EASTMAN KODAK1

1. The Beginning Eastman, a genius and high school dropout, invented a dry-plate process and established (1880) a factory at Rochester, N ! , for ma"ing dry photographic plates #he Eastman $ry %late &ompany became Eastman 'oda" in 18() *eorge Eastman came up +ith the name 'oda" himself, after e,perimenting +ith many names starting and ending in ', +hich he considered to be a -strong, incisive "ind of letter. 'oda" is no+ a +orld reno+ned company, +hich ran"s as a premier multinational corporation and one of the )/ largest companies in the 0nited 1tates George Eastman was born in Waterville, New York on July 12, 1854 and moved with his family to Ro hester, New York in 185!" #e dro$$ed out of s hool in 18%8, at the death of his father" #e was $oor, but even as a youn& man, he took it u$on himself to su$$ort his mother and two sisters, one of whom was severely handi a$$ed" #e be&an his business areer as a 14'year old offi e boy in an insuran e om$any and followed that with work as a lerk in a lo al bank at a&e 1!" #e studied a ountin& at ni&ht to be able to advan e in his (ob" #is $assion for $hoto&ra$hy be&an with the $ur hase of his first amera in 18)8" *he invention of the dry'$late $ro ess took one year and many slee$less ni&hts tryin& different formulas" + ordin& to his mother, sometimes he was too tired to undress and sle$t on the kit hen floor" ,n 18)! he filed first $atent for a ma hine that oated dry $hoto&ra$hi $lates and founded the -astman .ry /late 0om$any" #e didn1t on entrate on $erfe tin& lenses and tryin& to rival so$histi ated -uro$ean makers of $hoto e2ui$ment" ,nstead, he develo$ed the 3rownie, a bo4 amera that went on the market in 1!55 with an all'+meri an $ri e ta& of 61" + roll of film went for 15 ents" With the slo&an 7you $ress the button, we do the rest7, 8eor&e -astman $ut the first sim$le amera into the hands of a world of onsumers" ,n so doin&, he made what had been a umbersome and om$li ated $ro ess easy to use and a essible to nearly everyone" *he 3rownie was the invention that brou&ht 9odak into the ranks of &reat om$anies"
1

Eythor Eythorsson, 2olger *eyer, 3ana 4osif and Ramon #rull5s, 0niversitat %ompeu 6abra (0%6) #his case +as prepared during the course 6inancial 7ccounting (%rofessor 3riol 7mat) rather for class discussion than to illustrate either effective or ineffective handling of an administrative situation &opyright )00/, 0niversitat %ompeu 6abra (0%6) $epartment of Economic and 8usiness No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any from by any means 9 electronic, mechanical, photocopying, recording or other+ise 9 +ithout the permission of 0niversitat %ompeu 6abra (0%6)

