Kodak 2004 Annual Report Download - page 69

Financials
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2 0 0 4 ฀ S U M M A R Y ฀ A N N U A L ฀ R E P O R T
144A฀under฀the฀Securities฀Act฀of฀1933.฀Interest฀on฀the฀Convertible฀Securi-
ties฀will฀accrue฀at฀the฀rate฀of฀3.375%฀per฀annum฀and฀is฀payable฀semian-
nually.฀The฀Convertible฀Securities฀are฀unsecured฀and฀rank฀equally฀with฀all฀
of฀the฀Company’s฀other฀unsecured฀and฀unsubordinated฀indebtedness.฀As฀a฀
condition฀of฀the฀private฀placement,฀on฀January฀6,฀2004฀the฀Company฀filed฀
a฀shelf฀registration฀statement฀under฀the฀Securities฀Act฀of฀1933฀relating฀to฀
the฀resale฀of฀the฀Convertible฀Securities฀and฀the฀common฀stock฀to฀be฀issued฀
upon฀conversion฀of฀the฀Convertible฀Securities฀pursuant฀to฀a฀registration฀
rights฀agreement,฀and฀made฀this฀shelf฀registration฀statement฀effective฀on฀
February฀6,฀2004.฀
The฀Convertible฀Securities฀contain฀a฀number฀of฀conversion฀features฀
that฀include฀substantive฀contingencies.฀The฀Convertible฀Securities฀are฀
convertible฀by฀the฀holders฀at฀an฀initial฀conversion฀rate฀of฀32.2373฀shares฀
of฀the฀Company’s฀common฀stock฀for฀each฀$1,000฀principal฀amount฀of฀
the฀Convertible฀Securities,฀which฀is฀equal฀to฀an฀initial฀conversion฀price฀
of฀$31.02฀per฀share.฀The฀initial฀conversion฀rate฀of฀32.2373฀is฀subject฀to฀
adjustment฀for:฀(1)฀stock฀dividends,฀(2)฀subdivisions฀or฀combinations฀of฀the฀
Company’s฀common฀stock,฀(3)฀issuance฀to฀all฀holders฀of฀the฀Company’s฀
common฀stock฀of฀certain฀rights฀or฀warrants฀to฀purchase฀shares฀of฀the฀
Company’s฀common฀stock฀at฀less฀than฀the฀market฀price,฀(4)฀distributions฀
to฀all฀holders฀of฀the฀Company’s฀common฀stock฀of฀shares฀of฀the฀Company’s฀
capital฀stock฀or฀the฀Company’s฀assets฀or฀evidences฀of฀indebtedness,฀(5)฀
cash฀dividends฀in฀excess฀of฀the฀Company’s฀current฀cash฀dividends฀or฀(6)฀
certain฀payments฀made฀by฀the฀Company฀in฀connection฀with฀tender฀offers฀
and฀exchange฀offers.฀
฀The฀holders฀may฀convert฀their฀Convertible฀Securities,฀in฀whole฀or฀
in฀part,฀into฀shares฀of฀the฀Company’s฀common฀stock฀under฀any฀of฀the฀
following฀circumstances:฀(1)฀during฀any฀calendar฀quarter,฀if฀the฀price฀of฀the฀
Company’s฀common฀stock฀is฀greater฀than฀or฀equal฀to฀120%฀of฀the฀appli-
cable฀conversion฀price฀for฀at฀least฀20฀trading฀days฀during฀a฀30฀consecutive฀
trading฀day฀period฀ending฀on฀the฀last฀trading฀day฀of฀the฀previous฀calendar฀
quarter;฀(2)฀during฀any฀five฀consecutive฀trading฀day฀period฀following฀any฀10฀
consecutive฀trading฀day฀period฀in฀which฀the฀trading฀price฀of฀the฀Convertible฀
Securities฀for฀each฀day฀of฀such฀period฀is฀less฀than฀105%฀of฀the฀conver-
sion฀value,฀and฀the฀conversion฀value฀for฀each฀day฀of฀such฀period฀was฀less฀
than฀95%฀of฀the฀principal฀amount฀of฀the฀Convertible฀Securities฀(the฀Parity฀
Clause);฀(3)฀if฀the฀Company฀has฀called฀the฀Convertible฀Securities฀for฀re-
demption;฀(4)฀upon฀the฀occurrence฀of฀specified฀corporate฀transactions฀such฀
as฀a฀consolidation,฀merger฀or฀binding฀share฀exchange฀pursuant฀to฀which฀
the฀Company’s฀common฀stock฀would฀be฀converted฀into฀cash,฀property฀or฀
securities;฀and฀(5)฀if฀the฀credit฀rating฀assigned฀to฀the฀Convertible฀Securi-
ties฀by฀either฀Moody’s฀or฀S&P฀is฀lower฀than฀Ba2฀or฀BB,฀respectively,฀which฀
represents฀a฀three฀notch฀downgrade฀from฀the฀Company’s฀current฀standing,฀
or฀if฀the฀Convertible฀Securities฀are฀no฀longer฀rated฀by฀at฀least฀one฀of฀these฀
services฀or฀their฀successors฀(the฀Credit฀Rating฀Clause).฀฀
The฀Company฀may฀redeem฀some฀or฀all฀of฀the฀Convertible฀Securities฀at฀
any฀time฀on฀or฀after฀October฀15,฀2010฀at฀a฀purchase฀price฀equal฀to฀100%฀
of฀the฀principal฀amount฀of฀the฀Convertible฀Securities฀plus฀any฀accrued฀and฀
