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, 1995
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, 1995
Common Stock, $2.50 par value 340,333,003
2
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
First Quarter
1995 1994
(in millions)
REVENUES
Sales $3,137 $2,755
Earnings from equity interests and other revenues 72 24
------ ------
TOTAL REVENUES 3,209 2,779
------ ------
COSTS
Cost of goods sold 1,613 1,470
Selling, general and administrative expenses 895 747
Research and development costs 219 204
Interest expense 19 57
Other charges 48 71
------ ------
TOTAL COSTS 2,794 2,549
------ ------
Earnings from continuing operations before income taxes 415 230
Provision for income taxes from continuing operations 153 85
------ ------
Earnings from continuing operations before
extraordinary item 262 145
Loss from discontinued operations - (51)
------ ------
Earnings before extraordinary item 262 94
Extraordinary item - (12)
------ ------
NET EARNINGS $ 262 $ 82
====== ======
First Quarter
1995 1994
Primary earnings per share from continuing
operations before extraordinary item $ .77 $ .44
Primary loss per share from discontinued operations - (.15)
------ ------
Primary earnings per share before extraordinary item .77 .29
Extraordinary item - (.04)
------ ------
Primary earnings per share $ .77 $ .25
====== ======
Fully diluted earnings per share from continuing
operations before extraordinary item $ .76 $ .43
Fully diluted loss per share from discontinued
operations - (.15)
------ ------
Fully diluted earnings per share before extraordinary item .76 .28
Extraordinary item - (.04)
------ ------
Fully diluted earnings per share $ .76 $ .24
====== ======
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
First Quarter
1995 1994
(in millions)
Retained earnings at beginning of year $4,485 $4,469
Net earnings 262 82
Cash dividends declared (136) (132)
Other changes (6) (2)
------ ------
RETAINED EARNINGS at end of quarter $4,605 $4,417
====== ======
- - --------------------------------------------------------------------------------------
See Notes to Financial Statements
3
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
March 31, Dec. 31,
1995 1994
(in millions)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 573 $ 2,020
Marketable securities 60 48
Receivables (net of allowances of $117 and $120) 2,855 3,064
Inventories 1,834 1,480
Deferred income tax charges 627 711
Other 353 360
------- -------
Total current assets 6,302 7,683
PROPERTIES
Land, buildings and equipment at cost 12,667 12,299
Less: Accumulated depreciation 7,261 7,007
------- -------
Net properties 5,406 5,292
OTHER ASSETS
Goodwill (net of accumulated amortization of
$243 and $226) 623 616
Deferred income tax charges 475 505
Long-term receivables and other noncurrent assets 887 872
------- -------
TOTAL ASSETS $13,693 $14,968
======= =======
- - --------------------------------------------------------------------------------
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,212 $ 3,398
Short-term borrowings 373 371
Taxes-income and other 445 1,701
Dividends payable 136 136
Deferred income tax credits 21 129
------- -------
Total current liabilities $ 4,187 $ 5,735
OTHER LIABILITIES
Long-term borrowings 652 660
Postemployment liabilities 3,710 3,671
Other long-term liabilities 824 790
Deferred income tax credits 102 95
------- -------
Total liabilities 9,475 10,951
SHAREOWNERS' EQUITY
Common stock at par* 967 966
Additional capital paid in or
transferred from retained earnings 533 515
Retained earnings 4,605 4,485
Accumulated translation adjustment 68 8
------- -------
6,173 5,974
Less: Treasury stock shares at cost* 1,955 1,957
------- -------
Total shareowners' equity 4,218 4,017
------- -------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $13,693 $14,968
======= =======
*Common stock: $2.50 par value, 950 million shares authorized, 386.9 million shares issued
as of March 31, 1995. Treasury stock shares at cost consists of approximately 47 million
shares at each balance sheet date.
