Kodak Rep

Integrated Company Analysis
Fall, 2009
For over one hundred years, Eastman Kodak Company has provided imaging products to consumers, earning brand equity through innovation. Today, Kodak struggles with declining revenue and steep restructuring costs as it transitions to the digital imaging market.
Alejandro Castano
Joe Czechowicz
Troy Golden
Matt Johnson
Lindsay Kruger
Wisconsin School of Business 975 University Ave Madison, WI 53706 608-262-1550
Contents
Contents .................................................................................................................................................................................. 2 Executive Summary ................................................................................................................................................................ 4 Company Analysis .................................................................................................................................................................. 5 Organizational Structure ..................................................................................................................................................... 5 Financial Analysis ............................................................................................................................................................... 5 Performance Indicators ................................................................................................................................................... 5 Quality of Financial Statements ...................................................................................................................................... 6 Financing and Capital Structure ...................................................................................................................................... 7 Valuation ......................................................................................................................................................................... 7 Kodaks Current Marketing Strategy .................................................................................................................................. 8 Consumer ........................................................................................................................................................................ 8 Positioning ...................................................................................................................................................................... 8 Product ............................................................................................................................................................................ 9 Price ................................................................................................................................................................................ 9 Placement ...................................................................................................................................................................... 10 Promotion ...................................................................................................................................................................... 10 Recommendations ................................................................................................................................................................. 12 Appendix ............................................................................................................................................................................... 14 Exhibit 1 Products Analysis ........................................................................................................................................... 14 Digital Cameras............................................................................................................................................................. 14 Printers .......................................................................................................................................................................... 15 Digital Picture Frames .................................................................................................................................................. 16 Photo Storage ................................................................................................................................................................ 16 Exhibit 2 Its time to smile Campaign ........................................................................................................................ 18 Exhibit 3 Competitor Endorsements .............................................................................................................................. 22 Exhibit 4 Economic Value Pricing................................................................................................................................. 22 Exhibit 5 Kodak Product Pricing ................................................................................................................................... 22 Exhibit 6 ............................................................................................................................................................................ 23 Point And Shoot Models: Rankings And Price ............................................................................................................. 23 Compiled from ConsumerReports.org .......................................................................................................................... 23 Exhibit 7 Competitor Business Descriptions ................................................................................................................. 25 Canon Inc. ..................................................................................................................................................................... 25 2
Fujifilm Holdings Corp. ................................................................................................................................................ 25 Hewlett-Packard Co. ..................................................................................................................................................... 25 Ricoh Co. Ltd. ............................................................................................................................................................... 25 Sony Corp. .................................................................................................................................................................... 26 Xerox Corp.................................................................................................................................................................... 26 Nikon Corp.................................................................................................................................................................... 26 Olympus Corp. .............................................................................................................................................................. 27 Lexmark International Inc. ............................................................................................................................................ 27 Seiko Epson Corp.......................................................................................................................................................... 27 Exhibit 8 Profitability Scenario Analysis....................................................................................................................... 28 Exhibit 9: Comparison of accounting methods ................................................................................................................. 30 Exhibit 10: Operating cost breakdown............................................................................................................................. 31 Exhibit 11 - Cash Conversion Cycle ................................................................................................................................ 32 Exhibit 12 EK Pro Forma Financial Statements ............................................................................................................ 34 Exhibit 13 CDG Pro Forma Financial Statements ......................................................................................................... 35 Exhibit 14 FPEG Pro Forma Financial Statements ........................................................................................................ 36 Exhibit 15 GCG Pro Forma Financial Statements ......................................................................................................... 37 Exhibit 16 Segment Valuations and Key Assumptions ................................................................................................. 38 Exhibit 17 Regression Analysis of Traditional Sales Lines ........................................................................................... 39 Exhibit 18 Sensitivity Analysis of Stock Price .............................................................................................................. 43 Exhibit 19 Cash Benefit of Financing Transactions ...................................................................................................... 44 Works Cited .......................................................................................................................................................................... 45
Executive Summary
Eastman Kodak Co. was founded in 1892 by George Eastman and offers imaging products for leisure, commercial, entertainment, and scientific purposes. Traded on the New York Stock Exchange (symbol: EK), the company reported over $9 billion in revenue and $9 billion in assets in FY08. Kodak is organized along three segments: the Graphic Communications Group (GCG); the Film, Photofinishing, and Entertainment Group (FPEG); and the Consumer Digital Imaging Group (CDG). Kodaks history is one of innovation, but the company was slow to react to the digital revolution. Kodak has struggled to overcome this legacy ever since. Through our due diligence, we have uncovered that Kodak must improve gross margins to become profitable in 2010. Our sensitivity analysis shows that sales growth alone will not lead to profitability. We have identified a target gross margin of 27.5% to become profitable in 2010. Kodak entered into two financing transactions over the past two months involving convertible debt and warrants. These transactions allowed Kodak to raise almost $700 million in cash, while saving around $35 million per year in interest. In exchange for the savings, existing shareholders will potentially give up 25% of the equity value. Kodak also continues to sell significant assets and intellectual property rights, including its OLED business, a potential nextgeneration flat-panel display technology that Kodak pioneered over the last couple of decades (Kodak, 2009). Kodak positions itself as the user-friendly choice for amateur users of imaging products. The companys product attributes detract from this position. In general, Kodak products are priced below the competition. Kodaks lower price, though offering a benefit to some consumers, signals inferior quality to the market. Kodaks placement strategy employs wide market coverage, ensuring easy access for consumers. Presently, Kodak does not direct consumers to preferred channels. Kodak recently launched an integrated, multi-media marketing campaign. The campaign touches on multiple product lines, rather than emphasizing an energizer product. The following are our key recommendations: (1) redesign Kodaks marketing communication message to position it as the premier provider of imaging solutions that connects the consumer with their loved ones; (2) through marketing communications, walk the consumer from image capturing, through storage, to sharing, allowing them to process each of Kodaks product offerings; (3) increase marketing focus on digital cameras to leverage brand equity (reposition); (4) increase prices on digital cameras.
Company Analysis
Organizational Structure
Eastman Kodak is an international corporation with over 24,000 employees, over $9 billion in annual sales (FY08), and over $9 billion in assets (FY08). The company is organized along three segments: the Graphic Communications Group (GCG); the Film, Photofinishing, Entertainment Group (FPEG); and the Consumer Digital Imaging Group (CDG). Thirty-nine percent of Kodaks revenue comes from the GCG segment, which provides products and services to businesses with large scale printing operations. Thirty-one percent of Kodaks revenue comes from the FPEG segment, which provides traditional photographic products and services to consumer, professional, and industrial markets. Thirty percent of Kodaks revenue comes from the CDG segment, which provides digital consumer products. Kodak began in the late nineteenth century with George Eastmans advance in dry plate technology, which allowed photography to become an amateur pursuit. Since then, Kodak has continued to excel in technological innovation. The company issued over 19,000 U.S. patents between 1900 and 1999. In 1935, Kodak introduced Kodachrome film, the first commercially successful amateur color film. NASA relied on a Kodak camera to take photos on the moon and transmit them to earth. Also, Kodak invented the first digital camera in 1975 (Kodak, 2009). Kodak reacted slowly to the digital revolution. Since the takeoff of digital cameras, Kodak has seen revenues plummet from $15 billion to $9.4 billion (Butcher, 2009). Kodak has cut 40,000 jobs over the last five years, and plans to eliminate 3,500 to 4,500 in 2009 (Dobbin, 2009). Since 2003, Kodak has sought to meet this challenge with robust restructuring programs. Approximately 80% of Kodak revenue is from new products and services developed within the last five years (Butcher, 2009). Approximately 60% of Kodak employees have been there less than four years (Butcher, 2009).
Financial Analysis
Performance Indicators Kodak faces the challenge of high restructuring costs and declining demand for its digital products, while trying to redefine its organizational structure and brand name. On top of company-specific problems, Kodak faces a stiff macroeconomic headwind, as consumers continue to watch their spending on luxury items. To combat these problems, Kodak has cut costs via layoffs and reductions in R&D expenditures, removed dividend payments to common stockholders and
targeted its cash conversion cycle. In the near term, Kodak appears to be poorly positioned to handle an extended economic contraction, and must act immediately to generate additional revenues and profits. Negatives for FY08 vs. Competitors Revenues: Kodak experienced revenue growth (pro-forma) of -2.5% and -8.6% in FY07 and FY08, respectively. The median competitor revenue growth was 6.7% and -8.6% in FY07 and FY08, respectively. We attribute the quicker revenue decline to the companys inability to resonate with consumers. Rapidly declining gross margins. Since Kodak introduced its digital plan in 2003, gross margins have declined sharply from a high of 36% to the current low of around 20% (23% FY08 vs. competitor median of 36%). The decline in margins is a pressing issue. We believe our marketing recommendations give Kodak the best chance of survival. Return-on-Equity (Dupont): Kodak has seen its ROE go from 24.5% in FY02 (vs. 6.6% for competitors) to 44.4% in FY05 (vs. 10.4% for competitors), to -36.4% (vs. 0.6% for competitors) in FY08. One of the distinguishing detractors comes from Kodaks above median equity multiplier at 5.4x (vs. 2.7x for competitors). As the industry and economy deteriorated, Kodak suffered from higher financial leverage relative to its peers (3-yr average of 6.4x vs. 2.7x for competitors) that accelerated the decline of profitability. Positives for FY08 vs. Competitors Cash Conversion Cycle (CCC): Kodak has reduced its cash conversion cycle to -5 days for FY08, versus a competitor median of 82 days (FactSet Research Systems, 2009). Kodak accomplished the improvement in CCC through extensions of terms on accounts payable, while maintaining steady inventory and days of sales outstanding. Lean operating costs: Kodak has been successful in cutting SG&A costs as a percentage of sales. By reducing its workforce, Kodak expects future cost savings of over $300 million. Current operating costs (ex-restructuring and goodwill write-offs) of 22% are well below Canon (35%), Fujifilm (35%) and Nikon (31%). If Kodak can survive the economic contraction and continue to operate at current levels in comparison to its competitors, we believe the company can survive and return to profitability. Quality of Financial Statements Kodak reports under US GAAP (Exhibit 9). Inconsistency in Kodaks financial reports inhibits the ability to serially compare and forecast financial performance. Through our due diligence process, we discovered that Kodak is more aggressive (8%) than Canon in respect to estimating expected returns on assets (6.5%) of pension plan obligations. 6
Restatements: Kodak restated financial statements in 2003 and 2004 due to mistakes in reporting income taxes, accruals for pensions and other post-retirement benefits due to the rapid turnover (firing) of 15,000 workers. The restatement reduced reported earnings by $85 million (effect from income tax error - $56 million, effect from pension errors $29 million), decreased retained earnings and decreased cash flow from operations. Reclassifications: Continuous restructuring of the company prevents proper historical comparisons beyond three years. The reclassifications also introduce discrepancies between segment breakdowns and total firm numbers. Change in useful life of assets: In the first quarter of 2008, the company performed an updated analysis of expected useful lives on its traditional film and paper business. This analysis resulted in an increase in useful lives, which in turn will result in decreasing depreciation expenses ($107 million), increasing net income, increasing retained earnings and increasing assets in the future. Impairment of goodwill: In 4Q08, Kodak re-evaluated all of its business segments with an increased WACC between 18.5% and 23.0% to reflect the rapidly deteriorating environment. Due to the estimated future cash flows being less than the overall cost of the GCG segment, Kodak reported a pre-tax, non-cash $785 million impairment charge. Financing and Capital Structure Many of Kodaks financing decisions are being dictated by its weak financial position. The company is relying on convertible securities and warrants in order to secure debt financing at bearable costs (around 8.5%, Exhibit 19) while giving up significant upside of around 25% of common stock if the company recovers. Equity financing is not an option due to the low market value of Kodaks common stock relative to its operating and financing cash needs. It has decided to cut its dividend and discontinue stock repurchases after spending over $450 million of needed cash in 2008. Valuation Discounted Cash Flow Analysis We valuate Kodaks stock at $5.32. This makes the share price of $4.40 as of 12/11/09 slightly undervalued. The DCF analysis was performed using a two-stage model in which we estimated the cash flows for Kodaks three business segments, CDG, FPEG and GCG, through 2018, and then calculated a terminal value based on assumed long-term growth rates (Exhibits 15). Kodak has re-organized its business segments repeatedly, making it difficult to compare revenues and costs over a long period and establish any significant trend at the segment level. Second, the business is undergoing rapid changes as a result of the technological shift to digital products, which has increased volatility and made it very difficult to establish 7
any kind of even a short-term trend. We ended up using a regression model of Kodaks overall revenues with several factors related to their traditional business segments to predict revenues going forward for GCG and FPEG, which most closely resemble Kodaks traditional combined business lines since 1990 (Exhibit 16). Finally, we believe that our WACC calculation could be undervaluing Kodaks risk based on management expectations for the cost of capital (Kodak, 2009). Exhibit 17 contains a sensitivity table of the stock value based on WACC and long-term growth rates. WACC We estimated a weighted average cost of capital (WACC) of 15.1% for the overall company based on a risk-free rate of 3.2%, and a market risk premium of 7.4%1 (Kavajecz, 2009, p. 19). We calculated Kodaks equity beta of 1.68 from September 2002 through November 2009. We chose this time period to accurately reflect the increased volatility of Kodaks share price relative to the market based on the companys digital transition. We also used industry comparables to estimate the cost of capital for each of Kodaks business units, and then increased them by a factor based on the company WACC, which we assume reflects significant additional risk of bankruptcy as indicated by the stock volatility relative to the S&P 500 (Exhibit 15).
Kodaks Current Marketing Strategy

