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 September 30, 1998
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 September 30, 1998
Common Stock, $2.50 par value 323,949,681
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
(in millions, except per share data)
Third Quarter Three Quarters
1998 1997 1998 1997
REVENUES
Sales $3,391 $3,773 $ 9,843 $10,759
Earnings from equity
interests and other revenues 28 14 241 120
------ ------ ------- -------
TOTAL REVENUES 3,419 3,787 10,084 10,879
------ ------ ------- -------
COSTS
Cost of goods sold 1,780 2,045 5,193 5,703
Selling, general and
administrative expenses 761 1,035 2,348 2,905
Research and development costs 224 259 671 782
Purchased research and
development - - - 186
Interest expense 32 26 96 69
Other costs 19 70 82 99
------ ------ ------- -------
TOTAL COSTS 2,816 3,435 8,390 9,744
------ ------ ------- -------
Earnings before income taxes 603 352 1,694 1,135
Provision for income taxes 205 120 576 386
------ ------ ------- -------
NET EARNINGS $ 398 $ 232 $ 1,118 $ 749
====== ====== ======= =======
Basic earnings per share $ 1.23 $ .71 $ 3.46 $ 2.28
====== ====== ======= =======
Diluted earnings per share $ 1.21 $ .71 $ 3.41 $ 2.25
====== ====== ======= =======
Earnings used in basic and
diluted earnings per share $ 398 $ 232 $ 1,118 $ 749
Number of common shares used in
basic earnings per share 323.9 325.2 323.3 328.3
Incremental shares from assumed
conversion of options 6.0 3.9 4.5 5.0
------ ------ ------- -------
Number of common shares used in
diluted earnings per share 329.9 329.1 327.8 333.3
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS
Retained earnings at beginning
of period $5,829 $6,153 $ 5,350 $ 5,931
Net earnings 398 232 1,118 749
Cash dividends declared (142) (143) (427) (434)
Other changes (17) 5 27 1
------ ------ ------- -------
RETAINED EARNINGS
at end of period $6,068 $6,247 $ 6,068 $ 6,247
====== ====== ======= =======
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See Notes to Financial Statements
3
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions, except number of shares and per share data)
Sept. 30, Dec. 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 381 $ 728
Marketable securities 53 24
Receivables 2,519 2,271
Inventories 1,597 1,252
Deferred income tax charges 912 958
Other 294 242
------- -------
Total current assets 5,756 5,475
------- -------
PROPERTIES
Land, buildings and equipment at cost 13,093 12,824
Less: Accumulated depreciation 7,582 7,315
------- -------
Net properties 5,511 5,509
------- -------
OTHER ASSETS
Goodwill (net of accumulated amortization
of $480 and $473) 1,014 548
Long-term receivables and other
noncurrent assets 1,468 1,231
Deferred income tax charges 330 382
------- -------
TOTAL ASSETS $14,079 $13,145
======= =======
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,554 $ 3,832
Short-term borrowings 1,252 611
Taxes - income and other 533 567
Dividends payable 143 143
Deferred income tax credits 20 24
------- -------
Total current liabilities 5,502 5,177
OTHER LIABILITIES
Long-term borrowings 459 585
Postemployment liabilities 3,021 3,075
Other long-term liabilities 1,107 1,083
Deferred income tax credits 76 64
------- -------
Total liabilities 10,165 9,984
SHAREHOLDERS' EQUITY
Common stock at par* 978 978
Additional capital paid in or
transferred from retained earnings 906 914
Retained earnings 6,068 5,350
Accumulated translation adjustment (145) (172)
Minimum pension liability adjustment (37) (37)
------- -------
7,770 7,033
Less: Treasury stock at cost* 3,856 3,872
------- -------
Total shareholders' equity 3,914 3,161
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $14,079 $13,145
======= =======
* Common stock: $2.50 par value, 950 million shares authorized, 391 million
shares issued at September 30, 1998 and at December 31, 1997. Treasury
stock at cost consists of approximately 67 million shares at September 30,
1998 and 68 million shares at December 31, 1997.
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See Notes to Financial Statements
4
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Three Quarters
1998 1997
Cash flows from operating activities:
Net earnings $1,118 $ 749
Adjustments to reconcile above earnings to
net cash provided by operating activities,
excluding the effect of initial consolidation
of acquired companies:
Depreciation and amortization 619 600
Purchased research and development - 186
Deferred taxes (63) (76)
(Gain) loss on sale or retirement
of businesses, investments and properties (107) 1
Increase in receivables (216) (57)
Increase in inventories (334) (156)
Decrease in liabilities excluding borrowings (553) (285)
Other items, net (26) (97)
------ ------
Total adjustments (680) 116
------ ------
Net cash provided by operating activities 438 865
------ ------
Cash flows from investing activities:
Additions to properties (619) (1,024)
Proceeds from sale of businesses,
investments and properties 181 (65)
Acquisitions, net of cash acquired (415) (318)
Marketable securities - sales 100 11
Marketable securities - purchases (130) -
Cash flows related to sales of non-imaging
health businesses - (65)
------ ------
Net cash used in investing activities (883) (1,461)
------ ------
Cash flows from financing activities:
Net increase in borrowings
with original maturity of
90 days or less 645 384
Proceeds from other borrowings 867 1,038
Repayment of other borrowings (996) (1,200)
Dividends to shareholders (427) (424)
Exercise of employee stock options 163 89
Stock repurchases (158) (732)
------ ------
Net cash provided by (used in)
financing activities 94 (845)
------ ------
Effect of exchange rate changes on cash 4 (26)
------ ------
Net decrease in cash and cash equivalents (347) (1,467)
Cash and cash equivalents, beginning of year 728 1,777
------ ------
Cash and cash equivalents, end of quarter $ 381 $ 310
====== ======
The following transactions are not reflected in the Consolidated
Statement of Cash Flows:
Three Quarters
(in millions) 1998 1997
Liabilities assumed in acquisitions $ 228 $ 105
Liabilities assumed by purchaser
in sale of properties - 31
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See Notes to Financial Statements
5
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The financial statements have been prepared by the Company in accordance
with the accounting policies stated in the 1997 Annual Report 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 estimates and have not been audited by independent accountants.
