Exhibit 99.1
Kodak Has 2nd-Quarter Reported Net Income
of 54 Cents Per Share; EPS from Continuing Operations, Excluding
Non-Operational Items, Totals 88 Cents
ROCHESTER, N.Y.--(BUSINESS WIRE)--July 21, 2004--Eastman Kodak Company today
said second-quarter reported net income totaled 54 cents per share and revenue
increased 6%, led by rising demand for the company's digital products and
services as well as favorable foreign exchange.
Kodak's net income for the quarter included income from discontinued
operations of 4 cents per share and reported net income from continuing
operations of 50 cents per share. Excluding the impact of previously announced
focused cost reductions and other non-operational items, earnings from
continuing operations were 88 cents per share, higher than the forecast of 55
cents to 65 cents per share that the company issued on April 21. The operational
earnings also include 7 cents per share associated with a tax benefit and the
impact of Medicare prescription drug legislation, which has reduced the
company's health-care costs. The company anticipates that the positive effect of
the Medicare-related benefit will continue at its present level of about 4 cents
per share each quarter for an extended period of years.
For the second quarter of 2004:
-- Sales totaled $3.469 billion, an increase of 6% from $3.259 billion in
the second quarter of 2003. Excluding foreign exchange, sales increased
4%.
-- The company reported net income of $154 million, or 54 cents per share,
compared with $112 million, or 39 cents per share, in the second quarter
of 2003. The net income from discontinued operations of 4 cents per
share in the second quarter of 2004 primarily reflects income from the
company's Remote Sensing Systems operation, which Kodak has agreed to
sell to ITT Industries Inc.
-- Earnings from continuing operations, excluding the impact of the focused
cost reductions, were $253 million, or 88 cents per share. The
non-operational items include a charge of 38 cents per share primarily
related to the previously announced focused cost reductions. In the
second quarter of 2003, earnings from continuing operations, excluding
non-operational items, were $166 million, or 58 cents per share.
"Kodak delivered solid earnings growth in the second quarter, reinforcing
our confidence in the digitally oriented strategy we presented to investors last
year," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "Sales
continue to increase, led by broad demand among consumers and commercial
customers for our digital products and services. In fact, our digital revenue
increased 48%, more than offsetting a decline of 8% in traditional revenue. At
the same time, Kodak continues to cut costs as part of our commitment to reduce
expenses faster than the decline in portions of our traditional portfolio. The
performance of our acquisitions is on target, and our balance sheet remains
strong."
Other second-quarter 2004 details from continuing operations:
-- For the quarter, operating cash flow excluding acquisitions was a
negative $39 million, compared with negative $27 million for the second
quarter of 2003. (Kodak defines operating cash flow excluding
acquisitions as net cash provided by continuing operations, as
determined under Generally Accepted Accounting Principles in the U.S.
(U.S. GAAP), plus proceeds from the sale of assets, minus capital
expenditures, investments in unconsolidated affiliates and dividends.)
-- Debt decreased $208 million from the year-end level to $3.040 billion
and the debt-to-capital ratio decreased to 48.2% from 49.9% at the end
of 2003. Kodak remains committed to reducing its debt this year by as
much as $800 million. The company held $519 million in cash on its
balance sheet at the end of the quarter, unchanged from the first
quarter of 2004 and down from $1.25 billion at the end of 2003.
-- Gross Profit on an operational basis was 33.1%, down from the year-ago
level of 33.9%, better than the company expected.
-- Selling, General and Administrative expenses on an operational basis
were 17.7% of sales, down from 20.6% in the year-ago quarter.
The segment results from continuing operations for the second quarter of
2004 are as follows:
-- Digital & Film Imaging segment sales totaled $2.396 billion, up 2%.
