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Note 20 - Financial Instruments | 9 Months Ended
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Sep. 30, 2023
Notes to Financial Statements |
Fair Value Disclosures [Text Block] | NOTE 20: FINANCIAL INSTRUMENTS Kodak, as a result of its global operating and financing activities, is exposed to changes in foreign currency exchange rates and interest rates, which may adversely affect its results of operations and financial position. Kodak manages such exposures, in part, with derivative financial instruments. Foreign currency forward contracts are used to mitigate currency risk related to foreign currency denominated assets and liabilities. Kodak’s exposure to changes in interest rates results from its investing and borrowing activities used to meet its liquidity needs. Kodak does not utilize financial instruments for trading or other speculative purposes. Kodak’s foreign currency forward contracts are not designated as hedges and are marked to market through net income at the same time that the exposed assets and liabilities are remeasured through net income (both in Other charges (income), net in the Consolidated Statement of Operations). The notional amount of such contracts open at September 30, 2023 and December 31, 2022 was approximately $270 million and $308 million, respectively. The majority of the contracts of this type held by Kodak as of September 30, 2023 and December 31, 2022 are denominated in euros, Chinese renminbi and Japanese yen. The net effect of foreign currency forward contracts in the results of operations is shown in the following table:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in millions) |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net loss from derivatives not designated as hedging instruments |  | $ | 3 |  |  | $ | 6 |  |  | $ | 15 |  |  | $ | 16 |
Kodak had no derivatives designated as hedging instruments for the three and nine months ended September 30, 2023 and 2022. In the event of a default under any of the Company’s credit agreements, or a default under any derivative contract or similar obligation of Kodak, subject to certain minimum thresholds, the derivative counterparties would have the right, although not the obligation, to require immediate settlement of some or all open derivative contracts at their then-current fair value, but with liability positions netted against asset positions with the same counterparty. The Company concluded that the Convertible Notes were considered more akin to a debt-type instrument and that the economic characteristics and risks of certain of the embedded conversion features were not considered clearly and closely related to the Convertible Notes. The embedded conversion features not considered clearly and closely related are the conversion at the option of the holder (“Optional Conversion”), the mandatory conversion by Kodak (“Mandatory Conversion”) and the conversion in the event of a fundamental transaction by the holder at the then applicable conversion rate (“Fundamental Change”). Accordingly, these embedded conversion features were bifurcated from the Convertible Notes and separately accounted for on a combined basis as a single derivative asset or liability. The derivative was revalued when the Convertible Notes were repaid in the third quarter of 2023. The embedded conversion features expired on July 21, 2023 upon the repayment of the Convertible Notes. The derivative was in a liability position at December 31, 2022 and was reported in Other long-term liabilities in the Consolidated Statement of Financial Position. The derivative was being accounted for at fair value with changes in fair value included in Other charges (income), net in the Consolidated Statement of Operations. The Company concluded that the Series B Preferred Stock and the Series C Preferred Stock are each considered more akin to a debt-type instrument and that the economic characteristics and risks of the conversion in the event of a Fundamental Change is not considered clearly and closely related to the Series B and Series C Preferred Stock. Accordingly, this embedded conversion feature was bifurcated from both the Series B and Series C Preferred Stock and both are separately accounted for as a single derivative asset or liability. Both derivatives were in a liability position at September 30, 2023 and December 31, 2022 and were reported in Other long-term liabilities in the Consolidated Statement of Financial Position. The derivatives are being accounted for at fair value with changes in fair value included in Other charges (income), net in the Consolidated Statement of Operations. The net effect of the Preferred Stock and Convertible Notes embedded derivatives on the results of operations is shown in the following table:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in millions) |  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Net loss (gain) from Preferred Stock and Convertible Notes embedded derivatives |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | (1 | )
Fair Value Fair values of Kodak’s foreign currency forward contracts are determined using observable inputs (Level 2 fair value measurements) and are based on the present value of expected future cash flows (an income approach valuation technique) considering the risks involved and using discount rates appropriate for the duration of the contracts. The gross fair value of foreign currency forward contracts in an asset position are reported in Other current assets and the gross fair value of foreign currency forward contracts in a liability position are reported in Other current liabilities in the Consolidated Statement of Financial Position. The gross fair value of forward contracts in an asset position as of September 30, 2023 and December 31, 2022 was $0 million and $1 million, respectively. The gross fair value of foreign currency forward contracts in a liability position as of both September 30, 2023 and December 31, 2022 was $1 million. Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. There were no transfers between levels of the fair value hierarchy during the three and nine months ended September 30, 2023. The fair values of the embedded conversion features derivatives were calculated using unobservable inputs (Level 3 fair measurements). The fair values of the embedded derivatives associated with the Convertible Notes and Series B and Series C Preferred Stock were calculated using a binomial lattice model. The following tables present the key inputs in the determination of fair value for the embedded conversion features: Convertible Notes:
|  | Valuation Date |
|  | July 21, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Total value of embedded derivative liability ($ millions) |  | $ | 5 |  |  | $ | 2 |
Kodak's closing stock price |  | $ | 5.26 |  |  | $ | 3.05 |
Expected stock price volatility |  |  | 60.00 | % |  |  | 50.00 | %
Risk free rate |  |  | 4.50 | % |  |  | 4.17 | %
Implied credit spread on the Convertible Notes |  |  | 17.75 | % |  |  | 26.19 | %
Series B Preferred Stock:
|  | Valuation Date |
|  | September 30, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Total value of embedded derivative liability ($ millions) |  | $ | 1 |  |  | $ | 1 |
Kodak's closing stock price |  | $ | 4.21 |  |  | $ | 3.05 |
Expected stock price volatility |  |  | 55.00 | % |  |  | 50.00 | %
Risk free rate |  |  | 4.88 | % |  |  | 4.17 | %
Implied credit spread on the preferred stock |  |  | 19.32 | % |  |  | 27.19 | %
Series C Preferred Stock:
|  | Valuation Date |
|  | September 30, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Total value of embedded derivative liability ($ millions) |  | $ | 1 |  |  | $ | 1 |
Kodak's closing stock price |  | $ | 4.21 |  |  | $ | 3.05 |
Expected stock price volatility |  |  | 55.00 | % |  |  | 50.00 | %
Risk free rate |  |  | 4.88 | % |  |  | 4.17 | %
Implied credit spread on the preferred stock |  |  | 21.32 | % |  |  | 29.19 | %
The Fundamental Change values at issuance were calculated as the difference between the total value of the Convertible Notes, Series B or Series C Preferred Stock, as applicable, and the sum of the net present value of the cash flows if the Convertible Notes are repaid at their maturity date or Series B and Series C Preferred Stock are redeemed on their redemption date and the values of the other embedded derivatives. The Fundamental Change values reduce the value of the embedded conversion features derivative liability. Other than events that alter the likelihood of a fundamental change or reorganization event, the value of the Fundamental Change reflects the value as of the issuance date, amortized for the passage of time. The fair values of long-term debt (Level 2 fair value measurements) are determined by reference to quoted market prices of similar instruments, if available, or by pricing models based on the value of related cash flows discounted at current market interest rates. The fair values of long-term borrowings were $364 million and $271 million at September 30, 2023 and December 31, 2022, respectively. The carrying values of cash and cash equivalents, restricted cash and the current portion of long-term debt approximate their fair values at both September 30, 2023 and December 31, 2022.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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