The annual statements will be audited by PricewaterhouseCoopers LLP.
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NOTE 2: COMMITMENTS AND CONTINGENCIES
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 financial position or results of operations.
Refer to Item 1, Legal Proceedings, on page 21.
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NOTE 3: ACQUISITIONS
On March 12, 1998, the Company acquired 51% of PictureVision Inc.'s stock.
PictureVision, the leading provider of digital imaging network services and
solutions at retail, will operate as a subsidiary of the Company. Kodak
will integrate the products and activities of its Picture Network, which
provides consumers with an Internet-based digital imaging network service,
with PictureVision's digital imaging service, PhotoNet. The acquisition
has been accounted for as a purchase and, accordingly, the results of
operations for the company have been included in the Consolidated Statement
of Earnings from the date of acquisition. The acquisition did not have a
material impact on the results of operations for the three- or nine-month
periods ending September 30, 1998.
On March 24, 1998, the Company contributed $308 million to Kodak (China)
Company Limited (KCCL), a newly formed company operating in China, in
exchange for 80% of the outstanding shares of the company. On that date,
the new company acquired the manufacturing assets of Xiamen Fuda
Photographic Materials Company, Ltd., a Chinese domestic photographic
enterprise. On September 1, 1998, KCCL acquired the assets of
Shantou Era Photo Material Industry Corporation, another Chinese
domestic photographic enterprise.
6
On April 2, 1998, the Company contributed $32 million to Kodak (Wuxi)
Company Limited (KWCL), a newly formed company, in exchange for 70% of the
outstanding shares of the business. KWCL acquired part of the
manufacturing assets of Wuxi Aermei Film and Chemical Corporation, a state-
owned enterprise.
The acquisitions by KCCL and KWCL have been accounted for as purchases and,
accordingly, the results of operations for the acquired companies have been
included in the Consolidated Statement of Earnings from the dates of
acquisition. Substantial portions of the purchase prices were allocated to
goodwill, which is being amortized over a ten-year period. The
acquisitions did not have a material impact on the results of operations
for the three- or nine-month periods ending September 30, 1998.
On August 3, 1998, Kodak and Imation Corp. announced that they have signed
an agreement for Kodak to acquire most of Imation's worldwide medical
imaging business. The business being acquired by Kodak generates
approximately $500 million in revenues annually. The transaction is
expected to close in the fourth quarter of 1998.
Under the terms of the agreement, Kodak will pay Imation approximately $520
million in cash at closing and will acquire certain assets and assume
certain liabilities of Imation's medical imaging business, including
Imation's manufacturing facilities in White City, Oregon and Oakdale,
Minnesota, and all of the outstanding shares of Imation's Cemax-Icon(TM)
subsidiary in Fremont, California. Kodak has also agreed to reimburse
Imation for certain contingent amounts payable to the former shareholders
of Cemax-Icon.
Imation will retain its manufacturing facility in Ferrania, Italy, where
the company will manufacture x-ray and wet laser medical imaging film for
Kodak under a supply agreement for a minimum of two years. As part of the
cash payment, and in connection with the Ferrania supply agreement, Kodak
will pay Imation $20 million at closing. The Company may also be required
to make a payment of up to an additional $25 million no later than the
termination of the supply agreement. Under a separate supply agreement,
Kodak will supply document imaging products to Imation out of the White
City, Oregon facility.
In addition, upon closing of the acquisition, the civil litigation
concerning certain intellectual property disputes between the companies in
the United States and Italy will be settled. At the same time, the related
civil litigation between Kodak and Minnesota Mining & Manufacturing Co.
will also be settled.
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7
NOTE 4: DIVESTITURES
On September 1, 1998, the Company sold all of its shares of Fox Photo, Inc.
to Wolf Camera for an amount approximating the current carrying value of
Fox Photo's net assets. In June 1998, the Company sold part of its
investment in Gretag Imaging Group, a Swiss manufacturer of film processing
equipment. The proceeds from the sale were $72 million and resulted in a
pre-tax gain of $66 million. In addition, during the second quarter, the
Company sold Eastman Software's Storage Management group and the BIS
Document Management System product and service business in the U.S., Canada
and Latin America.
On October 1, 1998, Elan Corporation, plc, a leading specialty
pharmaceutical company, purchased from Kodak all the assets and liabilities
of Kodak's subsidiary NanoSystems L.L.C., a drug delivery company, for
approximately $150 million in a combination of $137 million cash and
warrants to purchase ordinary shares in Elan. The Company will record a
gain of approximately $87 million ($54 million after-tax) on the sale in
the fourth quarter of 1998.
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NOTE 5: COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," as of January 1, 1998. The Company has
determined that at December 31, 1998 it will display comprehensive income
in the Consolidated Statement of Shareholders' Equity. The components of
comprehensive income were as follows:
Third Quarter Three Quarters
(in millions) 1998 1997 1998 1997
Net earnings $ 398 $ 232 $1,118 $ 749
Other comprehensive income (loss),
net of tax:
Unrealized holding (losses) gains
arising during the period (16) 29 28 25
Translation adjustments 50 (45) 27 (181)
----- ----- ------ -----
Total other comprehensive income (loss) $ 34 $ (16) $ 55 $(156)
----- ----- ------ -----
Total comprehensive income $ 432 $ 216 $1,173 $ 593
===== ===== ====== =====
The unrealized holding gains and losses for 1998 include an unrealized pre-
tax holding loss of $16 million ($10 million after-tax) for the quarter and
a gain of $52 million ($34 million after-tax) for the year to date on the
Company's remaining equity investment in Gretag. The unrealized holding
gains for 1997 are related primarily to the Company's equity investment in
a Japanese company. Except for the gains and losses associated with
Gretag, the unrealized holding gains and losses are not adjusted for income
taxes because they originate in subsidiaries which have net operating loss
carryforwards subject to a valuation allowance. For both the quarter and
year to date, the
8
improvement in translation adjustments from 1997 to 1998 occurred
predominantly in Europe. The translation adjustments are not currently
adjusted for income taxes since they relate to investments which are
permanent in nature.
