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Kodak Releases 1Q Results: Cash Flow Improves by $504 Million

Press release from the issuing company

ROCHESTER, N.Y.--April 25, 2002--Eastman Kodak Company today reported first-quarter net income that was within company guidance and ahead of consensus expectations, and said that operating cash flow improved by $504 million from the year-ago quarter. For the first quarter of 2002: * Sales totaled $2.707 billion, a decline of 9% from $2.975 billion in the first quarter of 2001, in line with company expectations given the current economic weakness. Excluding the impact of foreign exchange, sales declined 7%. * The company reported net income of $39 million, or 13 cents per share, compared with net income of $150 million, or 52 cents per share, in the first quarter of 2001. In the year-ago quarter, a charge of 2 cents per share, related to the exit of an equipment manufacturing facility, resulted in earnings on an operational basis of $157 million, or 54 cents per share. On a pro-forma basis, excluding the effect of a required change in goodwill amortization, as-reported and operational earnings in the year-ago quarter would have been $186 million, or 64 cents per share, and $193 million, or 66 cents per share, respectively. "In the first quarter, we achieved our goals for earnings and cash-flow performance and continued to strengthen our balance sheet during difficult economic times," said Daniel A. Carp, Chairman and CEO. "We remain focused on product innovation, expanding markets, reducing costs and debt, and improving inventory and receivable performance." "So far this year, we see few signs of an economic recovery, which reinforces our strategy to maximize cash," Carp said. "We will continue to manage our businesses aggressively so margins and profit improve as we move into the second half of 2002, when, as we've said before, we expect modest revenue growth. We also reiterate our second-quarter earnings guidance of 60 cents to 70 cents per share, and our full-year 2002 guidance of $2.00 to $2.60 per share." Other first-quarter 2002 highlights: * Operating cash flow in the quarter was a negative $48 million, an improvement of $504 million from the first quarter of 2001, when operating cash flow was a negative $552 million. Due to a previously announced change in the timing of Kodak's dividend payments, the first-quarter 2002 cash flow did not include a dividend payment, while $128 million was paid in the first quarter of 2001. (Kodak defines operating cash flow as cash provided by operating activities and proceeds from the sale of assets minus capital expenditures, acquisitions and dividends.) * Total costs declined by about 4% in the quarter, indicative of the company's continued effort to contain costs. Total costs include cost of goods sold plus selling, general and administrative expenses, and exclude research and development costs. * Debt declined $628 million from the year-ago level to $3.32 billion, driven by the cash flow improvements. * Inventories declined $628 million versus the year-ago level to $1.205 billion. * Sales in both China and India rose 8% versus the first quarter of 2001, reflecting industry growth in large emerging markets. The segment results for the first quarter of 2002 are compared with the first quarter results of 2001, which include goodwill amortization. The first-quarter 2002 results are as follows: * Photography segment sales totaled $1.814 billion, down 11%. Earnings from operations for the segment were $16 million, down from $103 million a year ago. U.S. consumer film sales to dealers declined 19%, reflecting a combination of lower volumes and prices. * Health Imaging sales were $521 million, down 7%. Earnings from operations for the segment were $76 million, down from $108 million a year ago. Margins based on earnings from operations in the Health Imaging business continue to improve, rising to 14.6% in the first quarter, up from 11.6% in the fourth quarter of 2001. * Commercial Imaging sales were $348 million, down 3%. Earnings from operations were $45 million, down from $47 million. * All Other sales were $24 million, down from $25 million. Losses from operations totaled $7 million, compared with earnings of $4 million. The All Other category includes the Kodak Display business, Sensors, and Optics, as well as miscellaneous businesses. Earnings Outlook: * Kodak leaves unchanged the previously announced guidance range of 60 cents to 70 cents per share for second-quarter 2002 earnings, and $2.00 to $2.60 per share for full-year 2002 earnings. "The U.S. consumer film business performed in line with our expectations, taking into account the competitive climate and adifficult year-over-year comparison," Carp said. "While we lost some market share in the first quarter, as we previously forecast, we fully expect to maintain our U.S. market share in consumer film for a fifth consecutive year as new marketing programs take effect. In our Health Imaging business, we continue to improve, as evidenced by another quarter-sequential increase in profitability. "I remain confident that Kodak's strategy to generate cash, combined with our proven record of product innovation and market leadership, will position us to drive profitable growth once the economy recovers," Carp said. "We remain totally committed to generating value for Kodak shareholders."