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, 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 March 31, 1998
Common Stock, $2.50 par value 322,686,419
2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data)
First Quarter
1998 1997
REVENUES
Sales $2,911 $3,133
Earnings from equity interests
and other revenues 54 69
------ ------
TOTAL REVENUES 2,965 3,202
------ ------
COSTS
Cost of goods sold 1,585 1,643
Selling, general and administrative
expenses 753 849
Research and development costs 223 257
Purchased research and development - 186
Interest expense 24 22
Other costs 39 20
------ ------
TOTAL COSTS 2,624 2,977
------ ------
Earnings before income taxes 341 225
Provision for income taxes 116 76
------ ------
NET EARNINGS $ 225 $ 149
====== ======
Basic earnings per share $ .70 $ .45
====== ======
Diluted earnings per share $ .69 $ .44
====== ======
Earnings used in basic and diluted
earnings per share $ 225 $ 149
Number of common shares used in basic
earnings per share 323.0 332.4
Incremental shares from assumed
conversion of options 3.4 5.8
------ ------
Number of common shares used in
diluted earnings per share 326.4 338.2
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS
Retained earnings at beginning
of period $5,350 $5,931
Net earnings 225 149
Cash dividends declared (142) (147)
Other changes 2 (5)
------ ------
RETAINED EARNINGS
at end of period $5,435 $5,928
====== ======
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See Notes to Financial Statements
3
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
March 31, Dec. 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 489 $ 728
Marketable securities 50 24
Receivables 2,221 2,271
Inventories 1,455 1,252
Deferred income tax charges 953 958
Other 287 242
------- -------
Total current assets 5,455 5,475
------- -------
PROPERTIES
Land, buildings and equipment at cost 12,854 12,824
Less: Accumulated depreciation 7,374 7,315
------- -------
Net properties 5,480 5,509
------- -------
OTHER ASSETS
Goodwill (net of accumulated amortization
of $484 and $473) 852 548
Long-term receivables and other
noncurrent assets 1,305 1,231
Deferred income tax charges 372 382
------- -------
TOTAL ASSETS $13,464 $13,145
======= =======
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,637 $ 3,832
Short-term borrowings 1,158 611
Taxes - income and other 587 567
Dividends payable 142 143
Deferred income tax credits 19 24
------- -------
Total current liabilities 5,543 5,177
OTHER LIABILITIES
Long-term borrowings 494 585
Postemployment liabilities 3,073 3,075
Other long-term liabilities 1,089 1,083
Deferred income tax credits 66 64
------- -------
Total liabilities 10,265 9,984
SHAREHOLDERS' EQUITY
Common stock at par* 978 978
Additional capital paid in or
transferred from retained earnings 908 914
Retained earnings 5,435 5,350
Accumulated translation adjustment (185) (172)
Minimum pension liability adjustment (37) (37)
------- -------
7,099 7,033
Less: Treasury stock at cost* 3,900 3,872
------- -------
Total shareholders' equity 3,199 3,161
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $13,464 $13,145
======= =======
* Common stock: $2.50 par value, 950 million shares authorized,
391 million shares issued at March 31, 1998 and December 31,
1997. Treasury stock at cost consists of approximately 69
million shares at March 31, 1998 and 68 million shares at
December 31, 1997.
- -------------------------------------------------------------------------
See Notes to Financial Statements
4
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
First Quarter
1998 1997
Cash flows from operating activities:
Net earnings $ 225 $ 149
Adjustments to reconcile above earnings to
net cash used in operating activities,
excluding the effect of initial
consolidation of acquired companies:
Depreciation and amortization 194 193
Purchased research and development - 186
Provision (benefit) for deferred taxes 4 (75)
Loss (gain) on sale and retirement of properties 15 (16)
Decrease in receivables 46 97
Increase in inventories (207) (198)
Decrease in liabilities excluding borrowings (296) (354)
Other items, net (119) 13
------ ------
Total adjustments (363) (154)
------ ------
Net cash used in operating activities (138) (5)
------ ------
Cash flows from investing activities:
Additions to properties (153) (309)
Proceeds from sale of properties
and investments 6 50
Acquisitions, net of cash acquired (228) (283)
Marketable securities - sales - 10
------ ------
Net cash used in investing activities (375) (532)
------ ------
Cash flows from financing activities:
Net increase in borrowings
with original maturity of
90 days or less 510 31
Proceeds from other borrowings 264 427
Repayment of other borrowings (321) (407)
Dividends to shareholders (143) (133)
Exercise of employee stock options 13 52
Stock repurchases (47) (348)
------ ------
Net cash provided by (used in)
financing activities 276 (378)
------ ------
Effect of exchange rate changes on cash (2) (19)
------ ------
Net decrease in cash and cash equivalents (239) (934)
Cash and cash equivalents, beginning of year 728 1,777
------ ------
Cash and cash equivalents, end of quarter $ 489 $ 843
====== ======
The following transactions are not reflected in the
Consolidated Statement of Cash Flows:
(in millions)
First Quarter
1998 1997
Liabilities assumed in acquisitions $136 $ 23
Liabilities assumed by purchaser
in sale of properties - 23
- -----------------------------------------------------------------
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 independent
accountants.
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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 business, financial
position or results of operations. Refer to Item 1, Legal Proceedings,
on page 14.
