<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 1-87
EASTMAN KODAK COMPANY
(Exact name of registrant as specified in its charter)
NEW JERSEY 16-0417150
(State of incorporation) (IRS Employer
Identification No.)
343 STATE STREET, ROCHESTER, NEW YORK 14650
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 716-724-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of Shares Outstanding at
Class June 30, 1997
Common Stock, $2.50 par value 325,807,294
<PAGE> 2
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF EARNINGS
<CAPTION>
(in millions)
Second Quarter First Half-Year
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES
Sales $3,853 $4,117 $6,986 $7,505
Earnings from equity
interests and other revenues 37 85 106 143
------ ------ ------ ------
TOTAL REVENUES 3,890 4,202 7,092 7,648
------ ------ ------ ------
COSTS
Cost of goods sold 2,015 2,100 3,658 3,876
Selling, general and
administrative expenses 1,021 1,137 1,870 2,108
Research and development costs 266 247 523 488
Purchased research and
development - - 186 -
Interest expense 21 21 43 39
Other costs 9 37 29 56
------ ------ ------ ------
TOTAL COSTS 3,332 3,542 6,309 6,567
------ ------ ------ ------
Earnings before income taxes 558 660 783 1,081
Provision for income taxes 190 220 266 367
------ ------ ------ ------
NET EARNINGS $ 368 $ 440 $ 517 $ 714
====== ====== ====== ======
Earnings per share $ 1.12 $ 1.30 $ 1.57 $ 2.09
CONSOLIDATED STATEMENT OF
RETAINED EARNINGS
Retained earnings at beginning
of period $5,928 $5,323 $5,931 $5,184
Net earnings 368 440 517 714
Cash dividends declared (144) (135) (291) (272)
Other changes 1 5 (4) 7
------ ------ ------ ------
RETAINED EARNINGS
at end of period $6,153 $5,633 $6,153 $5,633
====== ====== ====== ======
- ------------------------------------------------------------------
See Notes to Financial Statements
</TABLE>
<PAGE> 3
<TABLE>
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<CAPTION>
(in millions)
June 30, Dec. 31,
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 371 $ 1,777
Marketable securities 29 19
Receivables 2,884 2,738
Inventories 1,730 1,575
Deferred income tax charges 654 644
Other 270 212
------- -------
Total current assets 5,938 6,965
------- -------
PROPERTIES
Land, buildings and equipment at cost 12,814 12,585
Less: Accumulated depreciation 7,194 7,163
------- -------
Net properties 5,620 5,422
------- -------
OTHER ASSETS
Goodwill (net of accumulated amortization
of $399 and $366) 624 581
Long-term receivables and other
noncurrent assets 1,359 1,238
Deferred income tax charges 277 232
------- -------
TOTAL ASSETS $13,818 $14,438
======= =======
- -----------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 3,397 $ 4,116
Short-term borrowings 874 541
Taxes - income and other 586 603
Dividends payable 144 133
Deferred income tax credits 31 24
------- -------
Total current liabilities 5,032 5,417
OTHER LIABILITIES
Long-term borrowings 610 599
Postemployment liabilities 2,969 2,967
Other long-term liabilities 853 659
Deferred income tax credits 74 102
------- -------
Total liabilities 9,538 9,704
SHAREHOLDERS' EQUITY
Common stock at par* 978 978
Additional capital paid in or
transferred from retained earnings 911 910
Retained earnings 6,153 5,931
Accumulated translation adjustment (60) 75
------- -------
7,982 7,894
Less: Treasury stock at cost* 3,702 3,160
------- -------
Total shareholders' equity 4,280 4,734
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $13,818 $14,438
======= =======
<FN>
* Common stock: $2.50 par value, 950 million shares authorized,
391 million shares issued as of June 30, 1997 and as of December
31, 1996. Treasury stock at cost consists of approximately 65
million shares at June 30, 1997 and 59 million shares at December
31, 1996.
- -----------------------------------------------------------------
See Notes to Financial Statements
</TABLE>
<PAGE> 4
<TABLE>
Eastman Kodak Company and Subsidiary Companies
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(in millions)
First Half-Year
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 517 $ 714
Adjustments to reconcile above earnings to
net cash provided by operating activities,
excluding the effect of initial consolidation
of acquired companies:
Depreciation and amortization 390 442
Purchased research and development 186 -
Benefit for deferred taxes (68) (22)
(Gain) loss on sale and retirement of properties (16) 40
Increase in receivables (197) (166)
Increase in inventories (193) (310)
(Decrease) increase in liabilities excluding
borrowings (366) 73
Other items, net (160) (138)
------ ------
Total adjustments (424) (81)
------ ------
Net cash provided by operating activities 93 633
------ ------
Cash flows from investing activities:
Additions to properties (678) (532)
Proceeds from sale of properties
and investments 54 44
Acquisitions, net of cash acquired (316) -
Marketable securities - sales 10 35
Marketable securities - purchases - (16)
Cash flows related to sales of non-imaging
health businesses (65) (1)
------ ------
Net cash used in investing activities (995) (470)
------ ------
Cash flows from financing activities:
Net increase (decrease) in borrowings
with original maturity of
90 days or less 540 (206)
Proceeds from other borrowings 699 853
Repayment of other borrowings (865) (659)
Dividends to shareholders (280) (274)
Exercise of employee stock options 82 124
Stock repurchases (659) (827)
------ ------
Net cash used in financing activities (483) (989)
------ ------
Effect of exchange rate changes on cash (21) 2
------ ------
Net decrease in cash and cash equivalents (1,406) (824)
Cash and cash equivalents, beginning of year 1,777 1,764
------ ------
Cash and cash equivalents, end of quarter $ 371 $ 940
====== ======
- -----------------------------------------------------------------
See Notes to Financial Statements
</TABLE>
<PAGE> 5
NOTES TO FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The financial statements have been prepared by the Company in accordance
with the accounting policies stated in the 1996 Annual Report and should
be read in conjunction with the Notes to Financial Statements appearing
therein. In the opinion of the Company, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation
have been included in the financial statements. The statements are
based in part on estimates and have not been audited by independent
accountants. The annual statements will be audited by Price Waterhouse
LLP.
NOTE 2: COMMITMENTS AND CONTINGENCIES
The Company and its subsidiary companies are involved in lawsuits,
claims, investigations and proceedings, including product liability,
commercial, environmental, and health and safety matters, which are
being handled and defended in the ordinary course of business. There
are no such matters pending that the Company and its General Counsel
expect to be material in relation to the Company's business, financial
position or results of operations.
