Kodak 2014 Annual Report Download - page 71

The following table provides asset retirement obligation activity:
Other Commitments and Contingencies
The Company and its subsidiaries have entered into operating leases for various real estate and equipment needs. Rental expense, net of minor sublease income,
amounted to $38 million, $15 million, $36 million and $60 million in the year ended December 31, 2014, four months ending December 31, 2013, eight months ending
August 31, 2013 and year ended December 31, 2012, respectively.
As of December 31, 2014, the Company had outstanding letters of credit of $123 million issued under the ABL Credit Agreement as well as bank guarantees and letters
of credit of $5 million, surety bonds in the amount of $19 million, and restricted cash and deposits of $50 million, primarily to ensure the payment of possible casualty
and workers’ compensation claims, environmental liabilities, legal contingencies, rental payments, and to support various customs, hedging, tax and trade activities. The
restricted cash and deposits are recorded in Restricted cash, Other current assets and Other long-term assets in the Consolidated Statement of Financial Position.
Kodak’s Brazilian operations are involved in various litigation matters and have received or been the subject of numerous governmental assessments related to indirect and
other taxes in various stages of litigation, as well as civil litigation and disputes associated with former employees and contract labor. The tax matters, which comprise the
majority of the litigation matters, are primarily related to federal and state value-added taxes. Kodak is disputing these matters and intends to vigorously defend its
position. Based on the opinion of legal counsel and current reserves already recorded for those matters deemed probable of loss, management does not believe that the
ultimate resolution of these matters will materially impact Kodak’
s results of operations or financial position. Kodak routinely assesses all these matters as to the probability of
ultimately incurring a liability in its Brazilian operations and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable. As
of December 31, 2014, the unreserved portion of these contingencies, inclusive of any related interest and penalties, for which there was at least a reasonable possibility that a
loss may be incurred, amounted to approximately $50 million.
In connection with assessments in Brazil, local regulations may require Kodak to post security for a portion of the amounts in dispute. As of December 31, 2014, Kodak has
posted security composed of $8 million of pledged cash reported within Restricted cash in the Consolidated Statement of Financial Position and liens on certain Brazilian
assets with a net book value of approximately $90 million. Generally, any encumbrances on the Brazilian assets would be removed to the extent the matter is resolved in
Kodak's favor.
Kodak is involved in various lawsuits, claims, investigations, remediation and proceedings, including commercial, customs, employment, environmental, and health and safety
matters, which are being handled and defended in the ordinary course of business. Kodak is also subject, from time to time, to various assertions, claims, proceedings and
requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in a broad spectrum of Kodak’s
products. These matters are in various stages of investigation and litigation, and are being vigorously defended. Based on information currently available Kodak does not
believe that it is probable that the outcomes in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of
operations. Litigation is inherently unpredictable, and judgments could be rendered or settlements entered that could adversely affect Kodak’s operating results or cash flows
in a particular period. Kodak routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability, and records its best estimate
of the ultimate loss in situations where it assesses the likelihood of loss as probable.
Successor
Predecessor
(in millions)
For the Year
Ended
December 31,
2014
For the Four
Months Ended
December 31,
2013
For the Eight
Months Ended
August 31,
2013
Asset Retirement Obligations at start of period
$
52
$
51
$
63
Liabilities incurred in the current period
3
-
1
Liabilities settled in the current period
(1
)
-
(5
)
Accretion expense
2
1
1
Revision in estimated cash flows
(2
)
-
(1
)
Foreign exchange impact
(1
)
-
(1
)
Impact of fresh start accounting
-
-
(7
)
Asset Retirement Obligations at end of period
$
53
$
52
$
51
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