Consumer Kodak is likely targeting a segment of the consumer market that meets the following criteria: (1) adult, postbaccalaureate, 25-40 years old; (2) active/ involved; (3) caring about relationships (friends & family); (4) nonprofessional, sub-standard skills in photography; (5) high interest in capturing images of life (freeze in time) and sharing those images in digital or printed form. Positioning Kodaks marketing decisions (explained below) imply the following positioning statement: Kodak is preferred by adults who are active, busy and care about meaningful relationships and want to encapsulate and share important moments in their lives, because Kodaks products enable them to capture, share, display, and store pictures and create keepsakes, with more ease than competitors like Canon, Nikon, and Fujifilm.
Risk premium over government bonds: 13.0% - 5.6% = 7.4%
Product Kodak fails to offer clear, distinguishing benefits to consumers. The company attempts to position itself as a provider of user-friendly products, typically offering products whose names include the word easy. However, some of Kodaks product attributes detract from the credibility of this position (Exhibit 2). Other than a long battery life, the Kodak EasyShare M1033 digital camera features few differentiating attributes that appeal to the user-friendly consumer. The Kodak EasyShare 5300 printer has a cumbersome interface and PC Loader tray that lacks built-in networking capability. Kodaks user-friendly position is undermined with products that do not deliver the promised benefit. Kodak develops products quickly due to its competitive environment. A comprehensive program designed to include all desirable features is nearly impossible due to the speed at which the industry evolves. Product types face different risk scenarios depending on their newness to the company and their newness to the market. Digital cameras are familiar to the market and to Kodak. Thus, a line extension of Kodaks digital cameras creates a risk of cannibalization and a lack of incremental sales. Kodaks new approach to printers, with higher upfront costs and lower ink costs, presents different risks. The product type is new to the market and new to the company, representing a new to the world concept. Thus, the product introduction is at risk of a lack of company-market fit. Price Using the economic pricing model (Exhibit 5), a firm strives to deliver products that demand a price premium over its competitors. Based on this, we compared the pricing of Kodaks core consumer products (digital cameras and inkjet printers), and its secondary consumer products (digital picture frames and Kodak Gallery), to the pricing of its direct competitors in each category. In the compact digital camera segment, Kodaks products are generally priced below the products of its most direct competitors of Canon, Nikon, and Fujifilm. For example, Kodak cameras sell in the range of $80 to $160, while cameras offered by the competitors sell in the range of $110 to $500 (Consumers Union of U.S., 2009). This price differential implies that Kodak is suffering from negative price differentiation. While a lower price may offer the benefit of capturing a large portion of the price sensitive consumer, we believe that the lower price signals lower quality to the consumer, when in actuality Kodaks cameras deliver comparable quality to that of its competitors. According to ConsumerReports.org, Kodak holds four of the top twenty-six spots in the point and shoot digital camera category, only behind Canon, which dominates the rankings with nine of the top spotsFujifilm has two cameras ranked in the top twenty-six, while Nikon has zero (Consumers Union of U.S., 2009). As a result, we believe that there is an opportunity for Kodak to raise its prices in this segment. The other consumer products do not suffer from negative price 9
differentiation, and thus we do not believe an opportunity exists to change the pricing of these products (see Exhibit 6 for further discussion on pricing of printers, digital frames, and Kodak Gallery products). Placement Overall, Kodaks placement strategy is similar to that of its competitors, in each of the main consumer product categories. Digital cameras, inkjet printers, and digital picture frames, are typically sold through each companys website, and through all major retailers such as Best Buy, Target, and Wal-Mart, both in stores and online. The photo storage products are all offered exclusively online. Kodaks placement employs wide market coverage because its products are easily accessible to all consumers. It is difficult for Kodak to differentiate itself within the placement component of the marketing framework; however, it is important that it monitors the retailers to ensure both consistency across channels and alignment of objectives between itself and the retailers. Promotion Understanding the consumer Kodaks target consumers have lower levels of expertise than an amateur photographer. They are typically more concerned about the moments captured in pictures and video rather than the art or technical skills required to do so. These consumers will likely look to an expert (or perceived expert) in the field of photography for advice if any questions arise. Thus, the level of involvement of Kodaks consumer tends to be low. While in some cases, consumers may do some research to learn about the product theyre seeking, this type of research is typically shallow in technicalities or details. Once these consumers have learned what brands are reliable, where the best deals are, and how to obtain the product, they are ready to purchase. This is when Kodak must be ready to sell. Marketing objectives Increased sales is the ultimate marketing objective for Kodak. At the same time, Kodaks promotional strategy seems to have more specific goals depending on where the consumer is within the buying process. Prior to purchasing, Kodak wants to represent peace of mind, fun, and overall inspiration (Exhibit 3, figure 8). The following historic taglines are indicative of such intentions: you press the button, we do the rest in 1888 (Kodak, 2009), the Kodak moment, Share Moments, Share Life in 2001, and its most recent campaign Its time to smile (Exhibit 3), which will run for at least one year. These campaigns fit Kodaks aim to offer an easy way for consumers to capture the best moments of their lives. Kodak also appeals to creative consumers who are interested in creating picture books, cards, t-
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shirts, and the like. These additional, creative options entice the consumer to invest more in Kodak products (Exhibit 3, figure 3). Hence, after the first purchase, Kodaks goal is to create a repeat customer. Reseller Analysis The availability of products is vital to Kodaks success. Therefore, Kodak must ensure the consumer is directly connected to preferred retailers whenever they are ready to buy. Unfortunately, that is not always the case in Kodaks current marketing campaign. While Kodak is improving its presence amongst consumers by using several digital initiatives, it is not always clear what is the best way to obtain the products. There is not always a link or message that directs consumers to retailers Kodak prefers. Consequently, consumers interested in purchasing Kodak products may find inconsistent messages while searching for a channel (e.g. prices far lower than Kodak recommends, Exhibit 3, fig. 9). Marketing Communications Kodaks marketing communications today are focused on triggering emotions and presenting an argument in favor of some of its product attributes. The companys latest campaign, Its time to smile, stems from the consumer insight that todays work-life balance and the economic situation have negatively impacted relationships (Exhibit 3); even though, consumers perceive it is easier to connect with friends and family today than it was 5 years ago (thanks to e-mail, cell phones, and social networks) (Kodak, 2009). Kodak seeks to connect with the consumer at an emotional level and encourage them to smile and make others smile all while capturing and sharing their newfound happy moments with Kodak products. However, the company fails to deliver a clear and differentiating promise that resonates with a meaningful number of consumers. Even though Kodaks new integrated marketing campaign is present in all major social media channels (Facebook, Twitter, YouTube) the companys number of followers is significantly lower when compared with those of competitors and other successful brands. On Facebook, as of December 12, 2009, Kodak has 47,342 fans, while Canon and Nikon have 119,165 and 117,574 respectively. The #1 brand on Facebook, Coca-Cola, dwarfs these numbers with over four million fans. Kodak cannot afford to lose in the digital space as social media has the powerful effect of creating communities of ever-growing fans who evangelize the brand all at a relatively low and fixed cost. Without fans, the success of the social media initiative is in danger. For example, assume aggressively that the ideal Kodak consumer spends $200 per year for 20 years in a variety of products totaling $4,000. Also, assume Kodaks contribution margin stays at nearly 25% so each customer is worth $1000 to the company. If an integrated digital 11
campaign of the magnitude that Kodak is implementing costs nearly $10 million per year to maintain, the company will need 10,000 of these consumers to break even (Charlene Li., 2008). At less than 50,000 fans, the conversion rate needed (20%) is quite high, considering that Facebook claims a conversion rate of only 10% for its advertising (Facebook, 2009). Even at a more aggressive conversion rate of 15%, Kodak needs much higher numbers to succeed and be profitable. Currently Kodak does not utilize the services of a celebrity spokesperson. This reduces any risks of brand confusion or poor representation, commonly associated with endorsements. However, Kodak is betting too much on the strength of its brand alone, while competitors enlist the help of famous characters like Ashton Kutcher (Nikon), and Maria Sharapova (Canon) to energize its brand. Promotion Conclusion Overall, there seems to be a lack of buzz, energy, top-of-mind awareness, or fuel behind the Kodak brand. The current marketing campaigns are not driving the number of customers necessary to create the sense of community that Kodak is expecting, nor generating the revenues the company needs to survive.
