XML 224 R20.htm IDEA: XBRL DOCUMENT v2.4.0.8
Note 11 - Commitments and Contingencies
 6 Months Ended
Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block]

NOTE 11:  COMMITMENTS AND CONTINGENCIES


Environmental


Kodak’s undiscounted accrued liabilities for future environmental investigation, remediation, and monitoring costs are composed of the following items:


   

As of

 

(in millions)

 

June 30,

2013

   

December 31,

2012

 
                 

Eastman Business Park site, Rochester, NY

  $ 49     $ 49  

Other current operating sites

    16       9  

Sites associated with former operations

    20       17  

Sites associated with the non-imaging health businesses sold in 1994

    40       41  

Total

  $ 125     $ 116  

These amounts are reported in Other long-term liabilities and Liabilities subject to compromise in the accompanying Consolidated Statement of Financial Position.


Cash expenditures for the aforementioned investigation, remediation and monitoring activities are expected to be incurred over the next thirty years for most of the sites.  For these known environmental liabilities, the accrual reflects Kodak’s best estimate of the amount it will incur under the agreed-upon or proposed work plans.  Kodak’s cost estimates were determined using the ASTM Standard E 2137-06, "Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters," and have not been reduced by possible recoveries from third parties.  The overall method includes the use of a probabilistic model which forecasts a range of cost estimates and a single most probable cost estimate for the remediation required at individual sites.  For the purposes of establishing company-level environmental reserves, the single most probable cost estimate for each site is used.  All projects are closely monitored and the models are reviewed as significant events occur or at least once per year.  Kodak’s estimate includes investigations, equipment and operating costs for remediation and long-term monitoring of the sites.  Accrued liabilities of Debtor entities related to sites subject to the bankruptcy proceedings have been classified as liabilities subject to compromise.  Liabilities subject to compromise are reported at Kodak’s current estimate, where an estimate is determinable, of the allowed claim amount.


On June 17, 2013 the Company, the New York State Department of Environmental Conservation and the New York State Urban Development Corporation, d/b/a Empire State Development entered into an agreement, which, in part, establishes a $49 million environmental trust for Eastman Business Park (the “EBP Settlement Agreement”). The agreement was subsequently amended on August 6, 2013 (the “Amended and Restated EBP Settlement Agreement”).


The Amended and Restated EBP Settlement Agreement includes a settlement of Kodak’s historical environmental liabilities at Eastman Buisness Park (“EBP”) through the establishment of an environmental remediation trust (the “EBP Trust”).  If the Amended and Restated EBP Settlement Agreement is approved by the Bankruptcy Court, and upon the satisfaction or waiver of certain conditions, (i) the EBP Trust will be responsible for investigation and remediation at EBP arising from Kodak’s historical environmental liabilities in existence prior to the effective date of the EBP Settlement, (ii) Kodak will fund the EBP Trust with a $49 million payment and transfer to the EBP Trust Kodak’s interests in personal property, equipment and fixtures used for performing any environmental response actions at EBP, and (iii) in the event the historical liabilities exceed $99 million, Kodak will become liable for 50% of the portion above $99 million.  As of June 30, 2013, approximately $23 million was already held in a separate trust to support those environmental liabilities related to EBP.  The transaction is subject to the approval of the Bankruptcy Court, and resolution of issues raised by the United States Department of Justice on behalf of the U.S. Environmental Protection Agency as well as satisfaction of the other conditions precedent to effectiveness set forth in the EBP Settlement Agreement.


Kodak is presently designated as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (the Superfund Law), or under similar state laws, for environmental assessment and cleanup costs as the result of Kodak’s alleged arrangements for disposal of hazardous substances at eight Superfund sites.  In connection with the Bankruptcy Filing, the Debtors have provided withdrawal notifications or entered into settlement negotiations with involved regulatory agencies.


In addition, the Company provided an indemnity as part of the 1994 sale of Sterling Coporation (now “STWB”)  which covered a number of enviromental sites including the Lower Passaic River Study Area (“LPRSA”) portion of the Diamond Alkali Superfund Site. STWB, now owned by Bayer Corporation, is Potentially Responsible Party (“PRP”) at the site based on alleged releases from facilities formerly owned by subsidiaries of Sterling, a former Hilton Davis site in Newark and a Lehn & Fink facility in Bloomfield, New Jersey. On February 10. 2004, the Company (through its subsidiary NPEC) joined the Cooperating Parties Group (“CPG”) and entered into the 122(h) Agreement under CERCLA on June 22, 2004, and a Consent Order with the EPA on May 8, 2007. On February 29, 2012, the Company notified the EPA, STWB, Bayer, and the CPG that under bankruptcy proceeding, it has elected to discontinue funding and participation in the remedial investigation being implemented by the CPG pursuant to the EPA Order. STWB and its parent, Bayer, have filed proofs of claim against the Debtors in the chapter 11 cases.


Estimates of the amount and timing of future costs of environmental remediation requirements are by their nature imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of presently unknown remediation sites and the allocation of costs among the PRPs.  Based on information presently available, Kodak does not believe it is reasonably possible that losses for known exposures could exceed current accruals by material amounts, although costs could be material to a particular quarter or year.


Other Commitments and Contingencies


As of June 30, 2013, the Company had outstanding letters of credit of $128 million issued under the Amended and Restated Senior DIP Credit Agreement, as well as bank guarantees and letters of credit of $11 million, surety bonds in the amount of $25 million, and cash and investments in trust of $33 million, primarily to ensure the payment of possible casualty and workers’ compensation claims, environmental liabilities at EBP as noted above, legal contingencies, rental payments, and to support various customs, tax and trade activities.  The restricted cash and investment in trust amounts are recorded within Other long-term assets in the Consolidated Statement of Financial Position.


Kodak’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.  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 June 30, 2013, 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 $62 million.


Kodak is 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.  Kodak is also 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 Kodak’s products.  These matters are in various stages of investigation and litigation, and are being vigorously defended.  Much of the pending litigation against the Debtors has been stayed as a result of the Bankruptcy Filing and will be subject to resolution in accordance with the Bankruptcy Code and the orders of the Bankruptcy Court.  Although Kodak 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 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.