Kodak 2004 Annual Report Download - page 70

Financials
68
E A S T M A N฀ K OD A K ฀ C O M PA N Y
At฀December฀31,฀2004฀and฀2003,฀the฀Company’s฀undiscounted฀
accrued฀liabilities฀for฀environmental฀remediation฀costs฀amounted฀to฀$153฀
million฀and฀$141฀million,฀respectively.฀These฀amounts฀are฀reported฀in฀
other฀long-term฀liabilities฀in฀the฀accompanying฀Consolidated฀Statement฀of฀
Financial฀Position.
The฀Company฀is฀currently฀implementing฀a฀Corrective฀Action฀Program฀
required฀by฀the฀Resource฀Conservation฀and฀Recovery฀Act฀(RCRA)฀at฀the฀
Kodak฀Park฀site฀in฀Rochester,฀NY.฀As฀part฀of฀this฀program,฀the฀Company฀has฀
completed฀the฀RCRA฀Facility฀Assessment฀(RFA),฀a฀broad-based฀environ-
mental฀investigation฀of฀the฀site.฀The฀Company฀is฀currently฀in฀the฀process฀
of฀completing,฀and฀in฀some฀cases฀has฀completed,฀RCRA฀Facility฀Investiga-
tions฀(RFI)฀and฀Corrective฀Measures฀Studies฀(CMS)฀for฀areas฀at฀the฀site.฀At฀
December฀31,฀2004,฀estimated฀future฀investigation฀and฀remediation฀costs฀
of฀$67฀million฀are฀accrued฀for฀this฀site฀and฀are฀included฀in฀the฀$153฀million฀
reported฀in฀other฀long-term฀liabilities.
The฀Company฀announced฀the฀closing฀of฀three฀manufacturing฀facilities฀
outside฀the฀United฀States฀in฀2004.฀The฀Company฀has฀obligations฀with฀esti-
mated฀future฀investigation,฀remediation฀and฀monitoring฀costs฀of฀$21฀million฀
at฀two฀of฀these฀facilities.฀At฀December฀31,฀2004,฀these฀costs฀are฀accrued฀
and฀included฀in฀the฀$153฀million฀reported฀in฀other฀long-term฀liabilities.
The฀Company฀has฀obligations฀relating฀to฀other฀operating฀sites฀and฀for-
mer฀operations฀with฀estimated฀future฀investigation,฀remediation฀and฀moni-
toring฀costs฀of฀$35฀million.฀At฀December฀31,฀2004,฀these฀costs฀are฀accrued฀
and฀included฀in฀the฀$153฀million฀reported฀in฀other฀long-term฀liabilities.
The฀Company฀has฀retained฀certain฀obligations฀for฀environmental฀
remediation฀and฀Superfund฀matters฀related฀to฀certain฀sites฀associated฀
with฀the฀non-imaging฀health฀businesses฀sold฀in฀1994.฀At฀December฀31,฀
2004,฀estimated฀future฀remediation฀costs฀of฀$30฀million฀are฀accrued฀for฀
these฀sites฀and฀are฀included฀in฀the฀$153฀million฀reported฀in฀other฀long-term฀
liabilities.
Cash฀expenditures฀for฀the฀aforementioned฀investigation,฀remediation฀
and฀monitoring฀activities฀are฀expected฀to฀be฀incurred฀over฀the฀next฀thirty฀
years฀for฀many฀of฀the฀sites.฀For฀these฀known฀environmental฀exposures,฀the฀
accrual฀reflects฀the฀Company’s฀best฀estimate฀of฀the฀amount฀it฀will฀incur฀
under฀the฀agreed-upon฀or฀proposed฀work฀plans.฀The฀Company’s฀cost฀es-
timates฀were฀determined฀using฀the฀ASTM฀Standard฀E฀2137-01,฀“Standard฀
Guide฀for฀Estimating฀Monetary฀Costs฀and฀Liabilities฀for฀Environmental฀Mat-
ters,”฀and฀have฀not฀been฀reduced฀by฀possible฀recoveries฀from฀third฀parties.฀฀
The฀overall฀method฀includes฀the฀use฀of฀a฀probabilistic฀model฀which฀fore-
casts฀a฀range฀of฀cost฀estimates฀for฀the฀remediation฀required฀at฀individual฀
sites.฀The฀projects฀are฀closely฀monitored฀and฀the฀models฀are฀reviewed฀as฀
significant฀events฀occur฀or฀at฀least฀once฀per฀year.฀The฀Company’s฀estimate฀
includes฀equipment฀and฀operating฀costs฀for฀remediation฀and฀long-term฀
monitoring฀of฀the฀sites.฀The฀Company฀does฀not฀believe฀it฀is฀reasonably฀
possible฀that฀the฀losses฀for฀the฀known฀exposures฀could฀exceed฀the฀current฀
accruals฀by฀material฀amounts.
