Integrated Company Analysis - Business Library

Integrated Company Analysis 

Alejandro Castano 

Fall, 2009 

Joe Czechowicz 

Wisconsin School of Business 

975 University Ave 

Madison, WI 53706 

608-262-1550 

For over one hundred years, Eastman Kodak Company has provided imaging 

products to consumers, earning brand equity through innovation. Today, Kodak 

struggles with declining revenue and steep restructuring costs as it transitions to 

the digital imaging market. 

Troy Golden 

Matt Johnson Lindsay Kruger

Contents 

Contents .................................................................................................................................................................................. 2 

Executive Summary ................................................................................................................................................................ 4 

Company Analysis .................................................................................................................................................................. 5 

Organizational Structure ..................................................................................................................................................... 5 

Financial Analysis ............................................................................................................................................................... 5 

Performance Indicators ................................................................................................................................................... 5 

Quality of Financial Statements ...................................................................................................................................... 6 

Financing and Capital Structure ...................................................................................................................................... 7 

Valuation ......................................................................................................................................................................... 7 

Kodak‘s Current Marketing Strategy .................................................................................................................................. 8 

Consumer ........................................................................................................................................................................ 8 

Positioning ...................................................................................................................................................................... 8 

Product ............................................................................................................................................................................ 9 

Price ................................................................................................................................................................................ 9 

Placement ...................................................................................................................................................................... 10 

Promotion ...................................................................................................................................................................... 10 

Recommendations ................................................................................................................................................................. 12 

Appendix ............................................................................................................................................................................... 14 

Exhibit 1 – Products Analysis ........................................................................................................................................... 14 

Digital Cameras............................................................................................................................................................. 14 

Printers .......................................................................................................................................................................... 15 

Digital Picture Frames .................................................................................................................................................. 16 

Photo Storage ................................................................................................................................................................ 16 

Exhibit 2 – ―It‘s time to smile‖ Campaign ........................................................................................................................ 18 

Exhibit 3 – Competitor Endorsements .............................................................................................................................. 22 

Exhibit 4 – Economic Value Pricing ................................................................................................................................. 22 

Exhibit 5 – Kodak Product Pricing ................................................................................................................................... 22 

Exhibit 6 ............................................................................................................................................................................ 23 

Point And Shoot Models: Rankings And Price ............................................................................................................. 23 

Compiled from ConsumerReports.org .......................................................................................................................... 23 

Exhibit 7 – Competitor Business Descriptions ................................................................................................................. 25 

Canon Inc. ..................................................................................................................................................................... 25 

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Fujifilm Holdings Corp. ................................................................................................................................................ 25 

Hewlett-Packard Co. ..................................................................................................................................................... 25 

Ricoh Co. Ltd. ............................................................................................................................................................... 25 

Sony Corp. .................................................................................................................................................................... 26 

Xerox Corp. ................................................................................................................................................................... 26 

Nikon Corp. ................................................................................................................................................................... 26 

Olympus Corp. .............................................................................................................................................................. 27 

Lexmark International Inc. ............................................................................................................................................ 27 

Seiko Epson Corp.......................................................................................................................................................... 27 

Exhibit 8 – Profitability Scenario Analysis ....................................................................................................................... 28 

Exhibit 9: Comparison of accounting methods ................................................................................................................. 30 

Exhibit 10: Operating cost breakdown ............................................................................................................................. 31 

Exhibit 11 - Cash Conversion Cycle ................................................................................................................................ 32 

Exhibit 12 – EK Pro Forma Financial Statements ............................................................................................................ 34 

Exhibit 13 – CDG Pro Forma Financial Statements ......................................................................................................... 35 

Exhibit 14 – FPEG Pro Forma Financial Statements ........................................................................................................ 36 

Exhibit 15 – GCG Pro Forma Financial Statements ......................................................................................................... 37 

Exhibit 16 – Segment Valuations and Key Assumptions ................................................................................................. 38 

Exhibit 17 – Regression Analysis of Traditional Sales Lines ........................................................................................... 39 

Exhibit 18 – Sensitivity Analysis of Stock Price .............................................................................................................. 43 

Exhibit 19 – Cash Benefit of Financing Transactions ...................................................................................................... 44 

Works Cited .......................................................................................................................................................................... 45 

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Executive Summary 

Eastman Kodak Co. was founded in 1892 by George Eastman and offers imaging products for leisure, 

commercial, entertainment, and scientific purposes. Traded on the New York Stock Exchange (symbol: EK), the 

company reported over $9 billion in revenue and $9 billion in assets in FY08. Kodak is organized along three segments: 

the Graphic Communications Group (GCG); the Film, Photofinishing, and Entertainment Group (FPEG); and the 

Consumer Digital Imaging Group (CDG). Kodak‘s history is one of innovation, but the company was slow to react to the 

digital revolution. Kodak has struggled to overcome this legacy ever since. 

Through our due diligence, we have uncovered that Kodak must improve gross margins to become profitable in 

2010. Our sensitivity analysis shows that sales growth alone will not lead to profitability. We have identified a target 

gross margin of 27.5% to become profitable in 2010. 

Kodak entered into two financing transactions over the past two months involving convertible debt and warrants. 

These transactions allowed Kodak to raise almost $700 million in cash, while saving around $35 million per year in 

interest. In exchange for the savings, existing shareholders will potentially give up 25% of the equity value. Kodak also 

continues to sell significant assets and intellectual property rights, including its OLED business, a potential next- 

generation flat-panel display technology that Kodak pioneered over the last couple of decades (Kodak, 2009). 

Kodak positions itself as the user-friendly choice for amateur users of imaging products. The company‘s product 

attributes detract from this position. In general, Kodak products are priced below the competition. Kodak‘s lower price, 

though offering a benefit to some consumers, signals inferior quality to the market. Kodak‘s placement strategy employs 

wide market coverage, ensuring easy access for consumers. Presently, Kodak does not direct consumers to preferred 

channels. Kodak recently launched an integrated, multi-media marketing campaign. The campaign touches on multiple 

product lines, rather than emphasizing an ‗energizer‘ product. 

The following are our key recommendations: (1) redesign Kodak‘s marketing communication message to position 

it as the premier provider of imaging solutions that connects the consumer with their loved ones; (2) through marketing 

communications, walk the consumer from image capturing, through storage, to sharing, allowing them to process each of 

Kodak‘s product offerings; (3) increase marketing focus on digital cameras to leverage brand equity (reposition); (4) 

increase prices on digital cameras. 

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Company Analysis 

Organizational Structure 

Eastman Kodak is an international corporation with over 24,000 employees, over $9 billion in annual sales 

(FY08), and over $9 billion in assets (FY08). 

The company is organized along three segments: the Graphic Communications Group (GCG); the Film, 

Photofinishing, Entertainment Group (FPEG); and the Consumer Digital Imaging Group (CDG). Thirty-nine percent of 

Kodak‘s revenue comes from the GCG segment, which provides products and services to businesses with large scale 

printing operations. Thirty-one percent of Kodak‘s revenue comes from the FPEG segment, which provides traditional 

photographic products and services to consumer, professional, and industrial markets. Thirty percent of Kodak‘s revenue 

comes from the CDG segment, which provides digital consumer products. 

Kodak began in the late nineteenth century with George Eastman‘s advance in dry plate technology, which 

allowed photography to become an amateur pursuit. Since then, Kodak has continued to excel in technological 

innovation. The company issued over 19,000 U.S. patents between 1900 and 1999. In 1935, Kodak introduced 

Kodachrome film, the first commercially successful amateur color film. NASA relied on a Kodak camera to take photos 

on the moon and transmit them to earth. Also, Kodak invented the first digital camera in 1975 (Kodak, 2009). 

Kodak reacted slowly to the digital revolution. Since the takeoff of digital cameras, Kodak has seen revenues 

plummet from $15 billion to $9.4 billion (Butcher, 2009). Kodak has cut 40,000 jobs over the last five years, and plans to 

eliminate 3,500 to 4,500 in 2009 (Dobbin, 2009). Since 2003, Kodak has sought to meet this challenge with robust 

restructuring programs. Approximately 80% of Kodak revenue is from new products and services developed within the 

last five years (Butcher, 2009). Approximately 60% of Kodak employees have been there less than four years (Butcher, 

2009). 

Financial Analysis 

Performance Indicators 

Kodak faces the challenge of high restructuring costs and declining demand for its digital products, while trying 

to redefine its organizational structure and brand name. On top of company-specific problems, Kodak faces a stiff macro- 

economic headwind, as consumers continue to watch their spending on luxury items. To combat these problems, Kodak 

has cut costs via layoffs and reductions in R&D expenditures, removed dividend payments to common stockholders and 

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targeted its cash conversion cycle. In the near term, Kodak appears to be poorly positioned to handle an extended 

economic contraction, and must act immediately to generate additional revenues and profits. 

Negatives for FY08 vs. Competitors 

Revenues: Kodak experienced revenue growth (pro-forma) of -2.5% and -8.6% in FY07 and FY08, respectively. 

The median competitor revenue growth was 6.7% and -8.6% in FY07 and FY08, respectively. We attribute the quicker 

revenue decline to the company‘s inability to resonate with consumers. 

Rapidly declining gross margins. Since Kodak introduced its ―digital plan‖ in 2003, gross margins have declined 

sharply from a high of 36% to the current low of around 20% (23% FY08 vs. competitor median of 36%). The decline in 

margins is a pressing issue. We believe our marketing recommendations give Kodak the best chance of survival. 

Return-on-Equity (Dupont): Kodak has seen its ROE go from 24.5% in FY02 (vs. 6.6% for competitors) to - 

44.4% in FY05 (vs. 10.4% for competitors), to -36.4% (vs. 0.6% for competitors) in FY08. One of the distinguishing 

detractors comes from Kodak‘s above median equity multiplier at 5.4x (vs. 2.7x for competitors). As the industry and 

economy deteriorated, Kodak suffered from higher financial leverage relative to its peers (3-yr average of 6.4x vs. 2.7x 

for competitors) that accelerated the decline of profitability. 

