Kodak 2007 Annual Report Download - page 64

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NOTE 11: COMMITMENTS AND CONTINGENCIES
Environmental
Cash expenditures for pollution prevention and waste treatment for the Company’s current facilities were as follows:
For the Year Ended December 31,
(in millions) 2007 2006 2005
Recurring costs for pollution prevention and waste treatment $ 49 $ 63 $ 76
Capital expenditures for pollution prevention and waste treatment 4 3 7
Site remediation costs 2 1 2
Total $ 55 $ 67 $ 85
Environmental expenditures that relate to an existing condition caused by past operations and that do not provide future benefits are expensed as in-
curred. Costs that are capital in nature and that provide future benefits are capitalized. Liabilities are recorded when environmental assessments are made
or the requirement for remedial efforts is probable, and the costs can be reasonably estimated. The timing of accruing for these remediation liabilities is
generally no later than the completion of feasibility studies. The Company has an ongoing monitoring and identification process to assess how the activi-
ties, with respect to the known exposures, are progressing against the accrued cost estimates, as well as to identify other potential remediation sites that
are presently unknown.
At December 31, 2007 and 2006, the Company’s undiscounted accrued liabilities for environmental remediation costs amounted to $125 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. The Company is currently in the process of completing, and in many cases has completed, RCRA Facility Investigations
(RFI), Corrective Measures Studies (CMS) and Corrective Measures Implementation (CMI) for areas at the site. At December 31, 2007, estimated future
investigation and remediation costs of $63 million are accrued for this site, the majority of which relates to long-term operation, maintenance of remedia-
tion systems and monitoring costs.
In addition, the Company has accrued for obligations with estimated future investigation, remediation and monitoring costs of $19 million relating to other
operating sites, $23 million at sites of former operations and plant closures, and $20 million of retained obligations for environmental remediation and
Superfund matters related to certain sites associated with the non-imaging health businesses sold in 1994.
Cash expenditures for the aforementioned investigation, remediation and monitoring activities are expected to be incurred over the next twenty-eight
years for many of the sites. For these known environmental liabilities, the accrual reflects the Company’s best estimate of the amount it will incur under the
agreed-upon or proposed work plans. The Company’s cost estimates were determined using the ASTM Standard E 2137-01, “Standard Guide for Estimat-
ing Monetary Costs and Liabilities for Environmental Matters,” and have not been reduced by possible recoveries from third parties. The overall method
includes the use of a probabilistic model which forecasts a range of cost estimates for the remediation required at individual sites. The projects are closely
monitored and the models are reviewed as significant events occur or at least once per year. The Company’s estimate includes investigations, equipment
and operating costs for remediation and long-term monitoring of the sites. The Company does not believe it is reasonably possible that the losses for the
known exposures could exceed the current accruals by material amounts.
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. In connection with the Consent Decree, the Company is subject to a Compliance Schedule, under which the Company has 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 less than $1 million over the next year. These expenditures are incurred as part of plant operations
and, therefore, are not included in the environmental accrual at December 31, 2007.
The Company is presently designated as a potentially responsible party (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 seven Superfund sites. With respect to each of these sites, the Company’s
liability is minimal. In addition, the Company has been identified as a PRP in connection with the non-imaging health businesses in two active Superfund
sites. Numerous other PRPs have also been designated at these sites. 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, results of operations or cash flows.