April 24, 2003 - Eastman Kodak Company (NYSE: EK) Rochester, NY, a worldwide leader in imaging products and services for businesses and consumers reported its first quarter results for 2003. Mr. Dan Carp, Eastman Kodak's Chairman and CEO, initiated the conference call by introducing the newly appointed President and Chief Operating Officer, Antonio Perez. Mr. Perez, formerly Hewlett Packard's President of Consumer Business and Digital Media Solutions, said his objective will be to "drive continuous improvement in operations, accelerate digital imaging strategies with an emphasis on output, and grow new businesses in new business categories." The Chairman continued his comments citing that the current business uncertainty and world events are the worst in his 33 year career making it difficult to confidently forecast Kodak's future performance to shareholders. The weakness in the film industry that they have seen for the last three years represents the very real forces Kodak executives must deal with everyday. Revenues for the first quarter were $2.7 billion, increasing 1% from first quarter 2002. Without the benefits from exchange rates, revenues actually declined 4% overall primarily due to their photography division. The company reported a net income of $12 million, or $0.04 per share, which was a 69% decline from $39 million, or $0.13 per share, from first quarter 2002. Topics of this summary: * Financial Summary * Commercial Imaging Division: Kodak Polychrome Graphics and NexPress * Q & A Summary Financial Summary Revenue misses were generally a result of a 24% decrease in retail sales year over year; due to reduced travel, world events, SARS, and that Easter moved out of the first quarter in 2003. Expectations are that the retail "destocking" trends will continue into the second quarter. Earnings from operations for the first quarter of 2003 were $32 million as compared with $133 million for the same quarter last year, representing a decrease of 76%. Some of the attributed reasons include continued restructuring costs, increased research & development costs, and increased SG & A expenses. "Advertising costs are up because of stubborn new launches" said Robert Brust, Kodak's Chief Financial Officer. Ad expenditure for the quarter was $104 million which is up 8% from a year ago. Overall guidance for the second quarter and for the full year has been lowered from original expectations. It is possible that second quarter operational earnings could fall into the range of $0.60 to $0.80 per share. As a result, full year earnings are now focused on the low end of the $2.35 to $2.95 per share range. Commercial Imaging Division Revenues for the segment were $372 million for the first quarter which was a 4% increase, excluding favorable impact of exchange, from first quarter 2002. Revenues from Kodak Polychrome Graphics, in which Kodak has a 50% ownership interest, decreased 16% in the current quarter compared to first quarter of 2002, primarily reflecting volume declines in graphic arts film. This reduction resulted largely from digital technology substitution and continuing weakness in the commercial printing market. The Chairman specifically cited the adoption of CTP and color proofing technologies. NexPress, in which Kodak and Heidelberg each have 50% ownership interest, has sold 225 units of the NexPress 2100. This is below plan however they are satisfied with the average monthly volumes for these units. Mr. Carp specifically cited one customer that prints over 1 million impressions per month. Q&A 1. The emerging market portfolio increased sales by 6% in first quarter and represents 21% of Kodak's worldwide sales. Included in this group are China, India, Korea, Hong Kong, and Russia. China has become Kodak's second largest market to the U.S. and the threat of SARS is very real for both sales and manufacturing. Executives stated that there has been no impact on first quarter results however; second quarter will possibly see a contraction in sales due reduced consumption, tourism and holiday festivities. 2. Digital cannibalization of revenues is estimated at 5% in 2003. Kodak executives do not see this trend accelerating in the near term. The Chairman believes the bigger cannibalization is how consumer behaviors are changing away from taking pictures altogether. 3. Analysts pressed for more information on additional cost reductions for the upcoming quarter. Kodak executives maintain that they are on track with their restructuring process and use a disciplined approach to reduce costs. For example, as it relates to procurement efficiencies they have established a VP Business Process Outsourcing position. 4. Bernard Masson, hired by Kodak in December 2002 and formerly President of the Consumer Printer Division of Lexmark International, was named President of the company's expanded Display Group. In this capacity, he will also report to Chairman and Chief Executive Daniel A. Carp as does the newly appointed President and COO, Mr. Antonio Perez. The question was asked why there were two executives recently hired from inkjet businesses. The Chairman responded that "these two gentlemen understand the broad base elements of output businesses. They have the DNA of the high-tech businesses and they are here to do those kinds of things". Note: No questions were asked by analysts about the Commercial Imaging Division Susan Kelly