Exhibit 99.1
Kodak Reports 3rd-Quarter Net Income of 42 Cents Per Share; Sales Rise
3% to $3.447 Billion EPS from Continuing Operations, Excluding Charges
and Other Items, Total 88 Cents
ROCHESTER, N.Y.--(BUSINESS WIRE)--Oct. 22, 2003--Eastman Kodak
Company said that third-quarter net income, in accordance with
Generally Accepted Accounting Principles (GAAP) in the U.S., totaled
42 cents per share and that sales rose 3% compared with the year-ago
period.
Excluding the impact of previously announced focused cost
reductions and a one-time charitable donation, earnings from
continuing operations were 88 cents per share.
For the third quarter of 2003:
-- Sales totaled $3.447 billion, up 3% from $3.352 billion in the
third quarter of 2002. Excluding foreign exchange, sales
declined 1%.
-- The company reported net income of $122 million, or 42 cents
per share, compared with net income of $334 million, or $1.15
per share, in the third quarter of 2002.
-- Earnings from continuing operations, excluding the impact of
focused cost reductions and a non-operational item, were $252
million, or 88 cents per share. The after-tax non-operational
items include a charge of $125 million, or 44 cents per share,
related to previously announced cost reductions, and a charge
of $5 million, or 2 cents per share, for a charitable
contribution to the Infotonics Technology Center. The company
also adjusted its estimated annual effective tax rate to 19%
from 24%, which contributed 10 cents per share to both
operational and GAAP earnings. In the third quarter of 2002,
earnings from continuing operations, excluding non-operational
items, totaled $306 million, or $1.05 per share. The after-tax
non-operational items from the year-ago quarter added, on a
net basis, 11 cents per share to reported earnings and
included the restructuring of Japanese photofinishing
operations; a one-time write-down of venture investments;
adjustments related to previously announced restructuring
programs; and a one-time tax benefit related to the Japanese
photofinishing operations.
"Our third-quarter results reinforce the rationale behind the
strategy we unveiled to investors on Sept. 25," said Kodak Chairman
and Chief Executive Officer Daniel A. Carp. "Our digital businesses -
both commercial and consumer - continue to demonstrate solid growth.
In Health Imaging, for example, we are selling more computed
radiography and digital radiography systems. With the completion this
month of the PracticeWorks acquisition, we are now the leader in the
market for digital dentistry.
"On the consumer side, Kodak's EasyShare family of digital cameras
and printer docks continue to gain widespread acceptance," Carp said.
"Popular Photography & Imaging magazine, for example, recently hailed
the new Kodak EasyShare DX6490 digital camera for its ease-of-use and
image quality. And during the third quarter, Kodak posted its
first-ever profit in consumer digital cameras on a fully allocated
basis. The EasyShare printer dock also is selling briskly, providing
more evidence that Kodak knows how to satisfy the consumer's demand
for simple, high-quality prints at home.
"The company enjoyed solid cash generation in the third quarter,
which confirms our belief that we will continue to produce a
substantial amount of cash from our traditional businesses," Carp
said. "We are investing in a highly disciplined manner to fund the
transformation of Kodak into a digitally oriented imaging company.
"In markets where film continues to grow, we will continue to
invest smartly," Carp said. "Today, we announced that Kodak and China
Lucky Film Corp. have signed a 20-year agreement to expand each
other's market opportunities. This is an example of the kind of
disciplined investments that will help maximize the value of our
traditional businesses and create funding sources for the digital
transformation."
Other third-quarter 2003 details from continuing operations:
-- Kodak's operating cash flow was lower than the year-ago
quarter, primarily reflecting lower net income from continuing
operations.
-- For the quarter, operating cash flow was $243 million,
compared with $345 million in the third quarter of 2002.
(Kodak defines operating cash flow as net cash provided by
continuing operations, as determined under GAAP, plus proceeds
from the sale of assets minus capital expenditures,
acquisitions, investments in unconsolidated affiliates and
dividends.)
