The ratings on Rochester, N.Y.-based Carestream Health Inc. (Carestream) reflect Standard&Poor's Ratings Services' expectation that, although its operating margin is likely to fall below 20% due to rising commodity costs, we believe the company's capital expenditures of 3% to 4% of revenues should enable the company to continue to generate good free cash flow of more than $100 million and maintain leverage of 4x to 5x--a level we consider appropriate for the rating. Carestream's exposure to silver in its film products presents a significant risk to the company's historically good profitability. The price of silver has been volatile in the last year, rising from $30 per troy ounce in January to almost $50 in April and then recently
