1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1994
or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-87
EASTMAN KODAK COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 16-0417150
(State of incorporation) (IRS Employer
Identification No.)
343 STATE STREET, ROCHESTER, NEW YORK 14650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 716-724-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class March 31, 1994
Common Stock, $2.50 par value 332,646,215
2
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
First Quarter
1994 1993
(in millions)
REVENUES
Sales $3,592 $ 3,542
Earnings from equity interests and other revenues 31 87
------ -------
TOTAL REVENUES 3,623 3,629
------ -------
COSTS
Cost of goods sold 1,791 1,752
Marketing and administrative expenses 1,116 1,190
Research and development costs 315 308
Interest expense 175 165
Other charges 66 54
------ -------
TOTAL COSTS 3,463 3,469
------ -------
Earnings from continuing operations before income taxes 160 160
Provision for income taxes from continuing operations 66 66
------ -------
Earnings from continuing operations before
extraordinary item and cumulative effect of changes
in accounting principle 94 94
Earnings from discontinued operations before cumulative
effect of changes in accounting principle - 55
------ -------
Earnings before extraordinary item and cumulative
effect of changes in accounting principle 94 149
Extraordinary item (12) -
------ -------
Earnings before cumulative effect of changes in
accounting principle 82 149
------ -------
Cumulative effect of changes in accounting principle
from continuing operations - (1,723)
Cumulative effect of changes in accounting principle
from discontinued operations - (445)
------ -------
Total cumulative effect of changes in accounting
principle - (2,168)
------ -------
NET EARNINGS (LOSS) $ 82 $(2,019)
====== =======
3
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS (Continued)
First Quarter
1994 1993
Primary earnings per share from continuing
operations before extraordinary item and
cumulative effect of changes in accounting
principle $ .29 $ .29
Primary earnings per share from discontinued
operations before cumulative effect of
changes in accounting principle - .17
------ -------
Primary earnings per share before extraordinary
item and cumulative effect of changes in
accounting principle .29 .46
Extraordinary item (.04) -
------ -------
Primary earnings per share before cumulative effect
of changes in accounting principle .25 .46
------ -------
Cumulative effect of changes in accounting principle
from continuing operations - (5.28)
Cumulative effect of changes in accounting principle
from discontinued operations - (1.36)
------ -------
Total cumulative effect of changes in
accounting principle - (6.64)
------ -------
Primary earnings (loss) per share $ .25 $ (6.18)
====== =======
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
RETAINED EARNINGS
First Quarter
1994 1993
(in millions)
Retained earnings at beginning of year $4,469 $7,721
Net earnings (loss) 82 (2,019)
Cash dividends declared (132) (163)
Other changes (2) -
------ ------
RETAINED EARNINGS at end of quarter $4,417 $5,539
====== ======
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
Operations of subsidiary companies outside
the U.S. included in Consolidated Statement
of Earnings:
Sales $1,989 $1,903
Earnings from operations 202 130
- ----------------------------------------------------------------------------------------
See Notes to Financial Statements
4
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
March 31, Dec. 31,
1994 1993
(in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,163 $ 1,635
Marketable securities 127 331
Receivables (net of allowances of $136 and $141) 3,359 3,463
Inventories 2,150 1,913
Deferred income tax charges 530 435
Other 239 244
------- -------
Total current assets 7,568 8,021
------- -------
PROPERTIES
Land, buildings and equipment at cost 13,454 13,311
Less: Accumulated depreciation 7,128 6,945
------- -------
Net properties 6,326 6,366
OTHER ASSETS
Unamortized goodwill (net of accumulated
amortization of $885 and $846) 4,162 4,186
Deferred income tax charges 421 481
Long-term receivables and other
noncurrent assets 1,224 1,271
------- -------
TOTAL ASSETS $19,701 $20,325
======= =======
- -------------------------------------------------------------------------------------
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,331 $ 3,630
Short-term borrowings 2,232 655
Taxes-income and other 356 420
Dividends payable 132 165
Deferred income tax credits 44 40
------- -------
Total current liabilities 6,095 4,910
OTHER LIABILITIES
Long-term borrowings 4,866 6,853
Postemployment liabilities 3,796 3,678
Other long-term liabilities 1,384 1,449
Deferred income tax credits 99 79
------- -------
Total liabilities 16,240 16,969
------- -------
SHAREOWNERS' EQUITY
Common stock at par* 948 948
Additional capital paid in or
transferred from retained earnings 235 213
Retained earnings 4,417 4,469
Accumulated translation adjustment (182) (235)
------- -------
5,418 5,395
Less: Treasury stock shares at cost* 1,957 2,039
------- -------
Total shareowners' equity 3,461 3,356
------- -------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $19,701 $20,325
======= =======
*Common stock: $2.50 par value, 950 million shares authorized, 379.2 million shares
issued as of March 31, 1994. Of the shares authorized, approximately 7 million shares
are reserved for the conversion of the 6 3/8% debentures. Treasury stock at cost
consists of approximately 49 million shares on December 31, 1993 and approximately
47 million shares on March 31, 1994.