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NOTE 6: RECLASSIFICATIONS
Network Services business unit.
Effective January 1, 1998, the Network Services business unit, which
provides services enabling storage, transfer and printing of pictures using
Picture CD's and the Internet, has been transferred from the Commercial
Imaging segment to the Consumer Imaging segment, and 1997 amounts have been
reclassified to conform to the 1998 presentation. The sales and losses
from operations for the Network Services business unit were as follows:
Third Quarter Three Quarters
(in millions) 1998 1997 1998 1997
Sales $ 1 $ - $ 1 $ -
Loss from operations (14) (6) (37) (17)
Consumer Imaging segment promotional expenses.
In the Consumer Imaging segment, certain U.S. promotional expenses which
are shown as sales price reductions in 1998 were shown as advertising and
promotion expenses in 1997. The amounts of those expenses in the third
quarter and year to date of 1997 were $52 and $114 million, respectively.
When comparing 1998 to 1997, these amounts should be deducted from 1997
sales as well as advertising expense.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
(in millions, except earnings per share)
Third Quarter Three Quarters
1998 1997 Change 1998 1997 Change
Sales $3,391 $3,773 -10% $9,843 $10,759 - 9%
Net earnings 398 232 +72 1,118 749 +49
Basic earnings per share 1.23 .71 +73 3.46 2.28 +52
Diluted earnings per share 1.21 .71 +70 3.41 2.25 +52
1998
Sales for the first three quarters were reduced by the transfer of a
portion of Kodak's graphics business into the Kodak Polychrome Graphics
joint venture as well as the negative impact of the strong dollar. Net
earnings increased, reflecting continuing progress in the Company's cost
reduction program and a gain from the sale of a portion of the Company's
equity interest in Gretag Imaging Group.
9
1997
The results for the first three quarters included a pre-tax charge of $186
million ($.37 per diluted share) for in-process research and development
(R&D) associated with the acquisition of Wang Laboratories' software unit
on March 17, 1997, and a pre-tax charge of $46 million ($.09 per diluted
share) for payments in connection with litigation related to the sale of
micrographics and copier parts. Excluding these charges, diluted earnings
per share for the first three quarters would have been $2.71.
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Sales by Industry Segment
(in millions)
Third Quarter Three Quarters
1998 1997* Change 1998 1997* Change
Consumer Imaging
Inside the U.S. $ 849 $ 945 -10% $2,422 $ 2,556 - 5%
Outside the U.S. 1,024 1,130 - 9 2,867 3,142 - 9
------ ------ --- ------ ------ ---
Total Consumer Imaging 1,873 2,075 -10 5,289 5,698 - 7
------ ------ --- ------ ------ ---
Commercial Imaging
Inside the U.S. 743 870 -15 2,194 2,462 -11
Outside the U.S. 782 837 - 7 2,382 2,622 - 9
------ ------ --- ------ ------ ---
Total Commercial Imaging 1,525 1,707 -11 4,576 5,084 -10
------ ------ --- ------ ------ ---
Deduct Intersegment Sales (7) (9) (22) (23)
------ ------ --- ------ ------ ---
Total Sales $3,391 $3,773 -10% $9,843 $10,759 - 9%
====== ====== === ====== ======= ===
* Restated to reflect the transfer of Network Services from the Commercial
Imaging segment to the Consumer Imaging segment (see Note 6).
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Earnings from Operations by Industry Segment
(in millions)
Third Quarter Three Quarters
1998 1997* Change 1998 1997* Change
Consumer Imaging $360 $318 + 13% $ 858 $ 806 + 6%
Percent of Sales 19.2% 15.3% 16.2% 14.1%
Commercial Imaging $269 $116 +132% $ 776 $ 378 +105%
Percent of Sales 17.6% 6.8% 17.0% 7.4%
---- ---- ---- ------ ------ ----
Total Earnings from Operations $629 $434 + 45% $1,634 $1,184 + 38%
==== ==== ==== ====== ====== ====
* Restated to reflect the transfer of Network Services from the Commercial
Imaging segment to the Consumer Imaging segment (see Note 6).
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10
COSTS AND EXPENSES
(in millions)
Third Quarter Three Quarters
1998 1997 Change 1998 1997 Change
Gross profit $1,611 $1,728 - 7% $4,650 $5,056 - 8%
Percent of Sales 47.5% 45.8% 47.2 47.0%
Selling, general and
administrative expenses $ 761 $1,035 -27% $2,348 $2,905 -19%
Percent of Sales 22.4% 27.4% 23.9% 27.0%
Research and development costs $ 224 $ 259 -14% $ 671 $ 782# -14%
Percent of Sales 6.6% 6.9% 6.8% 7.3%
# Excludes $186 million R&D charge associated with the purchase of Wang
Laboratories' software unit.
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1998 COMPARED WITH 1997
Third quarter
Third quarter 1998 sales decreased 10% compared with the third quarter of
1997, in part due to the transfer of a portion of the graphics business to
the Kodak Polychrome Graphics joint venture. Excluding graphics sales from
both years, and after removing from 1997 the reclassified promotional
expenses (see Note 6), sales decreased 7%, due to lower effective selling
prices, the unfavorable effects of foreign currency rate changes and lower
unit volumes. Sales in emerging markets declined 17%, reflecting economic
conditions, and sales of broadly defined digital products were level.