Recommendations
Kodak fails to position itself as the indisputable solution between todays consumers and their need for connection. Therefore, Kodak must focus on delivering a clearer message, a differentiating promise, and products that meet such a promise. For example: Kodak is the premier provider of imaging solutions that bring your loved ones within arms reach. Additionally, Kodaks marketing campaign should present one path within the imaging process that allows the consumer to process the companys offerings. For instance, prioritize marketing efforts according to the following process (1 = highest priority): (1) take great pictures with Kodak digital cameras, (2) print quality pictures for less with Kodak photo printers (3) store your pictures at the KodakGallery, where you can create unique keepsakes (4) display your pictures in our industry-leading Kodak digital frames. Instead of overwhelming the consumer with all the options Kodak has to offer, focusing the message on one product at a time can be more effective for Kodaks target consumer. We feel that additional emphasis should be placed on digital cameras, with the other productsprinters, frames, and Kodak Gallerysupporting digital cameras as complementary products that round-out the digital imaging experience. Kodaks 120-year history as the premier provider of photography products lends itself to this strategy of emphasizing digital cameras. This focused strategy can be accomplished through changes in each of the components of the marketing framework, while keeping in mind the desired positioning for Kodaks product-line. 12
Because Kodak is targeting the novice photographer segment, it is important that its products incorporate easy-touse attributes and automatic features that deliver high-quality photos. Currently, Kodaks digital cameras compete well on the number of functions offered yet do not necessarily differentiate themselves. The same holds true for the printer category with complaints of complicated interfaces, cumbersome loader trays, and a lack of built-in networking capabilities. Kodak should strive to simplify its products across its entire product line and further educate customers of the easy-to-use features through its marketing campaign. Kodak prices its camera products well below the products of its main competitors. On average, Kodak cameras cost 31%, 132%, and 80% less than products of similar quality in the super-zoom, compact, and subcompact categories, respectively (Exhibit 6) (Consumers Union of U.S., 2009). Kodaks products are consistently ranked comparably to those of the competition. Thus, Kodak should demand similar prices for its products. Kodak should be able to increase its prices by at least 20% on the competitively ranked cameras to signal quality to the consumer without decreasing volumes, thus increasing profitability. This price increase will address the problem Kodak faces with poor gross margins in the CDG segment, and lead this segment towards profitability in the future. Success with an increased pricing strategy is dependent on Kodak effectively communicating the brand quality to the consumer. Kodak is dependent on its resellers to increase awareness and educate the consumers about its products. Kodak should work closely with its main retailers to encourage promotion of its digital product suite consisting of cameras, printers, frames, and Kodak Gallery. Kodak must first educate the retail sales representatives on the features of its products, namely the differentiating features that will focus on the ease-of-use theme. In addition, the products should be placed strategically within the stores, to encourage bundling of the Kodak product-line. In promotions, Kodak needs to improve the level of energy behind the Kodak brand. For this purpose, a celebrity spokesperson could be highly effective. Because Kodaks consumer is relatively low involvement and the market is already cluttered with many reasonable options (Canon, Nikon, Sony, Casio, etc.), a credible spokesperson should serve to hold the consumers hand and guide them to buy Kodak products. The current advertising budget may need to be revised, but an increase is not automatically necessary. Kodak should continue leveraging and improving its presence on the Internet through various digital initiatives. Kodak implementing these recommendations will lead to increased sales and margins and ultimately allow the company to regain its position as a world leader in its industry. 13
Appendix
Exhibit 1 Products Analysis
Digital Cameras Key Attributes Price Mega Pixels Zoom Video Battery Life Image Stabilizer Face Detection Wide Angle Manual Controls Manual Focus Kodak EasyShare M1033 $140 10 3x Yes, with sound 220 Canon Powershot A1100 IS $140 12 4x Yes, with sound 140 shots Meaningfulness to Market/Consumer Consumers value quality products at an affordable price Consumers value digital cameras which capture quality images Consumers value digital cameras which capture quality images Consumers value digital cameras which capture quality video Longer battery life lowers cost and adds convenience, creating value for the consumer Consumers value digital cameras which capture quality images Consumers value digital cameras which are easy to use Consumers value digital cameras which capture quality images Consumers value digital cameras which are easy to use Consumers value digital cameras which are easy to use Point of Differentiation n/a Negative Negative n/a Positive
Yes Yes No No No
Yes Yes No No No
n/a n/a n/a n/a n/a
14
Printers Key Attributes Kodak EasyShare 5300 $199.99 HP Photosmart C6180 300 Meaningfulness to Market/Consumer Point of Differentiation
Price
Consumers value printers which are affordable Consumers value affordable printer ink
Positive
Cheaper Ink
$9.99 for black, $14.99 for color
Presently, ink costs double or more; newly introduced ink costs $14.99 for black, $17.99 for color Marginally Faster
Positive
Printing Speed Built in Networking User Interface Paper printing quality Photo printing quality Hardwarepaper tray newer photos better No
Consumers value fast printers
Negative
Yes
Consumers value printers which are easy to use Consumers value printers which are easy to use Consumers value high quality printers
Negative
Better
Negative
n/a
older photos better
Consumers value high quality printers
n/a
worse
Consumers value printers which are easy to use
Negative
15
Digital Picture Frames Products Compared: Kodak Easyshare 10 W1020 Wireless Digital Frame vs. Sony 10.2 Widescreen LCD Digital Frame Meaningfulness to Market/Consumer Point of Differentiation Does Kodak have Credibility? Yes, because Kodak is known for its innovation and excellence in technology. This is an important attribute of digital frames, and therefore, Kodak should likely address the deficiency vs. the competition
Attribute:
Kodak
Sony
Built-In Wi-Fi Technology
Included
Not included
Important because makes the product more functional and easier to use
Positive
Resolution
800x480
1024 x 600 (better)
Higher resolution is perceived as higher quality
Negative
Source: www.Kodak.com; www.bestbuy.com
Photo Storage Key Attributes
Kodak Gallery Purchase of services necessary
Flickr
Meaningfulness to Market/Consumer Customers value the ability to store photos in a safe and secure way, with ease and at minimum or no cost. ""
Point of Differentiation Negative
Credibility
Price
Free
Requirements
yearly purchase
None
Negative
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Storage Limit
No
Yes
Customers want the ability to store as many pictures as possible so they don't have to delete or move photos
Positive
Kodak is a trusted company so customers believe that they have the ability to offer unlimited storage with no problems
Join Clubs/Groups
No
Yes
Consumers enjoy connecting with others whom share similar interests; provides a sense of community Consumers increasingly use digital camera devices to take videos in addition to photos, so the ability to store videos is valued This allows customers to creatively store and share their photos as keepsakes This feature delivers convenience by allowing users to store, edit, and print photos in one central place
Negative
Video Clips
Yes
No
Positive
Albums/Flipbooks
Yes
No
Positive
Prints and Editing
Yes
No
Positive
Kodak is known for its excellence in photography so customers have confidence in its ability to deliver on these attributes.
Source: www.kodakgallery.com;
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Exhibit 2 Its time to smile Campaign
Figure 1 - Reason for campaign. Source: Kodak.com
Figure 2 - Consumer Insight. Source: Kodak.com
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Figure 3 - Product Portfolio. Source: Kodak.com
Figure 4 - People in need to connect. Source: Kodak.com
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Figure 5 - Connecting with digital camera. Source: Kodak.com
Figure 6 Use of social media
Figure 7 Viral Campaign
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Figure 8 - Video ads for YouTube and TV. Source: YouTube/Kodak
Figure 9 sample banner, no link to purchase. Source: tweetPhoto.com
Figure 10 price advertised on Kodak.com
Figure 11 - Prices of other online retailers
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Exhibit 3 Competitor Endorsements
Figure 12 Ashton Kutche, Nikon
Figure 13 Maria Sharapova
Exhibit 4 Economic Value Pricing

