Exhibit 99.1
Kodak Reports Significantly Improved 2nd Quarter Operating Results
on Sales of $2.510 Billion
Reaffirms Full-Year Cash, Digital Revenue, and Digital Earnings Goals
Reduces 2nd Quarter SG&A Expenses by $87 Million; Gross Profit
Margins Improve Across All Major Businesses, Driven by Reduced Cost
GAAP Pre-Tax Loss from Continuing Operations Reduced by 41% to
$173 Million; Company Ends Quarter with $1.925 Billion in Cash
New Consumer Inkjet Products and Imaging Sensor Technology Seeing
Positive Market Acceptance; Graphic Communications Group's Enterprise
Solutions Business Achieves a 40% Sales Increase
ROCHESTER, N.Y.--(BUSINESS WIRE)--Aug. 2, 2007--Eastman Kodak
Company (NYSE:EK) today reported a $121 million year-over-year
improvement in pre-tax results from continuing operations, reflecting
gross profit margin improvements across all of its major business
units. The company achieved a $97 million improvement in digital
earnings and a $31 million improvement in traditional earnings, as
expenses declined. In addition, the company reported a $135 million
after-tax loss from continuing operations, or $0.47 per share, an
improvement of $220 million, or $0.77 per share, as compared to the
prior year.
Kodak also reaffirmed its plan to achieve its full-year financial
goals for net cash generation, digital revenue growth and digital
earnings.
"Our second-quarter results reinforce our confidence in our
full-year performance," said Antonio M. Perez, Chairman and Chief
Executive Officer, Eastman Kodak Company. "Revenues during the second
quarter were in line with our expectations. Earnings improved across
all of our major business units, reflecting our strong focus on cost
reduction and operational efficiencies. We continue to expect a strong
second half, with double-digit sales growth in both of our major
digital businesses, driven by a stronger-than-ever portfolio of
digital products, including our revolutionary consumer inkjet printing
system, new image sensors, workflow software, and an expanded line of
NEXPRESS digital color printing presses. I'm pleased with our
first-half results, and I remain confident in our ability to achieve
our 2007 key strategic objectives."
On the basis of generally accepted accounting principles in the
U.S. (GAAP), the company reported a second-quarter loss from
continuing operations of $173 million pre-tax, $135 million after tax,
or $0.47 per share, compared with a loss of $294 million pre-tax, $355
million after tax, or $1.24 per share in the year-ago period. Items of
expense impacting comparability in the second quarter of 2007 totaled
$266 million after tax, or $0.92 per share. The most significant item
was restructuring costs of $316 million before tax and $248 million
after tax, or $0.86 per share. In the second quarter of 2006, items
that impacted comparability totaled $206 million after tax, or $0.72
per share, primarily reflecting restructuring costs.
For the second quarter of 2007:
-- Sales totaled $2.510 billion, a decrease of 7% from $2.688
billion in the second quarter of 2006. Digital revenue totaled
$1.460 billion, a 3% increase from $1.417 billion. Traditional
revenue totaled $1.044 billion, a 17% decline from $1.262
billion in the year-ago quarter.
-- The company's second-quarter loss from continuing operations,
before interest, other income (charges), net, and income taxes
was $163 million, compared with a loss of $257 million in the
year-ago quarter.
Other financial details:
-- Gross Profit margin was 26.2% for the quarter, up from 21.4%
in the prior year, primarily attributable to lower costs,
driven by manufacturing footprint reductions and the favorable
impact of foreign exchange, offset by adverse silver and
aluminum costs.
-- Selling, General and Administrative expenses decreased $87
million from the year-ago quarter, reflecting the company's
cost reduction activities. SG&A as a percentage of revenue was
17%, down from 19% in the year-ago quarter.
-- Net Cash Generation for the second quarter was negative $251
million, compared with negative $74 million in the year-ago
quarter. Net Cash Generation for the first half of 2007 was
negative $704 million, compared with negative $691 million in
the year-ago period. This corresponds to net cash used in
operating activities from continuing operations of $298
million for the second quarter, compared with $17 million in
the year-ago quarter, driven primarily by changes in working
capital. For the first half of 2007, net cash used in
operating activities from continuing operations was $695
million, compared with $554 million in the year-ago period.
-- On April 30, 2007, the company completed the sale of its
Health Group to an affiliate of Onex Corporation for $2.350
billion. As previously announced, the company used a portion
of the cash proceeds from that transaction to fully repay
$1.145 billion of outstanding secured term debt. As of June
30, 2007, the company's debt level was $1.624 billion, a
$1.154 billion reduction from the 2006 year-end debt level of
$2.778 billion.