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NOTE 3: ACQUISITIONS
On March 24, 1998, the Company contributed $308 million to Kodak (China)
Company Limited, a newly-formed company operating in China, in exchange
for 80% of the outstanding shares of the company. The new company
acquired the manufacturing assets of Xiamen Fuda Photographic Materials
Company, Ltd., a Chinese domestic photographic enterprise. 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. A
substantial amount of the purchase price was allocated to goodwill,
which is being amortized over a ten year period. The acquisition did
not have a material impact on the results of operations for the first
quarter. Subsequent to March 31, 1998, the Company contributed $32
million to Kodak (Wuxi) Company Limited, a newly-formed company, in
exchange for 70% of the outstanding shares of the business. Kodak
(Wuxi) Company Limited acquired part of the manufacturing assets of Wuxi
Aermei Film and Chemical Corporation, a state-owned enterprise.
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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.
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NOTE 4: 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:
First Quarter
(in millions) 1998 1997
Net earnings $ 225 $ 149
Other comprehensive income (loss),
net of tax:
Unrealized holding gains (losses)
arising during the quarter 2 (5)
Translation adjustments (13) (105)
----- -----
Total other comprehensive loss $ (11) $(110)
----- -----
Total comprehensive income $ 214 $ 39
===== =====
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. 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 5: 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 the Internet, has been transferred from the Commercial Imaging
segment to the Consumer Imaging segment, and 1997 amounts have been
restated to conform to the 1998 presentation. The sales and losses from
operations for this business unit were as follows:
First Quarter
(in millions) 1998 1997
Sales - -
(Loss) from operations (8) (5)
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 amount of those expenses in the
first quarter of 1997 was $19 million.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
(in millions, except earnings per share)
First Quarter
1998 1997 Change
Sales $2,911 $3,133 - 7%
Net earnings 225 149 +51
Basic earnings per share .70 .45 +56
Diluted earnings per share .69 .44 +57
1998
When compared with a year ago, the 1998 first quarter earnings were
adversely impacted by $.15 per basic share due to the unfavorable
effects of foreign currency rate changes and $.04 per basic share for a
litigation settlement. Reported sales were reduced by the transfer of a
portion of Kodak's graphics business into the Kodak Polychrome Graphics
joint venture and the negative impact of the strong dollar. Earnings
from Kodak's 50% ownership of Kodak Polychrome Graphics are accounted
for using the equity method beginning January 1, 1998.
1997
The results for the first quarter included a pre-tax charge of $186
million ($.37 per basic share) for in-process research and development
(R&D) associated with the acquisition of Wang Laboratories' software
unit on March 17, 1997. Excluding this charge, basic earnings per share
would have been $.82.
- -------------------------------------------------------------------
Sales by Industry Segment
(in millions)
First Quarter
1998 1997* Change
Consumer Imaging
Inside the U.S. $ 601 $ 625 -4%
Outside the U.S. 810 877 -8
------ ------ --
Total Consumer Imaging 1,411 1,502 -6
------ ------ --
Commercial Imaging
Inside the U.S. 710 776 -9
Outside the U.S. 798 862 -7
------ ------ --
Total Commercial Imaging 1,508 1,638 -8
------ ------ --
Deduct Intersegment Sales (8) (7)
------ ------ --
Total Sales $2,911 $3,133 -7%
====== ====== ==
* Restated to reflect the transfer of Network Services from the
Commercial Imaging segment to the Consumer Imaging segment (see NOTE 5).
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Earnings from Operations by Industry Segment
(in millions)
First Quarter
1998 1997* Change
Consumer Imaging $ 94 $140 - 33%
Percent of Sales 6.7% 9.3%
Commercial Imaging $256 $ 60 +327%
Percent of Sales 17.0% 3.7%
---- ---- ----
Total Earnings from Operations $350 $200 + 75%
==== ==== ====
* Restated to reflect the transfer of Network Services from the
Commercial Imaging segment to the Consumer Imaging segment (see NOTE 5).
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COSTS AND EXPENSES
(in millions)
First Quarter
1998 1997 Change
Gross profit $1,326 $1,490 -11%
Percent of Sales 45.6% 47.6%
Selling, general and
administrative expenses $ 753 $ 849 -11%
Percent of Sales 25.9% 27.1%
Research and development costs $ 223 $ 257# -13%
Percent of Sales 7.7% 8.2%
# Excludes $186 million in-process R&D charge associated with the
purchase of Wang Laboratories' software unit.
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1998 COMPARED WITH 1997
First quarter
First quarter 1998 sales decreased 7% compared with the first quarter of
1997, due to the unfavorable effects of foreign currency rate changes,
lower effective selling prices and the transfer of a portion of the
graphics business to the Kodak Polychrome Graphics joint venture.
Excluding graphics sales from both years, sales decreased 5%.
Sales in the Consumer Imaging segment decreased 6%, due to the
unfavorable effects of foreign currency rate changes and lower effective
selling prices. Sales inside the U.S. decreased 4%, due to lower film
sales and lower effective selling prices for certain products. Sales
outside the U.S. decreased 8%, due to the unfavorable effects of foreign
currency rate changes.
Worldwide film sales decreased 14%, due to lower unit volumes and the
unfavorable effects of foreign currency rate changes. U.S. film sales
decreased 24%, primarily due to lower unit volumes and lower effective
selling prices. Outside the U.S., film sales decreased 5%, as modest
increases in effective selling prices and unit volumes were more than
offset by the unfavorable effects of foreign currency rate changes.
10
Worldwide color paper sales decreased 7%, as a modest increase in unit
volumes was more than offset by the unfavorable effects of foreign
currency rate changes and lower effective selling prices. U.S. paper
sales decreased 6%, due to lower volumes and lower effective selling
prices. Outside the U.S., paper sales decreased 7%, as higher unit
volumes were more than offset by the unfavorable effects of foreign
currency rate changes.
