Kodak 2012 Annual Report Download - page 65

Table of Contents
would be necessary to exclude the assets of the Document Imaging and Personalized Imaging businesses from the disposition. Closing of the
Junior DIP Facility is subject to certain conditions, including approval by the Bankruptcy Court of the Junior DIP Facility, repayment in full of
the term loans under the DIP Credit Agreement, and consent of the ABL lenders under the existing DIP Credit Agreement. On March 1, 2013,
the Debtors filed a motion with the Bankruptcy Court seeking approval of the Junior DIP Facility. The Bankruptcy Court approved the Debtors’
motion on March 8, 2013. The agreement with the Commitment Parties expires on April 5, 2013.
Refer to Note 11, “Short-Term Borrowings and Long-Term Debt” for additional information on the Junior DIP Facility.
PRE
-PETITION CLAIMS
On April 18, 2012, as amended on May 16, 2012 and February 1, 2013, the Debtors filed schedules of assets and liabilities and statements of
financial affairs with the Bankruptcy Court. On May 10, 2012, the Bankruptcy Court entered an order establishing July 17, 2012 as the bar date
for potential creditors to file proofs of claims and established the required procedures with respect to filing such claims. A bar date is the date by
which pre-petition claims against the Debtors must be filed if the claimants wish to receive any distribution in the chapter 11 proceedings.
As of February 22, 2013, the Debtors have received approximately 6,100 proofs of claim, a portion of which assert, in part or in whole,
unliquidated claims. In the aggregate, total liquidated proofs of claim of approximately $21.4 billion have been filed against the Debtors. New
and amended claims may be filed in the future, including claims amended to assign values to claims originally filed with no designated value.
The Debtors are now in the process of reconciling such claims to the amounts listed by the Debtors in their schedule of assets and liabilities (as
amended). Differences in liability amounts estimated by the Debtors and claims filed by creditors will be investigated and resolved, including
through the filing of objections with the Bankruptcy Court, where appropriate. Approximately 1,100 claims totaling approximately $1.1 billion
have been expunged or withdrawn and the Debtors have filed additional claim objections with the Bankruptcy Court for approximately 200
claims totaling approximately $30 million in additional reductions. The Debtors may continue to ask the Bankruptcy Court to disallow claims
that the Debtors believe are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for
other reasons. In addition, as a result of this process, the Debtors may identify additional liabilities that will need to be recorded or reclassified to
liabilities subject to compromise. In light of the substantial number of claims filed, the claims resolution process may take considerable time to
complete. The resolution of such claims could result in material adjustments to Kodak’s financial statements. The determination of how
liabilities will ultimately be treated cannot be made until the Bankruptcy Court approves a plan of reorganization. Accordingly, the ultimate
amount or treatment of such liabilities is not determinable at this time.
FINANCIAL REPORTING IN REORGANIZATION
Expenses, gains and losses directly associated with reorganization proceedings are reported as Reorganization items, net in the accompanying
Consolidated Statement of Operations. In addition, liabilities subject to compromise in the chapter 11 proceedings are distinguished from
liabilities of Non-Filing Entities, fully secured liabilities not expected to be compromised and from post-petition liabilities in the accompanying
Consolidated Statement of Financial Position as of December 31, 2012. Where there is uncertainty about whether a secured claim will be paid or
impaired under the chapter 11 proceedings, Kodak has classified the entire amount of the claim as a liability subject to compromise. The amount
of liabilities subject to compromise represents Kodak’s estimate, where an estimate is determinable, of known or potential pre-petition claims to
be addressed in connection with the bankruptcy proceedings. Such liabilities are reported at Kodak’s current estimate, where an estimate is
determinable, of the allowed claim amounts, even though the claims may be settled for lesser amounts. These claims remain subject to future
adjustments, which may result from: negotiations; actions of the Bankruptcy Court; disputed claims; rejection of contracts and unexpired leases;
the determination as to the value of any collateral securing claims; proofs of claims; or other events.
Effective as of January 19, 2012, Kodak ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to
compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to
compromise. For the period from January 19, 2012 through December 31, 2012 contractual interest expense related to liabilities subject to
compromise of approximately $45 million has not been recorded, as it is not expected to be an allowed claim under the chapter 11 case.
SECTION 363 ASSET SALES
On May 2, 2012, Kodak sold certain assets of Kodak Gallery on-line photo services business for $23.8 million to Shutterfly, Inc. Approximately
75% of the net proceeds from the sale were used to repay term debt under the DIP Credit Agreement.
On August 23, 2012, Kodak announced the decision to initiate sale processes for its Personalized Imaging and Document Imaging businesses.
The Personalized Imaging business consists of retail systems solutions, paper & output systems, and event imaging solutions. The Document
Imaging business consists of scanners, as well as capture software, and services for enterprise customers.
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