-- Kodak held $1.925 billion in cash and cash equivalents as of
June 30, 2007.
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 results improved by $78 million
to a loss of $55 million, compared with a year-ago loss of
$133 million. This improvement was driven by changes in
product portfolio management and lower SG&A expenses,
partially offset by scaling of the manufacturing and new
product introduction activities in the Inkjet Systems
business. Revenues for the second quarter totaled $1.000
billion, down from $1.105 billion in the year-ago quarter.
This largely reflects anticipated decreases in traditional
photofinishing products and services at retail, partially
offset by growth in consumer imaging services and imaging
sensors. The new consumer inkjet printer line continues to
receive strong customer response and the company continues to
expand retail distribution as it increases manufacturing
capacity.
-- Graphic Communications Group earnings from operations were $44
million, compared with $16 million in the year-ago quarter.
This earnings increase was primarily driven by manufacturing
productivity improvements and lower SG&A expenses, partially
offset by higher aluminum costs. Sales for the second quarter
were $929 million, a 2% increase from the year-ago quarter.
Revenues from digital products improved by 6% for the quarter
versus the prior year, driven by favorable foreign exchange
and increased sales of digital plates. In addition, the
Enterprise Solutions business achieved a 40% revenue increase,
driven by strong sales of workflow software.
-- Film Products Group earnings from operations were $137
million, compared with $119 million in the year-ago quarter,
representing a strong improvement in the face of declining
revenue. During the second quarter of 2007, the group achieved
a 25% operating margin, as compared with 18% in the year-ago
quarter. The operating margin performance resulted from
changing product mix, lower depreciation expense, and actions
to reduce traditional infrastructure ahead of revenue
declines. Film Products Group sales were $559 million, down
from $660 million in the year-ago quarter, representing a
decrease of 15%.
"The performance of our business units this quarter is more
evidence of the progress that we are making in positioning Kodak for
sustainable success," said Perez. "I am proud of my team's performance
and I am encouraged by the enthusiastic market response to our new
products. We continue to make great strides in transforming Kodak into
a growing, profitable digital company."
2007 Outlook Reaffirmed
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 indicated during its first-quarter conference call with
investors, the company's goal for net cash generation this year is in
excess of $100 million after restructuring disbursements of
approximately $600 million. This 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's goal for 2007 full-year digital
earnings from operations is $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.
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%.
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:
913-312-1292, access code 4557735. 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 4557735. The
playback number will be active until Thursday, August 9th 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, sales growth,
revenue, 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
press release 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;
-- integration of the Company's businesses to SAP, the Company's
enterprise system software;
-- completion of various portfolio actions;
-- reduction of inventories;
-- integration of acquired businesses and consolidation of the
Company's subsidiary structure;
-- improvement in manufacturing productivity and techniques;
-- improvements in working capital management and cash conversion
cycle;
-- 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 press release 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;
-- pension and other post retirement benefit cost factors, such
as actuarial assumptions, market performance, and employee
retirement decisions;
-- general economic, business, geo-political and regulatory
conditions or unanticipated environmental liabilities or
costs;
-- 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 press release should be
evaluated in light of these important factors and uncertainties.