Positives for FY08 vs. Competitors 

Cash Conversion Cycle (CCC): Kodak has reduced its cash conversion cycle to -5 days for FY08, versus a 

competitor median of 82 days (FactSet Research Systems, 2009). Kodak accomplished the improvement in CCC through 

extensions of terms on accounts payable, while maintaining steady inventory and days of sales outstanding. 

Lean operating costs: Kodak has been successful in cutting SG&A costs as a percentage of sales. By reducing its 

workforce, Kodak expects future cost savings of over $300 million. Current operating costs (ex-restructuring and goodwill 

write-offs) of 22% are well below Canon (35%), Fujifilm (35%) and Nikon (31%). If Kodak can survive the economic 

contraction and continue to operate at current levels in comparison to its competitors, we believe the company can survive 

and return to profitability. 

Quality of Financial Statements 

Kodak reports under US GAAP (Exhibit 9). Inconsistency in Kodak‘s financial reports inhibits the ability to 

serially compare and forecast financial performance. Through our due diligence process, we discovered that Kodak is 

more aggressive (8%) than Canon in respect to estimating expected returns on assets (6.5%) of pension plan obligations. 

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Restatements: Kodak restated financial statements in 2003 and 2004 due to mistakes in reporting income taxes, 

accruals for pensions and other post-retirement benefits due to the rapid turnover (firing) of 15,000 workers. The 

restatement reduced reported earnings by $85 million (effect from income tax error - $56 million, effect from pension 

errors – $29 million), decreased retained earnings and decreased cash flow from operations. 

Reclassifications: Continuous restructuring of the company prevents proper historical comparisons beyond three 

years. The reclassifications also introduce discrepancies between segment breakdowns and total firm numbers. 

Change in useful life of assets: In the first quarter of 2008, the company performed an updated analysis of 

expected useful lives on its traditional film and paper business. This analysis resulted in an increase in useful lives, which 

in turn will result in decreasing depreciation expenses ($107 million), increasing net income, increasing retained earnings 

and increasing assets in the future. 

Impairment of goodwill: In 4Q08, Kodak re-evaluated all of its business segments with an increased WACC 

between 18.5% and 23.0% to reflect the rapidly deteriorating environment. Due to the estimated future cash flows being 

less than the overall cost of the GCG segment, Kodak reported a pre-tax, non-cash $785 million impairment charge. 

Financing and Capital Structure 

Many of Kodak‘s financing decisions are being dictated by its weak financial position. The company is relying on 

convertible securities and warrants in order to secure debt financing at bearable costs (around 8.5%, Exhibit 19) while 

giving up significant upside of around 25% of common stock if the company recovers. Equity financing is not an option 

due to the low market value of Kodak‘s common stock relative to its operating and financing cash needs. It has decided to 

cut its dividend and discontinue stock repurchases after spending over $450 million of needed cash in 2008. 

Valuation 

Discounted Cash Flow Analysis 

We valuate Kodak‘s stock at $5.32. This makes the share price of $4.40 as of 12/11/09 slightly undervalued. The 

DCF analysis was performed using a two-stage model in which we estimated the cash flows for Kodak‘s three business 

segments, CDG, FPEG and GCG, through 2018, and then calculated a terminal value based on assumed long-term growth 

rates (Exhibits 15). 

Kodak has re-organized its business segments repeatedly, making it difficult to compare revenues and costs over a 

long period and establish any significant trend at the segment level. Second, the business is undergoing rapid changes as a 

result of the technological shift to digital products, which has increased volatility and made it very difficult to establish 

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any kind of even a short-term trend. We ended up using a regression model of Kodak‘s overall revenues with several 

factors related to their traditional business segments to predict revenues going forward for GCG and FPEG, which most 

closely resemble Kodak‘s traditional combined business lines since 1990 (Exhibit 16). Finally, we believe that our WACC 

calculation could be undervaluing Kodak‘s risk based on management expectations for the cost of capital (Kodak, 2009). 

Exhibit 17 contains a sensitivity table of the stock value based on WACC and long-term growth rates. 

WACC 

We estimated a weighted average cost of capital (WACC) of 15.1% for the overall company based on a risk-free 

rate of 3.2%, and a market risk premium of 7.4% 1 (Kavajecz, 2009, p. 19). We calculated Kodak‘s equity beta of 1.68 

from September 2002 through November 2009. We chose this time period to accurately reflect the increased volatility of 

Kodak‘s share price relative to the market based on the company‘s digital transition. We also used industry comparables 

to estimate the cost of capital for each of Kodak‘s business units, and then increased them by a factor based on the 

company WACC, which we assume reflects significant additional risk of bankruptcy as indicated by the stock volatility 

relative to the S&P 500 (Exhibit 15). 

Kodak’s Current Marketing Strategy 

Consumer 

Kodak is likely targeting a segment of the consumer market that meets the following criteria: (1) adult, post- 

baccalaureate, 25-40 years old; (2) active/ involved; (3) caring about relationships (friends & family); (4) non- 

professional, sub-standard skills in photography; (5) high interest in capturing images of life (freeze in time) and sharing 

those images in digital or printed form. 

Positioning 

Kodak‘s marketing decisions (explained below) imply the following positioning statement: Kodak is preferred by 

adults who are active, busy and care about meaningful relationships and want to encapsulate and share important 

moments in their lives, because Kodak’s products enable them to capture, share, display, and store pictures and create 

keepsakes, with more ease than competitors like Canon, Nikon, and Fujifilm. 

1 Risk premium over government bonds: 13.0% - 5.6% = 7.4% 

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Product 

Kodak fails to offer clear, distinguishing benefits to consumers. The company attempts to position itself as a 

provider of ‗user-friendly‘ products, typically offering products whose names include the word ‗easy‘. However, some of 

Kodak‘s product attributes detract from the credibility of this position (Exhibit 2). Other than a long battery life, the 

Kodak EasyShare M1033 digital camera features few differentiating attributes that appeal to the user-friendly consumer. 

The Kodak EasyShare 5300 printer has a cumbersome interface and PC Loader tray that lacks built-in networking 

capability. Kodak‘s ‗user-friendly‘ position is undermined with products that do not deliver the promised benefit. 

Kodak develops products quickly due to its competitive environment. A comprehensive program designed to 

include all desirable features is nearly impossible due to the speed at which the industry evolves. 

Product types face different risk scenarios depending on their newness to the company and their newness to the 

market. Digital cameras are familiar to the market and to Kodak. Thus, a line extension of Kodak‘s digital cameras 

creates a risk of cannibalization and a lack of incremental sales. Kodak‘s new approach to printers, with higher upfront 

costs and lower ink costs, presents different risks. The product type is new to the market and new to the company, 

representing a new to the world concept. Thus, the product introduction is at risk of a lack of company-market fit. 

Price 

Using the economic pricing model (Exhibit 5), a firm strives to deliver products that demand a price premium 

over its competitors. Based on this, we compared the pricing of Kodak‘s core consumer products (digital cameras and 

inkjet printers), and its secondary consumer products (digital picture frames and Kodak Gallery), to the pricing of its 

direct competitors in each category. In the compact digital camera segment, Kodak‘s products are generally priced below 

the products of its most direct competitors of Canon, Nikon, and Fujifilm. For example, Kodak cameras sell in the range 

of $80 to $160, while cameras offered by the competitors sell in the range of $110 to $500 (Consumers Union of U.S., 

2009). This price differential implies that Kodak is suffering from negative price differentiation. While a lower price 

may offer the benefit of capturing a large portion of the price sensitive consumer, we believe that the lower price signals 

lower quality to the consumer, when in actuality Kodak‘s cameras deliver comparable quality to that of its competitors. 

According to ConsumerReports.org, Kodak holds four of the top twenty-six spots in the point and shoot digital camera 

category, only behind Canon, which dominates the rankings with nine of the top spots—Fujifilm has two cameras ranked 

in the top twenty-six, while Nikon has zero (Consumers Union of U.S., 2009). As a result, we believe that there is an 

opportunity for Kodak to raise its prices in this segment. The other consumer products do not suffer from negative price 

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differentiation, and thus we do not believe an opportunity exists to change the pricing of these products (see Exhibit 6 for 

further discussion on pricing of printers, digital frames, and Kodak Gallery products). 

Placement 

Overall, Kodak‘s placement strategy is similar to that of its competitors, in each of the main consumer product 

categories. Digital cameras, inkjet printers, and digital picture frames, are typically sold through each company‘s website, 

and through all major retailers such as Best Buy, Target, and Wal-Mart, both in stores and online. The photo storage 

products are all offered exclusively online. Kodak‘s placement employs wide market coverage because its products are 

easily accessible to all consumers. It is difficult for Kodak to differentiate itself within the placement component of the 

marketing framework; however, it is important that it monitors the retailers to ensure both consistency across channels 

and alignment of objectives between itself and the retailers. 

Promotion 

Understanding the consumer 

Kodak‘s target consumers have lower levels of expertise than an amateur photographer. They are typically more 

concerned about the moments captured in pictures and video rather than the art or technical skills required to do so. These 

consumers will likely look to an expert (or perceived expert) in the field of photography for advice if any questions arise. 

Thus, the level of involvement of Kodak‘s consumer tends to be low. While in some cases, consumers may do some 

research to learn about the product they‘re seeking, this type of research is typically shallow in technicalities or details. 

Once these consumers have learned what brands are reliable, where the best deals are, and how to obtain the product, they 

are ready to purchase. This is when Kodak must be ready to sell. 

