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Table of contents
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Page 1
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Page 2
....
Dear Fellow Investors:
In 2006, a new Kodak began to emerge. For the ï¬rst time in our history, the full-year growth of our digital earnings exceeded the decline in earnings from our traditional business. When you consider where we were three years ago, with few digital prospects to speak...
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Page 3
resolve. reemerge.
"We're within sight of completing what will be one of the most remarkable turnarounds in corporate history."
Antonio M. Perez Chairman and Chief Executive Officer
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Page 4
... is ahead of plan, our investment in digital technologies has begun to pay off, and we are on track to achieve our target business model. We now offer the industry's broadest range of prepress equipment, workï¬,ow software, digital printing, variable data printing, and consumables. In 2006, we put...
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Page 5
... top market leader in the business segments where CDG competes, including digital cameras, snapshot printers, retail photo, kiosks, and online services. For the third year running, we received the J.D. Power and Associates award for Highest Customer Satisfaction with Digital Cameras-$200-$399. Kodak...
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Page 6
...part, in the Shanghai Center, working together with the other Kodak development centers in the U.S. and Europe. These products include the Kodak picture kiosk, Kodak Professional digital printing software (DP1), Document Imaging's Smart Touch, and Entertainment Imaging's Kodak look management system...
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Page 7
... people better use meaningful images and information in their life and work. Consumers use Kodak's system of digital and traditional products and services to take, print and share their pictures anytime, anywhere; Businesses effectively communicate with customers worldwide using Kodak solutions for...
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Page 8
... pricing changes in the Company's debt credit ratings and its ability to access capital markets the nature and pace of technology evolution c ฀ hanges to accounting rules and tax laws, as well as other factors which could impact the Company's reported ï¬nancial position or effective tax rate...
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Page 9
...X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the year ended December 31, 2006 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from Commission File Number 1-87 to
eastMaN KodaK coMPaNY...
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Page 10
... incorporate by reference information from the Notice of 2007 Annual Meeting and Proxy Statement: Item 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Item 11 - EXECUTIVE COMPENSATION Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS...
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Page 11
... Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services
129
Item 13.
129
Item 14.
PART II
20 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management...
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Page 12
... focused on helping people better use meaningful images and information in their life and work. Consumers use Kodak's system of digital and traditional image capture products and services to take, print, store and share their pictures anytime, anywhere; businesses effectively communicate with...
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Page 13
... DVDs set to music. On-Line Web Services: Kodak Gallery, which has more than 50 million members, is a leading online merchandise and sharing service in the category. The Kodakgallery.com site provides consumers with a secure and easy way to view, store and share their photos with friends and family...
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Page 14
...businesses in the commercial printing, data center, in-plant and digital service provider market segments. While there is price competition, the Company has been able to maintain price by adding more attractive features to its products through technological advances. The Company has developed a wide...
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Page 15
... management software, advanced picture-archiving and communications systems (PACS), and healthcare information systems (HCIS). Products of the Health Group segment also include traditional analog medical ï¬lms, chemicals, and processing equipment. The Company's history in traditional analog imaging...
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Page 16
...align the Company's reporting structure to the way in which the Company manages its business effective January 1, 2007. The most signiï¬cant change, the transfer of photographic paper and photoï¬nishing services to CDG from FPG, reï¬,ects the increasing manner in which images captured or generated...
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Page 17
...efforts in research and development. Research and development expenditures for the Company's four reportable segments and All Other for 2006, 2005 and 2004 were as follows: (in millions) Consumer Digital Imaging Group Film & Photoï¬nishing Systems Group Graphic Communications Group Health Group All...
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Page 18
... the Company's website at www.Kodak.com. To reach the SEC ï¬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...
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Page 19
... inkjet printers and commercial printing systems and solutions) designed to produce high quality documents and images, and media (thermal and silver halide) optimized for digital workï¬,ows. Kodak's success depends in part on its ability to develop and introduce new products and services in a timely...
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Page 20
... and cash ï¬,ow could be adversely impacted. The Company continues to migrate various administrative and ï¬nancial processes, such as general accounting, accounts payable, credit and collections, call centers and human resources processes to a global shared services model to more effectively manage...
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Page 21
...industry-wide pricing pressures. If the Company is unable to obtain pricing or programs sufï¬ciently competitive with current and future competitors, Kodak could also lose market share, adversely affecting its revenue and gross margins. If we fail to manage distribution of our products and services...
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Page 22
... products and services including prepress consumables, workï¬,ow and prooï¬ng software, color and black-and-white electrophotographic equipment and consumables, high-speed, high-volume continuous inkjet printing systems, wide-format inkjet printers, high-speed production document scanners, and...
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Page 23
...White City, Oregon. Manufacturing facilities outside the United States are located in Brazil, China, France, Germany, India and Mexico. The segment provides digital and traditional products and services including picture archiving and communications systems, radiology information systems, enterprise...
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Page 24
... Imaging Group in September 2005, effective January 1, 2006. He oversees Kodak's consumer, digital capture, printing, kiosk, and imaging systems businesses. He joined Kodak as Director, Inkjet Systems Program in December 2004. In February 2005, he was elected a Senior Vice President of the Company...
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Page 25
...same time she assumed the added responsibility of President, Entertainment Imaging. Kevin J. Hobert Kevin Hobert was appointed President of Kodak's Health Group and a Senior Vice President of the Company in February 2005. Prior to his current position, Mr. Hobert was General Manager, Digital Capture...
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Page 26
...ce in an executive capacity until early 2003. At that time, she took an operating line position as General Manager, Graphics and Printing Systems SPG, in the Commercial Imaging Group (now the Graphic Communications Group). In late June 2005, Ms. Wilfong was appointed Director, Corporate Audit. Prior...
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Page 27
... MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Eastman Kodak Company common stock is principally traded on the New York Stock Exchange under the symbol "EK." There are 63,219 shareholders of record of common stock as of January 31, 2007. Market Price Data 2006 Price per share: 1st Quarter 2nd...
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Page 28
... incentives that require the estimation of sales volumes or redemption rates, such as for volume rebates or coupons, the Company uses historical experience and internal and customer data to estimate the sales incentive at the time revenue is recognized. In the event that the actual results of these...
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Page 29
... rate, long-term growth rate and appropriate market comparables. The Company's assessments of impairment of long-lived assets, including goodwill and purchased intangible assets, and its periodic review of the remaining useful lives of its long-lived assets are an integral part of the Company...
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Page 30
..., for its U.S. and Canada plans, the Company determines a discount rate using a cash ï¬,ow model to incorporate the expected timing of beneï¬t payments and a AA-rated high quality corporate bond yield curve. For the Company's other non-U.S. plans, the discount rates are determined by comparison to...
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Page 31
... trend rate assumptions are based on historical cost and payment data, the near-term outlook and an assessment of the likely long-term trends. The Company reviews its EROA assumption annually for the Kodak Retirement Income Plan (KRIP). To facilitate this review, every three years, or when market...
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Page 32
... price equal to the market value of the underlying common stock on the date of grant. Kodak Operating Model and Reporting Structure As of and for the year ended December 31, 2006 the Company had four reportable segments: Consumer Digital Imaging Group (CDG), Film & Photoï¬nishing Systems Group...
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Page 33
...Sales from Continuing Operations by Reportable Segment and All Other (1) (in millions) Consumer Digital Imaging Group Inside the U.S. Outside the U.S. Total Consumer Digital Imaging Group Film & Photoï¬nishing Systems Group Inside the U.S. Outside the U.S. Total Film & Photoï¬nishing Systems Group...
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Page 34
... Income Taxes by Reportable Segment and All Other (in millions) Consumer Digital Imaging Group Film & Photoï¬nishing Systems Group Graphic Communications Group Health Group All Other Total of segments Restructuring costs and other Adjustments to legal reserves/(settlements) Interest expense Other...
