Interview: What is ahead for the U.S. economy next year?
>> what’s ahead for the u.s. economy next year? above average growth according to mayland. he shaved his 2005 prediction by a few 10ths of a percent because of high oil prices.
>> it looks to me like the economy can achieve somewhere from 3.75% to 4% growth next year on a calendar year basis. keep in mind that the long-term average for the economy is in the neighborhood of 2.9% growth.
>> mayland says the third quarter showed that the u.s. is taking high oil prices in stride and where some other economists have fretted about a housing bubble bursting, he sees home building edging lower next year.
>> probably the biggest wild card continues to be the issue with terrorism and if something just comes along and knox the economy off kilter. but the economy is just cyclically poised to continue to do well and that should be the strong presumption.
>> mayland expects the first half of 2005 will be softer than the second half. shares of eastman kodak had their biggest decline in a year after that company missed their estimates. they earned 79 cents a share, down from the level a year ago. they reaffirmed their full-year earnings forecast. brian sullivan spoke with chief executive dan carp about the outlook for the company.
>> we made a change in the dividend, i guess it’s been a year and a half ago, and we laid out a plan to transform the company given the inevitable drop of our traditional business and the great opportunity on digital business. at that point, we thought we could continue paying at dividend at this level which at the time was about the average of the s&p and we still feel good about that. we had an incredibly good cash flow through the first three quarters of the year and our debt to capital is down from 49.9 to 43 now. we are making the acquisitions and getting the cash out of the company and have the money to implement the strategy and pay the dividend.
>> you did away with a previously announced $200 million buyback. how about of the―how much of the $2 billion did you buy back?
>> we opened up a relatively small buyback to cover any options that are exercised. a number of years ago, we had two all-employee options. they are close or in the money right now and we’re starting to see some of that as you would expect to be redeemed so we don’t want that to be an overhang and we’re buying it back and that’s why the number is modest.
>> so you’re looking to mitigate the dilution from the exercising of employee options, correct?
>> that’s right. and of course the key here is to keep investing in the strategy in the digital world. our digital sales were up 39% in this quarter so we’re getting the growth in digital we wanted and the strategy is working in that way so as long as we can keep getting the cash out of the business, the traditional business as it winds down, which we’re doing, everything works out ok.
>> we know traditional film, especially in the u.s. and developing nations, is down. but still, investors can’t forget a big part of your business especially in markets like china, india and brazil. how long do you think you can continue to do a billion-plus in sales from the traditional silver halied business?
>> the traditional silver halied business in the consumer area is declining but in the motion picture business, it’s growing and it’s continuing to grow in emerging markets like china and russia so it provides a good cash flow if we take the costs out ahead of the decline, which we’ve demonstrated we can do. in china, not only is the traditional business doing fine in the consumer and health areas but the digital piece in the affluent areas is kicking in so we’re enjoying good sales and growth in the digital area in china, as well. it will be a two product market , thinking of both traditional and digital for a while in emerging markets .
>> but a billion in traditional film sales adinfinitum around the world?
>> no, no. next year over 50% of our sales will be digital products. when you think about how fast that’s moved, for the next couple of years, it will continue down for film. that’s why being over 50% digital next year will get us on the longer term growth stream we have committed to.
>> peak demand for heating oil is around the quarter and u.s. inventories fell for a third week.
