Exhibit 99.1
Kodak Delivers Positive 4th-Quarter Earnings on Sales of $3.821 Billion
4th-Qtr GAAP Profit From Continuing Operations of $17 Million
($0.06 Per Share), Including Restructuring Charges and Tax Valuation
Allowance
Full-Year Digital Earnings of $343 Million; Digital EFO Growth of
$271 Million Exceeds Traditional Earnings Decline for the Full Year
Company Meets Full-Year Cash Goals; Delivers $956 Million in Net
Cash From Operating Activities From Continuing Operations in 2006;
Cash Balance Totals $1.469 Billion at Year-End
ROCHESTER, N.Y.--(BUSINESS WIRE)--Jan. 31, 2007--Eastman Kodak
Company (NYSE:EK) today reported fourth-quarter net earnings from
continuing operations of $17 million, on lower year-over-year
revenues, reflecting cost reduction efforts that boosted earnings and
an emphasis on pursuing profitable sales. The company achieved $271
million in digital earnings for the fourth quarter, driven by wider
gross profit margins and the company's global cost-reduction
initiatives, resulting in strong earnings improvement in the company's
Consumer Digital and Graphic Communications businesses.
The company also delivered a $271 million increase in digital
earnings for the full year. Significantly, digital earnings growth for
the year exceeded the traditional earnings decline for the first time
in the company's history.
On the basis of generally accepted accounting principles (GAAP),
the company reported fourth-quarter earnings from continuing
operations of $17 million, or $0.06 per share. Items of net expense
that impacted comparability totaled $152 million, or $0.53 per share.
The most significant items included a restructuring charge of $69
million after tax, or $0.24 per share, and $89 million after tax, or
$0.31 per share, to record a valuation allowance against deferred tax
assets in various international entities.
For the fourth quarter of 2006:
-- Sales totaled $3.821 billion, a decrease of 9% from $4.197
billion in the fourth quarter of 2005. Digital revenue totaled
$2.449 billion, a 5% decrease from $2.587 billion in the
prior-year quarter, consistent with the company's focus on
improving digital profit margins. Traditional revenue totaled
$1.357 billion, a 15% decline from $1.592 billion in the
fourth quarter of 2005.
-- The GAAP earnings from continuing operations were $17 million,
or $0.06 per share, compared with a GAAP loss from continuing
operations of $137 million, or $0.48 per share, in the
year-ago period. The year-ago results included comparability
items of expense totaling $1.02 per share.
-- The company's fourth-quarter earnings from continuing
operations, before interest, other income (charges), net, and
income taxes were $222 million, compared with a loss of $171
million in the year-ago quarter.
-- Digital earnings for the fourth quarter were $271 million, an
increase of $130 million compared with the year-ago quarter,
and benefited from a number of items. The company generated
significant earnings growth in its Graphic Communications
business and achieved operational improvements in its Consumer
Digital Group, including a year-over-year increase in income
from licensing arrangements, which reflects the company's
continuing progress in generating returns from its
intellectual property.
"I am extremely pleased with our performance in 2006 and our
progress in implementing our digital business model," said Antonio M.
Perez, Chairman and Chief Executive Officer, Eastman Kodak Company.
"Our digital earnings greatly exceeded traditional earnings in the
fourth quarter. Profit margins expanded in the sizeable digital
businesses that we have assembled, debt declined by more than $800
million in 2006, and the year ended with a strong cash position. We
intend to conclude our restructuring this year, as part of the
creation of a digital company with sustainable revenue and profit
growth."
Other fourth-quarter 2006 details:
-- Net cash provided by operating activities from continuing
operations for the fourth quarter totaled $1.028 billion,
compared with $1.240 billion in the year-ago quarter. Net cash
generation (formerly investable cash) was $916 million,
bringing full-year net cash generation to $592 million, which
is at the upper end of the range provided by the company.
Full-year net cash provided by operating activities from
continuing operations totaled $956 million.
-- Kodak held $1.469 billion in cash as of December 31, 2006,
compared with $1.665 billion on December 31, 2005.
-- Debt decreased $561 million from the third-quarter level, to
$2.778 billion as of December 31, 2006. For the full-year
2006, debt decreased $805 million.
-- Selling, General and Administrative expenses decreased $172
million from the year-ago quarter, primarily reflecting the
company's cost reduction activities. SG&A as a percentage of
revenue was 15.6%, down from 18.3% in the year-ago quarter,
amplified by seasonally strong fourth-quarter revenue.
-- Gross profit margins were 26.4% in the current quarter, up
from 23.0% in the prior year quarter. This was driven by
operational improvements across the company's business units,
most notably KODAK PICTURE kiosks, the KODAK GALLERY, and the
favorable impact of the previously noted licensing
arrangements. The company also benefited from reduced
restructuring costs.
