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Note 16 - Financial Instruments

3 Months Ended

Mar. 31, 2015

NOTE 16: FINANCIAL INSTRUMENTS

The following tables present the carrying amounts, estimated fair values, and location in the Consolidated Statement of Financial Position for Kodak’s financial instruments:

		Value Of Items Recorded At Fair Value
(in millions)		As of March 31, 2015
		Total		Level 1		Level 2		Level 3
ASSETS
Derivatives
Short-term foreign exchange contracts	Receivables, net	$	4	$	-	$	4	$	-

Marketable securities
Long-term available-for-sale securities	Other long-term assets		4		4		-		-

LIABILITIES
Derivatives
Short-term foreign exchange contracts	Other current liabilities		2		-		2		-

(in millions)			Value Of Items Not Recorded At Fair Value
			As of March 31, 2015
			Total		Level 1		Level 2		Level 3
LIABILITIES
Debt
Short-term debt	Short-term borrowings and current portion of long-term debt	Carrying value	$	6	$	-	$	6	$	-
		Fair value		6		-		6		-

Long-term debt	Long-term debt, net of current portion	Carrying value		671		-		671		-
		Fair value		698		-		698		-

		Value Of Items Recorded At Fair Value
(in millions)		As of December 31, 2014
		Total		Level 1		Level 2		Level 3
ASSETS
Derivatives
Short-term foreign exchange contracts	Receivables, net	$	2	$	-	$	2	$	-

Marketable securities
Long-term available-for-sale securities	Other long-term assets		3		3		-		-

LIABILITIES
Derivatives
Short-term foreign exchange contracts	Other current liabilities		1		-		1		-

			Value Of Items Not Recorded At Fair Value
(in millions)			As of December 31, 2014
			Total		Level 1		Level 2		Level 3
LIABILITIES
Debt
Short-term debt	Short-term borrowings and current portion of long-term debt	Carrying value	$	5	$	-	$	5	$	-
		Fair value		5		-		5		-

Long-term debt	Long-term debt, net of current portion	Carrying value		672		-		672		-
		Fair value		681		-		681		-

Kodak does not utilize financial instruments for trading or other speculative purposes.

Fair Value

Fair values of marketable securities are determined using quoted prices in active markets for identical assets (Level 1 fair value measurements). Fair values of Kodak’s forward contracts are determined using observable inputs (Level 2 fair value measurements), and are based on the present value of expected future cash flows (an income approach valuation technique) considering the risks involved and using discount rates appropriate for the duration of the contracts. Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. There were no transfers between levels of the fair value hierarchy during the quarter ended March 31, 2015.

Fair values of long-term borrowings are determined by reference to quoted market prices, if available, or by pricing models based on the value of related cash flows discounted at current market interest rates. The carrying values of cash and cash equivalents and trade receivables (which are not shown in the table above) approximate their fair values.

Foreign Exchange

Foreign exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in Other charges, net in the accompanying Consolidated Statement of Operations. The net effects of foreign currency transactions, including changes in the fair value of foreign exchange contracts, are shown below:

	Location of Gain or (Loss) Recognized in Income	Three Months Ended March 31,
(in millions)		2015			2014
Foreign exchange gains (losses), net	Other charges, net	$	(10	)	$	(1	)

Derivative Financial Instruments

Kodak, as a result of its global operating and financing activities, is exposed to changes in foreign currency exchange rates, commodity prices, and interest rates, which may adversely affect its results of operations and financial position. Kodak manages such exposures, in part, with derivative financial instruments.

Kodak’s exposure to changes in interest rates results from its investing and borrowing activities used to meet its liquidity needs.

Foreign currency forward contracts are used to mitigate currency risk related to foreign currency denominated assets and liabilities. Kodak’s foreign currency forward contracts are not designated as hedges, and are marked to market through net loss at the same time that the exposed assets and liabilities are re-measured through net loss. The notional amount of such contracts open at March 31, 2015 was approximately $498 million. The majority of the contracts of this type held by Kodak are denominated in euros and Chinese renminbi.

Kodak had no derivatives designated as hedging instruments for the three months ended March 31, 2015 and 2014. The location and amounts of pre-tax gains and losses related to derivatives not designated as hedging instruments reported in the Consolidated Statement of Operations are shown in the following table:

Derivatives Not Designated as Hedging Instruments, Foreign Exchange Contracts
(in millions)

Location of Gain or (Loss) Recognized in Income on Derivative	Gain (Loss) Recognized in Income on Derivative
	Three Months Ended
	March 31,
	2015	2014
Other charges, net	$ 18	$ 4

Kodak’s financial instrument counterparties are high-quality investment or commercial banks with significant experience with such instruments. Kodak manages exposure to counterparty credit risk by requiring specific minimum credit standards and diversification of counterparties. Kodak has procedures to monitor the credit exposure amounts. The maximum credit exposure at March 31, 2015 was not significant to Kodak.

In the event of a default under the Company’s Senior Secured First Lien Term Credit Agreement, Senior Secured Second Lien Term Credit Agreement, the ABL Credit Agreement, or a default under any derivative contract or similar obligation of Kodak, subject to certain minimum thresholds, the derivative counterparties would have the right, although not the obligation, to require immediate settlement of some or all open derivative contracts at their then-current fair value, but with liability positions netted against asset positions with the same counterparty.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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