After removing from 1997 the reclassified promotional expenses (see Note
6), sales in the Consumer Imaging segment decreased 7%, due to lower
effective selling prices, the unfavorable effects of foreign currency rate
changes and lower unit volumes. Sales inside the U.S. decreased 5%, due to
lower effective selling prices. Sales outside the U.S. decreased 9%, due
primarily to the unfavorable effects of foreign currency rate changes and
lower effective selling prices.
After removing from 1997 the reclassified promotional expenses (see Note
6), worldwide film sales decreased 9%, due to lower effective selling
prices, the unfavorable effects of foreign currency rate changes and lower
unit volumes. U.S. film sales decreased 8%, as volume gains were more than
offset by lower effective selling prices. Outside the U.S., film sales
decreased 9%, due to the unfavorable effects of foreign currency rate
changes, lower unit volumes and lower effective unit prices.
After removing from 1997 the reclassified promotional expenses (see Note
6), worldwide color paper sales decreased 5%, as higher unit volumes were
more than offset by lower effective selling prices and the unfavorable
effects of foreign currency rate changes. U.S. paper sales increased 1%,
as higher unit volumes were mostly offset by lower effective selling
prices. Outside the U.S., paper sales decreased 7%, as higher unit volumes
were more than offset by lower effective selling prices and the unfavorable
effects of foreign currency rate changes.
11
Sales in the Commercial Imaging segment decreased 11%, in part due to the
transfer of a portion of the graphics business to the Kodak Polychrome
Graphics joint venture. Excluding the graphics business from both years,
segment sales decreased 6%, due to the unfavorable effects of foreign
currency rate changes, lower unit volumes and lower effective selling
prices. In the U.S., sales decreased 10%, due to lower unit volumes and
lower effective selling prices. Outside the U.S., sales decreased 3%, due
primarily to the unfavorable effects of foreign currency rate changes.
Earnings from operations for the Company increased 45%, as the Company
continues to realize the benefits of cost reductions and significant gains
in manufacturing productivity. Earnings were adversely affected by lower
effective selling prices, the unfavorable effects of foreign currency rate
changes and lower unit volumes. Losses in the digital products portfolio,
included in both the Commercial Imaging and Consumer Imaging segments, were
$52 million for the quarter compared with $157 million a year ago.
After adjusting 1997 for the reclassified promotional expenses (see Note
6), selling, general and administrative (SG&A) expenses for the Company
decreased 23% from 26.4% of sales to 22.4% of sales. Excluding advertising
expenses, SG&A expenses decreased 23% from 20.0% of sales to 17.0% of
sales. R&D expenses decreased 14% from 6.9% of sales to 6.6% of sales.
Earnings from operations in the Consumer Imaging segment increased 13%,
driven by cost reductions in manufacturing, SG&A and R&D, but adversely
affected by lower effective selling prices, the unfavorable effects of
foreign currency rate changes and lower unit volumes.
In the Consumer Imaging segment, after adjusting 1997 for the reclassified
promotional expenses (see Note 6), SG&A expenses decreased 18% from 28.3%
of sales to 25.0% of sales. Excluding advertising expenses, SG&A expenses
decreased 16% from 18.9% of sales to 17.1% of sales.
Earnings from operations in the Commercial Imaging segment increased 132%,
due to cost reductions in manufacturing, SG&A and R&D, but were adversely
affected by the unfavorable effects of foreign currency rate changes, lower
effective selling prices and lower unit volumes. Digital & Applied
Imaging, Document Imaging, Health Imaging and Entertainment Imaging
reported improved earnings performance.
In the Commercial Imaging segment, SG&A expenses decreased 29% from 24.0%
of sales to 19.2% of sales. Excluding advertising expenses, SG&A expenses
decreased 29% from 21.3% of sales to 16.9% of sales. R&D expenses
decreased 18% from 9.4% of sales to 8.6% of sales.
12
For the third quarter of 1998, earnings from equity interests and other
revenues increased slightly due to gains on some investments. Interest
expense was higher due to larger average levels of borrowings. Other costs
decreased primarily because of lower foreign exchange losses, and because
the 1997 third quarter reflected a $46 million pre-tax charge for payments
in connection with litigation related to the sale of micrographics and
copier parts. The effective tax rate was 34% in the third quarter of both
1998 and 1997.
Year to date
For the first three quarters of 1998, sales decreased 9% compared with the
first three quarters of 1997, in part due to the transfer of a portion of
the graphics business to the Kodak Polychrome Graphics joint venture.
Excluding graphics sales from both years, and after removing from 1997 the
reclassified promotional expenses (see Note 6), sales decreased 5%, as
higher unit volumes were more than offset by the unfavorable effects of
foreign currency rate changes and lower effective selling prices.
After removing from 1997 the reclassified promotional expenses (see Note
6), sales in the Consumer Imaging segment decreased 5%, as higher unit
volumes were more than offset by the unfavorable effects of foreign
currency rate changes and lower effective selling prices. Sales inside the
U.S. decreased 1%, as higher unit volumes were more than offset by lower
effective selling prices. Sales outside the U.S. decreased 9%, due to the
unfavorable effects of foreign currency rate changes, lower effective
selling prices and lower unit volumes.
After removing from 1997 the reclassified promotional expenses (see Note
6), worldwide film sales decreased 7%, due to the unfavorable effects of
foreign currency rate changes, lower unit volumes and lower effective
selling prices. U.S. film sales decreased 6%, due to lower effective
selling prices. Outside the U.S., film sales decreased 7%, as higher
effective selling prices were more than offset by the unfavorable effects
of foreign currency rate changes and lower unit volumes.
After removing from 1997 the reclassified promotional expenses (see Note
6), worldwide color paper sales decreased 5%, as higher unit volumes were
more than offset by the unfavorable effects of foreign currency rate
changes and lower effective selling prices. U.S. paper sales were level,
as higher unit volumes were offset by lower effective selling prices.