Earnings from operations for the segment were $230 million on a GAAP and
an operational basis, compared with $119 million a year ago. Highlights
for the quarter included a 93% increase in the sales of KODAK Picture
Maker kiosks and related media; a 91% increase in consumer digital
capture sales, which includes the KODAK EASYSHARE cameras; and strong
sales of motion-picture origination and print film. The segment's
earnings from operations increased largely because of administrative
cost reductions, higher manufacturing productivity and an improved
year-over-year earnings performance by retail and wholesale
photofinishing operations. For the quarter, the company estimates that
U.S. consumer film industry volume declined about 15% compared with the
second quarter of 2003.
-- Health Imaging sales were $672 million, up 11%. Earnings from operations
for the segment were $128 million on a GAAP and operational basis,
compared with $131 million a year ago. Highlights included a 22%
increase in sales of digital products and services.
-- Commercial Imaging sales were $193 million, down 3%. Earnings from
operations were $32 million on a GAAP and operational basis, compared
with $31 million a year ago. The segment's results reflect in part solid
market acceptance of the new i600 series of document scanners.
-- Graphic Communications sales were $177 million, up 99%, largely
reflecting the acquisition of Kodak Versamark and NexPress. The loss
from operations was $33 million on a GAAP and operational basis,
compared with a loss of $1 million a year ago. The integration plans are
on or ahead of schedule for both Kodak Versamark and NexPress, and both
subsidiaries enjoyed strong demand for their products and services at
the drupa trade show in May.
-- All Other sales were $31 million, up 35% from the year-ago quarter. The
loss from operations totaled $33 million on a GAAP and an operational
basis, compared with a loss of $22 million a year ago. The All Other
category includes the Display & Components operation and other
miscellaneous businesses.
Earnings Outlook:
-- Kodak expects second-half operational earnings to be in the range of
$1.25 to $1.55 per share, and GAAP earnings to range between $1.71 and
$2.01 per share. For the full year, the company is raising its guidance
for operational earnings to a range of $2.39 to $2.69 per share,
compared with the previous guidance of $2.15 to $2.45 per share. The
company expects full-year GAAP earnings to range between $2.35 and $2.65
per share.
"Our second-quarter results demonstrate that we are successfully
accelerating our participation in digital markets," said Kodak President and
Chief Operating Officer Antonio Perez. "We also recognize that the trend in
consumer film suggests that the volume decline will be greater than we expected
at the start of the year. We now anticipate that worldwide volume industrywide
will decline in the range of 10% to 12% this year, compared with the prior
forecast of a decline of 7% to 9%. In the U.S., we now expect the decline to be
in the range of 18% to 20%, compared with the prior forecast of a decline of 10%
to 12%.
"Consistent with the commitment we made in September, our ability to
generate earnings growth demonstrates that we are managing the traditional
business effectively," Perez said. "As we have stressed previously, we remain
determined to reduce costs in our traditional business ahead of the pace of its
decline."
To that end, Kodak is accelerating the cost reduction program announced in
January. At that time, the company said it would reduce employment by a range of
12,000 to 15,000 worldwide through 2006, with reductions of 2,500 to 3,500
occurring in 2004. Under the January program, the company has already reduced
employment by 2,700 positions through the second quarter, and plans an
additional reduction of 800 to 1,300 positions for the balance of the year.
These actions will result in charges this year of $315 million to $375 million.
"While our earnings outlook reflects a certain volatility that would be
expected in any significant transformation, we are reassured by our performance
thus far that we are on the right course," Perez said. "We fully intend to
continue delivering annual sales and earnings growth, reducing costs, and
introducing more market-leading products and services."