Marketing objectives 

Increased sales is the ultimate marketing objective for Kodak. At the same time, Kodak‘s promotional strategy 

seems to have more specific goals depending on where the consumer is within the buying process. Prior to purchasing, 

Kodak wants to represent ‗peace of mind‘, fun, and overall inspiration (Exhibit 3, figure 8). The following historic tag- 

lines are indicative of such intentions: ―you press the button, we do the rest‖ in 1888 (Kodak, 2009), ―the Kodak 

moment‖, ―Share Moments, Share Life‖ in 2001, and its most recent campaign ―It‘s time to smile‖ (Exhibit 3), which will 

run for at least one year. These campaigns fit Kodak‘s aim to offer an easy way for consumers to capture the best 

moments of their lives. Kodak also appeals to creative consumers who are interested in creating picture books, cards, t- 

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shirts, and the like. These additional, creative options entice the consumer to invest more in Kodak products (Exhibit 3, 

figure 3). Hence, after the first purchase, Kodak‘s goal is to create a repeat customer. 

Reseller Analysis 

The availability of products is vital to Kodak‘s success. Therefore, Kodak must ensure the consumer is directly 

connected to preferred retailers whenever they are ready to buy. Unfortunately, that is not always the case in Kodak‘s 

current marketing campaign. While Kodak is improving its presence amongst consumers by using several digital 

initiatives, it is not always clear what is the best way to obtain the products. There is not always a link or message that 

directs consumers to retailers Kodak prefers. Consequently, consumers interested in purchasing Kodak products may find 

inconsistent messages while searching for a channel (e.g. prices far lower than Kodak recommends, Exhibit 3, fig. 9). 

Marketing Communications 

Kodak‘s marketing communications today are focused on triggering emotions and presenting an argument in 

favor of some of its product attributes. The company‘s latest campaign, ―It‘s time to smile,‖ stems from the consumer 

insight that today‘s work-life balance and the economic situation have negatively impacted relationships (Exhibit 3); even 

though, consumers perceive it is easier to connect with friends and family today than it was 5 years ago (thanks to e-mail, 

cell phones, and social networks) (Kodak, 2009). Kodak seeks to connect with the consumer at an emotional level and 

encourage them to smile and make others smile – all while capturing and sharing their newfound happy moments with 

Kodak products. However, the company fails to deliver a clear and differentiating promise that resonates with a 

meaningful number of consumers. 

Even though Kodak‘s new integrated marketing campaign is present in all major social media channels 

(Facebook, Twitter, YouTube) the company‘s number of followers is significantly lower when compared with those of 

competitors and other successful brands. On Facebook, as of December 12, 2009, Kodak has 47,342 fans, while Canon 

and Nikon have 119,165 and 117,574 respectively. The #1 brand on Facebook, Coca-Cola, dwarfs these numbers with 

over four million fans. Kodak cannot afford to lose in the digital space as social media has the powerful effect of creating 

communities of ever-growing fans who evangelize the brand – all at a relatively low and fixed cost. 

Without fans, the success of the social media initiative is in danger. For example, assume aggressively that the 

ideal Kodak consumer spends $200 per year for 20 years in a variety of products totaling $4,000. Also, assume Kodak‘s 

contribution margin stays at nearly 25% so each customer is worth $1000 to the company. If an integrated digital 

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campaign of the magnitude that Kodak is implementing costs nearly $10 million per year to maintain, the company will 

need 10,000 of these consumers to break even (Charlene Li., 2008). At less than 50,000 fans, the conversion rate needed 

(20%) is quite high, considering that Facebook claims a conversion rate of only 10% for its advertising (Facebook, 2009). 

Even at a more aggressive conversion rate of 15%, Kodak needs much higher numbers to succeed and be profitable. 

Currently Kodak does not utilize the services of a celebrity spokesperson. This reduces any risks of brand 

confusion or poor representation, commonly associated with endorsements. However, Kodak is betting too much on the 

strength of its brand alone, while competitors enlist the help of famous characters like Ashton Kutcher (Nikon), and Maria 

Sharapova (Canon) to energize its brand. 

Promotion Conclusion 

Overall, there seems to be a lack of buzz, energy, top-of-mind awareness, or fuel behind the Kodak brand. The 

current marketing campaigns are not driving the number of customers necessary to create the sense of community that 

Kodak is expecting, nor generating the revenues the company needs to survive. 

Recommendations 

Kodak fails to position itself as the indisputable solution between today‘s consumers and their need for 

connection. Therefore, Kodak must focus on delivering a clearer message, a differentiating promise, and products that 

meet such a promise. For example: Kodak is the premier provider of imaging solutions that bring your loved ones within 

arm’s reach. 

Additionally, Kodak‘s marketing campaign should present one path within the imaging process that allows the 

consumer to process the company‘s offerings. For instance, prioritize marketing efforts according to the following process 

(1 = highest priority): (1) take great pictures with Kodak digital cameras, (2) print quality pictures for less with Kodak 

photo printers (3) store your pictures at the KodakGallery, where you can create unique keepsakes (4) display your 

pictures in our industry-leading Kodak digital frames. Instead of overwhelming the consumer with all the options Kodak 

has to offer, focusing the message on one product at a time can be more effective for Kodak‘s target consumer. 

We feel that additional emphasis should be placed on digital cameras, with the other products—printers, frames, 

and Kodak Gallery—supporting digital cameras as complementary products that round-out the digital imaging experience. 

Kodak‘s 120-year history as the premier provider of photography products lends itself to this strategy of emphasizing 

digital cameras. This focused strategy can be accomplished through changes in each of the components of the marketing 

framework, while keeping in mind the desired positioning for Kodak‘s product-line. 

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Because Kodak is targeting the novice photographer segment, it is important that its products incorporate easy-to- 

use attributes and automatic features that deliver high-quality photos. Currently, Kodak‘s digital cameras compete well 

on the number of functions offered yet do not necessarily differentiate themselves. The same holds true for the printer 

category with complaints of complicated interfaces, cumbersome loader trays, and a lack of built-in networking 

capabilities. Kodak should strive to simplify its products across its entire product line and further educate customers of 

the easy-to-use features through its marketing campaign. 

Kodak prices its camera products well below the products of its main competitors. On average, Kodak cameras 

cost 31%, 132%, and 80% less than products of similar quality in the super-zoom, compact, and subcompact categories, 

respectively (Exhibit 6) (Consumers Union of U.S., 2009). Kodak‘s products are consistently ranked comparably to those 

of the competition. Thus, Kodak should demand similar prices for its products. Kodak should be able to increase its 

prices by at least 20% on the competitively ranked cameras to signal quality to the consumer without decreasing volumes, 

thus increasing profitability. This price increase will address the problem Kodak faces with poor gross margins in the 

CDG segment, and lead this segment towards profitability in the future. Success with an increased pricing strategy is 

dependent on Kodak effectively communicating the brand quality to the consumer. 

Kodak is dependent on its resellers to increase awareness and educate the consumers about its products. Kodak 

should work closely with its main retailers to encourage promotion of its digital product suite consisting of cameras, 

printers, frames, and Kodak Gallery. Kodak must first educate the retail sales representatives on the features of its 

products, namely the differentiating features that will focus on the ease-of-use theme. In addition, the products should be 

placed strategically within the stores, to encourage bundling of the Kodak product-line. 

In promotions, Kodak needs to improve the level of energy behind the Kodak brand. For this purpose, a celebrity 

spokesperson could be highly effective. Because Kodak‘s consumer is relatively low involvement and the market is 

already cluttered with many reasonable options (Canon, Nikon, Sony, Casio, etc.), a credible spokesperson should serve to 

hold the consumer‘s hand and guide them to buy Kodak products. 

The current advertising budget may need to be revised, but an increase is not automatically necessary. Kodak 

should continue leveraging and improving its presence on the Internet through various digital initiatives. 

Kodak implementing these recommendations will lead to increased sales and margins and ultimately allow the 

company to regain its position as a world leader in its industry. 

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Appendix 

Exhibit 1 – Products Analysis 

Digital Cameras 

Key 

Attributes 

Kodak 

EasyShare 

M1033 

Canon 

Powershot 

A1100 IS 

Meaningfulness to 

Market/Consumer 

Price $140 $140 Consumers value quality 

products at an affordable price 

Mega 

10 12 Consumers value digital cameras 

Pixels 

which capture quality images 

Zoom 3x 4x Consumers value digital cameras 


Video Yes, with sound Yes, with Consumers value digital cameras 

sound which capture quality video 

Battery 

220 140 shots Longer battery life lowers cost 

Life 

and adds convenience, creating 

value for the consumer 

Image 

Yes Yes Consumers value digital cameras 

Stabilizer 


Face 

Yes Yes Consumers value digital cameras 

Detection 

which are easy to use 

Wide 

No No Consumers value digital cameras 

Angle 


Manual 


Controls 


Manual 


Focus 


Point of 

Differentiation 

n/a 

Negative 

Negative 

n/a 

Positive 

n/a 

n/a 

n/a 

n/a 

n/a 

14

Printers 

Key 

Attributes 

Kodak 

EasyShare 

5300 

HP 

Photosmart 

C6180 



Price $199.99 300 Consumers value printers which 

are affordable 

Cheaper 

Ink 

Printing 

Speed 

Built in 

Networking 

User 

Interface 

Paper 

printing 

quality 

Photo 

printing 

quality 

Hardware- 

paper tray 

$9.99 for black, 

$14.99 for 

color 

Presently, 

ink costs 

double or 

more; 

newly 

introduced 

ink costs 

$14.99 for 

black, 

$17.99 for 

color 

Marginally 

Faster 

Consumers value affordable 

printer ink 

Point of 


Positive 

Positive 

Consumers value fast printers Negative 

No Yes Consumers value printers which 

are easy to use 

newer photos 

better 

Better Consumers value printers which 


older 

photos 

better 

Consumers value high quality 

printers 

Consumers value high quality 

printers 

worse Consumers value printers which 


Negative 

Negative 

n/a 

n/a 

Negative 

15

Digital Picture Frames 

Products Compared: Kodak Easyshare 10‖ W1020 Wireless Digital Frame vs. Sony 10.2‖ Widescreen LCD Digital Frame 

Attribute: Kodak Sony 

Built-In 

Wi-Fi 

Technology 

Included 

Resolution 800x480 

Source: www.Kodak.com; www.bestbuy.com 

Photo Storage 

Key Attributes Kodak 

Gallery 

Price Purchase of 

services 

necessary 

Requirements yearly 

purchase 

Not 

included 

1024 x 600 

(better) 



Important because makes the 

product more functional and 

easier to use 

Higher resolution is perceived as 

higher quality 

Flickr Meaningfulness to 


Free Customers value the ability to 

store photos in a safe and 

secure way, with ease and at 

minimum or no cost. 