Fourth-quarter segment sales and results from continuing
operations, before interest, other income (charges), net, and income
taxes (earnings from operations), are as follows:
-- Consumer Digital Group earnings from operations were $150
million, compared with $40 million a year ago, on sales of
$1.154 billion, which were down 13% from the prior-year
quarter, consistent with the company's focus on improving
digital profit margins. On a full year-over-year basis,
earnings from operations improved by $132 million. Highlights
for the quarter included a 27% increase in sales of KODAK
PICTURE kiosks, of which 52% was a volume increase in related
thermal media sales, a significant earnings improvement in the
KODAK GALLERY, and an increase in income from licensing
arrangements. According to the NPD Group's consumer tracking
service, KODAK EASYSHARE digital cameras were number one in
unit market share in the U.S. for the fourth quarter and full
year of 2006.
-- Graphic Communications Group earnings from operations were $57
million, compared with $28 million in the year-ago quarter, on
sales of $974 million, which were up 3% from the prior-year
quarter. On a full year-over-year basis earnings from
operations improved by $182 million. The sales growth largely
reflects increased demand for NEXPRESS Color Presses and
digital plates, partially offset by a decline in NEXPRESS
Black & White Printers and the traditional product portfolio.
-- Film and Photofinishing Group earnings from operations were
$77 million, compared with $51 million a year ago, on sales of
$1.013 billion, which were down 16% from the prior-year
quarter. During the fourth quarter of 2006, the group achieved
an 8% operating margin, double the rate of the year-ago
quarter and in line with company expectations.
-- Health Group segment earnings from operations were $86
million, compared with $87 million a year ago, despite
substantial costs associated with the divestiture effort and
increased costs for silver. Sales for this segment were $660
million, down 6%. Highlights for the quarter included sales
increases in Healthcare Information System, digital dental
products, and digital capture, offset by declines in
traditional radiography and digital output. The company
announced on January 10th that it has reached an agreement to
sell the Health Group to Onex for as much as $2.55 billion.
The transaction is expected to close in the first half of
2007.
Other 2006 Highlights:
-- The company's net loss narrowed by $754 million, or $2.61 per
share, from a negative $1.354 billion, or $4.70 per share, in
2005 to a negative $600 million, or $2.09 per share in 2006.
The favorable year-over-year change reflects greatly improved
operational performance in the company's Consumer Digital,
Graphic Communications, and Film and Photofinishing
businesses. It also reflects a year-over-year decrease in
restructuring charges, reduced SG&A expenses and lower tax
valuation allowances versus the prior year.
-- On a full-year basis, the company posted $343 million in
digital earnings, a nearly five-fold improvement
year-over-year, and close to the company's aggressive target
for the year.
-- Net cash provided by operating activities from continuing
operations totaled $956 million for the year, compared with
$1.180 billion in 2005, at the upper end of the company's
forecasted range.
"I'm proud of my team and their accomplishments in 2006, and our
results reflect our progress in becoming a more profitable company,"
said Perez. "We delivered on every important goal that we set, with
the exception of digital revenue growth, where we made a specific
decision to focus on overall digital profit margins over revenue
growth.
"Kodak is now a company with a strong market position in a
significant number of digital categories. We enter 2007 with solid
momentum, a strong emphasis on sustaining profitable growth, and the
talent and resources necessary to generate value for our
shareholders."
Conference Call
Antonio Perez and Kodak Chief Financial Officer Frank Sklarsky
will host a conference call with investors at 11:00 a.m. Eastern Time
today. To access the call, please use the direct dial-in number:
913-981-5591, access code 1644226. There is no need to pre-register.
The call will be recorded and available for playback by 2:00 p.m.
Eastern Time today by dialing 719-457-0820, access code 1644226. The
playback number will be active until Wednesday, February 7th at 5:00
p.m. Eastern Time.
Investor Meeting
Eastman Kodak Company will hold its annual strategy meeting with
the institutional investment community on Thursday, February 8th in
New York City.
The meeting will be held at Thomson Financial, located at 195
Broadway (between Fulton & Dey). Presentations by Antonio Perez, Frank
Sklarsky, and other senior Kodak managers will begin promptly at 9:00
a.m. The program, including a question and answer period, is expected
to conclude by 12:30 p.m.
If you wish to attend, please RSVP by contacting Jo Ann Bruno at
(585) 724-1130 by Friday, February 2nd or by e-mail to
joann.bruno@kodak.com.
For those unable to attend in person, the meeting will be
available via a live webcast.
To access the webcast please go to: http://www.kodak.com/go/invest
The meeting will also be teleconferenced in listen-only mode. To
listen please call 913-981-5542 access code 1685146 or ask for the
Kodak Investor Meeting.
