Kodak 2011 Annual Report Download - page 54

management’s examination of historical operating trends and data are based upon the Company’s expectations and various assumptions. Future events or
results may differ from those anticipated or expressed in these forward-looking statements. Important factors that could cause actual events or results to
differ materially from these forward-looking statements include, among others, the risks and uncertainties described under the heading “Risk Factors” in
this annual report on Form 10–K for the year end December 31, 2011, and under the headings “Business” (Item 1 of Part 1), “Risk Factors” (Item 1A of
Part 1), “Management’s Discussion and Analysis of Financial Conditions and Results of Operations Liquidity and Capital Resources” (Item 7 of Part 2),
“Notes to Financial Statements”, and “Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Litigation Reform Act of 1995” in this
report, and those described in filings made by the Company with the U.S. Bankruptcy Court for the Southern District of New York and in other filings the
Company makes with the SEC from time to time. There may be other factors that may cause the Company’s actual results to differ materially from the
forward–looking statements. All forward–looking statements attributable to the Company or persons acting on its behalf apply only as of the date of this
report on Form 10–K, and are expressly qualified in their entirety by the cautionary statements included in this report. The Company undertakes no
obligation to update or revise forward–looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of
unanticipated events.
SUMMARY OF OPERATING DATA
A summary of operating data for 2011 and for the four years prior is shown on page 117.
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, 2011 and 2010, the fair value of open forward contracts would have decreased $30 million and $35 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, 2011 and 2010, the fair value of open forward contracts would have decreased $2 million and $1 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
301 basis points) lower at December 31, 2011, the fair value of short-term and long-term borrowings would have increased $3 million and $66 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 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.
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, 2011 was not
significant to the Company.
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