Point of 


Positive 

Negative 

Point of 


Negative 

None " " Negative 

Does Kodak 

have 

Credibility? 

Yes, because 

Kodak is 

known for its 

innovation and 

excellence in 

technology. 

This is an 

important 

attribute of 

digital frames, 

and therefore, 

Kodak should 

likely address 

the deficiency 

vs. the 

competition 

Credibility 

16

Storage Limit No Yes Customers want the ability to 

store as many pictures as 

possible so they don't have to 

delete or move photos 

Join 

Clubs/Groups 

No Yes Consumers enjoy connecting 

with others whom share 

similar interests; provides a 

sense of community 

Video Clips Yes No Consumers increasingly use 

digital camera devices to take 

videos in addition to photos, 

so the ability to store videos 

is valued 

Albums/Flipbooks Yes No This allows customers to 

creatively store and share 

their photos as keepsakes 

Prints and Editing Yes No This feature delivers 

convenience by allowing 

users to store, edit, and print 

photos in one central place 

Source: www.kodakgallery.com; 

Positive Kodak is a 

trusted 

company so 

customers 

believe that 

they have the 

ability to offer 

unlimited 

storage with no 

problems 

Negative 

Positive Kodak is 

known for its 

excellence in 

photography 

so customers 

have 

Positive confidence in 

its ability to 

deliver on 

these 

Positive 

attributes. 

17

Exhibit 2 – “It’s time to smile” Campaign 

Figure 1 - Reason for campaign. Source: Kodak.com 

Figure 2 - Consumer Insight. Source: Kodak.com 

18

Figure 3 - Product Portfolio. Source: Kodak.com 

Figure 4 - People in need to connect. Source: Kodak.com 

19

Figure 5 - Connecting with digital camera. Source: Kodak.com 

Figure 6 – Use of social media 

Figure 7 – Viral Campaign 

20

Figure 8 - Video ads for YouTube and TV. Source: YouTube/Kodak 

Figure 9 – sample banner, no link to purchase. Source: tweetPhoto.com 

Figure 10 – price advertised on Kodak.com 

Figure 11 - Prices of other online retailers 

21

Exhibit 3 – Competitor Endorsements 

Figure 12 – Ashton Kutche, Nikon 

Figure 13 – Maria Sharapova 

Exhibit 4 – Economic Value Pricing 

According to the economic value-pricing model, a firm‘s product price is a sum of its reference value and its 

differentiation value. As such, the reference value for Kodak‘s products is the price of its competitor‘s comparable 

products, while differentiation value is the price premium (or discount) captured by Kodak‘s products due to additional 

(or fewer) benefits offered, as perceived by the consumer. 

Figure 14 - Economic Value Pricing 

Exhibit 5 – Kodak Product Pricing 

Within the all-in-one inkjet printer category, Kodak‘s prices are slightly higher than those of Hewlett Packard (HP) and 

Canon, which is consistent with its current campaign to charge a small premium for the printer, while offering the ink at 

significantly lower prices. In addition, to offset the price premium, Kodak is partnering with retailers such as Best Buy to 

offer a $50 discount on a printer, when a customer recycles an old printer. The digital picture frame market is highly 

fragmented with 15 different brands ranked in the top 20 by Consumer Reports (add works cited). Kodak‘s price range of 

$60-$230 is consistent with the pricing of other brands. An exception to this is the pricing of Kodak‘s recently released 

wireless OLED frame, which demands an extreme price premium, at a price of $999, because it is the only frame offered 

22

to the consumer market, using this advanced technology. Kodak‘s position in the high-end digital frame market is a 

significant opportunity for the company going forward. Finally, within the photo storage product market, Kodak‘s prices 

are consistent with competitors such as Shutterfly and Flickr, with all three offering unlimited storage and 4x6 prints in 

the $.10-$.15 range. However, Kodak is unique in requiring members to make a minimum annual purchase, depending on 

the size of their photo storage. 

Exhibit 6 

Point And Shoot Models: Rankings And Price 

Compiled from ConsumerReports.org 

Super Zoom Models 

Overall 

Price 

Relative 

Rank Brand Line Model Family Price Score to Kodak 

1 Canon PowerShot SX10 IS Super zoom 390 78 56.00% 

2 Canon PowerShot SX1 IS Super zoom 550 75 120.00% 

4 Casio Exilim EX-H10 Super zoom 300 73 20.00% 

5 Casio Exilim EX-FH20 Super zoom 400 73 60.00% 

6 Fujifilm Finepix F70 EXR Super zoom 240 72 -4.00% 

7 Kodak EasyShare Z950 Super zoom 250 72 0.00% 

8 Sony Cyber-shot DSC-H20 Super zoom 280 72 12.00% 

16 Samsung HZ10W Super zoom 230 69 -8.00% 

21 Olympus Stylus 9000 Super zoom 230 68 -8.00% 

Compact Models 

Max -8.00% 

Min 120.00% 

Range 128.00% 

Avg 31.00% 

Overall 

Price 

Relative 

Rank Brand Line Model Family Price Score to Kodak 

3 Canon PowerShot G10 Compact 480 74 242.86% 

9 Canon PowerShot A1000 IS Compact 170 71 21.43% 

13 Panasonic Lumix DMC-TS1 Compact 350 70 150.00% 

18 Kodak EasyShare M1033 Compact 140 68 0.00% 

20 Canon PowerShot D10 Compact 300 68 114.29% 

Min 21.43% 

Max 242.86% 

Range 221.43% 

Avg 132.14% 

23

Subcompact Models 

Overall 

Price 

Relative 

Rank Brand Line Model 

SD1200 IS 

Family Price Score to Kodak 

10 Canon PowerShot ELPH Subcompact 200 71 53.85% 

11 Panasonic Lumix DMC-ZR1 Subcompact 240 71 84.62% 

12 Fujifilm Finepix 

Exilim 

F200EXR Subcompact 320 70 146.15% 

14 Casio Card EX-S12 Subcompact 200 69 53.85% 

15 Canon PowerShot SX110 IS Subcompact 250 69 0.00% 

17 Sony Cyber-shot DSC-G3 Subcompact 420 68 223.08% 

19 Canon PowerShot SD780 IS ELPH Subcompact 220 68 69.23% 

22 Canon PowerShot SD980 IS ELPH Subcompact 330 68 153.85% 

23 Sony Cyber-shot DSC-T90 Subcompact 250 67 92.31% 

24 Samsung SL102 Subcompact 100 67 -23.08% 

25 Kodak EasyShare C160 Subcompact 90 65 -30.77% 

26 GE E1250TW Subcompact 160 65 23.08% 

27 Kodak EasyShare M320 Subcompact 130 65 0.00% 

Min -23.08% 

Max 223.08% 

Range 246.15% 

Avg 79.72% 

24

Exhibit 7 – Competitor Business Descriptions 2 

We chose the following companies as competitors because of the similarities in product type and customer focus. The 

following ten companies make up the ―competitor median‖ referenced in the analysis section. 

Canon Inc. 

Canon Inc. is a manufacturer of business machines, cameras, and optical and other products. Canon offers business 

machines including office imaging products, such as office network digital multifunction devices (MFDs), color network 

digital MFDs, office copying machines and personal-use copying machines; computer peripherals, including laser beam 

printers, inkjet printers and scanners and business information products, such as personal computers, servers, document 

scanners, calculators and micrographic equipment. Canon also manufactures and markets digital cameras, film cameras, 

digital video camcorders, lenses and various camera accessories. Canon's optical and other products mainly include 

semiconductor production equipment, mirror projection mask aligners for liquid crystal display (LCD) panels, 

broadcasting equipment, medical equipment, large format printers, and electronic components. On March 31, 2008, it 

acquired a 24.9% stake in Hitachi Displays, Ltd. For the nine months ended 30 September 2009, CANON INC.'s revenues 

decreased 27% to Y2.255T. The Company's net income decreased 76% to Y70.08B. Revenues reflect lower sales volume 

from business machines, cameras and optical & other products business segments. Lower net income also suffers from 

higher percentage of cost of sales and SGA expense, as well as significantly decreased interest & dividend income. 

Fujifilm Holdings Corp. 

FUJIFILM Holdings Corporation is a Japan-based company mainly engaged in the provision of imaging, information and 

document solutions. The Company operates in three business segments. The Imaging Solution segment offers color films, 

digital cameras, photo-finishing machines, and color papers, chemical and services for instant printing. The information 

Solution segment offers medical systems, life-science machinery, graphic system machinery, front panel display 

materials, recording media, optical devices, electronic components and inkjet materials. The Document Solution segment 

offers printers, copy machines, production service-related products, paper, consumer goods and others. For the six months 

ended 30 September 2009, FUJIFILM Holdings Corp.'s revenues decreased 22% to Y1.043T. Net loss totaled Y5.41B, vs. 

an income of Y45.38B. Revenues reflect decreased sales from all its business segments. The company's net loss also 

suffers from higher percentage of cost of sales and selling, general & administrative expense, decreases interest & 

dividend income as well as higher exchange loss. 

