Note 23 - Financial Instruments

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 23:  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:

(in millions)		Value Of Items Recorded At Fair Value As of September 30, 2013 (Successor)
		Total		Level 1		Level 2		Level 3
ASSETS
Derivatives
Short-term foreign exchange contracts	Receivables, net	$	2	$	-	$	2	$	-
LIABILITIES
Derivatives
Short-term foreign exchange contracts	Other current liabilities		3		-		3		-

			Value Of Items Not Recorded At Fair Value As of September 30, 2013 (Successor)
(in millions)
			Total		Level 1		Level 2		Level 3
LIABILITIES
Debt
Short-term debt	Short-term borrowings and current portion of long-term debt	Carrying value	$	4	$	-	$	4	$	-
		Fair value		4		-		4		-
Long-term debt	Long-term debt, net of current portion	Carrying value		675		-		675		-
		Fair value		692		-		692		-

(in millions)		Value Of Items Recorded At Fair Value As of December 31, 2012 (Predecessor)
		Total		Level 1		Level 2		Level 3
ASSETS
Marketable securities
Short-term available-for-sale	Other current assets	$	4	$	4	$	-	$	-
Long-term available-for-sale	Other long-term assets		7		7		-		-
Derivatives
Short-term foreign exchange contracts	Receivables, net		1		-		1		-
LIABILITIES
Derivatives
Short-term foreign exchange contracts	Other current liabilities		1		-		1		-

			Value Of Items Not Recorded At Fair Value As of December 31, 2012 (Predecessor)
(in millions)
			Total		Level 1		Level 2		Level 3
ASSETS
Marketable securities
Long-term held-to-maturity	Other long-term assets	Carrying value	$	23	$	23	$	-	$	-
		Fair value		23		23		-		-
LIABILITIES
Debt
Short-term debt	Short-term borrowings and current portion of long-term debt	Carrying value		699		-		699		-
		Fair value		686		-		686		-
Long-term debt	Long-term debt, net of current portion	Carrying value		740		-		740		-
		Fair value		606		-		606		-
Debt subject to compromise	Liabilities subject to compromise	Carrying value		683		-		683		-
		Fair value		72		-		72		-

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

Fair Value

The 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 other 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 one month ended September 30, 2013 (Successor) and the eight months ended August 31, 2013 (Predecessor).

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 income (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:

	Successor			Predecessor						Successor			Predecessor
(in millions)	One Month Ended September 30, 2013			Two Months Ended August 31, 2013			Three Months Ended September 30, 2012			One Month Ended September 30, 2013			Eight Months Ended August 30, 2013			Nine Months Ended September 30, 2012
Net gain (loss)	$	(4	)	$	(3	)	$	(2	)	$	(4	)	$	(7	)	$	(15	)

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.

Foreign currency forward contracts are used to mitigate currency risk related to foreign currency denominated assets and liabilities.  Silver forward contracts may be used to mitigate Kodak’s risk to fluctuating silver prices.  Kodak’s exposure to changes in interest rates results from its investing and borrowing activities used to meet its liquidity needs.

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 September 30, 2013 was not significant to Kodak.

In the event of a default under the Company’s Term Credit Agreements, 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.  At September 30, 2013, Kodak had open derivative contracts in liability positions with a total fair value of $3 million.

The location and amounts of pre-tax gains and losses related to derivatives reported in the Consolidated Statement of Operations are shown in the following tables:

Derivatives not designated as hedging instruments	Location of gain or (loss) recognized in income on derivative	Gain (loss) recognized in income on derivative
(in millions)		Successor	Predecessor		Successor	Predecessor
		One Month Ended September 30, 2013	Two Months Ended August 31, 2013	Three Months Ended September 30, 2012	One Month Ended September 30, 2013	Eight Months Ended August 31, 2013	Nine Months Ended September 30, 2012
Foreign exchange contracts	Other income (charges), net	$                   (3)	3	$                6	$                 (3)	$                 1	$                 2

Derivatives in cash flow hedging relationships	Gain recognized in OCI on derivative (effective portion)			Loss reclassified from OCI into cost of sales (effective portion)			Gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
(in millions)	Successor	Predecessor		Successor	Predecessor		Successor	Predecessor
	One Month Ended September 30, 2013	Two Months Ended August 31, 2013	Three Months Ended September 30, 2012	One Month Ended September 30, 2013	Two Months Ended August 31, 2013	Three MonthsEnded September 30, 2012	One Month Ended September 30, 2013	Two Months Ended August 31, 2013	Three Months Ended September 30, 2012
Commodity contracts	$                           -	$                             -	$                             -	$                           -	$                           -	$                          (1)	$                          -	$                            -	$                             -

	Successor	Predecessor		Successor	Predecessor		Successor	Predecessor
	One Month Ended September 30, 2013	Eight Months Ended August 31, 2013	Nine Months Ended September 30, 2012	One Month Ended September 30, 2013	Eight Months Ended August 31, 2013	Nine Months Ended September 30, 2012	One Month Ended September 30, 2013	Eight Months Ended August 31, 2013	Nine Months Ended September 30, 2012
Commodity contracts	$                           -	$                             -	$                            1	$                           -	$                           -	$                          (6)	$                          -	$                            -	$                             -

Foreign Currency Forward Contracts

Kodak’s foreign currency forward contracts used to mitigate currency risk related to existing foreign currency denominated assets and liabilities are not designated as hedges, and are marked to market through net (loss) earnings at the same time that the exposed assets and liabilities are re-measured through net earnings (loss) (both in Other income (charges), net in the Consolidated Statement of Operations).  The notional amount of such contracts open at September 30, 2013 was approximately $680 million.  The majority of the contracts of this type held by Kodak are denominated in euros and Swiss francs.

Silver Forward Contracts

Kodak may enter into silver forward contracts that are designated as cash flow hedges of commodity price risk related to forecasted purchases of silver.  Kodak had no open hedges as of September 30, 2013.

In January 2012, Kodak terminated all its existing hedges at a loss of $5 million.  These hedges were designated as secured agreements under the Second Amended and Restated Credit Agreement and needed to be settled prior to the termination of that facility in conjunction with the Company’s Original Senior DIP Credit Agreement.  Hedge gains and losses related to these silver forward contracts are reclassified into Cost of sales in the Consolidated Statement of Operations as the related silver containing products are sold to third parties.  These gains or losses transferred to Cost of sales are generally offset by increased or decreased costs of silver purchased in the open market.  As of September 30, 2013, there were no existing gains or losses to be reclassified to Cost of sales within the next twelve months.