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Eastman Kodak CompanyKodak Reports Results For 1999 Fourth Quarter, Full YearSolid Revenue Growth Contributes to Record Full-Year Net Earnings Up 13% to $1.6 Billion, Excluding Special Charges and CreditsROCHESTER, N.Y., Jan. 24--Eastman Kodak Company today reported sales of $3.799 billion for the fourth quarter of 1999, up 7% from the $3.563 billion reported for the fourth quarter of 1998. When adjusted for portfolio changes including the acquisition of Imation's medical imaging business and the sale of the Office Imaging business, sales were up 6%, continuing the company's top-line growth momentum. Net earnings for the quarter were $475 million, or $1.50 per share, up 81% from the $.83 per share reported for 1998's fourth quarter. Excluding special charges and credits from both years, net earnings for the quarter were $403 million, or $1.27 per share, an increase of 21% over the prior year's $1.05. Earnings continued to benefit from top line growth and the on-going cost reduction activities. Earnings from operations for the quarter were $619 million, an increase of $365 million or 144%. Excluding special charges in both years, earnings from operations increased $199 million, or 46%. The improvement in operating performance resulted from higher gross margin driven by higher sales and productivity gains, and lower selling, general and administrative expense, partially offset by higher research and development expenditures and the negative impact of foreign exchange. This represents the fourth consecutive quarter of worldwide sales growth for the company. In the U.S., both volumes and revenues for consumer film increased 9%, while pricing was stable. Sales in emerging markets continued to rebound, up 15% for the quarter. For the full year 1999, sales were $14.089 billion, up 5% from the $13.406 billion reported for 1998. Portfolio changes had minimal impact on full year sales, and foreign exchange had a negative $12 million impact. The company reported net earnings of $1.392 billion for the full year 1999, or $4.33 per share, an increase of 2% from the $4.24 per share reported for 1998. Excluding special charges and credits from both years, net earnings were $1.619 billion, a record high for the company and an increase of 13% over 1998. Adjusted earnings per share were $5.03, an increase of 15% from $4.37 for 1998. Full year earnings from operations were $1.990 billion, an increase of 5%. Excluding special charges from both years, earnings from operations were $2.454 billion, an increase of $389 million or 19%, primarily due to higher sales and gross margin, and lower research and development and selling, general and administrative costs. Foreign exchange had a negative $43 million impact on earnings from operations. The company achieved cost savings of $180 million during the fourth quarter and $520 million for the full year. When combined with the $730 million in savings generated in 1998, the company exceeded its two-year cost reduction goal of $1.2 billion by $50 million. Company-wide sales of digital products were $2.333 billion for the full year, an increase of 46%. The company significantly improved the financial performance of its digital portfolio in 1999 with losses of $17 million in the fourth quarter and $116 million for the full year, an improvement from the losses of $91 million and $262 million for the same periods of 1998. Consumer Imaging segment sales were $1.975 billion for the fourth quarter, an increase of 5% from the $1.875 billion a year ago, or 6% when adjusted for portfolio changes. Earnings from operations for the segment were $316 million for the quarter, an increase of 42%; net earnings were $210 million, up 30%. Strong film and paper volume drove revenue increases of 11% and 7% respectively. In addition, the company's strategy of moving consumers to premium products led to continued gains for Max and Advantix films; and photofinishing volumes kept pace with film growth. For the year, Consumer Imaging segment sales were $7.411 billion, up 3% compared with $7.164 billion for 1998, or 6% when adjusted for portfolio changes. Earnings from operations were $1.299 billion, up 20%; net earnings were $900 million, up 15%. Excluding special credits and charges from both years, earnings from operations and net earnings were up 21%. In the U.S., the industry saw strong category growth for the year. Kodak also met its objective of holding share. Kodak Professional