Eastman Kodak

-astman also introdu ed $a$er roll film in 1884 and the followin& year $atented a ma hine that oated rolls of $a$er with emulsion" ,n 188! he invented $erforated elluloid film" *he -astman 9odak 0om$any was the one of the first in +meri a to establish a $lant for lar&e's ale $rodu tion of a standardi:ed $rodu t and to maintain a fine hemi al laboratory" ,ts $ro&ressive welfare $ro&ram in luded a $rofit'sharin& $lan" 8eor&e -astman was a $hilanthro$ist whose donations were estimated at over 6155 million" *he $rin i$al re i$ients were the ;niversity of Ro hester and the -astman < hool of =usi , =assa husetts ,nstitute of *e hnolo&y, *uske&ee and #am$ton ,nstitutes, Ro hester .ental .is$ensary, and dental lini s in several -uro$ean a$itals" ,n 1!>2, after a lon& illness -astman ommitted sui ide ?by &un to head@ after leavin& most of his wealth to the ;niversity of Ro hester" *he note he left read A=y work is done" Why waitBC 2. Kodak after Eastman +fter -astman1s death in 1!>2, 9odak ontinued to $ioneer onsumer $rodu ts, with olor film in 1!>5 and with the ,nstamati amera in the 1!%5s" *hrou&h the years, 9odak has led the way with an abundan e of new $rodu ts and $ro esses that have made $hoto&ra$hy sim$ler, more useful and more en(oyable" *he 1!)5s brou&ht ma(or &rowth to 9odak" ,ts sales were risin& at that time, hittin& about 65 billion in mid'de ade, and its $rofits were solid" <o it de ided to be faithful to their basi and most $rofitable $rodu tsD film and basi ameras" 3y the late 1!85s, Eu(i /hoto Eilm 0o" of Ja$an had ome out of seemin&ly nowhere to take over hu&e $ortions of 9odak1s market share in film" 9odak mana&ement be&an thinkin& about $hoto&ra$hy as a fadin& business F and de ided to diversify by buyin& a bi& $harma euti al om$any" Gnly a few years later, 9odak abandoned the dru& om$any and, finally, be&an to invest in the di&ital ima&in& $rodu ts that were dis$la in& filmed H'rays in medi al $ra ti e" +nd it be&an to $ush develo$ment of its 1!)% invention, the di&ital amera" 3. Major Changes - Kodak under Fisher *he se ond man to mark 9odak in a si&nifi ant way was 8eor&e Eisher, who took u$ the $osition of hief e4e utive in 1!!>" 3y the be&innin& of the 1!!5s 9odak was in need of hel$" *he main fear was that di&ital te hnolo&y would make its onventional film business obsolete" +s a onse2uen e, 9odak had bran hed into $harma euti als and a $oly&lot of other businesses" ,ts &rowth had slowed, and it was burdened with hu&e debt" =r" Eisher was re ruited from the to$ s$ot at =otorola in 1!!> as the wi:ard who would ma&i ally solve 9odak1s $roblems" 9odak" =r" Eisher sold those businesses, leaned u$ the balan e sheet, and be&an steerin& the om$any toward its urrent strate&y of usin& di&ital te hnolo&y to enhan e, not re$la e, onventional film" #e brou&ht more outsiders into the om$any and onto its board, and be&an investin& heavily in 0hina and other emer&in& markets" ,n

Eastman Kodak

traditional film, sales of 9odak1s hi&h'$ri ed +dvanti4 film system were on the in rease" 3ut by late 1!!), when =r" Eisher1s ontra t was runnin& out, 9odak was a&ain in a finan ial mess" *he om$any was sufferin& from a stren&thenin& dollar and &rowin& softness in overseas marketsI it was a hi&h' ost manufa turer, and its &rowin& $ortfolio of di&ital $rodu ts was losin& hundreds of millions of dollars annually" 9odak1s board did not blame =r" EisherI it e4tended his ontra t throu&h 2555, to &ive him more time to fi4 the om$any" #e soon announ ed a restru turin& that would brin& down osts" 3ut =r" Eisher did make numerous mistakes" #e bou&ht a hain of retail $hoto stores, only to sell it at a loss" + software business he bou&ht has never made money" ,n November 1!!) he unveiled the restru turin& $lan to save 6 1 billion, in $art by uttin& 1!,!55 (obs" With those savin&s, 9odak earned 6 1"4 billion on sales of 6 1>"4 billion in 1!!8" =ost analysts say he should have ut osts mu h sooner F and several say that =r" 0ar$ would have liked to do so" +nd they say that =r" Eisher $um$ed money into far too many di&ital $rodu ts" ,n film, =r" Eisher fou&ht an ultimately unsu essful battle to &et the World *rade Gr&ani:ation to ite Ja$an for anti' om$etitive market $ra ti es" 9odak laimed Eu(i /hoto Jtd was $ra ti in& e4 lusionary ta ti s on the Ja$anese market by $ri e fi4in& in trade asso iations, ash $ayments to wholesalers and retailers to fa ilitate ontrol and distributor &rou$ boy otts" Eu(i, whi h was not affe ted ne&atively by this filin&, was in the meantime in reasin& its share of the ;nited <tates market" .aniel 0ar$, the $resent 0-G of -astman 9odak su eeded the former hief e4e utive 8eor&e Eisher on January 1 st 1!!!" 3y the time =r" 0ar$ took over thou&h 9odak was in fairly solid sha$e" ,ts osts were down, its di&ital losses under ontrol, and sales were u$ 5 $er ent in the first 2uarter of that year" 4. The Compan !s E"o#ution under CE$ Carp ,n 1!!!, 9odak traded at a somewhat more im$ressive 685" 0urrently, 9odak bears the i&noble distin tion of bein& one of the worst $erformin& sto k on the .ow this year" *here were some ma(or develo$ments whi h led to the urrent situation of 9odak, whi h is one of mi4ed si&nals" 9odak is at a rossroad, with some seein& o$$ortunity and some seein& dan&er" ,n tryin& to de ide, we should start by tryin& to understand the om$any as it fun tions today"

