Kodak Withdraws Second-Half and Full-Year 2008 Guidance on Continued Economic Weakness and Currency Shifts
Balance Sheet Solid; Debt Balance Modest; Company Expresses Confidence in Market Position of Key Businesses and Overall Strategy; Strong Emphasis on Cash Flow and Cost Reduction; Actions to Include Executive Compensation and Other Expense Elements
ROCHESTER, N.Y. -- Eastman Kodak Company (NYSE:EK) today announced that it has withdrawn its second-half and full-year 2008 guidance for revenue growth, digital revenue growth, earnings from continuing operations, and cash generation because of the deepening global recession and changes in the value of the U.S. dollar.
In recent weeks, and subsequent to providing its forecast on October 30, 2008, the company has seen the dramatic slowdown in consumer spending continue and worsen. Additionally, businesses are reducing capital expenditures, and as credit markets remain very tight, commercial customers are finding it increasingly difficult to secure financing for new equipment purchases. Real estate markets also remain weak, making sales of the company’s surplus assets more difficult. Dramatic changes in the value of the U.S. dollar in countries where the company sources and sells its products are also reducing revenue and earnings.
As a result, Kodak now expects 2008 second-half and full-year revenue growth, digital revenue growth, earnings from continuing operations, and cash generation to be below its October forecast. The company did not provide a revised forecast and will update investors on business performance when it announces its fourth-quarter and full-year 2008 results on January 29, 2009.
As previously announced, Kodak is taking a number of specific actions to address the global economic challenges impacting all of its businesses. These actions, which the company has already begun, include more tightly focusing its portfolio of investments, intensifying its emphasis on generating cash, and further streamlining its cost structure. Additionally, today the company announced that where permissible by law its executives would not receive a salary increase in 2009 and that it would temporarily suspend for 2009 the company’s U.S. 401(k) match. Based upon the current outlook, company management also does not expect a payout in 2009 for the executive Leadership Stock program that is based on 2008 performance.
“There is an unprecedented amount of uncertainty surrounding the economic environment and most signs indicate that we may be facing a prolonged global recession,” said Antonio M. Perez, Kodak Chairman and Chief Executive Officer. “Yet, Kodak is financially strong and we are well positioned to manage through this economic downturn. We have a solid cash position, a modest debt balance, and, despite current lower overall demand, we continue to maintain our market share in key businesses. That reinforces our confidence in our overall strategy. We will continue to take prudent actions necessary to ensure that Kodak is well positioned to take full advantage of the economic recovery when it comes.”
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CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this press release may be forward-looking in nature, or “forward-looking statements” as defined in the United States Private Securities Litigation Reform Act of 1995. For example, references to the Company’s expectations for revenue growth, digital revenue growth, earnings, cash and market share are forward looking statements.
Actual results may differ from those expressed or implied in forward-looking statements. In addition, any forward-looking statements represent the Company’s estimates only as of the date they are made, and should not be relied upon as representing the Company’s estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, even if its estimates change. The forward-looking statements contained in this press release are subject to a number of factors and uncertainties, including our successful:
* execution of the digital growth and profitability strategies, business model and cash plan;
* alignment of the Company’s cost structure to the new economic realities;
* execution of our restructuring and rationalization activities;
* implementation of the Company’s plans to tighten its focus on its portfolio of investments;
* implementation of, and performance under, the debt management program, including compliance with the Company’s debt covenants;
* development and implementation of product go-to-market and e-commerce strategies;
* protection, enforcement and defense of the Company’s intellectual property, including defense of its products against the intellectual property challenges of others;
* execution of intellectual property licensing programs and other strategies;
* integration of the Company’s businesses to SAP, the Company’s enterprise system software;
* execution of the Company’s planned process driven productivity gains;
* commercialization of the Company’s breakthrough technologies;
* expansion of the Company’s product portfolios in each of its core businesses;
* ability to accurately predict product, customer and geographic sales mix and seasonal sales trends;
* management of inventories and capital expenditures;
* integration of acquired businesses and consolidation of the Company’s subsidiary structure;
* improvement in manufacturing productivity and techniques;
* improvement in working capital management and cash conversion cycle;
* continued availability of essential components and services from concentrated sources of supply;
* performance under the Company’s share repurchase program;
* improvement in supply chain efficiency and dependability; and
* implementation of the strategies designed to address the decline in the Company’s traditional businesses.
The forward-looking statements contained in this press release are subject to the following additional risk factors:
* inherent unpredictability of currency fluctuations, commodity prices and raw material costs;
* competitive actions, including pricing;
* uncertainty generated by volatility in the financial markets;
* the nature and pace of technology evolution;
* changes to accounting rules and tax laws, as well as other factors which could impact the Company’s reported financial position or effective tax rate;
* pension and other postretirement benefit cost factors such as actuarial assumptions, market performance, and employee retirement decisions;
* general economic, business, geo-political and regulatory conditions or unanticipated environmental liabilities or costs;
* changes in market growth;
* continued effectiveness of internal controls; and
* other factors and uncertainties disclosed from time to time in the Company’s filings with the Securities and Exchange Commission.
Any forward-looking statements in this press release should be evaluated in light of these important factors and uncertainties.
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