Kodak Reports Progress in Previously Announced Accounting Review
Press release from the issuing company
ROCHESTER, N.Y.--March 16, 2005-- Eastman Kodak Company today reported that the accounting review announced on January 26 is nearing completion. As a result, the company also announced that it will report revised results for the fourth quarter of 2004, and will restate results for the first three quarters of 2004 and the quarters and full year of 2003. To allow sufficient time for completion of the restatement, the company will request tomorrow an automatic extension for the filing of its 2004 Annual Report on Form 10-K, which it now intends to file by March 31.
The restatements reflect accounting errors related to income taxes, accruals for pensions and other post-retirement benefits, as well as other miscellaneous items that were immaterial in the aggregate. The company expects that the impact of the errors will have no material impact on revenue or cash flow, and no impact of any kind on its ability to pay retirement benefits. The decision to restate was approved today by the Audit Committee of the company's Board of Directors, following consultation with management and discussion with the company's independent registered public accounting firm, PricewaterhouseCoopers LLP.
The income tax accounting issues in aggregate are expected to reduce 2004 earnings by approximately $35 million, or 11 cents per share, on an operational basis, and $21 million, or 7 cents per share, on the basis of Generally Accepted Accounting Principles (GAAP). The difference between the operational and GAAP figures are primarily attributable to the accounting for income taxes relating to restructuring charges and discontinued operations. The pension and other post-retirement accounting issues will result in a pre-tax charge to 2004 earnings of approximately $29 million, or approximately 6 cents per share on both an operational and GAAP basis.
The company now expects that its 2004 GAAP earnings will be in the range of $2.05 to $2.15 per share, versus $2.16 per share reported on January 26. Earnings from continuing operations, excluding the impact of non-operational items, are expected to be in the range of $2.40 to $2.50 per share, versus $2.62 cents per share reported on January 26.
For 2003, GAAP earnings are expected to be in the range of $0.75 to $0.85 per share versus $0.92 per share reported previously. Earnings from continuing operations, excluding the impact of non-operational items, are expected be in the range of $2.05 to $2.15 per share, versus the $2.15 per share reported previously.
As announced on January 26th, the company has determined that it has an internal control deficiency related to income tax accounting that constitutes a "material weakness," as defined by the Public Company Accounting Oversight Board's Auditing Standard No. 2. The company has also determined that it has a material weakness related to its controls surrounding the accounting for pensions and other post-retirement benefits. Consequently, management will be unable to conclude that the company's internal controls over financial reporting are effective as of Dec. 31, 2004. An assessment of the company's internal controls will be included in the Annual Report on Form10-K, which also will include an adverse opinion from PricewaterhouseCoopers with respect to the company's internal controls over financial reporting.
"Although the errors reported on January 26 now include items in addition to income tax accounting, it is important to note that the errors do not materially affect Kodak's 2004 revenue or cash flow, nor do they affect the company's financial strength or business prospects," said Robert H. Brust, Kodak's Chief Financial Officer. "Keep in mind that this situation arises from inadvertent accounting errors. We are confident that we will shortly put this issue behind us."
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