Hewlett-Packard Co. 

Hewlett-Packard Company is a provider of products, technologies, software, solutions and services to individual 

consumers, small- and medium-sized businesses (SMBs) and large enterprises, including the public and education sectors. 

Its offerings span personal computing and other access devices; imaging and printing-related products and services; 

enterprise information technology infrastructure, including enterprise storage and server technology and software that 

optimizes business technology investments, and multi-vendor customer services, including technology support and 

maintenance, consulting and integration and outsourcing services, as well as application services and business process 

outsourcing. During the fiscal year ended October 31, 2008, its operations were organized into seven business segments: 

Enterprise Storage and Servers, HP Services, HP Software, the Personal Systems Group, the Imaging and Printing Group, 

HP Financial Services and Corporate Investments. For the fiscal year ended 31 October 2009, Hewlett- Packard 

Company's revenues fell 3% to $114.40B. Revenues reflect a decrease in income from Company's Products & Services. 

Hewlett-Packard Company is a provider of Products, technologies, software, solutions & services to individual 

consumers, small & medium-sized businesses & large enterprises, including the public and education sectors. 

Ricoh Co. Ltd. 

Ricoh Company, Ltd. (Ricoh) is engaged in the manufacturing of office automation equipment. Ricoh's principal products 

include copiers (such as plain paper copiers (PPCs)), printers (multi-functional printers (MFPs), laser printers and 

2 Source: Reuters 

25

GELJET printers), production printing products and facsimile machines. Ricoh is also a manufacturer of digital and 

advanced electronic devices such as semiconductor devices. Ricoh supports its office and production printing equipment 

businesses by offering customers various solution systems that work with personal computers (PC) and servers, and 

related product support and after-sales services to assist customers in utilizing the Ricoh products that they purchase. 

Ricoh also offers various supplies and peripheral products to be used with its products and systems. Ricoh operates in 

three segments: Imaging and Solutions, Industrial Products and Other. In August 2008, Ricoh Elemex Corporation 

becomes a wholly owned subsidiary of the Company. For the six months ended 30 September 2009, RICOH 

COMPANY,LTD.'s revenues decreased 7% to Y988.79B. The Company's net income decreased 95% to Y1.81B. 

Revenues reflect lower sales from image & solution, industrial and other business segments due to unfavorable business 

environment. Net income also suffers from higher percentage of selling, general & admin expenses, as well as increased 

interest expenses. 

Sony Corp. 

Sony Corporation (Sony) is engaged in the development, design, manufacture and sale of various kinds of electronic 

equipment, instruments and devices. Sony operates in five segments: Electronics, which develops, designs, manufactures 

and sells electronic equipment, instruments and devices for consumer and professional markets; Games, in which Sony 

Computer Entertainment Inc. (SCEI) develops, produces, markets and distributes PlayStation 2 (PS2), PSP (PlayStation 

Portable) (PSP) and PLAYSTATION 3 (PS3) hardware and related software; Pictures, which encompasses motion picture 

production and distribution, television production and distribution, and digital content creation and distribution; Financial 

Services, which includes the activities of Sony Financial Holdings Inc. (SFH), and All Other, which comprises Sony 

Music Entertainment (SME) and Sony Music Entertainment (Japan) Inc. (SMEJ). On October 1, 2008, it acquired 

Bertelsmann's 50% interest in SONY BMG MUSIC ENTERTAINMENT (SONY BMG). For the six months ended 30 

September 2009, SONY CORPORATION's revenues decreased 20% to Y3.261T. Net loss totaled Y63.40B, vs. an 

income of Y55.79B. Revenues reflect decreased sales volume from United States and Europe markets. The Company's net 

loss also suffers from higher percentage of selling, general and administration expenses, increased interest expenses, as 

well as decreased interest & dividend income. 

Xerox Corp. 

Xerox Corporation (Xerox) is engaged in developing, manufacturing, marketing, servicing and financing a range of 

document equipments, software, solutions and services. Digital systems include printing and publishing systems; digital 

presses, advanced and basic multifunctional devices (MFD's), which can print, copy, scan and fax; digital copiers; laser 

and solid ink printers, and fax machines. The Company provides software and workflow solutions with which businesses 

can print books, create personalized documents for their customers, and scan and route digital information. Xerox also 

offers software, support and supplies, such as toner, paper and ink. The Company operates in three business segments: 

production, office and other. During the year ended December 31, 2008, the Company completed the acquisition of 

Veenman B.V. (Veenman) and Global Imaging Systems, Inc. (GIS). For the nine months ended 30 September 2009, 

Xerox Corporation's revenues decreased 17% to $10.96B. Net income increased 33% to $305M. Revenue reflects a 

decrease in revenues from production, office and other segments. Net income reflects a decrease in cost of sales & 

services, lower equipment financing interest, a decrease in selling, administrative & general expenses and lower litigation 

charges. 

Nikon Corp. 

NIKON CORPORATION is a Japan-based company mainly engaged in the manufacture and sale of optical products. The 

Company is active in four business segments. The Precision Apparatus segment offers semiconductor exposure apparatus 

and liquid crystal (LC) exposure apparatus. The image segment provides digital cameras, film cameras and 

interchangeable lens. The Instruments segment offers microscopes, measuring machines and semiconductor inspection 

equipment. The Others segment provides glass materials, telescopes, glasses and survey airplanes. The Company has 65 

subsidiaries and 10 associated companies in the country and overseas markets. As of August 19, 2009, the Company held 

26

a 92.17% stake in Metis NV. For the six months ended 30 September 2009, NIKON CORPORATION's revenues 

decreased 24% to Y368.09B. The Company's net loss totaled Y17.67B, vs. an income of Y33.62B. Revenues reflect lower 

sales from precision equipment business and imaging product business. Net loss also suffers from higher percentage of 

cost of sales and SGA expense, significantly increased exchange loss, as well as the presence of Y1.35B loss on business 

reorganization. 

Olympus Corp. 

OLYMPUS CORPORATION is a Japan-based manufacturer engaged in five main business segments. Its Imaging 

segment offers digital cameras, film cameras and voice recorders. The Medical segment offers medical endoscopes, 

surgical endoscopes, endoscope disposal equipment and ultrasonic endoscopes. The Life Science segment offers clinical 

hemanalysis systems, biological microscopes and industrial microscopes. The Information Communication segment sells 

semiconductor-related equipment, electronic machines, network systems an d mobile terminals, such as cellular phones, 

as well as provides mobile solutions and mobile contents services. The Others segment offers industrial endoscopes, 

nondestructive inspection equipment, printers and bar code scanners, as well as develops systems. In August 2009, the 

Company transferred its analytical instrumentation business to its wholly owned subsidiary, which has been engaged in 

the manufacturing and sale of clinical laboratory examination equipment. For the six months ended 30 September 2009, 

OLYMPUS CORPORATION's revenues decreased 19% to Y435.42B. The Company's net income totaled Y36.19B, up 

from Y3.60B. Revenues reflect lower sales from imaging, medical and life science business segments. Net income 

benefits from a lower percentage of SG&A expenses, decreased foreign exchange losses, and the presence of Y46.27B 

gains on transfer of business. 

Lexmark International Inc. 

Lexmark International, Inc.(Lexmark) is engaged in developing, manufacturing and supplying printing and imaging 

solutions for offices and homes. Its products include laser printers, inkjet printers, multifunction devices, and associated 

supplies, services and solutions. Lexmark develops and owns the technology for its laser and inkjet products and related 

solutions. Lexmark also sells dot matrix printers for printing single and multi-part forms by business users. The Company 

operates in the office products industry. The Company is primarily managed along divisional lines: the Printing Solutions 

and Services Division and the Imaging Solutions Division. Lexmark's products are sold in more than 150 countries in 

North and South America, Europe, the Middle East, Africa, Asia, the Pacific Rim and the Caribbean. For the nine months 

ended 30 September 2009, Lexmark International, Inc.'s revenues decreased 19% to $2.81B. Net income decreased 61% 

to $86.2M. Revenues reflect a decrease in income from sales volume of the Company. Net income also reflects decreased 

operating margin, an increase in restructuring & related charges, the presence of net impairment losses on securities and 

the presence of interest expense net vs. an interest income net. 

Seiko Epson Corp. 

SEIKO EPSON CORPORATION is a Japan-based company primarily involved in the development, manufacture and sale 

of information equipment, electronic devices and precision equipment. The Company operates in four business segments. 

The Information Equipment segment offers printers, liquid crystal display (LCD) projectors and personal computers, 

among others. The Electronic Devices segment provides thin-film transistor (TFT) LCD panels, crystal devices and 

semiconductors. The Precision Equipment segment offers watches and plastic lens under the brand name Seiko, as well as 

factory automation (FA) equipment. The Others segment is engaged in the distribution and transportation services, the 

provision of maintenance services for facilities, as well as the insurance agency and travel agency businesses. For the six 

months ended 30 September 2009, Seiko Epson Corporation's revenues decreased 27% to Y449.63B. The Company's net 

loss totaled Y29.19B, vs. an income of Y11.72B. Revenues reflect lower sales especially from electronic device business 

segment. Net loss also suffers from a higher percentage of selling, general & administrative expenses, as well as the 

presence of Y2.42B impairment losses. 

