Kodak 2004 Annual Report Download - page 70
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68
E A S T M A N K OD A K C O M PA N Y
AtDecember31,2004and2003,theCompany’sundiscounted
accruedliabilitiesforenvironmentalremediationcostsamountedto$153
millionand$141million,respectively.Theseamountsarereportedin
otherlong-termliabilitiesintheaccompanyingConsolidatedStatementof
FinancialPosition.
TheCompanyiscurrentlyimplementingaCorrectiveActionProgram
requiredbytheResourceConservationandRecoveryAct(RCRA)atthe
KodakParksiteinRochester,NY.Aspartofthisprogram,theCompanyhas
completedtheRCRAFacilityAssessment(RFA),abroad-basedenviron-
mentalinvestigationofthesite.TheCompanyiscurrentlyintheprocess
ofcompleting,andinsomecaseshascompleted,RCRAFacilityInvestiga-
tions(RFI)andCorrectiveMeasuresStudies(CMS)forareasatthesite.At
December31,2004,estimatedfutureinvestigationandremediationcosts
of$67millionareaccruedforthissiteandareincludedinthe$153million
reportedinotherlong-termliabilities.
TheCompanyannouncedtheclosingofthreemanufacturingfacilities
outsidetheUnitedStatesin2004.TheCompanyhasobligationswithesti-
matedfutureinvestigation,remediationandmonitoringcostsof$21million
attwoofthesefacilities.AtDecember31,2004,thesecostsareaccrued
andincludedinthe$153millionreportedinotherlong-termliabilities.
TheCompanyhasobligationsrelatingtootheroperatingsitesandfor-
meroperationswithestimatedfutureinvestigation,remediationandmoni-
toringcostsof$35million.AtDecember31,2004,thesecostsareaccrued
andincludedinthe$153millionreportedinotherlong-termliabilities.
TheCompanyhasretainedcertainobligationsforenvironmental
remediationandSuperfundmattersrelatedtocertainsitesassociated
withthenon-imaginghealthbusinessessoldin1994.AtDecember31,
2004,estimatedfutureremediationcostsof$30millionareaccruedfor
thesesitesandareincludedinthe$153millionreportedinotherlong-term
liabilities.
Cashexpendituresfortheaforementionedinvestigation,remediation
andmonitoringactivitiesareexpectedtobeincurredoverthenextthirty
yearsformanyofthesites.Fortheseknownenvironmentalexposures,the
accrualreflectstheCompany’sbestestimateoftheamountitwillincur
undertheagreed-uponorproposedworkplans.TheCompany’scostes-
timatesweredeterminedusingtheASTMStandardE2137-01,“Standard
GuideforEstimatingMonetaryCostsandLiabilitiesforEnvironmentalMat-
ters,”andhavenotbeenreducedbypossiblerecoveriesfromthirdparties.
Theoverallmethodincludestheuseofaprobabilisticmodelwhichfore-
castsarangeofcostestimatesfortheremediationrequiredatindividual
sites.Theprojectsarecloselymonitoredandthemodelsarereviewedas
significanteventsoccuroratleastonceperyear.TheCompany’sestimate
includesequipmentandoperatingcostsforremediationandlong-term
monitoringofthesites.TheCompanydoesnotbelieveitisreasonably
possiblethatthelossesfortheknownexposurescouldexceedthecurrent
accrualsbymaterialamounts.
AConsentDecreewassignedin1994insettlementofacivil
complaintbroughtbytheU.S.EnvironmentalProtectionAgencyandthe
U.S.DepartmentofJustice.InconnectionwiththeConsentDecree,the
CompanyissubjecttoaComplianceSchedule,underwhichtheCompany
hasimproveditswastecharacterizationprocedures,upgradedoneofits
incinerators,andisevaluatingandupgradingitsindustrialsewersystem.
Thetotalexpendituresrequiredtocompletethisprogramarecurrently
estimatedtobeapproximately$15millionoverthenextfiveyears.These
expendituresareincurredaspartofplantoperationsand,therefore,arenot
includedintheenvironmentalaccrualatDecember31,2004.
TheCompanyispresentlydesignatedasapotentiallyresponsible
party(PRP)undertheComprehensiveEnvironmentalResponse,Compensa-
tion,andLiabilityActof1980,asamended(theSuperfundLaw),orunder
similarstatelaws,forenvironmentalassessmentandcleanupcostsasthe
resultoftheCompany’sallegedarrangementsfordisposalofhazardous
substancesatfivesuchactivesites.Withrespecttoeachofthesesites,the
Company’sliabilityisminimal.Inaddition,theCompanyhasbeenidentified
asaPRPinconnectionwiththenon-imaginghealthbusinessesinfour
activeSuperfundsites.NumerousotherPRPshavealsobeendesignated
atthesesites.AlthoughthelawimposesjointandseveralliabilityonPRPs,
theCompany’shistoricalexperiencedemonstratesthatthesecostsare
sharedwithotherPRPs.SettlementsandcostspaidbytheCompanyin
Superfundmatterstodatehavenotbeenmaterial.Futurecostsarealso
notexpectedtobematerialtotheCompany’sfinancialposition,resultsof
operationsorcashflows.
TheCleanAirActAmendmentswereenactedin1990.Expenditures
tocomplywiththeCleanAirActimplementingregulationsissuedtodate
havenotbeenmaterialandhavebeenprimarilycapitalinnature.Inaddi-
tion,futureexpendituresforexistingregulations,whichareprimarilycapital
innature,arenotexpectedtobematerial.Manyoftheregulationstobe
promulgatedpursuanttothisActhavenotbeenissued.
Uncertaintiesassociatedwithenvironmentalremediationcontingen-
ciesarepervasiveandoftenresultinwiderangesofoutcomes.Estimates
developedintheearlystagesofremediationcanvarysignificantly.Afinite
estimateofcostdoesnotnormallybecomefixedanddeterminableata
specifictime.Rather,thecostsassociatedwithenvironmentalremediation
becomeestimableoveracontinuumofeventsandactivitiesthathelpto
frameanddefinealiability,andtheCompanycontinuallyupdatesitscost
estimates.TheCompanyhasanongoingmonitoringandidentification
processtoassesshowtheactivities,withrespecttotheknownexposures,
areprogressingagainsttheaccruedcostestimates,aswellastoidentify
otherpotentialremediationsitesthatarepresentlyunknown.
Estimatesoftheamountandtimingoffuturecostsofenvironmen-
talremediationrequirementsarenecessarilyimprecisebecauseofthe
continuingevolutionofenvironmentallawsandregulatoryrequirements,
theavailabilityandapplicationoftechnology,theidentificationofpresently
unknownremediationsitesandtheallocationofcostsamongthepoten-
tiallyresponsibleparties.Baseduponinformationpresentlyavailable,such
futurecostsarenotexpectedtohaveamaterialeffectontheCompany’s
competitiveorfinancialposition.However,suchcostscouldbematerialto
resultsofoperationsinaparticularfuturequarteroryear.
OtherCommitmentsandContingenciesTheCompanyhasentered
intoagreementswithseveralcompanies,whichprovideKodakwithprod-
uctsandservicestobeusedinitsnormaloperations.Theseagreements
arerelatedtosupplies,productionandadministrativeservices,aswellas
marketingandadvertising.Thetermsoftheseagreementscoverthenext
twotoeighteenyears.Theminimumpaymentsfortheseagreementsare
approximately$182millionin2005,$171millionin2006,$155millionin
2007,$117millionin2008,$75millionin2009and$159millionin2010
andthereafter.