Eastman Kodak

%ote& '() * 'o+ (ones )ndustria# indes, EK * Eastman Kodak. Kodak represents a p#a-e +ithin the '() inde.. '() has outperformed Kodak sin-e 1/// and sti## is.

0. The Compan !s $perating 1tru-ture 9odak1s o$eratin& stru ture is entered around strate&i $rodu t &rou$s" *he strate&i $rodu t &rou$s are se&ments that share ommon te hnolo&y, manufa turin& and $rodu t $latforms and ustomer sets" *he 0om$any has three re$ortable se&mentsD /hoto&ra$hyI #ealth ,ma&in&I and 0ommer ial ,ma&in&" *he Photography segment derives revenues from onsumer film $rodu ts, sales of ori&ination and $rint film to the entertainment industry, sales of $rofessional film $rodu ts, traditional and ink(et $hoto $a$er, hemi als, traditional and di&ital ameras, $hoto $ro essin& e2ui$ment and servi es, and di&iti:ation servi es, in ludin& online servi es" *he Health mag!ng segment derives revenues from the sale of di&ital $rodu ts, in ludin& laser ima&ers, media, om$uted and dire t radio&ra$hy e2ui$ment and $i ture ar hivin& and ommuni ations systems, as well as traditional medi al $rodu ts, in ludin& analo& film, e2ui$ment, hemistry, servi es and s$e ialty $rodu ts for the mammo&ra$hy, on olo&y and dental fields" *he "ommer#!al mag!ng segment derives revenues from mi rofilm e2ui$ment and media, $rinters, s anners, other business e2ui$ment, media sold to ommer ial and &overnment ustomers, and from &ra$hi s film $rodu ts sold to the 9odak /oly hrome 8ra$hi s (oint venture" *he All Other gro$p derives revenues from the sale of or&ani li&ht emittin& diode ?GJ-.@ dis$lays, ima&in& sensor solutions and o$ti al $rodu ts to other manufa turers" 2. The Main Business of Kodak Toda