Sales in the Commercial Imaging segment decreased 8%, 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 4%, as the benefits of higher unit
volumes were more than offset by the unfavorable effects of foreign
currency rate changes and lower effective selling prices. In the U.S.,
sales decreased 6%, due to lower effective selling prices and lower unit
volumes; outside the U.S., sales decreased 3%, as the benefits of higher
unit volumes were more than offset by the unfavorable effects of foreign
currency rate changes. Higher worldwide sales were reported in the
Entertainment Imaging and Business Imaging Systems business units.
Excluding the $186 million write-off of in-process research and
development associated with the acquisition of Wang Laboratories'
software unit (the "Wang charge") in 1997, earnings from operations for
the Company decreased 9%, as they were negatively impacted by the
unfavorable effects of foreign currency rate changes and lower effective
selling prices. Losses in the digital products portfolio, included in
both the Commercial Imaging and Consumer Imaging segments, increased
slightly to $55 million compared with the first quarter of 1997, but
were significantly lower than the $130 million of losses reported for
the fourth quarter of 1997.
Selling, general and administrative expenses decreased 11%, or from
27.1% of sales to 25.9% of sales. Excluding advertising expenses, the
decrease was 15%, or from 22.4% of sales to 20.5% of sales. Research
and development expenses decreased 13%, or from 8.2% of sales to 7.7% of
sales.
Earnings from operations in the Consumer Imaging segment decreased 33%,
due to the unfavorable effects of foreign currency rate changes, lower
effective selling prices, higher advertising expenses driven by the
Winter Olympics and lower film volumes. Lower earnings were recorded in
color film, color paper and photofinishing.
In the Consumer Imaging segment, selling, general and administrative
expenses decreased 7%, or from 32.2% of sales to 32.0% of sales.
Excluding advertising expenses, the decrease was 10%, or from 24.2% of
sales to 23.1% of sales. Research and development expenses decreased
9%, or from 6.8% of sales to 6.6% of sales.
Excluding the Wang charge, earnings from operations in the Commercial
Imaging segment increased 4%, due to increased earnings contributions
from Business Imaging Systems, Digital & Applied Imaging, Entertainment
Imaging and Health Imaging. However, earnings from operations for the
segment were negatively impacted by the unfavorable effects of foreign
currency rate changes and lower effective selling prices.
11
In the Commercial Imaging segment, selling, general and administrative
expenses decreased 17%, or from 22.3% of sales to 20.0% of sales.
Excluding advertising expenses, the decrease was 20%, or from 20.7% of
sales to 18.1% of sales. Research and development expenses decreased
16%, or from 9.5% of sales to 8.6% of sales.
Business Imaging Systems earnings improved, due to improved cost
management, portfolio rationalization and share gains in the microfilm
market.
Digital & Applied Imaging benefited from reductions in selling, general
and administrative expenses, lower research and development expenses and
strong growth in sales of high-volume digital cameras.
Entertainment Imaging earnings increases were driven by productivity
gains, reductions in selling, general and administrative expenses and
lower research and development expenses.
Health Imaging earnings increased, due to improved expense management in
the face of declining sales and continuing price pressures.
For the first quarter of 1998, earnings from equity interests and other
revenues decreased $15 million, due to a reduction in interest income
attributable to lower average cash balances. Other costs increased, due
to an $18 million ($.04 per basic share) charge for a litigation
settlement. The effective tax rate was 34% in the first quarter of both
1998 and 1997.
From the beginning of the fourth quarter of 1997 through the end of the
first quarter of 1998, 5,600 employees (2,200 in 1997 and 3,400 in 1998)
have left the Company under restructuring programs. These separations
and other separations due to attrition, seasonal employment and buffer
workforce reductions have reduced headcount to approximately 91,500 as
of March 31, 1998. The current total does not reflect approximately
2,600 employees to be added as part of the Company's acquisitions in
China.
On April 28, 1998, the Company confirmed that it is exploring options
regarding the sale of its Fox Photo Inc. subsidiary, a chain of retail
photo specialty stores. Kodak acquired a 51% interest in Fox Photo from
CPI Corp. in October, 1996, for $56 million in cash. The two companies
initially operated the chain as a joint venture. In October, 1997,
Kodak purchased CPI's 49% interest in Fox with a $44 million note due on
Jan. 4, 1999, and $10 million in cash.
As described in Note 3, Acquisitions, the Company contributed $308
million to Kodak (China) Company Limited, a newly-formed company
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.
12
OTHER
In June 1997, the FASB issued 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.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." This
Statement standardizes the disclosure requirements for pensions and
other postretirement benefits, requires additional information on
changes in the benefit obligations and fair values of plan assets and
eliminates certain disclosures. Restatement of disclosures for earlier
periods is required. The Company will adopt this Statement in its
financial statements for the year ending December 31, 1998.
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LIQUIDITY AND CAPITAL RESOURCES
Available cash reserves and cash from operations have been and will be
used to complete the $2 billion stock repurchase program.
Net cash used in operating activities for the first quarter of 1998 was
$138 million, as net earnings of $225 million, which included non-cash
expenses for depreciation and amortization of $194 million, were offset
by decreases in liabilities (excluding borrowings) of $296 million and a
$207 million increase in inventories. Net cash used in investing
activities of $375 million for the first quarter of 1998 was due
primarily to acquisitions, net of cash acquired, of $228 million and
additions to properties of $153 million. Net cash provided by financing
activities of $276 million for the first quarter of 1998 was primarily
due to net increases in total borrowings of $453 million reduced by $143
million of dividend payments.
