Kodak 2010 Annual Report Download - page 45

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SUMMARY OF OPERATING DATA
A summary of operating data for 2010 and for the four years prior is shown on page 99.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a result of its global operating and financing activities, is exposed to changes in foreign currency exchange rates,
commodity prices, and interest rates, which may adversely affect its results of operations and financial position. In seeking to
minimize the risks associated with such activities, the Company may enter into derivative contracts. The Company does not utilize
financial instruments for trading or other speculative purposes.
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 fluctuating 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 finance long-term investments, while short-term debt is used to meet working capital
requirements.
Using a sensitivity analysis based on estimated fair value of open foreign currency forward contracts using available forward rates, if
the U.S. dollar had been 10% stronger at December 31, 2010 and 2009, the fair value of open forward contracts would have
decreased $35 million and $17 million, respectively. Such changes in fair value would be substantially offset by the revaluation or
settlement of the underlying positions hedged.
Using a sensitivity analysis based on estimated fair value of open silver forward contracts using available forward prices, if available
forward silver prices had been 10% lower at December 31, 2010 and 2009, the fair value of open forward contracts would have
decreased $1 million and $4 million, respectively. Such changes 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 fixed-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 financing 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 76 basis points) lower at December 31, 2010, the fair value of short-term and long-term borrowings would
have increased less than $1 million and $50 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 121 basis points) lower at December 31,
2009, the fair value of short-term and long-term borrowings would have increased less than $1 million and $59 million, respectively.
The Company’s financial instrument counterparties are high-quality investment or commercial banks with significant experience with
such instruments. The Company manages exposure to counterparty credit risk by requiring specific minimum credit standards and
diversification of counterparties. The Company has procedures to monitor the credit exposure amounts. The maximum credit
exposure at December 31, 2010 was not significant to the Company.