Kodak 2004 Annual Report Download - page 44
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Please find page 44 of the 2004 Kodak annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Financials
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E A S T M A N K OD A K C O M PA N Y
categoryexpansionanddigitization);implementationofintellectualprop-
ertylicensingstrategies;developmentandimplementationofe-commerce
strategies;completionofinformationsystemsupgrades,includingSAP,our
enterprisesystemsoftware;completionofvariousportfolioactions;reduc-
tionofinventories;completionoffocusedcapitalexpenditures;integra-
tionofnewlyacquiredbusinesses;performanceofaccountsreceivable;
improvementinmanufacturingproductivityandtechniques;improvementin
supplychainefficiency;implementationoffuturefocusedcostreductions,
includingpersonnelreductions;andthedevelopmentoftheCompany’s
businessinemergingmarketslikeChina,India,Brazil,MexicoandRussia.
Theforward-lookingstatementscontainedinthisreportaresubjecttothe
followingadditionalfactorsanduncertainties:inherentunpredictabilityof
currencyfluctuationsandrawmaterialcosts;changesintheCompany’s
debtcreditratingsanditsabilitytoaccesscapitalmarkets;competitive
actions,includingpricing;thenatureandpaceoftechnologyevolution,
includingtheanalog-to-digitaltransition;continuingcustomerconsolida-
tionandbuyingpower;currentandfutureproposedchangestotaxlaws,
aswellasotherfactorswhichcouldadverselyimpactoureffectivetax
rateinthefuture;generaleconomic,business,geo-political,regulatory
andpublichealthconditions;marketgrowthpredictions;andotherfactors
anduncertaintiesdisclosedhereinandfromtimetotimeintheCompany’s
otherfilingswiththeSecuritiesandExchangeCommission.
Anyforward-lookingstatementsinthisreportshouldbeevaluatedin
lightoftheseimportantfactorsanduncertaintiesaswellasothercaution-
aryinformationcontainedherein.
SUMMARYOFOPERATINGDATA
Asummaryofoperatingdatafor2004andforthefouryearspriorisshown
onpage98.
QuantitativeandQualitativeDisclosuresabout
MarketRisk
TheCompany,asaresultofitsglobaloperatingandfinancingactivities,is
exposedtochangesinforeigncurrencyexchangerates,commodityprices,
andinterestrates,whichmayadverselyaffectitsresultsofoperationsand
financialposition.Inseekingtominimizetherisksassociatedwithsuch
activities,theCompanymayenterintoderivativecontracts.
Foreigncurrencyforwardcontractsareusedtohedgeexisting
foreigncurrencydenominatedassetsandliabilities,especiallythoseofthe
Company’sInternationalTreasuryCenter,aswellasforecastedforeigncur-
rencydenominatedintercompanysales.Silverforwardcontractsareused
tomitigatetheCompany’srisktofluctuatingsilverprices.TheCompany’s
exposuretochangesininterestratesresultsfromitsinvestingandborrow-
ingactivitiesusedtomeetitsliquidityneeds.Long-termdebtisgenerally
usedtofinancelong-terminvestments,whileshort-termdebtisusedto
meetworkingcapitalrequirements.TheCompanydoesnotutilizefinancial
instrumentsfortradingorotherspeculativepurposes.
Usingasensitivityanalysisbasedonestimatedfairvalueofopen
forwardcontractsusingavailableforwardrates,iftheU.S.dollarhad
been10%weakeratDecember31,2004and2003,thefairvalueofopen
forwardcontractswouldhaveincreased$62millionand$23million,
respectively.Suchgainsorlosseswouldbesubstantiallyoffsetbylossesor
gainsfromtherevaluationorsettlementoftheunderlyingpositionshedged.
Usingasensitivityanalysisbasedonestimatedfairvalueofopen
forwardcontractsusingavailableforwardprices,ifavailableforwardsilver
priceshadbeen10%loweratDecember31,2004and2003,thefairvalue
ofopenforwardcontractswouldhavedecreased$1millionand$1million,
respectively.Suchlossesinfairvalue,ifrealized,wouldbeoffsetbylower
costsofmanufacturingsilver-containingproducts.
TheCompanyisexposedtointerestrateriskprimarilythroughits
borrowingactivitiesand,toalesserextent,throughinvestmentsinmarket-
ablesecurities.TheCompanymayutilizeborrowingstofunditsworking
capitalandinvestmentneeds.Themajorityofshort-termandlong-term
borrowingsareinfixed-rateinstruments.Thereisinherentroll-overriskfor
borrowingsandmarketablesecuritiesastheymatureandarerenewedat
currentmarketrates.Theextentofthisriskisnotpredictablebecauseof
thevariabilityoffutureinterestratesandbusinessfinancingrequirements.
Usingasensitivityanalysisbasedonestimatedfairvalueofshort-
termandlong-termborrowings,ifavailablemarketinterestrateshadbeen
10%(about40basispoints)higheratDecember31,2004,thefairvalueof
short-termandlong-termborrowingswouldhavedecreased$1millionand
$59million,respectively.Usingasensitivityanalysisbasedonestimated
fairvalueofshort-termandlong-termborrowings,ifavailablemarket
interestrateshadbeen10%(about43basispoints)higheratDecember
31,2003,thefairvalueofshort-termandlong-termborrowingswouldhave
decreased$2millionand$70million,respectively.
TheCompany’sfinancialinstrumentcounterpartiesarehigh-quality
investmentorcommercialbankswithsignificantexperiencewithsuch
instruments.TheCompanymanagesexposuretocounterpartycreditrisk
byrequiringspecificminimumcreditstandardsanddiversificationofcoun-
terparties.TheCompanyhasprocedurestomonitorthecreditexposure
amounts.ThemaximumcreditexposureatDecember31,2004wasnot
significanttotheCompany.