Cash dividends per share of $.44, payable quarterly, were declared in
the first quarter of 1998 and 1997. Total cash dividends of $143
million and $133 million were paid in the first quarter of 1998 and
1997, respectively.
Cash, cash equivalents and marketable securities were $539 million at
the end of the first quarter, compared with $752 million at year-end
1997. Net working capital at the end of the quarter was negative $88
million, compared with $298 million at year-end 1997. Both decreases
are primarily attributable to the Company's investments in China and
restructuring payments.
Capital additions for the first quarter of 1998 were $153 million
compared with $309 million for the first quarter of 1997.
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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 futures 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.
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 $94 million loss on foreign
currency forward contracts outstanding at March 31, 1998. Such losses
would be substantially offset by gains from the revaluation or
settlement of the underlying positions hedged.
The Company has entered into silver option and futures contracts to
minimize its exposure to increases in silver price in 1998. As of March
31, 1998, the Company had hedged approximately 50% of its planned silver
requirements for 1998. Based on broker quoted termination values, if
the price of silver decreased 10% from $6.44 per troy ounce at March 31,
1998, the fair value of silver options and futures would be reduced by
$10 million. Such losses in fair value, if realized, would be offset by
lower costs of silver-containing products manufactured during 1998.
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 60 basis points) with the March 31, 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, $3 million and $11 million, respectively.
14
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 and reversing in part. 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
February 5, 1998, the Company filed its petition for Supreme Court
review; on April 27, 1998, the Supreme Court denied the Company's
petition, effectively concluding the case. The Company took a third
quarter 1997 pre-tax charge of $46,000,000 to cover damages and related
costs.
Three cases that raise essentially the same antitrust issues as ITS are
pending (Nationwide, et al v. Eastman Kodak Company, filed March 10,
1995, A-1 Copy Center, et al v. Eastman Kodak Company, filed December
13, 1993, and Broward Microfilm, Inc. v. Eastman Kodak Company, filed
February 27, 1996). The Nationwide and A-1 cases are pending in federal
district court in San Francisco, while Broward Microfilm is pending in
federal district court in Miami. A-1 is a consolidated class action,
while Broward Microfilm purports to be a national class action. The
complaints in all three cases seek unspecified compensatory and punitive
damages. The Company is defending these matters vigorously.
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 not expected to be material to the Company's financial
position or results of operations.
15
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 16.
(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, 1998.
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 May 7, 1998
David J. FitzPatrick
Controller and Vice President
16
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits and Financial Statement Schedules
Exhibit Page No.
(10) H. Eastman Kodak Company Management Variable Compensation
Plan, as amended effective April 2, 1998.
(Incorporated by reference to the Eastman Kodak Company
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1997, Exhibit 10.) 17
I. Eastman Kodak Company 1995 Omnibus Long-Term Compensation
Plan, as amended effective April 2, 1998.
(Incorporated by reference to the Eastman Kodak Company
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and the Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1997, Exhibit 10.) 17
P. Eric Steenburgh Agreement dated March 12, 1998. 18
(27) Financial Data Schedule - Submitted with the EDGAR filing
as a second document to this Form 10-Q.
17
Exhibits (10) H. & I.
EASTMAN KODAK COMPANY
BOARD OF DIRECTORS
EXECUTIVE COMPENSATION AND DEVELOPMENT COMMITTEE
Action by Unanimous Written Consent
The undersigned, being all of the members of the Executive
Compensation and Development Committee of the Board of Directors of
Eastman Kodak Company, adopt the following resolutions:
RESOLVED: That Section 9.1, entitled "Available Shares," of the
Wage Dividend Plan is hereby amended to decrease the number of shares of
Common Stock available for grant of awards under the Plan from 4,000,000
to 1,000,000; and be it further
RESOLVED: That Article 5, entitled "Form of Awards," of the
Management Variable Compensation Plan is hereby amended to provide that
awards under the Plan may only be paid in cash and, as a result, Section
12.1, entitled "Available Shares," of the Plan is hereby amended to
provide that no shares of Common Stock are available for grant of awards
under the Plan; and be it further
RESOLVED: That Section 6.1, entitled "Available Shares," of the
Eastman Kodak Company 1995 Omnibus Long-Term Compensation Plan is hereby
amended to increase the number of shares of Common Stock available for
grant of awards under the Plan from 16,000,000 to 20,000,000; and be it
further
RESOLVED: That the legal counsel for the Company is hereby
authorized, empowered and directed to take and all such actions as they
deem necessary, proper and appropriate in order to effectuate the
purpose and intent of the foregoing Resolutions.
_________________________________ ______________________________
Richard S. Braddock Alice F. Emerson
_________________________________
John J. Phelan, Jr.
Dated: March __, 1998
18
Exhibit (10) P.
March 12, 1998
Mr. Eric Steenburgh
20 Moraine Point
Victor, NY 14564
Dear Eric:
We would like to extend an offer to you to join Eastman Kodak Company as
Executive Vice President and Assistant Chief Operating Officer, Eastman
Kodak Company. We are confident that your professional talents will be
a great asset to our company.
This letter outlines the compensation and benefits arrangements of your
offer and employment with Kodak.
1. Position
Your position will be Assistant Chief Operating Officer, Eastman Kodak
Company. Upon your employment, we will recommend to the Board of
Directors that you be elected an Executive Vice President, Eastman Kodak
Company. You will be responsible for the following organizations:
Business Imaging Systems, Global Customer Service, Office Imaging, US &
Canada Services, Canada, Commercial & Government Systems, Corporate
Quality, Equipment Manufacturing and Purchasing. You will report
directly to me in my capacity as President and Chief Operating Officer,
Eastman Kodak Company.