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Page 35
... decline in digital cameras within the consumer digital capture SPG of the CDG segment. Product sales from new technologies, which are included in digital product sales, were $49 million in the current year and $57 million in the prior year. Traditional Strategic Product Groups' Revenues Net sales...
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Page 36
...strategic alternatives for the Health Group. The Company announced on January 10, 2007 that it has reached an agreement to sell the Health Group to Onex Corporation for as much as $2.55 billion. The transaction is expected to close in the ï¬rst half of 2007. Research and Development Costs R&D costs...
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Page 37
... NPD Group's consumer tracking service, Kodak EasyShare digital cameras were number one in unit market share in the U.S. for the year 2006. On a year-to-date basis through November, the Company remains in the top three unit market share position on a worldwide basis for consumer digital cameras. Net...
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Page 38
... equipment and photoï¬nishing services at retail on-site and Qualex in the U.S. and CIS (Consumer Imaging Services) outside the U.S., decreased 45% in 2006 as compared with 2005, reï¬,ecting continuing volume declines in the development and processing of consumer ï¬lms. Net worldwide sales for the...
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Page 39
... Inkjet Printing Solutions - Versamark equipment, consumables and service • Workï¬,ow and Prepress - workï¬,ow software, output devices, prooï¬ng equipment, and services • Other Digital - electrophotographic black and white equipment and consumables, document scanners and services, wide-format...
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Page 40
... of commercial inkjet printing solutions increased 3% year-over-year, reï¬,ecting volume increases for services and consumables, partially offset by negative price/mix. Net worldwide sales of other digital products and services decreased 6% year-over-year, primarily driven by volume declines. Sales...
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Page 41
... Strategic Product Groups' Revenues Health Group segment digital sales, which include digital output (DryView laser imagers/media and wet laser printers/media), digital capture systems (computed radiography and digital radiography equipment), digital dental systems (practice management software...
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Page 42
... by a pension settlement charge of $54 million resulting from the ï¬nalization of the transfer of pension assets to ITT Industries, Inc. (ITT) in connection with the sale of the Company's Remote Sensing Systems business (RSS) in August 2004. Loss from Cumulative Effect of Accounting Change, Net of...
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Page 43
... price/ mix impact was primarily driven by consumer digital cameras, one-time-use cameras, traditional consumer and digital health products and services, partially offset by the year-over-year increase in royalty income relating to digital capture. These decreases were partially offset by exchange...
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Page 44
... accounted for under the equity method, and have been consolidated in the Company's Statement of Operations and included in the Graphic Communications Group segment since the date of acquisition. These items were partially offset by a net year-over-year increase of $59 million from gains on the sale...
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Page 45
... of strong volume increases and favorable exchange. Sales continue to be driven by strong market acceptance of Kodak's new generation of kiosks and an increase in consumer demand for digital printing at retail. Net worldwide sales of the home printing solutions SPG, which includes inkjet photo paper...
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Page 46
... sales of the ï¬lm capture SPG, including consumer roll ï¬lm (35mm and APS ï¬lm), one-time-use cameras (OTUC), professional ï¬lms, reloadable traditional ï¬lm cameras and batteries/videotape, decreased 31% in 2005 as compared with 2004, primarily reï¬,ecting volume declines and negative price...
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Page 47
... of prepress systems; NexPress Solutions, a producer of digital color and black and white printing solutions; Kodak Versamark, a leader in continuous inkjet technology; document scanners; Encad, Inc., a maker of wide-format inkjet printers; and service and support. Digital product sales for the...
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Page 48
...Groups' Revenues Health Group segment digital sales, which include digital products (DryView laser imagers/media and wet laser printers/media), digital capture equipment (computed radiography capture equipment and digital radiography equipment), services, dental systems (practice management software...
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Page 49
...obligation with respect to the retirement of an asset when the timing or method of settling that obligation is conditional upon a future event (for example, the sale of, exiting from or disposal of an asset - the "settlement date"). The primary application of FIN 47 to the Company is with respect to...
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Page 50
...with what is necessary to compete proï¬tably in digital markets. In connection with its announcement relating to the extended "2004-2007 Restructuring Program," the Company has provided estimates with respect to (1) the number of positions to be eliminated, (2) the facility square footage reduction...
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Page 51
... the year ended December 31, 2006: Other Balance Adjustments Balance Dec. 31, Cash Non-cash and Dec. 31, (in millions) 2005 Charges Reversals Payments (1) Settlements Reclasses (2) 2006 2004 - 2007 Restructuring Program: Severance reserve Exit costs reserve Total reserve Long-lived asset impairments...
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Page 52
... depreciation on long-lived assets in cost of goods sold in the accompanying Consolidated Statement of Operations for the year ended December 31, 2006. The accelerated depreciation relates to long-lived assets accounted for under the held and used model of SFAS No. 144. The year-to-date amount of...
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Page 53
... are shared across all segments. The restructuring actions implemented during ï¬scal year 2006 under the 2004-2007 Restructuring Program are expected to generate future annual cost savings of approximately $400 million and future annual cash savings of approximately $380 million. These cost savings...
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Page 54
... makes semi-annual payments of dividends, when declared, on the Company's 10th business day each July and December to shareholders of record on the close of the ï¬rst business day of the preceding month. On May 10, 2006, the Board of Directors declared a semi-annual cash dividend of $.25 per share...
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Page 55
... Company will sell its Health Group to Onex for up to $2.55 billion. The price is composed of $2.35 billion in cash at closing, plus up to $200 million in additional future payments if Onex achieves certain returns with respect to its investment. If Onex Healthcare investors realize an internal rate...
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Page 56
...: Interest expense Provision for income taxes Depreciation and amortization Non-cash restructuring charges and asset write-downs/impairments Non-cash stock compensation expense Total additions to calculate EBITDA Less: Investment income Total subtractions to calculate EBITDA EBITDA, as included in...
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Page 57
... Credit Agreement, in the event the Company sells assets for net proceeds totaling $75 million or more in any year, except for proceeds used within 12 months for reinvestments in the business of up to $300 million, proceeds from sales of assets used in the Company's non-digital products and services...
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Page 58
... May 5, 2006, Moody's placed the Company's ratings on review for possible downgrade. The review was prompted by the announcement to explore strategic alternatives for the Health Group, declining Health Group revenue and earnings, a Consumer Digital Group revenue decline, and increased operating loss...
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Page 59
... operations, cumulative effect of a change in accounting principle, equity in earnings from unconsolidated afï¬liates, depreciation and amortization, purchased research and development, the gain on sales of businesses/assets, restructuring costs, asset impairments and other non-cash charges, and...
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Page 60
... it makes semi-annual payments which, when declared, will be paid on the Company's 10th business day each July and December to shareholders of record on the close of the ï¬rst business day of the preceding month. On May 12, 2004, the Board of Directors declared a dividend of $.25 per share payable...
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Page 61
...which the timing and/(or) method of settlement are conditional on a future event, be reported, along with associated capitalized asset retirement costs, at their fair values. Upon initial application, FIN 47 requires recognition of (1) a liability, adjusted for cumulative accretion from the date the...
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Page 62
...impact of adoption on the Company's Consolidated Statement of Financial Position as of December 31, 2006. Before Application of SFAS No. 158 Other long-term assets Total assets Accounts payable and other current liabilities Total current liabilities Pension and other postretirement liabilities Other...
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Page 63
...the motion picture ï¬lm market, cash, cash ï¬,ow, restructuring plans and charges, accelerated depreciation, cost savings from restructuring, reduction of SG&A, employment reductions, pension contributions, target cost model and closing of the sale of the Health Group are forward-looking statements...