Eastman Kodak

*oday, 9odak in reasin&ly on entrates on di&ital te hnolo&y, but it has been slow in han&in& from the lassi $rodu ts" *he om$any has embra ed di&ital te hnolo&y to a de&ree ' from its medi al'ima&in& business to its own di&ital amera line ' but the om$any itself has admitted it was slow to a$$re iate how 2ui kly onsumers would ada$t to di&ital $hoto&ra$hy, and hadn1t anti i$ated that film sales, the om$any1s traditional ash $rovider, would dro$ as swiftly as they have" +t the $resent moment, di&ital amera sales are &rowin& 45K a year" <ony1s ameras, with 22K of all sales, lead the market, says analyst 0hristo$her 0hute of market resear h firm ,.0 0or$" F but 9odak is se ond with a 1%K share" +s a remedy, 9odak has now suddenly (um$ed on the di&ital wave, and while themati ally that would a$$ear to be a &ood thin&, the om$any1s stated reforms a$$ear so freneti that it1s fair to wonder whether it is thinkin& learly, or (ust des$erately" ,n late <e$tember 255>, the 122'year'old om$any announ ed that it was &oin& to on entrate its efforts in di&ital $hoto&ra$hy '' on di&ital ameras for onsumers, on di&ital ima&in& $rodu ts for medi al are and ommer ial industry" *here was irony in the announ ement, be ause 9odak holds $atents for inventin& the di&ital amera in 1!)%" *he om$any (ust never &ot around to develo$in& the te hnolo&y, be ause the money to be made from its traditional business of old'fashioned $hoto&ra$hi film was so mu h bi&&er" 3. Carp!s 'igita# )n"estment 4#an *he lima4 of the delayed at h'u$ $ro ess ame when 9odak 0hairman .aniel 0ar$ announ ed that the om$any would be devotin& its ener&ies, and 6> billion in the ne4t three years, to $ersuadin& the world to buy its di&ital ameras and other $rodu ts" *o fund the investment, 9odak said, it will ut its annual dividend by )2K to 55 ents a share from 61"85" #is $redi tionD the move would boost sales from around 6 1> billion today to 6 1% billion 255%, while liftin& earnin&s some 45K above this year1s e4$e ted results" ;nder 0ar$, 9odak also is $ushin& a&&ressively into 0hina, re ently investin& 6155 million in the ountry1s lar&est $hoto&ra$hi firm, Ju ky Eilm, beatin& out bidder Eu(i for a 25K stake" 3ut the move met a ske$ti al rea tion from investors" 9odak1s share $ri e $lummeted nearly 25 $er ent after the announ ement" /roblem is, after years of disa$$ointments, investors have little faith in the ability of 0ar$ and his mana&ement team to deliver" ,ndeed, 0ar$1s bi& $lan $rom$ted o$en revolt amon& some shareholders" Gn G t" 22, ma(or investors met to dis uss radi ally different 11strate&ies to ma4imi:e shareholder value"11 Gne would be to for&et about the di&ital investment, restore the dividend to its hi&h level and ontinue en(oyin& the ash flow out of the fadin& film business ' whi h last year was a$able of reatin& more than 6)55 million of $reta4 $rofit for 9odak, or 5%K of its total" Gther shareholders have raised the idea of s$littin& 9odak into se$arate om$anies, for onsumer, medi al and ommer ial $rodu ts" ;nder either s enario, old 9odak would die" ;nder the first, the one that has re eived the most attention, it theoreti ally would be a very lon& and omfortable death"
&

Eastman Kodak

3ut =r" 0ar$ ar&ues that tryin& to a$itali:e on the film business would only a elerate 9odak1s de line" *hat1s be ause many of the retailers, $hoto sho$s, and radiolo&ists 9odak su$$lies would abandon it for su$$liers better able to hel$ mana&e the transition to di&ital" *he $lan to sink another 6> billion into un ertain di&ital $lans aused frustration, but retreat from di&ital markets is a bad idea" WhyB 3e ause, at least in the develo$ed world, the traditional film business is fadin&" 9odak itself alluded to that bleak future on G t" 22, when it announ ed that ;"<" film sales $lummeted an alarmin& 2>K in the third 2uarter" +lthou&h $artly due to an inventory orre tion, 9odak now says film sales will dro$ 15K to 12K annually over the ne4t three years in the ;"<", and nearly twi e as fast in Ja$an" Erank J" Romano, $rofessor of di&ital $rintin& at the Ro hester ,nstitute of *e hnolo&y saysD 11,f they don1t invest in di&ital, that1s the end of 9odak"11 *he $roblem isn1t that 0ar$ has the wron& vision '' but that he waited until the last minute to embra e it" +nalysts have fairly asked why he didn1t ommen e a studied venture into di&ital lon& a&o" 7, saw that di&ital was &oin& to eventually re$la e film when we first develo$ed the first di&ital amera in 1!85,7 said 0ar$" 7+nd it would have been a rime to start walkin& away from the histori business in 1!85." =r 0ar$ is also sayin& that 9odak Ahas been investin& in di&ital for years and has been &rowin& a fairly lar&e set of di&ital businesses" *he onsumer di&ital business, for instan e, is now about a 61"2 billion business Lin ludin& di&ital ameras, ink(et $a$er, and GfotoM, and we have kiosks Lfor $rintin& di&ital ima&esM all over the $la e" 3ut now film is in se ular de line in the ;"<" and Western -uro$e" A Gn the other hand, some analysts onsider 9odak has failed in its efforts to build a di&ital onsumer business" ,t has taken a s attered a$$roa h to di&ital $hoto $ro essin&, $la in& bets on everythin& from online kiosks to minilabs used by retailers to $rint $hotos" 3y ontrast, ar h'rival Eu(i /hoto Eilm 0o" started sooner, has better amera te hnolo&y, and fo used more on minilabs, whi h are e4$e ted to dominate the $ro essin& market" <till, the ra e is hardly over" 9odak1s di&ital amera business was $rofitable for the first time in the third 2uarter, as sales (um$ed 11)K" =oreover, 9odak1s bets are $ayin& off in health'ima&in&, where it an take advanta&e of lon&standin& ties with do tors ea&er to re$la e H'rays with di&ital ima&es" *hat business makes more money than $hoto&ra$hy, and o$eratin& $rofits limbed 14K, to 6 >5) million, in the first nine months of 255>" ,ts sales in 0hina, an im$ortant &rowth market, re overed as fears about <+R< abated" ,t bou&ht a stake in Ju ky Eilm, 0hina1s main film manufa turer, whi h ould in rease distribution in +sia as well as brin& royalties for manufa turin& te hnolo&ies" +nd in the ;nited <tates, sales of $hoto&ra$hi $a$er and di&ital $rintin& servi es in reased" +nother si&n of $ro&ressD Gn Nov" 12, 9odak announ ed a&reements with 0in&ular Wireless and Nokia under whi h it will $rovide servi es that will hel$ their ustomers store, share, and $rint the di&ital ima&es they take with $o$ular new amera ell $hones" 0ar$ insists the om$any is on the ri&ht tra k" *he sto k has boun ed ba k from the low of 6 25"45 it hit after he revealed his $lan" Yet that re overy may have been fueled by news of , ahn1s interest" =r" , ahn, who &ained fame as a
'