According to the economic value-pricing model, a firms product price is a sum of its reference value and its differentiation value. As such, the reference value for Kodaks products is the price of its competitors comparable products, while differentiation value is the price premium (or discount) captured by Kodaks products due to additional (or fewer) benefits offered, as perceived by the consumer.
Figure 14 - Economic Value Pricing
Exhibit 5 Kodak Product Pricing

Within the all-in-one inkjet printer category, Kodaks prices are slightly higher than those of Hewlett Packard (HP) and Canon, which is consistent with its current campaign to charge a small premium for the printer, while offering the ink at significantly lower prices. In addition, to offset the price premium, Kodak is partnering with retailers such as Best Buy to offer a $50 discount on a printer, when a customer recycles an old printer. The digital picture frame market is highly fragmented with 15 different brands ranked in the top 20 by Consumer Reports (add works cited). Kodaks price range of $60-$230 is consistent with the pricing of other brands. An exception to this is the pricing of Kodaks recently released wireless OLED frame, which demands an extreme price premium, at a price of $999, because it is the only frame offered 22
to the consumer market, using this advanced technology. Kodaks position in the high-end digital frame market is a significant opportunity for the company going forward. Finally, within the photo storage product market, Kodaks prices are consistent with competitors such as Shutterfly and Flickr, with all three offering unlimited storage and 4x6 prints in the $.10-$.15 range. However, Kodak is unique in requiring members to make a minimum annual purchase, depending on the size of their photo storage.
Exhibit 6
Point And Shoot Models: Rankings And Price Compiled from ConsumerReports.org
Super Zoom Models Overall Rank 1 2 4 5 6 7 8 16 21 Price Relative to Kodak 56.00% 120.00% 20.00% 60.00% -4.00% 0.00% 12.00% -8.00% -8.00% -8.00% 120.00% 128.00% 31.00%
Brand Canon Canon Casio Casio Fujifilm Kodak Sony Samsung Olympus
Line PowerShot PowerShot Exilim Exilim Finepix EasyShare Cyber-shot Stylus
Model SX10 IS SX1 IS EX-H10 EX-FH20 F70 EXR Z950 DSC-H20 HZ10W
Family Super zoom Super zoom Super zoom Super zoom Super zoom Super zoom Super zoom Super zoom 9000 Super zoom
Price Score 390 78 550 75 300 73 400 73 240 72 250 72 280 72 230 69 230 68 Max Min Range Avg
Compact Models Overall Rank 3 9 13 18 20 Price Relative to Kodak 242.86% 21.43% 150.00% 0.00% 114.29% 21.43% 242.86% 221.43% 132.14%
Brand Canon Canon Panasonic Kodak Canon
Line PowerShot PowerShot Lumix EasyShare PowerShot
Model G10 A1000 IS DMC-TS1 M1033 D10
Family Compact Compact Compact Compact Compact
Price Score 480 74 170 71 350 70 140 68 300 68 Min Max Range Avg
23
Subcompact Models Overall Rank Price Relative to Kodak 53.85% 84.62% 146.15% 53.85% 0.00% 223.08% 69.23% 153.85% 92.31% -23.08% -30.77% 23.08% 0.00% -23.08% 223.08% 246.15% 79.72%
Brand
Line PowerShot Lumix Finepix Exilim Card PowerShot Cyber-shot PowerShot PowerShot Cyber-shot EasyShare EasyShare
10 Canon 11 Panasonic 12 Fujifilm 14 15 17 19 22 23 24 25 26 27 Casio Canon Sony Canon Canon Sony Samsung Kodak GE Kodak
Model SD1200 IS ELPH DMC-ZR1 F200EXR EX-S12 SX110 IS DSC-G3 SD780 IS ELPH SD980 IS ELPH DSC-T90 SL102 C160 E1250TW M320
Family Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact Subcompact
Price Score 200 240 320 200 250 420 220 330 250 100 90 160 130 71 71 70 69 69 68 68 68 67 67 65 65 65 Min Max Range Avg
24
Exhibit 7 Competitor Business Descriptions2

We chose the following companies as competitors because of the similarities in product type and customer focus. The following ten companies make up the competitor median referenced in the analysis section. Canon Inc. Canon Inc. is a manufacturer of business machines, cameras, and optical and other products. Canon offers business machines including office imaging products, such as office network digital multifunction devices (MFDs), color network digital MFDs, office copying machines and personal-use copying machines; computer peripherals, including laser beam printers, inkjet printers and scanners and business information products, such as personal computers, servers, document scanners, calculators and micrographic equipment. Canon also manufactures and markets digital cameras, film cameras, digital video camcorders, lenses and various camera accessories. Canon's optical and other products mainly include semiconductor production equipment, mirror projection mask aligners for liquid crystal display (LCD) panels, broadcasting equipment, medical equipment, large format printers, and electronic components. On March 31, 2008, it acquired a 24.9% stake in Hitachi Displays, Ltd. For the nine months ended 30 September 2009, CANON INC.'s revenues decreased 27% to Y2.255T. The Company's net income decreased 76% to Y70.08B. Revenues reflect lower sales volume from business machines, cameras and optical & other products business segments. Lower net income also suffers from higher percentage of cost of sales and SGA expense, as well as significantly decreased interest & dividend income. Fujifilm Holdings Corp. FUJIFILM Holdings Corporation is a Japan-based company mainly engaged in the provision of imaging, information and document solutions. The Company operates in three business segments. The Imaging Solution segment offers color films, digital cameras, photo-finishing machines, and color papers, chemical and services for instant printing. The information Solution segment offers medical systems, life-science machinery, graphic system machinery, front panel display materials, recording media, optical devices, electronic components and inkjet materials. The Document Solution segment offers printers, copy machines, production service-related products, paper, consumer goods and others. For the six months ended 30 September 2009, FUJIFILM Holdings Corp.'s revenues decreased 22% to Y1.043T. Net loss totaled Y5.41B, vs. an income of Y45.38B. Revenues reflect decreased sales from all its business segments. The company's net loss also suffers from higher percentage of cost of sales and selling, general & administrative expense, decreases interest & dividend income as well as higher exchange loss. Hewlett-Packard Co. Hewlett-Packard Company is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including the public and education sectors. Its offerings span personal computing and other access devices; imaging and printing-related products and services; enterprise information technology infrastructure, including enterprise storage and server technology and software that optimizes business technology investments, and multi-vendor customer services, including technology support and maintenance, consulting and integration and outsourcing services, as well as application services and business process outsourcing. During the fiscal year ended October 31, 2008, its operations were organized into seven business segments: Enterprise Storage and Servers, HP Services, HP Software, the Personal Systems Group, the Imaging and Printing Group, HP Financial Services and Corporate Investments. For the fiscal year ended 31 October 2009, Hewlett- Packard Company's revenues fell 3% to $114.40B. Revenues reflect a decrease in income from Company's Products & Services. Hewlett-Packard Company is a provider of Products, technologies, software, solutions & services to individual consumers, small & medium-sized businesses & large enterprises, including the public and education sectors. Ricoh Co. Ltd. Ricoh Company, Ltd. (Ricoh) is engaged in the manufacturing of office automation equipment. Ricoh's principal products include copiers (such as plain paper copiers (PPCs)), printers (multi-functional printers (MFPs), laser printers and
2
Source: Reuters
25
GELJET printers), production printing products and facsimile machines. Ricoh is also a manufacturer of digital and advanced electronic devices such as semiconductor devices. Ricoh supports its office and production printing equipment businesses by offering customers various solution systems that work with personal computers (PC) and servers, and related product support and after-sales services to assist customers in utilizing the Ricoh products that they purchase. Ricoh also offers various supplies and peripheral products to be used with its products and systems. Ricoh operates in three segments: Imaging and Solutions, Industrial Products and Other. In August 2008, Ricoh Elemex Corporation becomes a wholly owned subsidiary of the Company. For the six months ended 30 September 2009, RICOH COMPANY,LTD.'s revenues decreased 7% to Y988.79B. The Company's net income decreased 95% to Y1.81B. Revenues reflect lower sales from image & solution, industrial and other business segments due to unfavorable business environment. Net income also suffers from higher percentage of selling, general & admin expenses, as well as increased interest expenses. Sony Corp. Sony Corporation (Sony) is engaged in the development, design, manufacture and sale of various kinds of electronic equipment, instruments and devices. Sony operates in five segments: Electronics, which develops, designs, manufactures and sells electronic equipment, instruments and devices for consumer and professional markets; Games, in which Sony Computer Entertainment Inc. (SCEI) develops, produces, markets and distributes PlayStation 2 (PS2), PSP (PlayStation Portable) (PSP) and PLAYSTATION 3 (PS3) hardware and related software; Pictures, which encompasses motion picture production and distribution, television production and distribution, and digital content creation and distribution; Financial Services, which includes the activities of Sony Financial Holdings Inc. (SFH), and All Other, which comprises Sony Music Entertainment (SME) and Sony Music Entertainment (Japan) Inc. (SMEJ). On October 1, 2008, it acquired Bertelsmann's 50% interest in SONY BMG MUSIC ENTERTAINMENT (SONY BMG). For the six months ended 30 September 2009, SONY CORPORATION's revenues decreased 20% to Y3.261T. Net loss totaled Y63.40B, vs. an income of Y55.79B. Revenues reflect decreased sales volume from United States and Europe markets. The Company's net loss also suffers from higher percentage of selling, general and administration expenses, increased interest expenses, as well as decreased interest & dividend income. Xerox Corp. Xerox Corporation (Xerox) is engaged in developing, manufacturing, marketing, servicing and financing a range of document equipments, software, solutions and services. Digital systems include printing and publishing systems; digital presses, advanced and basic multifunctional devices (MFD's), which can print, copy, scan and fax; digital copiers; laser and solid ink printers, and fax machines. The Company provides software and workflow solutions with which businesses can print books, create personalized documents for their customers, and scan and route digital information. Xerox also offers software, support and supplies, such as toner, paper and ink. The Company operates in three business segments: production, office and other. During the year ended December 31, 2008, the Company completed the acquisition of Veenman B.V. (Veenman) and Global Imaging Systems, Inc. (GIS). For the nine months ended 30 September 2009, Xerox Corporation's revenues decreased 17% to $10.96B. Net income increased 33% to $305M. Revenue reflects a decrease in revenues from production, office and other segments. Net income reflects a decrease in cost of sales & services, lower equipment financing interest, a decrease in selling, administrative & general expenses and lower litigation charges. Nikon Corp. NIKON CORPORATION is a Japan-based company mainly engaged in the manufacture and sale of optical products. The Company is active in four business segments. The Precision Apparatus segment offers semiconductor exposure apparatus and liquid crystal (LC) exposure apparatus. The image segment provides digital cameras, film cameras and interchangeable lens. The Instruments segment offers microscopes, measuring machines and semiconductor inspection equipment. The Others segment provides glass materials, telescopes, glasses and survey airplanes. The Company has 65 subsidiaries and 10 associated companies in the country and overseas markets. As of August 19, 2009, the Company held 26
a 92.17% stake in Metis NV. For the six months ended 30 September 2009, NIKON CORPORATION's revenues decreased 24% to Y368.09B. The Company's net loss totaled Y17.67B, vs. an income of Y33.62B. Revenues reflect lower sales from precision equipment business and imaging product business. Net loss also suffers from higher percentage of cost of sales and SGA expense, significantly increased exchange loss, as well as the presence of Y1.35B loss on business reorganization. Olympus Corp. OLYMPUS CORPORATION is a Japan-based manufacturer engaged in five main business segments. Its Imaging segment offers digital cameras, film cameras and voice recorders. The Medical segment offers medical endoscopes, surgical endoscopes, endoscope disposal equipment and ultrasonic endoscopes. The Life Science segment offers clinical hemanalysis systems, biological microscopes and industrial microscopes. The Information Communication segment sells semiconductor-related equipment, electronic machines, network systems an d mobile terminals, such as cellular phones, as well as provides mobile solutions and mobile contents services. The Others segment offers industrial endoscopes, nondestructive inspection equipment, printers and bar code scanners, as well as develops systems. In August 2009, the Company transferred its analytical instrumentation business to its wholly owned subsidiary, which has been engaged in the manufacturing and sale of clinical laboratory examination equipment. For the six months ended 30 September 2009, OLYMPUS CORPORATION's revenues decreased 19% to Y435.42B. The Company's net income totaled Y36.19B, up from Y3.60B. Revenues reflect lower sales from imaging, medical and life science business segments. Net income benefits from a lower percentage of SG&A expenses, decreased foreign exchange losses, and the presence of Y46.27B gains on transfer of business. Lexmark International Inc. Lexmark International, Inc.(Lexmark) is engaged in developing, manufacturing and supplying printing and imaging solutions for offices and homes. Its products include laser printers, inkjet printers, multifunction devices, and associated supplies, services and solutions. Lexmark develops and owns the technology for its laser and inkjet products and related solutions. Lexmark also sells dot matrix printers for printing single and multi-part forms by business users. The Company operates in the office products industry. The Company is primarily managed along divisional lines: the Printing Solutions and Services Division and the Imaging Solutions Division. Lexmark's products are sold in more than 150 countries in North and South America, Europe, the Middle East, Africa, Asia, the Pacific Rim and the Caribbean. For the nine months ended 30 September 2009, Lexmark International, Inc.'s revenues decreased 19% to $2.81B. Net income decreased 61% to $86.2M. Revenues reflect a decrease in income from sales volume of the Company. Net income also reflects decreased operating margin, an increase in restructuring & related charges, the presence of net impairment losses on securities and the presence of interest expense net vs. an interest income net. Seiko Epson Corp. SEIKO EPSON CORPORATION is a Japan-based company primarily involved in the development, manufacture and sale of information equipment, electronic devices and precision equipment. The Company operates in four business segments. The Information Equipment segment offers printers, liquid crystal display (LCD) projectors and personal computers, among others. The Electronic Devices segment provides thin-film transistor (TFT) LCD panels, crystal devices and semiconductors. The Precision Equipment segment offers watches and plastic lens under the brand name Seiko, as well as factory automation (FA) equipment. The Others segment is engaged in the distribution and transportation services, the provision of maintenance services for facilities, as well as the insurance agency and travel agency businesses. For the six months ended 30 September 2009, Seiko Epson Corporation's revenues decreased 27% to Y449.63B. The Company's net loss totaled Y29.19B, vs. an income of Y11.72B. Revenues reflect lower sales especially from electronic device business segment. Net loss also suffers from a higher percentage of selling, general & administrative expenses, as well as the presence of Y2.42B impairment losses.
27
Exhibit 8 Profitability Scenario Analysis
28
29
Exhibit 9: Comparison of accounting methods