- - ------------------------------------------------------------------------------------------
See Notes to Financial Statements
4
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
First Quarter
1995 1994
(in millions)
Cash flows from operating activities:
Earnings from continuing operations before
extraordinary item $ 262 $ 145
Adjustments to reconcile above earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 219 184
Benefit for deferred taxes (1) (11)
Loss on sale and retirement of properties 19 13
Decrease in receivables 301 125
Increase in inventories (296) (189)
Decrease in liabilities excluding borrowings (113) (299)
Other items, net (187) 4
------- -------
Total adjustments (58) (173)
------- -------
Net cash provided by (used in)
operating activities 204 (28)
------- -------
Cash flows from investing activities:
Additions to properties (238) (149)
Proceeds from sale of properties 13 6
Marketable securities - purchases - (8)
Marketable securities - sales 19 212
Cash flows related to sales of non-imaging
health businesses (1,328) -
------- -------
Net cash (used in) provided by
investing activities (1,534) 61
------- -------
Cash flows from financing activities:
Net (decrease) increase in borrowings
with original maturity of
90 days or less (215) 34
Proceeds from other borrowings 217 -
Repayment of other borrowings (8) (381)
Dividends to shareowners (136) (165)
Exercise of employee stock options 20 5
------- -------
Net cash used in financing activities (122) (507)
------- -------
Effect of exchange rate changes on cash 5 2
------- -------
Net decrease in cash and cash equivalents (1,447) (472)
Cash and cash equivalents, beginning of year 2,020 1,635
------- -------
Cash and cash equivalents, end of quarter $ 573 $ 1,163
======= =======
- - -----------------------------------------------------------------------------------------
See Notes to Financial Statements
5
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 1994 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 independent accountants.
- - ------------------------------------------------------------------------------
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 business, financial condition or results of
operations.
- - ------------------------------------------------------------------------------
RECLASSIFICATIONS
Certain 1994 financial statement amounts have been reclassified to conform to
the 1995 presentation.
David J. FitzPatrick, Controller
April 27, 1995
6
Management's Discussion and Analysis of Financial Condition and Results of
Operations
SUMMARY
(in millions, except earnings per share) First Quarter
1995 1994 Change
Sales $3,137 $2,755 +14%
Earnings (loss) from operations before extraordinary item:
Continuing 262 145
Discontinued - (51)
Net earnings 262 82
Primary earnings (loss) per share from operations before
extraordinary item:
Continuing .77 .44
Discontinued - (.15)
Primary earnings per share .77 .25
Fully diluted earnings per share .76 .24
Sales for the first quarter of 1995 were $3,137 million, an increase of 14%
over sales for the first quarter of 1994. Excluding the sales of Qualex (a
U.S. photofinishing company which had been treated as an equity investment
until the remainder of its outstanding shares were acquired in August, 1994),
sales from continuing operations increased 9% over a year ago. Sales
benefited from volume gains and the favorable effects of foreign currency rate
changes, but were adversely affected by lower effective selling prices.
Currency changes against the U.S. dollar favorably affected 1995 sales by
approximately $127 million. Earnings from continuing operations before
extraordinary item for the first quarter of 1995 were $262 million ($.77 per
share), a sharp increase over earnings of $145 million ($.44 per share) in the
first quarter last year. Earnings benefited from increased volumes,
manufacturing productivity, the favorable effects of foreign currency rate
changes, higher investment and other income, and lower interest expense.
These benefits were partially offset by cost escalation, increased selling,
general and administrative (SG&A) expenses and lower effective selling prices.
During 1994, the Company divested the following non-imaging health businesses:
the pharmaceutical and consumer health businesses of Sterling Winthrop Inc.,
the household products and do-it-yourself products businesses of L&F Products
and the Clinical Diagnostic Division. These businesses have been reported as
discontinued operations. As part of the divestitures, the Company announced
on April 7, 1995, an agreement to sell its pharmaceutical research and
development facility to SmithKline Beecham for $120 million. The proceeds
from this sale did not differ materially from the Company's estimated proceeds
for the sale of this facility.
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.