-- The company's debt totaled $2.890 billion at the end of the
quarter, compared with $2.742 billion in the year-ago quarter.
The company held $983 million in cash on its balance sheet at
the end of the quarter, up from $561 million at the end of the
third quarter of 2002. Net debt, or total debt minus cash,
totaled $1.907 billion at the end of the third quarter, down
$274 million from the year-ago quarter. These figures don't
include the $1.075 billion in debt that Kodak issued in
October.
-- Gross profit on an operational basis was 33.7%, compared with
38.5% in the year-ago period.
-- Selling, general and administrative expenses on an operational
basis were 18.3% of sales, down from 18.4% in the year-ago
quarter.
The segment results for the third quarter of 2003 are as follows:
-- Photography segment sales totaled $2.475 billion, up 3%. The
segment had earnings from operations of $204 million on an
operational and GAAP basis, compared with earnings from
operations of $324 million a year ago. Highlights for the
quarter included a 117% increase in consumer digital camera
sales, a 43% increase in sales at Ofoto, a 33% increase in
inkjet paper sales, and a 14% increase in the sale of photo
kiosks and related media.
-- Health Imaging segment sales were $571 million, up 1%.
Earnings from operations on an operational and GAAP basis for
the segment were $117 million, down from $126 million in the
year-ago period. Highlights included higher sales of digital
capture equipment, digital media and services.
-- Commercial Imaging segment sales were $373 million, up 6%.
Earnings from operations on an operational and GAAP basis were
$33 million, compared with $42 million in the year-ago period.
-- All Other sales were $28 million, up from $26 million. Losses
from operations on an operational and GAAP basis totaled $19
million, compared with losses of $8 million in the year-ago
period. The All Other category includes the Kodak Display
business, as well as Sensors, Optics and miscellaneous
businesses.
Earnings Outlook:
-- The company expects operational earnings of $2.10 to $2.20 per
share, and GAAP earnings of $1.15 to $1.30 per share, for all
of 2003.
"As we said on Sept. 25, Kodak intends to harness the power of
digital technology to become a bigger, more diversified company,
pursuing markets as varied as consumer digital cameras, digital
medical imaging equipment, commercial printing and organic displays,"
Carp said. "In keeping with the Sept. 25 announcement, we will change
the way Kodak reports its financial results so that investors benefit
from a consistent, transparent presentation that aligns with the
markets we are pursuing."
Beginning with the first quarter of 2004, Kodak will report
results for the following segments: Digital & Film Imaging Systems;
Health Imaging; Commercial Imaging; and Commercial Printing. The All
Other category will include the operations that comprise Display &
Components. Kodak also will provide in the first quarter results from
past years that reflect the new reporting segments outlined above.
"As we execute on our strategy, investors can expect to see more
of the milestones that we've already achieved in digital markets,"
Carp said. "Kodak, for example, holds the No. 1 share position in the
market for photo kiosks at retail, online photofinishing through
Ofoto, high-speed document scanners, DryView laser printers for
medical images, digital dental equipment and software, and OLED
flat-panel displays, while sharing the top spot in the U.S. for
photo-quality inkjet paper. That's above and beyond our No. 1 position
in such traditional markets as consumer photographic film,
motion-picture film and medical x-ray film - just to name a few.
"Today's results represent another step toward the successful
implementation of a strategy that will allow Kodak to claim a larger
share of the growing $385 billion infoimaging market," Carp said.
"With success will come higher sales, profits and investment returns
for Kodak shareholders. I am committed - along with a management team
experienced in digital markets - to generate as much value as possible
from Kodak's assets, and we are convinced that the plan announced on
Sept. 25 represents the best way to achieve that goal."
Operational items are non-GAAP financial measures as defined by
the Securities and Exchange Commission's final rules under "Conditions
for Use of Non-GAAP Financial Measures." Reconciliations of
operational items included in this press release to the most directly
comparable GAAP financial measures can be found in the Financial
Discussion Document attached to this press release.
