A BETTER VIEW OF LIFE.
Health ImagingRSNA Investors Meeting
December 3, 2002
A BETTER VIEW OF LIFE.
Agenda
• Welcome and introductions• Sneak preview of new products • Booth tour• Formal remarks• Questions and answers
A BETTER VIEW OF LIFE.
Sneak Preview – New Products
A BETTER VIEW OF LIFE.
HI’s New Products• Film capture & output
– Next-generation X-Sight Screens• Digital output
– DryView 8900 Laser Imager• Digital capture
– DirectView CR 850 System– DirectView CR Long-Length Imaging System– Kodak DirectView DR 5100/7100 Operator Console
• Healthcare information services– DirectView PACS Web Distribution System– DirectView PACS System 5
A BETTER VIEW OF LIFE.
Film Capture & Output• New X-Sight screen
system– Produces ~20% sharper
images vs. previous system• Mammography
– Introducing accessories and showcasing services
– Also showcasing our DryView 8610 laser imager for digital mammography
A BETTER VIEW OF LIFE.
DryView 8900 Laser Imager• New flag-ship member of DryView family• Sets higher standards for image quality
and productivity– Double the image resolution of most
existing dry laser systems– Much greater speed: 180 films per hour at
650 dpi resolution• Three-drawer system accommodates all
film sizes– Excellent for centralized printing in busy
multi-modality areas– Also ideal in tandem with modalities that
generate mixed film sizes, such as CR• Small footprint – place almost anywhere• Available in second-half 2003• Fifth-generation product in line that
pioneered dry laser technology– More than 20,000 units shipped to date
A BETTER VIEW OF LIFE.
DirectView CR 850• Top-of-the-line, single-cassette, system• Key differentiator is speed: up to 100
cassettes per hour– Improved productivity and faster patient
throughput• Compact “all-in-one design” with 25 x 29
inch footprint– Can go anywhere: ER, ICU, other areas
with limited space• Bar code reader for patient/cassette I.D.• Supports DirectView remote operations
panels– Allow patient/cassette I.D. plus image
review and distribution from exam room• Supports Kodak’s unique EVP image
enhancement software for enhanced image quality
• Available in second-quarter 2003
A BETTER VIEW OF LIFE.
DirectView CR Long-Length Imaging System
• Enables digital capture of full leg and spine images
• Key differentiators: automatic “stitching” software and ability to print areas of interest in full size
– Software delivers images up to 17 x 51 inches
– Also helps significantly reduce retakes– Result: enhanced productivity
• System features wall-mounted vertical cassette holder with a unique “key” (picture at left)
– Prevents improper insertion of cassettes• Available immediately
A BETTER VIEW OF LIFE.
DirectView DR 5100/7100Operator Console
• Kodak DirectView DR 5100/7100 Operator Console– Maximizes productivity and
image quality through new touch-screen user interface
– Standard on DirectView DR 5100 and 7100 systems, available as upgrade on DR 9000
• The 5100 and 7100 come with DirectView PTS software, which helps enhance image quality and, in turn, diagnostic confidence
A BETTER VIEW OF LIFE.
DirectView PACSWeb Distribution System
• Feature-rich system enables referring physicians to obtain patient images and reports via the Internet
• Serves as foundation for transition to new DirectView PACS System 5
– Replaces our previous web product• Key advantages of new system:
– Multi-platform, multi-browser support, with no customer installation necessary
– Supports comprehensive image viewing and manipulation tools
– Compression options minimize low-bandwidth wait times without impeding image quality
– Enables online conferencing between radiologists and referring physicians
– Links to HIS/RIS– Scalable from small standalone system to large,
distributed enterprise-wide systems• Available in first-quarter 2003
A BETTER VIEW OF LIFE.
DirectView PACS System 5• Advanced next-generation PACS from Kodak• Scalable: can support small or large, single or
multi-site hospitals• Powerful web component (next slide)• Streamlined workflow adapts to a range of
customer configurations• Central database enables customers to
optimize workflow and performance– Allows customers to participate in a single,
global workgroup– Supports distributed storage elements, resulting
in rapid image access• Seamless integration with HIS/RIS• Images and reports can be e-mailed or written
to self-playing CDs for distribution to referring physicians and patients
• Available in second-half 2003
A BETTER VIEW OF LIFE.
