Kodak 2004 Annual Report Download - page 42
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Financials
40
E A S T M A N K OD A K C O M PA N Y
andcashflowthatKodakcanachievefromitstraditionalconsumerfilm
andpaperbusinesses;(2)thespeedatwhichconsumertransitionfrom
traditionalphotographytodigitalphotographyoccurs;(3)Kodak’sability
todevelopnewdigitalbusinessesinitscommercial,consumerandhealth
markets;(4)Kodak’sabilitytoidentify,completeandintegratecompatible
strategicacquisitionsconsistentwithitsgrowthtimeline;and(5)thecosts
andtimingofactivitiesundertakeninconnectionwiththeseinitiatives.In
addition,theseestimatesandassumptionsaresubjecttosignificanteco-
nomic,competitiveandotheruncertaintiesthatarebeyondKodak’scontrol.
Iftheseassumptionsarenotrealized,orifotherunforeseeneventsoccur,
Kodak’sresultsofoperationscouldbeadverselyaffected,asitmaynot
beabletogrowitsbusiness,anditsabilitytocompetecouldbenegatively
affected.
Ifwecannotmanageourproductandservicestransitionorcon-
tinuetodevelopanddeploynewproductsandservices,thiscould
adverselyaffectourrevenues.
Unanticipateddelaysinimplementingcertainproductstrategies(including
digitalproducts,categoryexpansionanddigitization)couldadverselyaffect
Kodak’srevenues.Kodak’sabilitytosuccessfullytransitionitsexisting
productsanddevelopanddeploynewproductsrequiresthatKodakmake
accuratepredictionsoftheproductdevelopmentscheduleaswellas
volumes,productmix,customerdemand,saleschannels,andconfigura-
tion.Theprocessofdevelopingnewproductsandservicesiscomplexand
oftenuncertainduetothefrequentintroductionofnewproductsthatoffer
improvedperformanceandpricing.Kodakmayanticipatedemandand
perceivedmarketacceptancethatdiffersfromtheproduct’srealizablecus-
tomerdemandandrevenuestream.Further,inthefaceofintenseindustry
competition,anydelayinthedevelopment,productionormarketingofa
newproductcoulddecreaseanyadvantageKodakmayhavetobethefirst
oramongthefirsttomarket.Kodak’sfailuretocarryoutaproductrollout
inthetimeframeanticipatedandinthequantitiesappropriatetocustomer
demand,oratall,couldadverselyaffectfuturedemandforKodak’sprod-
uctsandservicesandhaveanadverseeffectonitsbusiness.
Ourrevenue,earningsandexpensesmaysufferifwecannotcontinue
toenforceourlicensingagreementsandintellectualpropertyrights.
Kodak’sabilitytoimplementitsintellectualpropertylicensingstrategies
couldalsoaffecttheCompany’srevenueandearnings.Kodakhasmade
substantialinvestmentsintechnologiesandneedstoprotectitsintellectual
propertyaswellastheinterestsofotherlicensees.Theestablishmentand
enforcementoflicensingagreementsprovidesarevenuestreamintheform
ofroyaltiesthatprotectsKodak’sabilitytofurtherinnovateandhelpthe
marketplacegrow.Kodak’sfailuretoproperlymanagethedevelopmentof
itsintellectualpropertycouldadverselyaffectthefutureofthesepatents
andthemarketopportunitiesthatcouldresultfromtheuseofthisproperty.
Kodak’sfailuretomanagethecostsassociatedwiththepursuitofthese
licensescouldadverselyaffecttheprofitabilityoftheseoperations.
Ourinabilitytodevelopandimplemente-commercestrategiesthat
alignwithindustrystandards,couldadverselyaffectourbusiness.
IntheeventKodakwereunabletodevelopandimplemente-commerce
strategiesthatareinalignmentwiththetrendtowardindustrystandards
andservices,theCompany’sbusinesscouldbeadverselyaffected.The
availabilityofsoftwareandstandardsrelatedtoe-commercestrategies
isofanemergingnature.Kodak’sabilitytosuccessfullyalignwiththe
industrystandardsandservicesandensuretimelysolutions,requiresthe
Companytomakeaccuratepredictionsofthefutureacceptedstandards
andservices.
Systemintegrationissuescouldadverselyaffectourrevenuesand
earnings.
Kodak’scompletionofplannedinformationsystemsupgrades,including
SAP,ifdelayed,couldadverselyaffectitsbusiness.AsKodakcontinues
toexpandtheplannedinformationservices,theCompanymustcontinue
tobalancetheinvestmentoftheplanneddeploymentwiththeneedto
upgradethevendorsoftware.Kodak’sfailuretosuccessfullyupgradetothe
vendor-supportedversioncouldresultinriskstosystemavailability,which
couldadverselyaffectthebusiness.
Ourinabilitytomanageouracquisitions,divestituresandotherport-
folioactionscouldadverselyimpactourrevenuesandearnings.
Kodakhasrecentlycompletedvariousbusinessacquisitionsandintendsto
completevariousotherbusinessacquisitionsinthefuture,particularlyin
itsHealthandGraphicCommunicationssegments,inordertostrengthen
anddiversifyitsportfolioofbusinesses.Atthesametime,Kodakneedsto
streamlineandsimplifyitstraditionalbusinesses,includingitsphotofinish-
ingoperationsintheUnitedStatesandEAMER.IntheeventthatKodak
failstoeffectivelymanagetheportfolioofitsmoretraditionalbusinesses
whilesimultaneouslyintegratingtheseacquisitions,itcouldfailtoobtain
theexpectedsynergiesandfavorableimpactoftheseacquisitions.Sucha
failurecouldcauseKodaktolosemarketopportunitiesandexperiencea
resultingadverseimpactonitsrevenuesandearnings.
In2005,Kodakcontinuestofocusonreductionofinventories,
improvementinreceivableperformance,improvementinmanufacturing
productivityandthecompletionoffocusedcapitalexpenditures.
Ifwedonottimelyimplementourplannedinventoryreductions,this
couldadverselyaffectourcashflow.
UnanticipateddelaysintheCompany’splanstocontinueinventory
reductionsin2005couldadverselyimpactKodak’scashflowoutlook.
Plannedinventoryreductionscouldbecompromisedbyslowersalesthat
couldresultfromaccelerateddigitalreplacementorcontinuedweakglobal
economicconditions.Purchasers’uncertaintyabouttraditionalproduct
demandortheextentoftheglobaleconomicdownturncouldresultinlower
demandforproductsandservices.Inaddition,thecompetitiveenvironment
andthetransitiontodigitalproductsandservicescouldalsoplacepres-
suresonKodak’ssalesandmarketshare.IntheeventKodakisunableto
successfullymanagetheseissuesinatimelymanner,theycouldadversely
impacttheplannedinventoryreductions.
Delaysinourplanstocontinuetoimproveouraccountsreceivable
collectionscouldadverselyimpactourcashflow.
UnanticipateddelaysintheCompany’splanstocontinuetheimprove-
mentofitsaccountsreceivablecollectioncouldalsoadverselyimpact
Kodak’scashoutlook.Acontinuedweakeconomycouldslowcustomer
paymentpatterns.Inaddition,competitivepressuresinmajorsegments
maycausethefinancialconditionofcertainofKodak’scustomerstodete-
riorate.ThesesamepressuresmayadverselyaffecttheCompany’sefforts
toshortencustomerpaymentterms.Kodak’sabilitytomanagecustomer
riskwhilemaintainingacompetitivemarketsharemayadverselyaffect
continuedaccountsreceivableimprovementin2005.