Eastman Kodak Company · NYSE:KODK
Eastman Kodak — Investor Day (February 2008)
95 slides from Eastman Kodak's investor day presentation, Feb 7, 2008
Slide 1: Kodak
Kodak
Slide 2: Cautionary Statement Pursuant to Safe Harbor Provisions
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements in this presentation may be forward-looking in nature, or "forward looking statements” as defined in the United States Private Securities, Litigation Reform Act of 1985.
Slide 3: The New Kodak - Antonio Perez, Chairman and CEO
The New Kodak Antonio Perez Chairman and CEO
Slide 4: Program of Events
Program of Events
Slide 5: Key Messages of the New Kodak
The New Kodak Key Messages of the New Kodak
Slide 6: 2007: Every Metric Met or Exceeded
The New Kodak 2007: Every Metric Met or Exceeded
Slide 7: Successfully Delivered 2007 Strategic Imperatives
The New Kodak Successfully Delivered 2007 Strategic Imperatives
Slide 8: Achieve market success with new products
. Achieve market success with new products = Successful launch of consumer inkjet = Top-line growth in GCG through product line extensions and new markets = Great progress on CMOS technologies & products . Significant progress toward installation of target cost model = Completed corporate restructur
Slide 9: New Reporting Structure: Leverage Traditional Assets
New Reporting Structure: Leverage Traditional Assets
Slide 10: Digital Portfolio: Built to Grow
The New Kodak Digital Portfolio: Built to Grow
Slide 11: Digital Portfolio
The New Kodak Digital Portfolio Corporate average gross profit improves over the planning period
Slide 12: Traditional Portfolio: Viable Mid-Term
The New Kodak Traditional Portfolio: Viable Mid- Term #1 market positions, smaller size, good cash generation
Slide 13: The New Kodak: 2008 Revenue
The New Kodak The New Kodak: 2008 Revenue
Slide 14: Digital Business: Critical Mass and Healthy Growth
The New Kodak Digital Business: Critical Mass and Healthy Growth
Slide 15: Geographic Balance: Global Stability and Growth
The New Kodak Geographic Balance: Global Stability and Growth
Slide 16: Balancing the Returns from IP Remains a Priority
The New Kodak Balancing the Returns from IP Remains a Priority
Slide 17: Surplus Cash Allocation 2008-2011
The New Kodak Surplus Cash Allocation 2008-2011
Slide 18: 2008 Key Strategic Imperatives
The New Kodak 2008 Key Strategic Imperatives
Slide 19: 2008 Financial Targets
The New Kodak This is the New Kodak: 2008 Financial Targets
Slide 20: Target Business Model 2008-2011
2008-2011: Target Business Model
Slide 21: A Shift Towards Annuities Enhances Gross Profit
Excludes restructuring/rationalization A Shift Towards Annuities Enhances Gross Profit
Slide 22: Annuities Drive Gross Profit in Digital Output Businesses
+ Industry avg. equipment GP Digital Output Businesses ~20% + Industry avg. annuity GP >50% + Hardware placements seed future annuities stream + As annuities increase relative to hardware, GP increases exponentially EM Equipment — ElAnnuity ~— @ Gross Profi + Rising annuities volumes require little
Slide 23: Traditional's Staying Power
Traditional’s Staying Power Mary Jane Hellyar President, Film, Photofinishing & Entertainment Group Executive Vice President, Eastman Kodak Company
Slide 24: FPEG Key Messages
FPEG Key Messages
Slide 25: Poised for Success in 2008 and Beyond
Poised for success in 2008 and beyond with sustainable business model = Strong cash generation through 2011 = Operating margin of 8% - 10% by 2011 Solid profit outlook continues for Entertainment Imaging Profitability improvements in Traditional Photofinishing will sustain strong cash generation Com
Slide 26: Positioned FPEG for Sustainable Business Model