NOTE 3: ACQUISITION OF WANG LABORATORIES' SOFTWARE UNIT
On March 17, 1997, the Company acquired Wang Laboratories' software
business unit for approximately $260 million in cash. The unit is
engaged in the development of workflow, imaging, document management and
network storage management software. The transaction was accounted for
by the purchase method and, accordingly, the operating results of the
business have been included in the accompanying consolidated financial
statements from the date of acquisition.
In connection with the acquisition, the Company recorded a pre-tax
charge of $186 million in purchased research and development expense in
the first quarter. The amount attributed to purchased research and
development was determined by a nationally recognized independent
valuation firm through established valuation techniques in the high
technology document imaging industry. The amount was expensed upon
acquisition as the technology has not reached technological feasiblity
and has no alternative future use.
David J. FitzPatrick,
Controller and Vice President
August 13, 1997
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
<TABLE>
SUMMARY
<CAPTION>
(in millions, except earnings per share)
Second Quarter First Half-Year
1997 1996 Change 1997 1996 Change
<S> <C> <C> <C> <C> <C> <C>
Sales $3,853 $4,117 - 6% $6,986 $7,505 - 7%
Net earnings 368 440 -16 517 714 -28
Earnings per share 1.12 1.30 -14 1.57 2.09 -25
</TABLE>
1997
The Company results for the first half-year include a pre-tax charge of
$186 million ($.37 per share after tax) for in-process research and
development (R&D) associated with the acquisition of Wang Laboratories'
software unit on March 17, 1997. Excluding this charge, net earnings
per share for the first half-year would have been $1.94.
1996
During the 1996 second quarter, the Company initiated a $2 billion share
repurchase program which is expected to be completed by mid-year 1998.
- ----------------------------------------------------------------------
<TABLE>
Sales by Industry Segment
(in millions)
<CAPTION>
Second Quarter First Half-Year
1997 1996 Change 1997 1996 Change
<S> <C> <C> <C> <C> <C> <C>
Consumer Imaging
Inside the U.S. $ 986 $ 903 + 9% $1,611 $1,461 +10%
Outside the U.S. 1,135 1,124 + 1 2,012 2,021 0
------ ------ --- ------ ------ ---
Total Consumer Imaging 2,121 2,027 + 5 3,623 3,482 + 4
------ ------ --- ------ ------ ---
Commercial Imaging
Inside the U.S. 816 1,031 -21 1,592 1,964 -19
Outside the U.S. 923 1,066 -13 1,785 2,074 -14
------ ------ --- ------ ------ ---
Total Commercial Imaging 1,739 2,097 -17 3,377 4,038 -16
------ ------ --- ------ ------ ---
Deduct Intersegment Sales (7) (7) (14) (15)
------ ------ --- ------ ------ ---
Total Sales $3,853 $4,117 - 6% $6,986 $7,505 - 7%
====== ====== === ====== ====== ===
</TABLE>
- -------------------------------------------------------------------------
<PAGE> 7
<TABLE>
Earnings from Operations by Industry Segment
<CAPTION>
(in millions)
Second Quarter First Half-
Year
1997 1996 Change 1997 1996 Change
<S> <C> <C> <C> <C> <C> <C>
Consumer Imaging $353 $422 -16% $ 498 $ 583 -15%
Percent of Sales 16.6% 20.8% 13.7% 16.7%
Commercial Imaging $197 $209 - 6% $ 252 $ 448 -44%
Percent of Sales 11.3% 10.0% 7.5% 11.1%
---- ---- --- ------ ------ ---
Total Earnings from Operations $550 $631 -13% $ 750 $1,031 -27%
==== ==== === ====== ====== ===
</TABLE>
- ---------------------------------------------------------------------------
<TABLE>
COSTS AND EXPENSES
<CAPTION>
(in millions)
Second Quarter First Half-Year
1997 1996 Change 1997 1996 Change
<S> <C> <C> <C> <C> <C> <C>
Gross profit $1,838 $2,017 - 9% $3,328 $3,629 - 8%
Percent of Sales 47.7% 49.0% 47.6% 48.4%
Selling, general and
administrative expenses $1,021 $1,137 -10% $1,870 $2,108 -11%
Percent of Sales 26.5% 27.6% 26.8% 28.1%
Research and development costs $ 266 $ 247 + 8% $ 523* $ 488 + 7%
Percent of Sales 6.9% 6.0% 7.5% 6.5%
* Excludes $186 million R&D charge associated with the purchase of Wang
Laboratories' software unit.
- -------------------------------------------------------------------------
</TABLE>
1997 COMPARED WITH 1996
Second quarter
For the second quarter of 1997, sales decreased 6% compared with the
second quarter of 1996, due to the sale of the Office Imaging business
on December 31, 1996. With Office Imaging sales excluded from both
years, sales were up 2% on a year-over-year basis, or up 5% excluding
the effects of the stronger dollar.
Sales in the Consumer Imaging segment increased 5%, due to higher unit
volumes partially offset by lower effective selling prices and the
unfavorable effects of foreign currency rate changes. Excluding the
impact of the stronger dollar, sales would have increased 8%. Sales
inside the U.S. increased 9%, or $83 million, of which $40 million are a
result of the Company's acquisition of Fox Photo, Inc. in October, 1996.
Sales outside the U.S. increased 1%, due to higher unit volumes offset
by the unfavorable effects of foreign currency rate changes and lower
effective selling prices.
Worldwide film sales increased 2%, as a 9% volume increase was largely
offset by lower prices and negative foreign exchange. U.S. film sales
were essentially level, with 4% volume growth offset by lower prices,
principally in the one-time-use camera category. Outside the U.S., film
sales increased 3%, with a 15% volume growth partially offset by lower
prices and the unfavorable effects of foreign currency rate changes.
<PAGE> 8
Worldwide color paper sales decreased 2%, as 11% volume gains were more
than offset by negative price and unfavorable foreign exchange. U.S.
sales decreased 15%, driven by a 7% decline in volumes and lower prices
caused by recent consolidation of the U.S. photofinishing industry.
While this unfavorable year-over-year comparison will continue for the
balance of 1997, we expect the magnitude of the decline to lessen in the
second half. Paper sales outside the U.S. increased 6%, driven by a 21%
volume increase partially offset by lower price and unfavorable foreign
exchange. Sales increases reflect the impact of continuing growth in
emerging markets.