- - ------------------------------------------------------------------------------
Sales by Segment
(in millions)
First Quarter
1995 1994 Change
Consumer Imaging
Inside the U.S. $ 486 $ 331 +47%
Outside the U.S. 781 668 +17
------ ------ ---
Total Consumer Imaging 1,267 999 +27
------ ------ ---
Commercial Imaging
Inside the U.S. 925 909 +2
Outside the U.S. 952 847 +12
------ ------ ---
Total Commercial Imaging 1,877 1,756 +7
------ ------ ---
Deduct Intersegment Sales (7) 0
------ ------ --
Total Worldwide $3,137 $2,755 +14%
====== ====== ===
7
SEGMENT SALES
In the Consumer Imaging segment, sales for the first quarter of 1995 to
customers inside the U.S. increased 47% over sales for the first quarter of
1994. Excluding the sales of Qualex, sales were up 10% over a year ago, due
to increased volumes. Sales to customers outside the U.S. recorded a 17%
increase for the first quarter of 1995 when compared with the first quarter of
1994. The favorable effects of solid gains in unit volumes and foreign
currency rate changes were only slightly offset by lower effective selling
prices. Currency changes against the U.S. dollar favorably affected 1995
sales by approximately $49 million. Worldwide volume gains were led by
Ektacolor papers and Kodacolor films.
In the Commercial Imaging segment, 1995 first quarter sales inside the U.S.
increased 2% when compared with sales for the first quarter of 1994. Outside
the U.S., sales in the first quarter of 1995 increased 12% over sales for the
comparable period a year ago as the favorable effects of foreign currency rate
changes and higher volumes were only slightly offset by lower effective
selling prices. Currency changes against the U.S. dollar favorably affected
1995 sales by approximately $78 million. Worldwide sales increases were led
by printing and professional imaging, and office imaging products.
- - ------------------------------------------------------------------------------
COSTS AND EXPENSES
First Quarter
(in millions) 1995 1994 Change
Gross profit $1,524 $1,285 +19%
Percent of Sales 48.6% 46.7%
Selling, general and administrative expenses $ 895 $ 747 +20%
Percent of Sales 28.5% 27.1%
Research and development costs $ 219 $ 204 +7%
Percent of Sales 7.0% 7.4%
The improvement in gross profit as a percent of sales from 46.7% in 1994 to
48.6% in 1995 was primarily due to manufacturing productivity and increased
volumes. Excluding the SG&A expenses of Qualex, SG&A expenditures were up 14%
over the first quarter of 1994. This increase in SG&A expenditures was
primarily due to cost escalation, the effect of higher volumes on distribution
costs, the unfavorable effects of foreign currency rate changes on locally
incurred costs and higher advertising expenditures.
- - ------------------------------------------------------------------------------
Earnings from Operations by Industry Segment
(in millions)
First Quarter
1995 1994 Change
Consumer Imaging $ 152 $ 103 +48%
Percent of Sales 12.0% 10.3%
Commercial Imaging $ 264 $ 224 +18%
Percent of Sales 14.1% 12.8%
----- ----- ----
Total $ 416 $ 327 +27%
===== ===== ====
8
- - ------------------------------------------------------------------------------
SEGMENT EARNINGS
Operating earnings for the Consumer Imaging segment for the first quarter of
1995 increased 48% over the first quarter of last year as the favorable
effects from higher volumes, manufacturing productivity and foreign currency
rate changes were only partially offset by increased SG&A expenses, cost
escalation and lower effective selling prices.
Commercial Imaging segment operating earnings for the 1995 first quarter
increased 18% when compared with the first quarter of a year ago, as the
benefits from increased unit volumes and manufacturing productivity were only
partially offset by cost escalation, lower effective selling prices and
increased SG&A expenses.
- - ------------------------------------------------------------------------------
OTHER REVENUES AND COSTS
Earnings from equity interests and other revenues for the first quarter of
1995 were higher than the 1994 first quarter primarily due to increased
investment income earned on higher average cash balances and increased
earnings from equity interests. Interest expense for the 1995 first quarter
decreased when compared with the 1994 first quarter due to lower average
borrowings. The decrease in other charges in 1995 when compared with 1994 is
primarily due to lower net losses in 1995 from foreign exchange transactions
and the translation of net monetary items in highly inflationary economies.
- - ------------------------------------------------------------------------------
CASH DIVIDENDS
Cash dividends of 40 cents per share were declared on the Company's common
stock during the first quarters of 1995 and 1994. Total cash dividends
declared in the first quarters of 1995 and 1994 were $136 million and
$132 million, respectively.
FINANCIAL POSITION
Cash and marketable securities were $633 million at the end of the first
quarter of 1995, compared with $2,068 million at year-end 1994. The decrease
is primarily due to tax payments of approximately $1.3 billion related to the
divestiture of the non-imaging health businesses. Working capital at the end
of the quarter increased to $2,115 million compared with $1,948 million at
year-end 1994. Projected operating cash flows are expected to be adequate to
support normal business operations, planned capital expenditures and dividend
payments in 1995.
