Kodak 2011 Annual Report Download - page 38

Other Operating (Income) Expenses, Net
The other operating (income) expenses, net category includes gains and losses on sales of assets and businesses and certain impairment charges. The
amount for 2011 primarily reflects a gain of approximately $62 million related to the sale of CMOS image sensor patents and patent applications. The
amount for 2010 primarily reflects a $626 million goodwill impairment charge related to the FPEG segment. The amount for 2009 primarily reflects a gain
of approximately $100 million on the sale of assets of the Company’s organic light emitting diodes (OLED) group, as described further below.
In November 2009, the Company agreed to terminate its patent infringement litigation with LG Electronics, Inc., LG Electronics USA, Inc., and LG
Electronics Mobilecomm USA, Inc., entered into a technology cross license agreement with LG Electronics, Inc. and agreed to sell assets of its OLED
group to Global OLED Technology LLC, an entity established by LG Electronics, Inc., LG Display Co., Ltd. and LG Chem, Ltd. As the transactions were
entered into in contemplation of one another, in order to reflect the asset sale separately from the licensing transaction, the total consideration was allocated
between the asset sale and the licensing transaction based on the estimated fair value of the assets sold. Fair value of the assets sold was estimated using
other competitive bids received by the Company. Accordingly, $100 million of the proceeds was allocated to the asset sale. The remaining gross proceeds
of $414 million were allocated to the licensing transaction and reported in net sales of the CDG segment for the year ended December 31, 2009.
Interest Expense
The increases in interest expense for 2011 as compared with 2010 and 2010 as compared with 2009 were attributable to higher weighted-average
effective interest rates on the Company’s outstanding debt, resulting from the issuance of new debt in the third quarter of 2009, the first quarter of 2010
and the first quarter of 2011.
Loss on Early Extinguishment of Debt, Net
On March 5, 2010, the Company issued $500 million of aggregate principal amount of 9.75% senior secured notes due March 1, 2018. The net proceeds
of this issuance were used to repurchase all of the $300 million of 10.5% senior secured notes due 2017 previously issued to Kohlberg, Kravis, Roberts
& Co. L.P. (the “KKR Notes”) and $200 million of 7.25% senior notes due 2013 (collectively the “Notes”). The Company recognized a net loss of $102
million on the early extinguishment of the Notes in the first quarter of 2010, representing the difference between the carrying values of the Notes and the
costs to repurchase. This difference between the carrying values and costs to repurchase was primarily due to the original allocation of the proceeds
received from the issuance of the KKR Notes to Additional paid-in-capital for the value of the detachable warrants issued to the holders of the KKR
Notes.
OTHER INCOME (CHARGES), NET
See Note 15, “Other Income (Charges), Net”, in the Notes to Financial Statements.
Income Tax Provision
The change in the Company’s effective tax rate from continuing operations for 2011 as compared with 2010 is primarily attributable to: (1) a pre-tax
goodwill impairment charge of $626 million that resulted in a tax benefit of only $2 million due to the limited amount of tax deductible goodwill that
existed as of December 31, 2010 , (2) a benefit associated with the release of deferred tax asset valuation allowances in certain jurisdictions outside of the
U.S. as of December 31, 2010, (3) incremental withholding taxes related to non-recurring licensing agreements entered into during 2010 as compared with
2011 , (4) the mix of earnings from operations in certain jurisdictions outside the U.S. as of December 31, 2010, (5) a provision associated with the
establishment of a deferred tax asset valuation allowance outside the U.S.
(dollars in millions)
For the Year Ended
December 31,
2011
2010
2009
Loss from continuing operations before income taxes
$
(758
)
$
(561
)
$
(117
)
Provision for income taxes
$
9
$
114
$
115
Effective tax rate
(1.2
)%
(20.3
)%
(98.3
)%
Benefit for income taxes @ 35%
$
(265
)
$
(196
)
$
(41
)
Difference between tax at effective vs statutory rate
$
274
$
310
$
156
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