Kodak 2012 Annual Report Download - page 50

Table of Contents
Off-Balance Sheet Arrangements
Kodak guarantees debt and other obligations of certain customers. The debt and other obligations are primarily due to banks and leasing
companies in connection with financing of customers’ purchases of equipment and product from Kodak. At December 31, 2012, the maximum
potential amount of future payments (undiscounted) that Kodak could be required to make under these customer-related guarantees was $19
million and the carrying amount of the liability related to these customer guarantees was not material.
The customer financing agreements and related guarantees, which mature between 2013 and 2016, typically have a term of 90 days for product
and short-term equipment financing arrangements, and up to five years for long-term equipment financing arrangements. These guarantees
would require payment from Kodak only in the event of default on payment by the respective debtor. In some cases, particularly for guarantees
related to equipment financing, Kodak has collateral or recourse provisions to recover and sell the equipment to reduce any losses that might be
incurred in connection with the guarantees. However, any proceeds received from the liquidation of these assets may not cover the maximum
potential loss under these guarantees.
EKC also guarantees potential indebtedness to banks and other third parties for some of its consolidated subsidiaries. The maximum amount
guaranteed is $100 million, and the outstanding amount for those guarantees is $83 million. Of this outstanding amount, $38 million is recorded
within Short-term borrowings and current portion of long-term debt. The remaining $45 million of outstanding guarantees represent parent
guarantees providing financial assurance to third parties that the Company’s subsidiaries will fulfill their future performance or financial
obligations under various contracts, which do not necessarily have corresponding liabilities reported in Kodak’s financial statements. These
guarantees expire in 2013 through 2019. Pursuant to the terms of the Company’s Amended Credit Agreement, obligations of the Borrowers to
the Lenders under the Amended Credit Agreement, as well as secured agreements in an amount not to exceed $75 million, are guaranteed by the
Company and the Company’s U.S. subsidiaries and included in the above amounts. As of December 31, 2012, these secured agreements totaled
$20 million.
EKC has issued a guarantee to Kodak Limited (the “Subsidiary”) and the Trustee (the “Trustee”) of the Kodak Pension Plan (the “KPP”) in the
United Kingdom. Under that arrangement, EKC guaranteed to the Subsidiary and the Trustees the ability of the Subsidiary, only to the extent it
becomes necessary to do so, to (1) make contributions to the KPP to ensure sufficient assets exist to make plan benefit payments, and (2) make
contributions to the KPP such that it will achieve full funded status by the funding valuation for the period ending December 31, 2022. The
guarantee expires (a) upon the conclusion of the funding valuation for the period ending December 31, 2022 if the KPP achieves full funded
status or on payment of the balance if the KPP is underfunded by no more than 60 million British pounds by that date, (b) earlier in the event that
the KPP achieves full funded status for two consecutive funding valuation cycles which are typically performed at least every three years, or
(c) June 30, 2024 on payment of the balance in the event that the KPP is underfunded by more than 60 million British pounds upon conclusion of
the funding valuation for the period ending December 31, 2022. The amount of potential future contributions is dependent on the funding status
of the KPP as it fluctuates over the term of the guarantee. The funded status of the KPP may be materially impacted by future changes in key
assumptions used in the valuation of the plan, particularly the discount rate and expected rate of return on plan assets. The funded status of the
KPP (calculated in accordance with U.S. GAAP) is included in Pension and other postretirement liabilities presented in the Consolidated
Statement of Financial Position. The guarantee is the subject of the chapter 11 claims asserted by the Trustee of the KPP and the Subsidiary, and
it is intended that the obligations under the guarantee, as well as future contributions to the KPP, will be considered as part of the overall
resolution of these claims.
Kodak issues indemnifications in certain instances when it sells businesses and real estate, and in the ordinary course of business with its
customers, suppliers, service providers and business partners. Further, the Company indemnifies its directors and officers who are, or were,
serving at the Company’s request in such capacities. Historically, costs incurred to settle claims related to these indemnifications have not been
material to Kodak’s financial position, results of operations or cash flows. Additionally, the fair value of the indemnifications that Kodak issued
during the year ended December 31, 2012 was not material to Kodak’s financial position, results of operations or cash flows.
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