Kodak's 4th-Quarter Reported Net Income 39 Cents Per Share; Full-Year Operating Cash Flow Improves by $568 Million

Kodak's net income for the quarter included a loss from discontinued operations of 6 cents per share and earnings from continuing operations of 45 cents per share. Excluding the impact of previously announced focused cost reductions and other one-time items, earnings from continuing operations were 65 cents per share.

For the fourth quarter of 2002:

Sales totaled $3.441 billion, an increase of 2% from $3.358 billion in the fourth quarter of 2001. Excluding foreign exchange, sales were unchanged.

The company reported net income of $113 million, or 39 cents per share, compared with a reported loss of $206 million, or 71 cents per share, in the fourth quarter of 2001. The net loss from discontinued operations of 6 cents per share is composed of a loss of 10 cents per share from the previously announced closing of Kodak Global Imaging, within the company's Commercial Imaging Group, offset in part by income of 4 cents per share related to a business Kodak sold in 1994.

Earnings from continuing operations, excluding the impact of focused cost reductions and other one-time items, were $191 million, or 65 cents per share. The adjustments include a charge of 26 cents per share related to the previously announced focused cost reductions;

charges for asset impairments and write-offs totaling 4 cents per share, primarily related to venture investments; and income tax benefits totaling 10 cents per share, primarily related to adjustments to the company's full-year effective tax rate. In the fourth quarter of 2001, earnings from continuing operations, excluding restructuring and other one-time items, and including goodwill amortization of 11 cents, were $38 million, or 13 cents per share.

"The company's success in 2002 reflected our commitment to managing well those things within our control during a period of economic weakness," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "While the economy constrained sales, profit rose as we cut costs, improved our manufacturing productivity and introduced a number of exciting new products, including the latest EasyShare consumer digital cameras, Kodak PerfectTouch processing and Vision2 color negative motion-picture film. Additionally, we generated more cash flow than initially forecast, paid down debt and reduced inventory, reflecting improved financial management of the company."

Other fourth-quarter 2002 highlights from continuing operations:

Kodak recorded strong cash flow for the quarter and for the year.

For the quarter, operating cash flow was $347 million, a decrease of $124 million from the fourth quarter of 2001. The decrease reflects in part a smaller reduction in inventory and accounts receivables in the fourth quarter of 2002 versus the year-ago period, plus $59 million related to the purchase of minority interests in China and India, and $38 million to fund a non-U.S. pension plan. These uses of cash were partially offset by $187 million in proceeds from surrendering company-owned life insurance. (Kodak defines operating cash flow as net cash provided by continuing operations, as determined under Generally Accepted Accounting Principles in the U.S. [U.S. GAAP], plus proceeds from the sale of assets minus capital expenditures, acquisitions, investments in unconsolidated affiliates and dividends.)

For the year, operating cash flow was $948 million, an improvement of $568 million from the same period of 2001, when operating cash flow was $380 million. Net cash provided by continuing operations, as determined under U.S. GAAP, for the year ended Dec. 31, 2002 and 2001, respectively, was $2.22 billion and $2.21 billion.

Debt declined $594 million from the year-ago level to $2.606 billion, and the company's debt-to-capital ratio declined to 48.4% from 52.5% a year ago.

Gross Profit on an operational basis rose to 35.5%, up from the year-ago level of 31.2%.

Selling, General and Administrative expenses on an operational basis were 20.2% of sales, down from 20.5% in the year-ago quarter.

Days sales outstanding decreased by 6 days, reflecting improved receivables management despite the challenge created by a weak economy. At the same time, inventory turns finished 2002 at 5.2, up from 4.2 in 2001, another indication of improved operational management.

The segment results from continuing operations for the fourth quarter of 2002 are as follows:

Photography segment sales totaled $2.401 billion, up 1%. Earnings from operations for the segment were $174 million, up from $60 million a year ago, which included goodwill amortization of $26 million. Highlights for the quarter included a 32% increase in sales of Digital & Applied Imaging products and services; an 8% increase in sales of Entertainment Imaging products and services; and a fifth consecutive year of steady share in the U.S. consumer film market, even as difficult economic conditions curtailed sales of consumer film in the U.S. and Western Europe.

Health Imaging sales were $619 million, up 9%. Earnings from operations for the segment were $117 million, up from $66 million a year ago, which included goodwill amortization of $8 million. Highlights included the launch of the second generation of direct digital radiography products, the Kodak DirectView DR 5100 system.

Commercial Imaging sales were $396 million, up 3%. Earnings from operations were $49 million, up from $39 million, which included goodwill amortization of $3 million. The segment's results reflect in part the successful launch of the i200 series of document scanners.

All Other sales were $25 million, unchanged from the year-ago quarter. Losses from operations totaled $7 million, compared with losses of $49 million, which included no goodwill amortization. The All Other category includes Sensors, Optics and miscellaneous businesses, as well as the Kodak Display business. Kodak's joint venture with Sanyo, SK Display Corp., remains on track to supply OLED screens in production quantity to the consumer electronics market in 2003.

Full-year results:

For the year, sales were $12.835 billion, down 3% compared with $13.229 billion in 2001. Excluding the impact of currency, sales were down 4% compared with a year ago.

