Kodak 2011 Annual Report Download - page 84

The Company’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. The Company 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 the Company’s results of operations or financial position. The Company 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, 2011, 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 $70
million.
The Company and its subsidiaries are involved in various lawsuits, claims, investigations and proceedings, including commercial, customs,
employment, environmental, and health and safety matters, which are being handled and defended in the ordinary course of business. In addition, the
Company is subject 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 the Company’s products. These matters are in various stages of
investigation and litigation and are being vigorously defended. Although the Company does not expect that the outcome 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. Therefore, judgments could be rendered or settlements entered that could adversely affect the Company’s operating results or cash
flow in a particular period. The Company routinely assesses all 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 12: GUARANTEES
The Company guarantees debt and other obligations of certain customers. The debt and other obligations are primarily due to banks and leasing
companies in connection with financing of customers’ purchases of equipment and product from the Company. At December 31, 2011, the maximum
potential amount of future payments (undiscounted) that the Company could be required to make under these customer-related guarantees was $25
million. At December 31, 2011, the carrying amount of any liability related to these customer guarantees was not material.
The customer financing agreements and related guarantees, which mature between 2012 and 2016, typically have a term of 90 days for product and
short-term equipment financing arrangements, and up to five years for long-term equipment financing arrangements. These guarantees would
require payment from the Company only in the event of default on payment by the respective debtor. In some cases, particularly for guarantees
related to equipment financing, the Company has collateral or recourse provisions to recover and sell the equipment to reduce any losses that might
be incurred in connection with the guarantees. However, any proceeds received from the liquidation of these assets may not cover the maximum
potential loss under these guarantees.
Eastman Kodak Company (“EKC”) also guarantees potential indebtedness to banks and other third parties for some of its consolidated
subsidiaries. The maximum amount guaranteed is $185 million, and the outstanding amount for those guarantees is $161 million with $75 million
recorded within the Short-term borrowings and current portion of long-term debt, and Long-term debt, net of current portion components in the
accompanying Consolidated Statement of Financial Position. These guarantees expire in 2012 through 2019. Pursuant to the terms of the
Company's Amended Credit Agreement, obligations of the Borrowers to the Lenders under the Amended Credit Agreement, as well as secured
agreements in an amount not to exceed $125 million, are guaranteed by the Company and the Company’s U.S. subsidiaries and included in the
above amounts. These secured agreements totaled $63 million as of December 31, 2011.
EKC has issued a guarantee to Kodak Limited (the “Subsidiary”) and the Trustee (the “Trustee”) of the Kodak Pension Plan of the United Kingdom (the
“Plan”). Under that arrangement, EKC guaranteed to the Subsidiary and the Trustee the ability of the Subsidiary, only to the extent it becomes necessary to
do so, to (1) make contributions to the Plan to ensure sufficient assets exist to make Plan benefit payments, and (2) make contributions to the Plan such that
it will achieve full funded status by the funding valuation for the period ending December 31, 2022. The guarantee expires (a) upon the conclusion of the
funding valuation for the period ending December 31, 2022 if the Plan achieves full funded status or on payment of the balance if the Plan is underfunded
by no more than 60 million British pounds by that date, (b) earlier in the event that the Plan achieves full funded status for two consecutive funding
valuation cycles which are typically performed at least every three years, or (c) June 30, 2024 on payment of the balance in the event that the Plan is
underfunded by more than 60 million British pounds upon conclusion of the funding valuation for the period ending December 31, 2022. The amount of
potential future contributions is dependent on the funding status of the Plan as it fluctuates over the term of the guarantee. The funded status of the Plan
may be materially impacted by
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