APPENDIX
Reconciliation of Non-GAAP Financial Measures
to the Most Directly Comparable GAAP Measures
In its February 7, 2008 Investor Meeting presentation, Eastman Kodak Company (“The Company”) referenced certain non-GAAP financial measures, "Digital Revenue Growth", “Digital Earnings”, “Digital EFO", “Digital EFO Improvement”, “Gross Profit excluding Restructuring”, “ Pro Forma Revenue Change”, “EFO excluding Restructuring”, “EBITDA”, Total Company and Segment: “Pro Forma Revenue”, “Pro Forma Gross Profit”, “Pro Forma SG&A” as a percent of sales, “Pro Forma R&D” as a percent of sales, and “Pro Forma Earnings from Operations excluding Restructuring” as a percent of sales. Additional non-GAAP financial measures presented include “CDG and GCG Segment Digital Revenue Growth", “CDG Pro Forma EFO Improvement”, “GCG Pro Forma EFO”, “Pro Forma Digital EFO”, “Pro Forma Digital Revenue”, “Net Cash Generation”, “Cash Generation before Dividends”, and "Cash Generation Excluding Carryover Restructuring/Rationalization".
The Company believes that these non-GAAP measures represent important internal measures of performance. Accordingly, where they are provided, it is to give investors the same financial data management uses with the belief that this information will assist the investment community in properly assessing the underlying performance of the Company, its financial condition, results of operations and cash flow on a year-over-year basis.
The following reconciliations are provided with respect to terms used in the February 7, 2008 presentations of Kodak’s Chief Executive Officer Antonio Perez, Chief Financial Officer Frank Sklarsky and other Company Officers.
1. The following table reconciles 2007 net cash generation to the most directly comparable GAAP measure of net cash provided by continuing operations from operating activities (amounts in millions):
2007 | 2007 | |||
Goal | Actual | |||
Net cash generation, as presented | ~$100 | $ | 333 | |
Additions to properties, net proceeds from the sales of | ||||
businesses/assets, distributions from (investments in) | ||||
unconsolidated affiliates and dividends, net | 150-300 | 19 | ||
Net cash provided by continuing operations from | ||||
operating activities (GAAP basis) | $250-$400 | $ | 352 |
2. The following table reconciles the 2007 digital revenue growth for CDG, GCG and Total Company to the most directly comparable GAAP measure of consolidated total revenue decline:
2007 | 2007 | ||
Goal | Actuals | ||
CDG Digital revenue growth, as presented | 2%-4% | 8% | |
GCG Digital revenue growth, as presented | 6%-9% | 7% | |
Total Digital revenue growth, as presented | 3%-5% | 8% | |
Total Traditional and New Technologies revenue decline | (18)% | (15)% | |
Total Company revenue decline (GAAP basis) | (7)%-(4)% | (3)% |
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3. The following table reconciles 2007 digital earnings to the most directly comparable GAAP measure of loss from continuing operations before interest, other income (charges), net and income taxes (amounts in millions):
2007 | 2007 | ||||
Goal | Actual | ||||
Digital earnings, as presented | $150-$250 | $ | 176 | ||
Traditional earnings and New Technologies loss | ~$150 | 167 | |||
Total EFO, as presented | $300-$400 | $ | 343 | ||
Restructuring and items of comparability | $(725)-$(925) | (573 | ) | ||
Loss from continuing operations before interest, other | |||||
income (charges), net and income taxes (GAAP basis) | $(425)-$(525) | $ | (230 | ) |
4. The following table reconciles 2006 and 2007 digital earnings from operations to the most directly comparableGAAP measure of loss from continuing operations before interest, other income (charges), net and income taxes (amounts in millions):
2007 | 2006 | Increase | ||||||||
Actual | Actual | (Decrease) | ||||||||
Digital Earnings from Operations, as presented | $ | 176 | $ | (13 | ) | $ | 189 | |||
Traditional earnings, New Technologies loss, restructuring | ||||||||||
costs and items of comparability | (406 | ) | (463 | ) | $ | 57 | ||||
Loss from continuing operations before interest, other | ||||||||||
income (charges), net and income taxes (GAAP basis) | $ | (230 | ) | $ | (476 | ) | $ | 246 |
