Kodak 2012 Annual Report Download - page 84

Table of Contents
Sterling Drug liabilities and a defense and indemnification agreement between the Company and Bayer, which purchased all stock in Sterling
Drug (now STWB). Bayer and STWB have filed proofs of claim against the Debtors in this matter.
Estimates of the amount and timing of future costs of environmental remediation requirements are by their nature imprecise because of the
continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of
presently unknown remediation sites and the allocation of costs among the potentially responsible parties. Based on information presently
available, Kodak does not believe it is reasonably possible that losses for known exposures could exceed current accruals by material amounts,
although costs could be material to a particular quarter or year.
Asset Retirement Obligations
Kodak’s asset retirement obligations primarily relate to asbestos contained in buildings that Kodak owns. 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. Otherwise, Kodak is not required to remove the asbestos from its buildings. 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. Kodak does not have a liability recorded related to every building
that contains asbestos because Kodak cannot estimate the fair value of its obligation for certain buildings due to a lack of sufficient information
about the range of time over which the obligation may be settled through demolition, renovation or sale of the building.
The following table provides asset retirement obligation activity:
Other Commitments and Contingencies
Kodak has entered into non-cancelable agreements with several companies which provide Kodak with products and services to be used in its
normal operations. These agreements are related to raw materials, supplies, production and administrative services, as well as marketing and
advertising. The terms of these agreements cover the next one to five years. The minimum payments for obligations under these agreements are
approximately $67 million in 2013, $36 million in 2014, $28 million in 2015, $17 million in 2016, and $15 million in 2017.
Rental expense, net of minor sublease income, amounted to $68 million, $87 million, and $96 million in 2012, 2011, and 2010, respectively. The
amounts of non-cancelable lease commitments with terms of more than one year, principally for the rental of real property, reduced by minor
sublease income, are $43 million in 2013, $31 million in 2014, $24 million in 2015, $18 million in 2016, $15 million in 2017 and $26 million in
2018 and thereafter.
As of December 31, 2012, the Company had outstanding letters of credit of $126 million issued under the DIP Credit Agreement, as well as
bank guarantees and letters of credit of $12 million, surety bonds in the amount of $26 million, and cash and investments in trust of $33 million,
primarily to ensure the payment of possible casualty and workers’ compensation claims, environmental liabilities, legal contingencies, rental
payments, and to support various customs, tax and trade activities. The restricted cash and investment in trust amounts are recorded within Other
long-term assets in the Consolidated Statement of Financial Position.
In March 2012, Kodak sold a property in Mexico for approximately $41 million and leased back the property for a one-year term. The pre-tax
gain on the property sale of approximately $35 million was deferred and no gain was recognizable upon the closing of the sale as Kodak has
continuing involvement in the property for the remainder of the lease term. The deferred pre-
tax gain is reported in Other current liabilities in the
Consolidated Statement of Financial Position as of December 31, 2012.
Kodak’s Brazilian operations are involved in governmental assessments of indirect and other taxes in various stages of litigation, primarily
related to federal and state value-added taxes. Kodak is disputing these matters and intends to vigorously defend its position.
80
For the Year Ended December 31,
(in millions)
2012
2011
2010
Asset retirement obligations as of January 1
$
66
$
57
$
62
Liabilities incurred in the current period
6
15
—
Liabilities settled in the current period
(1
)
(9
)
(8
)
Accretion expense
3
4
3
Revisions in estimated cash flows
(4
)
(1
)
—
Asset retirement obligations as of December 31
$
70
$
66
$
57