Sales in the Commercial Imaging segment decreased 17%, largely due to
the sale of the Office Imaging business. Excluding the sales of Office
Imaging from both years, sales decreased 2% (or increased 1% excluding
the effects of the stronger dollar), as higher unit volumes were more
than offset by lower effective selling prices and the unfavorable
effects of foreign currency rate changes.
Earnings from operations for the Company decreased 13%, as the benefits
of higher unit volumes, reduced selling, general and administrative
expenses and manufacturing productivity were more than offset by lower
effective selling prices, the unfavorable effects of foreign currency
rate changes and write-offs of first generation Advantix camera tooling
and parts.
Earnings from operations in the Consumer Imaging segment decreased 16%,
as the benefits of higher unit volumes were more than offset by lower
effective selling prices, the unfavorable effects of foreign currency
rate changes and increased year-over-year losses from the Company's
Advantix business. The increased Advantix losses reflect principally
continued investment to ensure system success and a charge of $25
million ($.05 per share after tax) to write off tooling and parts for
some first generation Advantix cameras. The Company expects losses
attributable to Advantix in 1997 to exceed those of 1996.
Earnings from operations in the Commercial Imaging segment decreased 6%
as the benefits of reduced selling, general and administrative expenses
and manufacturing productivity were more than offset by lower unit
volumes, lower effective selling prices and the unfavorable effects of
foreign currency rate changes. Excluding the effects of the stronger
dollar, earnings from operations would have increased.
<PAGE> 9
Improvements in Entertainment Imaging and Kodak Professional were
insufficient to offset reduced earnings in Business Imaging, Health
Imaging and Digital & Applied Imaging. In Digital & Applied Imaging,
losses were higher in the 1997 second quarter compared with a year ago
and the rate of sales growth slowed during the period. Increased
expenses on a year-over-year basis reflecting the costs of integrating
acquisitions, the largest of which was the Company's purchase of Wang
Laboratories' software unit, also contributed to decreased earnings
primarily in the Company's Business Imaging Systems business unit. In
that unit, sales declined 3% on a year-over-year basis with level volume
offset by negative exchange. Kodak Professional continues its long-term
strategy to improve its cost structure while leveraging its strong
product portfolio, including computer-to-plate technology, improved
color reversal films and digital proofing systems. Strategic alliances,
such as the one recently announced with Heidelberg, should also improve
performance over the long haul. Health Imaging worldwide revenues were
down 7% on modest volume growth, unfavorable foreign exchange and
continuing price pressures in the medical X-ray line of products. Price
pressures and unfavorable foreign exchange caused a year-over-year
earnings decline. Entertainment Imaging continues its excellent
performance, with strong top line growth and record quarterly earnings.
For the second quarter of 1997, earnings from equity interests and other
revenues decreased $48 million primarily due to a reduction in interest
income attributable to lower average cash balances. Other costs
decreased $28 million due primarily to lower reportable foreign exchange
costs. The increase in the effective tax rate from 33% in the second
quarter of 1996 to 34% in the second quarter of 1997 was primarily due
to the effect, on the 1996 rate, of the expected increased utilization
of certain foreign tax loss carryforwards.
Year to date
For the first half of 1997, sales decreased 7% compared with the first
half of 1996, due to the sale of the Office Imaging business on December
31, 1996. With Office Imaging sales excluded from both years, sales
were up 2% on a year-over-year basis, or up 5% excluding the effects of
the stronger dollar.
Sales in the Consumer Imaging segment increased 4%, as higher unit
volumes were partially offset by lower effective selling prices and the
unfavorable effects of foreign currency rate changes. Excluding the
impact of the stronger dollar, sales would have increased 7%. Sales
inside the U.S. increased 10%, or $150 million, of which $73 million are
a result of the Company's acquisition of Fox Photo, Inc. in October,
1996. Sales outside the U.S. were level, as higher unit volumes were
offset by lower effective selling prices and the unfavorable effects of
foreign currency rate changes.
Worldwide film sales increased 2%, as an 11% volume increase was largely
offset by lower prices and unfavorable foreign exchange. U.S. film
sales increased 6%, with 10% volume growth partially offset by lower
prices. Outside the U.S., film sales decreased 1%, with a 12% volume
growth more than offset by lower prices and unfavorable foreign
exchange.
<PAGE> 10
Worldwide color paper sales decreased 3%, as 9% volume gains were more
than offset by negative price and unfavorable exchange. U.S. sales
decreased 16%, driven by lower prices and a 7% decline in volumes caused
by recent consolidation of the U.S. photofinishing industry. Paper
sales outside the U.S. increased 4%, driven by an 18% volume increase
partially offset by lower price and unfavorable foreign exchange. Sales
increases reflect the impact of continuing growth in emerging markets.
Sales in the Commercial Imaging segment decreased 16%, largely due to
the sale of the Office Imaging business. Excluding the sales of Office
Imaging from both years, sales decreased 1% (or increased 2% excluding
the effects of the stronger dollar), as higher unit volumes were more
than offset by lower effective selling prices and the unfavorable
effects of foreign currency rate changes.
Earnings from operations for the Company decreased 27%, as the benefits
of reduced selling, general and administrative expenses, higher unit
volumes and manufacturing productivity were more than offset by lower
effective selling prices, the R&D charge associated with the purchase of
Wang Laboratories' software unit in the first quarter 1997, the
unfavorable effects of foreign currency rate changes and write-offs of
first generation Advantix camera tooling and parts. Excluding the R&D
charge associated with the purchase of Wang Laboratories' software unit,
earnings from operations decreased 9%. Losses on the Company's digital
products portfolio, which are in both the Commercial and Consumer
segments, were in excess of $100 million for the first six months and
larger than the comparable 1996 period.
Earnings from operations in the Consumer Imaging segment decreased 15%,
as the benefits of higher unit volumes were more than offset by lower
effective selling prices, the unfavorable effects of foreign currency
rate changes and increased year-over-year losses from the Company's
Advantix business.
Earnings from operations in the Commercial Imaging segment decreased
44%, as the benefits of reduced selling, general and administrative
expenses were more than offset by the R&D charge associated with the
purchase of Wang Laboratories' software unit in the first quarter 1997,
lower effective selling prices, lower unit volumes and the unfavorable
effects of foreign currency rate changes. Excluding the R&D charge
associated with the purchase of Wang Laboratories' software unit,
earnings from operations decreased 2%. Improvements in Entertainment
Imaging and Kodak Professional were insufficient to offset reduced
earnings in Business Imaging, Health Imaging and Digital & Applied
Imaging.