International Comparison of Accounting Standards-Overview of Major Japanese GAAP, IAS/IFRS, and US GAAP
Accounting Standards Items Measurement of securities Estimating potential credit losses/impairment Financial Instruments Derecognition of financial assets Measurement of derivatives Hedge accounting Basic method Business Combinations Pooling of interests method Goodwill Grouping Indication of impairment Impairment of Assets Recognition test Measurement Reversal of impairment losses Recognition of liability Retirement benefits Actuarial gains/losses Recognition of additional minimum liability Income Taxes Research & Development Consolidated Financial Statements Investment Property Basic method Recording of deferred tax assets Development costs Scope of subsidiaries Presentation of minority interests Measurement Japanese GAAP Fair value or amortized cost (bonds) depending on category Discounted future cash flows Legal isolation required (financialcomponent approach) Fair value When hedging criteria are met Purchase method Exceptionally used only when strict criteria are met Strictly amortized with impairment Lowest level (smallest identifiable group of assets) for which cash flows are largely independent of cash flows of other assets Assessed Undiscounted future cash flows Recoverable amount (higher of net selling price and value in use) Prohibited Retirement benefit obligation adjusted for unrecognized actuarial gains/losses and past service cost, minus plan assets Strictly amortized without corridor Not recognized Asset liability method Based on recoverability/realizability Expensed when incurred Based on control Between liability and equity Cost IAS/IFRS Fair value or amortized cost (bonds) depending on category Discounted future cash flows Legal isolation not required (primarily risks and rewards approach) Fair value When hedging criteria are met Purchase method Purchase method only Not amortized, impairment only Lowest level (smallest identifiable group of assets) for which cash flows are largely independent of cash flows of other assets Assessed Recoverable amount (higher of net selling price and value in use) Recoverable amount (higher of net selling price and value in use) Reversed (excluding goodwill) Retirement benefit obligation adjusted for unrecognized actuarial gains/losses and past service cost, minus plan assets Corridor amortization Not recognized Asset liability method Based on recoverability/realizability Capitalized Based on control Equity Fair value or cost US GAAP Fair value or amortized cost (bonds) depending on category Discounted future cash flows Legal isolation required (financialcomponent approach) Fair value When hedging criteria are met Purchase method Purchase method only Not amortized, impairment only Lowest level (smallest identifiable group of assets) for which cash flows are largely independent of cash flows of other assets Assessed Undiscounted future cash flows Fair value Prohibited Retirement benefit obligation adjusted for unrecognized actuarial gains/losses and past service cost, minus plan assets Corridor amortization Unfunded accumulated benefit obligations Asset liability method Based on recoverability/realizability Expensed when incurred Based on majority voting interest Between liability and equity (under deliberation to change to equity Generally cost Indicates inconsistency
Source: IASplus.com
30
Exhibit 10: Operating cost breakdown

Operating costs as % of sales (ex-restructuring/other) FY08 FY07 FY06 22% 22% 23% Kodak 35% 33% 33% Canon 35% 32% 32% FujiFilm 31% 28% 27% Nikon SG&A (ex-advertising) as % of sales FY08 13.1% Kodak 23.3% Canon 26.6% FujiFilm 15.2% Nikon Advertising costs as % of sales FY08 3.7% Kodak 2.8% Canon 1.0% FujiFilm 8.5% Nikon R/D costs as % of sales FY08 5.3% Kodak 9.1% Canon 7.9% FujiFilm 7.0% Nikon Restructuring costs as % of sales FY08 1.5% Kodak 0.0% Canon 0.0% FujiFilm 0.0% Nikon FY05 24% 33% 33% 27% FY04 25% 34% 32% 28% FY03 25% 36% 33% 31% FY02 25% 36% 33% 34% FY01 25% 34% 32%
FY07 13.3% 22.1% 24.7% 14.2%
FY06 15.0% 22.3% 24.8% 14.7%
FY05 15.1% 22.5% 24.6% 15.3%
FY04 14.7% 22.6% 23.6% 16.1%
FY03 14.9% 24.9% 24.0% 18.7%
FY02 14.5% 25.5% 24.3% 20.6%
FY01 14.5% 24.5% 24.2%
FY07 3.8% 3.0% 1.0% 7.9%
FY06 3.0% 2.8% 1.3% 7.0%
FY05 3.4% 2.8% 1.5% 6.4%
FY04 3.8% 3.2% 1.9% 6.7%
FY03 4.5% 3.1% 1.8% 6.1%
FY02 4.9% 2.4% 2.1% 7.1%
FY01 4.8% 2.3% 2.2%
FY07 5.2% 8.2% 6.6% 6.1%
FY06 5.3% 7.4% 6.4% 5.7%
FY05 5.9% 7.6% 6.8% 5.1%
FY04 6.3% 7.9% 6.6% 5.3%
FY03 5.6% 8.1% 6.8% 6.0%
FY02 5.9% 7.9% 6.3% 5.9%
FY01 5.9% 7.5% 6.1%
FY07 5.3% 0.0% 0.0% 0.1%
FY06 3.5% 0.0% 3.4% 0.2%
FY05 4.8% 0.0% 3.2% 0.0%
FY04 5.1% 0.0% 0.0% 0.0%
FY03 3.6% 0.0% 0.0% 0.0%
FY02 0.8% 0.0% 0.0% 0.0%
FY01 5.0% 0.0% 0.0% 0.0%
Source: Company reports, Factset Fundamentals
31
Exhibit 11 - Cash Conversion Cycle

