Kodak 2015 Annual Report Download - page 28

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 $30 million, $38 million, $15 million and $36 million in the years ended December 31, 2015 and December 31, 2014, four months ending
December 31, 2013, and eight months ending August 31, 2013, respectively.
As of December 31, 2015, the Company had outstanding letters of credit of $118 million issued under the ABL Credit Agreement as well as bank guarantees and
letters of credit of $4 million, surety bonds in the amount of $17 million, and restricted cash and deposits of $58 million, primarily to support compliance with the
Excess Availability threshold under the ABL Credit Agreement, 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, 2015, 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 $49 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, 2015,
Kodak has posted security composed of $6 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 $62 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.
NOTE 10: GUARANTEES
EKC guarantees obligations to third parties for some of its consolidated subsidiaries. The maximum amount guaranteed is $17 million and the outstanding amount
for those guarantees is $6 million.
In connection with the settlement of certain of the Company’s historical environmental liabilities at EBP and in accordance with the terms of the Amended EBP
Settlement Agreement, in the event the historical EBP liabilities exceed $99 million, the Company will become liable for 50% of the portion above $99 million
with no limitation to the maximum potential future payments. There is no liability recorded related to this guarantee.
Indemnifications
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, Kodak indemnifies officers and directors 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, 2015 was not material to Kodak’s financial
position, results of operations or cash flows.
27