- --------------------------------------------------------------------------------------
See Notes to Financial Statements
5
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
First Quarter
1994 1993
(in millions)
Cash flows from operating activities:
Earnings from continuing operations before
extraordinary item and cumulative effect of
changes in accounting principle $ 94 $ 94
Adjustments to reconcile above earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 251 274
Benefit for deferred taxes (8) (22)
Loss on sale and retirement of properties 14 11
Decrease in receivables 152 215
Increase in inventories (214) (229)
Decrease in liabilities excluding borrowings (340) (361)
Other items, net 141 (86)
------- ------
Total adjustments (4) (198)
------- ------
Net cash provided by (used in)
operating activities 90 (104)
------- ------
Cash flows from investing activities:
Additions to properties (180) (277)
Proceeds from sale of investments - 35
Proceeds from sale of properties 6 3
Marketable securities - purchases (8) (14)
Marketable securities - sales 212 70
------- ------
Net cash provided by (used in)
investing activities 30 (183)
------- ------
Cash flows from financing activities:
Net increase in commercial paper
borrowings of 90 days or less 25 498
Proceeds from other borrowings 9 49
Repayment of other borrowings (468) (23)
Dividends to shareowners (165) (163)
Exercise of employee stock options 5 70
------- ------
Net cash provided by (used in)
financing activities (594) 431
------- ------
Effect of exchange rate changes on cash 2 (3)
------- ------
Net increase (decrease) in cash and
cash equivalents (472) 141
Cash and cash equivalents, beginning of year 1,635 361
------- ------
Cash and cash equivalents, end of quarter $ 1,163 $ 502
======= ======
- -----------------------------------------------------------------------------------------
See Notes to Financial Statements
6
Eastman Kodak Company and Subsidiary Companies
NOTES TO FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial statements have been prepared by the Company in accordance with
the accounting policies stated in the 1993 Annual Report, except as noted
below, and should be read in conjunction with the Notes to Financial
Statements appearing therein. In the opinion of the Company, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation have been included in the financial statements. The statements
are based in part on approximations and have not been audited by independent
accountants. The annual statements will be audited by independent
accountants.
NEW ACCOUNTING STANDARDS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". In accordance with the standard, prior period
financial statements have not been restated to reflect the change in
accounting principle. Shareowners' equity was decreased by $2 million, net of
taxes, to reflect the unrealized loss on securities classified as
available-for-sale which had been carried at amortized cost. This amount is
reported as other changes in the Consolidated Statement of Retained Earnings.
DEBT REDEMPTION
In March, 1994, the Company announced its intention to redeem on April 1,
1994, the zero coupon convertible subordinated debentures due 2011. The 1994
first quarter earnings were reduced by an extraordinary charge of $12 million
after-tax ($.04 per share) related to this early extinguishment of debt, and
$1,058 million was reclassified from long-term to short-term borrowings.
Approximately 2 million shares of stock were issued from treasury shares to
debenture holders who elected to convert their debentures into stock.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The recorded amounts of other investments as of March 31, 1994 and December
31, 1993 shown below include $46 million and $81 million, respectively, of
equity investments in a number of entities for which it is not practicable to
estimate fair value, since quoted market prices do not exist for any of these
investments.
The fair values of long-term borrowings were estimated based on quoted market
prices or by obtaining quotes from brokers.
