Kodak 2005 Annual Report Download - page 21

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located in the United Kingdom, France, Germany, South Africa, Israel, Bulgaria, China, Japan, Canada and Mexico. The segment provides digital and
traditional products and services including digital printing, industrial solutions, prepress consumables and workfl ow and prepress equipment.
Properties within a country may be shared by all segments operating within that country.
Regional distribution centers are located in various places within and outside of the United States. The Company owns or leases administrative,
manufacturing, marketing and processing facilities in various parts of the world. The leases are for various periods and are generally renewable.
The Company anticipates that its property portfolio will be reduced signifi cantly over the next few years as a result of the 2004-2006 cost reduction
program. Under this program, the Company expected to reduce its worldwide facility square footage by approximately one-third. In July 2005, the
Company expanded this program and now plans to reduce its traditional manufacturing infrastructure by two-thirds below 2004 levels. This program
has been renamed the “2004-2007 Restructuring Program” and is expected to be largely complete by mid-2007. During 2005, the Company made
signifi cant progress towards achieving this goal and remains committed to this plan.
ITEM 3. LEGAL PROCEEDINGS
During March 2005, the Company was contacted by members of the Division of Enforcement of the SEC concerning the announced restatement of
the Company’s fi nancial statements for the full year and quarters of 2003 and the fi rst three unaudited quarters of 2004. An informal inquiry by the
staff of the SEC into the substance of that restatement is continuing. The Company continues to fully cooperate with this inquiry, and the staff has
indicated that the inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred.
On June 13, 2005, a purported shareholder class action lawsuit was fi led against the Company and two of its executives in the United States District
Court for the Southern District of New York. On June 20, 2005 and August 10, 2005, similar lawsuits were fi led against the same defendants in the
United States District Court for the Western District of New York. The cases have been consolidated in the Western District of New York and the lead
plaintiffs are John Dudek and the Alaska Electrical Pension Fund. The complaints fi led in each of these actions (collectively, the “Complaints”) seek
to allege claims under the Securities Exchange Act on behalf of a proposed class of persons who purchased securities of the Company between April
23, 2003 and September 25, 2003, inclusive. The substance of the Complaints is that various press releases and other public statements made by
the Company during the proposed class period allegedly misrepresented the Company’s fi nancial condition and omitted material information regarding,
among other things, the state of the Company’s fi lm and paper business. An amended complaint was fi led on January 20, 2006, containing
essentially the same allegations as the original complaint but adding an additional named defendant. Defendants’ initial responses to the Complaints
are not yet due. The Company intends to defend these lawsuits vigorously but is unable currently to predict the outcome of the litigation or to estimate
the range of potential loss, if any.
On or about November 9, 2005, the Company was served with a purported derivative lawsuit that had been commenced against the Company, as
a nominal defendant, and eleven current and former directors and offi cers of the Company, in the New York State Supreme Court, Monroe County.
The Complaint seeks to allege claims on behalf of the Company that, between April 2003 and September 2003, the defendant offi cers and directors
caused the Company to make allegedly improper statements, in press release and other public statements, which falsely represented or omitted
material information about the Company’s fi nancial results and guidance. The plaintiff alleges that this conduct was a breach of the defendants’
common law fi duciary obligations to the Company, and constituted an abuse of control, gross mismanagement, waste and unjust enrichment.
Defendants’ initial responses to the Complaint are not yet due. The Company intends to defend this lawsuit vigorously but is unable currently to
predict the outcome of the litigation or to estimate the range of possible loss, if any.
The Company is named a Potentially Responsible Party (“PRP”) along with seven other companies in connection with certain alleged environmental
contamination at the Rochester Fire Academy, located in Rochester, New York. The Company provided fl ammable materials to the Fire Academy,
which were used in fi re-fi ghting training. The Company and the seven other PRPs have been negotiating with the New York State Attorney General’s
offi ce. On November 15, 2005, the New York State Attorney General fi led a complaint in the U.S. District Court, Western District of New York against
all eight PRPs seeking recovery of expenses to remediate the site. The Company has not yet been served and therefore its initial response is not yet
due. The potential monetary sanction will be in excess of $100,000 but is not expected to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.