Outside the U.S., paper sales decreased 8%, as higher unit volumes were
more than offset by the unfavorable effects of foreign currency rate
changes and lower effective selling prices.
13
Sales in the Commercial Imaging segment decreased 10%, in part due to the
transfer of a portion of the graphics business to the Kodak Polychrome
Graphics joint venture. Excluding the graphics business from both years,
segment sales decreased 6%, due to the unfavorable effects of foreign
currency rate changes, lower effective selling prices and lower unit
volumes. In the U.S., sales decreased 6%, due to lower unit volumes and
lower effective selling prices. Outside the U.S., sales decreased 5%, as
higher unit volumes were more than offset by the unfavorable effects of
foreign currency rate changes and lower effective selling prices.
Earnings from operations for the Company increased 38%, as the Company
continues to realize the benefits of cost reductions and significant gains
in manufacturing productivity. Also, 1997 included a pre-tax charge of
$186 million for in-process research and development associated with the
acquisition of Wang Laboratories' software unit on March 17, 1997.
Earnings were adversely affected by lower effective selling prices and the
unfavorable effects of foreign currency rate changes. Losses in the
digital products portfolio, included in both the Commercial Imaging and
Consumer Imaging segments, were $171 million for the first three quarters
of 1998 compared with $308 million a year ago.
After adjusting 1997 for the reclassified promotional expenses (see Note
6), SG&A expenses for the Company decreased 16% from 26.2% of sales to
23.9% of sales. Excluding advertising expenses, SG&A expenses decreased
18% from 20.6% of sales to 18.3% of sales. Excluding the Wang charge, R&D
expenses decreased 14% from 7.3% of sales to 6.8% of sales.
Earnings from operations in the Consumer Imaging segment increased 6%,
as cost reductions in manufacturing, SG&A and R&D, and higher unit volumes,
were mostly offset by lower effective selling prices and the unfavorable
effects of foreign currency rate changes.
In the Consumer Imaging segment, after removing from 1997 the reclassified
promotional expenses (see Note 6), SG&A expenses decreased 10% from 28.8%
of sales to 27.3% of sales. Excluding advertising expenses, SG&A expenses
decreased 11% from 20.1% of sales to 18.8% of sales. R&D expenses
decreased 8%, remaining at 5.3% of sales.
Earnings from operations in the Commercial Imaging segment increased 105%
(or 38%, excluding from the first three quarters of 1997 a pre-tax charge
of $186 million for in-process R&D associated with the acquisition of Wang
Laboratories' software unit), as cost reductions in manufacturing, SG&A and
R&D were partially offset by the unfavorable effects of foreign currency
rate changes and lower effective selling prices. Document Imaging, Digital
& Applied Imaging, Health Imaging and Entertainment Imaging reported
improved earnings performance.
In the Commercial Imaging segment, SG&A expenses decreased 24% from 23.3%
of sales to 19.8% of sales. Excluding advertising expenses, SG&A expenses
decreased 25% from 21.1% of sales to 17.6% of sales. Excluding the Wang
charge, R&D expenses decreased 18% from 9.4% of sales to 8.5% of sales.
14
For the first three quarters of 1998, earnings from equity interests and
other revenues increased significantly due to a pre-tax gain of $66 million
($.13 per diluted share) on the sale of a portion of the Company's equity
interest in Gretag Imaging Group, as well as gains from sales of real
estate and the divestiture of some relatively small businesses. Interest
expense was higher due to larger average levels of borrowings. The
effective tax rate was 34% in the first three quarters of both 1998 and
1997.
From the beginning of the fourth quarter of 1997 through September 30,
1998, approximately 10,000 employees have left the Company under
restructuring programs. This includes 2,200 employees separated by the end
of 1997, 3,400 separated during the first quarter of 1998, 2,000 separated
during the second quarter of 1998, and 2,400 separated during the third
quarter of 1998. Kodak employment as of the end of the third quarter of
1998 is approximately 90,000, slightly lower than at the end of the second
quarter of 1998. Workforce reductions have been largely offset by planned
hiring in China and planned seasonal hiring in worldwide photofinishing
operations.
Since the inception of its cost reduction program, the Company has achieved
net savings of $649 million, including $293 million in the third quarter of
1998. The third quarter figure includes approximately $50 million of
savings from lower pension and health care costs due to reduced headcount
resulting from the restructuring programs, but does not include the benefit
of divestitures or the effects of changes in exchange rates and is net of
increased investments. Many of the anticipated future headcount reductions
are associated with portfolio actions which will generate a lower rate of
savings.
On December 31, 1996, Danka Business Systems PLC (Danka) and the Company
entered into an agreement for Danka to acquire the sales, marketing and
equipment services operations of the Company's Office Imaging business, as
well as the Company's facilities management business, then known as Kodak
Imaging Services. In connection with this agreement, the Company supplies
high-volume copiers and printers to Danka, and Danka provides the Company
with R&D funding. Danka is the Company's primary customer for Office
Imaging products, accounting for about 90% of Office Imaging's annual sales
of approximately $425 million.
Danka is currently experiencing financial difficulties, which could affect
Danka's ongoing ability to fulfill the terms of its agreements with the
Company. The Company continues to assess the situation with Danka, and
could be required to take actions that would result in charges for employee
severance and for write-downs of facilities, equipment and working capital.
Such charges could have a material impact on the Company's financial
position and results of operations.
As described in Note 3, Acquisitions, the Company contributed to two newly
formed companies operating in China. Under terms of agreements announced
on March 23, 1998, the Company plans to invest more than $1 billion in
China over the next several years. The investment will be used to upgrade
technology, improve manufacturing capacity and expand distribution and
marketing capability needed to build and support a strong domestic Chinese
imaging industry.