The Company is a party to various interest rate option and swap agreements and
foreign currency contracts which are included in other instruments below. The
fair values of other instruments were estimated by obtaining quotes from
brokers, where practicable, or by estimating the amounts the Company would
receive or pay to terminate the instruments at the reporting date.
The recorded amounts of certain financial instruments, such as cash and
marketable securities and short-term borrowings, approximate their fair values
and are excluded from the amounts below. The recorded amounts and estimated
fair values of the Company's long-term borrowings and other financial
instruments as of March 31, 1994 and December 31, 1993 were as follows:
March 31, 1994 December 31, 1993
(in millions)
Recorded Fair Recorded Fair
Amount Value Amount Value
Other investments $ 53 $ 55 $ 93 $ 93
Long-term borrowings (4,866) (5,225) (6,853) (7,513)
Other instruments (700) (1,075) (816) (1,308)
RECLASSIFICATIONS
Certain 1993 financial statement amounts have been reclassified to conform to
the 1994 presentation.
C. Michael Hamilton, General Comptroller
May 13, 1994
7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
SUMMARY
(in millions, except earnings per share) First Quarter
1994 1993 Change
Sales $ 3,592 $ 3,542 +1%
Earnings from operations before extraordinary item
and cumulative effect of changes in accounting principle:
Continuing 94 94
Discontinued - 55
Net earnings (loss) 82 (2,019)
Primary earnings per share from operations before
extraordinary item and cumulative effect of changes
in accounting principle:
Continuing .29 .29
Discontinued - .17
Primary earnings (loss) per share .25 (6.18)
Sales for the first quarter of 1994 were $3,592 million, an increase of 1%
when compared with sales for the first quarter of 1993. Earnings from
continuing operations before extraordinary item and cumulative effect of
changes in accounting principle for the first quarter of 1994 were $94 million
($.29 per share), level with earnings in the first quarter of 1993. Earnings
benefited from more efficient utilization of marketing and administrative
activity, manufacturing productivity gains, increased unit volumes and a gain
from the sale of technology; but were adversely affected by cost escalation,
lower effective selling prices, the unfavorable effects of foreign currency
rate changes and related hedging activities, and the absence of gains from the
sales of assets and other items recorded in the first quarter of 1993.
On December 31, 1993, the Company completed the spin-off of its worldwide
chemical business, which consisted of Eastman Chemical Company operations.
Earnings for Eastman Chemical Company operations, which have been reported as
discontinued operations, were $55 million ($.17 per share) in the first
quarter of 1993 before deducting the cumulative effect of changes in
accounting principle.
Net earnings for 1994 were reduced by an extraordinary charge of $12 million
after-tax ($.04 per share) related to the early extinguishment of debt. The
1993 net loss was due to an after-tax charge of $2.17 billion ($6.64 per
share) associated with the adoption of Statement of Financial Accounting
Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions", and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" effective as of January 1, 1993.
On May 3, 1994, the Company announced its intention to divest its non-Imaging
Health segment businesses, which consist of Sterling Winthrop Inc.,
L&F Products and the Clinical Diagnostics Division.
- ------------------------------------------------------------------------------
Sales by Segment
(in millions)
First Quarter
1994 1993 Change
Imaging
Inside the U.S. $ 545 $ 502 +9%
Outside the U.S. 933 894 +4
------ ------ ----
Total Imaging 1,478 1,396 +6
------ ------ ----
Information
Inside the U.S. 520 518 0
Outside the U.S. 390 383 +2
------ ------ ----
Total Information 910 901 +1
------ ------ ----
Health
Inside the U.S. 664 731 -9
Outside the U.S. 540 515 +5
------ ------ ----
Total Health 1,204 1,246 -3
------ ------ ----
Deduct Intersegment Sales 0 (1)
------ ------ ----
Total Worldwide $3,592 $3,542 +1
====== ====== ====
8
SEGMENT SALES
In the Imaging segment, sales for the first quarter of 1994 to customers
inside the U.S. reflect good gains when compared with the first quarter of
1993, as increased unit volumes were slightly offset by lower effective
selling prices. Sales to customers outside the U.S. recorded a slight
increase for the first quarter of 1994 when compared with the first quarter of
1993. The effects of good gains in unit volumes were only partially offset by
lower effective selling prices and unfavorable foreign currency rate changes.
