Kodak 2004 Annual Report Download - page 73
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Please find page 73 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
71
2 0 0 4 S U M M A R Y A N N U A L R E P O R T
(inmillions)
DeferredrevenueatDecember31,2002 $ 103
Newextendedwarrantyarrangementsin2003 372
Recognitionofextendedwarrantyarrangement
revenuein2003 (355)
Adjustmentsforchangesinestimates (2)
DeferredrevenueatDecember31,2003 $ 118
Newextendedwarrantyarrangementsin2004 411
Recognitionofextendedwarrantyarrangement
revenuein2004 (388)
DeferredrevenueatDecember31,2004 $ 141
NOTE13:FINANCIALINSTRUMENTS
Thefollowingtablepresentsthecarryingamountsoftheassets(liabilities)
andtheestimatedfairvaluesoffinancialinstrumentsatDecember31,
2004and2003:
20042003
Carrying FairCarrying Fair
(inmillions) Amount Value Amount Value
Marketablesecurities:
Current $ 3 $ 3 $ 11 $ 11
Long-term 24 26 24 35
Long-termborrowings (1,852) (2,039) (2,302) (2,450)
Foreigncurrencyforwards 25 25 (1) (1)
Silverforwards — — 1 1
Marketablesecuritiesarevaluedatquotedmarketprices.Thefair
valuesoflong-termborrowingsaredeterminedbyreferencetoquoted
marketpricesorbyobtainingquotesfromdealers.Thefairvaluesforthe
remainingfinancialinstrumentsintheabovetablearebasedondealer
quotesandreflecttheestimatedamountstheCompanywouldpayor
receivetoterminatethecontracts.Thecarryingvaluesofcashandcash
equivalents,receivables,short-termborrowingsandpayablesapproximate
theirfairvalues.
TheCompany,asaresultofitsglobaloperatingandfinancingactivi-
ties,isexposedtochangesinforeigncurrencyexchangerates,commodity
pricesandinterestrateswhichmayadverselyaffectitsresultsofopera-
tionsandfinancialposition.TheCompanymanagessuchexposures,in
part,withderivativefinancialinstruments.Thefairvalueofthesederivative
contractsisreportedinothercurrentassetsoraccountspayableandother
currentliabilitiesintheaccompanyingConsolidatedStatementofFinancial
Position.
Foreigncurrencyforwardcontractsareusedtohedgeexisting
foreigncurrencydenominatedassetsandliabilities,especiallythoseofthe
Company’sInternationalTreasuryCenter,aswellasforecastedforeigncur-
rencydenominatedintercompanysales.Silverforwardcontractsareused
tomitigatetheCompany’srisktofluctuatingsilverprices.TheCompany’s
exposuretochangesininterestratesresultsfromitsinvestingandborrow-
ingactivitiesusedtomeetitsliquidityneeds.Long-termdebtisgenerally
usedtofinancelong-terminvestments,whileshort-termdebtisusedto
meetworkingcapitalrequirements.TheCompanydoesnotutilizefinancial
instrumentsfortradingorotherspeculativepurposes.
TheCompanyperiodicallyentersintoforeigncurrencyforward
contractsthataredesignatedascashflowhedgesofexchangeraterisk
relatedtoforecastedforeigncurrencydenominatedintercompanysales.At
December31,2004,theCompanyhadnoopencashflowhedgesrelated
totheseforeigncurrencyforwardcontracts.During2004,asaresultof
thesaleoftheintercompanyforeigncurrencydenominatedassetsand
liabilitiestothirdparties,apre-taxlossof$16millionwasreclassifiedfrom
accumulatedothercomprehensive(loss)incometocostofgoodssold.
Hedgeineffectivenesswasinsignificant.
TheCompanydoesnotapplyhedgeaccountingtotheforeigncur-
rencyforwardcontractsusedtooffsetcurrency-relatedchangesinthe
fairvalueofforeigncurrencydenominatedassetsandliabilities.These
contractsaremarkedtomarketthroughearningsatthesametimethatthe
exposedassetsandliabilitiesareremeasuredthroughearnings(bothin
otherincome(charges),net).Themajorityofthecontractsofthistypeheld
bytheCompanyaredenominatedineuros,Australiandollars,andCanadian
dollars.AtDecember31,2004,thefairvalueoftheseopencontractswas
anunrealizedgainof$25million(pre-tax).
TheCompanyhasenteredintosilverforwardcontractsthataredes-
ignatedascashflowhedgesofpriceriskrelatedtoforecastedworldwide
silverpurchases.TheCompanyusedsilverforwardcontractstominimize
itsexposuretoincreasesinsilverpricesin2002,2003,and2004.AtDe-
cember31,2004,theCompanyhadopenforwardcontractswithmaturities
throughMarch2005.
AtDecember31,2004,thefairvalueofopensilverforwardcontracts
wasanunrealizedlossoflessthan$1million(pre-tax),whichisincluded
inaccumulatedothercomprehensive(loss)income.Ifthisamountwere
toberealized,allofitwouldbereclassifiedintocostofgoodssoldduring
thenexttwelvemonths.Additionally,realizedgainsof$2million(pre-tax),
relatedtoclosedsilvercontracts,havebeendeferredinaccumulatedother
comprehensive(loss)income.Thesegainswillbereclassifiedintocostof
goodssoldassilver-containingproductsaresold,allwithinthenexttwelve
months.During2004,resultingfromthesaleofsilver-containingproducts,
arealizedgainof$10million(pre-tax)wasrecordedincostofgoodssold.
Hedgeineffectivenesswasinsignificant.
TheCompany’sfinancialinstrumentcounterpartiesarehigh-quality
investmentorcommercialbankswithsignificantexperiencewithsuch
instruments.TheCompanymanagesexposuretocounterpartycreditrisk
byrequiringspecificminimumcreditstandardsanddiversificationofcoun-
terparties.TheCompanyhasprocedurestomonitorthecreditexposure
amounts.ThemaximumcreditexposureatDecember31,2004wasnot
significanttotheCompany.
TheCompanyhasa50percentownershipinterestinKPG,ajoint
ventureaccountedforundertheequitymethod.TheCompany’spropor-
tionateshareofKPG’sothercomprehensiveincomeisthereforeincluded
initspresentationofothercomprehensive(loss)incomedisplayedinthe
ConsolidatedStatementofShareholders’Equity.