Kodak 2014 Annual Report Download - page 16

There can be no assurance that we will be able to market and sell our products in all of Kodak’s targeted markets. If our efforts are not successful, our business growth and
results of operations could be harmed. As a global company, Kodak is subject to regulatory requirements and laws in the jurisdictions in which we operate, and any alleged
non-compliance with these requirements or laws could result in an adverse financial or reputational impact.
We are subject to environmental laws and regulations and failure to comply with such laws and regulations or liabilities imposed as a result of such laws and regulations
could have an adverse effect on our business, results of operations and financial condition.
We are subject to environmental laws and regulations in the jurisdictions in which we conduct our business, including laws regarding the discharge of pollutants, including
greenhouse gases, into the air and water, the need for environmental permits for certain operations, the management and disposal of hazardous substances and wastes, the
cleanup of contaminated sites, the content of Kodak’s products and the recycling and treatment and disposal of our products. If we do not comply with applicable laws and
regulations in connection with the use and management of hazardous substances, or otherwise incur liabilities under such laws which in some instances can impose liability
without regard to fault, then we could incur liability and/or could be prohibited or limited in the operation of certain facilities, which could have a material adverse effect on
our business, results of operations and financial condition. The cost of complying with such laws, and costs associated with the cleanup of contaminated sites, could have a
material adverse effect on our business, results of operations and financial condition.
In addition, the Company, the New York State Department of Environmental Conservation and the New York State Urban Development Corporation have entered into a
settlement agreement concerning certain of the Company’s historical environmental liabilities at Eastman Business Park through the establishment of a $49 million
environmental remediation trust. Should historical liabilities exceed $49 million, New York State is responsible for payments of cost up to an additional $50 million. In the
event the historical liabilities exceed $99 million, the Company will become liable for 50% of the portion above $99 million, which could have a material adverse effect on our
financial condition. The implementation date of the settlement agreement occurred on May 20, 2014. The settlement agreement includes a covenant not to sue from the U.S.
Environmental Protection Agency. Any uncertainties related to the Company’s environmental obligations may impact our ability to further develop and transform Eastman
Business Park.
Our business, results of operations and financial condition may be negatively impacted by legal matters.
We have various contingencies that are not reflected on our balance sheet, including those arising as a result of being involved from time to time in a variety of claims,
lawsuits, investigations and proceedings concerning: commercial, customs, employment, and intellectual property matters, as well as the Employee Retirement Income
Security Act (ERISA) and other laws and regulations as discussed in the “Contingencies” note in the Consolidated Financial Statements. Should developments in any of these
matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final
adverse judgment or be settled for significant amounts, they could have a material adverse effect on our results of operations, cash flows and financial position in the period or
periods in which such change in determination, judgment or settlement occurs.
Regulations related to
“conflict minerals” will require Kodak to incur additional expenses and could limit the supply and increase the cost of certain metals used in
manufacturing Kodak’s products.
The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of minerals
originating from the conflict zones of the Democratic Republic of Congo (DRC) and adjoining countries. As a result, in August 2012, the SEC adopted rules requiring
disclosure related to sourcing of specified minerals, known as “conflict minerals,” that are necessary to the functionality or production of products manufactured or contracted
to be manufactured by public companies. Kodak has developed a framework and management system consistent with the guidance issued by the Organization for Economic
Co-operation and Development (OECD), and is currently performing due diligence on our supply chain. We expect to incur additional costs to comply with these disclosure
requirements, including costs related to determining the sources of the specified minerals used in our products, in addition to the cost of any changes to products, processes, or
sources of supply as a consequence of such verification activities, which may adversely affect our business. In addition, the number of suppliers who provide “conflict-free”
minerals may be limited, which may make it difficult to satisfy customers who require that all of the components of our products be certified as conflict-free, which could
place us at a competitive disadvantage if we are unable to do so. Because Kodak’s supply chain is complex, we may also not be sufficiently able to verify the origins of the
relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation.
We have determined that certain of our products contain such specified minerals, and we have developed a process to identify where such minerals originated. We filed our
Conflict Minerals Disclosure report on June 2, 2014. As of the date of our conflict minerals report for the 2013 calendar year, we were unable to determine whether or not such
minerals originate from the DRC or adjoining country.
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limitations or reductions in protection of intellectual property rights;
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complications in logistics and distribution arrangements; and
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political or economic instability.
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