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Page 64
... pricing; • changes in the Company's debt credit ratings and its ability to access capital markets; • the nature and pace of technology evolution; • changes to accounting rules and to tax laws, as well as other factors which could impact the Company's reported ï¬nancial position or effective...
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Page 65
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Eastman Kodak Company: We have completed integrated audits of Eastman Kodak Company's consolidated ï¬nancial statements and of its internal ...
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Page 66
... of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP Rochester, New York March 1, 2007
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Page 67
... Basic and diluted net (loss) earnings per share: Continuing operations Discontinued operations Cumulative effect of accounting change Total Cash dividends per share The accompanying notes are an integral part of these consolidated ï¬nancial statements. 2006 $ 13,274 9,906 3,368 2,389 710 471...
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Page 68
... data) Assets Current Assets Cash and cash equivalents Receivables, net Inventories, net Deferred income taxes Other current assets Total current assets Property, plant and equipment, net Goodwill Other long-term assets Total Assets Liabilities and Shareholders' Equity Current Liabilities Accounts...
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Page 69
... income Cash dividends declared ($.50 per common share) Treasury stock issued, net (105,323 shares) (4) Unvested stock issuances (10,944 shares) Reclassiï¬cation of stock-based compensation awards under SFAS No. 123R adoption (2) Shareholders' Equity December 31, 2004
Common Stock (1) $ 978...
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Page 70
... pension liability adjustment ($223 million pre-tax) Other comprehensive loss Comprehensive loss Cash dividends declared ($.50 per common share) Recognition of equity-based compensation expense Treasury stock issued, net (357,345 shares) (4) Unvested stock issuances (169,040 shares) Shareholders...
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Page 71
... No. 158 for pension and other postretirement beneï¬ts ($466 million pre-tax) Cash dividends declared ($.50 per common share) Recognition of equity-based compensation expense Treasury stock surrendered, net (135 shares) (4) Unvested stock issuances (109,935 shares) Shareholders' Equity December 31...
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Page 72
... costs Repayment of other borrowings Dividends to shareholders Exercise of employee stock options Net cash (used in) provided by ï¬nancing activities Effect of exchange rate changes on cash Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash...
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Page 73
...current receivables through increase in deferred royalty revenue from licensee
continued
2006 $ 255 96 136 386 - 1 - - $ 2005 172 110 $ 2004 169 72 82 - 123 - - -
$
$ 156 - 681 5 395 311
$
During the years ended December 31, 2005 and 2004, the Company completed several acquisitions. Information...
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Page 74
...s
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Company Operations Eastman Kodak Company (the Company or Kodak) is engaged primarily in developing, manufacturing, and marketing digital and traditional imaging products, services and solutions to consumers, businesses, the graphic communications market, the...
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Page 75
...the Company had available-for-sale equity securities of $4 million and $13 million, respectively, included in other long-term assets in the accompanying Consolidated Statement of Financial Position. The Company had no investment securities classiï¬ed as trading securities as of December 31, 2006 or...
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Page 76
... time collection becomes reasonably assured, which is generally upon receipt of payment. Software maintenance and support revenue is recognized ratably over the term of the related maintenance period. The Company's transactions may involve the sale of equipment, software, and related services under...
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Page 77
...144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Under the guidance of SFAS No. 144, the Company reviews the carrying values of its long-lived assets, other than goodwill and purchased intangible assets with indeï¬nite useful lives, for impairment whenever events or changes in...
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Page 78
The Company uses cash ï¬,ow hedges to manage foreign currency exchange risk and commodity price risk related to forecasted transactions. The Company also uses foreign currency forward contracts to offset currency-related changes in foreign currency denominated assets and liabilities; these foreign ...
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Page 79
... share exclude the effect of the Convertible Securities, as they were anti-dilutive for all periods presented. Stock-Based Compensation On January 1, 2005, the Company early adopted the stock option expensing rules of Statement of Financial Accounting Standards (SFAS) No. 123R, "Share-Based Payment...
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Page 80
... information is as follows: Year Ended December 31, 2004 $ 544 (12) $ $ $ $ $ 532 1.90 1.86 1.90 1.85
(in millions, except per share data) Net earnings, as reported Deduct: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects...
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Page 81
...which the timing and/(or) method of settlement are conditional on a future event, be reported, along with associated capitalized asset retirement costs, at their fair values. Upon initial application, FIN 47 requires recognition of (1) a liability, adjusted for cumulative accretion from the date the...
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Page 82
... implemented prior to January 1, 2004. Refer to Note 11, "Commitments and Contingencies," for further discussion of the Company's asset retirement obligations. FASB Statement No. 155 In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments (an amendment of...
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Page 83
...impact of adoption on the Company's Consolidated Statement of Financial Position as of December 31, 2006. Before Application of SFAS No. 158 Other long-term assets Total assets Accounts payable and other current liabilities Total current liabilities Pension and other postretirement liabilities Other...
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Page 84
... rapid technological change in the Company's products. The average cost method also better reï¬,ects more current costs of inventory on the Company's Statement of Financial Position. As prescribed in SFAS No. 154, "Accounting Changes and Error Corrections," retrospective application of the change in...
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Page 85
... Statement of Operations affected by the change in costing methodology as originally reported under the LIFO method and as adjusted for the change in inventory costing methodology from the LIFO method to the average cost method are as follows (in millions, except per share data): Year Ended...
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Page 86
...millions): LIFO to Average Cost Change in Costing Methodology Adjustments
As Previously Reported Assets Current Assets Inventories, net Total Current Assets Total Assets Shareholders' Equity Retained earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity $ 6,402 1,967 $ 14,921...
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Page 87
... by reportable segment for 2005 and 2006 were as follows: Film & Graphic Consumer Photoï¬nishing Health Communications Consolidated (in millions) Digital Group Systems Group Group Group Total Balance at December 31, 2004 Goodwill related to acquisitions Finalization of purchase accounting Currency...
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Page 88
... of the Company's operating model and change in reporting structure, as described in Note 23, "Segment Information," effective January 1, 2006, the Company reassessed its goodwill for impairment during the ï¬rst quarter of 2006, and determined that no reporting units' carrying values exceeded...
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Page 89
...31, 2006 and 2005, the carrying value of the Company's equity investment in these signiï¬cant unconsolidated afï¬liates was $36 million and $30 million, respectively, and is reported within other long-term assets in the accompanying Consolidated Statement of Financial Position. The Company records...
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Page 90
... effect on the fair value. The remaining carrying value of the Company's investments accounted for under the cost method at December 31, 2006 and 2005 of $18 million and $31 million, respectively, is included in other long-term assets in the accompanying Consolidated Statement of Financial Position...
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Page 91
...note Term note Term notes Term notes Term note Term note Term note Convertible Notes
Maturity 2006 2008 2007 2012 2012 2006-2013 2006-2013 2013 2018 2021 2033 2006-2010
Current portion of long-term debt Long-term debt, net of current portion
* Represents debt with a variable interest rate.
Annual...
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Page 92
... Credit Agreement, in the event the Company sells assets for net proceeds totaling $75 million or more in any year, except for proceeds used within 12 months for reinvestments in the business of up to $300 million, proceeds from sales of assets used in the Company's non-digital products and services...
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Page 93
... in excess of the Company's current cash dividends, or (6) certain payments made by the Company in connection with tender offers and exchange offers. The holders may convert their Convertible Securities, in whole or in part, into shares of the Company's common stock under any of the following...
-
Page 94
... amounts are reported in other long-term liabilities in the accompanying Consolidated Statement of Financial Position. The Company is currently implementing a Corrective Action Program required by the Resource Conservation and Recovery Act (RCRA) at the Kodak Park site in Rochester, NY. As part of...
