Eastman Kodak Company · NYSE:KODK
Eastman Kodak — Investor Day (February 2009)
78 slides from Eastman Kodak's investor day presentation, Feb 4, 2009
Slide 1: Slide 1
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 ststements in these presentations may be fonwandleokng in nature, ororwsrdsooking tstements’ as dafed in the United Stats Private Secures Litgation Reform Act of 1096, For example
Slide 3: Non-GAAP financial measures notice
This Investor Meeting presentation, Eastman Kodak Company (“The Company’) referenced certain non-GAAP financial measures including “1 Haif Digital Revenue Growth’, ‘Double-Digit Digital Revenue Growth, “Digital Revenue Target’, "Traditional Revenue Target, “Segment Earnings Target’, ‘Segment Earning
Slide 4: Presenters: Perez, Hellyar, Faraci, Sklarsky
Antonio M. Perez, Chairman and CEO Mary Jane Hellyar, President, FPEG Phil Faraci, President and Chief Operating Officer Frank Sklarsky, Chief Financial Officer
Slide 5: Key Messages
Key Messages
Slide 6: 2009 starts with a strong cash position and solid balance sheet
«2009 starts with a strong cash position and solid balance sheet =We build upon stable, cash-generating businesses =Our core investments are demonstrating traction in a tough economic environment =Our core investments reflect breakthrough technology and differentiated, sustainable value propositions
Slide 7: Rapidly falling global demand reduces revenue
*Rapidly falling global demand reduces revenue =Tight credit reduces demand for capital equipment «Drastic change in top line requires reduction in cost structure =Volatile commodities and currencies add variability
Slide 8: Focus on our customers
«Focus on our customers «Continue to invest in our core businesses «Align cost structure to new top line "Conserve cash «Transform parts of the portfolio
Slide 9: YOY Revenue (Q3 2008)
YOY Revenue Digital revenues grew 10% = Four consecutive quarters of double-digit growth Traditional revenues in line = 7 with forecast 2 = Entertainment Imaging stable- = modest declines 208 Introduction of innovative new products Traditional = Strong showing at drupa- Digital Stream “star” of the
Slide 10: YOY Revenue (Q4 2008)
YOY Revenue = Global retail markets collapsed oe = Price/mix pressures on a consumer electronics : 7 i i Traditional = Held or improved key a a market positions aa Digital = Consumer Inkjet grew in ad a declining industry ol = Rapid decline in global Earnings Diminished print demand J = Weak demand
Slide 11: Balanced portfolio of digital imaging applications
= Balanced portfolio of Commercial & Consumer | IMAGE Ss digital imaging applications se = Higher margin driven by recurring consumables = Capture opportunities | in large market | KAMER transformations Gwe
Slide 12: 2009 Revenue by segment
2009 Revenue GCG Graphic Communications Group Enterprise Solutions Inkjet Printing Solutions Electrophotographic Printing Solutions Prepress Solutions Document Imaging $3B Digital A ——— CDG Consumer Digital Group Inkjet Systems Digital Capture and Devices Retail System Solutions Consumer Imaging Ser
Slide 13: 2008 Revenue: cash generators, core investments, transform
2008 Revenue $6 B Cash Generators — Profitable and sustainable $ 1B Core Investments — Large, sustainable growth potential $2B Transform - Improve margins, maximize cash or partner
Slide 14: Portfolio categorization
umer Inkjet mmercial Inkjet (Stream) Enterprise Solutions Cash Generators Investments Ivansiorm Prepress Solutions Film Capture 1 Document Imaging J Traditional Photofinishing Digital Capture & Devices Graphics Arts Film Retail System Solutions Image Sensors Entertainment Imaging Kodak Gallery Elect
Slide 15: Growth, market position and relative profitability
Growth Market Position Relative Profitability GCG CDG Prepress Document Digital Capture Retail Solutions Imaging Devices System {Includes IP Licensing) Solutions 4 —_ Innovative \ 2) new products Track GDP Track GDP Strengthening Greater than Intellectual GDP Property Licensing Market leader Top 3 T