segment reported fourth quarter sales of $510 million, up 3% from the $496 million reported for the prior year or 9% when adjusted for portfolio changes. Earnings from operations were $106 million, up 1%; net earnings were $61 million, a decline of $19 million from 1998's fourth quarter, largely due to lower equity income from Kodak Polychrome Graphics and increased research and development investments by the NexPress joint venture. Full year segment sales were $1.910 billion, up 4% compared with 1998's $1.840 billion, or 8% when adjusted for portfolio changes. Earnings from operations were $374 million, up 13%; net earnings were $265 million, up 12%. Excluding special charges in 1999, earnings from operations and net earnings increased 20% and 17% respectively. The Health Imaging segment posted fourth quarter sales of $571 million, up 29% compared with the $442 million posted in the prior year, largely due to the acquisition of Imation's medical imaging business. Notably, a record number of DryView laser imaging systems were placed during the quarter. Earnings from operations were $126 million, an increase of 232%; net earnings were $85 million, up 204%. Excluding charges associated with the acquired business in 1998's fourth quarter, earnings from operations and net earnings increased 53% and 46% respectively. Full year segment sales were $2.120 billion, an increase of 39% compared with $1.526 billion in 1998. Operating earnings were $470 million, up 46%; net earnings were $315 million, up 54%. Both full year sales and earnings benefited from the successful integration of the acquired business. Excluding special charges, full year earnings from operations and net earnings increased 29% and 27% respectively. The other Imaging segment reported fourth quarter sales of $743 million, a decline of 1% compared with $750 million for 1998. When adjusted for the divestiture of the Office Imaging business, sales increased 6%. Operating earnings were $71 million, compared with a loss of $111 million in the prior year; net earnings were $136 million, compared with a loss of $50 million. Excluding special charges and credits from both years, earnings from operations increased $52 million and net earnings increased $16 million or 38%. Digital & Applied Imaging continued to experience strong sales growth of digital cameras and ink jet media in the quarter. Sales were lower for Entertainment Imaging, which continued to experience the effects of cost reduction in the motion picture industry. Full year segment sales were $2.648 billion, a decline of 8% from $2.876 billion for 1998. When adjusted for the Office Imaging divestiture, sales increased 5%. Operating earnings for the year were $197 million, an increase of 25%; net earnings were $222 million, an increase of 37%. Excluding special charges and credits from both years, earnings from operations and net earnings were down 2% and 21% respectively. "The sustained improvement in our revenue growth for both traditional photographic and digital imaging products is both gratifying and indicative of Kodak's future prospects," said Daniel A. Carp, president and chief executive officer. "The strength and consistency of these results underscores the progress that Kodak has made, under George Fisher's leadership, on its path to achieve annual top line growth of 8 12%. Our earnings performance for 1999, driven by sales growth and continuing cost reduction actions, enabled us to exceed our ongoing commitment to increase earnings per share at least 10%, while simultaneously making investments in our business." "We expect continued top line growth momentum in 2000," said Carp. "Kodak continues to see unparalleled growth prospects in the picture business. Indeed, many others also see this huge potential as scores of Internet start-ups are entering the picture business. This competition validates what we have been saying for years, there is substantial growth potential in the picture business. Kodak is better positioned than anyone to succeed in terms of technology, brand recognition, marketplace knowledge, and financial strength." Editor's Note: Additional information about Kodak's fourth quarter results is available on the company's web site on the Internet. Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
(in millions, except per share data)
Fourth Quarter Full Year
1999 1998 1999 1998
Sales $3,799 $3,563 $14,089 $13,406
Cost of goods sold 2,145 2,103 7,987 7,293
------ ------ ------- ------