Days of Sales Outstanding (DSO) Eastman Kodak Co. Canon Inc. FUJIFILM Holdings Corp. Hewlett-Packard Co. Ricoh Co. Ltd. Sony Corp. Xerox Corp. Nikon Corp. Olympus Corp. Lexmark International Inc. Seiko Epson Corp. Mean EK (+/-) Median EK (+/-) Days of Inventory on Hand (DIO) Eastman Kodak Co. Canon Inc. FUJIFILM Holdings Corp. Hewlett-Packard Co. Ricoh Co. Ltd. Sony Corp. Xerox Corp. Nikon Corp. Olympus Corp. Lexmark International Inc. Seiko Epson Corp. 3 Yr Avg 72 days 63 days 77 days 73 days 115 days 51 days 117 days 62 days 61 days 45 days 56 days 72 days 0 days 63 days 10 days 3 Yr Avg 48 days 94 days 89 days 37 days 54 days 55 days 46 days 183 days 61 days 48 days 64 days FY08 71 days 62 days 80 days 72 days 120 days 48 days 108 days 56 days 64 days 41 days 51 days 70 days 0 days 64 days 6 days FY08 48 days 92 days 95 days 32 days 57 days 60 days 44 days 172 days 68 days 55 days 71 days FY07 82 days 64 days 77 days 70 days 114 days 53 days 112 days 58 days 61 days 43 days 54 days 72 days 10 days 64 days 17 days FY07 50 days 92 days 87 days 36 days 53 days 60 days 44 days 169 days 59 days 50 days 66 days FY06 75 days 62 days 77 days 72 days 117 days 51 days 116 days 62 days 61 days 44 days 59 days 72 days 2 days 62 days 12 days FY06 50 days 89 days 87 days 38 days 53 days 54 days 46 days 179 days 54 days 46 days 66 days FY05 68 days 63 days 75 days 74 days 120 days 50 days 120 days 64 days 58 days 49 days 58 days 73 days -5 days 64 days 4 days FY05 47 days 95 days 87 days 38 days 55 days 51 days 47 days 189 days 58 days 44 days 59 days FY04 67 days 62 days 77 days 78 days 105 days 53 days 128 days 69 days 59 days 47 days 57 days 73 days -6 days 67 days 0 days FY04 43 days 100 days 87 days 39 days 54 days 48 days 46 days 205 days 68 days 47 days 60 days FY03 63 days 61 days 75 days 70 days 86 days 50 days 132 days 79 days 62 days 47 days 54 days 71 days -7 days 63 days 0 days FY03 44 days 103 days 85 days 40 days 52 days 47 days 49 days 244 days 91 days 48 days 61 days FY02 65 days 59 days 77 days 60 days 90 days 53 days 133 days 79 days 63 days 55 days 62 days 72 days -7 days 63 days 2 days FY02 49 days 104 days 88 days 48 days 57 days 46 days 54 days 258 days 103 days 53 days 68 days FY01 69 days 59 days 85 days 61 days 93 days 59 days 142 days 90 days 62 days 57 days 78 days -9 days 66 days 3 days FY01 60 days 106 days 93 days 59 days 64 days 55 days 73 days 243 days 118 days 56 days -
Mean 71 days 72 days 70 days 69 days 70 days 73 days 79 days 84 days 92 days EK (+/-) -23 days -24 days -19 days -19 days -23 days -29 days -35 days -35 days -32 days Median 55 days 60 days 59 days 54 days 55 days 54 days 52 days 57 days 68 days EK (+/-) -7 days -12 days -9 days -3 days -8 days -10 days -9 days -8 days -8 days Days of Payables Outstanding (DPO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 Eastman Kodak Co. 67 days 123 days 108 days 38 days 33 days 33 days 32 days 31 days 31 days Canon Inc. 86 days 79 days 84 days 85 days 92 days 91 days 94 days 90 days 90 days FUJIFILM Holdings Corp. 74 days 68 days 73 days 72 days 75 days 84 days 81 days 74 days 71 days Hewlett-Packard Co. 55 days 52 days 55 days 58 days 53 days 56 days 55 days 47 days 48 days Ricoh Co. Ltd. 105 days 95 days 103 days 107 days 111 days 109 days 104 days 103 days 107 days Sony Corp. 116 days 111 days 120 days 117 days 116 days 117 days 113 days 112 days 113 days Xerox Corp. 43 days 48 days 45 days 43 days 42 days 39 days 36 days 32 days 32 days Nikon Corp. 110 days 99 days 110 days 110 days 112 days 118 days 126 days 105 days 115 days Olympus Corp. 55 days 50 days 54 days 55 days 53 days 61 days 76 days 75 days 78 days Lexmark International Inc. 65 days 73 days 67 days 62 days 63 days 59 days 48 days 47 days 52 days Seiko Epson Corp. 44 days 39 days 43 days 44 days 44 days 50 days 47 days 47 days Mean EK (+/-) Median EK (+/-) Cash Conversion Cycle Eastman Kodak Co. Canon Inc. FUJIFILM Holdings Corp. Hewlett-Packard Co. Ricoh Co. Ltd. 75 days 76 days -7 days 47 days 67 days 73 days 0 days 50 days 3 Yr Avg FY08 FY07 53 days -5 days 24 days 70 days 76 days 72 days 91 days 107 days 91 days 55 days 52 days 52 days 65 days 82 days 65 days 78 days 30 days 73 days 35 days FY06 87 days 67 days 92 days 51 days 63 days 72 days -34 days 62 days -24 days FY05 81 days 66 days 87 days 59 days 64 days 72 days -39 days 63 days -30 days FY04 77 days 70 days 80 days 61 days 50 days 74 days -41 days 61 days -28 days FY03 75 days 70 days 79 days 55 days 34 days 74 days -42 days 76 days -45 days FY02 83 days 73 days 91 days 61 days 44 days 69 days 74 days -38 days -42 days 74 days 74 days -43 days -43 days FY01 98 days 74 days 107 days 73 days 50 days
32
Sony Corp. Xerox Corp. Nikon Corp. Olympus Corp. Lexmark International Inc. Seiko Epson Corp. Mean EK (+/-) Median EK (+/-)
-11 days 119 days 135 days 68 days 28 days 76 days 68 days -15 days 68 days -15 days
-12 days 119 days 132 days 60 days 28 days 81 days 70 days 17 days 67 days 20 days
-14 days 155 days 231 days 90 days 61 days 83 days 87 days -4 days 83 days 0 days
1 days 183 days 218 days 102 days 61 days
97 days 1 days 86 days 12 days
33
Exhibit 12 EK Pro Forma Financial Statements

EK Financial Statement projections - Continuing Operations (Fiscal year ends 12/31) Revenue COGS Gross Profit SG&A (excl. Advertising) Advertising R&D EBIT D&A EBITDA NOPAT (EBIT * (1-tax)) D&A Restructuring (after tax) Cap-Ex Free Cash Flow (excl dividends) Margin Analysis Gross Margin SG&A margin R&D margin EBIT margin EBITDA margin 2006 $10,568.0 7,825.0 2,743.0 1,567.0 366.0 578.0 232.0 1,195.0 1,427.0 191.4 1,195.0 618.8 335.0 $432.7 2007 $10,301.0 7,628.0 2,673.0 1,378.0 394.0 549.0 352.0 785.0 1,137.0 290.4 785.0 547.0 259.0 $269.4 2008 $9,416.0 7,275.0 2,141.0 1,236.0 350.0 501.0 54.0 500.0 554.0 44.6 500.0 122.9 254.0 $167.6 2009E* $7,434.2 6,037.3 1,396.8 970.3 254.8 364.0 (192.3) 470.2 277.9 (158.6) 470.2 133.4 254.0 ($75.8) 2010E $8,125.1 6,221.7 1,903.4 1,063.0 273.9 395.2 171.3 448.1 619.4 141.3 448.1 121.9 254.0 $213.5 2011E $8,133.3 6,128.4 2,005.0 1,059.4 283.1 400.7 261.8 430.2 692.0 216.0 430.2 116.7 254.0 $275.5 2012E $7,912.6 5,964.2 1,948.4 1,023.3 289.2 397.9 238.0 416.2 654.2 196.4 416.2 114.2 254.0 $244.3 2013E $7,622.6 5,725.9 1,896.7 977.2 294.7 392.5 232.3 407.2 639.5 191.6 407.2 113.0 254.0 $231.8 2014E $7,314.5 5,470.4 1,844.1 928.5 300.1 386.7 228.9 399.7 628.6 188.8 399.7 112.4 254.0 $222.1 2015E $7,001.6 5,207.4 1,794.2 879.1 305.3 380.6 229.1 393.5 622.6 189.0 393.5 112.1 254.0 $216.4 2016E $6,706.0 4,953.4 1,752.6 831.9 311.4 375.4 233.9 388.5 622.4 193.0 388.5 112.0 254.0 $215.5 2017E $6,430.5 4,709.9 1,720.6 787.3 318.2 371.3 243.8 384.6 628.3 201.1 384.6 111.9 254.0 $219.8 2018E $6,179.0 4,479.6 1,699.4 745.9 325.8 368.4 259.4 381.7 641.1 214.0 381.7 111.9 254.0 $229.8
26.0% 18.3% 5.5% 2.2% 11.3%
25.9% 17.2% 5.3% 3.4% 7.6%
22.7% 16.8% 5.3% 0.6% 5.3%
18.8% 16.5% 4.9% -2.6% 6.3%
23.4% 16.5% 4.9% 2.1% 5.5%
24.7% 16.5% 4.9% 3.2% 5.3%
24.6% 16.6% 5.0% 3.0% 5.3%
24.9% 16.7% 5.1% 3.0% 5.3%
25.2% 16.8% 5.3% 3.1% 5.5%
25.6% 16.9% 5.4% 3.3% 5.6%
26.1% 17.0% 5.6% 3.5% 5.8%
26.8% 17.2% 5.8% 3.8% 6.0%
27.5% 17.3% 6.0% 4.2% 6.2%
Key Assumptions: * 2009 assumptions are based on results through Q3 2009 with a seasonality uptick for the fourth quarter. Key cash flow assumptions stated for segments below. Note that these are pro forma numbers and there might be immaterial differences with the aggregated segments due to slightly different treatment of Other income and expense items.
34
Exhibit 13 CDG Pro Forma Financial Statements

Consumer Digital Imaging Group (CDG) - Continuing Operations (Fiscal year ends 12/31) Revenue COGS Gross Profit SG&A (excl. Advertising) Advertising R&D EBIT D&A EBITDA NOPAT (EBIT * (1-tax)) D&A Restructuring (after tax) Cap-Ex Free Cash Flow Margin Analysis Gross Margin SG&A margin (incl. Advertising) R&D margin EBIT margin EBITDA margin 2006 3,013.0 2,491.2 521.8 378.8 219.6 281.0 (357.6) 188.0 (169.6) (295.1) 188.0 82.7 102.0 (291.7) 2007 3,247.0 2,419.0 828.0 358.6 236.4 250.0 (17.0) 92.0 75.0 (14.0) 92.0 53.6 94.0 (69.7) 2008 3,088.0 2,495.0 593.0 345.0 210.0 215.0 (177.0) 105.0 (72.0) (146.0) 105.0 34.7 96.0 (171.7) 2009E* 2,390.1 2,007.7 382.4 267.0 167.3 166.4 (218.3) 94.5 (123.8) (180.1) 94.5 38.1 100.1 (223.8) 2010E 2,525.1 2,020.1 505.0 282.1 176.8 175.8 (129.7) 89.8 (39.9) (107.0) 89.8 34.3 104.3 (155.8) 2011E 2,695.9 2,048.8 647.0 301.2 188.7 187.7 (30.6) 87.5 56.9 (25.2) 87.5 32.6 108.8 (79.1) 2012E 2,886.2 2,193.5 692.7 322.5 202.0 200.9 (32.8) 87.5 54.8 (27.0) 87.5 31.8 113.4 (84.7) 2013E 3,085.4 2,322.7 762.7 344.7 216.0 214.8 (12.8) 91.3 78.5 (10.6) 91.3 31.4 118.2 (68.9) 2014E 3,289.9 2,452.2 837.7 367.6 230.3 229.1 10.8 95.1 105.9 8.9 95.1 31.2 123.3 (50.4) 2015E 3,493.0 2,576.9 916.0 390.2 244.5 243.2 38.1 99.2 137.3 31.4 99.2 31.1 128.5 (29.0) 2016E 3,705.3 2,704.4 1,000.9 414.0 259.4 258.0 69.6 103.4 173.0 57.4 103.4 31.0 134.0 (4.2) 2017E 3,926.4 2,834.0 1,092.4 438.7 274.9 273.4 105.5 107.8 213.3 87.1 107.8 31.0 139.7 24.2 2018E 4,153.6 2,963.3 1,190.3 464.1 290.8 289.2 146.3 112.4 258.7 120.7 112.4 31.0 145.6 56.5
17.3% 19.9% 9.3% -11.9% -5.6%
25.5% 18.3% 7.7% -0.5% 2.3%
19.2% 18.0% 7.0% -5.7% -2.3%
16.0% 18.2% 7.0% -9.1% -5.2%
20.0% 18.2% 7.0% -5.1% -1.6%
24.0% 18.2% 7.0% -1.1% 2.1%
24.0% 18.2% 7.0% -1.1% 1.9%
24.7% 18.2% 7.0% -0.4% 2.5%
25.5% 18.2% 7.0% 0.3% 3.2%
26.2% 18.2% 7.0% 1.1% 3.9%
27.0% 18.2% 7.0% 1.9% 4.7%
27.8% 18.2% 7.0% 2.7% 5.4%
28.7% 18.2% 7.0% 3.5% 6.2%
Key Assumptions: Sales for CDG follow are 1.5x CBO GDP projections. (Congressional Budget Office)
35
Exhibit 14 FPEG Pro Forma Financial Statements