-
Page 95
..., such future costs are not expected to have a material effect on the Company's competitive or ï¬nancial position. However, such costs could be material to results of operations in a particular future quarter or year. Asset Retirement Obligations As of December 31, 2006 and 2005, the Company has...
-
Page 96
... with several companies, which provide Kodak with products and services to be used in its normal operations. These agreements are related to supplies, production and administrative services, as well as marketing and advertising. The terms of these agreements cover the next two to sixteen years. The...
-
Page 97
... Secured Credit Facilities lenders are guaranteed. Indemniï¬cations The Company issues indemniï¬cations in certain instances when it sells businesses and real estate, and in the ordinary course of business with its customers, suppliers, service providers and business partners. Further, the Company...
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Page 98
... of sale for a given product based on historical failure rates and related costs to repair. The change in the Company's accrued warranty obligations balance, which is reï¬,ected in accounts payable and other current liabilities in the accompanying Consolidated Statement of Financial Position, was...
-
Page 99
...nancial position. The Company manages such exposures, in part, with derivative ï¬nancial instruments. The fair value of these derivative contracts is reported in other current assets or accounts payable and other current liabilities in the accompanying Consolidated Statement of Financial Position...
-
Page 100
... Minority interest Asset impairments Gains on sales of cost method investments Loss on early extinguishment of debt Lucky Film impairment Sun Microsystems settlement Legal settlement Other Total $ 2006 60 (3) 7 56 3 (7) (11) 13 (9) - - - 9 $ 2005 25 (31) 12 74 4 (4) (25) 4 - (19) - - 4 44 $ 2004 18...
-
Page 101
... follows: (in millions) Amount computed using the statutory rate Increase (reduction) in taxes resulting from: State and other income taxes, net of federal Export sales and manufacturing credits Operations outside the U.S. Valuation allowance Tax settlements and adjustments, including interest Other...
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Page 102
... all open years in accordance with SFAS No. 5, "Accounting for Contingencies." A degree of judgment is required in determining our effective tax rate and in evaluating our tax position. The Company establishes reserves when, despite signiï¬cant support for the Company's ï¬ling position, a belief...
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Page 103
...between the years 2007 and 2026. Utilization of these net operating losses may be subject to limitations in the event of signiï¬cant changes in stock ownership of the Company. The Company also has $353 million of unused foreign tax credits at December 31, 2006, with various expiration dates through...
-
Page 104
... the year ended December 31, 2006: Other Balance Adjustments Balance Dec. 31, Cash Non-cash and Dec. 31, (in millions) 2005 Charges Reversals Payments (1) Settlements Reclasses (2) 2006 2004-2007 Restructuring Program: Severance reserve Exit costs reserve Total reserve Long-lived asset impairments...
-
Page 105
... depreciation on long-lived assets in cost of goods sold in the accompanying Consolidated Statement of Operations for the year ended December 31, 2006. The accelerated depreciation relates to long-lived assets accounted for under the held and used model of SFAS No. 144. The year-to-date amount of...
-
Page 106
... Cash Balance Plus plan credits employees' accounts with an amount equal to 4% of their pay, plus interest based on the 30-year treasury bond rate. In addition, for employees participating in this plan and the Company's deï¬ned contribution plan, the Savings and Investment Plan (SIP), the Company...
-
Page 107
... beneï¬t formulas using years of service and/or compensation prior to retirement. The actuarial assumptions used for these plans reï¬,ect the diverse economic environments within the various countries in which the Company operates. The measurement date used to determine the pension obligation for...
-
Page 108
... Financial Position for all major funded and unfunded U.S. and Non-U.S. deï¬ned beneï¬t plans are as follows:
2006 (in millions) Other long-term assets Accounts payable and other current liabilities Pension and other postretirement liabilities Additional minimum pension liability Intangible asset...
-
Page 109
... to the Japanese Government in December 2004. The effect of the transfer resulted in a one-time credit due to the derecognition of future salary increases in the amount of $3 million, a one-time credit due to the government subsidy from the transfer of liabilities and related plan assets of $25...
-
Page 110
...74% to 9.00% for 2006. Every three years or when market conditions have changed materially, the Company will undertake new asset and liability modeling studies for each of its larger pension plans. The asset allocations and expected return on plan assets are individually set to provide for beneï¬ts...
-
Page 111
... private equity, venture capital, cash and other investments. The Company expects to contribute approximately $19 million and $41 million in 2007 for U.S. and Non-U.S. deï¬ned beneï¬t pension plans, respectively. The following pension beneï¬t payments, which reï¬,ect expected future service, are...
-
Page 112
... Statement of Financial Position as of December 31, 2006. Changes in the Company's beneï¬t obligation and funded status for the U.S., United Kingdom and Canada other postretirement beneï¬t plans are as follows: (in millions) Net beneï¬t obligation at beginning of year Service cost Interest cost...
-
Page 113
... into account the impact of the subsidy the Company will receive under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) and certain actuarial assumption changes including: (1) changes in participation rates, (2) a decrease in the Company's Medicare plan premiums...
-
Page 114
... rate Salary increase rate 5.79% 4.26% 2005 5.50% 4.34%
The weighted-average assumed healthcare cost trend rates used to compute the other postretirement amounts were as follows: 2006 Healthcare cost trend Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) Year...
-
Page 115
... Plan (the 2000 Plan), and the 1995 Omnibus Long-Term Compensation Plan (the 1995 Plan). The Plans are administered by the Executive Compensation and Development Committee of the Board of Directors. Under the 2005 Plan, 11 million shares of the Company's common stock may be granted to employees...
-
Page 116
...nanced with a term loan under the Company's Secured Credit Agreement. Creo's extensive solutions portfolio is now part of the Company's Graphic Communications Group segment. The following represents the total purchase price of the acquisition (in millions): Cash paid at closing Estimated transaction...
-
Page 117
... million of intangible assets, which relate to developed technology, trademarks and customer relationships, have useful lives ranging from six to eight years. The $445 million of goodwill is assigned to the Company's Graphic Communications Group segment. As of the acquisition date, management began...
-
Page 118
... of intangible assets, which relate to developed technology, trademarks and customer relationships, have useful lives ranging from three to sixteen years. The $237 million of goodwill is assigned to the Company's Graphic Communications Group segment. As of the acquisition date, management began...
-
Page 119
... interest in NexPress Solutions LLC, a 50/50 joint venture of Kodak and Heidelberg that makes high-end, on-demand digital color printing systems, and the equity of Heidelberg Digital LLC, a leading maker of digital black-and-white variable-data printing systems. Kodak also announced the acquisition...
-
Page 120
... of acquired net assets over cost of $30 million represents negative goodwill and was recorded as a component of other longterm liabilities in the Company's Consolidated Statement of Financial Position. As of the acquisition date, management began to assess and formulate plans to restructure the...
-
Page 121
... were included as research and development costs in the Company's Consolidated Statement of Operations for the year ended December 31, 2004. The remaining $86 million of intangible assets, which relate to developed technology, customer relationships, and trade names, have useful lives ranging from...
-
Page 122
... the stock of Kodak's wholly owned subsidiary, Research Systems, Inc. (collectively known as RSS), to ITT Industries for $725 million in cash. RSS, a leading provider of specialized imaging solutions to the aerospace and defense community, was part of the Company's commercial and government systems...
-
Page 123
...management software (DPMS), advanced picture-archiving and communications systems (PACS), and healthcare information solutions (HCIS). Products of the Health Group segment also include traditional analog medical and dental ï¬lms, chemicals, and processing equipment and related services. The Company...
-
Page 124
... average cost method. This change increased cost of goods sold for the years ended December 31, 2005 and 2004 for each of the segments as follows: Year Ended December 31, (in millions) Consumer Digital Imaging Group Film and Photoï¬nishing Systems Group Graphic Communications Group Health Group All...