5. The following table reconciles 2008 EBITDA goal to the most directly comparable GAAP measure of earnings from continuing operations before interest, other income (charges), net and income taxes (amounts in millions):
2008 | |
Goal | |
EBITDA, as presented | $1,000-$1,100 |
Depreciation and Amortization | ~$(675) |
Earnings from continuing operations before interest, other income | |
(charges), net and income taxes (GAAP basis) | $360-$400 |
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6. The following table reconciles 2008 cash generation excluding carryover restructuring/rationalization to the most directly comparable GAAP measure of net cash provided by continuing operations from operating activities (amounts in millions):
2008 | |
Goal | |
Cash generation excluding carryover restructuring/rationalization, as | |
presented | $550-$650 |
Projected restructuring payments | ~$150 |
Cash generation before dividend payments | $400-$500 |
Additions to properties, net proceeds from the sales of businesses/assets, | |
distributions from (investments in) unconsolidated affiliates and dividends | $125-$175 |
Net cash provided by continuing operations from operating activities | |
(GAAP basis), as presented | $575-$625 |
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7. The following table reconciles 2006 and 2007 Pro Forma Revenue, Gross Profit and SG&A, R&D, and EFO segment as a percent of sales for CDG, GCG and FPEG to the most directly comparable GAAP measures based on previously reported 2006 and 2007 actual segment results:
($ in millions) | Impact of 2008 | GAAP basis | Impact of 2008 | GAAP basis | ||||||||||||||||||||
2006 | structure realignment | 2006 | 2007 | structure realignment | 2007 | |||||||||||||||||||
FPEG (previously FPG) | Pro Forma | and cost reallocations | Actual | Pro Forma | and cost reallocations | Actual | ||||||||||||||||||
Revenue | $ | 4,271 | $ | (1,959 | ) | $ | 2,312 | $ | 3,638 | $ | (1,670 | ) | $ | 1,968 | ||||||||||
Gross Profit | 25 | % | 12 | % | 37 | % | 24 | % | 13 | % | 37 | % | ||||||||||||
SG&A | 15 | % | 5 | % | 20 | % | 14 | % | 3 | % | 17 | % | ||||||||||||
R&D | 2 | % | (1 | )% | 1 | % | 2 | % | (1 | )% | 1 | % | ||||||||||||
EFO | 8 | % | 8 | % | 16 | % | 8 | % | 11 | % | 19 | % | ||||||||||||
Impact of 2008 | GAAP basis | Impact of 2008 | GAAP basis | |||||||||||||||||||||
2006 | structure realignment | 2006 | 2007 | structure realignment | 2007 | |||||||||||||||||||
CDG | Pro Forma | and cost reallocations | Actual | Pro Forma | and cost reallocations | Actual | ||||||||||||||||||
Revenue | $ | 2,995 | $ | 1,716 | $ | 4,711 | $ | 3,241 | $ | 1,390 | $ | 4,631 | ||||||||||||
Gross Profit | 21 | % | (3 | )% | 18 | % | 26 | % | (6 | )% | 20 | % | ||||||||||||
SG&A | 19 | % | (2 | )% | 17 | % | 18 | % | (1 | )% | 17 | % | ||||||||||||
R&D | 10 | % | (4 | )% | 6 | % | 8 | % | (3 | )% | 5 | % | ||||||||||||
EFO | (7 | )% | 2 | % | (5 | )% | 0 | % | (2 | )% | (2 | )% | ||||||||||||
Impact of 2008 | GAAP basis | Impact of 2008 | GAAP basis | |||||||||||||||||||||
2006 | structure realignment | 2006 | 2007 | structure realignment | 2007 | |||||||||||||||||||
GCG | Pro Forma | and cost reallocations | Actual | Pro Forma | and cost reallocations | Actual | ||||||||||||||||||
Revenue | $ | 3,287 | $ | 190 | $ | 3,477 | $ | 3,413 | $ | 177 | $ | 3,590 | ||||||||||||
Gross Profit | 31 | % | (2 | )% | 29 | % | 28 | % | (1 | )% | 27 | % | ||||||||||||
SG&A | 23 | % | (3 | )% | 20 | % | 19 | % | (1 | )% | 18 | % | ||||||||||||
R&D | 6 | % | 0 | % | 6 | % | 6 | % | 0 | % | 6 | % | ||||||||||||
EFO | 2 | % | 1 | % | 3 | % | 3 | % | 0 | % | 3 | % |
8. The following table reconciles 2006 and 2007 total company Pro Forma Gross Profit excluding restructuring andSG&A, R&D, and EFO excluding restructuring as a percent of sales to the most directly comparable GAAP measures of Gross Profit, SG&A as a percent of sales, R&D as a percent of sales, and loss from continuing operations before interest, other income (charges), net and income taxes as a percent of sales (“GAAP basis”), as previously reported:
Impacts of 2008 | Impacts of 2008 | |||||||||||||||||||||||
($ in millions) | structure realignment | structure realignment | ||||||||||||||||||||||
cost reallocations, | GAAP basis | cost reallocations, | GAAP basis | |||||||||||||||||||||
2006 | restructuring and items | 2006 | 2007 | restructuring and items | 2007 | |||||||||||||||||||