Film, Photofinishing and Entertainment Group (FPEG) - Continuing Operations (Fiscal year ends 12/31) Revenue COGS Gross Profit SG&A (excl. Advertising) Advertising R&D EBIT D&A EBITDA NOPAT (EBIT * (1-tax)) D&A Restructuring (after tax) Cap-Ex FCF Margin Analysis Gross Margin SG&A margin (incl. Advertising) R&D margin EBIT margin EBITDA margin 2006 4,254.0 2,853.8 1,400.2 509.5 128.1 33.0 729.6 498.0 1,227.6 602.0 1,195.0 70.0 56.0 974.0 2007 3,632.0 2,771.0 861.0 382.1 137.9 60.0 281.0 379.0 660.0 231.8 785.0 45.4 65.0 500.5 2008 2,987.0 2,335.0 652.0 281.5 122.5 52.0 196.0 193.0 389.0 161.7 500.0 29.7 40.0 285.0 2009E* 2,456.5 1,965.2 491.3 231.5 74.0 42.8 143.1 173.7 316.8 118.0 470.2 32.7 36.4 222.6 2010E 2,727.7 2,100.3 627.4 257.1 82.1 47.5 240.7 156.3 397.0 198.6 448.1 29.4 38.5 287.0 2011E 2,648.4 2,039.3 609.1 249.6 79.8 46.1 233.7 140.7 374.4 192.8 430.2 27.9 37.9 267.7 2012E 2,448.0 1,884.9 563.0 230.7 73.7 42.6 216.0 126.6 342.6 178.2 416.2 27.2 36.5 241.1 2013E 2,209.3 1,701.2 508.1 208.2 66.5 38.5 194.9 114.0 308.9 160.8 407.2 26.9 34.7 213.2 2014E 1,959.4 1,508.7 450.7 184.7 59.0 34.1 172.9 102.6 275.5 142.6 399.7 26.7 32.7 185.7 2015E 1,707.7 1,314.9 392.8 160.9 51.4 29.7 150.7 92.3 243.0 124.3 393.5 26.6 30.6 159.4 2016E 1,460.0 1,124.2 335.8 137.6 44.0 25.4 128.8 83.1 211.9 106.3 388.5 26.6 28.4 134.4 2017E 1,217.8 937.7 280.1 114.8 36.7 21.2 107.5 74.8 182.2 88.7 384.6 26.6 26.0 110.8 2018E 984.4 758.0 226.4 92.8 29.6 17.1 86.9 67.3 154.2 71.7 381.7 26.6 23.6 88.8
32.9% 15.0% 0.8% 17.2% 28.9%
23.7% 14.3% 1.7% 7.7% 18.2%
21.8% 13.5% 1.7% 6.6% 13.0%
20.0% 12.4% 1.7% 5.8% 12.9%
23.0% 12.4% 1.7% 8.8% 14.6%
23.0% 12.4% 1.7% 8.8% 14.1%
23.0% 12.4% 1.7% 8.8% 14.0%
23.0% 12.4% 1.7% 8.8% 14.0%
23.0% 12.4% 1.7% 8.8% 14.1%
23.0% 12.4% 1.7% 8.8% 14.2%
23.0% 12.4% 1.7% 8.8% 14.5%
23.0% 12.4% 1.7% 8.8% 15.0%
23.0% 12.4% 1.7% 8.8% 15.7%
36
Exhibit 15 GCG Pro Forma Financial Statements

Graphic Communications Group (GCG) - Continuing Operations (Fiscal year ends 12/31) Revenue COGS Gross Profit SG&A (excl. Advertising) Advertising R&D EBIT D&A EBITDA NOPAT (EBIT * (1-tax)) D&A Restructuring (after tax) Cap-Ex FCF Margin Analysis Gross Margin SG&A margin (incl. Advertising) R&D margin EBIT margin EBITDA margin 2006 3,287.0 2,480.0 807.0 678.7 18.3 200.0 (90.0) 221.0 131.0 (74.3) 221.0 31.4 142.0 (26.6) 2007 3,413.0 2,438.0 975.0 637.3 19.7 214.0 104.0 195.0 299.0 85.8 195.0 47.9 98.0 135.0 2008 3,334.0 2,445.0 889.0 609.5 17.5 231.0 31.0 193.0 224.0 25.6 193.0 40.4 118.0 60.2 2009E* 2,580.5 2,064.4 516.1 471.8 13.5 154.8 (124.0) 193.0 69.0 (102.3) 193.0 44.5 104.7 (58.5) 2010E 2,865.3 2,101.3 764.0 523.8 15.0 171.9 53.2 193.0 246.2 43.9 193.0 40.0 104.7 92.2 2011E 2,782.1 2,040.2 741.8 508.6 14.6 166.9 51.7 193.0 244.7 42.7 193.0 38.0 104.7 93.0 2012E 2,571.5 1,885.8 685.7 470.1 13.5 154.3 47.8 193.0 240.8 39.4 193.0 37.1 100.7 94.7 2013E 2,320.8 1,702.0 618.8 424.3 12.2 139.2 43.1 193.0 236.1 35.6 193.0 36.6 95.8 96.2 2014E 2,058.3 1,509.4 548.8 376.3 10.8 123.5 38.3 193.0 231.3 31.6 193.0 36.4 90.4 97.8 2015E 1,793.9 1,315.6 478.3 327.9 9.4 107.6 33.3 193.0 226.3 27.5 193.0 36.3 84.6 99.7 2016E 1,533.7 1,124.7 409.0 280.4 8.1 92.0 28.5 193.0 221.5 23.5 193.0 36.2 78.4 101.9 2017E 1,279.3 938.2 341.1 233.9 6.7 76.8 23.8 193.0 216.8 19.6 193.0 36.2 71.9 104.5 2018E 1,034.0 758.3 275.7 189.0 5.4 62.0 19.2 193.0 212.2 15.9 193.0 36.2 65.0 107.7
24.6% 21.2% 6.1% -2.7% 4.0%
28.6% 19.2% 6.3% 3.0% 8.8%
26.7% 18.8% 6.9% 0.9% 6.7%
20.0% 18.8% 6.0% -4.8% 2.7%
26.7% 18.8% 6.0% 1.9% 8.6%
26.7% 18.8% 6.0% 1.9% 8.8%
26.7% 18.8% 6.0% 1.9% 9.4%
26.7% 18.8% 6.0% 1.9% 10.2%
26.7% 18.8% 6.0% 1.9% 11.2%
26.7% 18.8% 6.0% 1.9% 12.6%
26.7% 18.8% 6.0% 1.9% 14.4%
26.7% 18.8% 6.0% 1.9% 16.9%
26.7% 18.8% 6.0% 1.9% 20.5%
37
Exhibit 16 Segment Valuations and Key Assumptions

Business Segment Long-term growth rate CDG 2.5% Grows slightly less than overall economy. Reflects transition to digital products and increased adoption of cell phones as primary cameras. FPEG 0.0% Traditional business slowly being replaced by digital filming techniques. Kodak is involved in these business lines because they make sensors for cameras, but long-term we do not believe there will be any growth in this business. GCG 2.5% There will always be a need for commercial printing, but the business should grow at a slower rate than the overall economy, which we are assuming to grow at a long-term rate of 3% Combined 1.50% Weighted average based on current assets.
Reasoning
Total Shares Outstanding for EK Scenario 1 - No restructuring, gross debt WACC (levered) Value Value per Share Scenario 2 - No restructuring, net debt WACC (levered) Value Value per Share Scenario 3 - Restructuring, gross debt WACC (levered) Value Value per Share Scenario 4 - Restructuring, net debt WACC (levered) Value Value per Share
268.19
268.19
268.19
268.19
15.8% (148.0) ($0.55)
12.5% 1,508.1 $5.62
12.8% 952.2 $3.55
13.5% 2,312.3 $8.62
17.7% (149.9) ($0.56)
14.0% 1,392.4 $5.19
14.4% 847.7 $3.16
15.1% 2,090.2 $7.79
15.8% (324.9) ($1.21)
12.5% 1,265.9 $4.72
12.8% 649.2 $2.42
13.5% 1,590.2 $5.93
17.7% (312.5) ($1.17)
14.0% 1,167.3 $4.35
14.4% 571.7 $2.13
15.1% 1,426.5 $5.32
Scenario 5 - Management Guidance WACC WACC (levered) Value Value per Share
A5 stock valuation
23.0% (293.8) ($1.10) 18.2% 959.2 $3.58 18.7% 423.0 $1.58 19.6% 1,088.4 $4.06
38
Exhibit 17 Regression Analysis of Traditional Sales Lines

We performed a regression analysis of Kodak using data on magazine and newspaper circulation, internet users, and GDP. We were not able to generate any meaningful regression results by looking at individual segments because of Kodaks continuous reorganizations. The data sets were chosen because they show clear trends that can be projected forward and relate directly to Kodaks customers, except for internet users, which we picked as a general proxy for the transition from traditional imaging and media to digital. People do not buy printers and digital cameras unless they have a computer.
Magazines
400 350 300 Millions 250 200 150 100 50 0 1985 1990 1995 Year 2000 2005 2010 Subscription Single Copy Total
(Magazine Publishers of America)
39
U.S. Newspaper Circulation (000's)