Worldwide volume gains were led by Ektacolor papers, Kodacolor films and
single-use cameras.
In the Information segment, 1994 first quarter sales inside the U.S. were
level with sales for the first quarter of 1993. Outside the U.S., sales in
the first quarter of 1994 increased slightly when compared with sales for the
comparable period a year ago as moderate volume increases were slightly offset
by lower effective selling prices.
In the Health segment, sales to customers inside the U.S. in the first quarter
of 1994 were down when compared with the first quarter of 1993 due to
decreases in unit volumes. Sales to customers outside the U.S. in the first
quarter of 1994 recorded moderate gains over the comparable period of a year
ago primarily due to gains in unit volumes. Increases in sales outside the
U.S. were led by Sterling Winthrop, health sciences and clinical diagnostics
products.
- ------------------------------------------------------------------------------
COSTS AND EXPENSES
First Quarter
(in millions) 1994 1993 Change
Cost of goods sold $1,791 $1,752 +2%
Percent of Sales 49.9% 49.5%
Marketing and administrative expenses $1,116 $1,190 -6%
Percent of Sales 31.1% 33.6%
Research and development costs 315 $ 308 +2%
Percent of Sales 8.8% 8.7%
- ------------------------------------------------------------------------------
Earnings from Operations by Industry Segment
(in millions)
First Quarter
1994 1993 Change
Imaging $ 180 $ 133 +35%
Percent of Sales 12.2% 9.5%
Information $ 52 $ 43 +21%
Percent of Sales 5.7% 4.8%
Health $ 138 $ 118 +17%
Percent of Sales 11.5% 9.5%
----- ----- -----
Total $ 370 $ 294 +26%
===== ===== =====
9
- ------------------------------------------------------------------------------
SEGMENT EARNINGS
Operating earnings for the Imaging segment for the first quarter of 1994
increased when compared with the first quarter of last year, as the benefits
from increased unit volumes, manufacturing productivity and more efficient
utilization of marketing and administrative activity were only partially
offset by lower effective selling prices, cost escalation and the unfavorable
effects of foreign currency rate changes and related hedging activities.
Information segment operating earnings for the 1994 first quarter increased
over the first quarter of a year ago, as the benefits from more efficient
utilization of marketing and administrative activity were only partially
offset by cost escalation.
Health segment operating earnings for the first quarter of 1994 increased when
compared with the first quarter of last year, as the benefits from more
efficient utilization of marketing and administrative activity, manufacturing
productivity, a gain from the sale of technology and lower research and
development activity were only partially offset by lower unit volumes and cost
escalation.
- ------------------------------------------------------------------------------
OTHER REVENUES AND COSTS
Earnings from equity interests and other revenues for the first quarter of
1994 decreased from the 1993 first quarter. This comparison was adversely
affected by $56 million of gains from the sales of assets and other items in
the first quarter of 1993. Interest expense for the 1994 first quarter
increased when compared with the 1993 first quarter due to higher effective
interest rates and lower capitalized interest in 1994.
- ------------------------------------------------------------------------------
CURRENCY TRANSACTIONS AND TRANSLATION
The net effect from foreign exchange transactions, related hedging activities,
and the translation of net monetary items in hyper-inflationary economies was
a loss of $51 million in the 1994 first quarter, compared with a loss of
$14 million in the first quarter last year.
- ------------------------------------------------------------------------------
CASH DIVIDENDS
During the first quarters of 1994 and 1993, cash dividends of 40 cents per
share and 50 cents per share were declared on the Company's common stock,
respectively. This change in the dividend disbursement resulted from the
spin-off of the Company's worldwide chemical business through a tax-free
dividend to its shareowners on December 31, 1993. For every four Eastman
Kodak Company shares owned, shareowners received one share of Eastman Chemical
Company stock. Total dividends declared in the first quarters of 1994 and
1993 were $132 million and $163 million, respectively.
FINANCIAL POSITION
Cash and marketable securities were $1,290 million at the end of the first
quarter of 1994, compared with $1,966 million at year-end 1993. The decrease
is primarily due to the repayment of borrowings and a maturing interest rate
swap and the termination of a receivables financing program. Receivables were
$3,359 million, down from $3,463 million at year-end 1993. Worldwide
inventories were $2,150 million, up from $1,913 million at year-end 1993.