2. Employment Date
You will commence your employment with Kodak no later than April 13,
1998.
3. Base Salary
Your base salary will be at the rate of $420,000 per year.
4. Management Variable Compensation Plan
You will be eligible to participate in Kodak's Management Variable
Compensation Plan ("MVCP") with an annual target award of 60% of your
base salary, making your total targeted annual compensation $672,000.
19
For the performance year 1998 (payable in April, 1999), you will receive
an MVCP award equal to at least your target MVCP award. This MVCP award
will, however, be pro-rated based upon your length of service during the
1998 performance year. To the extent all or any part of this amount
cannot be paid pursuant to MVCP, it will be paid to you outside of MVCP
in 1999 at the same time that other participants of MVCP receive their
awards. Even though all or part of this award may be paid outside the
terms of MVCP, you nevertheless must be employed by the Company on
December 31, 1998 in order to receive this award. That portion, if any,
paid outside of MVCP will not be subject to deferral nor will it be
"benefits bearing." In other words, the amount will not be taken into
account, or considered for any reason, for purposes of determining any
company provided benefits or compensation to which you become eligible,
including, by way of illustration and not by way of limitation, the Wage
Dividend Plan or any pension or other retirement benefit.
Subsequent awards under MVCP, if any, will be tied to Company
performance as set forth in MVCP.
5. Signing Bonus-Cash Award
Upon your employment by Kodak, we will pay you a gross cash signing
bonus of $100,000. Such payment will be made, subject to withholding
for all applicable income and payroll taxes, within 30 days of your
start date. In no event will any of this bonus be "benefits bearing."
6. Signing Bonus-Restricted Stock Award
Upon your employment, Kodak will award you a one-time grant under the
Eastman Kodak Company 1995 Omnibus Long-Term Compensation Plan (the
"Omnibus Plan") of 10,000 shares of restricted Kodak Common Stock. All
of the shares will vest on the fifth anniversary of the date of their
grant. If your employment terminates for any reason, other than a
"Permitted Reason" as determined by the CEO in the exercise of his sole
discretion, during the one year period following the date of grant, you
will immediately forfeit all of the shares. Thereafter, so long as
these share remain unvested, they will be subject to forfeiture in the
event of your termination of employment for any reason other than for
death or for "Disability" or an "Approved Reason," as those terms are
defined under the terms of the Omnibus Plan. In the event, however,
your employment is involuntarily terminated for any reason other than
"Cause," as such term is defined in Section 8, Kodak management will
recommend to the Executive Compensation and Development Committee (the
"Compensation Committee") of the Board of Directors of Kodak that your
termination of employment be treated as for an Approved Reason.
20
7. Stock Option Program
You will be eligible to participate in our Stock Option Program under
the Omnibus Plan. Grants are typically made in the spring of each year.
If awards are granted for the 1999 calendar year, it is anticipated that
you would be eligible for a grant of approximately 34,000 nonqualified
stock options to purchase Kodak common stock. Individual awards under
the program are, however, wholly within the discretion of the
Compensation Committee and, if made, are a function of a participant's
attainment of established performance criteria which includes corporate,
business unit and individual performance.
8. Performance Stock Program
A. In General. Upon your employment with Kodak, you will be
named a participant in the Performance Stock Program under the
Omnibus Plan for purposes of the 1996-1998, 1997-1999, 1998-
2000 Performance Cycles. Awards earned under the program are
paid in the form of restricted shares of Kodak common stock.
The restrictions, which lapse at age 60, require continuous
employment, noncompetition and nonalienation of awards. Newly
eligible participants are eligible for a pro-rata "Target
Award," as that term is defined in the Omnibus Plan, based on
the number of months he or she was eligible to participate in
the program for such cycle. Given your wage grade, your
Target Award for a full Performance Cycle under the
Performance Stock Program will be 6,575 shares of restricted
Kodak common stock.
B. Guaranteed Awards. For purposes of the 1996-1998 and 1997-
1999 Performance Cycles, Kodak guarantees that you will
receive for each such cycle an award of not less than 8,000
shares of restricted Kodak common stock. To the extent that
all or any part of these shares cannot be paid pursuant to the
terms of the program, they will be paid to you outside the
terms of the program at the same the shares under the program
are paid. Any shares of restricted Kodak common stock paid to
you outside the terms of the program, will be subject to the
same restrictions as the shares paid under the terms of the
program. In the event your employment is involuntarily
terminated for any reason other than "Cause," as such term is
defined in Section 8(C) below, Kodak management will recommend
to the Compensation Committee that your termination of
employment be treated as for an Approved Reason for purposes
of the awards paid for the 1996-1998 and 1997-1999 Performance
outside the terms of the Restricted Stock Program.
21
C. Cause. For purposes of this Section 8, "Cause" shall mean:
i. engaging in gross misconduct in the performance of your
Kodak duties and responsibilities or willfully and
repeatedly failing to perform such duties and
responsibilities; or
ii. your willful failure to follow a lawful written material
directive of the Chief Executive Officer or President,
unless you in good faith believe such directive is not in
Kodak's best interest; or
iii. your willful violation of any material rule, regulation,
or policy that may be established from time to time for
the conduct of Kodak's business and, in the case of those
violations which may be cured, your failure to cure such
violation after receiving 10 days' written notice from
Kodak specifying the nature of such violation; or
iv. your unlawful possession, use or sale of narcotics or
other controlled substances, or performing job duties
while illegally used controlled substances are present in
your system; or
v. any act of omission or commission by you in the scope of
your employment which results in the assessment of a
civil or criminal penalty against you or Kodak; or
vi. your conviction of or plea of guilty or no contest to any
crime involving moral turpitude other than a crime
described in the vehicle and traffic laws of any
jurisdiction; or
vii. any misrepresentation of a significant material fact to,
or concealment of a significant material fact from, your
supervisor or any other person in Kodak to whom you have
a reporting relationship in any capacity; or
viii. your breach of the Eastman Kodak Company Employees'
Agreement; provided, however, with respect to the
confidentiality obligations under the Eastman Kodak
Company Employees' Agreement, the breach must relate to
material confidential information; or
ix. your material breach of the Kodak Business Conduct Guide
and, in the case of those material breaches which may be
cured, your failure to cure such breach after receiving 10
days' written notice from Kodak specifying the nature of
such breach.
