Kodak 2005 Annual Report Download - page 93

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The holders have the right to require the Company to purchase their Convertible Securities for cash at a purchase price equal to 100% of the
principal amount of the Convertible Securities plus any accrued and unpaid interest on October 15, 2010, October 15, 2013, October 15, 2018,
October 15, 2023 and October 15, 2028, or upon a fundamental change as described in the offering memorandum fi led under Rule 144A in
conjunction with the private placement of the Convertible Securities. As of December 31, 2005, the Company has reserved 18,536,447 shares in
treasury stock to cover potential future conversions of these Convertible Securities into common stock.
Certain of the conversion features contained in the Convertible Securities are deemed to be embedded derivatives as defi ned under SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities.” These embedded derivatives include the Parity Clause, the Credit Rating Clause, and
any specifi ed corporate transaction outside of the Company’s control such as a hostile takeover. Based on an external valuation, these embedded
derivatives were not material to the Company’s fi nancial position, results of operations or cash fl ows.
NOTE 10: OTHER LONG-TERM LIABILITIES
(in millions) 2005 2004
Deferred royalty revenue from licensees $ 501 $ —
Environmental liabilities 171 153
Deferred compensation 158 167
Deferred income taxes 33 67
Minority interest in Kodak companies 20 25
Other 342 325
Total $ 1,225 $ 737
The other component above consists of other miscellaneous long-term liabilities that, individually, are 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 11: COMMITMENTS AND CONTINGENCIES
Environmental
Cash expenditures for pollution prevention and waste treatment for the Company’s current facilities were as follows:
(in millions) 2005 2004 2003
Recurring costs for pollution prevention and waste treatment $ 79 $ 75 $ 74
Capital expenditures for pollution prevention and waste treatment 7 7 8
Site remediation costs 2 3 2
Total $ 88 $ 85 $ 84
At December 31, 2005 and 2004, the Company’s undiscounted accrued liabilities for environmental remediation costs amounted to $171 million
and $153 million, respectively. These amounts are reported in other long-term liabilities 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 the Kodak
Park site in Rochester, NY. As part of this program, the Company has completed the RCRA Facility Assessment (RFA), a broad-based environmental
investigation of the site. The Company is currently in the process of completing, and in some cases has completed, RCRA Facility Investigations (RFI)
and Corrective Measures Studies (CMS) for areas at the site. At December 31, 2005, estimated future investigation and remediation costs of
$67 million are accrued for this site and are included in the $171 million reported in other long-term liabilities.
The Company announced the closing of four manufacturing facilities outside the United States in 2004 and 2005. The Company has obligations with
estimated future investigation, remediation and monitoring costs of $27 million at three of these facilities. There were no such costs associated with
the fourth facility. At December 31, 2005, these costs are accrued and included in the $171 million reported in other long-term liabilities.