New At RSNA 2002
A BETTER VIEW OF LIFE.
Overview
• Third-quarter results– Factors driving results
• HI growth plans– Strategy– Globalization
• Questions and answers
• Operational focus
A BETTER VIEW OF LIFE.
Operational Focus&
Third-Quarter Results
A BETTER VIEW OF LIFE.
Operational Focus• Sustaining successful margin recovery• Execution: day-to-day attention to detail• Continuing to make improvements in
business operating model• Innovation and growth
A BETTER VIEW OF LIFE.
Health Imaging Earnings Performance
$58$73 $76
$112$126
41.6%34.6% 35.6% 37.5%
43.4%
22.3%19.7%
14.6%12.8%10.6%
$-
$20
$40
$60
$80
$100
$120
$140
Q3 01 Q4 01 Q1 02 Q2 02 Q3 02
$ MM
0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%
(excluding goodwill)
EFO GP % EFO %
Business Improvement
A BETTER VIEW OF LIFE.
Third-Quarter 2002 Results• Revenues increased 4%
– U.S. up 2%– Outside U.S. up 5%
• Gross Profit was 43.5% vs. 34.6% year ago– Driven primarily by productivity improvements
• SG&A was 18.5% of sales vs. 20% year ago• R&D totaled 5.6% of sales vs. 6% year ago
A BETTER VIEW OF LIFE.
Business Improvements Driven By:
• Increased manufacturing productivity– Implementation of lean manufacturing
(Kodak Operating System)– Reduced material costs– Formulation improvements
• Lower distribution costs– Driven by enhanced capacity utilization
• Strengthened management team• Improved business governance and
processes
A BETTER VIEW OF LIFE.
Business Improvements Driven By:
• Improved equipment quality and reliability– Leads to enhanced service costs
• Changes in sales force compensation– More balanced approach, including margin
• Improved cost control initiatives• Better discipline on film and equipment
pricing• Solid cash performance
A BETTER VIEW OF LIFE.
Improvement Sustainability• Operating margins will move from >20%
to mid-to-upper teens level as HI invests for growth
• Growth investments include:– Increased R&D to expand products/services
portfolio– Targeted acquisitions/strategic partnerships– Expansion of global market presence
A BETTER VIEW OF LIFE.
In Summary. . .Goal is to continue to:• Sustain progress in operational
excellence• Invest intelligently to drive future
growth
A BETTER VIEW OF LIFE.
Going For Growth
A BETTER VIEW OF LIFE.
• The growth imperative• Renewed Health Imaging growth
strategy– “How” we’ll grow
• Globalization– “Where” we’ll grow
Going For Growth
A BETTER VIEW OF LIFE.
The Growth Imperative• Health Imaging is among Kodak’s most
profitable businesses• The business is robust• Healthcare technology and services markets
are growing• Our competencies and assets create
opportunities:– Product extensions– New technologies and services in current markets– Adjacencies
This is an Ideal Time to Grow Our Business
A BETTER VIEW OF LIFE.