15
On April 30, 1998, the Company and Intel Corporation announced a series of
agreements that cover joint development efforts in digital imaging products
and platforms, a broad patent cross-license, upgrading of Kodak's Qualex
photofinishing laboratories with Intel architecture and new scanning
equipment, and collaborative consumer-oriented marketing efforts which
could amount to $150 million (each company contributing half) over a three-
year period.
On May 19, 1998, the Company and America Online, Inc. (AOL) announced an
alliance to offer AOL members an exclusive new online service called
"You've Got Pictures!"(sm). The service entails consumers taking pictures
with traditional cameras and film followed by photofinishers developing the
film and then scanning and uploading pictures to AOL via Kodak PhotoNet
online. Using an integrated feature of their AOL account, AOL members can
view their pictures, organize them into an AOL Picture Album and allow
others to access their images.
YEAR 2000
In 1996, the Company established a formal global program office to assess
the impact of the Year 2000 issue on the software and hardware utilized in
the Company's internal operations and included in its product offerings to
customers. The assessment addresses software applications, systems
software, information technology (IT) infrastructure, embedded
manufacturing control technology, and products and services.
Representatives of the global program office and operating divisions meet
monthly with the Chief Financial Officer to monitor program status and
address issues. In July 1998, the global program office presented its
first quarterly update to the Board of Directors. In June 1998, an
independent third party completed a comprehensive review of the Company's
overall Year 2000 program.
The project phases include: inventorying affected technology and assessing
impact of the Year 2000 issue; developing solution plans; modification;
testing and certification; implementation; and developing contingency
plans. All components of software and hardware of the Company are
presently in various phases. The Company expects to have its mission-
critical IT systems and server infrastructure tested and installed by the
end of 1998, and manufacturing control systems Year 2000 compliant by mid-
year 1999. The Company also expects that actively supported products and
services, which are presently in the first five phases, will be compliant
by the end of August, 1999. The product commercialization process has been
modified so that it will produce compliant products.
During the third quarter of 1998, the project team increased global mission-
critical compliance from 50% to 70%, used mainframe test facilities to
simulate remaining mission-critical formal applications, completed an
inventory, assessment and solution plan for the Company's U.S. server
network and allocated resources to support the fourth quarter workplan.
The project team drove advances in remediation of products and services,
and in compliance of operating divisions and third parties.
16
The Company relies on third-party suppliers for many systems, products and
services including telecommunications and data center support. The Company
will be adversely impacted if these suppliers do not make necessary changes
to their own systems and products successfully and in a timely manner. The
Company has a formalized comprehensive supplier compliance program in
place. As a third-party supplier to other companies, the Company has
posted its own product compliance plan on its Internet web site
(www.kodak.com/go/year2000), which was enhanced during the third quarter to
support customer and business partner inquiries.
Costs of software and hardware remediation were $13 million in 1997, and
are estimated to be $27 million, $12 million and $6 million in 1998, 1999
and 2000, respectively. These remediation efforts, almost entirely for
software, will not increase the Company's spending on information
technology because some normal development and maintenance work has been
postponed. Furthermore, some non-compliant systems will be eliminated in
1999 as the Company installs Year 2000 compliant globally deployed ERP/SAP
software in connection with its enterprise resource planning project. A
charge for the total cost of product modification of $20 million was
accrued in 1997. At September 30, 1998, the Company had a reserve of $11
million to cover remaining product modifications.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. Nevertheless, since it is
not possible to anticipate all possible future outcomes, especially when
third parties are involved, there could be circumstances in which the
Company would be unable to take customer orders, manufacture and ship
products, invoice customers or collect payments. The Company could be
subject to litigation for product failure, for example, equipment shutdown
or failure to properly date business or medical records. The amount of
potential liability and lost revenue has not been estimated.
The Company has contingency plans for some mission-critical applications
and is working on plans for others. For example, plans for the U.S.
payroll system have been in place since January 1998, while plans for
sensitized goods manufacturing will be completed by year-end 1998.
Contingency plans involve, among other actions, manual workarounds,
increased inventories and extra staffing.
THE EURO
The Treaty on European Union provides that an economic and monetary union
("EMU") will be established in Europe whereby a single European currency,
the euro, will be introduced and replace the currencies of participating
member states. The euro will be introduced on January 1, 1999, at which
time the value of participating member state currencies will be irrevocably
fixed against the euro and the European Currency Unit ("ECU") will be
replaced at the rate of one euro to one ECU. For the three year
transitional period ending December 31, 2001, the national currencies of
member states will continue to circulate but be sub-units of the euro. New
public debt will be issued in euro and existing debt may be redominated
into euro. At the end of the transitional period, euro banknotes and coins
will be issued, and the national currencies of the member states will cease
to be legal tender no later than June 30, 2002. The countries adopting the
euro on January 1, 1999
17
are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg,
The Netherlands, Portugal, and Spain. Other countries are expected to
follow later. The Company has operations in all of these countries.
It is probable that selling prices of products and services will experience
downward pressure, as current price variations among countries are reduced
due to easy comparability of euro prices across countries. Prices will
tend to harmonize at the lowest level, although value added taxes and
transportation costs will still justify price differentials. Adoption of
the euro will probably accelerate existing market and pricing trends
including pan-European buying and general price erosion.
On the other hand, currency exchange and hedging costs will be
significantly reduced; lower prices and pan-European buying will benefit
the Company in its purchasing endeavors; there will no longer be gray
imports and exports triggered by currency fluctuations among participating
countries, since currency relationships will be frozen; the number of banks
and suppliers needed will be reduced; there will be less variation in
payment terms; and the Company will be able to expand into new marketing
channels such as mail order and internet marketing.
The Company is in the process of making changes in areas such as marketing
and pricing, purchasing, contracts, payroll, taxes, cash management and
treasury operations. Billing systems will be modified so that, beginning
in 1999, the Company will be able to show total gross, value added tax, and
net in euros on national currency invoices, to enable customers to pay in
the new euro currency if they wish to do so. Systems for pricing, payroll
and expense reimbursements will continue to use national currencies until
year-end 2001. The functional currencies of the Company's operations in
affected countries will remain the national currencies until approximately
year-end 2000, when they will change to the euro.