Positioned FPEG for Sustainable Business Model Going Forward Delivered on Kodak forecasted film revenues in ’04 -’05; Exceeded forecasts in 06 and ’07 Reduced the manufacturing and go-to-market footprint ('04 -’07): = Sensitizing locations from 10 to 2 = Net Book Value: $3.1B to $0.7B = SG&A reduced
Slide 27: Revenue Decline Rate Stabilizes
Revenue Decline Rate Stabilizes, Driven by Shift in Portfolio Mix
Slide 28: 2008 Revenue and 2011 Revenue Mix
2008 Revenue 2011 Revenue Other Film iti Other Film iti 10% Traditional Traditional Photofinishing 12% Photofinishing 40% Film 40% Film Capture Capture 8% 16% [ Entertainment Entertainment Imaging Imaging 34% 40%
Slide 29: Traditional Photofinishing: Focus on Margin Expansion
Traditional Photofinishing: Focus on Margin Expansion
Slide 30: Entertainment Imaging: A Year of Solid Results
Entertainment Imaging: A Year of Solid Results for Kodak
Slide 31: Cinema Screens Broadly Distributed and Growing
Cinema Screens are Broadly Distributed & Growing
Slide 32: D-Cinema Adoption Still in Early Stages
2007 Estimated WW First-Run Screens = 88,000 D- Cinema Adoption Still in Early Stages
Slide 33: Origination Film Transitioning at Measured Pace
SOURCE: Screen Digest 2007 Forecast Origination Film Transitioning at Measured Pace
Slide 34: Digital Capture - Origination Film Substitution Profile
Digital Capture — Origination Film Substitution Profile 2004 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 Highly segmented category with differing rates of substitution Healthy WW movie production volumes in 2007 Drive film as highest quality capture media via: = Targeted innovations (VISION3 laun
Slide 35: Realize the Synergies of the New FPEG Organization
Realize the synergies of the new FPEG organization Focus color paper/chemistry business toward higher margin segments, products, channels Optimize share-price equation for all product categories Introduce motion picture film and digital products & services to support evolving workflow Continue impro
Slide 36: Digital Growth
Digital Growth Phil Faraci President & Chief Operating Officer
Slide 37: Progress to Date with the Digital Businesses
Progress to Date with the Digital Businesses
Slide 38: Graphic Communications Group: Growth to Outpace the Market
Graphic Communications Group Growth to Outpace the Market
Slide 39: Kodak
Kodak
Slide 40: 2007 Performance: GCG
The New Kodak 2007 Performance: GCG
Slide 41: Kodak Participates in Strong and Growing Markets
The New Kodak Kodak Participates in Strong & Growing Markets
Slide 42: Market Growth 2007 to 2011 and Drivers
CAGR $28B 47% $21B 2007 2011 Drivers
Slide 43: Market Drivers Fueling Kodak's Profitable Growth
The New Kodak Market Drivers Fueling Kodak’s Profitable Growth
Slide 44: GCG Portfolio
The New Kodak GCG Portfolio Large, profitable position in Capture & Prepress, growth in Digital Print & Enterprise Solutions
Slide 45: KODAK STREAM Breakthrough Technology
The New Kodak KODAK STREAM Breakthrough Technology Introduction at Drupa ‘08
Slide 46: KODAK STREAM Breakthrough Technology
The New Kodak KODAK STREAM Breakthrough Technology Introduction at Drupa ‘08
Slide 47: KODAK STREAM Continuous Inkjet Printing
The New Kodak KODAK STREAM Continuous Inkjet Printing
Slide 48: Making Progress Toward Target Model
The New Kodak Making Progress Toward Target Model
Slide 49: Solid Business Model
The New Kodak Solid Business Model
Slide 50: More Pages, More Annuities
More pages, more annuities Large installed base drives annuities Full digital printing portfolio Deploy enterprise marketing workflow Emerging market expansion Integrated scanning solutions 2008 - 2011 CAGR 9% - 10% 32% - 33% 29% - 30% 16% - 17% 17% - 18% 6% -7% 2008 2011 Target Target
Slide 51: Consumer Digital Group: Growth to Outpace the Market
The New Kodak Consumer Digital Group Growth to Outpace the Market