฀A฀Consent฀Decree฀was฀signed฀in฀1994฀in฀settlement฀of฀a฀civil฀
complaint฀brought฀by฀the฀U.S.฀Environmental฀Protection฀Agency฀and฀the฀
U.S.฀Department฀of฀Justice.฀In฀connection฀with฀the฀Consent฀Decree,฀the฀
Company฀is฀subject฀to฀a฀Compliance฀Schedule,฀under฀which฀the฀Company฀
has฀improved฀its฀waste฀characterization฀procedures,฀upgraded฀one฀of฀its฀
incinerators,฀and฀is฀evaluating฀and฀upgrading฀its฀industrial฀sewer฀system.฀฀
The฀total฀expenditures฀required฀to฀complete฀this฀program฀are฀currently฀
estimated฀to฀be฀approximately฀$15฀million฀over฀the฀next฀five฀years.฀These฀
expenditures฀are฀incurred฀as฀part฀of฀plant฀operations฀and,฀therefore,฀are฀not฀
included฀in฀the฀environmental฀accrual฀at฀December฀31,฀2004.
The฀Company฀is฀presently฀designated฀as฀a฀potentially฀responsible฀
party฀(PRP)฀under฀the฀Comprehensive฀Environmental฀Response,฀Compensa-
tion,฀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฀the฀Company’s฀alleged฀arrangements฀for฀disposal฀of฀hazardous฀
substances฀at฀five฀such฀active฀sites.฀With฀respect฀to฀each฀of฀these฀sites,฀the฀
Company’s฀liability฀is฀minimal.฀In฀addition,฀the฀Company฀has฀been฀identified฀
as฀a฀PRP฀in฀connection฀with฀the฀non-imaging฀health฀businesses฀in฀four฀
active฀Superfund฀sites.฀Numerous฀other฀PRPs฀have฀also฀been฀designated฀
at฀these฀sites.฀Although฀the฀law฀imposes฀joint฀and฀several฀liability฀on฀PRPs,฀
the฀Company’s฀historical฀experience฀demonstrates฀that฀these฀costs฀are฀
shared฀with฀other฀PRPs.฀Settlements฀and฀costs฀paid฀by฀the฀Company฀in฀
Superfund฀matters฀to฀date฀have฀not฀been฀material.฀Future฀costs฀are฀also฀
not฀expected฀to฀be฀material฀to฀the฀Company’s฀financial฀position,฀results฀of฀
operations฀or฀cash฀flows.
The฀Clean฀Air฀Act฀Amendments฀were฀enacted฀in฀1990.฀Expenditures฀
to฀comply฀with฀the฀Clean฀Air฀Act฀implementing฀regulations฀issued฀to฀date฀
have฀not฀been฀material฀and฀have฀been฀primarily฀capital฀in฀nature.฀In฀addi-
tion,฀future฀expenditures฀for฀existing฀regulations,฀which฀are฀primarily฀capital฀
in฀nature,฀are฀not฀expected฀to฀be฀material.฀Many฀of฀the฀regulations฀to฀be฀
promulgated฀pursuant฀to฀this฀Act฀have฀not฀been฀issued.
Uncertainties฀associated฀with฀environmental฀remediation฀contingen-
cies฀are฀pervasive฀and฀often฀result฀in฀wide฀ranges฀of฀outcomes.฀Estimates฀
developed฀in฀the฀early฀stages฀of฀remediation฀can฀vary฀significantly.฀A฀finite฀
estimate฀of฀cost฀does฀not฀normally฀become฀fixed฀and฀determinable฀at฀a฀
specific฀time.฀Rather,฀the฀costs฀associated฀with฀environmental฀remediation฀
become฀estimable฀over฀a฀continuum฀of฀events฀and฀activities฀that฀help฀to฀
frame฀and฀define฀a฀liability,฀and฀the฀Company฀continually฀updates฀its฀cost฀
estimates.฀The฀Company฀has฀an฀ongoing฀monitoring฀and฀identification฀
process฀to฀assess฀how฀the฀activities,฀with฀respect฀to฀the฀known฀exposures,฀
are฀progressing฀against฀the฀accrued฀cost฀estimates,฀as฀well฀as฀to฀identify฀
other฀potential฀remediation฀sites฀that฀are฀presently฀unknown.
Estimates฀of฀the฀amount฀and฀timing฀of฀future฀costs฀of฀environmen-
tal฀remediation฀requirements฀are฀necessarily฀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฀poten-
tially฀responsible฀parties.฀Based฀upon฀information฀presently฀available,฀such฀
future฀costs฀are฀not฀expected฀to฀have฀a฀material฀effect฀on฀the฀Company’s฀
competitive฀or฀financial฀position.฀However,฀such฀costs฀could฀be฀material฀to฀
results฀of฀operations฀in฀a฀particular฀future฀quarter฀or฀year.
Other฀Commitments฀and฀Contingencies฀฀The฀Company฀has฀entered฀
into฀agreements฀with฀several฀companies,฀which฀provide฀Kodak฀with฀prod-
ucts฀and฀services฀to฀be฀used฀in฀its฀normal฀operations.฀These฀agreements฀
are฀related฀to฀supplies,฀production฀and฀administrative฀services,฀as฀well฀as฀
marketing฀and฀advertising.฀The฀terms฀of฀these฀agreements฀cover฀the฀next฀
two฀to฀eighteen฀years.฀The฀minimum฀payments฀for฀these฀agreements฀are฀
approximately฀$182฀million฀in฀2005,฀$171฀million฀in฀2006,฀$155฀million฀in฀
2007,฀$117฀million฀in฀2008,฀$75฀million฀in฀2009฀and฀$159฀million฀in฀2010฀
and฀thereafter.