Exhibit 99.1
Kodak Reports 1st-Quarter Sales of $2.119
Billion
Company Reduces GAAP Loss From Continuing Operations by 50% to
$174 Million ($0.61 Loss Per Share); Reduces 1st Quarter SG&A Expenses
by $112 Million; Ends Quarter with $1.026 Billion in Cash
China Announcement Marks Final Major Manufacturing Restructuring
Action
Kodak to Accelerate 2007 Inkjet Investment in Response to Strong
Demand
Kodak Concludes Health Group Sale After Quarter End, Receives
$2.35 Billion in Cash; Fully Repays Approximately $1.15 Billion
Secured Term Debt
ROCHESTER, N.Y.,--(BUSINESS WIRE)--May 4, 2007--Eastman Kodak
Company (NYSE:EK) today reported a $172 million year-over-year
improvement in results from continuing operations on lower
year-over-year revenue, reflecting significant cost reduction efforts
and lower restructuring charges. The company achieved a $48 million
improvement in digital earnings for the quarter, driven by reduced
selling, general and administrative expenses and improved profit
margins in its Consumer Digital business.
Kodak also plans to expand its inkjet investment in 2007 in direct
response to the strong demand created by its revolutionary inkjet
product line announced in February.
On the basis of generally accepted accounting principles in the
U.S. (GAAP), the company reported a first-quarter loss from continuing
operations of $174 million, or $0.61 per share, compared with a loss
of $346 million, or $1.21 per share in the year-ago period. Items that
impacted comparability in the first quarter of 2007 totaled $76
million after tax, or $0.26 per share. The most significant items
included a restructuring charge of $0.49 per share after tax, income
of $0.20 per share after tax for the reversal of a foreign tax
reserve, and income of $0.03 per share after tax from a property sale.
In the first quarter of 2006, items that impacted comparability
totaled $189 million after tax, or $0.66 per share, primarily
reflecting restructuring costs.
For the first quarter of 2007:
-- Sales totaled $2.119 billion, a decrease of 8% from $2.292
billion in the first quarter of 2006. Digital revenue totaled
$1.210 billion, a 3% decrease from $1.250 billion. Traditional
revenue totaled $896 million, a 13% decline from $1.026
billion in the year-ago quarter. New Technologies revenue was
$13 million in the first quarter, compared with $16 million in
the year-ago period.
-- The company's first-quarter loss from continuing operations,
before interest, other income (charges), net, and income taxes
was $188 million, compared with a loss of $324 million in the
year-ago quarter.
Other first-quarter 2007 details:
-- Kodak held $1.026 billion in cash and cash equivalents as of
March 31, 2007, consistent with the company's goal of
maintaining at least $1.0 billion in cash on its balance
sheet.
-- As of March 31, 2007, the company's debt level was $2.754
billion. With the completion of the sale of Kodak's Health
Group to an affiliate of Onex Corporation, the company has now
fully repaid approximately $1.15 billion of secured term debt.
-- Selling, General and Administrative expenses decreased $112
million from the year-ago quarter, reflecting the company's
cost reduction activities. SG&A as a percentage of revenue was
19%, down from 22% in the year-ago quarter.
-- Gross Profit was 20.2%, down from 20.5%, primarily
attributable to approximately $30 million of adverse silver
and aluminum costs, partially offset by the favorable impact
of foreign exchange.
-- Net Cash Generation: At this time, the company has not yet
completed the full balance sheet and cash flow analysis
adjusted for the impact of discontinued operations. These
items will be detailed in the company's first quarter Form 10Q
filing on or before May 10, 2007. However, current estimates
suggest that the company achieved a year-over-year improvement
in net cash generation in the range of $175 million to $200
million. This corresponds to an estimated improvement in net
cash used in continuing operations from operating activities
in the range of $150 million to $175 million.
"I'm very pleased with our first-quarter performance, in which we
made significant progress on our two key objectives for 2007 - new
product success and cost reduction. Thus far the year is proceeding on
plan," said Antonio M. Perez, Chairman and Chief Executive Officer,
Eastman Kodak Company. "Both our Consumer Digital and Film Products
groups were well ahead of plan. On the product side, we successfully
launched a revolutionary line of inkjet products, and at the recent
AIIM/On Demand Conference our Graphic Communications Group introduced
several award-winning products that broadened our portfolio of
solutions. We also significantly reduced our SG&A expenses, improved
our receivables performance, and ended the quarter with more than $1.0
billion in cash on our balance sheet. When we conclude the recently
announced sale of our manufacturing facility in Xiamen, China, we will
have completed the last, significant step in our manufacturing
restructuring."