27

Exhibit 8 – Profitability Scenario Analysis 

28

Exhibit 9: Comparison of accounting methods 

International Comparison of Accounting Standards-Overview of Major Japanese GAAP, IAS/IFRS, and US GAAP 

Accounting Standards Items Japanese GAAP IAS/IFRS US GAAP 

Financial Instruments 

Business Combinations 

Impairment of Assets 

Retirement benefits 

Income Taxes 

Measurement of securities 

Estimating potential credit 

losses/impairment 

Derecognition of financial assets 

Fair value or amortized cost (bonds) 

depending on category 





Discounted future cash flows Discounted future cash flows Discounted future cash flows 

Legal isolation required (financialcomponent 

approach) 

Legal isolation not required (primarily risks 

and rewards approach) 

Legal isolation required (financialcomponent 

approach) 

Measurement of derivatives Fair value Fair value Fair value 

Hedge accounting When hedging criteria are met When hedging criteria are met When hedging criteria are met 

Basic method Purchase method Purchase method Purchase method 

Pooling of interests method 

Exceptionally used only when strict criteria 

are met 

Purchase method only Purchase method only 

Goodwill Strictly amortized with impairment Not amortized, impairment only Not amortized, impairment only 

Grouping 

Lowest level (smallest identifiable group of 

assets) for which cash flows are largely 

independent of cash flows of other assets 







Indication of impairment Assessed Assessed Assessed 

Recognition test Undiscounted future cash flows 

Measurement 

Recoverable amount (higher of net selling 

price and value in use) 





Undiscounted future cash flows 

Fair value 

Reversal of impairment losses Prohibited Reversed (excluding goodwill) Prohibited 

Recognition of liability 

Retirement benefit obligation adjusted for 

unrecognized actuarial gains/losses and past 

service cost, minus plan assets 







Actuarial gains/losses Strictly amortized without corridor Corridor amortization Corridor amortization 

Recognition of additional minimum 

liability 

Not recognized Not recognized Unfunded accumulated benefit obligations 

Basic method Asset liability method Asset liability method Asset liability method 

Recording of deferred tax assets Based on recoverability/realizability Based on recoverability/realizability Based on recoverability/realizability 

Research & Development Development costs Expensed when incurred Capitalized Expensed when incurred 

Consolidated Financial 

Statements 

Scope of subsidiaries Based on control Based on control Based on majority voting interest 

Presentation of minority interests Between liability and equity Equity 

Between liability and equity (under 

deliberation to change to equity 

Investment Property Measurement Cost Fair value or cost Generally cost 

Source: IASplus.com 

Indicates inconsistency 

30

Exhibit 10: Operating cost breakdown 

Operating costs as % of sales (ex-restructuring/other) 

FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 

Kodak 22% 22% 23% 24% 25% 25% 25% 25% 

Canon 35% 33% 33% 33% 34% 36% 36% 34% 

FujiFilm 35% 32% 32% 33% 32% 33% 33% 32% 

Nikon 31% 28% 27% 27% 28% 31% 34% 

SG&A (ex-advertising) as % of sales 


Kodak 13.1% 13.3% 15.0% 15.1% 14.7% 14.9% 14.5% 14.5% 

Canon 23.3% 22.1% 22.3% 22.5% 22.6% 24.9% 25.5% 24.5% 

FujiFilm 26.6% 24.7% 24.8% 24.6% 23.6% 24.0% 24.3% 24.2% 

Nikon 15.2% 14.2% 14.7% 15.3% 16.1% 18.7% 20.6% 

Advertising costs as % of sales 


Kodak 3.7% 3.8% 3.0% 3.4% 3.8% 4.5% 4.9% 4.8% 

Canon 2.8% 3.0% 2.8% 2.8% 3.2% 3.1% 2.4% 2.3% 

FujiFilm 1.0% 1.0% 1.3% 1.5% 1.9% 1.8% 2.1% 2.2% 

Nikon 8.5% 7.9% 7.0% 6.4% 6.7% 6.1% 7.1% 

R/D costs as % of sales 


Kodak 5.3% 5.2% 5.3% 5.9% 6.3% 5.6% 5.9% 5.9% 

Canon 9.1% 8.2% 7.4% 7.6% 7.9% 8.1% 7.9% 7.5% 

FujiFilm 7.9% 6.6% 6.4% 6.8% 6.6% 6.8% 6.3% 6.1% 

Nikon 7.0% 6.1% 5.7% 5.1% 5.3% 6.0% 5.9% 

Restructuring costs as % of sales 


Kodak 1.5% 5.3% 3.5% 4.8% 5.1% 3.6% 0.8% 5.0% 

Canon 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 

FujiFilm 0.0% 0.0% 3.4% 3.2% 0.0% 0.0% 0.0% 0.0% 

Nikon 0.0% 0.1% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 

Source: Company reports, Factset Fundamentals 

31

Exhibit 11 - Cash Conversion Cycle 

Days of Sales Outstanding (DSO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 

Eastman Kodak Co. 72 days 71 days 82 days 75 days 68 days 67 days 63 days 65 days 69 days 

Canon Inc. 63 days 62 days 64 days 62 days 63 days 62 days 61 days 59 days 59 days 

FUJIFILM Holdings Corp. 77 days 80 days 77 days 77 days 75 days 77 days 75 days 77 days 85 days 

Hewlett-Packard Co. 73 days 72 days 70 days 72 days 74 days 78 days 70 days 60 days 61 days 

Ricoh Co. Ltd. 115 days 120 days 114 days 117 days 120 days 105 days 86 days 90 days 93 days 

Sony Corp. 51 days 48 days 53 days 51 days 50 days 53 days 50 days 53 days 59 days 

Xerox Corp. 117 days 108 days 112 days 116 days 120 days 128 days 132 days 133 days 142 days 

Nikon Corp. 62 days 56 days 58 days 62 days 64 days 69 days 79 days 79 days 90 days 

Olympus Corp. 61 days 64 days 61 days 61 days 58 days 59 days 62 days 63 days 62 days 

Lexmark International Inc. 45 days 41 days 43 days 44 days 49 days 47 days 47 days 55 days 57 days 

Seiko Epson Corp. 56 days 51 days 54 days 59 days 58 days 57 days 54 days 62 days - 

Mean 72 days 70 days 72 days 72 days 73 days 73 days 71 days 72 days 78 days 

EK (+/-) 0 days 0 days 10 days 2 days -5 days -6 days -7 days -7 days -9 days 

Median 63 days 64 days 64 days 62 days 64 days 67 days 63 days 63 days 66 days 

EK (+/-) 10 days 6 days 17 days 12 days 4 days 0 days 0 days 2 days 3 days 

Days of Inventory on Hand (DIO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 













EK (+/-) -23 days -24 days -19 days -19 days -23 days -29 days -35 days -35 days -32 days 


EK (+/-) -7 days -12 days -9 days -3 days -8 days -10 days -9 days -8 days -8 days 

Days of Payables Outstanding (DPO) 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 













EK (+/-) -7 days 47 days 30 days -34 days -39 days -41 days -42 days -38 days -42 days 


EK (+/-) 0 days 50 days 35 days -24 days -30 days -28 days -45 days -43 days -43 days 

Cash Conversion Cycle 3 Yr Avg FY08 FY07 FY06 FY05 FY04 FY03 FY02 FY01 

Eastman Kodak Co. 53 days -5 days 24 days 87 days 81 days 77 days 75 days 83 days 98 days 





32

Sony Corp. -11 days -4 days -7 days -12 days -14 days -16 days -17 days -14 days 1 days 





Seiko Epson Corp. 76 days 83 days 78 days 81 days 73 days 67 days 69 days 83 days 


EK (+/-) -15 days -71 days -39 days 17 days 11 days 6 days 0 days -4 days 1 days 


EK (+/-) -15 days -86 days -42 days 20 days 15 days 10 days 5 days 0 days 12 days 

33

Exhibit 12 – EK Pro Forma Financial Statements 

EK Financial Statement projections - Continuing Operations 

(Fiscal year ends 12/31) 2006 2007 2008 2009E* 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 

Revenue $10,568.0 $10,301.0 $9,416.0 $7,434.2 $8,125.1 $8,133.3 $7,912.6 $7,622.6 $7,314.5 $7,001.6 $6,706.0 $6,430.5 $6,179.0 

COGS 7,825.0 7,628.0 7,275.0 6,037.3 6,221.7 6,128.4 5,964.2 5,725.9 5,470.4 5,207.4 4,953.4 4,709.9 4,479.6 

Gross Profit 2,743.0 2,673.0 2,141.0 1,396.8 1,903.4 2,005.0 1,948.4 1,896.7 1,844.1 1,794.2 1,752.6 1,720.6 1,699.4 

SG&A (excl. Advertising) 1,567.0 1,378.0 1,236.0 970.3 1,063.0 1,059.4 1,023.3 977.2 928.5 879.1 831.9 787.3 745.9 

Advertising 366.0 394.0 350.0 254.8 273.9 283.1 289.2 294.7 300.1 305.3 311.4 318.2 325.8 

R&D 578.0 549.0 501.0 364.0 395.2 400.7 397.9 392.5 386.7 380.6 375.4 371.3 368.4 

EBIT 232.0 352.0 54.0 (192.3) 171.3 261.8 238.0 232.3 228.9 229.1 233.9 243.8 259.4 

D&A 1,195.0 785.0 500.0 470.2 448.1 430.2 416.2 407.2 399.7 393.5 388.5 384.6 381.7 

EBITDA 1,427.0 1,137.0 554.0 277.9 619.4 692.0 654.2 639.5 628.6 622.6 622.4 628.3 641.1 

NOPAT (EBIT * (1-tax)) 191.4 290.4 44.6 (158.6) 141.3 216.0 196.4 191.6 188.8 189.0 193.0 201.1 214.0 

D&A 1,195.0 785.0 500.0 470.2 448.1 430.2 416.2 407.2 399.7 393.5 388.5 384.6 381.7 

Restructuring (after tax) 618.8 547.0 122.9 133.4 121.9 116.7 114.2 113.0 112.4 112.1 112.0 111.9 111.9 

Cap-Ex 335.0 259.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 254.0 

Free Cash Flow (excl dividends) $432.7 $269.4 $167.6 ($75.8) $213.5 $275.5 $244.3 $231.8 $222.1 $216.4 $215.5 $219.8 $229.8 

Margin Analysis 

Gross Margin 26.0% 25.9% 22.7% 18.8% 23.4% 24.7% 24.6% 24.9% 25.2% 25.6% 26.1% 26.8% 27.5% 

SG&A margin 18.3% 17.2% 16.8% 16.5% 16.5% 16.5% 16.6% 16.7% 16.8% 16.9% 17.0% 17.2% 17.3% 

R&D margin 5.5% 5.3% 5.3% 4.9% 4.9% 4.9% 5.0% 5.1% 5.3% 5.4% 5.6% 5.8% 6.0% 

EBIT margin 2.2% 3.4% 0.6% -2.6% 2.1% 3.2% 3.0% 3.0% 3.1% 3.3% 3.5% 3.8% 4.2% 

EBITDA margin 11.3% 7.6% 5.3% 6.3% 5.5% 5.3% 5.3% 5.3% 5.5% 5.6% 5.8% 6.0% 6.2% 

Key Assumptions: 

* 2009 assumptions are based on results through Q3 2009 with a seasonality uptick for the fourth quarter. 

