Kodak 2005 Annual Report Download - page 16

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The current employment amounts are expected to decline more over the next few years as a result of the personnel reductions yet to be made
under the 2004-2007 cost reduction program, which contemplated a 40 percent reduction in headcount below 2003 levels of 62,300 full time
equivalents worldwide.
Available Information
The Company fi les many reports with the Securities and Exchange Commission (SEC), including annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K. These reports, and amendments to these reports, are made available free of charge as soon as
reasonably practicable after being electronically fi led with or furnished to the SEC. They are available through the Company’s website at
www.Kodak.com. To reach the SEC fi lings, follow the links to Corporate, and then Investor Center. The Company also makes available free of charge
through its website, at www.Kodak.com/go/annualreport, its summary annual report to shareholders and proxy statement.
The public may also read and copy any materials the Company fi les with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
also maintains an Internet site, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that
fi le electronically with the SEC.
We have included the CEO and CFO certifi cations required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to this report. We have also
included these certifi cations with the Form 10-K fi led on April 6, 2005. Additionally, we fi led with the New York Stock Exchange (NYSE) the CEO
certifi cation, dated June 3, 2005, regarding our compliance with the NYSE’s corporate governance listing standards pursuant to Section 303A.12(a) of
the listing standards, and indicated that the CEO was not aware of any violations of the listing standards by the Company.
ITEM 1A. RISK FACTORS
Set forth below and elsewhere in this report and in other documents that the Company fi les with the Securities and Exchange Commission are
risks and uncertainties that could cause the actual future results of the Company to differ from those expressed or implied in the forward-looking
statements contained in this document and other public statements the Company makes. Additionally, because of the following risks and
uncertainties, as well as other variables affecting our operating results, the Company’s past fi nancial performance should not be considered an
indicator of future performance.
If we do not effectively execute our digital transformation, this could adversely affect our operations, revenue and ability to compete.
The Company continues with its transformation from a traditional products and services company to a digital products and services company.
This transformation includes an aggressive restructuring program to reduce its traditional infrastructure to cost-effectively manage the declining
traditional business and to reduce its general and administrative costs to the level necessary to compete profi tably in the digital markets. The
Company expects these actions to be largely completed by mid 2007. As a result of the digital transformation, the Company has established three key
fi nancial metrics against which it will measure success: digital earnings growth through expanding margins from the Company’s digital businesses,
digital revenue growth and cash generation. Accordingly, the success of the Company’s transformation is dependent upon the execution of the
Company’s transformation initiatives including (1) managing the amount and timing of the cost savings resulting from the restructuring of its traditional
infrastructure and the reductions in general and administrative costs, (2) Kodak’s ability to continue its development and sale of digital products and
services that deliver competitive margins in each of its segments, (3) the Company’s ability to manage the traditional business for cash generation in a
cost-effective manner, and (4) Kodak’s ability to successfully integrate its acquisitions, including KPG and Creo. If Kodak cannot successfully execute
its transformation initiatives, the Company’s ability to compete as a profi table and growing digital company could be negatively affected, which could
adversely affect its results of operations and its ability to generate cash.
If we fail to comply with the covenants contained in our Secured Credit Agreement, including the two fi nancial covenants, our ability to
meet our fi nancial obligations could be severely impaired.
There are affi rmative, negative and fi nancial covenants contained in the Company’s Secured Credit Agreement. These covenants are typical for a
secured credit agreement of this nature. The Company’s failure to comply with these covenants could result in a default under the Secured Credit
Agreement. If an event of default were to occur and is not waived by the lenders, then all outstanding debt, interest and other payments under the
Secured Credit Agreement could become immediately due and payable and any unused borrowing availability under the revolving credit facility of the
Secured Credit Agreement could be terminated by the lenders. The failure of the Company to repay any accelerated debt under the Secured Credit
Agreement could result in acceleration of the majority of the Company’s unsecured outstanding debt obligations.
If we cannot effectively manage transitions of our products and services, this could adversely affect our revenues.
The industries in which Kodak competes are rapidly changing and becoming increasingly more complex. Kodak’s ability to successfully transition its
existing products to new offerings requires that Kodak make accurate predictions of the product development schedule as well as volumes, product
mix, customer demand, sales channels, and confi guration. The process of developing new products and services is complex and often uncertain
due to the frequent introduction of new products that offer improved performance and pricing. Kodak may anticipate demand and perceived market