An audio replay of the meeting will be available beginning Friday,
February 9th at 9:00 a.m. and will run until 5:00 p.m. Eastern Time on
Friday, February 16th. The replay phone number is 719-457-0820 and the
reference number is 1685146.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this report 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 revenue and profit growth
and restructuring are forward-looking statements.
Actual results may differ from those expressed or implied in
forward-looking statements. In addition, any forward-looking
statements represent the Company's estimates only as of the date they
are made, and should not be relied upon as representing the Company's
estimates as of any subsequent date. While the Company may elect to
update forward-looking statements at some point in the future, the
Company specifically disclaims any obligation to do so, even if its
estimates change. The forward-looking statements contained in this
report are subject to a number of factors and uncertainties, including
the successful:
-- execution of the digital growth and profitability strategies,
business model and cash plan;
-- implementation of the cost reduction programs;
-- transition of certain financial processes and administrative
functions to a global shared services model and the
outsourcing of certain functions to third parties;
-- implementation of, and performance under, the debt management
program, including compliance with the Company's debt
covenants;
-- development and implementation of product go-to-market and
e-commerce strategies;
-- protection, enforcement and defense of the Company's
intellectual property, including defense of our products
against the intellectual property challenges of others;
-- implementation of intellectual property licensing and other
strategies;
-- completion of information systems upgrades, including SAP, the
Company's enterprise system software;
-- completion of various portfolio actions;
-- reduction of inventories;
-- integration of acquired businesses;
-- improvement in manufacturing productivity and techniques;
-- improvement in receivables performance;
-- improvement in supply chain efficiency; and
-- implementation of the strategies designed to address the
decline in the Company's traditional businesses.
The forward-looking statements contained in this report are
subject to the following additional risk factors:
-- inherent unpredictability of currency fluctuations, commodity
prices and raw material costs;
-- competitive actions, including pricing;
-- changes in the Company's debt credit ratings and its ability
to access capital markets;
-- the nature and pace of technology evolution;
-- changes to accounting rules and tax laws, as well as other
factors which could impact the Company's reported financial
position or effective tax rate;
-- general economic, business, geo-political and regulatory
conditions;
-- market growth predictions;
-- continued effectiveness of internal controls; and
-- other factors and uncertainties disclosed from time to time in
the Company's filings with the Securities and Exchange
Commission.
Any forward-looking statements in this report should be evaluated
in light of these important factors and uncertainties.
Eastman Kodak Company
Fourth Quarter 2006 Results
Non-GAAP Reconciliations
Within the Company's fourth quarter 2006 press release and
financial discussion document, the Company makes reference to certain
non-GAAP financial measures including "digital earnings", "digital EFO
growth", "digital earnings growth", "traditional earnings decline",
"digital revenue", "traditional revenue", and "net cash generation
(formerly investable cash)". Whenever such information is presented,
the Company has complied with the provisions of the rules under
Regulation G and Item 2.02 of Form 8-K. The specific reasons why the
Company's management believes that the presentation of each of these
non-GAAP financial measures provides useful information to investors
regarding Kodak's financial condition, results of operations and cash
flows has been provided in the Form 8-K filed in connection with this
press release.
The following table reconciles digital earnings to the most
directly comparable GAAP measure of net loss from continuing
operations (dollar amounts in millions):
Increase/
FY 2006 FY 2005 (Decrease)
------- -------- ----------
Digital earnings, as presented $ 343 $ 72 $ 271
Traditional earnings, as presented 432 650 (218)
New Technologies loss (211) (215) 4
Legal settlements 2 (21) 23
Restructuring costs and other items (768) (1,118) 350
------- -------- ----------
Loss from continuing operations before
interest, other income (charges), net and
income taxes (GAAP basis) (202) (632) 430
Interest expense (262) (211) (51)
Other income (charges), net 118 44 74
Provision for income taxes (254) (555) 301
------- -------- ----------
Net loss from continuing operations (GAAP
basis), as presented $ (600) $(1,354) $ 754
======= ======== ==========
The following table reconciles digital earnings to the most
directly comparable GAAP measure of net earnings (loss) from
continuing operations (dollar amounts in millions):
Increase/
Q4 2006 Q4 2005 (Decrease)
------- ------- ----------
Digital earnings, as presented $ 271 $ 141 $ 130