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
expectations for the Company's growth in sales and earnings, the effects of
legislation, cash generation, tax rate, and debt 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 the date they are made, 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 factors
and uncertainties, including:
-- The successful implementation of our recently announced digitally
oriented growth strategy;
-- Implementation of product strategies (including category expansion,
digitization, organic light emitting diode (OLED), and digital
products);
-- Implementation of intellectual property licensing strategies;
-- Development and implementation of e-commerce strategies;
-- Completion of information systems upgrades, including SAP, our
enterprise system software;
-- Completion of various portfolio actions;
-- Reduction of inventories;
-- Integration of newly acquired businesses;
-- Improvement in manufacturing productivity and techniques;
-- Improvement in receivables performance;
-- Reduction in capital expenditures;
-- Improvement in supply chain efficiency;
-- Implementation of future focused cost reductions, including
personnel reductions;
-- Development of our business in emerging markets like China,
India, Brazil, Mexico and Russia;
-- Inherent unpredictability of currency fluctuations and raw
material costs;
-- Competitive actions, including pricing;
-- The nature and pace of technology evolution, including the
analog-to-digital transition;
-- Continuing customer consolidation and buying power;
-- General economic, business, geopolitical, regulatory and
public health conditions; and
-- Other factors and uncertainties disclosed from time to time in our
filings with the Securities and Exchange Commission.
Any forward-looking statements in this press release should be evaluated in
light of these important factors and uncertainties.
Editor's Note: For additional information about Kodak, visit our
web site on the Internet at: www.kodak.com
2004
- -0-
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Eastman Kodak Company
CONSOLIDATED STATEMENT OF EARNINGS - UNAUDITED
(in millions, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ----------------------
2004 2003 2004 2003
Net sales $ 3,469 $3,259 $6,388 $5,899
Cost of goods sold 2,354 2,163 4,461 4,002
-------- -------- -------- --------
Gross profit 1,115 1,096 1,927 1,897
Selling, general and
administrative expenses 613 707 1,165 1,265
Research and development
costs 212 178 409 371
Restructuring costs and
other 135 44 185 76
-------- -------- -------- -------
Earnings from continuing
operations before
interest,
other income
(charges), net, and
income taxes 155 167 168 185
Interest expense 43 34 87 71
Other income (charges), net 7 (9) 6 (30)
-------- ------- -------- -------
Earnings from continuing
operations before income
taxes 119 124 87 84
(Benefit) provision for
income taxes (24) 18 (72) (10)
-------- ------- -------- -------
Earnings from continuing
operations 143 106 159 94
Earnings from discontinued
operations, net of income
taxes 11 6 23 30
------- ------- --------- -------
NET EARNINGS $ 154 $ 112 $ 182 $ 124
======= ======= ========= =======
Basic and diluted net earnings (loss) per share:
Continuing operations $ .50 $ .37 $ .56 $ .33
Discontinued operations .04 .02 .08 .10
------- ------- --------- -------
Total $ .54 $ .39 $ .64 $ .43
======= ======= ========= =======
Number of common shares
used in basic earnings
per share 286.6 286.5 286.6 286.4
Incremental shares from
assumed conversion of
options 0.0 0.1 0.1 0.2
------- -------- --------- -------
Number of common shares
used in diluted earnings
per share 286.6 286.6 286.7 286.6
======= ======== ========= =======
SUPPLEMENTAL INFORMATION - UNAUDITED
(in millions)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ---------------------
2004 2003 2004 2003
Provision for
depreciation $ 212 $ 192 $ 426 $ 392
After-tax exchange losses