70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1990 1995 2000 2005
(Newspaper Association of America)
Total Newspapers
920 918 916 914 912 910 908 906 904 902 900 1998 2000 2002 2004 2006 2008 2010
(Newspaper Association of America) 40
Internet Users
1800.0 1600.0 1400.0 1200.0 1000.0 800.0 600.0 400.0 200.0 0.0 1994 1996 1998 2000 2002 Year 2004 2006 2008 2010
(Miniwatts Marketing Group) The regression output shows that Newspapers, Circulation, and the natural log of Internet users are all significant predictors of Kodaks consolidated revenues. Sales should roughly follow the following equation: 113566.3 - 159.535 *(Newspapers) + 666.5 *(Circulation) + 977.8 *LN(Internet_Users) We used this along with simple projections based on newspaper circulation and internet user data to predict revenues going forward. SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations
Millions
0.93 0.86 0.83 913.95 19
41
ANOVA df Regression Residual Total 3 15 18 SS 74772215.47 12529664.21 87301879.68 Standard Error 26,499.0 32.7 97.1 231.8 MS 24924071.82 835310.9475 F 29.83807635 Significance F 1.43957E-06
Intercept Newspapers Circulation LN(Internet users)
Coefficients 113,566.3 -159.5 666.5 977.8
t Stat 4.2857 -4.8780 6.8663 4.2180
P-value 0.0007 0.0002 0.0000 0.0007
Lower 95% 57,085.1 -229.2 459.6 483.7
Upper 95% 170,047.5 -89.8 873.4 1,471.9
Lower 95.0% 57,085.1 -229.2 459.6 483.7
Upper 95.0% 170,047.5 -89.8 873.4 1,471.9
42
Exhibit 18 Sensitivity Analysis of Stock Price

We performed multiple sensitivity analyses to give an idea of what the company is worth under different assumptions. The first one looks at the WACC sensitivity with and without estimated restructuring charges reflected in free cash flows. Diluted Values reflect complete conversion of KKR warrants and convertible debt even though effective strike prices are $5.50 and $7.41, respectively.
With Restructuring Charges WACC Stock Value Diluted Value 13% $6.06 $4.54 14.0% $5.69 $4.27 15.0% $5.34 $4.01 16.0% $5.03 $3.77 17.0% $4.73 $3.55 18.0% $4.46 $3.34 19.0% $4.20 $3.15 20.0% $3.97 $2.97 21.0% $3.74 $2.81 22.0% $3.54 $2.65 23.0% $3.35 $2.51
WACC using gross debt (not conservative)
WACC using net debt (A5s choice)
WACC using management guidance
Without Restructuring Charges WACC Stock Value Diluted Value
13% $8.81 $6.61
14.0% $8.30 $6.23
15.0% $7.83 $5.87
16.0% $7.39 $5.54
17.0% $6.99 $5.24
18.0% $6.61 $4.96
19.0% $6.26 $4.70
20.0% $5.94 $4.45
21.0% $5.64 $4.23
22.0% $5.35 $4.01
23.0% $5.09 $3.82
This second sensitivity analysis looks at the weighted-average terminal growth rate of the three business segments vs. the company WACC.
WACC 13% $5.88 $5.96 $6.06 $6.17 $6.29 $6.43 $6.60 $6.80
Growth
$5.32 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00%
14.0% $5.52 $5.60 $5.69 $5.79 $5.90 $6.03 $6.18 $6.36
15.0% $5.19 $5.26 $5.34 $5.43 $5.54 $5.66 $5.80 $5.96
16.0% $4.89 $4.95 $5.03 $5.11 $5.20 $5.31 $5.44 $5.60
17.0% $4.60 $4.66 $4.73 $4.81 $4.90 $5.00 $5.11 $5.25
18.0% $4.34 $4.39 $4.46 $4.53 $4.61 $4.70 $4.81 $4.94
19.0% $4.09 $4.14 $4.20 $4.27 $4.34 $4.43 $4.53 $4.64
20.0% $3.86 $3.91 $3.96 $4.02 $4.09 $4.17 $4.26 $4.37
21.0% $3.65 $3.70 $3.74 $3.80 $3.86 $3.93 $4.02 $4.12
22.0% $3.45 $3.49 $3.54 $3.59 $3.65 $3.71 $3.79 $3.88
23.0% $3.27 $3.30 $3.35 $3.39 $3.45 $3.51 $3.58 $3.66
A5 Valuation
Current Stock Price $4.40 (12/11/09)
43
Exhibit 19 Cash Benefit of Financing Transactions

Kodak cost of debt Private Placement of Convertible Debt Face Value Discount Coupon Principle Accrual Due Date KKR Debt w/ Warrants Face Value KKR Fee from EK Discount Coupon Principle Accrual Due Date 13.85%
$400.0 0% 7% 0.00% 2017
$300.0 $15.0 4% 10% 0.50% 2017
Year KKR transaction Interest Interest payments at cost of debt $ Saved PV NPV of Savings PP of Convertible Debt Interest Interest payments at cost of debt $ Saved PV NPV of Savings Cash payments saved Combined NPV
2010 30.0 41.5 11.5 10.1 53.8
2011 30.0 41.5 11.5 8.9
2012 30.0 41.5 11.5 7.8
2013 30.0 41.5 11.5 6.9
2014 30.0 41.5 11.5 6.0
2015 30.0 41.5 11.5 5.3
2016 30.0 41.5 11.5 4.7
2017 30.0 41.5 11.5 4.1
28.0 55.4 27.4 24.1 127.7 38.9 181.5
28.0 55.4 27.4 21.1
28.0 55.4 27.4 18.6
28.0 55.4 27.4 16.3
28.0 55.4 27.4 14.3
28.0 55.4 27.4 12.6
28.0 55.4 27.4 11.0
28.0 55.4 27.4 9.7
38.9
38.9
38.9
38.9
38.9
38.9
38.9
44
Works Cited
Bureau of Economic Analysis. (n.d.). National Economic Accounts. Retrieved November 30, 2009, from bea.gov: http://www.bea.gov/national/index.htm#gdp Butcher, D. (2009, June 3). Retrieved December 12, 2009, from Mobile Marketer: http://www.mobilemarketer.com/cms/news/advertising/3393.html Charlene Li., J. B. (2008). Talking with the Groundswell. In J. B. Charlene Li., Groundswell. Boston, MA: Harvard Business School Publishing Corporation. Congressional Budget Office. (n.d.). Appendix A - CBO's Economic Projections for 2009 to 2019. Retrieved November 30, 2009, from cbo.gov: http://www.cbo.gov/ftpdocs/100xx/doc10014/AppendixA.7.2.shtml Consumers Union of U.S., I. (2009). Retrieved December 12, 2009, from ConsumerReports.org: http://www.consumerreports.org Dobbin, B. (2009, January 29). Retrieved December 12, 2009, from The Huffington Post: http://www.huffingtonpost.com/2009/01/29/kodak-to-slash-up-to-4500_n_162133.html Eastman Kodak. (2009, February 27). Filings and Annual Reports. Retrieved October 6, 2009, from Capital IQ: https://www.capitaliq.com Facebook. (2009). Facebook. Retrieved December 12, 2009, from http://www.facebook.com FactSet Research Systems. (2009). FactSet Fundamentals 2009.4A. Google. (n.d.). Eastman Kodak Company Financials. Retrieved November 3, 2009, from Google Finance: http://www.google.com/finance?q=NYSE:EK&fstype=ii Kavajecz, K. (2009). Module 5, Risk, Returns and the Capital Asset Pricing Model. Madison, WI. Kodak, E. (2009, December). About Kodak. Retrieved October 20, 2009, from Kodak.com: www.kodak.com Magazine Publishers of America. (n.d.). Retrieved November 30, 2009, from magazine.org: http://www.magazine.org/consumer_marketing/circ_trends/1318.aspx Miniwatts Marketing Group. (n.d.). Internet World Stats. Retrieved November 30, 2009, from Internet Growth Statistics: http://www.internetworldstats.com/emarketing.htm Newspaper Association of America. (n.d.). Total Paid Circulation. Retrieved November 30, 2009, from Newspaper Association of America: http://www.naa.org/TrendsandNumbers/Total-Paid-Circulation.aspx

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Integrated Company Analysis

Wisconsin School of Business 975 University Ave Madison, WI 53706 608-262-1550

Kodaks Current Marketing Strategy

Risk premium over government bonds: 13.0% - 5.6% = 7.4%

n/a n/a n/a n/a n/a

$9.99 for black, $14.99 for color

Consumers value fast printers

older photos better

Consumers value high quality printers

Consumers value printers which are easy to use

Built-In Wi-Fi Technology

1024 x 600 (better)

Higher resolution is perceived as higher quality

Source: www.Kodak.com; www.bestbuy.com

Photo Storage Key Attributes

Kodak Gallery Purchase of services necessary

Point of Differentiation Negative

Prints and Editing

Exhibit 2 Its time to smile Campaign

Figure 1 - Reason for campaign. Source: Kodak.com

Figure 2 - Consumer Insight. Source: Kodak.com

Figure 3 - Product Portfolio. Source: Kodak.com

Figure 4 - People in need to connect. Source: Kodak.com

Figure 5 - Connecting with digital camera. Source: Kodak.com

Figure 6 Use of social media

Figure 7 Viral Campaign

Figure 8 - Video ads for YouTube and TV. Source: YouTube/Kodak

Figure 9 sample banner, no link to purchase. Source: tweetPhoto.com

Figure 10 price advertised on Kodak.com

Figure 11 - Prices of other online retailers

Exhibit 3 Competitor Endorsements

Figure 12 Ashton Kutche, Nikon

Figure 13 Maria Sharapova

Exhibit 4 Economic Value Pricing

Figure 14 - Economic Value Pricing

Exhibit 5 Kodak Product Pricing

Line PowerShot PowerShot Exilim Exilim Finepix EasyShare Cyber-shot Stylus

Brand Canon Canon Panasonic Kodak Canon

Line PowerShot PowerShot Lumix EasyShare PowerShot

Model G10 A1000 IS DMC-TS1 M1033 D10

Family Compact Compact Compact Compact Compact

Exhibit 7 Competitor Business Descriptions2

Exhibit 8 Profitability Scenario Analysis

Exhibit 9: Comparison of accounting methods

Exhibit 10: Operating cost breakdown

FY07 13.3% 22.1% 24.7% 14.2%

FY06 15.0% 22.3% 24.8% 14.7%

FY05 15.1% 22.5% 24.6% 15.3%

FY04 14.7% 22.6% 23.6% 16.1%

FY03 14.9% 24.9% 24.0% 18.7%

FY02 14.5% 25.5% 24.3% 20.6%

FY01 14.5% 24.5% 24.2%

FY07 3.8% 3.0% 1.0% 7.9%

FY06 3.0% 2.8% 1.3% 7.0%

FY05 3.4% 2.8% 1.5% 6.4%

FY04 3.8% 3.2% 1.9% 6.7%

FY03 4.5% 3.1% 1.8% 6.1%

FY02 4.9% 2.4% 2.1% 7.1%

FY01 4.8% 2.3% 2.2%

FY07 5.2% 8.2% 6.6% 6.1%

FY06 5.3% 7.4% 6.4% 5.7%

FY05 5.9% 7.6% 6.8% 5.1%