Kodak 2011 Annual Report Download - page 46

Financing Activities
Net cash provided by financing activities increased $320 million for the year ended December 31, 2011 as compared with 2010 due to an increase in net
borrowings.
Sources of Liquidity
The Company has been using cash received from operations, including intellectual property licensing, and the sale of non-core assets to fund its investment
in the consumer and commercial inkjet businesses and its transformation from a traditional film manufacturing company to a digital technology
company. The Company faces an uncertain business environment and a number of substantial challenges, including the level of investment necessary to
support growth in its consumer and commercial inkjet businesses, historically high commodity costs, aggressive price competition, secular decline in the
Company’s traditional film businesses, the cost to restructure the Company to enable sustainable profitability, underfunded and unfunded defined benefit
and other postretirement benefit plans, and short-term uncertainty relating to certain of the Company’s intellectual property licensing activities pending the
outcome of the infringement litigation against Apple, Inc. and Research in Motion Ltd. before the International Trade Commission. In July 2011, the
Company announced that it is exploring strategic alternatives, including a potential sale, related to its digital imaging patent portfolios. As this process
proceeds, the Company will continue to pursue its patent licensing program as well as all litigation related to its digital imaging technology. A sale of the
Company’s digital imaging patent portfolios, which would accelerate the monetization of the digital imaging patent portfolios that has been implemented
largely through licensing transactions, could result in the cessation of license revenue related to these patents.
During the year ended December 31, 2011, the Company has supplemented cash on hand with additional debt to fund operations, while pursuing asset
sales, intellectual property licenses, and a sale of, or other strategic alternatives with, its digital imaging patent portfolio. Net cash provided by
financing activities was $246 million in 2011.
On January 20, 2012, in connection with the Company’s Bankruptcy Filing, the Company entered into, and the Bankruptcy Court approved on an interim
basis, the DIP Credit Agreement which provides up to a $700 million super-priority senior secured term loan facility and up to a $250 million super-
priority
senior secured asset-based revolving credit facilities. On January 20, 2012, the Company borrowed $400 million in term loans and issued $102 million of
letters of credit under the revolving credit facilities. In connection with entering into and drawing funds on the DIP Credit Agreement, the Company repaid,
refinanced, or transferred all obligations and terminated all commitments under the Second Amended and Restated Credit Agreement. On February 15,
2012, the Company received from the Bankruptcy Court the final DIP Credit Agreement order (the "Final DIP Order") and shortly thereafter borrowed the
remaining $300 million super-priority senior secured term loan.
Cash and cash equivalents are held in various locations throughout the world. At December 31, 2011 and December 31, 2010, approximately $170 million
and $580 million, respectively, of cash and cash equivalents were held within the U.S. During the twelve month period ended December 31, 2011,
approximately $320 million of cash was repatriated, or loaned, from foreign subsidiaries to the U.S., net of loans and repayments of loans to foreign
subsidiaries, at an incremental cash tax cost of $4 million. The Company utilizes a variety of tax planning and financing strategies in an effort to ensure that
cash is available in locations where it is needed; however, as of December 31, 2011, cash balances held outside of the U.S. are generally required to support
local country operations and are therefore not available for operations in other jurisdictions. Additionally, in China, where approximately $340 million in
cash and cash equivalents was held as of December 31, 2011, there are limitations related to net asset balances that impact the ability to make cash
available to other jurisdictions in the world. The Company plans to meet its current liquidity needs through existing cash balances, operating earnings from
foreign subsidiaries, including Chinese subsidiaries, when available, financing available under the DIP Credit Agreement, proceeds from sales of businesses
and assets, and through monetization of its digital imaging patent portfolio.
The Company’s Bankruptcy Filing is intended to permit the Company to reorganize and improve liquidity in the U.S. and abroad, monetize non-strategic
intellectual property, fairly resolve legacy liabilities, and focus on the most valuable business lines to enable sustainable profitability. The Company’s goal
is to develop and implement a reorganization plan that meets the standards for confirmation under the Bankruptcy Code. If the Company is unable to sell
its digital imaging patent portfolio at an appropriate price, it will pursue additional licensing opportunities related to that patent portfolio. Additionally, if
liquidity needs require, the Company could slow its rate of investment in its digital growth initiatives and/or pursue the sale of certain of its cash generating
businesses that have leading market positions in large markets. The Company believes that it will have sufficient amounts available under the DIP Credit
Agreement, plus trade credit extended by vendors, proceeds from sales of assets, intellectual property monetization transactions, and cash generated from
operations to fund anticipated cash requirements through the end of 2012.
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