For the first half of 1997, earnings from equity interests and other
revenues decreased $37 million primarily due to a reduction in interest
income attributable to lower average cash balances. Other costs
decreased $27 million due primarily to lower reportable foreign exchange
costs.
<PAGE> 11
With the Company facing continuing pressure from the effect of the
stronger dollar compared with 1996, encountering price pressures, making
investments to support the Advantix system and experiencing widening
losses in digital products, it is unlikely full year 1997 earnings per
share will exceed $4.50 (the 1996 earnings per share, adjusted to
exclude: $358 million ($256 million after tax) of restructuring costs, a
$387 million loss ($252 million after tax) related to the sale of the
Office Imaging business, and a gain on the sale of discontinued
operations of $277 million).
- -------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Available cash reserves and cash from operations have been and will be
used to complete the $2 billion stock repurchase program.
Net cash provided by operating activities for the first half of 1997 was
$93 million, as net earnings of $517 million, which included non-cash
expenses for depreciation and amortization of $390 million and a $186
million R&D charge associated with the purchase of Wang Laboratories'
software unit, were offset by decreases in liabilities (excluding
borrowings) of $366 million, a $197 million increase in receivables and
a $193 million increase in inventories. Net cash used in investing
activities of $995 million for the first half of 1997 was due primarily
to additions to properties of $678 million and acquisitions, net of cash
acquired, of $316 million. Net cash used in financing activities of
$483 million for the first half of 1997 was primarily due to $659
million of stock repurchases and $280 million of dividend payments.
During the second quarter of 1997, a cash dividend of $144 million (44
cents per share) was declared on the Company's common stock, versus $135
million (40 cents per share) a year ago. Total cash dividends declared
for the year-to-date periods of 1997 and 1996 amounted to $291 million
(88 cents per share) and $272 million (80 cents per share),
respectively.
Cash, cash equivalents and marketable securities were $400 million at
the end of the second quarter, compared with $1,796 million at year-end
1996. Net working capital at the end of the quarter was $906 million,
compared with $1,548 million at year-end 1996. Both decreases are
primarily attributable to the stock repurchase program and the
acquisition of Wang Laboratories' software unit.
Capital additions for the second quarter of 1997 were $369 million
compared with $282 million for the second quarter of 1996. For the
first half of 1997, capital additions were $678 million versus $532
million a year ago.
- -------------------------------------------------------------------------
<PAGE> 12
OTHER
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
Per Share." This standard replaces primary earnings per share with
basic earnings per share and requires presentation of diluted EPS as
well as a reconciliation of basic earnings per share to diluted earnings
per share. The Company plans to adopt SFAS No. 128 in the fourth
quarter of 1997 and at that time all historical earnings per share data
presented will be restated to conform to the provisions of SFAS No. 128.
The Company does not expect this statement to have a material impact on
its earnings per share.
- -------------------------------------------------------------------------
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this report may be forward looking in nature, or
"forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
identified by such words and phrases as "expects" and "is unlikely."
The sentence in this report that reads, in part, "... it is unlikely
full year 1997 earnings per share will exceed $4.50 ..." is a forward-
looking statement.
Actual results may differ from those expressed or implied in forward-
looking statements. With respect to any forward-looking statements
contained in this report, the Company believes that it is subject to a
number of risk factors, including: the Company's ability to implement
its product strategies (including strategies for digital products and
Advantix products) and to develop its business in emerging markets;
competitive actions; the nature and pace of technological development;
fluctuations in foreign currency; and general economic and business
conditions.
Any forward-looking statements in this report should be evaluated in
light of these important risk factors.
<PAGE> 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
In April 1987, the Company was sued in federal district court in San
Francisco by a number of independent service organizations who alleged
violations of Sections 1 and 2 of the Sherman Act and of various state
statutes in the sale by the Company of repair parts for its copier and
micrographics equipment (Image Technical Service, Inc. (ITS), et al v.
Eastman Kodak Company). The complaint sought unspecified compensatory
and punitive damages. Trial began on June 19, 1995 and concluded on
September 18, 1995 with a jury verdict for plaintiffs of $23,948,300
($71,844,900 after trebling). The Company's appeal of the jury's
verdict was argued in the 9th Circuit Court of Appeals on September 19,
1996, and a decision is awaited. The Company intends to continue to
vigorously defend the ITS case.
Three cases that raise essentially the same antitrust issues as ITS are
pending (Nationwide, et al v. Eastman Kodak Company, filed March 10,
1995, A-1 Copy Center, et al v. Eastman Kodak Company, filed December
13, 1993, and Broward Microfilm, Inc. v. Eastman Kodak Company, filed
February 27, 1996). The Nationwide and A-1 cases are pending in federal
district court in San Francisco, while Broward Microfilm is pending in
federal district court in Miami. A-1 is a consolidated class action,
while Broward Microfilm purports to be a national class action. The
complaints in all three cases seek unspecified compensatory and punitive
damages. As is the case in ITS, the Company is defending these matters
vigorously.
The Company has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (the Superfund law), or under similar
state laws, for environmental assessment and cleanup costs as the result
of the Company's alleged arrangements for disposal of hazardous
substances at approximately twenty Superfund sites. With respect to
each of these sites, the Company's actual or potential allocated share
of responsibility is small. Furthermore, numerous other PRPs have
similarly been designated at these sites and, although the law imposes
joint and several liability on PRPs, as a practical matter, costs are
shared with other PRPs. Settlements and costs paid by the Company in
Superfund matters to date have not been material. Future costs are not
expected to be material to the Company's financial position or results
of operations.
<PAGE> 14
Item 4. Submission of Matters to a Vote of Security Holders
The 1997 Annual Meeting of Shareholders of Eastman Kodak Company was
held on May 14.
A total of 266,154,146 of the Company's shares were present or
represented by proxy at the meeting. This represented more than 79% of
the Company's shares outstanding.
The individuals named below were elected to three-year terms as Class I
Directors:
Name Votes Received Votes Withheld
Martha Layne Collins 262,590,329 3,563,817
George M. C. Fisher 262,596,596 3,557,550
Paul E. Gray 262,622,868 3,531,278
John J. Phelan, Jr. 262,593,237 3,560,909
The individuals named below were elected to a one-year term as Class II
Directors:
Name Votes Received Votes Withheld
Harry L. Kavetas 262,616,367 3,537,779
Laura D'Andrea Tyson 262,203,077 3,951,069
Alice F. Emerson, Roberto C. Goizueta, Richard S. Braddock, Karlheinz
Kaske and Richard A. Zimmerman all continue as Directors of the Company.