The systems costs of adopting the euro are estimated to be less than $4
million because many non-euro-compliant systems will be eliminated as the
Company installs ERP/SAP software in connection with its enterprise
resource planning project. The Company plans to be at least minimally euro-
compliant when necessary, and is preparing contingency plans to address
potential delays in systems implementation.
OTHER
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information," replacing SFAS
No. 14 and its amendments. This standard requires enterprises to report
certain information about their operating segments in a complete set of
financial statements to shareholders; to report certain enterprise-wide
information about products and services, activities in different geographic
areas, and reliance on major customers; and to disclose certain segment
information in their interim financial statements. The basis for
determining an enterprise's operating segments is the manner in which
financial information is used internally by the enterprise's chief
operating decision maker. The Company will adopt this Statement in its
financial statements for the year ending December 31, 1998. The Company
has not yet determined how the "management approach" will impact existing
segment disclosures.
18
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement requires that an
entity recognize all derivatives as either assets or liabilities and
measure those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge. The accounting for
changes in the fair value of a derivative depends on the intended use of
the derivative and the resulting designation. This Statement must be
adopted by the Company in the year 2000, but may be adopted in any earlier
fiscal quarter, and is not to be applied retroactively. If the Company had
adopted SFAS No. 133 as of July 1, 1998, the impact would not have been
material to its results of operations or financial position. The Company
has not yet determined when it will adopt this Statement.
- ---------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1998, the Company repurchased $158 million
of shares under the $2 billion repurchase program initiated in 1996,
bringing to $1.6 billion the total cost of treasury shares purchased under
that program. The Company expects to complete the program early in 1999.
As described in Note 3, Acquisitions, the Company will pay $520 million in
cash to acquire most of Imation Corp.'s worldwide medical imaging business.
This cash will be obtained from internal operations and, if needed, from
the capital markets.
As described in Note 4, Divestitures, the Company will receive $137 million
in cash from the sale of the assets and liabilites of NanoSystems to Elan
in the fourth quarter of 1998.
Net cash provided by operating activities for the first three quarters of
1998 was $438 million, as net earnings of $1,118 million, which included
non-cash expenses for depreciation and amortization of $619 million, were
offset by decreases in liabilities (excluding borrowings) of $553 million,
a $334 million increase in inventories and a $216 million increase in
receivables. Net cash used in investing activities of $883 million for the
first three quarters of 1998 was due primarily to additions to properties
of $619 million and acquisitions (net of cash acquired) of $415 million.
Net cash provided by financing activities of $94 million for the first
three quarters of 1998 was due to net increases in borrowings of $516
million and exercise of employee stock options of $163 million, offset by
$427 million of dividend payments and $158 million of stock repurchases.
During the third quarter of 1998, a cash dividend of $142 million (44 cents
per share) was declared on the Company's common stock, versus $143 million
(44 cents per share) a year ago. Total cash dividends declared for the
year-to-date periods of 1998 and 1997 amounted to $427 million ($1.32 per
share) and $434 million ($1.32 per share), respectively.
Cash, cash equivalents and marketable securities were $434 million at the
end of the third quarter, compared with $752 million at year-end 1997. Net
working capital at the end of the quarter was $254 million, compared with
$298 million at year-end 1997. The decrease in cash, cash equivalents and
marketable securities is primarily attributable to the Company's
investments in China and restructuring payments.
19
Capital additions for the third quarter of 1998 were $246 million compared
with $346 million for the third quarter of 1997. For the first three
quarters of 1998, capital additions were $619 million versus $1,024 million
a year ago.
- ---------------------------------------------------------------------------
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 Private Securities
Litigation Reform Act of 1995. Forward-looking statements in this 10-Q
relate to the Company's Year 2000 and euro compliance efforts, including
expectations about compliance timetables and costs.
Actual results may differ from those expressed or implied in forward-
looking statements. With respect to any forward-looking statements
contained in this report, the Company believes that its results are subject
to a number of risk factors, including: the ability of the Company to
identify and address successfully Year 2000 issues in a timely manner, and
at costs that are reasonably in line with projections; and the ability of
the Company's vendors to identify and address successfully their own Year
2000 issues in a timely manner.
Any forward-looking statements in this report should be evaluated in light
of these important risk factors.
- ------------------------------------------------------------------------
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The Company, as a result of its global operating and financing activities,
is exposed to changes in foreign currency exchange rates, commodity prices
and interest rates which may adversely affect its results of operations and
financial position. In seeking to minimize the risks and/or costs
associated with such activities, the Company manages exposures to changes
in commodity prices, interest rates and foreign currency exchange rates
through its regular operating and financing activities.
Foreign currency forward contracts are used to hedge certain firm
commitments and the currency risk inherent in the deposit-taking and
lending activities of the Company's International Treasury Center. Option
and forward contracts are used to mitigate the Company's risk to
fluctuating commodity prices. The Company's exposure to changes in
interest rates results from its investing and borrowing activities used to
meet its liquidity needs. Long-term debt is generally used to finance long-
term investments, while short-term debt is used to meet working capital
requirements. Derivative instruments are not presently used to adjust the
Company's interest rate risk profile. The Company does not utilize
financial instruments for trading or other speculative purposes, nor does
it utilize leveraged financial instruments.
20
The majority of foreign currency forward contracts are denominated in
Australian, British, French, German, Irish and Spanish currencies. The
magnitude and nature of such hedging activities are explained further in
Note 11, Financial Instruments, in the Company's 1997 Annual Report on Form
10-K. If foreign currency exchange rates of currencies sold increased
10%, the Company would incur a $106 million loss on foreign currency
forward contracts outstanding at September 30, 1998. Such losses would be
substantially offset by gains from the revaluation or settlement of the
underlying positions hedged.
