Kodak 2011 Annual Report Download - page 16

to provide competitive financing arrangements to the Company’s customers or if we extend credit to customers whose creditworthiness deteriorates, this
could adversely impact the Company’s revenues, profitability and financial position.
We have outsourced a significant portion of the Company’s overall worldwide manufacturing, logistics and back office operations and face the
risks associated with reliance on third party suppliers.
We have outsourced a significant portion of the Company’s overall worldwide manufacturing, logistics, customer support and administrative operations to
third parties. To the extent that we rely on third party service providers, we face the risk that those third parties may not be able to:
Further, even if the Company honors its payment and other obligations to the Company’s key suppliers of products, components and services, such
suppliers may choose to unilaterally withhold products, components or services, or demand changes in payment terms. As a result of such risks, we may be
unable to meet the Company’s customer commitments, the Company’s costs could be higher than planned, and the Company’
s cash flows and the reliability
of the Company’s products could be negatively impacted. The Company will vigorously enforce its contractual rights under such circumstances, but there
is no guarantee we will be successful in preventing or mitigating the effects of unilateral actions by the Company’s suppliers. Other supplier problems that
we could face include electronic component shortages, excess supply, risks related to favorable terms, the duration of the Company’s contracts with
suppliers for components and materials and risks related to dependency on single source suppliers on favorable terms or at all. If any of these risks were to
be realized, and assuming alternative third party relationships could not be established, we could experience interruptions in supply or increases in costs that
might result in the Company’s inability to meet customer demand for the Company’s products, damage to the Company’s relationships with the Company’
s
customers, and reduced market share, all of which could adversely affect the Company’s results of operations and financial condition.
The Company’s sales are typically concentrated in the last four months of the fiscal year, therefore, lower than expected demand or increases in
costs during that period may have a pronounced negative effect on the Company’s results of operations.
The demand for the Company’s consumer products is largely discretionary in nature, and sales and earnings of the Company’s consumer businesses are
linked to the timing of holidays, vacations, and other leisure or gifting seasons. Accordingly, we have typically experienced greater net sales in the fourth
fiscal quarter as compared with the other three quarters. Developments, such as lower-than-anticipated demand for the Company’s products, an internal
systems failure, increases in materials costs, or failure of or performance problems with one of the Company’s key logistics, components supply, or
manufacturing partners, could have a material adverse impact on the Company’
s financial condition and operating results, particularly if such developments
occur late in the third quarter or during the fourth fiscal quarter. Further, with respect to the Graphic Communications Group segment, equipment and
consumable sales in the commercial marketplace peak in the fourth quarter based on increased commercial print demand. Tight credit markets that limit
capital investments or a weak economy that decreases print demand could negatively impact equipment or consumable sales. In addition, the Company’s
inability to achieve intellectual property licensing revenues in the timeframe and amount we anticipate could adversely affect the Company’s revenues,
earnings and cash flow. These external developments are often unpredictable and may have an adverse impact on the Company’s business and results of
operations.
If we fail to manage distribution of the Company’s products and services properly, the Company’s revenue, gross margins and earnings could be
adversely impacted.
We use a variety of different distribution methods to sell and deliver the Company’s products and services, including third party resellers and distributors
and direct and indirect sales to both enterprise accounts and customers. Successfully managing the interaction of direct and indirect channels to various
potential customer segments for the Company’
s products and services is a complex process. Moreover, since each distribution method has distinct risks and
costs, the Company’s failure to implement the most advantageous balance in the delivery model for the Company’s products and services could adversely
affect the Company’s revenue, gross margins and earnings. Due to changes in the Company’s go to market models, we are more reliant on fewer
distributors than in past periods. This has concentrated the Company’s credit and operational risk and could result in an adverse impact on the Company’s
financial performance.
•
develop manufacturing methods appropriate for the Company’s products;
•
maintain an adequate control environment;
•
quickly respond to changes in customer demand for the Company’s products;
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obtain supplies and materials necessary for the manufacturing process; or
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mitigate the impact of labor shortages and/or disruptions.
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