Economic Troubles Kodak Faced After 9/11

Kodak's sales have gone down prior to the year 2002 due to the terrorist attacks that had occurred in 9/11. Now that Kodak's crucial strengths in image and material sciences had put them in the forefront within its industry, the company instantly became a market leader on many different aspects. Through R&D, Kodak was able to continuously provide the market with brand new product innovations. The Kodak brand was known worldwide, thus opening doors for more opportunities. With that, market penetration had become extensive, with products carrying the Kodak brand throughout the globe. Kodak was able to maintain the leading spot in the market in 2001 with sales that had reached up to $13.234 million along with more than 50% of net sales outside the U.S. The Market had reported $6,775 million, while sales within the nation had reported around $6,459 million. Kodak found it crucial to keep investing in R&D as a critical path to its future success in delivering innovative, customer-focused imaging products, systems, and last but not least, services.

Sadly, after the tragic events that had occurred in September, 11, 2001, the terrorist attacks critically reduced Kodak's sales in the industries that had major support to its business. There was a 5% decrease from its sales from 2000 to 2001 even though they were still making profits and returning dividends to its shareholders. The devastation had also led to the decline in sales among the consumer film product groups within the photography division. So basically, the collapse in photography sales was provoked by the declines among the consumers, entertainment origination, and professional film products.

Despite the good old fashion film business maintaining its health, Kodak still noticed that some digital substitutions were taking place. Both the film and photo imaging division of the company was not the only business damaged by the economy, but the health of imaging businesses had suffered pricing pressures and operating problems which had pretty much led to marginal declines. Unfortunately, Kodak had diminished world wide employment by a total of 9% and a far even worse 34% from inventories. Not only that, but the company had also reduced receivables and continued to hold back on capital expenditures.

Over the course of 2002, worldwide sales had tallied up to $12.8 billion; over half of it coming from outside the U.S. Everything seemed according to plan for Kodak, but profits and revenues had also significantly slowed down in the first quarter. To make matters even worse, photographic products' hit rock bottom. Net income for the first quarter fell to $39 million (13 cents per share) in contrast to what it was a year earlier with $150 million (52 cents per share). 2002 was all about recovery in terms of the unfortunate events that had occurred on September 11. In fact, Operating cash flow (cash provided by operations and sale of assets) improved from a minus $552 million a year ago, to a minus $48 million, which was guided by the transformation in Kodak's dividend date.

Financial Ratio data collected at Morningstar.com

Kodak's estimated earnings were provided by the textbook "Strategic Management and Business Policy".

Ivestopedia.com was used to calculated financial ratios.