Working capital at the end of the quarter decreased to $1,473 million compared
with $3,111 million at year-end 1993. The decrease was primarily due to the
reclassification of $1,058 million of zero coupon convertible subordinated
debentures, called in March, 1994, from long-term to short-term borrowings as
of March 31, 1994. These debentures were redeemed for cash by the Company on
April 1, 1994. Total borrowings decreased $410 million from year-end 1993.
The Company expects to have positive operating cash flow for the year.
Proceeds from the sale of certain Health segment businesses are expected to be
used to reduce debt.
CAPITAL ADDITIONS
Capital additions for the first quarter of 1994 were $180 million compared with
$277 million for the first quarter of 1993. The provision for depreciation
for the first quarter of 1994 was $212 million, compared with $236 million for
the first quarter of last year.
- ------------------------------------------------------------------------------
10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is in discussion with the Environmental Protection Agency ("EPA")
and the Environment and Natural Resources Division of the U.S. Department of
Justice concerning the EPA/NEIC (National Enforcement Investigations Center)
investigation of the Company's Kodak Park site in Rochester, New York. As a
result of the investigation, the Company expects to incur a civil fine of at
least $100,000 for violations of federal environmental laws and regulations.
The Company is participating in the EPA's Toxic Substances Control Act
("TSCA") Section 8 (e) Compliance Audit Program. As a participant, the
Company has agreed to audit its files for materials which under current EPA
guidelines would be subject to notification under Section 8 (e) of TSCA and to
pay stipulated penalties for each report submitted under this program. The
Company anticipates that its liability under the Program will be $1,000,000.
In addition to the foregoing environmental actions, the Company has been
designated as a potentially responsible party ("PRP") under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended (the
"Superfund" law), or under similar state laws, for environmental assessment
and cleanup costs as the result of the Company's alleged arrangements for
disposal of hazardous substances at fewer than twenty Superfund sites. With
respect to each of these sites, the Company's actual or potential allocated
share of responsibility is small. Furthermore, numerous other PRPs have
similarly been designated at these sites and, although the law imposes joint
and several liability on PRPs, as a practical matter costs are shared with
other PRPs. Settlements and costs paid by the Company in Superfund matters to
date have not been material. Future costs are also not expected to be
material to the Company's financial condition or results of operations.
The Company and its subsidiary companies are involved in lawsuits, claims,
investigations, and proceedings, including product liability, commercial,
environmental, and health and safety matters, which are being handled and
defended in the ordinary course of business. There are no such matters
pending that the Company and its General Counsel expect to be material in
relation to the Company's business, financial condition, or results of
operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required as part of this report are listed in the index
appearing on page 12.
(b) Reports on Form 8-K
No reports on Form 8-K were filed or required to be filed for the
quarter ended March 31, 1994.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASTMAN KODAK COMPANY
(Registrant)
C. M. Hamilton, General Comptroller,
Principal Accounting Officer and
Duly Authorized Officer
Date May 13, 1994
12
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits
Exhibit Number Page No.