The election of Price Waterhouse LLP as independent accountants was
ratified, with 264,745,936 shares voting for, 662,626 shares voting
against, and 745,584 shares abstaining.
The shareholder proposal concerning the annual election of directors was
approved, with 111,342,915 shares voting for, 110,009,242 shares voting
against, 5,215,434 shares abstaining, and 39,586,555 non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and financial statement schedules required as part of this
report are listed in the index appearing on page 16.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed or required to be filed for the
quarter ended June 30, 1997.
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
EASTMAN KODAK COMPANY
(Registrant)
Date August 13, 1997
David J. FitzPatrick
Controller and Vice President
<PAGE> 16
Eastman Kodak Company and Subsidiary Companies
Index to Exhibits and Financial Statement Schedules
Exhibit Page
No.
(10) C. Eastman Kodak Company Deferred Compensation Plan for
Directors, as amended and restated effective July 10, 1997. 17
(11) Computation of Earnings Per Common Share. 31
(27) Financial Data Schedule - Submitted with the EDGAR filing
as a second document to this Form 10-Q.
<PAGE> 17
Exhibit (10) C.
EASTMAN KODAK COMPANY
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Article Page
Preamble 20
1. Definitions 20
2. Term 22
3. Participation 22
4. Deferral of Compensation 22
5. Deferral Elections 22
6. Hypothetical Investments 23
7. Investment Elections 24
8. Payment of Deferred Compensation 26
9. Administration 28
10. Miscellaneous 28
11. Change in Control 29
Amended and Restated
Effective July 10, 1997
<PAGE> 18
Eastman Kodak Company
Deferred Compensation Plan For Directors
Table of Contents
Article Page
Preamble 20
1. Definitions 20
2. Term 22
3. Participation 22
4. Deferral of Compensation 22
5. Deferral Elections 22
5.1 In General 22
5.2 Timing 23
5.3 Irrevocability 23
5.4 Elections 23
6. Hypothetical Investments 23
6.1 Deferred Compensation Account 23
6.2 Stock Account 23
6.3 Time Accounts are Credited 23
6.4 Stock Account Crediting 24
7. Investment Elections 24
7.1 Elections 24
7.2 Elections into the Stock Account 24
7.3 Elections out of the Stock Account 25
7.4 Dividend Equivalents 25
7.5 Stock Dividends 25
7.6 Recapitalization 25
7.7 Distributions 26
8. Payment of Deferred Compensation 26
8.1 Background 26
8.2 Manner of Payment 26
8.3 Timing of Payments 26
8.4 Valuation 26
8.5 Payment of Deferred Compensation After Death 27
9. Administration 28
9.1 Responsibility 28
9.2 Authority of Administrator 28
9.3 Discretionary Authority 28
9.4 Delegation of Authority 28
<PAGE> 19
Eastman Kodak Company
Deferred Compensation Plan For Directors
Table of Contents Continued
Article Page
10. Miscellaneous 28
10.1 Participant's Rights Unsecured 28
10.2 Non-Assignability 28
10.3 Statement of Account 29
10.4 Amendment 29
10.5 Governing Law 29
10.6 Non Guarantee of Tax Consequences 29
10.7 Compliance with Securities Laws 29
11. Change In Control 29
11.1 Background 29
11.2 Payment of Deferred Compensation 30
11.3 Amendment On or After Change In Control 30
<PAGE> 20
EASTMAN KODAK COMPANY
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Preamble
The name of this Plan is the Eastman Kodak Company Deferred Compensation
Plan for Directors. Its purpose is to provide certain members of the
Board of Directors of Eastman Kodak Company with an opportunity to defer
compensation earned as a Director.
Article 1 Definitions
1.1 Account
"Account" means the Deferred Compensation Account or the Stock Account.
1.2 Administrator
"Administrator" means the Controller of Kodak.
1.3 Beneficiary
"Beneficiary" means the person or persons (including, but not limited
to, a trust) designated as such in accordance with Section 8.5(C).
1.4 Board
"Board" means Board of Directors of Kodak.
1.5 Cash Deferrable Amount
"Cash Deferrable Amount" means that portion of the Deferrable Amount
that would otherwise be paid to a Participant in cash.
1.6 Change in Control
"Change in Control" means a change in control of Kodak of a nature that
would be required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the Current Report of
Form 8-K, as in effect on August 1, 1989, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); provided that, without limitation, a Change in Control shall be
deemed to have occurred at such time as (i) any "person" within the
meaning of Section 14(d) of the Exchange Act is or has become the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, of 25% or more of the combined voting power of
the outstanding securities of Kodak ordinarily having the right to vote
at the election of directors ("Voting Securities"), or (ii) individuals
who constitute the Board of Directors of Kodak on March 1, 1990 (the
"Incumbent Board") have ceased for any reason to constitute at least a
majority thereof, provided that any person becoming a director
subsequent to March 1, 1990 whose election, or nomination for election
by Kodak's stockholders, was approved by a vote of at least three-
quarters (3/4) of the directors comprising the Incumbent Board (either
<PAGE> 21
by a specific vote or by approval of the proxy statement of Kodak in
which such person is named as a nominee for director without objection
to such nomination) shall be, for purposes of this clause (ii),
considered as though such person were a member of the Incumbent Board.
1.7 Common Stock
"Common Stock" means the common stock of Kodak.
1.8 Deferrable Amount
"Deferrable Amount" means the amount of compensation (whether payable in
cash or Common Stock) otherwise payable to a Participant (exclusive of
expense reimbursements) for serving on the Board and attending meetings
or committee meetings thereof.
1.9 Deferred Compensation Account
"Deferred Compensation Account" means the account established by Kodak
for each Participant for compensation deferred pursuant to this Plan.
The maintenance of individual Deferred Compensation Accounts is for
bookkeeping purposes only.
1.10 Enrollment Period
"Enrollment Period" means the period designated by the Administrator
each year; provided however, that the Enrollment Period for a given
calendar year shall always commence and end in the year immediately
prior to such calendar year.
1.11 Interest Rate
"Interest Rate" means the base rate, as reported in the "Money Rates"
section of The Wall Street Journal, on corporate loans posted by at
least 75% of the nation's 30 largest banks (known as the "Prime Rate").
1.12 Kodak
"Kodak" means Eastman Kodak Company.