Slide 16: Large market opportunity >$100B
°——— Large market opportunity >$100B Breakthrough technologies & strong IP Differentiated value proposition We are creating high margin annuity businesses
Slide 17: Maximize cash and reposition
d Maximize fe Exit Short-term Cash Reposition Qualex Color Paper Image Sensors Consumer Kodak Gallery Fil yt Electrophotographic Printing Graphic Arts Films OLED We are taking actions to extract the maximum value from these products and technologies
Slide 18: Actions for transform businesses
Image Sensors = Profitable CCD business = Intellectual property = CMOS know-how = Joint venture » Partner/Alliance = Licensing program = Large installed base = Powerful brand Form alliance Expand to social network = Know-how Kodak Galle ry = Strong network IP = Expand advertising & merchandising = L
Slide 19: Cash Generators, Core Investment, Transform
= Cash Generators = Margin improvement, including cost reductions = Strengthen IP licensing = Core Investment = Continued investment in core strategy = Align consumer inkjet distribution to optimal customer profile Segment Earnings $900 500 00 000 = Transform = Drive margin improvements = Partnering
Slide 20: Weak economic climate continues
"Weak economic climate continues = 2009 mirrors second half of 2008 "Cost reductions in progress, most completed by the end of Q2 2009
Slide 21: 2009 revenue and earnings outlook
Digital -6% to -12% Revenue Decline -12% to -18% Traditional -25% to -30% Segment Earnings $0 — $200M Cash Generation $75M - $325M before dividends & restructuring
Slide 22: 2009 business outlook by unit
Digital Capture & Devices has modest growth Retail System growth driven by conversion to dry mini labs Entertainment Imaging has modest declines Prepress Solutions and Document Imaging track GDP Consumer Inkjet gains share; breaks even during 2011 Stream Press marketplace entrance moves up to early
Slide 23: Cash Generators, Core Investments, Transform
=Cash Generators = Growth returns when economy recovers = Growth in low-single digits = Remain stable profitable cash generators =Core Investments = Innovative products drive high growth = Shift from investment mode to profit generators = Mix shifts to high margin annuities "Transform = Continued ma
Slide 24: Target business model
Gross Profit SG&A R&D Segment Eamings 26% 27% -28% 23% 26% 24% - 22% - 25% 14% - % 23% 15% 11% ra 17% 16% 15% -
Slide 25: 2009 starts with a strong cash position and solid balance sheet
=2009 starts with a strong cash position and solid balance sheet =We build upon stable, cash-generating businesses =Our core investments are demonstrating traction in a tough economic environment =Our core investments reflect breakthrough technology and differentiated, sustainable value propositions
Slide 26: Slide 26
Slide 27: Strong cash generation continues for 2009-2012
= Strong cash generation continues for. 2009-2012 * Across the portfolio Ws * On-going improvements in working capitals (ANA = Operating margins stabilize at 6% - 8% by end of period =Continued focus on aggressive cost reductions = Streamlined, platformed product portfolio = Leveraged operational ef
Slide 28: Film, Photofinishing and Entertainment Group portfolio
Unit Portfolio Revenue Entertainment Imaging Traditional Photofinishing Film Capture Other Film Products Capture, Print, & Intermediate Films, Digital Services & Cinema Color Paper, Chemistry Consumer Roll Film, Single Use Cameras, Professional Film Graphics Arts Film, Aerial Film, PCB Film, Mig Ser
Slide 29: Key industry metrics in 2008
= Several key industry metrics showed strength in 2008* = Global box office grew at an estimated 5% = U.S. box office held roughly even with last year’s record =Economy and U.S. labor actions significantly impacted 2008 = Feature film production slowed mid-year = TV production soft in Q1 due to writ
Slide 30: Box office and 3D screen forecast