-
Page 125
... assets: Consumer Digital Imaging Group Film and Photoï¬nishing Systems Group Graphic Communications Group Health Group All Other Total of segments Cash and marketable securities Deferred income tax assets Assets of discontinued operations Other corporate reserves Consolidated total assets 2006...
-
Page 126
... from continuing operations: Consumer Digital Imaging Group Film and Photoï¬nishing Systems Group Graphic Communications Group Health Group All Other Consolidated total Net sales to external customers attributed to (1): The United States Europe, Middle East and Africa Asia Paciï¬c Canada and Latin...
-
Page 127
...align the Company's reporting structure to the way in which the Company manages its business effective January 1, 2007. The most signiï¬cant change, the transfer of photographic paper and photoï¬nishing services to CDG from FPG, reï¬,ects the increasing manner in which images captured or generated...
-
Page 128
... (10) Net earnings (loss) Basic and diluted net earnings (loss) per share (11) Continuing operations Discontinued operations Cumulative effect of accounting change, net Total 2005 Net sales from continuing operations Gross proï¬t from continuing operations (5) Loss from continuing operations...
-
Page 129
...31, 2006, the Company recorded a charge of approximately $17 million, net of tax, related to changes in estimate with respect to certain of its employee beneï¬t and compensation accruals. These changes in estimates negatively impacted the results for the fourth quarter by $.06 per share. Changes in...
-
Page 130
NOTE 25: SUBSEQUENT EVENT - PENDING SALE OF THE COMPANY'S HEALTH GROUP
On January 8, 2007, the Company's Board of Directors authorized management to enter into a deï¬nitive agreement to sell all of the assets and business operations of the Health Group to Onex Healthcare Holdings, Inc. ("Onex"), a ...
-
Page 131
... of accounting change Total Cash dividends declared and paid - on common shares - per common share Common shares outstanding at year end Shareholders at year end Statement of Financial Position Data Working capital Property, plant and equipment, net Total assets Short-term borrowings and current...
-
Page 132
... for a charge connected with a prior-year acquisition; $9 million for a charge to write down certain assets held for sale following the acquisition of the Burrell Companies; $8 million for a donation to a technology enterprise; an $8 million charge for legal settlements; a $9 million reversal for an...
-
Page 133
...submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods speciï¬ed in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Company's Chief Executive Ofï¬cer and Chief Financial Ofï¬cer, as...
-
Page 134
... operating effectiveness over a period of time that is sufï¬cient to support its conclusion. In reviewing the results from this testing, management has concluded that the internal controls related to the completeness and accuracy of the Company's deferred income tax valuation allowance account have...
-
Page 135
... and Corporate Governance - Corporate Governance Guidelines" and "Board Structure and Corporate Governance - Business Conduct Guide and Directors' Code of Conduct" in the Proxy Statement. The information required by Item 10 regarding compliance with Section 16(a) of the Securities Exchange Act of...
-
Page 136
...the following features: 1) a grant price equal to the fair market value of the Company's common stock on the date of grant; 2) a two-year vesting period; and 3) a term of 10 years.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13...
-
Page 137
...nancial statements: Report of independent registered public accounting ï¬rm Consolidated statement of operations Consolidated statement of ï¬nancial position Consolidated statement of shareholders' equity Consolidated statement of cash ï¬,ows Notes to ï¬nancial statements 2. Financial statement...
-
Page 138
...S. Sklarsky Frank S. Sklarsky Chief Financial Ofï¬cer, and Executive Vice President /s/ Diane E. Wilfong Diane E. Wilfong Chief Accounting Ofï¬cer, and Corporate Controller Date: March 1, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by...
-
Page 139
... allowances Total From Long-Term Receivables and Other Noncurrent Assets: Reserve for doubtful accounts From Deferred Tax Assets: Valuation Allowance Year ended December 31, 2004 Deducted in the Statement of Financial Position: From Current Receivables: Reserve for doubtful accounts Reserve for loss...
-
Page 140
..., 2003, Exhibit 4.) I. Resolutions of the Committee of the Board of Directors of Eastman Kodak Company, adopted on October 7, 2003, establishing the terms of the Securities. (Incorporated by reference to the Eastman Kodak Company Current Report on Form 8-K for the date October 10, 2003 as ï¬led on...
-
Page 141
... of Award Notice for Annual Director Restricted Stock Grant under the 2005 Omnibus Long-Term Compensation Plan. (Incorporated by reference to the Eastman Kodak Company Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005, Exhibit 10.) G. Frank S. Sklarsky Agreement dated...
-
Page 142
... by reference to the Eastman Kodak Company Annual Report on Form 10-K for the ï¬scal year ended December 31, 1995, Exhibit 10.)
J.
K.
L.
Kodak Executive Health Management Plan, as amended effective January 1, 1995. (Incorporated by reference to the Eastman Kodak Company Annual Report on Form 10...
-
Page 143
... of Award of Restricted Stock Granted To , Pursuant to the 2000 Omnibus Long-Term Compensation Plan. (Incorporated by reference to the Eastman Kodak Company Annual Report on Form 10-K for the ï¬scal year ended December 31, 2004, Exhibit 10.)
S.
Eastman Kodak Company Executive Compensation for...
-
Page 144
... Jane Hellyar Retention Agreement dated August 14, 2006.
Y.
Z.
AA1. AA2. AA3. AA4. BB. (12) (18)
Statement Re Computation of Ratio of Earnings to Fixed Charges. Letter Re Change in Accounting Principles. (Incorporated by reference to the Eastman Kodak Company Quarterly Report on Form 10-Q for...
-
Page 145
... 9, 2006. AA4. Dan Meek Termination Agreement dated May 2, 2006. BB. Mary Jane Hellyar Retention Agreement dated August 14, 2006. (These exhibits have been omitted due to length. They can be accessed through either the SEC website at www.sec.gov, or Eastman Kodak Company website at www.Kodak.com...
-
Page 146
... Interest component of rental expense is estimated to equal 1/3 of such expense, which is considered a reasonable approximation of the interest factor. * Earnings for the year ended December 31, 2006 were inadequate to cover ï¬xed charges. The coverage deï¬ciency was $306 million. ** Earnings for...
-
Page 147
...B.V. Eastman Kodak SA Kodak Brasileira Comercio E Industria Ltda. Kodak Nederland B.V. Kodak Polychrome Graphics Enterprises B.V. Algotec Systems Ltd. OREX Computed Radiography, Ltd. Kodak (China) Investment Company Ltd. Organized Under Laws of New Jersey Delaware California Delaware Delaware Canada...
-
Page 148
... m.b.H. Kodak Kft. Kodak Oy Kodak S.p.A. Kodak Portuguesa Limited Kodak, S.A. Kodak Nordic AB Kodak Japan Ltd. K.K. Kodak Information Systems Kodak Digital Product Center, Japan Ltd. Kodak (China) Limited Kodak Electronic Products (Shanghai) Company Limited Kodak (China) Company Limited Kodak (China...
-
Page 149
..., and No. 333-125355) of Eastman Kodak Company of our report dated March 1, 2007 relating to the ï¬nancial statements, ï¬nancial statement schedule, management's assessment of the effectiveness of internal control over ï¬nancial reporting and the effectiveness of internal control over ï¬nancial...
-
Page 150
...Perez, certify that: 1. 2. I have reviewed this Annual Report of Eastman Kodak Company on Form 10-K; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under...
-
Page 151
... certify that: 1. 2. I have reviewed this Annual Report of Eastman Kodak Company on Form 10-K; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which...