1.13 Market Value
"Market Value" means the mean between the high and low at which the
Common Stock trades as quoted in the New York Stock Exchange Composite
Transactions as published in The Wall Street Journal on the day for
which the determination is to be made or, if such day is not a trading
day, the immediately preceding trading day.
1.14 Plan
"Plan" means the Eastman Kodak Company Deferred Compensation Plan For
Directors as adopted by the Board and amended.
<PAGE> 22
1.15 Participant
"Participant" means (i) any member of the Board who is not an employee
of Kodak; or (ii) any former member of the Board who has a balance in an
Account under the Plan.
1.16 Stock Account
"Stock Account" means the account established by Kodak for each
Participant, the performance of which shall be measured by reference to
the Market Value of Common Stock. The maintenance of individual Stock
Accounts is for bookkeeping purposes only.
1.17 Stock Deferrable Amount
"Stock Deferrable Amount" means that portion of the Deferrable Amount
that would otherwise be payable to a Participant in Common Stock.
1.18 Valuation Date
"Valuation Date" means, with regards to a Participant's Deferred
Compensation Account, the last day of each calendar month and, with
regards to the Participant's Stock Account, the last business day of
each calendar month.
Article 2 Term
The Plan became effective January 1, 1979.
Article 3 Participation
Only Participants shall be eligible to participate in the Plan.
Article 4 Deferral of Compensation
For any given calendar year, a Participant may make a deferral election,
in accordance with the requirements of Article 5 below, to defer receipt
of all or any portion of his or her Deferrable Amount to be earned
during such year into his or her Accounts. Any Deferrable Amount which
is so deferred shall be credited to the Participant's Accounts in
accordance with Article 6 below.
Article 5 Deferral Elections
5.1 In General
A Participant may make a deferral election to defer compensation by
executing and returning to the Administrator in accordance with this
Article 5 a deferred compensation form provided by Kodak.
<PAGE> 23
5.2 Timing
A Participant who wishes to make a deferral election must irrevocably
elect to do during an Enrollment Period. Such election shall be
effective for the calendar year immediately following the Enrollment
Period during which such election was made and for all succeeding
calendar years, unless the Participant revokes his or her election or
files a new election during the Enrollment Period for such a succeeding
calendar year. In which case, such revocation or election, as the case
may be, shall be effective on the first day of such succeeding calendar
year.
5.3 Irrevocability
Deferral elections made under this Plan with respect to any calendar
year will be final and, after the close of the Enrollment Period for
such calendar year, may not be revoked or amended in any manner until
the Enrollment Period for a succeeding calendar. In which case, such
revocation or amendment, as the case may be, shall be effective on the
first day of such succeeding calendar year.
5.4 Elections
A deferred compensation form filed by a Participant during an Enrollment
Period shall indicate: (1) the amount of the Cash Deferrable Amount to
be deferred; (2) the amount of the Stock Deferrable Amount to be
deferred; and (3) the allocation in whole percentages of the deferred
Cash Deferrable Amount between the Deferred Compensation Account and the
Stock Account. Stock Deferrable Amounts may only be deferred by a
Participant into his or her Stock Account; they may not be deferred into
the Participant's Deferred Compensation Account.
Article 6 Hypothetical Investments
6.1 Deferred Compensation Account
Amounts in a Participant's Deferred Compensation Account are
hypothetically invested in an interest bearing account which bears
interest computed at the Interest Rate, compounded monthly.
6.2 Stock Account
Amounts in a Participant's Stock Account are hypothetically invested in
units of Common Stock. Amounts transferred to a Stock Account are
recorded as units of Common Stock, and fractions thereof, with one unit
equating to a single share of Common Stock. Thus, the value of one unit
shall be the Market Value of a single share of Common Stock. The use of
units is merely a bookkeeping convenience; the units are not actual
shares of Common Stock. Kodak will not reserve or otherwise set aside
any Common Stock for or to any Stock Account.
6.3 Time Accounts are Credited
Amounts to be deferred shall be credited to the Participant's Accounts
on the date such amounts would otherwise be payable.
<PAGE> 24
6.4 Stock Account Crediting
A. If a Participant makes an election to defer into his or her Stock
Account pursuant to Section 5.4 above, the Stock Account of the
Participant shall, for so long as the election remains in effect,
be credited with that number of units of Common Stock, and
fractions thereof, determined in accordance with Section 6.4(B)
immediately below as of each applicable date specified in Section
6.3 above.
B. In accordance with Section 6.4(A) above, the Stock Account of a
Participant shall be credited as follows:
i. Cash Deferrable Amounts. In the case of elections to defer
Cash Deferrable Amounts, with that number of units of Common
Stock, and fractions thereof, equal to the number of full and
fractional shares of Common Stock, that could be purchased with
the dollar amount that would otherwise be paid to the
Participant but for his or her election to defer into the Stock
Account using the Market Value of the Common Stock as of the
applicable date specified in Section 6.3 above.
ii. Stock Deferrable Amounts. In the case of elections to defer
Stock Deferrable Amounts, with that number of units of Common
Stock equal to the number of shares of Common Stock that would
otherwise be paid to the Participant but for his or her election
to defer into the Stock Account.
Article 7 Investment Elections
7.1 Elections
A. In General. Subject to Section 7.1(B) below, a Participant may
make an investment election to direct that all or any portion,
designated as a whole percentage, of the existing balance of one of
his or her Accounts be transferred to his or her other Account,
effective as of the close of business on the last day of any
calendar month (hereinafter the election's "Effective Date"), by
filing a written election with the Administrator on or prior to
such date.
B. Deferred Stock Deferrable Amounts. A Participant may not transfer
to his or her Deferred Compensation Account any Stock Deferrable
Amounts that he or she has elected to defer under the Plan. All
units of Common Stock credited as a result of such amounts pursuant
to Sections 7.4 or 7.5 below may, however, be transferred by the
Participant to his or her Deferred Compensation Account pursuant to
Section 7.3.
7.2 Election into the Stock Account
If a Participant makes an investment election pursuant to Section 7.1 to
transfer an amount from his or her Deferred Compensation Account to his
or her Stock Account, effective as of the election's Effective Date, (i)
his or her Stock Account shall be credited with that number of units of
Common Stock, and
<PAGE> 25
fractions thereof, obtained by dividing the dollar amount elected to be
transferred by the Market Value of the Common Stock on the Valuation
Date immediately preceding or coincident with the election's Effective
Date; and (ii) his or her Deferred Compensation Account shall be reduced
by the amount elected to be transferred.
