Kodak 2004 Annual Report Download - page 66

Financials
64
E A S T M A N฀ K OD A K ฀ C O M PA N Y
Estimated฀future฀amortization฀expense฀related฀to฀purchased฀intangible฀
assets฀at฀December฀31,฀2004฀is฀as฀follows฀(in฀millions):
฀ 2005฀฀฀ $฀ 66
฀ 2006฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 59
฀ 2007฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 54
฀ 2008฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 54
฀ 2009฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 44
฀ 2010+฀฀฀฀฀฀฀฀฀฀฀฀฀ 201
฀ Total฀ $฀478
NOTE฀6:฀OTHER฀LONG-TERM฀ASSETS
฀2004฀2003
(in฀millions)฀฀฀฀฀฀฀฀฀ ฀ (Restated)
Prepaid฀pension฀costs฀ $฀ 1,203฀ $฀ 1,135฀฀฀฀฀฀฀฀฀฀฀
Investments฀in฀unconsolidated฀฀฀฀
฀฀ affiliates฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 513฀ ฀ 446฀฀฀฀฀฀฀฀฀฀฀
Deferred฀income฀taxes฀฀฀฀฀฀฀฀ ฀ 521฀ ฀ 439฀฀฀฀฀฀฀฀฀฀
Intangible฀assets฀other฀than฀
฀฀ goodwill฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 478฀ ฀ 294฀฀฀฀฀฀฀฀฀฀
Non-current฀receivables฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 163฀ ฀ 292฀฀฀฀฀฀฀฀฀฀
Miscellaneous฀other฀long-term฀assets฀฀฀฀฀฀฀฀ ฀ 253฀ ฀ 323฀฀฀฀฀฀฀฀
฀ Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀ 3,131฀ $฀2,929฀฀฀฀฀฀฀฀
The฀miscellaneous฀component฀above฀consists฀of฀other฀miscellaneous฀
long-term฀assets฀that,฀individually,฀are฀less฀than฀5%฀of฀the฀Company’s฀total฀
long-term฀assets,฀and฀therefore,฀have฀been฀aggregated฀in฀accordance฀with฀
Regulation฀S-X.
NOTE฀7:฀INVESTMENTS
Equity฀Method฀฀At฀December฀31,฀2004,฀the฀Company’s฀significant฀equity฀
method฀investees฀and฀the฀Company’s฀approximate฀ownership฀interest฀in฀
each฀investee฀were฀as฀follows:
Kodak฀Polychrome฀Graphics฀(KPG)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 50%
Express฀Stop฀Financing฀(ESF)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 50%
SK฀Display฀Corporation฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 34%
Matsushita-Ultra฀Technologies฀Battery฀Corporation฀฀฀฀฀ 30%
Lucky฀Film฀Co.฀Ltd฀฀(Lucky฀Film)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 13%
At฀December฀31,฀2004฀and฀2003,฀the฀carrying฀value฀of฀the฀Company’s฀
equity฀investment฀in฀these฀significant฀unconsolidated฀affiliates฀was฀$488฀
million฀and฀$417฀million,฀respectively,฀and฀is฀reported฀within฀other฀long-
term฀assets฀in฀the฀accompanying฀Consolidated฀Statement฀of฀Financial฀
Position.฀The฀Company฀records฀its฀equity฀in฀the฀income฀or฀losses฀of฀these฀
investees฀and฀reports฀such฀amounts฀in฀other฀income฀(charges),฀net,฀in฀the฀
accompanying฀Consolidated฀Statement฀of฀Earnings.฀See฀Note฀14,฀“Other฀
Income฀(Charges),฀Net.”฀These฀investments฀do฀not฀meet฀the฀Regulation฀S-X฀
significance฀test฀requiring฀the฀inclusion฀of฀the฀separate฀investee฀financial฀
statements.
The฀Company฀sells฀graphics฀film฀and฀other฀products฀to฀its฀equity฀affili-
ate,฀KPG.฀Sales฀to฀KPG฀for฀the฀years฀ended฀December฀31,฀2004,฀2003฀and฀
2002฀amounted฀to฀$268฀million,฀$271฀million฀and฀$315฀million,฀respec-
tively.฀These฀sales฀are฀reported฀in฀the฀Consolidated฀Statement฀of฀Earnings.฀
The฀Company฀eliminates฀profits฀on฀these฀sales,฀to฀the฀extent฀the฀inventory฀
has฀not฀been฀sold฀through฀to฀third฀parties,฀on฀the฀basis฀of฀its฀50%฀interest.฀
Amounts฀due฀from฀KPG฀relating฀to฀these฀sales฀were฀$6฀million฀at฀December฀
31,฀2004฀and฀2003,฀and฀are฀reported฀in฀receivables,฀net฀in฀the฀accompany-
ing฀Consolidated฀Statement฀of฀Financial฀Position.฀Additionally,฀the฀Company฀
has฀guaranteed฀certain฀debt฀obligations฀of฀KPG฀up฀to฀$160฀million,฀which฀
is฀included฀in฀the฀total฀guarantees฀amount฀of฀$356฀million฀at฀December฀31,฀
2004,฀as฀discussed฀in฀Note฀12,฀“Guarantees.”