-
Page 152
...SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Eastman Kodak Company (the "Company") on Form 10-K for period ended December 31, 2006 as ï¬led with the Securities and Exchange Commission on the date hereof (the "Report"), I, Antonio M. Perez, Chairman and Chief Executive Ofï¬cer...
-
Page 153
... THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Eastman Kodak Company (the "Company") on Form 10-K for the period ended December 31, 2006 as ï¬led with the Securities and Exchange Commission on the date hereof (the "Report"), I, Frank S. Sklarsky, Chief Financial Ofï¬cer of...
-
Page 154
NOTICE OF 2007 ANNUAL MEETING AND PROXY STATEMENT
Date of Notice April 2, 2007
EASTMAN KODAK COMPANY 343 STATE STREET ROCHESTER, NEW YORK 14650
-
Page 155
...
78 2007 Annual Meeting Directions and Parking Information
CORPORATE DIRECTORY
80 Board of Directors and Corporate Ofï¬cers
COMMITTEE REPORTS
28 29 31 Report of the Audit Committee Report of the Corporate Responsibility and Governance Committee Report of the Executive Compensation and Development...
-
Page 156
... contact: Coordinator, Shareholder Services, Eastman Kodak Company, 343 State Street, Rochester, NY 14650-0205, (585) 724-5492. The Annual Meeting will be accessible by the handicapped. If you require special assistance, call the Coordinator, Shareholder Services. By Order of the Board of Directors...
-
Page 157
...to you by Kodak. As the shareholder of record, you have the right to grant your voting proxy directly to Kodak or a third party, or to vote in person at the Annual Meeting. Kodak has enclosed or sent a proxy card for you to use. Beneï¬cial Owner. If your shares are held in a brokerage account or by...
-
Page 158
...vote your Kodak shares, the records of the Company must show that you held your shares as of the close of business on March 19, 2007, the record date for the Annual Meeting. Each share of common stock is entitled to one vote.
Can I change my vote or revoke my proxy?
Yes. If you are a shareholder of...
-
Page 159
...name and address. You may do this by contacting our transfer agent, Computershare Investor Services at (800) 253-6057.
Q. A.
Who can attend the Annual Meeting?
If the records of the Company show that you held your shares as of the close of business on March 19, 2007, the record date for the Annual...
-
Page 160
....kodak.com/go/governance. For purposes of summarizing this procedure, we have assumed: 1) the date of the upcoming Annual Meeting is within 30 days of the date of the annual meeting for the previous year; and 2) if the size of the Board is to be increased, that both the name of the director nominee...
-
Page 161
..., Executive Compensation and Development Committee, and Finance Committee) on Kodak's website at www.kodak.com/go/governance • Directors' Code of Conduct on Kodak's website at www.kodak.com/go/governance • Kodak Board of Directors Policy on Recoupment of Annual Incentive Bonuses in the Event of...
-
Page 162
...) 724-5492 The address of our principal executive ofï¬ce is: Eastman Kodak Company 343 State Street Rochester, NY 14650
HOUSEHOLDING OF DISCLOSURE DOCUMENTS
The SEC has adopted rules regarding the delivery of disclosure documents to shareholders sharing the same address. This rule beneï¬ts both...
-
Page 163
... 18. The number of directors is set by the Board and is currently 11. Mr. Perez is the only director who is an employee of the Company. We are in the process of declassifying our Board. • Class I directors who stood for election at the 2006 annual meeting were elected for two-year terms ending in...
-
Page 164
... of annual pay, annual variable pay and long-term variable equity incentives, should be at a competitive median level. Limits Compensation Committee's Flexibility. The Executive Compensation and Development Committee (Compensation Committee) of our Board is composed solely of independent directors...
-
Page 165
... cap would hinder the Compensation Committee's ability to fulï¬ll its duties. Contrary to Company's Executive Compensation Principles. Our Executive Compensation Principles link closely the compensation of our senior ofï¬cers with the achievement of annual and long-term performance goals. By...
-
Page 166
... listing standards. Early this year, the Board made several changes to the guidelines to enhance its governance practices. The changes are described on page 30 of this Proxy Statement. A copy of the Corporate Governance Guidelines is published on our website at www.kodak.com/go/governance.
BUSINESS...
-
Page 167
... family member of another executive ofï¬cer or a director of our Company and the related compensation would be reported in our proxy statement if the executive ofï¬cer was a "named executive ofï¬cer" and our Compensation Committee approved (or recommended that the Board approve) such compensation...
-
Page 168
BOARD OF DIRECTORS NOMINEES TO SERVE A ONE-YEAR TERM EXPIRING AT THE 2008 ANNUAL MEETING (CLASS II DIRECTORS)
MICHAEL J. HAWLEY Director since December 2004 Dr. Hawley, 45, is the former Director of Special Projects at the Massachusetts Institute of Technology. Prior to assuming these duties in 2001...
-
Page 169
... competition. She is a Director of Morgan Stanley and AT&T.
DIRECTORS CONTINUING TO SERVE A THREE-YEAR TERM EXPIRING AT THE 2008 ANNUAL MEETING (CLASS III DIRECTORS)
RICHARD S. BRADDOCK Director since May 1987 Mr. Braddock, 65, is Chairman of MidOcean Partners, a private equity ï¬rm, a position...
-
Page 170
... service providers; • reviewed the results of the PCAOB report on the 2005 limited inspection of the independent accountants; • reviewed the results of the Company's employee afï¬rmation and training process relating to the Company's Business Conduct Guide; • oversaw management's evaluation...
-
Page 171
...employment opportunity. A detailed list of the Corporate Responsibility and Governance Committee's functions is included in its charter, which can be accessed at www.kodak. com/go/governance. In the past year, the Corporate Responsibility and Governance Committee: • recommended to the Board a 2006...
-
Page 172
... at www.kodak.com/go/governance. In the past year, the Finance Committee: • reviewed the Company's capital structure and ï¬nancing strategies, including dividend declaration, capital expenditures, debt repayment plan, share repurchase and hedging of foreign exchange and commodity price risks...
-
Page 173
... and equity-based compensation plan other than to increase the beneï¬ts accruing to the participant and to determine the manner and timing of payments under the Eastman Kodak Company 1982 Executive Deferred Compensation Plan. The Compensation Committee meets routinely throughout the year. It...
-
Page 174
... at www.kodak.com/go/governance. Under this policy, all of our directors are strongly encouraged to attend our annual meeting of shareholders. In 2006, the Board held a total of 10 meetings. Each director attended in excess of 75% of the meetings of the Board and committees of the Board on which...
-
Page 175
... next annual meeting of shareholders (or a statement to the effect that no material interest is known to such shareholder). Our Board may change the process by which shareholders may recommend director candidates to the Governance Committee. Please refer to the Company's website at www.kodak.com/go...
-
Page 176
... in 2006. The following table reports the amount of the retainer that was deferred by a director into his or her deferred stock account under Kodak's Director Deferred Compensation Plan and the amount of phantom stock units that were credited to the director as a result of that deferral. Name Martha...
-
Page 177
... were: Risk-Free Interest Rate (%) 4.4 4.5 Expected Option Life (Years) 3 3 Expected Volatility (%) 31 29 Expected Dividend Yield (%) 2.2 2.0
Grant Date December 7, 2005 December 12, 2006
The following table reports the outstanding option awards held by each of the non-employee directors at the...
-
Page 178
... retainer and restricted stock award into a deferred compensation plan. The plan has two investment options: an interest-bearing account that pays interest at the prime rate and a Kodak phantom stock account. The value of the Kodak phantom stock account reï¬,ects changes in the market price of the...
-
Page 179
...attending Board, committee and shareholder meetings and other Company-sponsored events, and provides Company transportation to the directors (including use of Company aircraft) to attend such meetings and events. Review of Director Compensation The Board has delegated to the Governance Committee the...