Traditional earnings, as presented 98 57 41
New Technologies loss (71) (53) (18)
Legal settlements 6 (21) 27
Restructuring costs and other items (82) (295) 213
------- ------- ----------
Earnings (loss) from continuing operations
before interest, other income (charges),
net and income taxes (GAAP basis), as
presented 222 (171) 393
Interest expense (60) (67) 7
Other income (charges), net 36 55 (19)
(Provision) benefit for income taxes (181) 46 (227)
------- ------- ----------
Net earnings (loss) from continuing
operations (GAAP basis), as presented $ 17 $ (137) $ 154
======= ======= ==========
The following table reconciles digital revenue, traditional
revenue, and new technologies revenue amounts to the most directly
comparable GAAP measure of consolidated revenue (dollar amounts in
millions):
Q4 2006 Q4 2005 Change from prior year
------- ------- ----------------------
Digital revenue, as presented $2,449 $2,587 - 5%
Traditional revenue, as
presented 1,357 1,592 -15%
New technologies revenue 15 18 -17%
------- ------- ----------------------
Consolidated revenue (GAAP
basis), as presented $3,821 $4,197 - 9%
======= ======= ======================
The following table reconciles the net cash provided by continuing
operations relating to operating activities under US GAAP, to Kodak's
definition of (1) free cash flow, (2) operating cash flow, and (3) net
cash generation* :
4th Quarter
($ amounts in millions) 2006
--------------
Net cash provided by continuing operations relating to
operating activities, as presented $1,028
Additions to properties (97)
--------------
Free Cash Flow (continuing operations) 931
Net proceeds from sales of businesses/assets 66
Investments in unconsolidated affiliates (9)
Acquisitions, net of cash acquired -
Dividends (72)
--------------
Operating Cash Flow (continuing operations) 916
Acquisitions, net of cash acquired -
--------------
Net Cash Generation * (continuing operations), as
presented $916
- ----------------------------------------------------------------------
Full Year
($ amounts in millions) 2006
--------------
Net cash provided by continuing operations relating to
operating activities, as presented $956
Additions to properties (379)
--------------
Free Cash Flow (continuing operations) 577
Net proceeds from sales of businesses/assets 178
(Investments in) / distributions from unconsolidated
affiliates (19)
Acquisitions, net of cash acquired (3)
Debt assumed through acquisitions -
Dividends (144)
--------------
Operating Cash Flow (continuing operations) 589
Acquisitions, net of cash acquired 3
Debt assumed through acquisitions -
--------------
Net Cash Generation * (continuing operations), as
presented $592
- ----------------------------------------------------------------------
* formerly Investable Cash Flow
As previously announced, the Company will only report its results
on a GAAP basis, which will be accompanied by a description of
non-operational items affecting its GAAP quarterly results by line
item in the statement of operations. The Company defines
non-operational items as restructuring and related charges, legal
settlements, in-process research and development charges related to
acquisitions, significant gains and losses on sales of assets, asset
impairments, the related tax effects of those items and certain other
significant items not related to the Company's core operations.
Non-operational items, as defined, are specific to the Company and
other companies may define the term differently. The following table
presents a description of the non-operational items affecting the
Company's quarterly results by line item in the statement of
operations for the fourth quarter of 2006 and 2005, respectively.
4th Quarter
------------------------------------
2006 2005
(in millions, except per share
data)
$ EPS $ EPS
-------------- --------------
(Loss) earnings from continuing
operations - GAAP $17 $0.06 $(137) $(0.48)
COGS
- - Charges for accelerated
depreciation in connection with
the focused cost reduction
actions 58 130
- - Charges for inventory
writedowns in connection with
focused cost reduction actions 4 6
------- ------ ------ -------
Subtotal 62 0.22 136 0.48
------- ------ ------ -------
SG&A
- - Adjustment for Legal Settlement
(reversals)/charges (6) 21
------- ------ ------ -------
Subtotal (6) (0.02) 21 0.07
------- ------ ------ -------
Restructuring
- - Charges for focused cost
reduction actions 20 159
------- ------ ------ -------
Subtotal 20 0.07 159 0.56
------- ------ ------ -------
Other Income/(Charges)
- - Gain on the sale of properties
related to focused cost
reduction actions, net (3)
- - Impairment of property related
to focused cost reduction
actions 4
------- ------ ------ -------
Subtotal (3) (0.01) 4 0.01
------- ------ ------ -------
Taxes
- - Impact of establishment of
valuation allowances 89
- - Tax impacts of the above-
mentioned items (10) (28)
------- ------ ------ -------
Subtotal 79 0.27 (28) (0.10)
------- ------ ------ -------
CONTACT: Eastman Kodak Company
Media:
David Lanzillo, 585-781-5481
david.lanzillo@kodak.com
or
Barbara Pierce, 585-724-5036
barbara.pierce@kodak.com
or
Investor Relations:
Don Flick, 585-724-4352
donald.flick@kodak.com
or
Patty Yahn-Urlaub, 585-724-4683
patty.yahn-urlaub@kodak.com
or
Angela Nash, 585-724-0982
angela.nash@kodak.com