Note 14 - Guarantees

9 Months Ended

Sep. 30, 2013

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 September 30, 2013, the maximum potential amount of future payments (undiscounted) that Kodak could be required to make under these customer-related guarantees was $34 million. At September 30, 2013, the carrying amount of any liability related to these customer guarantees was not material.

Customer financing agreements and related guarantees, which mature on varying dates through 2018, 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 debtor. 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 may not cover the maximum potential loss under these guarantees.

EKC also guarantees obligations to third parties for some of its consolidated subsidiaries. The maximum amount guaranteed is $103 million, and the outstanding amount for those guarantees is $103 million.

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, 2012 (Predecessor):	$	29
Actual warranty experience		(24	)
Warranty provisions		13
Accrued warranty obligations as of August 31, 2013 (Predecessor):	$	18

Actual warranty experience	$	(3	)
Warranty provisions		2
Accrued warranty obligations as of September 30, 2013 (Successor):	$	17

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. Costs incurred under these arrangements for the one month ended September 30, 2013 (Successor) and eight months ended August 31, 2013 (Predecessor) amounted to $12 million and $107 million, respectively. The change in Kodak's deferred revenue balance in relation to these extended warranty and maintenance arrangements from December 31, 2012 to September 30, 2013, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:

(in millions)

Deferred revenue on extended warranties as of December 31, 2012 (Predecessor):	$	37
New extended warranty and maintenance arrangements		119
Recognition of extended warranty and maintenance arrangement revenue		(122	)
Deferred revenue on extended warranties as of August 31, 2013 (Predecessor):	$	34

Impact of fresh start accounting	$	(8	)
New extended warranty and maintenance arrangements		15
Recognition of extended warranty and maintenance arrangement revenue		(14	)
Deferred revenue on extended warranties as of September 30, 2013 (Successor):	$	27