Certain statements in this press release may be forward looking in
nature, or "forward-looking statements" as defined in the United
States Private Securities Litigation Reform Act of 1995. For example,
references to the Company's fourth-quarter 2003 revenue, earnings,
cash flow expectations and future focused cost reductions are
forward-looking statements.
Actual results may differ from those expressed or implied in
forward-looking statements. In addition, any forward-looking
statements represent our estimates only as of Oct. 22, 2003, and
should not be relied upon as representing our estimates as of any
subsequent date. While we may elect to update forward-looking
statements at some point in the future, we specifically disclaim any
obligation to do so, even if our estimates change. The forward-looking
statements contained in this press release are subject to a number of
risk factors, including the successful:
-- Implementation of product strategies (including category
expansion, digitization, OLED, and digital products);
-- Implementation of intellectual property licensing
strategies;
-- Development and implementation of e-commerce strategies;
-- Completion of information systems upgrades, including SAP;
-- Completion of various portfolio actions;
-- Reduction of inventories;
-- Improvement in manufacturing productivity;
-- Improvement in receivables performance;
-- Reduction in capital expenditures;
-- Improvement in supply chain efficiency;
-- Implementation of future focused cost reductions,
including personnel reductions;
-- Development of the Company's business in emerging markets
like China, India, Brazil, Mexico, and Russia.
The forward-looking statements contained in this press release are
subject to the following additional risk factors:
-- Inherent unpredictability of currency fluctuations and raw
material costs;
-- Competitive actions, including pricing;
-- The nature and pace of technology substitution, including the
analog-to-digital shift;
-- Continuing customer consolidation and buying power;
-- General economic, geo-political, public health and business
conditions.
-- Other factors disclosed previously and from time to time in
the Company's filings with the Securities and Exchange
Commission.
Any forward-looking statements in this press release should be
evaluated in light of these important risk factors.
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS - UNAUDITED
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ----------------
2003 2002 2003 2002
Net sales $3,447 $3,352 $9,539 $9,394
Cost of goods sold 2,320 2,062 6,472 5,990
------ ------ ------ ------
Gross profit 1,127 1,290 3,067 3,404
Selling, general and
administrative expenses 639 631 1,921 1,827
Research and development costs 194 188 567 567
Restructuring costs (credits)
and other 152 (9) 228 (9)
------ ------ ------ ------
Earnings from continuing
operations before interest,
other charges, and income
taxes 142 480 351 1,019
Interest expense 33 40 104 128
Other charges 9 21 39 74
------ ------ ------ ------
Earnings from continuing
operations before income taxes 100 419 208 817
(Benefit) provision for income
taxes (22) 83 (23) 154
------ ------ ------ ------
Earnings from continuing
operations 122 336 231 663
Earnings (loss) from discontinued
operations, net of income tax
benefits for the three and nine
months ended Sept. 30, 2002 of $2
and $4, respectively - (2) 15 (6)
------ ------ ------ ------
NET EARNINGS $ 122 $ 334 $ 246 $ 657
====== ====== ====== ======
Basic and diluted net earnings
(loss) per share:
Continuing operations $ .42 $ 1.16 $ .81 $ 2.27
Discontinued operations .00 (.01) .05 (.02)
------ ------ ------ ------
Total $ .42 $ 1.15 $ .86 $ 2.25
====== ====== ====== ======
Number of common shares used in
basic earnings (loss) per share 286.5 291.8 286.5 291.6
Incremental shares from
assumed conversion of options .1 - .1 -