22
9. Pension Benefits
A. In General. Kodak agrees to enhance the retirement benefits
you may become entitled to under the Kodak Retirement Income
Plan ("KRIP"), the Kodak Unfunded Retirement Income Plan
("KURIP"), and the Kodak Excess Retirement Income Plan
("KERIP"). Assuming you satisfy the conditions of Section
9(B) below and subject to the offset provisions contained in
Section 9(D) below, Kodak agrees to calculate your retirement
income benefit under KRIP, KURIP and KERIP: (1) in accordance
with the terms of KRIP, KURIP and KERIP as in effect on the
date of this letter; and (2) based on an additional 20 years
of deemed service. This crediting of deemed service shall
apply for purposes of establishing: (i) the total amount of
your "Vesting Service" under KRIP, KURIP and KERIP; (ii) the
total amount of "Accrued Service" used to calculate your KRIP,
KURIP and KERIP retirement benefits and rights to those
benefits; and (iii) your "Total Service" for purposes of
determining the applicability of any early retirement
reduction factor contained in KRIP, KURIP and KERIP. This
crediting of 20 additional years of service applies solely for
these purposes and is not intended to enhance any other Kodak
benefit or compensation to which you may become entitled,
including, but not limited to, any survivor income benefit
that may become payable under KRIP or any other company plan
as a result of your death.
B. Continuous Employment. In order to receive the enhanced
retirement benefit described above, you must remain
continuously employed with Kodak during the 5 year period
commencing on the date of your employment. Except as provided
in Section 9(C) below, if your employment terminates for any
reason, whether voluntarily or involuntarily, prior to the
fifth anniversary of your employment with Kodak, you will not
be entitled to receive any of the enhanced retirement benefits
described above.
C. Termination For Other Than Cause or Disability.
Notwithstanding Section 9(B) above, if Kodak involuntarily
terminates your employment for other than "Cause" or
"Disability," as those terms are defined below in this Section
9, you will be entitled to the enhanced retirement benefit
described in Section 9(A) above.
D. Offset. The amount of the retirement income benefit, if any,
provided to you under this Section 9 will be offset by the
retirement income benefit payable to you under the terms of
KRIP, KURIP and KERIP, and any successor plan(s) thereto.
For purposes of determining the amount of any offset under
this Section 9, the amount of any retirement benefit payable to you
under any plan shall be calculated pursuant to the same
actuarial assumptions that are used to calculate your KRIP benefit
and assuming the same frequency of payment, form of benefit and
commencement date of payment as the benefits payable to you
under KRIP.
23
E. Payment. The amount of the enhanced retirement benefit, if
any, payable to you under this Section 9 will: (i) be paid in
such form(s) as Kodak, in its discretion, determines; (ii) be
paid out of Kodak's general assets, not under KRIP; (iii) not
be funded in any manner; (iv) be included in your gross income
as ordinary income, subject to all income and payroll tax
withholding required to be made under all applicable laws; and
(v) not be grossed up or be given any other special tax
treatment by Kodak.
F. Employee Benefit Plan. To the extent the terms of this
enhanced retirement benefit constitute an "employee benefit
plan" under Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA"), the Senior Vice President,
Eastman Kodak Company and Director, Human Resources shall be
the plan administrator of the plan. The plan administrator
shall have total and exclusive responsibility to control,
operate, manage and administer the plan in accordance with its
terms and all the authority that may be necessary or helpful
to enable him/her to discharge his/her responsibilities with
respect to the plan. Without limiting the generality of the
preceding sentence, the plan administrator shall have the
exclusive right to: interpret the plan, decide all questions
concerning eligibility for and the amount of benefits payable
under the plan, construe any ambiguous provision of the plan,
correct any default, supply any omission, reconcile any
inconsistency, and decide all questions arising in the
administration, interpretation and application of the plan.
The plan administrator shall have full discretionary authority
in all matters related to the discharge of his/her
responsibilities and the exercise of his/her authority under
the plan, including, without limitation, his/her construction
of the terms of the plan and his/her determination of
eligibility for benefits under the plan. It is the intent of
the plan, as well as both parties hereto, that the decisions
of the plan administrator and his/her action with respect to
the plan shall be final and binding upon all persons having or
claiming to have any right or interest in or under the plan
and that no such decision or actions shall be modified upon
judicial review unless such decision or action is proven to be
arbitrary or capricious.