Kodak฀sells฀certain฀of฀its฀long-term฀lease฀receivables฀relating฀to฀the฀
sale฀of฀photofinishing฀equipment฀to฀ESF฀without฀recourse฀to฀the฀Company.฀฀
Sales฀of฀long-term฀lease฀receivables฀to฀ESF฀were฀approximately฀$0,฀$15฀
million฀and฀$9฀million฀in฀2004,฀2003฀and฀2002,฀respectively.฀See฀Note฀11,฀
“Commitments฀and฀Contingencies.”
฀The฀Company฀performed฀an฀analysis฀of฀ESF฀in฀order฀to฀determine฀
whether฀the฀provisions฀of฀FASB฀Interpretations฀No.฀46(R)฀“Consolidation฀of฀
Variable฀Interest฀Entities฀an฀interpretation฀of฀ARB฀No.฀51”฀(FIN฀46(R))฀were฀
applicable฀to฀ESF,฀requiring฀consolidation.฀Based฀on฀the฀analysis฀performed,฀
it฀was฀determined฀that฀ESF฀does฀not฀qualify฀as฀a฀variable฀interest฀entity฀
under฀FIN฀46(R)฀and,฀therefore,฀consolidation฀is฀not฀required.฀ESF฀is฀an฀
operating฀entity฀formed฀between฀Qualex฀and฀Dana฀Credit฀Corporation฀in฀
October฀1993฀to฀provide฀a฀long-term฀financing฀solution฀to฀Qualex’s฀photo-
finishing฀customers฀in฀connection฀with฀Qualex’s฀leasing฀of฀photofinishing฀
equipment฀to฀third฀parties,฀as฀opposed฀to฀Qualex฀extending฀long-term฀credit฀
(see฀Note฀11฀under฀“Other฀Commitments฀and฀Contingencies”).฀Qualex’s฀es-
timated฀maximum฀exposure฀to฀loss฀as฀a฀result฀of฀its฀continuing฀involvement฀
with฀ESF฀is฀$59฀million฀as฀of฀December฀31,฀2004,฀which฀is฀equal฀to฀the฀
carrying฀value฀of฀Qualex’s฀investment฀balance฀in฀the฀entity.฀As฀of฀December฀
31,฀2004฀the฀Company฀does฀not฀intend฀to฀nor฀is฀it฀committed฀to฀fund฀any฀
amounts฀to฀ESF฀in฀the฀future,฀and฀there฀are฀no฀debt฀guarantees฀under฀
which฀Qualex฀could฀potentially฀be฀required฀to฀perform฀in฀relation฀to฀its฀
investment฀in฀ESF.฀The฀Company฀was฀not฀involved฀with฀any฀other฀entities฀
that฀would฀qualify฀as฀VIEs฀under฀the฀Revised฀Interpretations฀of฀FIN฀46.฀฀฀฀฀
On฀February฀10,฀2004,฀the฀Company฀acquired฀a฀13฀percent฀interest฀
in฀Lucky฀Film,฀the฀largest฀China-based฀manufacturer฀of฀photographic฀film,฀
as฀of฀March฀31,฀2004.฀The฀Company’s฀interest฀in฀Lucky฀Film฀is฀accounted฀
for฀under฀the฀equity฀method฀of฀accounting฀as฀the฀Company฀has฀the฀ability฀
to฀exercise฀significant฀influence฀over฀Lucky฀Film’s฀operating฀and฀financial฀
policies.฀Refer฀to฀Note฀21,฀“Acquisitions”฀for฀further฀discussion฀of฀this฀
purchase.฀
Kodak฀has฀no฀other฀material฀activities฀with฀its฀equity฀method฀invest-
ees.
Cost฀Method฀฀The฀Company฀also฀has฀certain฀investments฀with฀less฀
than฀a฀20%฀ownership฀interest฀in฀various฀private฀companies฀whereby฀the฀
Company฀does฀not฀have฀the฀ability฀to฀exercise฀significant฀influence.฀These฀
investments฀are฀accounted฀for฀under฀the฀cost฀method.฀The฀remaining฀
carrying฀value฀of฀the฀Company’s฀investments฀accounted฀for฀under฀the฀cost฀
method฀at฀December฀31,฀2004฀and฀2003฀of฀$19฀million฀and฀$20฀million,฀
respectively,฀is฀included฀in฀other฀long-term฀assets฀in฀the฀accompanying฀
Consolidated฀Statement฀of฀Financial฀Position.