Segment sales and results from continuing operations, before
interest, taxes, and other income and charges (earnings from
operations), are as follows:
-- Consumer Digital Imaging Group sales totaled $778 million,
down 14%, largely reflecting expected declines in digital
capture revenue as a result of the company's strategy to
reduce its digital camera portfolio in the low-end price
range, decreases in photofinishing services at retail, and an
industry-wide decline in snapshot printing. This was partially
offset by growth in kiosks and related media, imaging sensors
and royalty revenues. Loss from operations for the segment was
$114 million, compared with a year-ago loss of $167 million,
driven by significantly lower SG&A expenses, partially offset
by higher silver costs. Highlights for the quarter included a
23% sales increase in the KODAK Gallery and a 13% increase in
sales of KODAK PICTURE kiosks and related media. Additionally,
Kodak remains in the top three in digital camera market share
in the U.S. and worldwide. The company also introduced its new
inkjet printer line during the first quarter and began
shipment to retailers in March.
-- Graphic Communications Group sales were $864 million,
essentially flat with the year-ago quarter. Earnings from
operations were $16 million, compared with $24 million in the
year-ago quarter. This earnings decrease was primarily driven
by higher aluminum and silver costs, partially offset by lower
SG&A expenses. The company also recently extended its digital
color portfolio with the introduction of the KODAK NEXPRESS
S3000 Digital Production Color Press and the KODAK NEXPRESS
M700 Digital Color Press, which received "Best of Show" honors
in its category at the 2007 On Demand Conference & Exposition.
The company also introduced the KODAK i1840 scanner and three
new workflow products.
-- Film Products Group sales were $458 million, down from $500
million in the year-ago quarter, representing a decrease of
8%, a significantly lower decline than has been recently
experienced, reflecting high single-digit year-over-year
growth in the entertainment film business. Earnings from
operations were $74 million, compared with $51 million in the
year-ago quarter, representing a strong earnings improvement
in the face of declining revenue. During the first quarter of
2007, the group achieved a 16% operating margin, as compared
with 10% in the year-ago quarter, which was ahead of company
expectations. The operating margin performance resulted from
growth in entertainment imaging and also reflects the
company's actions to reduce traditional infrastructure ahead
of declines. This improved performance was particularly
impressive given higher silver costs during the quarter.
-- All Other sales were $19 million, essentially flat with the
year-ago quarter. The loss from operations in this category
totaled $13 million, compared with a loss of $16 million a
year ago.
"I am encouraged by the enthusiastic consumer and retail response
to our new line of inkjet printers. At this point we are selling all
that we can make and we are bringing on retailers as quickly as we can
supply them," said Perez. "Yesterday, we announced agreements with
MediaMarkt in Germany and Dixons in the U.K., and we have also reached
agreements with two major U.S. retailers, which we will announce in
the near future.
"Our goal remains to sell at least 500,000 units in 2007. Given
the enthusiastic response, we plan to increase our 2007 inkjet
investment by as much as $50 million in order to accelerate our ramp
up, boost new product development, and position ourselves to better
supply current and future demand. This decision will impact our
full-year results by lowering our expected cash flow and digital
earnings, but this is the right move to make in order to take full
advantage of the opportunity that is in front of us."
Updated 2007 Outlook
Kodak remains focused on three financial metrics as it continues
to transform its business: net cash generation, digital earnings from
operations and digital revenue growth.
As previously indicated, the company has decided to increase its
inkjet investment by as much as $50 million in order to fully
capitalize on strong customer reaction. As a result, the company
expects net cash generation this year of greater than $100 million
(after restructuring cash disbursements of approximately $600
million), compared with the previous net cash generation estimate of
$100 million to $200 million. This new outlook corresponds to expected
net cash provided by continuing operations from operating activities,
on a GAAP basis, in the range of $200 million to $450 million.
Additionally, the company now expects 2007 full-year digital
earnings from operations of $150 million to $250 million, which
corresponds to a GAAP loss from continuing operations before interest,
other income (charges), net, and income taxes for the full year of
$550 million to $650 million. The company originally estimated 2007
full-year digital earnings of $200 million to $300 million, which
corresponds to a GAAP loss from continuing operations before interest,
other income (charges), net, and income taxes for the full year of
$500 million to $600 million.
Finally, the company continues to forecast 2007 digital revenue
growth of 3% to 5%, with total 2007 revenue expected to be down
between 4% and 7%.
"We are just beginning to scratch the surface of what we think we
can achieve in the printing industry, on both the consumer and
commercial side," said Perez. "Now is the time to accelerate our
activity and more aggressively pursue this opportunity in the interest
of creating value for our shareholders."
Health Group Sale Closed
On April 30, 2007, the company completed the sale of its Health
Group to an affiliate of Onex Corporation for up to $2.55 billion. At
closing Kodak received $2.35 billion in cash with the potential to
receive up to $200 million in additional future payments if Onex
achieves certain returns with respect to its investment. In addition,
consistent with prior guidance, the company also fully repaid
approximately $1.15 billion of outstanding secured term debt. The
company is also studying options with its Board of Directors to deploy
the remaining cash in order to drive profitable growth and enhance
shareholder value.
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:
913-981-4910, access code 6992488. There is no need to pre-register.
For those wishing to participate via an Internet Broadcast, please
access our Kodak Investor Center web page at:
http://www.kodak.com/go/invest.
The call will be recorded and available for playback by 2:00 p.m.
Eastern Time today by dialing 719-457-0820, access code 6992488. The
playback number will be active until Friday, May 11th at 5:00 p.m.