Eastman Kodak

or$orate raider in the 1!85s, re ently re eived a$$roval from the Eederal *rade 0ommission to buy u$ to 6 555 million worth of shares in 9odak" <ome investors are worried he will try to stren&then 9odak1s dee$ly de$ressed shares, $ossibly by breakin& it u$" Gthers, who believe , ahnNs interest in the om$any is for the lon& term, see this as si&nalin& o$$ortunity" Je&& =ason Eunds, 9odak1s lar&est shareholder, re$orted on Nov" 12 it in reased its stake from 8"%K in June to 15K, or 28") million shares, at the end of G tober" 5. Future $ut#ook =r" 0ar$ has been runnin& the om$any for the lon& ride down" 0an he be trusted to brin& 9odak ba kB With the new mana&ement team, all with ama:in& e4$erien e and a om$lishments in the di&ital world, 9odak is onfident about the om$anyNs &rowth strate&ies" =r 0ar$ saysD AWe1ve said we an &row our sales 5K to %K a year" 3ut sales from traditional $rodu ts Lfilm, $a$er and $hotofinishin&, et "M will shrink )K to 8K a year, while di&ital is &rowin& 22K to 2%K a year" 3y 255%, revenues from the di&ital business will a ount for %5K of 9odak1s revenues, with traditional about 45K" +t the same time, the &ross $rofit of the di&ital businesses will ross over those of the film business"C ,n 2552 9odak also had some im$ortant a om$lishments whi h they say e4 eeded their strate&i , o$erational and finan ial ob(e tives" *hey have stren&thened the balan e sheet and im$roved free ash flow" *hey also maintained the ommon sto k dividend" With a 25K total return, in ludin& dividends, 9odak losed 2552 as the best'$erformin& sto k amon& om$anies that make u$ the .ow Jones ,ndustrial +vera&e" 2552 worldwide sales de lined >K om$ared with 2551 be ause of the ontinuin& e onomi slum$ in the ;"<", -uro$e and many other ountries 3ut the om$any ontinued to &row in the emer&in& markets of 0hina ?O25K@, Russia ?O25K@ and ,ndia ?O8K@" ,n the ;"<", market share in onsumer film was held steady for the fifth strai&ht year" *heir finan ial strate&y fo used on &eneratin& ash to su$$ort the underlyin& value of the om$any, $ay down debt, and enable $rudent investments for &rowth" 0ash flow from o$erations was a $ositive 6!48 million in obtained by lowerin& inventories, redu in& re eivables and ontrollin& a$ital e4$enditures" ,n the $ro ess, debt was redu ed by 65!4 and they also bou&ht ba k )"4 million shares of 9odak sto k from the om$anyNs ;"<" $ension $lan" *he ash $osition in reased by 6121 million to 65%! million" 0ontinuin& in 2552 was a worldwide workfor e redu tion, with the final $hase to be om$leted in 255>" Eor the future, 9odak sees as the $rimary sour e of future &rowth resear h and develo$ment and $rodu t innovation" 8uidin& their &rowth $lans are four key strate&ies within the 6>85 billion infoima&in& market, where the onver&en e of ima&in& and information te hnolo&y offers vast o$$ortunity for 9odak" 9odak $lans to e4$and the benefits of the traditional film business, drive ima&e out$ut in all forms, make di&ital ima&in& easier throu&h $rodu ts su h as -asy<hare di&ital ameras and Gfoto F the award'winnin& online $i ture servi e, and finally develo$ new businesses su h as the or&ani li&ht'emittin& diode ?GJ-.@ flat'$anel dis$lay business"
(

