Kodak 2005 Annual Report Download - page 64

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In 2005, the Company completed its evaluation of the repatriation provision, and repatriated approximately $580 million of gross qualifying dividends
subject to the 85% dividends received deduction. Accordingly, the Company recorded a corresponding tax provision of approximately $29 million in
2005 with respect to such dividends. See Note 15, “Income Taxes,” for further disclosure.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this report may be forward-looking in nature, or “forward-looking statements” as defi ned in the United States Private Securities
Litigation Reform Act of 1995. For example, references to expectations for the Company’s earnings, revenue, revenue growth, cash, seasonality of
sales, liquidity, pension costs and cost savings are forward-looking statements.
Actual results may differ from those expressed or implied in forward-looking statements. In addition, any forward-looking statements represent the
Company’s estimates only as of the date they are made, and should not be relied upon as representing the Company’s estimates as of any subsequent
date. While the Company may elect to update forward-looking statements at some point in the future, the Company specifi cally disclaims any
obligation to do so, even if its estimates change. The forward-looking statements contained in this report are subject to a number of factors and
uncertainties, including the successful: execution of the digital growth and profi tability strategies, business model and cash plan; implementation of
a changed segment structure; implementation of the cost reduction program, including asset rationalization and monetization, reduction in selling,
general and administrative costs and personnel reductions; transition of certain fi nancial processes and administrative functions to a global shared
services model and the outsourcing of certain functions to third parties; implementation of, and performance under, the debt management program,
including compliance with our debt covenants; implementation of product strategies (including category expansion, digitization, organic light emitting
diode (OLED) displays and digital products) and go-to-market strategies; protection and enforcement of our intellectual property; implementation of
intellectual property licensing and other strategies; development and implementation of e-commerce strategies; completion of information systems
upgrades, including SAP, our enterprise system software; completion of various portfolio actions; reduction of inventories; integration of newly
acquired businesses; improvement in manufacturing productivity and techniques; improvement in receivables performance; improvement in
supply chain effi ciency and management of third-party sourcing relationships; implementation of the strategies designed to address the decline in the
Company’s traditional businesses; and performance of the Company’s business in emerging markets like China, India, Brazil, Mexico and Russia.
The forward-looking statements contained in this report are subject to the following additional risk factors: inherent unpredictability of currency
fl uctuations and raw material costs; competitive actions, including pricing; changes in the Company’s debt credit ratings and its ability to access
capital markets; the nature and pace of technology evolution, including the traditional-to-digital transformation; continuing customer consolidation
and buying power; current and future proposed changes to accounting rules and tax laws, as well as other factors which could adversely impact
the Company’s effective tax rate in the future; general economic, business, geo-political, regulatory and public health conditions; market growth
predictions; continued effectiveness of internal controls; and other factors and uncertainties disclosed from time to time in the Company’s fi lings with
the Securities and Exchange Commission.
Any forward-looking statements in this report should be evaluated in light of these important factors and uncertainties.
SUMMARY OF OPERATING DATA
A summary of operating data for 2005 and for the four years prior is shown on page 130.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company, as a result of its global operating and fi nancing activities, is exposed to changes in foreign currency exchange rates, commodity prices,
and interest rates, which may adversely affect its results of operations and fi nancial position. In seeking to minimize the risks associated with such
activities, the Company may enter into derivative contracts.
Foreign currency forward contracts are used to hedge existing foreign currency denominated assets and liabilities, especially those of the Company’s
International Treasury Center, as well as forecasted foreign currency denominated intercompany sales. Silver forward contracts are used to mitigate
the Company’s risk to fl uctuating silver prices. The Company’s exposure to changes in interest rates results from its investing and borrowing activities
used to meet its liquidity needs. Long-term debt is generally used to fi nance long-term investments, while short-term debt is used to meet working
capital requirements. The Company does not utilize fi nancial instruments for trading or other speculative purposes.
Using a sensitivity analysis based on estimated fair value of open forward contracts using available forward rates, if the U.S. dollar had been 10%
weaker at December 31, 2005 and 2004, the fair value of open forward contracts would have decreased $29 million and $62 million, respectively.
Such gains or losses would be substantially offset by losses or gains from the revaluation or settlement of the underlying positions hedged.