G. Cause. For purposes of this Section 9, "Cause" shall mean:
i. your continuous failure for a period of at least 30
calendar days following delivery to you of a written
notification from Kodak's Chief Executive Officer or
President to bring the usual, customary and reasonable
functions of your position to a satisfactory level; or
ii. your failure to follow a lawful written directive of the
Chief Executive Officer or President; or
iii. your willful violation of any material rule, regulation,
or policy that may be established from time to time for
the conduct of Kodak's business; or
24
iv. your unlawful possession, use or sale of narcotics or
other controlled substances, or performing job duties
while illegally used controlled substances are present in
your system; or
v. any act of omission or commission by you in the scope of
your employment (a) which results in the assessment of a
civil or criminal penalty against you or Kodak, or (b)
which in the reasonable judgment of your supervisor could
result in a material violation of any foreign or U.S.
federal, state or local law or regulation having the
force of law; or
vi. your conviction of or plea of guilty or no contest to any
crime involving moral turpitude; or
vii. any misrepresentation of a material fact to, or
concealment of a material fact from, your supervisor or
any other person in Kodak to whom you have a reporting
relationship in any capacity; or
viii. your breach of the Eastman Kodak Company Employees'
Agreement or the Kodak Business Conduct Guide.
H. Disability. For purposes of this letter agreement,
"Disability" shall mean disability as defined under the terms
of the Kodak Long-Term Disability Plan.
I. Definitions. Any defined term used in this Section 9, other
than those specifically defined herein, shall have the same
meaning for purposes of this document as that ascribed to it
under KRIP.
10. Severance Allowance
A. In General. If prior to the fifth anniversary of the date of
your employment by Kodak, your employment is terminated by
Kodak for reasons other than "Cause," as defined in Section 8
above, or "Disability," as defined in Section 9 above, or you
voluntarily terminate your employment for "Good Reason," as that
term is defined below, Kodak will pay you, subject to your
satisfaction of the terms of this Section 10, a severance
allowance equal to one (1) times your then-current annual base
salary plus your then-current target annual incentive award
under MVCP. The severance allowance will be paid in equal
consecutive bi-monthly payments over the two (2) year period
commencing on the date of your termination of employment.
25
This severance allowance shall be paid to you in lieu of any
other severance benefit, payment or allowance that you would
otherwise be eligible for, except any benefits payable to you
under any Kodak severance plan. To the extent, however, you
are eligible for a benefit under a Kodak severance plan, the
benefits payable to you under this Section 10 will be reduced
by the amount of such severance benefit. In no event shall
any of this severance allowance be "benefits bearing." Kodak
will withhold from this severance allowance all income,
payroll and employment taxes required by applicable law or
regulation to be withheld.
In the event you breach any of the terms of the Eastman Kodak
Company Employees' Agreement described in Section 18 below or
the Agreement, Waiver and Release described in Section 10(B)
below, in addition to and not in lieu of, any other remedies
that Kodak may pursue against you, no further severance
allowance payments will be made to your pursuant to this
Section and you agree to immediately repay to Kodak all moneys
previously paid to you pursuant to this Section.
B. Agreement, Waiver and Release. In order to receive the
severance allowance described in Section 10(A) above, you must
execute immediately prior to your termination of employment a
waiver, general release and covenant not to sue in favor of
the Company (the "Agreement, Waiver and Release"), in a form
satisfactory to the Senior Vice President, Eastman Kodak
Company and Director, Human Resources.
C. Good Reason. For purposes of this letter agreement, "Good
Reason" means: (i) a significant diminution of your authority
or responsibilities; (ii) a reduction in your base salary or
target MVCP award which is inconsistent with the rest of
senior management; or (iii) an "Unforeseen Emergency," as
defined in Section 10(D) below.
D. Unforeseen Emergency. For purposes of this letter agreement,
an "Unforeseen Emergency" means:
i. a sudden and unexpected severe illness or accident to
you, your wife or any of your children that causes you,
in your reasonable judgment, to be continually unable to
perform your duties and responsibilities for a period
which is expected to last for at least 6 consecutive
months; or
ii. any other similar extraordinary and unforeseeable
circumstance that arises as a result of events beyond
your control that in the opinion of the Senior Vice
President, Eastman Kodak Company and Director, Human
Resources, in the exercise of his or her sole and
absolute discretion, causes you to be continually unable
to perform your duties and responsibilities for a period
which is expected to last for at least 6 consecutive
months.
26
11. Wage Dividend Plan
You will be eligible to participate in Kodak's Wage Dividend Plan. If
any award is earned for 1998, it will be paid in March, 1999, and pro-
rated based upon your 1998 participating earnings. Awards earned under
the Wage Dividend Plan by management level employees are paid in the
form of stock options to acquire Eastman Kodak Company Common Stock
pursuant to the terms of the Wage Dividend Plan.
12. Stock Ownership Guidelines
Kodak has in place for its senior managers stock ownership guidelines.
Under these guidelines, all senior executives are required to own common
stock of Kodak equal to a set multiple of his or her base salary. The
multiple that you are expected to own is three times your base salary.
This amount must be achieved by the fifth anniversary of the date of
your employment by Kodak.
13. Vacation
You will be entitled to six weeks vacation per calendar year.
14. Benefits
You will be eligible to participate immediately in Kodak's Flexible
Benefits Plan, which includes health and dental coverage, short- and
long-term disability coverage, group life insurance and eligibility for
long-term care insurance. In addition, you will be able to participate
in Kodak's Short-Term Disability Plan and will be eligible for up to 52
weeks of benefits under the terms of such plan. This is based upon a
special credit of having 15 years of deemed service for purposes of the
plan.
Our executives also qualify for company-paid coverage of $5 million of
personal umbrella liability insurance ("PULI").
You will be eligible to participate in the Kodak Retirement Income Plan
("KRIP"), Kodak's Pension Plan. KRIP is funded entirely by the Company
without any employee contributions. Your participation is automatic and
begins on your first day of employment.
In addition, you will be eligible to participate in the 1982 Eastman
Kodak Company Executive Deferred Compensation Plan ("EDCP"). This is a
non-qualified/unfunded plan in which you may elect to defer a portion of
your base salary and MVCP award. You may enroll within the first ten
(10) business days after joining Kodak or in the Fall 1998 enrollment
period for 1999.