Eastman Kodak

0an 9odak ome ba kB ,n 9odak1s favor is that its mana&ement a$$ears to be listenin& to what the om$anyNs founder 8eor&e -astman said 85 years a&oD .on1t &et omfortable" *rue then, and even more im$ortant now when 9odak has to find the se ret formula in the di&ital world that they found in the film world"

)$est!ons
1'+naly:e the stren&ths and weaknesses of 9odak from a finan ial and e onomi $ers$e tive 2'<hould 9odak onsider finan in& its future investments with debt finan e or e2uity finan eB >'Would you onsider be omin& a shareholder of 9odakB

Eastman Kodak

E+h!,!t 1- -astman 9odak ,n ome <tatement

Eastman Kodak "ompany
in millions, e4 e$t $er share data@ Net sales 0ost of &oods sold Gross pro/!t <ellin&, &eneral and administrative e4$enses Resear h and develo$ment osts 8oodwill amorti:ation Restru turin& osts ? redits@ and other

n#ome Statement
2..2 12"8>5 8"225 %0'1. 2"5>5 )%2 P !8 2..1 1>"22! 8"%%1 %0&'* 2"%25 ))! 15> %5! 2... 1>"!!4 8">)5 &0'11 2"514 )84 151 '44

Earnings b efore interest and ta, ,nterest e4$ense Gther ? har&es@ in ome

1"225 1)> '151

>52 21! '18

2"214 1)8 !%

Earnings b efore income ta,es /rovision for in ome ta4es Earn!ngs /rom #ont!n$!ng operat!ons Joss from dis ontinued o$erations, net of in ome of in ome ta4 benefits of 615 , 62 and 65 for the years endin& .e ember >1, 2552, 2551 and 2555 Net earn!ngs -arnin&s $er share Year end share $ri e Number of shares 0ash dividend $er share

!4% 15> (13

115 >4 *1

2"1>2 )25 10%.(

'2> ((. 62,%4 6>5,54 2!1,5 61,85

'5 (' 65,2% 62!,4> 2!5,% 62,21

P 10%.( 64,5! 6>!,4) >54,! 61,)%

Eastman Kodak

E+h!,!t 2- -astman 9odak 3alan e <heet

Eastman Kodak "ompany
?in millions, e4 e$t share and $er share data@ +<<-*< 0urrent +ssets 0ash and ash e2uivalents Re eivables, net ,nventories, net .eferred in ome ta4es Gther urrent assets Total #$rrent assets /ro$erty, $lant and e2ui$ment, net 8oodwill, net Gther lon&'term assets Total Assets J,+3,J,*,-< +N. <#+R-#GJ.-R<1 -Q;,*Y 0urrent Jiabilities + ounts $ayable and other urrent liabilities <hort'term borrowin&s + rued in ome ta4es *otal urrent liabilities Jon&'term debt, net of urrent $ortion /ostretirement liabilities Gther lon&'term liabilities Total 2!a,!l!t!es <hares issued ?note 15@ +dditional $aid in a$ital Retained earnin&s + umulated other om$rehensive loss 2552

5alan#e Sheet

2551

2551

5%! 2"2>4 1"5%2 512 15) %0&3% 5"425 !81 2"4>4 1303'1

448 2">>) 1"5)1 521 245 %0'1( 5"%5! !48 2"1>8 1303'2

24% 2"%5> 1")18 5)5 2!! &0%11 5"!1! !4) 1"855 1%0212

>">51 1"442 584 5">)) 1"1%4 >"412 %>! 1.0'12 !)8 84! )"%11 '))1 8"%%)

