Note 13 - Guarantees

12 Months Ended

Dec. 31, 2013

NOTE 13: GUARANTEES

Kodak 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 Kodak. At December 31, 2013, the maximum potential amount of future payments (undiscounted) that Kodak could be required to make under these customer-related guarantees was $14 million. At December 31, 2013, the carrying amount of any liability related to these customer guarantees was not material.

The customer financing agreements and related guarantees, which mature between 2014 and 2017, 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 Kodak only in the event of default on payment by the respective customer. In some cases, particularly for guarantees related to equipment financing, Kodak 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 would not cover the maximum potential loss under these guarantees.

EKC also guarantees obligations to third parties for some of its consolidated subsidiaries. The maximum amount guaranteed, and the outstanding amount for those guarantees, is $79 million.

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, 2013 was not material to Kodak’s financial position, results of operations or cash flows.

Warranty Costs

Kodak has warranty obligations in connection with the sale of its products and equipment. The original warranty period is generally one year or less. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. Kodak estimates its warranty cost at the point of sale for a given product based on historical failure rates and related costs to repair. The change in Kodak's accrued warranty obligations balance, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:

(in millions)

Accrued warranty obligations as of December 31, 2011 (Predecessor):	$	40
Actual warranty experience		(58	)
Warranty provisions		47
Accrued warranty obligations as of December 31, 2012 (Predecessor):	$	29
Actual warranty experience		(24	)
Warranty provisions		13
Accrued warranty obligations as of August 31, 2013 (Predecessor):	$	18

Actual warranty experience	$	(10	)
Warranty provisions		5
Accrued warranty obligations as of December 31, 2013 (Successor):	$	13

Kodak also offers its customers extended warranty arrangements that are generally one year, but may range from three months to three years after the original warranty period. Kodak provides repair services and routine maintenance under these arrangements. Kodak has not separated the extended warranty revenues and costs from the routine maintenance service revenues and costs, as it is not practicable to do so. Therefore, these revenues and costs have been aggregated in the discussion that follows. The change in Kodak's deferred revenue balance in relation to these extended warranty and maintenance arrangements, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:

(in millions)

Deferred revenue on extended warranties as of December 31, 2011 (Predecessor):	$	48
New extended warranty and maintenance arrangements		200
Recognition of extended warranty and maintenance arrangement revenue		(205	)
Deferred revenue on extended warranties as of December 31, 2012 (Predecessor):	$	43
New extended warranty and maintenance arrangements		139
Recognition of extended warranty and maintenance arrangement revenue		(148	)
Deferred revenue on extended warranties as of August 31, 2013 (Predecessor):	$	34

Impact of fresh start accounting	$	(8	)
New extended warranty and maintenance arrangements		68
Recognition of extended warranty and maintenance arrangement revenue		(64	)
Deferred revenue on extended warranties as of December 31, 2013 (Successor):	$	30

Costs incurred under these extended warranty and maintenance arrangements for the four months ended December 31, 2013, eight months ended August 31, 2013 and year ended December 31, 2012 amounted to $54 million, $107 million and $151 million, respectively.