Total Company | Pro Forma | of comparability | Actual | Pro Forma | of comparability | Actual | ||||||||||||||||||
Revenue | $ | 10,568 | $ | - | $ | 10,568 | $ | 10,301 | $ | - | $ | 10,301 | ||||||||||||
Gross Profit | 26 | %* | (3 | )% | 23 | % | 26 | %* | (2 | )% | 24 | % | ||||||||||||
SG&A | 19 | % | (1 | )% | 18 | % | 17 | % | 0 | % | 17 | % | ||||||||||||
R&D | 6 | % | (1 | )% | 5 | % | 5 | % | 0 | % | 5 | % | ||||||||||||
EFO | 2 | %* | (7 | )% | (5 | )% | 3 | %* | (5 | )% | (2 | )% |
* excluding restructuring and items of comparability
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9. The following table reconciles 2007 CDG Pro Forma EFO improvement to the most directly comparable GAAP measure of CDG improvement in loss from continuing operations before interest, other income (charges), net and income taxes:
2007 | |||
(in millions) | Actual | ||
CDG Pro Forma EFO improvement, as presented | $ | 198 | |
Impact of 2008 structure realignment and cost | |||
reallocations | $ | (50 | ) |
CDG improvement in loss from continuing | |||
operations before interest, other income | |||
(charges), net and income taxes (GAAP basis) | $ | 148 | |
10. The following table reconciles 2006 and 2007 Pro Forma digital revenue to the most directly comparable GAAP measures of total revenue:
2007 | 2006 | Growth/ | ||||||||
($ in billions) | Actual | Actual | (Decline) | |||||||
Pro Forma digital revenue, as presented | $ | 6.6 | $ | 6.3 | 6 | % | ||||
Impact of 2008 structure realignment | (0.2 | ) | (0.4 | ) | -50 | % | ||||
Digital Revenue as previously reported | $ | 6.4 | $ | 5.9 | 8 | % | ||||
Traditional and New Technologies revenue | 3.9 | 4.7 | -17 | % | ||||||
Total revenue (GAAP basis), as presented | $ | 10.3 | $ | 10.6 | -3 | % |
11. The following table reconciles 2006 and 2007 Pro Forma digital EFO to the most directly comparable GAAP measures of loss from continuing operations before interest, other income (charges), net and income taxes:
2007 | 2006 | Growth/ | ||||||||
($ in millions) | Actual | Actual | (Decline) | |||||||
Pro Forma digital EFO, as presented | $ | 83 | $ | (152 | ) | -155 | % | |||
Impact of 2008 structure realignment | 93 | 139 | -33 | % | ||||||
Digital EFO as previously reported | $ | 176 | $ | (13 | ) | 100 | % | |||
Traditional and New Technologies earnings, restructuring | ||||||||||
costs and items of comparability | (406 | ) | (463 | ) | -12 | % | ||||
Loss from continuing operations before interest, other | ||||||||||
income (charges), net and income taxes (GAAP basis) | $ | (230 | ) | $ | (476 | ) | -52 | % |
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12. The following table reconciles 2006 and 2007 GCG Pro Forma EFO to the most directly comparable GAAP measure of GCG earnings from continuing operations before interest, other income (charges), net and income taxes:
2007 | 2006 | |||||||||
Actual | Actual | Improvement | ||||||||
GCG Pro Forma EFO, as presented | $ | 100 | $ | 64 | $ | 36 | ||||
Impact of 2008 structure realignment and cost reallocations | 16 | 36 | (20 | ) | ||||||
2007 GCG earnings from continuing operations before | ||||||||||
interest, other income (charges), net and income taxes | ||||||||||
(GAAP basis) | $ | 116 | $ | 100 | $ | 16 |
13. The following table reconciles 2007 total company Gross Profit excluding restructuring costs to total company Gross Profit on a GAAP basis:
2007 | 2007 | ||
Goal | Actual | ||
Gross Profit excluding restructuring, as presented | 25%-26% | 26% | |
Restructuring and items of comparability | (1)% | (2)% | |
Gross Profit (GAAP basis) | 24%-25% | 24% |
14. The following table reconciles 2007 earnings from operations excluding restructuring as a percent of sales to the most directly comparable GAAP measure of loss from continuing operations before interest, other income (charges), net and income taxes as a percent of sales:
2007 | 2007 | |||
Goal | Actual | |||
Earnings from operations excluding restructuring as a percent of sales, as presented | 3%-4% | 3% | ||
Restructuring costs and items of comparability | (7)%-(9)% | (5)% | ||
Loss from continuing operations before interest, other income (charges), net and | ||||
income taxes as a percent of sales (GAAP basis) | (4)%-(5)% | (2)% |
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