>"2)% 1"5>4 544 5">54 1"%%% 2")28 )25 1.0%'* !)8 84! )"4>1 '5!) 8"%%1 5")%) 20*1% 1303'2

>"2)% 2"558 %5% %"215 1"1%% 2")22 %81 1.0(*% !)8 8)1 )"8%! '482 !"2>% 5"858 30%2* 1%0212

*reasurt sto k, at ost Total shareholders3 e4$!ty Total 2!a,!l!t!es and Shareholders3 E4$!ty

5"8!5 20((( 1303'1

1.

Eastman Kodak

E+h!,!t 3- -astman 9odak Einan ial Ei&ures

111* Kodak 2... 2..1 =illion .ollar 14"58! 1>"!!4 1>"22! 1">!2 1"45) )% 1111 2..2 12"8>5 ))5 2..1 15"%8% 1"544 7$8!/!lm 2..2 2..3 =illion .ollar 1)"5)4 2>"555 %)% 44)

Sales Net !n#ome

2!4$!d!ty 6at!o 0urrent Ratio ?0urrent assetsR0urrent liabilities@ Qui k ratio ?.ebts O 0ash and 3ankR0J@ + id test ?0ashR0urrent Jiabilities@ De,t 6at!os .ebt 2uality ?0urrent JiabilitiesR*otal .ebt@ .ebt 2uantity ?*otal .ebtR*otal .ebt O -2uity@ .ebt ost ?,nterestR*otal .ebt@ Assets Mangement +ssets *urnover ?<alesR+ssets@ Ei4ed assets turnovers ?<alesREi4ed +ssets@ 0urrent assets turnover ?<alesR0urrent +ssets@ Marg!n and Pro/!ta,l!l!ty ROS - Return on Sales (%) ROA - Return on Assets (%) ROE - Return of E u!t" (%) Terms olle tion day $ayment $eriod

1>"45% 1">!5

5,!1 5,%5 5,5)

5,!4 5,%8 5,5%

5,88 5,%1 5,54

5,8% 5,52 5,58

5,84 5,52 5,11

1,)% 1,>2 5,58

1,!> 1,4> 5,5>

2,51 1,51 5,58

5,5) 5,)> 5,51

5,55 5,)> 5,51

5,58 5,)% 5,52

5,51 5,)8 5,52

5,51 5,)! 5,52

5,%) 5,4> 5,51

5,58 5,42 5,51

5,5% 5,4> 5,51

5,!1 1,4) 2,>!

5,!8 1,58 2,5!

5,!8 1,%5 2,55

1,55 1,51 2,8)

5,!% 1,45 2,8>

5,4! 5,!8 5,!)

5,81 1,54 1,)>

5,85 1,%4 1,)5

10,05% 15,58% 41,04%

0,57% 2,63% 2,63%

6,00% 9,13% 27,73%

9,77% 5,2!K ),2%K

3,96% 5,)>K 4,)!K

1,94% 5,42K 2,8!K

%! 14>

%4 1>8

%4 14!

128 142,1

!4 )>,%

88 )),%

11

Eastman Kodak

E+h!,!t %- -astman 9odak 0ash Elow <tatement "ASH 72O9 STATEMENT

Eor the Year -nded .e ember >1 ?in millions@ Cash f#o+s from operating a-ti"ities& Net earnin&s 7d:ustments to reconcile to net cash provided by operating activities; Joss from dis ontinued o$erations -2uity in losses from un onsolidated affiliates .e$re iation and amorti:ation 8ain on sales of businessesRassets Restru turin& osts, asset im$airments and other har&es ?3enefit@ $rovision for deferred in ome ta4es .e rease ?in rease@ in re eivables .e rease ?in rease@ in inventories ,n rease ?de rease@ in liabilities e4 ludin& borrowin&s Gther items, net *otal ad(ustments Net ash $rovided by ontinuin& o$erations Net ash used for dis ontinued o$erations Net #ash pro:!ded ,y operat!ng a#t!:!t!es &ash flo+s from investing activities; +dditions to $ro$erties Net $ro eeds from sales of businessesRassets +2uisitions, net of ash a 2uired ,nvestments in un onsolidated affiliates =arketable se urities P sales =arketable se urities P $ur hases Net #ash $sed !n !n:est!ng a#t!:!t!es &ash flo+s from financing activities; Net ?de rease@ in rease in borrowin&s with ori&inal maturities of !5 days or less /ro eeds from other borrowin&s Re$ayment of other borrowin&s .ividends to shareholders -4er ise of em$loyee sto k o$tions <to k re$ur hase $ro&rams Net #ash $sed !n /!nan#!ng a#t!:!t!es -ffe t of e4 han&e rate han&es on ash Net in rease ?de rease@ in ash and ash e2uivalents 0ash and ash e2uivalents, be&innin& of year 0ash and ash e2uivalents, end of year 2..2 6))5 2..1 6)% 2... 6145)