unpaid฀interest.฀Upon฀a฀call฀for฀redemption฀by฀the฀Company,฀a฀conversion฀
trigger฀is฀met฀whereby฀the฀holder฀of฀each฀$1,000฀Convertible฀Senior฀Note฀
may฀convert฀such฀note฀to฀shares฀of฀the฀Company’s฀common฀stock.฀฀
The฀holders฀have฀the฀right฀to฀require฀the฀Company฀to฀purchase฀their฀
Convertible฀Securities฀for฀cash฀at฀a฀purchase฀price฀equal฀to฀100%฀of฀
the฀principal฀amount฀of฀the฀Convertible฀Securities฀plus฀any฀accrued฀and฀
unpaid฀interest฀on฀October฀15,฀2010,฀October฀15,฀2013,฀October฀15,฀2018,฀
October฀15,฀2023฀and฀October฀15,฀2028,฀or฀upon฀a฀fundamental฀change฀as฀
described฀in฀the฀offering฀memorandum฀filed฀under฀Rule฀144A฀in฀conjunction฀
with฀the฀private฀placement฀of฀the฀Convertible฀Securities.฀As฀of฀December฀
31,฀2004,฀the฀Company฀has฀reserved฀18,536,447฀shares฀in฀treasury฀stock฀
to฀cover฀potential฀future฀conversions฀of฀these฀Convertible฀Securities฀into฀
common฀stock.฀฀
Certain฀of฀the฀conversion฀features฀contained฀in฀the฀Convertible฀Securi-
ties฀are฀deemed฀to฀be฀embedded฀derivatives฀as฀defined฀under฀SFAS฀No.฀
133,฀“Accounting฀for฀Derivative฀Instruments฀and฀Hedging฀Activities.”฀These฀
embedded฀derivatives฀include฀the฀Parity฀Clause,฀the฀Credit฀Rating฀Clause,฀
and฀any฀specified฀corporate฀transaction฀outside฀of฀the฀Company’s฀control฀
such฀as฀a฀hostile฀takeover.฀Based฀on฀an฀external฀valuation,฀these฀embedded฀
derivatives฀were฀not฀material฀to฀the฀Company’s฀financial฀position,฀results฀of฀
operations฀or฀cash฀flows.฀฀
In฀November฀2004,฀the฀Emerging฀Issues฀Task฀Force฀finalized฀the฀con-
sensus฀in฀Issue฀No.฀04-8,฀“The฀Effect฀of฀Contingently฀Convertible฀Debt฀on฀
Diluted฀Earnings฀per฀Share”฀(EITF฀04-8).฀EITF฀04-8฀requires฀that฀contingent฀
convertible฀instruments฀be฀included฀in฀diluted฀earnings฀per฀share฀regard-
less฀of฀whether฀a฀market฀price฀trigger฀or฀other฀contingent฀feature฀has฀been฀
met.฀EITF฀04-8฀is฀effective฀for฀reporting฀periods฀ending฀after฀December฀15,฀
2004฀and฀requires฀restatement฀of฀prior฀periods.฀See฀Note฀1,฀“Significant฀
Accounting฀Policies,”฀“Earnings฀Per฀Share”฀for฀further฀discussion.
NOTE฀10:฀OTHER฀LONG-TERM฀฀ ฀
LIABILITIES฀
฀2004฀2003
(in฀millions)฀฀ ฀฀฀฀฀฀฀฀฀฀฀฀ (Restated)
Deferred฀compensation฀฀ $฀176฀ $฀ 164฀
Environmental฀liabilities฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 153฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 141
Deferred฀income฀taxes฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀67฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 89
Minority฀interest฀in฀Kodak฀companies฀ ฀ 25฀ ฀ 45
Other฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 325฀฀฀฀฀฀฀ ฀ 223
฀ Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀746฀ $฀ 662
The฀other฀component฀above฀consists฀of฀other฀miscellaneous฀long-
term฀liabilities฀that,฀individually,฀are฀less฀than฀5%฀of฀the฀total฀liabilities฀com-
ponent฀in฀the฀accompanying฀Consolidated฀Statement฀of฀Financial฀Position,฀
and฀therefore,฀have฀been฀aggregated฀in฀accordance฀with฀Regulation฀S-X.
NOTE฀11:฀COMMITMENTS฀AND฀฀ ฀
CONTINGENCIES฀
Environmental฀฀Cash฀expenditures฀for฀pollution฀prevention฀and฀waste฀
treatment฀for฀the฀Company’s฀current฀facilities฀were฀as฀follows:฀
(in฀millions)฀ 2004฀฀฀฀฀฀฀฀ 2003฀฀฀฀฀฀฀฀ 2002
Recurring฀costs฀for฀pollution฀
฀฀ prevention฀and฀waste฀treatment฀฀ $฀ 75฀ $฀ 74฀ $฀ 67
Capital฀expenditures฀for฀pollution฀
฀฀ prevention฀and฀waste฀treatment฀฀฀฀฀ ฀ 7฀ ฀ 8฀฀฀฀฀฀฀฀฀฀฀฀ 12
Site฀remediation฀costs฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 3฀ ฀ 2฀฀฀฀฀฀฀฀฀฀฀฀฀ 3
฀฀฀฀Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀ 85฀ $฀ 84฀฀ $฀ 82