and effect of translation
of net monetary items 1 (5) (1) (5)
Capital expenditures 91 123 182 234
- ----------------------------------------------------------------------
Net Sales from Continuing Operations by Reportable Segment and All
Other - Unaudited
(in millions)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ---------------------
2004 2003 Change 2004 2003 Change
Digital & Film Imaging
Systems
Inside the U.S. $ 971 $ 972 0% $1,691 $1,659 + 2%
Outside the U.S. 1,425 1,369 + 4 2,636 2,480 + 6
------- ------- ----- -------- ------- -----
Total Digital & Film
Imaging Systems 2,396 2,341 + 2 4,327 4,139 + 5
------- ------- ----- -------- ------- -----
Health Imaging
Inside the U.S. 277 266 + 4 535 504 + 6
Outside the U.S. 395 341 + 16 768 652 +18
------- ------- ----- --------- ------ -----
Total Health Imaging 672 607 + 11 1,303 1,156 +13
------- ------- ----- --------- ------ -----
Commercial Imaging
Inside the U.S. 79 92 - 14 158 169 - 7
Outside the U.S. 114 107 + 7 231 216 + 7
------- ------- ----- --------- ------ -----
Total Commercial Imaging 193 199 - 3 389 385 + 1
------- ------- ----- --------- ------ -----
Graphic Communications
Inside the U.S. 83 37 +124 138 74 +86
Outside the U.S. 94 52 + 81 172 103 +67
------- ------- ----- --------- ----- ----
Total Graphic
Communications 177 89 + 99 310 177 +75
------- ------- ----- -------- ------- ----
All Other
Inside the U.S. 19 10 + 90 32 21 +52
Outside the U.S. 12 13 - 8 27 21 +29
------- ------- ----- ------- ------- ----
Total All Other 31 23 + 35 59 42 +40
------- ------- ----- ------- ------- ----
Consolidated total $3,469 $3,259 + 6% $6,388 $5,899 + 8%
======= ======= ===== ======= ======= ====
Earnings (Loss) from Continuing Operations Before Interest, Other
Income (Charges), Net, and Income Taxes by Reportable Segment and All
Other - Unaudited
(in millions)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ --------------------
2004 2003 Change 2004 2003 Change
Digital & Film Imaging
Systems $ 230 $ 119 +93% $ 246 $ 73 +237%
Percent of Sales 9.6% 5.1% 5.7% 1.8%
Health Imaging $ 128 $ 131 - 2% $ 221 $ 240 - 8%
Percent of Sales 19.0% 21.6% 17.0% 20.8%
Commercial Imaging $ 32 $ 31 + 3% $ 63 $ 51 + 24%
Percent of Sales 16.6% 15.6% 16.2% 13.2%
Graphic Communications $ (33) $ (1) $ (58) $ 8 -825%
Percent of Sales (18.6%) (1.1%) (18.7%) 4.5%
All Other $ (33) $ (22) - 50% $ (61) $ (38) - 61%
Percent of Sales (106.5%) (95.7%) (103.4%) (90.5%)
-------- ------- ------ -------- ------ ------
Total of segments $ 324 $ 258 + 26% $411 $ 334 +23%
9.3% 7.9% 6.4% 5.7%
Restructuring costs
and other (169) (54) (243) (100)
Impairment of Burrell
Companies' net assets - (9) - (9)
GE settlement - - - (12)
Patent infringement
claim settlement - (14) - (14)
Prior year acquisition
settlement - (14) - (14)
-------- ------ ------- ------- ------ ------
Consolidated total $ 155 $ 167 - 7% $168 $ 185 - 9%
======== ====== ======= ======= ====== ======
Earnings (Loss) From Continuing Operations by Reportable Segment and
All Other - Unaudited
(in millions)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
2004 2003 Change 2004 2003 Change
Digital & Film Imaging Systems $199 $90 +121% $214 $52 +312%
Percent of Sales 8.3% 3.8% 4.9% 1.3%
Health Imaging $110 $101 + 9% $188 $181 + 4%
Percent of Sales 16.4% 16.6% 14.4% 15.7%
Commercial Imaging $26 $21 + 24% $51 $35 + 46%
Percent of Sales 13.5% 10.6% 13.1% 9.1%
Graphic Communications $(23) $(4) -475% $(45) $ (9) -400%
Percent of Sales (13.0%)(4.5%) (14.5%)(5.1%)
All Other $(32) $(21) - 52% $(57) $(35) - 63%
Percent of Sales (103.2%) (91.3%) (96.6%) (83.3%)
----- ----- ----- ----- ----- -----
Total of segments $280 $187 + 50% $351 $224 + 57%
8.1% 5.7% 5.5% 3.8%
Restructuring costs and other (169) (54) (243) (100)
Impairment of Burrell - (9) - (9)
Companies' net assets
GE settlement - - - (12)
Patent infringement claim - (14) - (14)
settlement
Prior year acquisition - (14) - (14)
settlement
Interest expense (43) (34) (87) (71)