2> 155 818 '24 85 '224 2%> 88 2! 285 1448 2218 '14 ;22.% '5)) 2) ')2 '12> 88 '151 ;(&*

5 84 !1) 5 415 '41 254 4%5 '111 14! 21>) 221> ') ;22.' ')4> 5 '>5% '141 54 '52 ;<11**

5 111 88! '11) 5 2>4 '24) '285 '858 '84 '>52 1155 5 ;11.& '!45 2)) '1>5 '12> 84 '%! ;<1.'

'215 )5! '114% '525 51 '2%5 ;<1331 % 121 448 5%!

'%!5 1!5) '1>55 '%4> 22 '44 ;<*.* '8 252 24% 448

!>! 1>15 '!>% '545 4> '1125 ;<31% '12 '12) >)> 24%

12

Eastman Kodak

E+h!,!t &- -astman 9odak ,m$ortant -vents in #istory

mportant E:ents !n Kodak H!story

18)! 1885 1884 188! 18!2 1!55 1!>2 1!>5 1!%5 1!)5 1!)% 1!85 1!85 1!88 1!!> 1!!4 1!!5 1!!) 1!!) 1!!8 1!!! 1!!! 2551 255> 255> 8eor&e -astman invented the dry'$late $ro ess and filed $atent for a ma hine that oated dry $hoto&ra$hi $lates 8eor&e -astman established the -astman .ry /late 0om$any, at Ro hester N"Y" ,ntrodu ed $a$er roll film ,nvented $erforated elluloid film *he -astman .ry /late 0om$any be ame -astman 9odak *he 3rownie bo4 amera went on the market with a $ri e of 61 +fter a lon& illness, 8eor&e -astman ommitted sui ide ,ntrodu ed olor film 3rou&ht the ,nstamati amera to the market =a(or sales &rowth for 9odak" 0on entrates on film and basi ameras ,nvented the di&ital amera Eu(i emer&es as a serious om$etitor 9odak develo$ed their first di&ital amera =ana&ement be&an thinkin& about $hoto&ra$hy as a fadin& business and de ided to diversify by a 2uirin& the $harma euti al om$any <terlin& .ru& ,n 8eor&e Eisher took u$ the $osition of hief e4e utive for 9odak 9odak abandoned its non'ima&in& health'related businesses be&an to invest in di&ital ima&in& $rodu ts for medi al $ra ti e 9odak filed a $etition a&ainst anti' om$etitive trade $ra ti es in the Ja$anese market and a used Eu(i /hoto Jtd of $ra ti in& e4 lusionary ta ti s , but lost the ase 9odak was a hi&h' ost manufa turer with a &rowin& $ortfolio of di&ital $rodu ts whi h was losin& hundreds of millions of dollars annually Restru turin& that eliminated 1!,555 (obs and ut more than 61 billion from annual osts 9odak a 2uired ,mationNs medi al ima&in& businesses in North +meri a, Jatin +meri a, and +sia .aniel 0ar$ took over as 0-G of -astman 9odak 9odak entered the di&ital radio&ra$hy market 9odak is $ushin& a&&ressively into 0hina, an im$ortant &rowth market 0ar$ unveiled the $lan to invest 6> billion in the ne4t three years in di&ital $rodu ts by uttin& dividends by )2K ' to 55 ents $er share <hare $ri e down to 62> from 6!5 in 1!!!

13