Slide 52: Key Messages
Key Messages Strong performance in 2007
Slide 53: 2007 Performance: CDG
The New Kodak 2007 Performance: CDG
Slide 54: Well Positioned in Higher Growth Digital Markets
The New Kodak Well Positioned in Higher Growth Digital Markets
Slide 55: Market Drivers of Kodak's Growth
The New Kodak Market Drivers of Kodak’s Growth
Slide 56: Well Positioned in Connected Imaging
The New Kodak Well Positioned in “Connected Imaging” Connecting personal content to the TV, mobile device, PC and retail commercial hubs
Slide 57: CDG Portfolio
The New Kodak CDG Portfolio Broad footprint with Cameras & Kiosks, high growth with CMOS, Inkjet printers & Connected Imaging
Slide 58: Kodak CMOS Redefines Mobile Quality
Kodak CMOS Redefines Mobile Quality 5 mp, ¼” CMOS Sensor
Slide 59: Inkjet's Breakthrough Value Broadly Accepted
Inkjet’s Breakthrough Value Broadly Accepted
Slide 60: Making Progress Toward Target Model
* SOURCE: NPD, does not include Mass, Direct channels Making Progress Toward Target Model
Slide 61: CDG Revenue and Margin Targets
Revenue $3.0B $3.2B $3.5B - $3.7B % growth 8% 10% - 12% 25% - 26% 26% Gross 21% Expanded portfolio Profit across all businesses + Inkjet printers 116% - 17% 18% SGA + Kiosks, dry labs 19% -DSCs R&D + Digital frames 6% -7% + First mobile solutions 8% New categories 2% - 3% EFO 7% 2006 2007 2008 Pro f
Slide 62: 2008-2011 CAGR
2008 — 2011 CAGR 12% - 14% 26% - 28% 25% - 26% 13% - 1494 Inkjet: annuities catch 16% - 179% hardware New products & new categories, higher growth Annuities > 25% of revenue Gab thd
Slide 63: The Growth Model
The Growth Model Frank Sklarsky Chief Financial Officer
Slide 64: Agenda
Agenda
Slide 65: 2007 Recap of Financial Results
2007 Recap of Financial Results Bridging the Change 2008 Priorities & Financial Model Cash Flow, Balance Sheet, Taxes & Net Earnings Looking Forward ....Target Business Model Capital Allocation and Value Creation
Slide 66: Mission Accomplished
“Mission Accomplished”
Slide 67: Achieved All 2007 Key Metrics
Achieved All 2007 Key Metrics
Slide 68: Our Corporate Restructuring is Complete
Our Corporate Restructuring is Complete
Slide 69: Restructuring Charges 2007 and 2004-2007 Cumulative
2004 — 2007 2007 Cumulative Total Restructuring Charges $662M $3.4B Non-Cash Charges $388M $1.6B Cash Restructuring Payments $446M $2.1B Employment Reductions ~ 4,300 ~ 27,650
Slide 70: 2007 Net Cash Generation
2007 Net Cash Generation = $333M, greater than $100M goal Key Elements of Achievement: = Working Capital = Capital Spending = Proceeds = Efficient Restructuring Ended the year with almost $3B in cash
Slide 71: Building Transparency into our Digital Businesses
Building Transparency into our Digital Businesses The New Reporting Structure (effective 1/1/08)
Slide 72: New Operating Structure - 2007 Breakdown
New Operating Structure – 2007 Breakdown
Slide 73: 2008 Priorities & Financial Model
2008 Priorities & Financial Model
Slide 74: Priorities
Priorities
Slide 75: Review of Key Trends Under New Structure
Review of Key Trends Under New Structure
Slide 76: Key Drivers: Gross Profit, R&D, SG&A, EFO
Key 2006 2007 2008 : Pro forma Pro forma Drivers G = 2006/2007 - Continued integration & ross 5 » a, 570, ‘ationalization Profit ns ee 26% - 27% 2008 & Beyond — Expand portfolio. Unit placements drive annuity streams R&D 5.7% 5.3% 5% - 6% —* Focus on growing digital portfolio SG&A 18.7% 173.% 16% -
Slide 77: 2008 Targets: Traditional, Digital, Total
Traditional Digital Total FPEG CDG & GCG Revenue Change -14% to -12% 7% - 10% 0% - 2% Gross Profit 23% - 25% 26% - 28% 26% - 27% R&D 2% 6% -7% 5% - 6% SG&A ~15% ~17% 16% - 17% *EFO 6% - 8% 3% - 4% 4% - 5% *Excludes charges for carryover restructuring/rationalization
Slide 78: How Should We Think About Net Earnings for 2008?