Gross profit 1,654 1,460 6,102 6,113
Selling, general and
administrative expenses 816 955 3,295 3,303
Research and development costs 219 209 817 880
Purchased research and
development - 42 - 42
------ ------ ------- ------
Earnings from operations 619 254 1,990 1,888
Interest expense 35 14 142 110
Other income (charges) 136 172 261 328
------ ------ ------- ------
Earnings before income taxes 720 412 2,109 2,106
Provision for income taxes 245 140 717 716
------ ------ ------- ------
Net earnings $ 475 $ 272 $ 1,392 $1,390
====== ====== ======= ======
Basic earnings per share $ 1.51 $ .84 $ 4.38 $ 4.30
====== ====== ======= ======
Diluted earnings per share $ 1.50 $ .83 $ 4.33 $ 4.24
====== ====== ======= ======
Earnings used in basic and
diluted earnings per share $ 475 $ 272 $ 1,392 $1,390
Number of common shares used in
basic earnings per share 314.7 323.2 318.0 323.3
Incremental shares from
assumed conversion of options 2.7 4.6 3.5 4.5
------ ------ ------- ------
Number of common shares used in
diluted earnings per share 317.4 327.8 321.5 327.8
====== ====== ======= ======
Cash dividends per share $ .44 $ .44 $ 1.76 $ 1.76
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SUPPLEMENTAL INFORMATION - UNAUDITED
(in millions)
Provision for depreciation $ 212 $ 198 $ 773 $ 737
After-tax exchange gains
(losses) and effect of
translation of net
monetary items 3 7 (2) (13)
Cash dividends declared 139 143 560 570
Capital expenditures 378 489 1,127 1,108
Cash and marketable securities 393 500
Net working capital,
excluding short-term borrowings 838 939
Sales by Operating Segment
(in millions)
Fourth Quarter Full Year
1999 1998 Change 1999 1998 Change
Consumer Imaging
Inside the U.S. $ 966 $ 920 + 5% $ 3,562 $ 3,342 + 7%
Outside the U.S. 1,009 955 + 6 3,849 3,822 + 1
------ ------ --- ------- ------- ---
Total Consumer
Imaging 1,975 1,875 + 5 7,411 7,164 + 3
------ ------ --- ------- ------- ---
Kodak Professional
Inside the U.S. 227 191 +19 766 725 + 6
Outside the U.S. 283 305 - 7 1,144 1,115 + 3
------ ------ --- ------- ------- ---
Total Kodak
Professional 510 496 + 3 1,910 1,840 + 4
------ ------ --- ------- ------- ---
Health Imaging
Inside the U.S. 263 191 +38 954 668 +43
Outside the U.S. 308 251 +23 1,166 858 +36
------ ------ --- ------- ------- ---
Total Health
Imaging 571 442 +29 2,120 1,526 +39
------ ------ ---- ------- ------- ---
Other Imaging
Inside the U.S. 371 383 - 3 1,312 1,558 -16
Outside the U.S. 372 367 + 1 1,336 1,318 + 1
------ ------ --- ------- ------- ---
Total Other Imaging 743 750 - 1 2,648 2,876 - 8
------ ------ --- ------- ------- ---
Total Sales $3,799 $3,563 + 7% $14,089 $13,406 + 5%
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Earnings from Operations by Operating Segment
(in millions)
Fourth Quarter Full Year
1999 1998 Change 1999 1998 Change
Consumer Imaging $316 $ 222 + 42% $1,299 $1,080 +20%
Percent of Sales 16.0% 11.8% 17.5% 15.1%
Kodak Professional $106 $ 105 + 1% $ 374 $ 330 +13%
Percent of Sales 20.8% 21.2% 19.6% 17.9%
Health Imaging $126 $ 38 +232% $ 470 $ 321 +46%
Percent of Sales 22.1% 8.6% 22.2% 21.0%
Other Imaging $ 71 $(111) - $ 197 $ 157 +25%
Percent of Sales 9.6% (14.8) 7.4% 5.5%
---- ----- ---- ------ ------ ---
Total of segments $619 $ 254 +144% $2,340 $1,888 +24%
Percent of Sales 16.3% 7.1% 16.6% 14.1%
Restructuring costs,
asset impairments,
and other charges - - (350) -
---- ---- ------ ------
Consolidated total $619 $254 $1,990 $1,888
==== ==== ====== ======
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Net Earnings by Operating Segment
(in millions)
Fourth Quarter Full Year
1999 1998 Change 1999 1998 Change
Consumer Imaging $210 $162 + 30% $ 900 $ 785 +15%
Percent of Sales 10.6% 8.6% 12.1% 11.0%
Kodak Professional $ 61 $ 80 - 24% $ 265 $ 237 +12%
Percent of Sales 12.0% 16.1% 13.9% 12.9%
Health Imaging $ 85 $ 28 +204% $ 315 $ 205 +54%
Percent of Sales 14.9% 6.3% 14.9% 13.4%
Other Imaging $136 $(50) - $ 222 $ 162 +37%
Percent of Sales 18.3% (6.7) 8.4% 5.6%
---- ---- ---- ------ ------ ---
Total of segments $492 $220 +124% $1,702 $1,389 +23%
Percent of Sales 13.0% 6.2% 12.1% 10.4%
Restructuring costs,
asset impairments,
and other charges - - (350) -
Gain on sale of
Nanosystems - 87 - 87
Interest expense (35) (14) (142) (110)
Corporate interest
income 7 7 22 27
Income tax effects on
above items and taxes
not allocated to
segments 11 (28) 160 (3)
---- ---- ------ ------
Consolidated total $475 $272 $1,392 $1,390
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