—— 2008 Base Case) 60% wooo 2009 Base Case 12% } 2 2000 macual 1 Original 2008 Forecast ae) 3 10000 ® 8000 2“ = 6000 + é = Gf 30% 2 4000 + 2 * 2000 + B 20% —_ 2 L 2005 2006 2007 2008 * 0% 0% 2006 =2008 Base Case: Driven by 3D optimism =2008 Actual: Significantly lower than forecast due to tight cred
Slide 31: Digital screens share
% Digital Screens 100% 80% 60% 40% 20% 0% 2007 2008 2009 2010 Base Case: Industry Forecast 201 202 «Impact of digital on print film market remains small = Kodak color print film has a strong, stable share = Roughly 8% of worldwide 1st run screens digital at end of 2008, up from 7% in 2007 & to be ge
Slide 32: Origination film substitution
Origination Film Substitution = Digital substitution rates “y [Base Case vary significantly by aa geography & production segment = Many “on set” digital workflow and data management issues 2007 © 2008200820 tok nO remain =Industry likely to take measured approach to adoption isplacement
Slide 33: Moving to a more variable cost model
=Continue moving to a more variable cost model «Leverage all silver halide technologies to achieve economies of scale = Product platforming ee ee = Optimized manufacturing asset utilization : =Create tighter go-to-market linkage between film and paper = Sharpen focus on “winning” customers & key pro
Slide 34: Maintaining Focus on Core Investment Areas
Maintaining Focus on Core Investment Areas Breakthrough Technology and Strong Intellectual Property
Slide 35: Strong traction from Consumer Inkjet
= Strong traction from Consumer Inkjet business =Commercial Inkjet (Stream) moving forward as planned =Recent workflow acquisitions strengthen the value proposition within Enterprise Solutions . ae la) wy a & ati =
Slide 36: Consolidating back-office operations
= Consolidating back-office operations = Significant reduction in administrative cost across all segments = Product / SKU simplification = Consolidation of equipment manufacturing = Focusing on core investments
Slide 37: Consumer Digital Group units
Unit Digital Capture and Retail System Inkjet Imaging Consumer Imaging Devices Solutions ‘Systems Sensors Services Products Digital cameras, IP, Retail kiosks, Desktop inkjet CMOS &CCD_ || Web merchandise Frames & imaging dry labs, service printers, inks, sensors, and services appliances, Mobile, pr
Slide 38: Higher printer price premium and consumables use
15% - 35% ~* HIGHER =Printer price premium a =Message resonates in tough economic environment = Breakthrough value proposition a a gel = 2x industry connect with high-use consumers) gs se os = 50% color cartridge mix a a da = 8 cartridges used per year, well above industry average
Slide 39: A winning value proposition
*A winning value proposition = Document quality and durability = Lab quality photos = Easy to use = Unique consumables value pricing 2 4%} " Delivered by Kodak Technology 3 2.0) = MEMS printhead = Pigment inks = Micro-porous papers = Color, image and materials science 5,500 5,000 4,500 S 3.500 g 2,5
Slide 40: Consumer Inkjet revenue mix and breakeven in 2011
Paper Double Digits Hardware R&D Single Digits High Single / Low Double Digits Revenue Mix Objective Operating Expense Structure 40% Blended Gross Margin 15% EFO Consumer Inkjet to breakeven during 2011
Slide 41: Consumer Inkjet sales and installed base
Portfolio — = cM Sales Sell-in 520K Sell-through 320K Installed base 320K Established footprint Distribution aa Market Down 5% 780K 730K 1,050K Expanded geographically Added accounts 2009 Outlook Broader >2X installed base ‘Add/Refocus accounts Focus on velocity
Slide 42: Slide 42
Slide 43: Graphic Communications Group units
Revenue Product 2009 Unit Products Position Digital Printing ah - Prepress Document Imaging Enterprise Inkjet Printing __Electrophotographic Solutions Solutions Solutions Solutions Solutions + Plates * Production + Production Workfiow | [» Imprinting ~ B&W Production + Platesetters ‘Scanners + Colla
Slide 44: Stream quality, cost and flexibility
