act have not been issued.
Uncertainties associated with environmental remediation
contingencies are pervasive and often result in wide ranges of reasonably
possible outcomes. Estimates developed in the early stages of
remediation can vary significantly. A finite estimate of cost does not
normally become fixed and determinable at a specific point in time.
Rather, the costs associated with environmental remediation become
estimable over a continuum of events and activities that help to frame
and define a liability and the Company continually updates its cost
estimates. It is reasonably possible that the Company’s recorded
estimates of its liabilities may change and there is no assurance that
additional costs greater than the amounts accrued will not be incurred or
that changes in environmental laws or their interpretation will not require
that additional amounts be spent.
Factors which cause uncertainties for the Company include, but are
not limited to, the effectiveness of the current work plans in achieving
targeted results and proposals of regulatory agencies for desired
methods and outcomes. It is possible that financial position, results of
operations, cash flows or competitive positions could be affected by the
impact of the ultimate resolution of these matters.
Other Commitments and Contingencies The Company has entered into
agreements with several companies which provide Kodak with products
and services to be used in its normal operations. The minimum payments
for these agreements are approximately $221 million in 2002, $191
million in 2003, $165 million in 2004, $137 million in 2005, $82 million
in 2006 and $246 million in 2007 and thereafter.
The Company guarantees debt and other obligations under
agreements with certain affiliated companies and customers. At
December 31, 2001, these guarantees totaled approximately $277