CAPITAL ADDITIONS
Capital additions for the first quarter of 1995 were $238 million compared with
$149 million for the first quarter of 1994. The provision for depreciation
for the first quarter of 1995 was $202 million, compared with $176 million for
the first quarter of last year.
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9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is participating in the Environmental Protection Agency's (EPA)
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 action, 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 twenty-five 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.
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 11.
(b) Reports on Form 8-K
Eastman Kodak Company filed the following Current Report on
Form 8-K during the first quarter of 1995:
1. Current Report on Form 8-K dated December 31, 1994
(filed January 9, 1995). The 8-K reported Items 2 and 7 and
included under Item 7 (b) financial data, consolidated financial
statements, financial statement schedules, and additional data to
provide historical financial information reclassifying the results
of the non-imaging health businesses which the Company divested in
1994.
10
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)
David J. FitzPatrick, Controller
Date April 27, 1995
11
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits
Exhibit Number Page No.
(11) Statement Re Computation of Earnings Per Common Share 12
(27) Financial Data Schedule, Exhibit (27) - Submitted with the
Edgar filing as a second document to this Form 10-Q
12
Eastman Kodak Company and Subsidiary Companies
Exhibit (11)
Computation of Earnings Per Common Share
First Quarter
1995 1994
(in millions, except
per share amounts)
PRIMARY:
Earnings from continuing operations before
income taxes $ 415 $ 230
Provision for income taxes from continuing
operations 153 85
------ ------
Earnings from continuing operations before
extraordinary item 262 145
Loss from discontinued operations - (51)
------ ------
Earnings before extraordinary item 262 94
Extraordinary item - (12)
------ ------
Net Earnings $ 262 $ 82
====== ======
Average number of common shares outstanding 340.0 330.7
------ ------
Primary earnings per share from continuing
operations before extraordinary item $ .77 $ .44
Primary loss per share from discontinued operations - (.15)
------ ------
Primary earnings per share before
extraordinary item .77 .29
Extraordinary item - (.04)
------ ------
Primary earnings per share $ .77 $ .25
====== ======
First Quarter
1995 1994
(in millions, except
per share amounts)
FULLY DILUTED:
Earnings from continuing operations
before extraordinary item $ 262 $ 145
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 262 145
Loss from discontinued operations - (51)
----- -----
Adjusted earnings before extraordinary item 262 94
Extraordinary item - (12)
----- -----
Adjusted net earnings $ 262 $ 82
===== =====
(1) 6 3/8% convertible debentures and zero coupon convertible debentures
were anti-dilutive in first quarter 1994 and repaid in 1994.
13
Eastman Kodak Company and Subsidiary Companies
Exhibit (11)
(Continued)
Computation of Earnings Per Common Share
First Quarter
1995 1994
(in millions, except
per share amounts)
Average number of common shares outstanding 340.0 330.7
Add-incremental shares under option 6.0 3.4
Add-incremental shares applicable to:
6 3/8% convertible debentures (1) - -
Zero coupon convertible debentures (1) - -
----- -----
Adjusted average number of shares outstanding 346.0 334.1
----- -----
Fully diluted earnings per share from
continuing operations before extraordinary
item $ .76 $ .43
Fully diluted loss per share from discontinued
operations - (.15)
----- -----
Fully diluted earnings per share before
extraordinary item .76 .28
Extraordinary item - (.04)
----- -----
Fully diluted earnings per share $ .76 $ .24
===== =====
(1) 6 3/8% convertible debentures and zero coupon convertible debentures
were anti-dilutive in first quarter 1994 and repaid in 1994.
5
0000031235
EASTMAN KODAK COMPANY
1,000,000
U.S. DOLLARS
3-MOS
DEC-31-1995
JAN-01-1995
MAR-31-1995
1.0
573
60
2,855
117
1,834
6,302
12,667
7,261
13,693
4,187
652
967
0
0
3,251
13,693
3,137
3,209
1,613
1,613
1,162
0
19
415
153
262
0
0
0
262
0.77
0.76