Quality Offset quality Throughput y Cost Offset-compatible - 1 } Competitive with offset printing Workflow Flexibility Digital efficiency, lean inventory, * Coated and uncoated, short cycle times, variable print commercial substrates + Broad applications from commercial print to packaging
Slide 45: Stream drop size, resolution and inks
Smaller drops Higher resolution Kodak’s inks Color and workflow
Slide 46: KODAK Stream Inkjet Technology
KODAK Stream Inkjet Technology
Slide 47: Stream applications markets
+ Color CRM Print Service Provider Consolidation + Shorter run lengths Distributed printing Targeted advertising Data Print + Transactions Statements TransPromo Direct mail Publishing + Books Magazines Newspapers Commercial + Direct mail Catalogs Inserts Packaging + Corrugates Folding cartons & labe
Slide 48: Pages moving from offset to digital
3-4T additional 1-2T by 2015 Current digital print technologies lack the cost advantage and throughput Stream enables more offset Pages to move to digital Traditional Offset Pages 74 Trillion Pages
Slide 49: Drive digital print in commercial and publishing
ES Drive Digital Print in Commercial and Publishing e 2 < Stream Print Head Imprinting a Laser print quality i Stream Press 2 Offset ci on comm ers S001 cost page
Slide 50: Stream revenue mix and breakeven in 2012
Revenue Mix Objective Operating Expense Structure 40%-45% Blended Gross Margin 12%-15% EFO Focus on hardware placement and breakeven during 2012
Slide 51: Frank Romano
Frank Romano Professor Emeritus School of Print Media Rochester Institute of Technology
Slide 52: Tightly focusing on core investments
=Tightly focusing on core investments = Consumer Inkjet = Stream = Workflow =Key technologies are resonating with customers in spite of challenged economy = 2009 — Caution, tight financial control = Ready to grow with improving economy
Slide 53: Agenda
Agenda
Slide 54: Financial presentation agenda
2008 Financial Results 2009 Priorities Aligning to External Realities Financial Strength to Fund Core Strategy Target Business Model & Outlook
Slide 55: 2008 Financial Summary
2008 Financial Summary
Slide 56: 2008 financial results
2007 2008 — Market declines Revenue $10.3B $9.4B : ; — Negative price/mix impacts (As a % of revenue): : Gross Margin 26% 23% — Higher commodity costs ] SG&A 17% 17% * Reduction in SGA/OPEB osts RED 5% 6% ‘+ Lengthened asset useful lives Segment Earnings 3% <1% + Held or improved market hare ¢ Rapid
Slide 57: Cash generation before dividends
2007* 2008* Cash Generation before dividends $477M ($5M) Cash Generation before dividends & $923M $138M restructuring — Revenue declines due primarily to external environment — Gross profit declines due to volume, price/mix, commodity cost pressures — Lower cash from intellectual property arrangemen
Slide 58: 2009 Priorities
2009 Priorities
Slide 59: Align cost structure with external realities
Align cost structure with external economic realities and new revenue forecast Fund core investments Consumer Inkjet Stream Workflow Transform portfolio Drive positive cash flow before dividends and restructuring
Slide 60: Weak economic climate to continue into 2009
=Weak economic climate will continue well into 2009; ready to grow when market recovers «Unfavorable first half seasonality driven by weak economy «Cost reduction actions in process; majority completed by end of first half 2009 «Exchange rate volatility expected to continue, particularly given uncer
Slide 61: 2009 revenue and margin outlook
2008 2009 Revenue $9.4B $7.7B - $8.3B (As a % of revenue): Gross Margin 23% 22% - 23% SG&A 17% 16% - 17% R&D 6% 5% Segment Earnings <1% 0% to 2% Cost structure planned around conservative revenue forecast; Earnings improvement driven by better mix and cost reductions es
Slide 62: Impact on gross profit
Impact on Gross Profit: Weak Global Demand Product Portfolio & Mix Management Manufacturing/Purchasing Productivity & Raw Material Costs ++! Currency Volatility
Slide 63: Restructuring charges and cash payments
