Kodak 2012 Annual Report Download - page 33

Table of Contents
The following table illustrates the sensitivity to a change to certain key assumptions used in the calculation of expense for the year ending
December 31, 2013 and the projected benefit obligation (“PBO”) at December 31, 2012 for Kodak’s major U.S. and non-U.S. defined benefit
pension plans:
Total pension cost from continuing operations before special termination benefits, curtailments, and settlements for the major funded and
unfunded defined benefit pension plans in the U.S. was $39 million in 2012 and is expected to increase to approximately $55 million in 2013.
Pension expense from continuing operations before special termination benefits, curtailments and settlements for the major funded and unfunded
non-U.S. defined benefit pension plans is projected to increase from $71 million in 2012 to approximately $80 million in 2013.
Additionally, Kodak expects the income, before curtailment and settlement gains and losses of its major other postretirement benefit plans, to be
approximately $103 million in 2013 as compared with income of $12 million for 2012. The change is primarily due to the impacts of the
settlement agreement between the Debtors and the retiree committee appointed by the U.S. Trustee related to its U.S. postretirement benefit
plans. Refer to Note 1, “Bankruptcy Proceedings,” in the Notes to Financial Statements in Item 8 for additional information related to the
settlement agreement.
Environmental Commitments
Environmental liabilities are accrued based on undiscounted estimates of known environmental remediation responsibilities. The liabilities
include accruals for sites owned or leased by Kodak, sites formerly owned or leased by Kodak, and other third party sites where Kodak was
designated as a potentially responsible party (“PRP”). The amounts accrued for such sites are based on these estimates, which are determined
using the ASTM Standard E 2137-06, “Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters.” The overall
method includes the use of a probabilistic model that forecasts a range of cost estimates for the remediation required at individual sites. Kodak’s
estimate includes equipment and operating costs for investigations, remediation and long-term monitoring of the sites. Such estimates may be
affected by changing determinations of what constitutes an environmental liability or an acceptable level of remediation. Kodak’s estimate of its
environmental liabilities may also change if the proposals to regulatory agencies for desired methods and outcomes of remediation are viewed as
not acceptable, or additional exposures are identified. Kodak has an ongoing monitoring process to assess how activities, with respect to the
known exposures, are progressing against the accrued cost estimates.
Additionally, in many of the countries in which Kodak operates, environmental regulations exist that require Kodak to handle and dispose of
asbestos in a special manner if a building undergoes major renovations or is demolished. Kodak records a liability equal to the estimated fair
value of its obligation to perform asset retirement activities related to the asbestos, computed using an expected present value technique, when
sufficient information exists to calculate the fair value.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See Note 2, “Significant Accounting Policies,” in the Notes to Financial Statements in Item 8.
KODAK OPERATING MODEL AND REPORTING STRUCTURE
Effective September 30, 2012, Kodak changed its segment reporting structure to three reportable segments: the Graphics, Entertainment and
Commercial Films Segment, the Digital Printing and Enterprise Segment, and the Personalized and Document Imaging Segment. Prior period
segment results have been revised to conform to the current period segment reporting structure. Within each of Kodak’s reportable segments are
various components, or Strategic Product Groups (SPGs). Throughout the remainder of Item 7, references to the segments’
SPGs are indicated in
italics.
30
Impact on 2013
Pre-Tax Pension Expense
Increase (Decrease)
Impact on PBO
December 31, 2012
Increase (Decrease)
(in millions)
U.S.
Non
-
U.S.
U.S.
Non
-
U.S.
Change in assumption:
25 basis point decrease in discount rate
$
1
$
4
$
111
$
164
25 basis point increase in discount rate
(5
)
(3
)
(106
)
(155
)
25 basis point decrease in EROA
11
6
N/A
N/A
25 basis point increase in EROA
(11
)
(6
)
N/A
N/A