Other corporate items 2 3 4 6
Tax benefit - donation of - - - 8
patents
Income tax effects on above
items and taxes not allocated 73 41 134 76
to above ----- ---- ----- ----- ----- -----
Consolidated total $143 $106 +35% $159 $94 +69%
===== ===== ==== ==== ==== ====
Eastman Kodak Company
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
June 30, Dec. 31,
2004 2003
---------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 519 $ 1,250
Receivables, net 2,605 2,328
Inventories, net 1,256 1,073
Deferred income taxes 662 602
Other current assets 129 130
Assets of discontinued 104 72
operations ---------- ------------
Total current assets 5,275 5,455
---------- ------------
Property, plant and equipment, 4,795 5,051
net
Goodwill 1,432 1,364
Other long-term assets 3,152 2,883
Assets of discontinued 66 65
operations ---------- ------------
TOTAL ASSETS $14,720 $14,818
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other
current liabilities $ 3,626 $ 3,614
Short-term borrowings 1,043 946
Accrued income taxes 657 654
Liabilities of discontinued 37 36
operations ---------- ------------
Total current liabilities 5,363 5,250
OTHER LIABILITIES
Long-term debt, net of current 1,997 2,302
portion
Postretirement liabilities 3,339 3,344
Other long-term liabilities 746 650
Liabilities of discontinued 4 8
operations ---------- ------------
Total liabilities 11,449 11,554
SHAREHOLDERS' EQUITY
Common stock at par 978 978
Additional paid in capital 850 850
Retained earnings 7,636 7,527
Accumulated other comprehensive (336) (231)
loss
Unearned restricted stock (6) (8)
---------- ------------
9,122 9,116
Less: Treasury stock at cost 5,851 5,852
---------- ------------
Total shareholders' equity 3,271 3,264
---------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $14,720 $14,818
====== ======
Eastman Kodak Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Six Months Ended
June 30
---------------------
2004 2003
Cash flows relating to operating activities:
Net earnings $ 182 $ 124
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Earnings from discontinued operations (23) (30)
Equity in losses from unconsolidated affiliates 4 30
Depreciation 426 392
Purchased research and development 9 21
Gain on sales of businesses/assets (1) -
Restructuring costs, asset impairments and
other non-cash charges 22 37
(Benefit) provision for deferred taxes (124) 16
Increase in receivables (204) (164)
Increase in inventories (77) (67)
Decrease in liabilities excluding borrowings (250) (235)
Other items, net 69 99
------- -------
Total adjustments (149) 99
------- -------
Net cash provided by continuing operations 33 223
------- -------
Net cash provided by discontinued operations 4 31
------- -------
Net cash provided by operating activities 37 254
------- -------
Cash flows relating to investing activities:
Additions to properties (182) (232)
Net proceeds from sales of businesses/assets 1 -
Acquisitions, net of cash acquired (335) (118)
Investments in unconsolidated affiliates (31) (41)
Marketable securities - purchases (64) (44)
Marketable securities - sales 58 43
------- -------
Net cash used in continuing operations (553) (392)
------- -------
Net cash used in discontinued operations (2) (4)
------- -------
Net cash used in investing activities (555) (396)
------- -------
Cash flows relating to financing activities:
Net (decrease) increase in borrowings
with original maturity of 90 days or less (40) 129
Proceeds from other borrowings 89 724
Repayment of other borrowings (257) (466)
Exercise of employee stock options - 12
------- -------
Net cash (used in) provided by financing
activities (208) 399
------- -------
Effect of exchange rate changes on cash (5) 12
------- -------
Net (decrease) increase in cash and cash
equivalents (731) 269
Cash and cash equivalents, beginning of year 1,250 569
------- -------
Cash and cash equivalents, end of quarter $ 519 $ 838
==== ====
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