Kodak 2004 Annual Report Download - page 67

Financials
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2 0 0 4 ฀ S U M M A R Y ฀ A N N U A L ฀ R E P O R T
The฀Company฀recorded฀total฀charges฀for฀the฀years฀ended฀Decem-
ber฀31,฀2004,฀2003฀and฀2002฀of฀$0฀million,฀$7฀million฀and฀$45฀million,฀
respectively,฀for฀other฀than฀temporary฀impairments฀relating฀to฀certain฀of฀its฀
strategic฀and฀non-strategic฀venture฀investments,฀which฀were฀accounted฀
for฀under฀the฀cost฀method.฀The฀strategic฀venture฀investment฀impairment฀
charges฀for฀the฀years฀ended฀December฀31,฀2004,฀2003฀and฀2002฀of฀$0฀
million,฀$3฀million฀and฀$27฀million,฀respectively,฀were฀recorded฀in฀selling,฀
general฀and฀administrative฀expenses฀in฀the฀accompanying฀Consolidated฀
Statement฀of฀Earnings.฀The฀non-strategic฀venture฀investment฀impairment฀
charges฀for฀the฀years฀ended฀December฀31,฀2004,฀2003฀and฀2002฀of฀$0฀
million,฀$4฀million฀and฀$18฀million,฀respectively,฀were฀recorded฀in฀other฀
income฀(charges),฀net,฀in฀the฀accompanying฀Consolidated฀Statement฀of฀
Earnings.฀The฀charges฀were฀taken฀in฀the฀respective฀periods฀in฀which฀the฀
available฀evidence,฀including฀subsequent฀financing฀rounds,฀independent฀
valuations,฀and฀other฀factors฀indicated฀that฀the฀underlying฀investments฀
were฀permanently฀impaired.
NOTE฀8:฀ACCOUNTS฀PAYABLE฀AND฀
OTHER฀CURRENT฀LIABILITIES
฀2004฀2003
(in฀millions)฀฀฀฀฀฀฀฀฀ ฀ (Restated)
Accounts฀payable,฀trade฀ $฀ 868฀ $฀ 832฀฀
Accrued฀advertising฀and฀promotional
฀฀ expenses฀ ฀ 762฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 738฀฀
Accrued฀employment-related฀liabilities฀฀฀฀฀฀ ฀ 872฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 889฀
Accrued฀restructuring฀liabilities฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 355฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 267
Other฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 1,039฀฀฀฀฀฀฀฀฀฀฀฀฀ ฀ 904
฀ Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀3,896฀฀฀฀฀฀ $฀3,630
The฀other฀component฀above฀consists฀of฀other฀miscellaneous฀current฀
liabilities฀that,฀individually,฀are฀less฀than฀5%฀of฀the฀total฀current฀liabilities฀
component฀within฀the฀Consolidated฀Statement฀of฀Financial฀Position,฀and฀
therefore,฀have฀been฀aggregated฀in฀accordance฀with฀Regulation฀S-X.
NOTE฀9:฀SHORT-TERM฀BORROWINGS฀
AND฀LONG-TERM฀DEBT
Short-Term฀Borrowings฀฀The฀Company’s฀short-term฀borrowings฀at฀
December฀31,฀2004฀and฀2003฀were฀as฀follows:฀
(in฀millions)฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 2004฀ 2003
Commercial฀paper฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ $฀ —฀฀ $฀ 304฀
Current฀portion฀of฀long-term฀debt฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 400฀฀฀฀฀฀฀฀฀฀฀฀฀฀457฀
Short-term฀bank฀borrowings฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 69฀฀฀฀฀฀฀฀฀฀฀฀฀ 185฀
฀฀฀฀Total฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀$฀ 469฀ $฀ 946
The฀weighted-average฀interest฀rate฀for฀commercial฀paper฀outstanding฀
at฀December฀31,฀2003฀was฀2.95%.฀The฀weighted-average฀interest฀rates฀for฀
short-term฀bank฀borrowings฀outstanding฀at฀December฀31,฀2004฀and฀2003฀
were฀5.02%฀and฀3.79%,฀respectively.