------ ------ ------ ------
Number of common shares used in
diluted earnings (loss) per share 286.6 291.8 286.6 291.6
====== ====== ====== ======
Cash dividends per share $ .25 $ - $ 1.15 $ .90
====== ====== ====== ======
SUPPLEMENTAL INFORMATION - UNAUDITED
(in millions)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
2003 2002 2003 2002
Provision for depreciation $ 225 $ 215 $ 620 $ 601
After-tax exchange losses
and effect of translation
of net monetary items (6) (4) (11) (16)
Cash dividends declared 72 0 330 262
Capital expenditures 117 155 353 362
Net Sales from Continuing Operations by Reportable Segment
and All Other - Unaudited
(in millions)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
2003 2002 Change 2003 2002 Change
Photography
Inside the U.S. $1,009 $1,051 - 4% $2,668 $2,933 - 9%
Outside the U.S. 1,466 1,358 + 8 3,946 3,668 + 8
------ ------ --- ------ ------ ---
Total Photography 2,475 2,409 + 3 6,614 6,601 0
------ ------ --- ------ ------ ---
Health Imaging
Inside the U.S. 251 273 - 8 755 791 - 5
Outside the U.S. 320 292 +10 972 864 +13
------ ------ --- ------ ------ ---
Total Health Imaging 571 565 + 1 1,727 1,655 + 4
------ ------ --- ------ ------ ---
Commercial Imaging
Inside the U.S. 223 200 +12 657 593 +11
Outside the U.S. 150 152 - 1 470 467 + 1
------ ------ --- ------ ------ ---
Total Commercial Imaging 373 352 + 6 1,127 1,060 + 6
------ ------ --- ------ ------ ---
All Other
Inside the U.S. 13 13 0 35 40 -13
Outside the U.S. 15 13 +15 36 38 - 5
------ ------ --- ------ ------ ---
Total All Other 28 26 + 8 71 78 - 9
------ ------ --- ------ ------ ---
Consolidated total $3,447 $3,352 + 3% $9,539 $9,394 + 2%
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Earnings (Loss) from Continuing Operations Before Interest, Other
Charges, and Income Taxes by Reportable Segment and All Other -
Unaudited (in millions)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ----------------------
2003 2002 Change 2003 2002 Change
Photography $ 204 $ 324 - 37% $ 277 $ 597 - 54%
Percent of Sales 8.2% 13.4% 4.2% 9.0%
Health Imaging $ 117 $ 126 - 7% $ 357 $ 314 + 14%
Percent of Sales 20.5% 22.3% 20.7% 19.0%
Commercial Imaging $ 33 $ 42 - 21% $ 117 $ 143 - 18%
Percent of Sales 8.8% 11.9% 10.4% 13.5%
All Other $ (19) $ (8) -138% $ (58) $ (21) -176%
Percent of Sales (67.9%) (30.8%) (81.7%) (26.9%)
------- ------ ---- ------ ------ ----
Total of segments $ 335 $ 484 - 31% $ 693 $1,033 - 33%
9.7% 14.4% 7.3% 11.0%
Venture investment
impairments - (13) - (23)
Impairment of Burrell
Companies' net assets
held for sale - - (9) -
Restructuring credits
(costs) and other (185) 9 (285) 9
Donation to technology
enterprise (8) - (8) -
GE settlement - - (12) -
Patent infringement
claim settlement - - (14) -
Prior year acquisition
settlement - - (14) -
------- ------ ---- ------ ------ -----
Consolidated total $ 142 $ 480 - 70% $ 351 $1,019 - 66%
======= ====== ==== ====== ====== ====
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Earnings (Loss) From Continuing Operations by Reportable Segment and
All Other - Unaudited
(in millions)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ----------------------
2003 2002 Change 2003 2002 Change
Photography $ 172 $ 232 - 26% $ 224 $ 410 - 45%
Percent of Sales 6.9% 9.6% 3.4% 6.2%
Health Imaging $ 106 $ 89 + 19% $ 287 $ 221 + 30%
Percent of Sales 18.6% 15.8% 16.6% 13.4%
Commercial Imaging $ 22 $ 23 - 4% $ 67 $ 72 - 7%
Percent of Sales 5.9% 6.5% 5.9% 6.8
All Other $ (21) $ (9) -133% $ (52) $ (19) -174%
Percent of Sales (75.0%) (34.6%) (73.2%) (24.4%)
------ ------ ---- ------ ----- -----
Total of segments $ 279 $ 335 - 17% $ 526 $ 684 - 23%
8.1% 10.0% 5.5% 7.3%
Venture investment
impairments - (21) - (34)
Impairment of Burrell
Companies' net assets
held for sale - - (9) -
Restructuring credits
(costs) and other (185) 9 (285) 9
Donation to technology
enterprise (8) - (8) -