How Should We Think About Net Earnings for 2008?
Slide 79: 2008 Net Earnings Outlook
(in $M, except per share data) Earnings from Operations $400M - $500M Carryover Restructuring and Other Cost Rationalization ($60 - $80) Earnings from Continuing Operations Before Interest, $360 - $400 Other Income (Charges), Net and Income Taxes Interest, Net Earnings from Continuing Operations Bef
Slide 80: Significant Improvement in Operating Cash Flow
Significant Improvement in Operating Cash Flow 2008 Cash Flow Plan
Slide 81: 2008 Cash Flow Plan
($ Millions) GAAP, Earnings From Continuing Operations Depreciation & Amortization Working Capital Restructuring/Rationalization Costs Other including impact of Cash Taxes & Liability Changes $250M - $275M ~675 ~50 ~(150) (250) - (225) Net Cash Provided from Operating Activities — Continuing Operati
Slide 82: Ample Liquidity Provides Significant Flexibility
Ample Liquidity Provides Significant Flexibility
Slide 83: Resources and Capital Allocation 2008
Resources: Beginning 08 Cash Balance Cash Generation before dividends Sub-Total Capital Allocation: Dividends Debt Maturities Target Cash Balance Net Cash Avail. For Value Creation 2008 ~$3.0B $400M — $500M $3.4B - $3.5B $145M $300M ~$1.0B ~$2.0B
Slide 84: Looking Forward: Target Business Model
Looking Forward … Target Business Model
Slide 85: Digital Businesses Drive Overall Revenue Growth
Driving Digital Businesses Drives Overall Revenue Growth
Slide 86: Revenue Growth 2008-2011 CAGR
CDG 2008 2011 $10.3B - $10.5B CAGR 2008 — 2011 CDG & GCG = +10% to +12% FPEG = -14% to -12% Total = ~5%
Slide 87: 2011 Target Business Model
Traditional Digital Total FPEG CDG & GCG Revenue Range $2.0B-$2.2B $9.8B-$10B $11.8B-$12.2B Gross Profit R&D SG&A EFO 25% - 27% 2% - 3% 14% - 15% 8% - 10% 29% - 30% 5% - 6% ~15% 8% - 10% 28% - 30% ~5% ~15% 8% - 10%
Slide 88: Margin Targets 2007-2011
Gross Profit 4 SG&A 26% - 27% 6% - 17% 27% - 28% 28% - 30% 28% - 29% 15% - 16% “ 5% -7% T% - 9% 8% - 10% 4% - 5% EFO 3.3% o~* 2007 2008 2009 2010 2011 Pro forma Excludes restructuring/rationalization
Slide 89: Capital Allocation and Value Creation
Capital Allocation and Value Creation
Slide 90: Capital Allocation Philosophy
Capital Allocation Philosophy
Slide 91: Ongoing Cash Flow from Operations and Surplus Cash
Ongoing Cash Flow from Operations 4 Fund | Fund Planned Existing Organic Dividends) Growth in Existing Businesses Surplus Cash Including One-time Proceeds a en Add'l Strategic Add'l Debt Organic and/or Share Reduction Investment Bolt on Repurchase (Lower to Acquisitions Priority) Accelerate Growth
Slide 92: Key Criteria for Inorganic Investments
Key Criteria for Inorganic Investments
Slide 93: Criteria for Inorganic Investments
Must align to core Consumer Digital and/or Graphic Communications portfolio Must have attractive valuation multiple Must be quickly accretive Must have significant strategic and financial impact Healthy net liquidity provides flexibility in current economic environment
Slide 94: Corporate Restructuring is Complete
Corporate Restructuring is Complete Significant Liquidity Position Provides Flexibility Focus on Growing Digital Businesses Sound Criteria for Evaluating Capital Deployment
Slide 95: Kodak
Kodak