(11) Statement Re Computation of Earnings Per Common Share 13
(99) Additional Exhibit: Kodak's CEO Unveils New Corporate
Strategy 16
13
Eastman Kodak Company and Subsidiary Companies
Exhibit (11)
Computation of Earnings Per Common Share
First Quarter
1994 1993
(in millions, except
per share amounts)
PRIMARY:
Earnings from continuing operations before
income taxes $ 160 $ 160
Provision for income taxes from continuing
operations 66 66
------ -------
Earnings from continuing operations before
extraordinary item and cumulative effect of
changes in accounting principle 94 94
Earnings from discontinued operations before
cumulative effect of changes in accounting
principle - 55
------ -------
Earnings before extraordinary item and
cumulative effect of changes
in accounting principle 94 149
Extraordinary item (12) -
------ -------
Earnings before cumulative effect of changes
in accounting principle 82 149
------ -------
Cumulative effect of changes in accounting
principle from continuing operations - (1,723)
Cumulative effect of changes in accounting
principle from discontinued operations - (445)
------ -------
Total cumulative effect of changes in
accounting principle - (2,168)
------ -------
Net Earnings (Loss) $ 82 $(2,019)
====== =======
Average number of common shares outstanding 330.7 326.7
------ -------
Primary earnings per share from continuing
operations before extraordinary item and
cumulative effect of changes in accounting
principle $ .29 $ .29
Primary earnings per share from discontinued
operations before cumulative effect of
changes in accounting principle - .17
------ -------
Primary earnings per share before
extraordinary item and cumulative effect of
changes in accounting principle .29 .46
Extraordinary item (.04) -
------ -------
Primary earnings per share before cumulative
effect of changes in accounting principle .25 .46
------ -------
Cumulative effect of changes in accounting
principle from continuing operations - (5.28)
Cumulative effect of changes in accounting
principle from discontinued operations - (1.36)
------ -------
Total cumulative effect of changes in
accounting principle - (6.64)
------ -------
Primary earnings (loss) per share $ .25 $ (6.18)
====== =======
14
Eastman Kodak Company and Subsidiary Companies
Exhibit (11)
(Continued)
Computation of Earnings Per Common Share
First Quarter
1994 1993
(in millions, except
per share amounts)
FULLY DILUTED:
Earnings from continuing operations
before extraordinary item and cumulative
effect of changes in accounting principle $ 94 $ 94
Add after-tax interest expense applicable to:
6 3/8% convertible debentures (1) - -
Zero coupon convertible debentures (1) - -
----- -------
Adjusted earnings from continuing
operations before extraordinary item and
cumulative effect of changes in
accounting principle 94 94
Earnings from discontinued operations
before cumulative effect of changes in
accounting principle - 55
----- -------
Adjusted earnings before extraordinary item
and cumulative effect of changes in
accounting principle 94 149
Extraordinary item (12) -
----- -------
Adjusted earnings before cumulative effect
of changes in accounting principle 82 149
----- -------
Cumulative effect of changes in accounting
principle from continuing operations - (1,723)
Cumulative effect of changes in accounting
principle from discontinued operations - (445)
----- -------
Total cumulative effect of changes in
accounting principle - (2,168)
----- -------
Adjusted net earnings $ 82 $(2,019)
===== =======
(1) 6 3/8% convertible debentures and zero coupon convertible debentures
were anti-dilutive in both years.
15
Eastman Kodak Company and Subsidiary Companies
Exhibit (11)
(Continued)
Computation of Earnings Per Common Share
First Quarter
1994 1993
(in millions, except
per share amounts)
Average number of common shares outstanding 330.7 326.7
Add-incremental shares under option 3.4 3.2
Add-incremental shares applicable to:
6 3/8% convertible debentures (1) - -
Zero coupon convertible debentures (1) - -
------ ------
Adj'd avg. number of shares outstanding 334.1 329.9
------ ------
Fully diluted earnings per share from
continuing operations before extraordinary
item and cumulative effect of changes in
accounting principle $ .29 $ .29
Fully diluted earnings per share from
discontinued operations before cumulative
effect of changes in accounting principle - .17
------ ------
Fully diluted earnings per share before
extraordinary item and cumulative effect of
changes in accounting principle .29 .46
Extraordinary item (.04) -
------ ------
Fully diluted earnings per share before
cumulative effect of changes in
accounting principle .25 .46
------ ------
Cumulative effect of changes in accounting
principle from continuing operations - (5.28)
Cumulative effect of changes in accounting
principle from discontinued operations - (1.36)
------ ------
Total cumulative effect of changes in
accounting principle - (6.64)
------ ------
Fully diluted earnings (loss) per share $ .25 $(6.18)
====== ======
(1) 6 3/8% convertible debentures and zero coupon convertible debentures
were anti-dilutive in both years.
16
Exhibit (99)
KODAK'S CEO UNVEILS
NEW CORPORATE STRATEGY
Rochester, N.Y., May 3--Eastman Kodak Company today revealed a new corporate
strategy that will focus the company's resources and management attention
exclusively on its imaging businesses.
"Imaging offers Kodak tremendous opportunities for long-term success and
growth. It is the business Kodak knows best, built on over a century of brand
strength, marketing know-how, and technological leadership," said George M.
C. Fisher, Kodak's Chairman, President, and CEO. "To achieve maximum success,
we have concluded that we must commit our entire resource base to imaging
opportunities and divest non-core businesses."