-
Page 180
... STOCK
As of February 14, 2007, based on Schedule 13G ï¬lings, the Company was aware of the following beneï¬cial owners of more than 5% of its common stock: Shareholder's Name and Address Legg Mason Capital Management, Inc. LLM LLC 100 Light St. Baltimore, MD 21202 Brandes Investment Partners...
-
Page 181
...
The above table reports beneï¬cial ownership of the Company's common stock in accordance with the applicable SEC rules. All Company securities over which the directors, nominees and executive ofï¬cers directly or indirectly have, or share voting or investment power, are listed as beneï¬cially...
-
Page 182
...The chart below includes the following: footnote (a) shows Kodak common stock equivalents, which are held in deferred or long-term compensation plans; and footnote (b) shows the number of shares which may be acquired by exercise of stock options: Name Richard S. Braddock Robert H. Brust Martha Layne...
-
Page 183
...Eastman Kodak Company's Board of Directors is composed solely of independent directors and operates under a written charter adopted by the Board, most recently amended on February 17, 2004. A copy of the Audit Committee's charter can be found on our website at www.kodak.com/go/governance. Management...
-
Page 184
... the Company to fail to meet any applicable rule, such as the NYSE's Listing Requirements. The Board will act on the Governance Committee's recommendation and publicly disclose its decision whether to accept the director's resignation offer within 90 days following certiï¬cation of the shareholder...
-
Page 185
...of two businesses within the Graphics Communications Group: Kodak Versamark, a leader in continuous inkjet solutions and manufacturer of high volume inkjet printers; and NexPress Solutions, a producer of digital color and black and white printing solutions. The Board also participated in training on...
-
Page 186
...
The Executive Compensation and Development Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the SEC rules with the Company's management. Based on such review and discussions, the Compensation Committee recommended to the Company's Board of Directors...
-
Page 187
...by the Committee's independent compensation consultant, using companies with gross revenues similar to Kodak. To achieve this objective, in 2006, the Committee increased the long-term variable equity incentive opportunities of our Named Executive Ofï¬cers, while holding base salaries constant, with...
-
Page 188
...known as the EXCEL plan; and • long-term variable equity incentives comprised of awards under the Company's stock option program, Leadership Stock Program (LSP), 2006 Executive Performance Share Plan (EPSP) and individual equity awards. In connection with the Committee's annual review of our Named...
-
Page 189
... Named Executive Ofï¬cers' salaries are targeted near the median of the range of salaries for executives in similar positions at companies with revenues similar to Kodak. Base salaries are reviewed annually by the Committee and do not automatically increase. As the analysis of market data in 2006...
-
Page 190
...to the Committee. Using our CEO's recommendations as a starting point, the Committee reviews and authorizes bonuses payable to each of our Named Executive Ofï¬cers.
Bonuses Awarded for 2006 Performance In each of the past three years of our Company's transformation, we have continued to make signi...
-
Page 191
... of annual stock option grants and Leadership Stock for the 2007 performance cycle to our Named Executive Ofï¬cers relative to prior years. The Committee determined that this increase was warranted because market data indicated that our executives' long-term variable equity incentive compensation...
-
Page 192
...the high and low price at which Kodak shares trade on the NYSE on the grant date.
Consistent with the Committee's strategy to close our Named Executive Ofï¬cers' total direct compensation competitive pay gap and to increase the relative percentage of long-term variable equity incentives, the number...
-
Page 193
...our Health Group, the Committee may, to the extent permitted by the plan, adjust the actual Company results for the two-year period to reï¬,ect the divestiture. The amount of shares earned by our Named Executive Ofï¬cers for the 2006-2007 performance cycle cannot be determined at this time. However...
-
Page 194
... Kodak. On occasion, the Committee also grants one-time, ad hoc option awards to reward an executive for superior individual performance. Any non-annual equity awards granted to Named Executive Ofï¬cers in 2006 are shown in the Grants of Plan-Based Awards Table on page 50 of this Proxy Statement...
-
Page 195
... found in the Change-inControl Severance Payments Table on page 72 of this Proxy Statement. Mr. Perez's Stock Ownership Requirements Mr. Perez has met the guideline for Kodak stock ownership. Please see page 42 of this Proxy Statement.
OTHER COMPENSATION ELEMENTS
Retirement Plan Program In addition...
-
Page 196
... relative to each executive's position and responsibilities. Our severance arrangements with our Named Executive Ofï¬cers also provide for the treatment of other compensation provided under the Company's annual bonus plan, equity plans and retirement plans. For additional information regarding the...
-
Page 197
...the executive's account under Kodak's Employee Stock Ownership Plan or Savings & Investment Plan, and any "phantom stock" selected by an executive as an investment option in the Executive Deferred Compensation Plan count toward meeting the executive's share ownership requirement. Our Named Executive...
-
Page 198
...summarizes the total compensation of each of our Named Executive Ofï¬cers for the ï¬scal year ended December 31, 2006. Change in Pension Value Non-Equity and Deferred Incentive Comp Comp (4) Earnings (5) $ 0 0 0 490,000 0 0
Name and Principal Position A. M. Perez Chairman & CEO F. S. Sklarsky EVP...
-
Page 199
... column reports his award for the 2006 performance period under his individual incentive plan. (5) This column reports the aggregate change in the present value of the Named Executive Ofï¬cer's accumulated beneï¬ts under all deï¬ned beneï¬t and pension plans, if any, and estimated above-market...
-
Page 200
... column also includes Company-paid personal use of the Company's driver services, tickets for Mr. Brust and family members for entertainment, home security systems and services, personal IT support, photographic equipment, umbrella insurance coverage, a retirement gift, and an executive physical. In...
-
Page 201
.... Meek ceased to be an employee of the Company effective June 30, 2006. (9) Represents a discretionary performance bonus received for 2006, granted by the Compensation Committee on February 27, 2007. One-half of the discretionary bonus was paid in cash, which is reported above. The remainder of the...
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Page 202
... information regarding his potential severance payments and beneï¬ts, please read the narrative descriptions and tables below, beginning on page 63 of this Proxy Statement. Frank S. Sklarsky The Company employed Mr. Sklarsky as Chief Financial Ofï¬cer under an offer letter dated September 19, 2006...
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Page 203
... for any other reason, he will forfeit this award. The amendment to Mr. Langley's letter agreement also provides for his enhanced retirement beneï¬ts to be paid in a lump sum. The term of Mr. Langley's employment is indeï¬nite. For information regarding his potential severance payments and bene...
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Page 204
... did not receive an award bonus under the EXCEL plan for the 2006 performance period. Based on the reasons stated in the CD&A, the Compensation Committee, however, granted our covered employees a discretionary performance bonus in February 2007. All of our Named Executive Ofï¬cers, with the...
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Page 205
...Company's annual bonus plan (EXCEL), the 2005 Omnibus Long-Term Compensation Plan, which provides for the grant of stock options, restricted stock grants and performance stock units, and any individual non-equity incentive bonus plan in which a Named Executive Ofï¬cer participated. Estimated Future...
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Page 206
... amount represents the annualized target bonus for Mr. Meek under the EXCEL plan for 2006. (7) The exercise price of $25.01 is based on the average of the high and low stock price on the date of grant (February 1, 2006). The closing price of the Company's common stock on February 1, 2006 was $25.04...
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Page 207
... grant for each Named Executive Ofï¬cer employed on that date, other than Mr. Brust, who was planning to voluntarily retire from the Company on February 1, 2007. Because the Committee increased all of our Named Executive Ofï¬cers' option grants in 2006 in line with the long-term incentive gap...