GE settlement - - (12) -
Patent infringement
claim settlement - - (14) -
Prior year acquisition
settlement - - (14) -
Interest expense (33) (40) (104) (128)
Other corporate items 2 4 8 9
Tax benefit -
PictureVision
subsidiary closure - - - 45
Tax benefit - Kodak
Imagex Japan - 46 - 46
Tax benefit - donation
of patents - - 8 -
Income tax effects on
above items and taxes
not allocated to
segments 67 3 135 32
------ ----- ---- ------ ----- ----
Consolidated total $ 122 $336 - 64% $ 231 $ 663 - 65%
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Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
Sept. 30, Dec. 31,
2003 2002
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 983 $ 569
Receivables, net 2,340 2,234
Inventories, net 1,202 1,062
Deferred income taxes 524 512
Other current assets 184 157
------- -------
Total current assets 5,233 4,534
------- -------
Property, plant and equipment, net 5,157 5,420
Goodwill, net 1,021 981
Other long-term assets 2,626 2,559
------- -------
TOTAL ASSETS $14,037 $13,494
======= =======
- ----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current
liabilities $ 3,531 $ 3,351
Short-term borrowings 1,410 1,442
Accrued income taxes 619 709
------- -------
Total current liabilities 5,560 5,502
OTHER LIABILITIES
Long-term debt, net of current portion 1,480 1,164
Postretirement liabilities 3,436 3,412
Other long-term liabilities 637 639
------- -------
Total liabilities 11,113 10,717
SHAREHOLDERS' EQUITY
Common stock at par 978 978
Additional paid in capital 849 849
Retained earnings 7,509 7,611
Accumulated other comprehensive loss (552) (771)
Unearned restricted stock (8) -
------- -------
8,776 8,667
Less: Treasury stock at cost 5,852 5,890
------- -------
Total shareholders' equity 2,924 2,777
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $14,037 $13,494
======= =======
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
(in millions)
Nine Months Ended
September 30
------------------
2003 2002
Cash flows relating to operating activities:
Net earnings $ 246 $ 657
Adjustments to reconcile to net cash
provided by operating activities:
(Gain) loss from discontinued operations (15) 6
Equity in losses from unconsolidated affiliates 43 73
Gain on sale of assets (12) (17)
Depreciation and amortization 620 601
Restructuring costs, asset impairments and
other non-cash charges 41 (9)
(Benefit) provision for deferred taxes (4) 35
(Increase) decrease in receivables (68) 126
Increase in inventories (65) (56)
Decrease in liabilities excluding borrowings (55) (35)
Other items, net 93 (72)
------ ------
Total adjustments 578 652
------ ------
Net cash provided by continuing
operations 824 1,309
------ ------
Net cash provided by (used in)
discontinued operations 19 (9)
------ ------
Net cash provided by operating activities 843 1,300
------ ------
Cash flows relating to investing activities:
Additions to properties (353) (362)
Net proceeds from sales of businesses/assets 21 18
Acquisitions, net of cash acquired (88) (6)
Investments in unconsolidated affiliates (54) (96)
Marketable securities - purchases (62) (78)
Marketable securities - sales 62 61
------ ------
Net cash used in investing activities (474) (463)
------ ------
Cash flows relating to financing activities:
Net increase (decrease) in borrowings
with original maturity of 90 days or less 52 (69)
Proceeds from other borrowings 865 625
Repayment of other borrowings (641) (1,015)
Dividend payments (258) (262)
Exercise of employee stock options 12 2
------ ------
Net cash provided by (used in) financing
activities 30 (719)
------ ------
Effect of exchange rate changes on cash 15 (5)
------ ------
Net increase in cash and cash equivalents 414 113
Cash and cash equivalents, beginning of year 569 448
------ ------
Cash and cash equivalents, end of quarter $ 983 $ 561
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