To realize this strategy, Kodak intends to divest the pharmaceutical and
consumer health products subsidiary, Sterling Winthrop Inc.; the personal care
and household products business, L&F Products; and the Clinical Diagnostics
Division. These businesses currently generate approximately $3.7 billion of
the company's annual revenues.
"Our goal is to divest these businesses in an orderly and responsible manner
that optimizes value for Kodak," Fisher said.
Kodak will retain its X-ray film and electronics-based medical, cardiology,
and dental diagnostic imaging business, the Health Sciences Division, because
it plays a vital role in its imaging strategy.
KODAK MISSION
Fisher noted, "Our mission must be to build a highly-profitable,
results-oriented company based on a sound value system that emphasizes five
key values. These values are the operating principles we will use with our
customers, employees, shareholders, suppliers, and the communities in
which we live and work." The key values are:
* Respect for the individual;
* Uncompromising integrity in everything we do;
* Trust;
* Credibility;
* Continuous improvement.
"We will rebuild this corporation on a platform based on those five values,"
he added.
He stressed that the company will focus on profitable participation in the
five links of the imaging chain: image capture, processing, storage, output,
and delivery of images for people and machines anywhere in Kodak's worldwide
market. Kodak will emphasize the sale of imaging consumables in support of its
mission, and will broaden its pursuit to include those digital electronic
imaging arenas in which Kodak can profitably compete.
Fisher said the company will ensure that:
* Kodak's customers--and the ultimate consumer--are satisfied; and
hence, Kodak's worldwide market share increases;
* Kodak's employees are energized, fulfilled, and productive, and hence
continue to show their loyalty, dedication, and winning spirit;
* Kodak achieves superior financial results which provide attractive
returns for its shareholders, and hence rewards Kodak with long-term
investment in its stock.
Fisher explained that Kodak will accomplish its business mission by driving
three imperatives: total customer satisfaction, total employee satisfaction,
and return on net asset (RONA) improvement.
17
Exhibit (99)
(continued)
RONA IMPROVEMENT PROGRAM
Fisher announced he is leading a new effort, the "RONA Improvement Program."
This consists of ten initiatives that will significantly improve both
after-tax profits and asset utilization, and deliver top-line revenue growth.
Each project will have a team champion, with Fisher directly responsible for
two: Growth of Market and Cycle Time Improvement. The ten RONA Improvement
Program initiatives are:
* Growth of Market
* Asset Management
* Span-of-Control
* Cost of Quality
* R&D Productivity
* Marketing Opportunities
* Portfolio Review
* Process Reengineering
* Cycle Time Improvement
* Policy Opportunities
Fisher further explained, "Pursuing growth for Kodak is not synonymous with
throwing money at the great information 'super highway in the sky,' or at
digital electronics for imaging as we might have in the past. Our growth
strategies must apply equally to our traditional silver halide film business
as well as to our digital imaging opportunities.
"Rather than simply take an ax to budgets and manpower, we are trying to
change, in significant ways, how this company operates," Fisher explained.
DIVESTMENT PLANS
By divesting the non-imaging businesses, three purposes are served. First and
foremost, Kodak can move quickly to achieve significant debt reduction and a
stronger balance sheet. Second, Kodak can commit its management attention and
resources to improving the current performance of its core imaging businesses.
And third, the company will strategically attack a broader array of imaging
opportunities around the world to build an exciting and financially sound
Kodak of the future--a company which is highly profitable with modest
growth--and more profitable when it achieves better sales growth.
Fisher noted that the divestment plan also will better position the
non-imaging businesses to achieve their full potential as central elements in
core strategies under new ownership. Kodak noted that Sterling Winthrop's
alliance partner, Elf Sanofi, has the right of first refusal to purchase the
pharmaceutical alliance portion of the business. Kodak has retained the
investment banking firm, Goldman Sachs, to assist in this transaction.
"The businesses we intend to divest are sound--with excellent prospects.
Their current performance compares quite favorably with peer health and
household products companies," Fisher added. "Kodak is now focused on its
core strength, which is both our heritage and our future."
Fisher emphasized, "It's not going to be business as usual. There is a new
Kodak, and it is moving swiftly and aggressively to achieve profitable
growth."
