Kodak 2011 Annual Report Download - page 64

The Company intends to propose a reorganization plan on or prior to the applicable date required under the Bankruptcy Code, as the same may be extended
with approval of the Bankruptcy Court. The Company presently expects that any proposed reorganization plan will provide, among other things,
mechanisms for settlement of claims against the Debtors’ estates, treatment of the Company’s existing equity and debt holders, and certain corporate
governance and administrative matters pertaining to the reorganized Company. Any proposed reorganization plan will be subject to revision prior to
submission to the Bankruptcy Court based upon discussions with the Company’
s creditors and other interested parties, and thereafter in response to creditor
claims and objections and the requirements of the Bankruptcy Code or the Bankruptcy Court. There can be no assurance that the Company will be able to
secure approval for the Company’s proposed reorganization plan from the Bankruptcy Court or that the Company’s proposed plan will be accepted by the
lenders under a Debtor-in-Possession Revolving Credit Agreement (the “DIP Credit Agreement”). In the event the Company does not secure approval of
the reorganization plan, the outstanding principal and interest could become immediately due and payable.
Going Concern
The Company incurred a net loss for the years ended 2009, 2010 and, 2011 and had a shareholders’ deficit as of December 31, 2011 and 2010. To improve
the Company’s performance and address competitive challenges, the Company is developing a strategic plan for the ongoing operation of the Company’s
business. Successful implementation of the Company’s plan, however, is subject to numerous risks and uncertainties. In addition, the increasingly
competitive industry conditions under which the Company operates have negatively impacted the Company’s results of operations and cash flows and may
continue to do so in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and
contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going
concern is contingent upon the Company’s ability to comply with the financial and other covenants contained in the DIP Credit Agreement, the
Bankruptcy Court’s approval of the Company’s reorganization plan and the Company’s ability to successfully implement the Company’s plan and
obtain exit financing, among other factors. As a result of the Bankruptcy Filing, the realization of assets and the satisfaction of liabilities are subject to
uncertainty. While operating as debtors-in-possession under chapter 11, the Company may sell or otherwise dispose of or liquidate assets or settle
liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions
contained in the DIP Credit Agreement), for amounts other than those reflected in the accompanying consolidated financial statements. Further, the
reorganization plan could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial
statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of
assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a
going concern or as a consequence of the Bankruptcy Filing.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PRINCIPLES
The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United
States of America. The following is a description of the significant accounting policies of Eastman Kodak Company.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Eastman Kodak Company, its wholly owned subsidiaries, and its majority owned
subsidiaries (collectively “the Company”). The Company consolidates variable interest entities if the Company has a controlling financial interest and
is determined to be the primary beneficiary of the entity. The Company accounts for investments in companies over which it has the ability to
exercise significant influence, but does not hold a controlling interest, under the equity method of accounting, and the Company records its
proportionate share of income or losses in Other income (charges), net in the accompanying Consolidated Statements of Operations. The Company
accounts for investments in companies over which it does not have the ability to exercise significant influence under the cost method of
accounting. These investments are carried at cost and are adjusted only for other-than-temporary declines in fair value. The Company has eliminated
all significant intercompany accounts and transactions, and net earnings are reduced by the portion of the net earnings of subsidiaries applicable to
noncontrolling interests.
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