7.3 Election out of the Stock Account
If a Participant makes an investment election pursuant to Section 7.1 to
transfer an amount from his or her Stock Account to his or her Deferred
Compensation Account, effective as of the election's Effective Date, (i)
his or her Deferred Compensation Account shall be credited with a dollar
amount equal to the amount obtained by multiplying the number of units
to be transferred by the Market Value of the Common Stock on the
Valuation Date immediately preceding or coincident with the election's
Effective Date; and (ii) his or her Stock Account shall be reduced by
the number of units elected to be transferred.
7.4 Dividend Equivalents
Effective as of the payment date for each cash dividend on the Common
Stock, additional units of Common Stock shall be credited to the Stock
Account of each Participant who has a balance in his or her Stock
Account on the record date for such dividend. The number of units that
shall be credited to the Stock Account of such a Participant shall be
computed by multiplying the dollar value of the dividend paid upon a
single share of Common Stock by the number of units of Common Stock held
in the Participant's Stock Account on the record date for such dividend
and dividing the product thereof by the Market Value of the Common Stock
on the payment date for such dividend.
7.5 Stock Dividends
Effective as of the payment date for each stock dividend (as defined in
Section 305 of the Internal Revenue Code of 1986) on the Common Stock,
additional units of Common Stock shall be credited to the Stock Account
of each Participant who has a balance in his or her Stock Account on the
record date for such dividend. The number of units that shall be
credited to the Stock Account of such a Participant shall equal the
number of shares of Common Stock which the Participant would have
received as stock dividends had he or she been the owner on the record
date for such stock dividend of the number of shares of Common Stock
equal to the number of units credited to his or her Stock Account on
such record date. To the extent the Participant would have also
received cash, in lieu of fractional shares of Common Stock, had he or
she been the record owner of such shares for such stock dividend, then
his or her Stock Account shall also be credited with that number of
units, or fractions thereof, equal to such cash amount divided by the
Market Value of the Common Stock on the payment date for such dividend.
7.6 Recapitalization
If Kodak undergoes a reorganization as defined in Section 368 (a) of the
Internal Revenue Code of 1986, the Administrator may, in his or her sole
and absolute discretion, take whatever action he or she deems necessary,
advisable
<PAGE> 26
or appropriate with respect to the Stock Accounts in order to reflect
such transaction, including, but not limited to, adjusting the number of
units credited to a Participant's Stock Account.
7.7 Distributions
Amounts in respect of units of Common Stock shall be distributed in cash
in accordance with Articles 8 and 11. For purposes of a distribution
pursuant to Articles 8 or 11, the number of units to be distributed from
a Participant's Stock Account shall be valued by multiplying the number
of such units by the Market Value of the Common Stock as of the
Valuation Date immediately preceding the date such distribution is to
occur. Pending the complete distribution under Section 8.2 of the Stock
Account of a Participant who is no longer a member of the Board, the
Participant shall continue to be able to make elections pursuant to
Sections 7.2 and 7.3 and his or her Stock Account shall continue to be
credited with additional units of Common Stock pursuant to Sections 7.4,
7.5, and 7.6.
Article 8 Payment of Deferred Compensation
8.1 Background
No withdrawal may be made from a Participant's Accounts except as
provided in this Article 8 and Article 11.
8.2 Manner of Payment
Payment of a Participant's Accounts shall be made at the sole discretion
of the Administrator in a single sum or in annual installments;
provided, however, that payment in the event of death shall be made in
accordance with Section 8.5 below. The maximum number of annual
installments is ten. All payments from the Plan shall be made in cash.
8.3 Timing
Payments shall be made as soon as administratively possible following
the fifth business day in March and shall commence in any year
designated by the Administrator up through the tenth year following the
year in which the Participant for any reason ceases to be a member of
the Board. Notwithstanding the immediately preceding sentence, payment
in the event of death shall be made in accordance with Section 8.5.
8.4 Valuation
The amount of each payment shall be equal to the value, as of the
immediately preceding Valuation Date, of the Participant's Accounts,
divided by the number of installments remaining to be paid. If payment
of a Participant's Accounts is determined by the Administrator to be
paid in installments and the Participant has a balance in his or her
Stock Account at the time of the payment of an installment, the amount
that shall be distributed from his or her Stock Account shall be the
amount obtained by multiplying the total amount of the installment
determined in accordance with the immediately preceding
<PAGE> 27
sentence by the percentage obtained by dividing the balance in the Stock
Account as of the immediately preceding Valuation Date by the total
value of the Participant's Accounts as of such Valuation Date.
Similarly, in such case, the amount that shall be distributed from the
Participant's Deferred Compensation Account shall be the amount obtained
by multiplying the total amount of the installment determined in
accordance with the first sentence of this Section 8.4 by the percentage
obtained by dividing the balance in the Deferred Compensation Account as
of the immediately preceding Valuation Date by the total value of the
Participant's Accounts as of such Valuation Date.
8.5 Payment of Deferred Compensation After Death
If a Participant dies prior to complete payment of his or her Accounts,
the provisions of this Section 8.5 shall become operative.
A. Stock Account. Effective as of the date of a Participant's death,
the entire balance of his or her Stock Account shall,
notwithstanding Section 7.1(B) to the contrary, be transferred to
his or her Deferred Compensation Account. For purposes of valuing
the units of Common Stock subject to such a transfer, the deceased
Participant's Deferred Compensation Account shall be credited with
a dollar amount equal to the amount obtained by multiplying the
number of units in the deceased Participant's Stock Account at the
time of his or her death by the Market Value of the Common Stock on
the date of his or her death. Thereafter, no amounts in the
deceased Participant's Deferred Compensation Account shall be
eligible for transfer to the deceased Participant's Stock Account
by any person, including, but not by way of limitation, the
deceased Participant's beneficiary or legal representative.
B. Distribution. The balance of the Participant's Accounts, valued
as of the Valuation Date immediately preceding the date payment is
made, shall be paid in a single, lump-sum payment to: (1) the
beneficiary or contingent beneficiary designated by the Participant
in accordance with Section 8.5(C); or, in the absence of a valid
designation of a beneficiary or contingent beneficiary, (2) the
Participant's estate within 30 days after appointment of a legal
representative of the deceased Participant.
C. Beneficiary Designation. Each Participant shall have the right,
at any time, to designate any person or persons as his or her
Beneficiary or Beneficiaries (both primary and contingent) to whom
payment under this Plan shall be paid in the event of his or her
death prior to complete distribution to the Participant of the
benefits due him or her under the Plan. Each Beneficiary
designation shall become effective only when filed in writing with
the Administrator during the Participant's lifetime on a form
provided by the Administrator. The filing of a new Beneficiary
designation form with the Administrator will cancel all Beneficiary
designation(s) previously filed.