Net earnings for the year totaled $770 million, or $2.64 a share, compared with $76 million, or 26 cents per share, in 2001. Excluding the loss from discontinued operations, earnings from continuing operations totaled $793 million, or $2.72 per share. Excluding the impact of focused cost reductions and other one-time items, earnings from continuing operations in 2002 were $787 million, or $2.70 per share. Excluding after-tax charges totaling $599 million, or $2.06 per share, earnings in 2001 were $675 million, or $2.32 per share.

Earnings Outlook:

Kodak expects per-share earnings in 2003 to range between $2.35 to $2.95, reflecting continued economic weakness, increased consumer use of digital photography, and the difficulty of making forecasts as global tensions rise. The company expects revenue in 2003 to increase slightly, and projects that cash flow after dividends will range from $450 million to $650 million. For the first quarter of 2003, Kodak expects operational earnings to be approximately in line with first-quarter 2002 earnings of 13 cents per share.

"We continue to improve the company's operational performance, supported by employees dedicated to producing the world's finest imaging products and services," Carp said. "Our forecast for 2003 reflects the expectation that economic conditions will remain weak, compounded by rising political tensions. As we have said in the past, the company continues to explore focused actions to increase our competitiveness and reduce costs so that we can deliver better returns to shareholders when the economy recovers."

As part of the company's focused cost-reduction effort, Kodak expects to reduce employment by a range of 2,300 to 2,900 in 2003, 500 to 700 of which are part of previously announced programs, with 1,800 to 2,200 reflecting new initiatives. The reductions related to the new initiatives represent about 3% of the company's worldwide employment base of about 70,000 at the end of 2002. A significant portion of the reduction related to the new actions will come from Kodak's photofinishing operations in the U.S. and Western Europe. The company expects to generate annual savings of $65 million to $85 million from the new initiatives, with $35 million to $50 million being realized in 2003. The company will take charges during the course of the year in the range of $75 million to $100 million to cover the costs associated with the new initiatives.

"In these unsettled times, we will stay focused on increasing revenue, improving productivity and taking advantage of the opportunities available to us in the enormous and rapidly changing infoimaging market," Carp said. "At a size of $385 billion, the infoimaging market is more than four times the size of the traditional photography market. We are optimistic that we have the products and services to execute on our four critical strategies expanding the benefits of film; making digital easy; driving output in all its forms; and developing new businesses in new markets. We are determined to position Kodak to benefit as much as possible from the eventual economic rebound."

Certain statements in this press release may be forward looking in nature, or "forward-looking statements" as defined in the United States Private Securities Litigation Reform Act of 1995. For example, references to the Company's 2003 revenue, earnings and cash flow expectations are forward-looking statements.

Actual results may differ from those expressed or implied in forward-looking statements. The forward-looking statements contained in this press release are subject to a number of risk factors, including the successful:

• Implementation of product strategies (including category expansion, digitization, OLED, and digital products);
• Implementation of intellectual property licensing strategies;
• Development and implementation of e-commerce strategies;
• Completion of information systems upgrades, including SAP;
• Completion of various portfolio actions;
• Reduction of inventories;
• Improvement in manufacturing productivity;
• Improvement in receivables performance;
• Reduction in capital expenditures;
• Improvement in supply chain efficiency;
• Implementation of restructurings, including personnel reductions;
• Development of the Company's business in emerging markets like China, India, razil, Mexico, and Russia.
• The forward-looking statements contained in this press release are subject to the following additional risk factors:
• Inherent unpredictability of currency fluctuations and raw material costs;
• Competitive actions, including pricing;
• The nature and pace of technology substitution, including the analog-to-digital shift;
• Continuing customer consolidation and buying power;
• General economic and business conditions.

Other factors disclosed previously and from time to time in the Company's filings with the Securities and Exchange Commission.

Any forward-looking statements in this press release should be evaluated in light of these important risk factors.

Noot voor de redactie: het volledige bericht met daarin de Consolidated Statement of Earnings kunt u vinden via http://www.kodak.com/US/en/corp/investorCenter/earningsReleases.shtml
 
Over Kodak

Kodak is toonaangevend op het gebied van producten en diensten waarmee mensen beelden kunnen uitwisselen, verbeteren, bewaren, afdrukken en ervan kunnen genieten, als informatie, als entertainment of als aandenken. Het bedrijf is een belangrijke speler op het gebied van infoimaging, een industrietak met een omvang van $225 miljard. De infoimaging-markt bestaat uit apparatuur (digitale camera's, inkjet printers, en personal digital assistants), infrastructuur (online netwerken en afleversystemen voor beelden), en diensten & media (film, papier en software waarmee mensen beelden kunnen bekijken, analyseren en afdrukken).

Het bedrijf, met een omzet van $14 miljard in 2001, is georganiseerd in vijf belangrijke onderdelen: Photography: digitale en traditionele producten en diensten voor professionals en consumenten; Commercial Imaging, producten en diensten voor het registreren, opslaan en weergeven van beelden voor bedrijven en overheden; Components, platte beeldschermen, optische producten en sensoren voor original equipment manufacturers; Health, traditionele en digitale producten en diensten voor registratie en weergaven van beelden ten behoeve van de gezondheidszorg; Entertainment, film, post-productiediensten en digitale bioscoopsystemen voor de filmindustrie.

Voor meer informatie:
Monogram Communication Strategies (MCS)
Contactpersoon: Jan Faber of Judith van Essen
janf@monogram.nl, judithve@monogram.nl
Tel.: 023 - 562 82 08