Growth Strategy Renewal
• CP3+PACS– Right strategy at the time– Delivered 10.4% CAGR over 4 years– Sustainability coming under increasing
pressure• Renewed Strategy
– More expansive view of market and Kodak’s participation
Market DynamicsDemographic
Europe26%
N. America
43%
ROW7%
Japan24%
Diagnostic Imaging MarketSize Growth
(02-05 CAGR)Imaging Procedure Trends(02-05 CAGR)
1999 2050
4.0% 4.1%
5.5%
Developed Total Emerging
-5.0%3.0%
15.0%
-10.0%
6.0%
27.0%
Analog Total Digital
$20.9B
Growing… But Shifting to Digital Technology & Emerging Markets
Healthcare Trends
Healthcare• Genomics/proteomics advance in clinical medicine
• Lab becomes center of risk assessment, diagnosis, therapy & monitoring
• Medical & scientific data overwhelm human analytical ability
• Cardiovascular disease, cancer, depression & bio-terrorism key research targets
• Shortage of skilled healthcare labor
Technological• Digital substitution in image acquisition &
presentation
• General parity in analog & digital capture / output devices
• Internet connectivity of all devices
• AgX manufacturing overcapacity
• Improving digital display, storage & communication bandwidth Socioeconomic
• Increasing population age burden
• Increasing healthcare spending / GNP
• Healthcare consumer activism
• Growth in populous developing countries
• Scrutiny over privacy, security & authenticity of medical records
• Pressure on healthcare costs
• Pressure to reduce medical errors
Film Capture & Output Radiography - Product mix/tiering
- Specific film products for emerging markets
Mammography - Continue to invest in mammography film- Expand into emerging markets
Digital Capture Computed Radiography - Launch DirectView CR 850
- Working on improved cassette & region-specific software
Digital Radiography - Launch DR 5100/7100
Digital OutputLaser Printers - Launch DryView 8900
- Enhance manufacturing productivity
Media - Film tiering and new products- Wet-to-dry conversion
Health Care Information Services PACS - Launch PACS web product & System 5.0
RIS - Expand into international markets- Launch RIS integration services
Current PortfolioMarket Kodak Growth
SPG Trend Plans
Well Balanced Portfolio…
A BETTER VIEW OF LIFE.
Digital O
utput
Film C
apture
& Output
Dental
System
s
Digital C
apture
(CR)
Health
care
Informati
on Service
s
Scientifi
c Imag
ing System
s-20%0%20%40%60%80%
Rev
Market CAGR
Current Portfolio$M
…Long Term, Growth Coming from New Segments
Digital C
apture
(DR)
HI Growth Strategy
Capture
Images Other Data
Archive
Integrate
Intelligence
Out
put
Serv
ices
IP A
ddre
sses
Applicability
Capture & Process
Image & Information Network
Integrate
IntelligenceO
utpu
t
Serv
ices
IP A
ddre
sses
Diagnosti
c
Radiology
Diagnosti
c
In-Vivo Diag
nostic
In-Vitr
o
Treatm
ent
Health
care
Manag
emen
t
Core Adjacencies
A BETTER VIEW OF LIFE.
Our Competitive Advantage• Kodak Brand• Intellectual property portfolio• Integration & interoperability expertise• Clinical workflow expertise• Distribution breadth & depth• Global presence• Image science… second to none
A BETTER VIEW OF LIFE.
Globalization• Why?
– Be a local player in rapidly growing markets– Optimize cost structure– Move decision making closer to the customer
• How?– Technology centers-of-excellence near intellectual
capital– Manufacturing centers-of-excellence near low-cost,
high-quality supply base– Decentralized global product management– In region/for region decision rights
Diversity of Leadership will Reflect Diversity of Our Markets
A BETTER VIEW OF LIFE.
Strategic Governing Principles• Nurture the media businesses
– Maximize cash flow– Sustain customer franchise for image expertise
• Leverage Kodak assets– Brand– Customer franchise– Distribution channels– Technology and intellectual property
• Leverage Kodak core competencies– Image science– Connectivity– Manufacturing processes
• Financial focus– Growth-oriented Strategic Product Groups improve earnings every year– Non-organic investments accretive in reasonable time
A BETTER VIEW OF LIFE.
Key Take-Aways• Health Imaging is a great business• We have a strong position in the industry
– Sales growth of 3% to 5% – Sustainable earnings growth– Leadership in strong businesses
• 2002/2003 are transitional years– In 2002…
RestructuringRenewed participation strategyRealigned R&D investments
– In 2003…Launch new productsEnter new growth areasAccelerate globalization
A BETTER VIEW OF LIFE.
Key Take-Aways
• Significant opportunities to extend our business– Digital capture– Advanced imaging applications– Adjacencies in non-radiographic
imaging– Solutions and services
A BETTER VIEW OF LIFE.