Eastern Time.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
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 expectations for digital earnings from
operations, digital revenue growth, net cash generation, revenue,
restructuring, and net cash from continuing operations 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
First Quarter 2007 Results
Non-GAAP Reconciliations
Within the Company's first quarter 2007 press release and
financial discussion document, the Company makes reference to certain
non-GAAP financial measures including "digital earnings improvement",
"digital revenue", "traditional revenue", "new technologies revenue",
"estimated improvement in net cash generation", "expected net cash
generation", "expected digital earnings from operations" and
"forecasted digital revenue growth". 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 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 as provided
in the Form 8-K filed in connection with this press release.
The following table reconciles digital earnings improvement to the
most directly comparable GAAP measure of improvement in loss from
continuing operations before interest, other income (charges), net and
income taxes (dollar amounts in millions):
2007
-----------
Improvement
-----------
Digital earnings, as presented $ 48
Traditional and New Technologies earnings 23
Restructuring costs and other items 65
-----------
Improvement in loss from continuing operation before
interest, other income (charges), net and income taxes
(GAAP basis) $ 136
===========
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):
Increase/
----------
Q1 2007 Q1 2006 (Decrease)
------- ------- ----------
Digital revenue, as presented $1,210 $1,250 -3%
Traditional revenue, as presented 896 1,026 -13%
New technologies revenue, as presented 13 16 -19%
Consolidated revenue (GAAP) basis, as
presented $2,119 $2,292 -8%
The following table reconciles the estimated improvement in net
cash used in continuing operations from operating activities (GAAP),
to an estimated improvement in Kodak's definition of net cash
generation (dollar amounts in millions):
Estimated 2007
---------------
Improvement
---------------
From To
------- -------
Net cash used in continuing operations from operating
activities (GAAP basis) $ 150 $ 175
Additions to properties, Net proceeds from sales of
business assets, and investments in unconsolidated
affiliates 25
---------------
Net Cash Generation, as presented $ 175 $ 200
======= =======
The following table reconciles expected net cash generation to the
most directly comparable GAAP measure of expected net cash provided by
continuing operations from operating activities (dollar amounts in
millions):
2007 2007
Original Revised
Forecast Forecast
---------- --------------
Expected net cash generation, as presented $100-$200 more than $100
Additions to properties, net proceeds from
sales of businesses/assets, distributions
from/(investments in) unconsolidated
affiliates and dividends 150-300 100-350
---------- --------------
Expected net cash provided by continuing
operations from operating activities (GAAP
basis), as presented $250-$500 $200-$450
========== ==============
The following table reconciles expected digital earnings from
operations to the most directly comparable GAAP measure of loss from
continuing operations before interest, other income (charges), net and
income taxes (dollar amounts in millions):
2007 2007
Original Revised
Forecast Forecast
------------- -------------
Expected digital earnings from operations,
as presented $200-$300 $150-$250
Expected traditional earnings, new
technologies earnings, restructuring
costs and other discrete items (700)-(900) (700)-(900)
Loss from continuing operations before
interest, other income (charges), net and
income taxes (GAAP basis), as presented $(500)-$(600) $(550)-$(650)
The expected digital revenue growth for 2007, as presented, of 3%
to 5% corresponds to the most directly comparable GAAP measure of
expected total company revenue decline for 2007 of 4% to 7%. Items to
reconcile from expected digital revenue growth to expected total
company revenue decline are expected traditional and new technologies
revenue decline of 13% to 22%.
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,
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
first quarter of 2007 and 2006, respectively.
1st Quarter
-----------------------------
2007 2006
(in millions, except per share data)
$ EPS $ EPS
-------------- --------------
Loss from continuing operations - GAAP $(174) $(0.61) $(346) $(1.21)
COGS
- - Charges for accelerated depreciation
in connection with the focused cost
reduction actions 65 77
- - Charges for inventory writedowns in
connection with focused cost reduction
actions 1 1
------ ------- ------ -------
Subtotal 66 0.23 78 0.27
------ ------- ------ -------
Restructuring
- - Charges for focused cost reduction
actions 85 138
------ ------- ------ -------
Subtotal 85 0.29 138 0.49
------ ------- ------ -------
Other Income/(Charges)
- - Gain on sale of property related to
focused cost reduction actions (9)
- - Impairment of property related to
focused cost reduction actions - 4
------ ------- ------ -------
Subtotal (9) (0.03) 4 0.01
------ ------- ------ -------
Taxes
- - Reversal of foreign tax reserve (56)
- - Tax impacts of the above-mentioned
items (10) (31)
------ ------- ------ -------
Subtotal (66) (0.23) (31) (0.11)
------ ------- ------ -------
CONTACT: Eastman Kodak Company
Media:
David Lanzillo, 585-781-5481
david.lanzillo@kodak.com
or
Investor Relations:
Donald Flick, 585-724-4352
donald.flick@kodak.com
or
Ann McCorvey, 585-724-5096
antoinette.mccorvey@kodak.com
or
Angela Nash, 585-724-0982
angela.nash@kodak.com