Immediately upon your employment, you will also be eligible to
participate in the Eastman Kodak Employees' Savings and Investment Plan
("SIP"). You will be eligible to make rollover deferrals to SIP from
other qualified plans within two years from the date of your hire.
27
Our executives are provided with individual financial counseling
services through one of three companies. You will be immediately
eligible for this benefit. You are also eligible to participate in the
Kodak Executive Health Management Plan.
15. Confidential Information
It is important that the relationship between you and Kodak be
established at the outset so as to enable you to properly safeguard
confidential information which you may have acquired from your previous
employer(s). "Confidential Information" is defined as information
proprietary to a previous employer which is generally secret, and which
you learned while employed with that employer.
By accepting this conditional offer, you represent to Kodak that your
obligations regarding the Confidential Information will not impede your
ability to perform the duties and responsibilities required by virtue of
your position with Kodak. You further represent that the performance of
these duties and responsibilities will not violate any agreement between
you and any other person, firm, entity or organization or violate any
Federal, state or local law, executive order or regulation.
During your employment with Kodak, we would expect that you will keep in
mind the Confidential Information and inform us if you believe that any
duties or responsibilities to which you are assigned will involve its
use or disclosure. I am available at any time to discuss questions
which might arise in this regard. All such discussions you may have with
me or anyone at Kodak in this regard should refer to the Confidential
Information only in general terms so as to avoid disclosure of the
information you believe to be confidential.
16. No Conflicts of Interest
By signing this letter, you represent that you are not subject to any
restrictions, particularly, but without limitation, in connection with
any previous employment, which now or hereafter prevent you from
entering into and performing your obligations under this letter or which
materially and adversely affect (or may in the future, so far as you can
reasonably foresee, materially affect), your rights to participate in
the affairs of Kodak.
17. Employment Preconditions
This conditional offer of employment is subject to the following
conditions and may be withdrawn by Kodak due to your inability to
satisfy any one or more of these conditions. By signing this letter,
you agree and acknowledge that Kodak may perform the activities
contemplated below in order to verify the stated conditions.
28
A. Physical Exam and Drug Test. You are required to complete a
physical examination and drug screen before this offer becomes
final. This will be at Kodak's expense. This offer is
contingent upon a negative drug screen urinalysis test result.
Additional information will be sent to you under separate
cover from our Medical Department.
B. INS. All employers are now required by Federal law to verify
identity and authorization to work for all prospective
employees. Enclosed is an Immigration and Naturalization
Service I-9 form that outlines the details of these
requirements. Inability to comply with these requirements
will cause rescission of this conditional offer.
C. Check of Past Employment, Education, Credit History, etc.
Kodak will conduct a check of your past employment, education,
credit history and criminal convictions records. This offer
is contingent upon such check being acceptable to Kodak.
Informed Directions International of 110 15th Street NE,
Canton, Ohio 44714, has been engaged by Kodak to conduct this
check. Enclosed is a disclosure letter required by Federal
Law concerning our request to obtain a copy of your credit
report. You will also find enclosed a consent form
authorizing Kodak to obtain such credit report. Please sign
and date the consent form and enclose it along with this
letter.
D. Reference Evaluation. Kodak will conduct a check of your
references. This offer is contingent upon this reference
check being acceptable to Kodak.
18. Employee's Agreement
Attached is a copy of the Kodak Employees' Agreement, which you must
sign and return to me upon your acceptance of this conditional offer.
19. Miscellaneous
By accepting this conditional offer of employment, you agree and
acknowledge that this letter contains the entire understanding between
Kodak and yourself with respect to your employment and supersedes all
previous written or oral negotiations, commitments, and agreements with
respect to such subject matter.
You are expected to devote your best efforts and all of your business
time to the affairs of Kodak. You may, however, engage in any
charitable, civic and community activities, provided, however, such
activity(ies) do not materially interfere with your Kodak duties and
responsibilities.
29
Please also keep in mind that, regardless of any provision contained in
this letter to the contrary, your employment at Kodak is "at will."
That is, you will be free to terminate your employment at any time, for
any reason, and Kodak is free to do the same.
If any portion of this letter is deemed to be void or unenforceable by a
court of competent jurisdiction, the remaining portions will remain in
full force and effect to the maximum extent allowed by law. The parties
intend and desire that each portion of this letter be given the maximum
possible effect by law.
This letter, and its interpretation and application, will be governed
and controlled by the laws of the State of New York.
* * *
Please respond to this conditional offer of employment prior to March
20, 1998. If you find the conditional offer acceptable, please
acknowledge this by signing your name on the signature line provided and
returning the signed original of this letter, along with the executed
copy of the enclosed Employees' Agreement and the consent form
authorizing Kodak to obtain your credit report, directly to me. A self-
addressed envelope has been included for your convenience.
Please feel free to contact me at (716) 724-1169 if you have any
questions.
Sincerely,
Daniel A. Carp
DAC:llh
Enclosures
cc: Michael P. Morley
Signature_________________________ Date_______________________
Eric Steenburgh
Social Security No. _____________________ Birthdate________________
5
0000031235
EASTMAN KODAK COMPANY
1,000,000
U.S. DOLLARS
3-MOS
DEC-31-1998
JAN-01-1998
MAR-31-1998
1.0
489
50
2221
112
1455
5455
12854
7374
13464
5543
494
0
0
978
2221
13464
2911
2965
1585
1585
1015
0
24
341
116
225
0
0
0
225
.70
.69