Eastman Kodak Company
Second Quarter 2007 Results
Non-GAAP Reconciliations
Within the Company's second quarter 2007 press release and
financial discussion document, reference is made to certain non-GAAP
financial measures, including "digital earnings improvement",
"traditional earnings improvement", "digital revenue", "traditional
revenue", "net cash generation", "GCG digital revenue improvement",
"net cash generation goal", "digital earnings from operations goal"
and "digital revenue growth forecast". 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 and traditional earnings
improvements to the most directly comparable GAAP measure of
improvement in loss from continuing operations before income taxes
(dollar amounts in millions):
2007
Improvement
-----------
Digital earnings improvement, as presented $ 97
Traditional earnings improvement, as presented 31
New technologies earnings improvement 15
Restructuring costs and other items (49)
-----------
Loss from continuing operations before interest, other
income (charges), net and income taxes improvement (GAAP
basis) $ 94
Improvement in interest expense and other income
(charges), net 27
-----------
Loss from continuing operations before income taxes
improvement (GAAP basis), as presented $ 121
The following table reconciles digital revenue and traditional
revenue to the most directly comparable GAAP measure of consolidated
revenue (dollar amounts in millions):
Increase/
Q2 2007 Q2 2006 (Decrease)
------- ------- ----------
Digital revenue, as presented $ 1,460 $ 1,417 3%
Traditional revenue, as presented 1,044 1,262 -17%
New technologies revenue 6 9
------- -------
Consolidated revenue (GAAP basis), as
presented $ 2,510 $ 2,688 -7%
The following table reconciles net cash generation to the most
directly comparable GAAP measure of net cash used in continuing
operations from operating activities (dollar amounts in millions):
Q2 2007 Q2 2006 YTD 2007 YTD 2006
------- ------- -------- --------
Net cash used in continuing
operations from operating
activities (GAAP basis), as
presented $ (298) $ (17) $ (695) $ (554)
Additions to properties (59) (83) (125) (161)
Net proceeds from sales of
businesses/assets 106 26 116 33
Investments in unconsolidated
affiliates (9)
------- ------- -------- --------
Net cash generation (continuing
operations), as presented $ (251) $ (74) $ (704) $ (691)
The following table reconciles GCG digital revenue improvement to
the most directly comparable GAAP measure of GCG total segment revenue
improvement:
2007
Improvement
(Decline)
-----------
GCG digital revenue improvement, as presented 6%
GCG traditional revenue decline -17%
GCG total segment revenue improvement (GAAP basis), as
presented 2%
The following table reconciles the net cash generation goal to the
most directly comparable GAAP measure of net cash provided by
continuing operations from operating activities goal (dollar amounts
in millions):
2007
Goal
-----------------
Net cash generation goal, as presented in excess of $100
Additions to properties, net proceeds from sales of
businesses/assets, distributions from/(investments
in) unconsolidated affiliates and dividends goal 100-350
-----------------
Net cash provided by continuing operations from
operating activities goal (GAAP basis), as
presented $200-$450
=================
The following table reconciles the digital earnings from
operations goal to the most directly comparable GAAP measure of loss
from continuing operations before interest, other income (charges),
net and income taxes goal (dollar amounts in millions):
2007
Goal
-------------
Digital earnings from operations goal, as presented $150-$250
Traditional earnings, new technologies earnings,
restructuring costs and other discrete items goals (700)-(900)
-------------
Loss from continuing operations before interest, other
income (charges), net and income taxes goal (GAAP
basis), as presented $(550)-$(650)
=============
The digital revenue growth forecast for 2007, as presented, of 3%
to 5% corresponds to the most directly comparable GAAP measure of
expected total company revenue decline for 2007, as presented, of 4%
to 7%. Items to reconcile from the digital revenue growth forecast to
expected total company revenue decline are expected traditional and
new technologies revenue declines 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, gains and
losses on sales of assets, certain asset impairments, the related tax
effects of those items and certain other significant pre-tax and tax
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
second quarter of 2007 and 2006, respectively.
2nd Quarter
---------------------------------
2007 2006
(in millions, except per share data)
$ EPS $ EPS
---------------- ----------------
Loss from continuing operations -
GAAP $ (135) $ (0.47) $ (355) $ (1.24)
COGS
- - Charges for accelerated
depreciation in connection with the
focused cost reduction actions 15 63
- - Charges for inventory writedowns
in connection with focused cost
reduction actions 6 5
------- -------- ------- --------
Subtotal 21 0.07 68 0.24
------- -------- ------- --------
SG&A
- - Charge for legal settlement - 4
------- -------- ------- --------
- - 4 0.01
------- -------- ------- --------
Restructuring
- - Charges for focused cost reduction
actions 295 156
------- -------- ------- --------
Subtotal 295 1.03 156 0.55
------- -------- ------- --------
Other Operating Income/(Charges),
Net
- - Gains on sale of property related
to focused cost reduction actions,
net (39) (3)
- - Impairment of property related to
focused cost reduction actions 6 9
------- -------- ------- --------
Subtotal (33) (0.12) 6 0.02
------- -------- ------- --------
Taxes
- - Audit settlement, establishment of
foreign valuation allowances and
adjustments of uncertain tax
positions 36
- - Tax impacts of the above-mentioned
pre-tax items (53) (28)
------- -------- ------- --------
Subtotal (17) (0.06) (28) (0.10)
- ----------------------------------------------------------------------
CONTACT: Eastman Kodak Company
Media:
David Lanzillo, 585-781-5481
david.lanzillo@kodak.com
or
Investor Relations:
Ann McCorvey, 585-724-5096
antoinette.mccorvey@kodak.com
or
Angela Nash, 585-724-0982
angela.nash@kodak.com