Lines฀of฀Credit฀฀The฀Company฀has฀$2,225฀million฀in฀committed฀revolv-
ing฀credit฀facilities,฀which฀are฀available฀for฀general฀corporate฀purposes฀
including฀the฀support฀of฀the฀Company’s฀commercial฀paper฀program.฀The฀
credit฀facilities฀are฀comprised฀of฀the฀$1,000฀million฀364-day฀committed฀
revolving฀credit฀facility฀(364-Day฀Facility)฀expiring฀in฀July฀2005฀and฀a฀
5-year฀committed฀facility฀at฀$1,225฀million฀expiring฀in฀July฀2006฀(5-Year฀
Facility).฀If฀unused,฀they฀have฀a฀commitment฀fee฀of฀$4.5฀million฀per฀year฀at฀
the฀Company’s฀current฀credit฀rating฀of฀Baa3฀and฀BBB-฀from฀Moody’s฀and฀
Standard฀&฀Poors฀(S&P),฀respectively.฀Interest฀on฀amounts฀borrowed฀under฀
these฀facilities฀is฀calculated฀at฀rates฀based฀on฀spreads฀above฀certain฀refer-
ence฀rates฀and฀the฀Company’s฀credit฀rating.฀The฀Company฀issues฀letters฀
of฀credit฀under฀the฀5-Year฀Facility.฀As฀of฀December฀31,฀2004,฀there฀were฀
$103฀million฀of฀letters฀of฀credit฀outstanding฀under฀the฀5-Year฀Facility.฀The฀
remainder฀of฀the฀5-Year฀Facility฀and฀the฀364-Day฀Facility฀was฀unused฀at฀
December฀31,฀2004.฀In฀February฀2005,฀the฀Company฀issued฀$31฀million฀in฀
letters฀of฀credit฀in฀support฀of฀Workers’฀Compensation฀liabilities.฀Under฀the฀
364-Day฀Facility฀and฀5-Year฀Facility,฀there฀is฀a฀quarterly฀financial฀covenant฀
that฀requires฀the฀Company฀to฀maintain฀a฀debt฀to฀EBITDA฀(earnings฀before฀
interest,฀income฀taxes,฀depreciation฀and฀amortization)฀ratio,฀on฀a฀rolling฀
four-quarter฀basis,฀of฀not฀greater฀than฀3฀to฀1.฀In฀the฀event฀of฀violation฀of฀
the฀covenant,฀the฀facility฀would฀not฀be฀available฀for฀borrowing฀until฀the฀
covenant฀provisions฀were฀waived,฀amended฀or฀satisfied.฀฀The฀Company฀was฀
in฀compliance฀with฀this฀covenant฀at฀December฀31,฀2004.฀฀The฀Company฀
does฀not฀anticipate฀that฀a฀violation฀is฀likely฀to฀occur.฀฀
The฀Company฀has฀other฀committed฀and฀uncommitted฀lines฀of฀credit฀
at฀December฀31,฀2004฀totaling฀$148฀million฀and฀$753฀million,฀respectively.฀฀
These฀lines฀primarily฀support฀borrowing฀needs฀of฀the฀Company’s฀subsidiar-
ies,฀which฀include฀term฀loans,฀overdraft฀lines,฀letters฀of฀credit฀and฀revolving฀
credit฀lines.฀Interest฀rates฀and฀other฀terms฀of฀borrowing฀under฀these฀lines฀of฀
credit฀vary฀from฀country฀to฀country,฀depending฀on฀local฀market฀conditions.฀
Total฀outstanding฀borrowings฀against฀these฀other฀committed฀and฀uncom-
mitted฀lines฀of฀credit฀at฀December฀31,฀2004฀were฀$53฀million฀and฀$47฀
million,฀respectively.฀These฀outstanding฀borrowings฀are฀reflected฀in฀the฀
short-term฀borrowings฀in฀the฀accompanying฀Consolidated฀Statement฀of฀
Financial฀Position฀at฀December฀31,฀2004.
Accounts฀Receivable฀Securitization฀Program฀฀The฀Company฀has฀an฀
accounts฀receivable฀securitization฀program฀(the฀Program),฀which฀provides฀
the฀Company฀with฀borrowings฀up฀to฀a฀maximum฀of฀$200฀million.฀The฀
Program฀is฀renewable฀annually,฀subject฀to฀the฀bank’s฀approval฀in฀March.฀
Under฀the฀Program,฀the฀Company฀sells฀certain฀of฀its฀domestic฀trade฀ac-
counts฀receivable฀without฀recourse฀to฀EK฀Funding฀LLC,฀a฀Kodak฀wholly฀
owned,฀consolidated,฀bankruptcy-remote,฀limited฀purpose,฀limited฀liability฀
corporation฀(EKFC).฀Kodak฀continues฀to฀service,฀administer฀and฀collect฀the฀
receivables.฀A฀bank,฀acting฀as฀the฀Program฀agent,฀purchases฀undivided฀
percentage฀ownership฀interests฀in฀those฀receivables฀on฀behalf฀of฀the฀
conduit฀purchasers,฀who฀have฀a฀first฀priority฀security฀interest฀in฀the฀related฀
receivables฀pool.฀The฀receivables฀pool฀at฀December฀31,฀2004,฀representing฀
the฀outstanding฀balance฀of฀the฀gross฀accounts฀receivable฀sold฀to฀EKFC,฀to-
taled฀approximately฀$555฀million.฀As฀the฀Company฀has฀the฀right฀at฀any฀time฀
during฀the฀Program฀to฀repurchase฀all฀of฀the฀then฀outstanding฀purchased฀in-
terests฀for฀a฀purchase฀price฀equal฀to฀the฀outstanding฀principal฀plus฀accrued฀
fees,฀the฀receivables฀remain฀on฀the฀Company’s฀Consolidated฀Statement฀of฀