The Company has used silver option and forward contracts to minimize its
exposure to increases in silver price in 1998 and 1999. As of September
30, 1998, the Company had hedged almost all of its planned silver
requirements for 1998 and the first quarter of 1999, and had open forward
contracts. Based on broker-quoted termination values, if the price of
silver decreased 10% from $5.39 per troy ounce at September 30, 1998, the
fair value of silver forward contracts would be reduced by $15 million.
Such losses in fair value, if realized, would be offset by lower costs of
silver-containing products manufactured during 1998 and 1999.
The Company is exposed to interest rate risk primarily through its
borrowing activities and less so through investments in marketable
securities. The Company utilizes U.S. dollar-denominated commercial paper
and borrowings as well as foreign currency-denominated borrowings to fund
its working capital and investment needs. The majority of short- and long-
term borrowings and marketable securities are in fixed-rate instruments.
There is inherent roll-over risk for borrowings and marketable securities
as they mature and are renewed at current market rates. The extent of this
risk is not quantifiable or predictable because of the variability of
future interest rates and business financing requirements. Using a yield-
to-maturity analysis, if interest rates increased 10% (about 51 basis
points) with the September 30, 1998 level of debt and marketable
securities, there would be decreases in fair value of marketable
securities, short-term and long-term borrowings of $1 million, $1 million
and $10 million, respectively.
- ---------------------------------------------------------------------------
21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In April 1987, the Company was sued in federal district court in San
Francisco by a number of independent service organizations who alleged
violations of Sections 1 and 2 of the Sherman Act and of various state
statutes in the sale by the Company of repair parts for its copier and
micrographics equipment (Image Technical Service, Inc. et al v. Eastman
Kodak Company, "ITS"). The complaint sought unspecified compensatory and
punitive damages. Trial began on June 19, 1995 and concluded on September
18, 1995 with a jury verdict for plaintiffs of $23,948,300 ($71,844,900
after trebling). The Company appealed the jury's verdict, and on August
26, 1997 the 9th Circuit Court of Appeals rendered its decision affirming
in part, reversing in part, and reversing and remanding on the issue of
used equipment damages. The court affirmed the jury's liability rulings,
but reduced damages (after trebling) from $71,844,900 to $35,818,200, and
narrowed the scope of the injunction under which the Company is required to
make parts available. On April 27, 1998, the Supreme Court denied the
Company's petition for Supreme Court review, effectively concluding all
aspects of the case except plaintiffs' used equipment claim. The Company
took a third quarter 1997 pre-tax charge of $46,000,000.
Two cases that raise essentially the same antitrust issues as ITS are
pending in federal district court in San Francisco: Nationwide, et al v.
Eastman Kodak Company, filed March 10, 1995, and A-1 Copy Center, et al v.
Eastman Kodak Company, filed December 13, 1993. A-1 is a consolidated
class action. The complaints in both cases seek unspecified compensatory
and punitive damages. On September 16, 1998, the Company and plaintiffs in
ITS, Nationwide, and A-1 engaged in a successful mediation, effectively
concluding these cases. Under the terms of the mediated settlement, the
Company will make a payment to plaintiffs in return for plaintiffs'
discontinuance of the litigation, with prejudice. The amount of the
Company's payment, which was covered by previously recorded reserves, will
not be material to the Company's financial position or results of
operations. The resolution of A-1, the class action, is subject to court
approval.
A fourth repair parts case, Broward Microfilm, Inc. v. Eastman Kodak
Company, a purported national class action which was filed February 27,
1996 in federal district court in Miami, was dismissed without prejudice on
May 13, 1998.
On July 7, 1998, the Company received a proposed administrative Consent
Order seeking unspecified penalties and a compliance schedule from the New
York State Department of Environmental Conservation, to address alleged
violations of the Environmental Conservation Law and regulations at the
Company's Kodak Park manufacturing complex in Rochester, New York. The
violations alleged are primarily comprised of air, water, and hazardous
substance releases and incidents, largely accidental, that have been
reported by the Company to the Agency over the past five years. The
Company expects that it will be assessed a civil penalty in excess of
$100,000.
22
The entire matter is subject to negotiation, which can be expected to
result in an administrative settlement that will include a penalty and a
compliance schedule for implementation of maintenance, upgrade, and
reporting activities. 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
approximately nineteen active and twenty-five inactive 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 not
expected to be material to the Company's financial position or results of
operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and financial statement schedules required as part of this
report are listed in the index appearing on page 24.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed or required to be filed for the quarter
ended September 30, 1998.
23
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)
Date November 10, 1998
E. Mark Rajkowski
Controller
24
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits and Financial Statement Schedules
Exhibit Page No.
(10) I. Eastman Kodak Company 1995 Omnibus Long-Term Compensation
Plan, as amended effective October 8, 1998.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, the Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 1997, the Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1998, and the Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998, Exhibit 10.) 25
(27) Financial Data Schedule - Submitted with the EDGAR
filing as a second document to this Form 10-Q.
25
Exhibit (10) I.
EASTMAN KODAK COMPANY 1995 OMNIBUS LONG-TERM COMPENSATION PLAN
The first sentence of Section 6.1, entitled "Available Shares," is hereby
amended in its entirety to read as follows:
The maximum number of shares of Common Stock, $2.50 par value per share,
of Kodak which shall be available for grant of Awards under the Plan
(including incentive stock options) during its term shall not exceed
22,000,000.
5
0000031235
EASTMAN KODAK COMPANY
1,000,000
U.S. DOLLARS
9-MOS
DEC-31-1998
JAN-01-1998
SEP-30-1998
1.0
381
53
2519
127
1597
5756
13093
7582
14079
5502
459
0
0
978
2936
14079
9843
10084
5193
5193
3101
0
96
1694
576
1118
0
0
0
1118
3.46
3.41