<PAGE> 28
Article 9 Administration
9.1 Responsibility
The Administrator shall have total and exclusive responsibility to
control, operate, manage and administer the Plan in accordance with its
terms.
9.2 Authority of the Administrator
The Administrator shall have all the authority that may be necessary or
helpful to enable him or her to discharge his or her responsibilities
with respect to the Plan. Without limiting the generality of the
preceding sentence, the Administrator shall have the exclusive right: to
interpret the Plan, to decide all questions concerning the amount of
benefits payable under the Plan, to construe any ambiguous provision of
the Plan, to correct any default, to supply any omission, to reconcile
any inconsistency, and to decide any and all questions arising in the
administration, interpretation, and application of the Plan.
9.3 Discretionary Authority
The Administrator shall have full discretionary authority in all matters
related to the discharge of his or her responsibilities and the exercise
of his or her authority under the Plan including, without limitation,
the construction of the terms of the Plan and the determination of
benefits under the Plan. It is the intent of the Plan that the
decisions of the Administrator and his or her actions with respect to
the Plan shall be final and binding upon all persons having or claiming
to have any right or interest in or under the Plan and that no such
decision or action shall be modified upon judicial review unless such
decision or action is proven to be arbitrary or capricious.
9.4 Delegation of Authority
The Administrator may delegate some or all of his or her authority under
the Plan to any person or persons provided that any such delegation be
in writing.
Article 10 Miscellaneous
10.1 Participant's Rights Unsecured
The amounts payable under the Plan shall be unfunded, and the right of
any Participant or his or her estate to receive any payment under the
Plan shall be an unsecured claim against the general assets of Kodak.
No Participant shall have the right to exercise any of the rights or
privileges of a shareholder with respect to the units credited to his or
her Stock Account.
10.2 Non-Assignability
The right of a Participant to the payment of deferred compensation as
provided in this Plan shall not be subject in any manner to alienation,
anticipation, sale, transfer (except by will or the laws of descent and
distribution), assignment, pledge, or encumbrance.
<PAGE> 29
10.3 Statement of Account
Statements will be sent no less frequently than annually to each
Participant or his or her beneficiary or estate showing the value of the
Participant's Accounts.
10.4 Amendment
The Plan may at any time or from time to time be amended, modified,
suspended or terminated by resolution of the Board. However, no
amendment, modification, or termination shall, without the consent of a
Participant, adversely affect such Participant's accruals in his or her
Accounts.
10.5 Governing Law
The Plan shall be construed, governed and enforced in accordance with
the law of New York State, except as such laws are preempted by
applicable federal law.
10.6 No Guarantee of Tax Consequences
No person connected with the Plan in any capacity, including, but not
limited to, Kodak and its directors, officers, agents and employees
makes any representation, commitment, or guarantee that any tax
treatment, including, but not limited to, federal, state and local
income, estate and gift tax treatment, will be applicable with respect
to amounts deferred under the Plan, or paid to or for the benefit of a
Participant or Beneficiary under the Plan, or that such tax treatment
will apply to or be available to a Participant or Beneficiary on account
of participation in the Plan.
10.7 Compliance with Securities Laws
The Board may, from time to time, impose additional, or modify or
eliminate existing, Plan terms, provisions, restrictions or
requirements, including, but not by way of limitation, the provisions
regarding a Participant's ability to elect into and out of his or her
Stock Account under Sections 7.2 and 7.3 or the requirement of an
automatic transfer pursuant to Section 8.5(A), as it deems necessary,
advisable or appropriate in order to comply with applicable federal or
state securities laws.
Article 11 Change in Control
11.1 Background
Upon a Change In Control: (i) the terms of this Section 11 shall
immediately become operative, without further action or consent by any
person or entity, (ii) all terms, conditions, restrictions, and
limitations in effect on any deferred compensation shall immediately
lapse as of the date of such event; and (iii) no other terms,
conditions, restrictions, and/or limitations shall be imposed upon any
deferred compensation on or after such date, and in no circumstance
shall any Account be forfeited on or after such date.
<PAGE> 30
11.2 Payment of Deferred Compensation
Upon a Change in Control, each Participant, whether or not he or she is
still a member of the Board, shall be paid in a single, lump-sum cash
payment the balance of his or her Accounts as of the Valuation Date
immediately preceding the date payment is made. Such payment shall be
made as soon as practicable, but in no event later than 90 days after
the date of the Change in Control.
11.3 Amendment On or After Change In Control
Upon a Change in Control, no action, including, but not by way of
limitation, the amendment, modification, suspension or termination of
the Plan, shall be taken which would affect the rights of any
Participant or the operation of this Plan with respect to the balance in
the Participant's Accounts.
<PAGE> 31
<TABLE>
Eastman Kodak Company and Subsidiary Companies
Exhibit (11)
Computation of Earnings Per Common Share
<CAPTION>
(in millions, except per share amounts)
Second Quarter First Half-Year
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Earnings before income taxes $ 558 $ 660 $ 783 $1,081
Provision for income taxes 190 220 266 367
------ ------ ------ ------
Net earnings $ 368 $ 440 $ 517 $ 714
====== ====== ====== ======
Average number of common shares
outstanding 327.4 338.2 329.9 340.8
------ ------ ------ ------
Earnings per share $ 1.12 $ 1.30 $ 1.57 $ 2.09
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the second
quarter 1997 form 10-Q of Eastman Kodak Company, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000031235
<NAME> EASTMAN KODAK COMPANY
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.0
<CASH> 371
<SECURITIES> 29
<RECEIVABLES> 2884
<ALLOWANCES> 92
<INVENTORY> 1730
<CURRENT-ASSETS> 5938
<PP&E> 12814
<DEPRECIATION> 7194
<TOTAL-ASSETS> 13818
<CURRENT-LIABILITIES> 5032
<BONDS> 610
0
0
<COMMON> 978
<OTHER-SE> 3302
<TOTAL-LIABILITY-AND-EQUITY> 13818
<SALES> 6986
<TOTAL-REVENUES> 7092
<CGS> 3658
<TOTAL-COSTS> 3658
<OTHER-EXPENSES> 2608
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 783
<INCOME-TAX> 266
<INCOME-CONTINUING> 517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 517
<EPS-PRIMARY> 1.57
<EPS-DILUTED> 0
</TABLE>
