health imaging rsna investors meeting december 3, 2002

A BETTER VIEW OF LIFE.

Health ImagingRSNA Investors Meeting

December 3, 2002


Agenda

• Welcome and introductions• Sneak preview of new products • Booth tour• Formal remarks• Questions and answers


Sneak Preview – New Products


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


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


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


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


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


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


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


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


New At RSNA 2002


Overview

• Third-quarter results– Factors driving results

• HI growth plans– Strategy– Globalization

• Questions and answers

• Operational focus


Operational Focus&

Third-Quarter Results


Operational Focus• Sustaining successful margin recovery• Execution: day-to-day attention to detail• Continuing to make improvements in

business operating model• Innovation and growth


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


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


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


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


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


In Summary. . .Goal is to continue to:• Sustain progress in operational

excellence• Invest intelligently to drive future

growth


Going For Growth


• The growth imperative• Renewed Health Imaging growth

strategy– “How” we’ll grow

• Globalization– “Where” we’ll grow

Going For Growth


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


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…


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


Our Competitive Advantage• Kodak Brand• Intellectual property portfolio• Integration & interoperability expertise• Clinical workflow expertise• Distribution breadth & depth• Global presence• Image science… second to none


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


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


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


Key Take-Aways

• Significant opportunities to extend our business– Digital capture– Advanced imaging applications– Adjacencies in non-radiographic

imaging– Solutions and services

health imaging rsna investors meeting december 3, 2002

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