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Page 208
... Any amount earned under the plan was payable in a single, lump-sum payment in shares of our common stock in 2008, no later than March 31, 2008, provided Mr. Meek remained employed with the Company through this date or was terminated by the Company without cause prior to this date. As a result of Mr...
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Page 209
... sets forth additional information concerning option awards and stock awards held by Named Executive Ofï¬cers as of December 31, 2006, including awards granted during 2006 and described in the Grants of Plan-Based Awards Table. Name Option Awards Number of Number of Equity Securities Securities...
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Page 210
Outstanding Equity Awards of Fiscal Year-End Table continued Name (#) P. J. Faraci 21,864 3,333 17,498 6,979 0 ...6,666 10,798 17,498 8,376 (#) 10,936 6,667
(9) (10)
Option Awards (#) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
(5) (12) (6) (7) (8)
Stock Awards ($) 32.50 26.46 26.47 24.75 25.01 25.88 31.30 ...
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Page 211
...by our Named Executive Ofï¬cers, and also includes 2006 EPSP awards. (3) The market value of unearned shares, units or other rights that have not vested was calculated using a stock price of $25.80, the closing price of Kodak stock on December 29, 2006, the last trading day of 2006. (4) This column...
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Page 212
.... All awards represented in this column were valued using a stock price equal to the closing price on the vesting date. This column also includes the value of dividends earned on vested and unvested restricted stock units including deferred units disclosed in the Non-Qualiï¬ed Deferred Compensation...
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Page 213
... Notes to the Consolidated Financial Statements to the Company's Form 10-K for the year ended December 31, 2006. The present value has been calculated for all Named Executive Ofï¬cers with the exception of Ms. Hellyar, assuming they will remain in service until the normal retirement age of 65, and...
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Page 214
... the sum of the employee's participating compensation for the highest consecutive 39 periods of earnings over the 10 years ending immediately prior to retirement or termination of employment. Participating compensation, in the case of the Named Executive Ofï¬cers, is base salary and any EXCEL award...
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Page 215
... retirement beneï¬t under the terms of his August 12, 2003 offer letter. Under this arrangement, the Company established a phantom cash balance account on behalf of Mr. Langley. For each full year of service he remains employed (up to a maximum of six years), the Company will credit the account...
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Page 216
... guidelines. Dividend equivalents on amounts invested in an executive's phantom stock account are credited to an executive's account in the form of additional stock units at the same rate as dividends are paid on shares of Company common stock. The plan's beneï¬ts are neither funded nor secured...
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Page 217
... prime rate, compounded annually, until they are distributed. Distributions from the account are subject to the same distribution rules as those in effect under our Executive Deferred Compensation Plan described above. Deferral of Stock Awards Under prior equity award programs, the Company at times...
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Page 218
... could affect the amounts payable include the executive's base salary, the Company's stock price and the executive's age and service with the Company. In addition, although the Company has entered into individual severance arrangements with most of our Named Executive Ofï¬cers, in connection with...
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Page 219
... his employment with the Company for good reason, he is eligible to receive (less applicable withholding): • an amount equal to two times the sum of his current base salary and target EXCEL bonus award, payable over 24 months; • a pro rata target bonus award under the EXCEL plan payable...
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Page 220
... beneï¬ts if his employment was terminated by the Company prior to January 3, 2007 for any reason other than cause or disability. He would have been eligible to receive a severance allowance equal to two times his current annual base salary plus target EXCEL award, payable over a twenty-four...
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Page 221
... her employment without cause without offering her a reasonably comparable position. She will be entitled to a severance allowance equal to two times her current annual base salary plus target EXCEL award, payable over a twelve-month period commencing on the six-month anniversary of her last day at...
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Page 222
...the Company without cause and for an "approved reason" as if the Named Executive Ofï¬cers' employment was terminated as of December 31, 2006 using the closing price of our common stock as of December 29, 2006, the last trading day in 2006. A. M. Perez Cash Severance (3) Additional Severance Payment...
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Page 223
..., as if the Named Executive Ofï¬cers' employment was terminated as of December 31, 2006, using the closing price of our common stock as of December 29, 2006, the last trading day in 2006. A. M. Perez Cash Severance (2) Additional Severance Payment Intrinsic Value of Stock Options (3) Restricted...
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Page 224
...reason, as if the Named Executive Ofï¬cers' employment was terminated as of December 31, 2006, using the closing price of our common stock as of December 29, 2006, the last trading day in 2006. A. M. Perez Cash Severance (3) Intrinsic Value of Stock Options (4) Restricted Stock (5) Leadership Stock...
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Page 225
... the Company. In the event of a termination of employment, either voluntarily with "good reason" or involuntarily without "cause," within two years following a change-in-control, each of the Named Executive Ofï¬cers receives a lump-sum severance payment equal to i) three times their base salary and...
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Page 226
...the Company's retirement plan will be entitled to a beneï¬t equal to 7% of the executive's annual compensation at the time of the termination times the number of additional years of service that the executive is entitled to under the plan. The actual number of years of service and years of age that...
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Page 227
... by the Company in connection with a change-incontrol, as if the Named Executive Ofï¬cers' employment was terminated as of December 31, 2006 using the closing price of our common stock as of December 29, 2006, the last trading day in 2006. A. M. Perez Cash Severance (2) Additional Severance Payment...
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Page 228
... class of our equity securities to ï¬le reports of ownership and changes in ownership with the SEC. We are required to disclose any failure of these executive ofï¬cers, directors and 10% stockholders to ï¬le these reports by the required deadlines. Based solely on our review of the copies...
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Page 229
... of the Company's present executives serve on that company's compensation committee; or • the director was employed by another company (other than a charitable organization), or an immediate family member of the director was employed as an executive ofï¬cer of such company, that makes payments to...
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Page 230
...meaningful, long-term equity ownership stake in the Company.
EXHIBIT III - DIRECTOR SELECTION PROCESS
The entire Board of Directors is responsible for nominating members for election to the Board and for ï¬lling vacancies on the Board that may occur between annual meetings of the shareholders. The...
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Page 231
... report on management's report on internal control over ï¬nancial reporting. The Audit Committee shall also approve, if necessary, any signiï¬cant changes in terms, conditions and fees resulting from changes in audit scope, company structure or other items. In addition to the annual audit services...
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Page 232
... accounting records or ï¬nancial statements of the audit client • Financial information systems design and implementation • Appraisal or valuation services, fairness opinions, or contribution-in-kind reports • Actuarial services • Internal audit outsourcing services • Management functions...
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Page 233
n Annual Meeting Information
2007 ANNUAL MEETING DIRECTIONS AND PARKING INFORMATION
Morris J. Wosk Centre for Dialogue at Simon Fraser University 580 W. Hastings Street, Vancouver, BC, Canada Directions From the Vancouver International Airport Follow the signs for Vancouver (downtown or city centre...
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Page 234
...will see a courtyard called Joe Segal Court on your right-hand side. There are 2 cement pillars out front ...right-hand side, just past the meridian of trees The main entrance is located in the courtyard, NOT on Hastings Street as the address...lot locations. There is a fee for parking at each lot...
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Page 235
... Marketing Ofï¬cer; Director, Brand Management
Kevin J. Hobert
President,* Kodak Health Group
Vice Presidents
John E. Blake, Jr.
General Manager, Digital Capture and Imaging Products, Consumer Digital Imaging Group
Michael W. Jackman
General Manager, Healthcare Information Systems, Kodak Health...
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Page 236
Eastman Kodak Company 343 State Street Rochester, NY 14650 www.kodak.com
This cover was produced using solutions from Kodak's Graphic Communications Group including; Kodak Prinergy Connect Workï¬,ow System, Approval XP4 Digital Color Imaging System, Sword Excel Plates, and a Magnus 800 Platesetter. ...