2008 2009 2010 Restructuring Charges $149M $250M - $300M Minimal Corporate Cash Payments, including prior year carryover $143M $225M-$275M $20M-$40M Q4 2008 Rationalization Actions and 2009 Restructuring Program + 3,500 — 4,500 Global Workforce Reduction in 2009 - Annual Savings of $300M - $350M — Q
Slide 64: 2009 outlook by digital and traditional
Digital CDG & GCG Traditional FPEG Total Revenue Change -6% to -12% -25% to -30% -12% to -18% (As a % of revenue): Gross Margin 23% - 24% 21% 22% - 23% SG&A 17% - 18% 14% - 15% 16% -17% R&D 6% 1% -2% 5% Segment Earnings -2% to 2% 5% 0% - 2%
Slide 65: 2009 EBITDA and cash generation outlook
2009 Total Revenue $7.7B - $8.3B Segment Earnings $0 — $200M GAAP Loss from Continuing 400M) — ($200M Operations Add: Interest, Net t Med ) Taxes 60-90 Depreciation & Amortization 475 EBITDA $200M - $400M EBITDA, excluding Restructuring $475M - $675M Cash Generation before Dividends & $75M - $325M R
Slide 66: 2009 segment earnings to GAAP loss
(in $M, except share count) Segment Earnings Other Income (Expense) Restructuring Loss from Continuing Operations Before Interest,Net, Other Income (Charges), Net and Income Taxes Interest, Net Loss from Continuing Operations Before Income Taxes Income Tax GAAP Loss from Continuing Operations 2008 E
Slide 67: Tax rate and cash taxes
"Effective rate for income statement = Changes in valuation allowances may impact P&L rate = Expect variation between quarters during the year = Income tax provision $60M to $90M "Cash taxes to be approximately $100M - $120M
Slide 68: Drivers of positive cash flow
=Improved segment earnings =Continued improvements in working capital =Strict discipline over capital spending =Incremental proceeds from asset sales =Continue Intellectual Property licensing Driving positive cash flow before dividends & restructuring
Slide 69: 2009 cash generation bridge
(in $M) GAAP Loss From Continuing Operations Depreciation & Amortization Working Capital Restructuring payments Other — Add back Restructuring charges, Net pension/OPEB payments, other ($400) - ($200) 475 100 (275) - (225) (25) - 25 Net Cash Provided from Operating Activities — Continuing Operations
Slide 70: Debt maturities
(sm) 750 $620M* $552M 500 250 $50M $43M. $40M. 9/1/09 ——. 0 2009 «= 200 2011 2012 2013+ * $575M convertible bond maturing 2033; October 2010 is first put/call date
Slide 71: 2009 resources and capital allocation
($M) Resources: 2009 Beginning 2009 Cash Balance $2,145 Cash Generation before Dividends & Restructuring $75 - $325 Sub-Total $2,220 - $2,470 Capital Allocation: Restructuring $275 - $225 Dividends $135 Debt Maturities $50 Target Cash Balance $1,000 Cash Cushion Provides Flexibility $760 - $1,060
Slide 72: Key Planning Period Assumptions
Key Planning Period Assumptions
Slide 73: Planning assumptions by segment
CDG + Digital Capture & Devices — modest growth + Consumer Inkjet — achieve targeted installed base with high mix of consumables + Retail Systems Solutions - maintain Kiosk/Dry Lab leadership, stable margins through very high mix of consumables GCG + Prepress Solutions - simplified cost structure, s
Slide 74: Revenue growth 2009-2012
2009 2012 $7.7B - $8.3B $8.7B - $9.3B 3 Year CAGR 2009 — 2012 CDG & GCG = +8% to +10% FPEG =-14% to -12% Total = 4%
Slide 75: 2012 target business model
Digital Traditional Total CDG & GCG FPEG $7.4B - Revenue $7.8B $1.3B - $1.5B $8.7B - $9.3B (As a % of revenue): Gross Margin 28% - 29% 20% - 21% 27% - 28% SG&A 14% - 15% 12% - 13% 14% - 15% R&D 5% - 6% 1% 5% Segment Earnings 8% -9% 6% - 8% 8%
Slide 76: Revenue and margin trajectory
2008 Total Revenue $9.48 3 Year CAGR ‘09 -"12 4% Digital Revenue $6.48 3 Year CAGR ‘09 -"12 8% to 10% Gross} 990, Profit 27% - 28% 23% 24% - 25% Segment Earnings 22% - 23% SG38A R&D 2007 2008 2009 2010
Slide 77: Unprecedented economic environment
Unprecedented economic environment Improved profitability driven by better mix, higher annuities, lower costs Tightly focusing investments in core portfolio Strong cash position and solid balance sheet provide financial flexibility
Slide 78: Slide 78