Key cash flow assumptions stated for segments below. Note that these are pro forma numbers and there might be immaterial differences with the aggregated 

segments due to slightly different treatment of ―Other‖ income and expense items. 

34

Exhibit 13 – CDG Pro Forma Financial Statements 

Consumer Digital Imaging Group (CDG) - Continuing Operations 


Revenue 3,013.0 3,247.0 3,088.0 2,390.1 2,525.1 2,695.9 2,886.2 3,085.4 3,289.9 3,493.0 3,705.3 3,926.4 4,153.6 

COGS 2,491.2 2,419.0 2,495.0 2,007.7 2,020.1 2,048.8 2,193.5 2,322.7 2,452.2 2,576.9 2,704.4 2,834.0 2,963.3 

Gross Profit 521.8 828.0 593.0 382.4 505.0 647.0 692.7 762.7 837.7 916.0 1,000.9 1,092.4 1,190.3 

SG&A (excl. Advertising) 378.8 358.6 345.0 267.0 282.1 301.2 322.5 344.7 367.6 390.2 414.0 438.7 464.1 

Advertising 219.6 236.4 210.0 167.3 176.8 188.7 202.0 216.0 230.3 244.5 259.4 274.9 290.8 

R&D 281.0 250.0 215.0 166.4 175.8 187.7 200.9 214.8 229.1 243.2 258.0 273.4 289.2 

EBIT (357.6) (17.0) (177.0) (218.3) (129.7) (30.6) (32.8) (12.8) 10.8 38.1 69.6 105.5 146.3 

D&A 188.0 92.0 105.0 94.5 89.8 87.5 87.5 91.3 95.1 99.2 103.4 107.8 112.4 

EBITDA (169.6) 75.0 (72.0) (123.8) (39.9) 56.9 54.8 78.5 105.9 137.3 173.0 213.3 258.7 

NOPAT (EBIT * (1-tax)) (295.1) (14.0) (146.0) (180.1) (107.0) (25.2) (27.0) (10.6) 8.9 31.4 57.4 87.1 120.7 

D&A 188.0 92.0 105.0 94.5 89.8 87.5 87.5 91.3 95.1 99.2 103.4 107.8 112.4 


Cap-Ex 102.0 94.0 96.0 100.1 104.3 108.8 113.4 118.2 123.3 128.5 134.0 139.7 145.6 

Free Cash Flow (291.7) (69.7) (171.7) (223.8) (155.8) (79.1) (84.7) (68.9) (50.4) (29.0) (4.2) 24.2 56.5 


Gross Margin 17.3% 25.5% 19.2% 16.0% 20.0% 24.0% 24.0% 24.7% 25.5% 26.2% 27.0% 27.8% 28.7% 

SG&A margin (incl. Advertising) 19.9% 18.3% 18.0% 18.2% 18.2% 18.2% 18.2% 18.2% 18.2% 18.2% 18.2% 18.2% 18.2% 

R&D margin 9.3% 7.7% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 

EBIT margin -11.9% -0.5% -5.7% -9.1% -5.1% -1.1% -1.1% -0.4% 0.3% 1.1% 1.9% 2.7% 3.5% 

EBITDA margin -5.6% 2.3% -2.3% -5.2% -1.6% 2.1% 1.9% 2.5% 3.2% 3.9% 4.7% 5.4% 6.2% 

Key Assumptions: 

Sales for CDG follow are 1.5x CBO GDP projections. (Congressional Budget Office) 

35

Exhibit 14 – FPEG Pro Forma Financial Statements 

Film, Photofinishing and Entertainment Group (FPEG) - Continuing Operations 


Revenue 4,254.0 3,632.0 2,987.0 2,456.5 2,727.7 2,648.4 2,448.0 2,209.3 1,959.4 1,707.7 1,460.0 1,217.8 984.4 

COGS 2,853.8 2,771.0 2,335.0 1,965.2 2,100.3 2,039.3 1,884.9 1,701.2 1,508.7 1,314.9 1,124.2 937.7 758.0 

Gross Profit 1,400.2 861.0 652.0 491.3 627.4 609.1 563.0 508.1 450.7 392.8 335.8 280.1 226.4 


Advertising 128.1 137.9 122.5 74.0 82.1 79.8 73.7 66.5 59.0 51.4 44.0 36.7 29.6 

R&D 33.0 60.0 52.0 42.8 47.5 46.1 42.6 38.5 34.1 29.7 25.4 21.2 17.1 

EBIT 729.6 281.0 196.0 143.1 240.7 233.7 216.0 194.9 172.9 150.7 128.8 107.5 86.9 

D&A 498.0 379.0 193.0 173.7 156.3 140.7 126.6 114.0 102.6 92.3 83.1 74.8 67.3 

EBITDA 1,227.6 660.0 389.0 316.8 397.0 374.4 342.6 308.9 275.5 243.0 211.9 182.2 154.2 

NOPAT (EBIT * (1-tax)) 602.0 231.8 161.7 118.0 198.6 192.8 178.2 160.8 142.6 124.3 106.3 88.7 71.7 

D&A 1,195.0 785.0 500.0 470.2 448.1 430.2 416.2 407.2 399.7 393.5 388.5 384.6 381.7 


Cap-Ex 56.0 65.0 40.0 36.4 38.5 37.9 36.5 34.7 32.7 30.6 28.4 26.0 23.6 

FCF 974.0 500.5 285.0 222.6 287.0 267.7 241.1 213.2 185.7 159.4 134.4 110.8 88.8 


Gross Margin 32.9% 23.7% 21.8% 20.0% 23.0% 23.0% 23.0% 23.0% 23.0% 23.0% 23.0% 23.0% 23.0% 


R&D margin 0.8% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 

EBIT margin 17.2% 7.7% 6.6% 5.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 8.8% 

EBITDA margin 28.9% 18.2% 13.0% 12.9% 14.6% 14.1% 14.0% 14.0% 14.1% 14.2% 14.5% 15.0% 15.7% 

36

Exhibit 15 – GCG Pro Forma Financial Statements 

Graphic Communications Group (GCG) - Continuing Operations 


Revenue 3,287.0 3,413.0 3,334.0 2,580.5 2,865.3 2,782.1 2,571.5 2,320.8 2,058.3 1,793.9 1,533.7 1,279.3 1,034.0 

COGS 2,480.0 2,438.0 2,445.0 2,064.4 2,101.3 2,040.2 1,885.8 1,702.0 1,509.4 1,315.6 1,124.7 938.2 758.3 

Gross Profit 807.0 975.0 889.0 516.1 764.0 741.8 685.7 618.8 548.8 478.3 409.0 341.1 275.7 


Advertising 18.3 19.7 17.5 13.5 15.0 14.6 13.5 12.2 10.8 9.4 8.1 6.7 5.4 

R&D 200.0 214.0 231.0 154.8 171.9 166.9 154.3 139.2 123.5 107.6 92.0 76.8 62.0 

EBIT (90.0) 104.0 31.0 (124.0) 53.2 51.7 47.8 43.1 38.3 33.3 28.5 23.8 19.2 

D&A 221.0 195.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 

EBITDA 131.0 299.0 224.0 69.0 246.2 244.7 240.8 236.1 231.3 226.3 221.5 216.8 212.2 

NOPAT (EBIT * (1-tax)) (74.3) 85.8 25.6 (102.3) 43.9 42.7 39.4 35.6 31.6 27.5 23.5 19.6 15.9 

D&A 221.0 195.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 193.0 


Cap-Ex 142.0 98.0 118.0 104.7 104.7 104.7 100.7 95.8 90.4 84.6 78.4 71.9 65.0 

FCF (26.6) 135.0 60.2 (58.5) 92.2 93.0 94.7 96.2 97.8 99.7 101.9 104.5 107.7 


Gross Margin 24.6% 28.6% 26.7% 20.0% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 26.7% 


R&D margin 6.1% 6.3% 6.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 

EBIT margin -2.7% 3.0% 0.9% -4.8% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 

EBITDA margin 4.0% 8.8% 6.7% 2.7% 8.6% 8.8% 9.4% 10.2% 11.2% 12.6% 14.4% 16.9% 20.5% 

37

Exhibit 16 – Segment Valuations and Key Assumptions 

Business Segment CDG FPEG GCG Combined 

Long-term growth rate 2.5% 0.0% 2.5% 1.50% 

Grows slightly less than overall Traditional business slowly being There will always be a need for Weighted average based 

economy. Reflects transition to digital replaced by digital filming 

commercial printing, but the business on current assets. 

products and increased adoption of techniques. Kodak is involved in these should grow at a slower rate than the 

cell phones as primary cameras. business lines because they make overall economy, which we are 

