Kodak 2005 Annual Report Download - page 65
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63
Using a sensitivity analysis based on estimated fair value of open forward contracts using available forward prices, if available forward silver prices
had been 10% lower at December 31, 2005 and 2004, the fair value of open forward contracts would have decreased $3 million and $1 million,
respectively. Such losses in fair value, if realized, would be offset by lower costs of manufacturing silver-containing products.
The Company is exposed to interest rate risk primarily through its borrowing activities and, to a lesser extent, through investments in marketable
securities. The Company may utilize borrowings to fund its working capital and investment needs. The majority of short-term and long-term
borrowings are in fi xed-rate instruments. There is inherent roll-over risk for borrowings and marketable securities as they mature and are renewed at
current market rates. The extent of this risk is not predictable because of the variability of future interest rates and business fi nancing requirements.
Using a sensitivity analysis based on estimated fair value of short-term and long-term borrowings, if available market interest rates had been 10%
(about 63 basis points) higher at December 31, 2005, the fair value of short-term and long-term borrowings would have decreased $2 million and
$67 million, respectively. Using a sensitivity analysis based on estimated fair value of short-term and long-term borrowings, if available market
interest rates had been 10% (about 40 basis points) higher at December 31, 2004, the fair value of short-term and long-term borrowings would have
decreased $1 million and $59 million, respectively.
The Company’s fi nancial instrument counterparties are high-quality investment or commercial banks with signifi cant experience with such
instruments. The Company manages exposure to counterparty credit risk by requiring specifi c minimum credit standards and diversifi cation of
counterparties. The Company has procedures to monitor the credit exposure amounts. The maximum credit exposure at December 31, 2005 was not
signifi cant to the Company.