Note 14: Guarantees

12 Months Ended

Dec. 31, 2012

NOTE 14: GUARANTEES

Kodak guarantees debt and other obligations of certain customers. The debt and other obligations are primarily due to banks and leasing companies in connection with financing of customers’ purchases of equipment and product from Kodak. At December 31, 2012, the maximum potential amount of future payments (undiscounted) that Kodak could be required to make under these customer-related guarantees was $19 million. At December 31, 2012, the carrying amount of any liability related to these customer guarantees was not material.

The customer financing agreements and related guarantees, which mature between 2013 and 2016, typically have a term of 90 days for product and short-term equipment financing arrangements, and up to five years for long-term equipment financing arrangements. These guarantees would require payment from Kodak only in the event of default on payment by the respective customer. In some cases, particularly for guarantees related to equipment financing, Kodak has collateral or recourse provisions to recover and sell the equipment to reduce any losses that might be incurred in connection with the guarantees. However, any proceeds received from the liquidation of these assets would not cover the maximum potential loss under these guarantees.

EKC also guarantees potential indebtedness to banks and other third parties for some of its consolidated subsidiaries. The maximum amount guaranteed is $100 million, and the outstanding amount for those guarantees is $83 million with $38 million recorded within the Short-term borrowings and current portion of long-term debt in the accompanying Consolidated Statement of Financial Position. The remaining $45 million of outstanding guarantees represent parent guarantees providing financial assurance to third parties that the Company’s subsidiaries will fulfill their future performance or financial obligations under various contracts, which do not necessarily have corresponding liabilities reported in Kodak’s financial statements. These guarantees expire in 2013 through 2019.

Pursuant to the terms of the Company's DIP Credit Agreement, obligations of the Borrowers to the Lenders under the DIP Credit Agreement, as well as secured agreements in an amount not to exceed $75 million, are guaranteed by the Company and the Company’s U.S. subsidiaries and included in the above amounts. Secured agreements under the DIP Credit Agreement for the Debtors totaled $20 million as of December 31, 2012.

EKC has previously issued (pre-petition) a guarantee to Kodak Limited (the “Subsidiary”) and the Trustee of the Kodak Pension Plan (the “KPP”) in the United Kingdom. Under that arrangement, EKC guaranteed to the Subsidiary and the Trustee the ability of the Subsidiary, only to the extent it becomes necessary to do so, to (1) make contributions to the KPP to ensure sufficient assets exist to make plan benefit payments, as they become due, if the KPP otherwise would not have sufficient assets and (2) make contributions to the KPP such that it will achieve fully funded status by the funding valuation for the period ending December 31, 2022. See Note 1, “Bankruptcy Proceedings” for additional information.

Indemnifications

Kodak issues indemnifications in certain instances when it sells businesses and real estate, and in the ordinary course of business with its customers, suppliers, service providers and business partners. Further, Kodak indemnifies officers and directors who are, or were, serving in such capacity at the request of Kodak or the entity for which they serve. Historically, costs incurred to settle claims related to these indemnifications have not been material to Kodak’s financial position, results of operations or cash flows. Additionally, the fair value of the indemnifications that Kodak issued during the year ended December 31, 2012 was not material to Kodak’s financial position, results of operations or cash flows.

Warranty Costs

Kodak has warranty obligations in connection with the sale of its products and equipment. The original warranty period is generally one year or less. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. Kodak estimates its warranty cost at the point of sale for a given product based on historical failure rates and related costs to repair. The change in Kodak's accrued warranty obligations balance, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:

(in millions)

Accrued warranty obligations as of December 31, 2010	$	43
Actual warranty experience during 2011		(92	)
2011 warranty provisions		95
Accrued warranty obligations as of December 31, 2011	$	46
Actual warranty experience during 2012		(72	)
2012 warranty provisions		60
Accrued warranty obligations as of December 31, 2012	$	34

Kodak also offers its customers extended warranty arrangements that are generally one year, but may range from three months to three years after the original warranty period. Kodak provides repair services and routine maintenance under these arrangements. Kodak has not separated the extended warranty revenues and costs from the routine maintenance service revenues and costs, as it is not practicable to do so. Therefore, these revenues and costs have been aggregated in the discussion that follows. The change in Kodak's deferred revenue balance in relation to these extended warranty and maintenance arrangements, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:

(in millions)

Deferred revenue as of December 31, 2010	$	130
New extended warranty and maintenance arrangements in 2011		428
Recognition of extended warranty and maintenance arrangement revenue in 2011		(438	)
Deferred revenue as of December 31, 2011	$	120
New extended warranty and maintenance arrangements in 2012		384
Recognition of extended warranty and maintenance arrangement revenue in 2012		(397	)
Deferred revenue as of December 31, 2012	$	107

Costs incurred under these extended warranty and maintenance arrangements for the years ended December 31, 2012 and 2011 amounted to $280 million and $305 million, respectively.