Reasoning 

sensors for cameras, but long-term we 

do not believe there will be any 

growth in this business. 

assuming to grow at a long-term rate 

of 3% 

Total Shares Outstanding for EK 268.19 268.19 268.19 268.19 

Scenario 1 - No restructuring, gross debt 

WACC (levered) 15.8% 12.5% 12.8% 13.5% 

Value (148.0) 1,508.1 952.2 2,312.3 

Value per Share ($0.55) $5.62 $3.55 $8.62 

Scenario 2 - No restructuring, net debt 

WACC (levered) 17.7% 14.0% 14.4% 15.1% 

Value (149.9) 1,392.4 847.7 2,090.2 


Scenario 3 - Restructuring, gross debt 

WACC (levered) 15.8% 12.5% 12.8% 13.5% 

Value (324.9) 1,265.9 649.2 1,590.2 


Scenario 4 - Restructuring, net debt 

WACC (levered) 17.7% 14.0% 14.4% 15.1% 

Value (312.5) 1,167.3 571.7 1,426.5 


A5 stock valuation 

Scenario 5 - Management Guidance WACC 

WACC (levered) 23.0% 18.2% 18.7% 19.6% 

Value (293.8) 959.2 423.0 1,088.4 


38

Exhibit 17 – Regression Analysis of Traditional Sales Lines 

We performed a regression analysis of Kodak using data on magazine and newspaper circulation, internet users, and GDP. We were not able to generate any 

meaningful regression results by looking at individual segments because of Kodak‘s continuous reorganizations. The data sets were chosen because they show 

clear trends that can be projected forward and relate directly to Kodak‘s customers, except for internet users, which we picked as a general proxy for the transition 

from traditional imaging and media to digital. People do not buy printers and digital cameras unless they have a computer. 

Millions 

400 

350 

300 

250 

200 

150 

100 

50 

0 

1985 1990 1995 2000 2005 2010 

(Magazine Publishers of America) 

Magazines 

Year 

Subscription 

Single Copy 

Total 

39

70,000 

60,000 

50,000 

40,000 

30,000 

20,000 

10,000 

0 

(Newspaper Association of America) 

920 

918 

916 

914 

912 

910 

908 

906 

904 

902 

900 

U.S. Newspaper Circulation (000's) 

1990 1995 2000 2005 

(Newspaper Association of America) 

Total Newspapers 

1998 2000 2002 2004 2006 2008 2010 

40

Millions 

1800.0 

1600.0 

1400.0 

1200.0 

1000.0 

800.0 

600.0 

400.0 

200.0 

0.0 

(Miniwatts Marketing Group) 

The regression output shows that Newspapers, Circulation, and the natural log of Internet users are all significant predictors of Kodak‘s consolidated revenues. 

Sales should roughly follow the following equation: 

113566.3 - 159.535 *(Newspapers) + 666.5 *(Circulation) + 977.8 *LN(Internet_Users) 

We used this along with simple projections based on newspaper circulation and internet user data to predict revenues going forward. 

SUMMARY 

OUTPUT 

Internet Users 

1994 1996 1998 2000 2002 2004 2006 2008 2010 

Regression Statistics 

Multiple R 0.93 

R Square 0.86 

Adjusted R Square 0.83 

Standard Error 913.95 

Observations 19 

Year 

41

ANOVA 

df SS MS F Significance F 

Regression 3 74772215.47 24924071.82 29.83807635 1.43957E-06 

Residual 15 12529664.21 835310.9475 

Total 18 87301879.68 

Coefficients 

Standard 

Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% 

Intercept 113,566.3 26,499.0 4.2857 0.0007 57,085.1 170,047.5 57,085.1 170,047.5 

Newspapers -159.5 32.7 -4.8780 0.0002 -229.2 -89.8 -229.2 -89.8 

Circulation 666.5 97.1 6.8663 0.0000 459.6 873.4 459.6 873.4 

LN(Internet users) 977.8 231.8 4.2180 0.0007 483.7 1,471.9 483.7 1,471.9 

42

Exhibit 18 – Sensitivity Analysis of Stock Price 

We performed multiple sensitivity analyses to give an idea of what the company is worth under different assumptions. The first one looks at the WACC sensitivity 

with and without estimated restructuring charges reflected in free cash flows. Diluted Values reflect complete conversion of KKR warrants and convertible debt 

even though effective strike prices are $5.50 and $7.41, respectively. 

With Restructuring Charges 

WACC 13% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 

Stock Value $6.06 $5.69 $5.34 $5.03 $4.73 $4.46 $4.20 $3.97 $3.74 $3.54 $3.35 

Diluted Value $4.54 $4.27 $4.01 $3.77 $3.55 $3.34 $3.15 $2.97 $2.81 $2.65 $2.51 

WACC using gross debt 

(not conservative) 

Without Restructuring Charges 

WACC 13% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 

Stock Value $8.81 $8.30 $7.83 $7.39 $6.99 $6.61 $6.26 $5.94 $5.64 $5.35 $5.09 

Diluted Value $6.61 $6.23 $5.87 $5.54 $5.24 $4.96 $4.70 $4.45 $4.23 $4.01 $3.82 

This second sensitivity analysis looks at the weighted-average terminal growth rate of the three business segments vs. the company WACC. 

WACC 

$5.32 13% 14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 21.0% 22.0% 23.0% 

Growth 0.50% $5.88 $5.52 $5.19 $4.89 $4.60 $4.34 $4.09 $3.86 $3.65 $3.45 $3.27 

1.00% $5.96 $5.60 $5.26 $4.95 $4.66 $4.39 $4.14 $3.91 $3.70 $3.49 $3.30 

1.50% $6.06 $5.69 $5.34 $5.03 $4.73 $4.46 $4.20 $3.96 $3.74 $3.54 $3.35 

2.00% $6.17 $5.79 

$5.43 

$5.11 $4.81 

$4.53 $4.27 

$4.02 $3.80 $3.59 $3.39 

2.50% $6.29 $5.90 $5.54 $5.20 $4.90 $4.61 $4.34 $4.09 $3.86 $3.65 $3.45 

3.00% $6.43 $6.03 $5.66 $5.31 $5.00 $4.70 $4.43 $4.17 $3.93 $3.71 $3.51 

3.50% $6.60 $6.18 $5.80 $5.44 $5.11 $4.81 $4.53 

$4.26 

$4.02 $3.79 $3.58 

4.00% $6.80 $6.36 $5.96 $5.60 $5.25 $4.94 $4.64 $4.37 $4.12 $3.88 $3.66 

A5 Valuation 

WACC using net debt 

(A5’s choice) 

WACC using management 

guidance 

Current Stock Price $4.40 (12/11/09) 

43

Exhibit 19 – Cash Benefit of Financing Transactions 

Kodak cost of debt 13.85% 

Private Placement of Convertible Debt 

Face Value 

Discount 

Coupon 

Principle Accrual 

Due Date 

KKR Debt w/ Warrants 

Face Value 

KKR Fee from EK 

Discount 

Coupon 

Principle Accrual 

Due Date 

Year 

KKR transaction 

Interest 

Interest payments at cost of debt 

$ Saved 

PV 

NPV of Savings 53.8 

PP of Convertible Debt 

Interest 

Interest payments at cost of debt 

$ Saved 

PV 

NPV of Savings 127.7 

Cash payments saved 

Combined NPV 181.5 

$400.0 

0% 

7% 

0.00% 

2017 

$300.0 

$15.0 

4% 

10% 

0.50% 

2017 

2010 2011 2012 2013 2014 2015 2016 2017 

30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 

41.5 41.5 41.5 41.5 41.5 41.5 41.5 41.5 

11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5 

10.1 8.9 7.8 6.9 6.0 5.3 4.7 4.1 

28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0 

55.4 55.4 55.4 55.4 55.4 55.4 55.4 55.4 

27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 

24.1 21.1 18.6 16.3 14.3 12.6 11.0 9.7 

38.9 38.9 38.9 38.9 38.9 38.9 38.9 38.9 

44

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http://www.bea.gov/national/index.htm#gdp 

Butcher, D. (2009, June 3). Retrieved December 12, 2009, from Mobile Marketer: 

http://www.mobilemarketer.com/cms/news/advertising/3393.html 

Charlene Li., J. B. (2008). Talking with the Groundswell. In J. B. Charlene Li., Groundswell. Boston, MA: Harvard 

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30, 2009, from cbo.gov: http://www.cbo.gov/ftpdocs/100xx/doc10014/AppendixA.7.2.shtml 

Consumers Union of U.S., I. (2009). Retrieved December 12, 2009, from ConsumerReports.org: 

http://www.consumerreports.org 

Dobbin, B. (2009, January 29). Retrieved December 12, 2009, from The Huffington Post: 

http://www.huffingtonpost.com/2009/01/29/kodak-to-slash-up-to-4500_n_162133.html 

Eastman Kodak. (2009, February 27). Filings and Annual Reports. Retrieved October 6, 2009, from Capital IQ: 

https://www.capitaliq.com 

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Kavajecz, K. (2009). Module 5, Risk, Returns and the Capital Asset Pricing Model. Madison, WI. 

Kodak, E. (2009, December). About Kodak. Retrieved October 20, 2009, from Kodak.com: www.kodak.com 

Magazine Publishers of America. (n.d.). Retrieved November 30, 2009, from magazine.org: 

http://www.magazine.org/consumer_marketing/circ_trends/1318.aspx 

Miniwatts Marketing Group. (n.d.). Internet World Stats. Retrieved November 30, 2009, from Internet Growth Statistics: 

http://www.internetworldstats.com/emarketing.htm 

Newspaper Association of America. (n.d.). Total Paid Circulation. Retrieved November 30, 2009, from Newspaper 

Association of America: http://www.naa.org/TrendsandNumbers/Total-Paid-Circulation.aspx

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