ROCHESTER, N.Y., Oct. 29 --
Eastman Kodak Company (NYSE:EK) today reported third-quarter 2009 results
that reflect improved operating performance in a number of businesses,
contributing to significant year-over-year improvement in cash performance
including positive cash generation before restructuring payments.
The company’s third-quarter results also demonstrate the success of
continued focused investments that Kodak is making in new products and core
growth businesses, especially consumer and commercial inkjet. Cost containment
and more tightly focused spending on research and development also positively
contributed to the company’s third-quarter results. Consistent with its
seasonal trend, the company expects cash and earnings performance to improve
significantly in the fourth quarter of the year.
The company’s ability to achieve significant improvement in fourth-quarter
results is predicated upon a modest improvement in the market for its consumer
and commercial products, the introduction of new, higher-margin digital cameras
and devices, stronger demand for its Prepress products, and the benefits from a
number of intellectual property transactions executed in a manner that maximize
shareholder value.
“On a sequential basis, the positive trends are clear. Our sales are
stabilizing and some businesses are showing real signs of growth in the fourth
quarter. That, combined with operational improvements in several of our key
product lines, increases our optimism for significant improvement in the fourth
quarter, our largest quarter of the year,” said Antonio M. Perez, Chairman and
Chief Executive Officer, Eastman Kodak Company. “We also continue to gain
significant traction with our new consumer and commercial inkjet businesses,
and the productivity improvements that we’ve implemented thus far are helping
to drive improved cash performance. We believe all of these factors are
sustainable and they give me increased confidence that we are on track for a
much improved fourth-quarter performance and achievement of our full-year
earnings and cash targets.
“Our consumer inkjet hardware and ink products enjoyed another quarter of
revenue growth that exceeded 100 percent, earning us a larger share of the
market, and commercial inkjet customer commitments for our PROSPER Press
Platform continue to grow rapidly in anticipation of delivery beginning in
early 2010. While consumer demand and commercial credit markets remain
constrained for the time being, we are well positioned to deliver sustained
profitability as the economy improves.”
For the third quarter of 2009:
- Sales worldwide totaled $1.781 billion, a decrease of 26% from $2.405
billion in the third quarter of 2008, including 2% of unfavorable foreign
exchange impact. Revenue from digital businesses totaled $1.209 billion, a 26%
decline from $1.641 billion in the prior-year quarter, primarily as a result of
the global recession and continued restrictions in the credit markets that are
dampening commercial printing purchases. Revenue from the company’s traditional
business decreased 25% to $572 million, in line with the industry decline.
- The company’s third-quarter loss from continuing operations, before
interest expense, other income (charges), net, and income taxes was $81
million, compared with earnings on the same basis of $147 million in the
year-ago quarter.
On the basis of U.S. generally accepted accounting principles (GAAP), the
company reported a third-quarter loss from continuing operations of $111
million, or $0.41 per share, compared with earnings on the same basis of $101
million, or $0.35 per share, in the year-ago period. Items of net expense that
impacted comparability in the third quarter of 2009 totaled $48 million after
tax, or $0.18 per share, primarily related to restructuring charges, asset
sales, and tax related items. Items of net benefit that impacted comparability
in the third quarter of 2008 totaled $40 million after tax, or $0.13 per share,
due primarily to certain changes to the company’s post-employment benefits,
partially offset by restructuring and rationalization costs. (Please refer to
the attached Items of Comparability table for more information.)
Other third-quarter 2009 details:
- Gross Profit was 20.3% of sales, a decline from 27.5% in the year-ago
period. This decline in margin was driven by lower intellectual property
licensing royalties and unfavorable foreign exchange, partially offset by
continued productivity improvements.
- Selling, General and Administrative (SG&A) expenses, on a GAAP basis,
were $318 million in the third quarter, down 14%, or $51 million, from $369
million in the year-ago quarter, as a result of company-wide efficiency gains.
Excluding a non-cash benefit from a change in the company’s post-employment
benefits in the prior year quarter, the company reduced SG&A expenses,
relative to the prior year quarter, by $78 million, or 20%.
- Research and Development expenses, on a GAAP basis, were $81 million in the
third quarter, down 15%, or $14 million, from $95 million in the year-ago
quarter, driven by a focus on investments in core growth businesses. Excluding
a non-cash benefit in the prior year quarter, the company reduced R&D
expenses, relative to the prior year quarter, by $33 million, or 29%.
- Third-quarter 2009 cash generation, before restructuring payments, was $29
million, compared with cash usage on the same basis of $78 million in the
year-ago quarter. This corresponds to net cash used in continuing operations
from operating activities on a GAAP basis of $16 million in the third quarter,
compared with a net cash usage of $47 million in the third quarter of 2008. As was the case in 2008, the company
expects to generate the majority of its cash flow in the fourth quarter of the
year, consistent with its historic seasonal pattern.
- Kodak held $1.147 billion in cash and cash equivalents as of September 30,
2009, up from $1.132 billion on June 30. This excludes $575 million of
restricted cash that the company deposited in a cash collateral account to be
used to fund the previously announced repurchase of Convertible Senior Notes
due 2033.
- The company’s debt level stood at $1.748 billion as of September 30, 2009,
and includes $575 million in Convertible Senior Notes due 2033, for which the
company completed a tender offer on October 19, 2009. As of the tender offer
expiration date, approximately 98% of the outstanding 2033 Notes were tendered,
representing an aggregate principal amount of approximately $563 million. The
company’s debt balance as of September 30, 2009 would have been $1.185 billion
if the tender offer for the 2033 Notes had been completed at that date.
Segment sales and earnings from continuing operations before interest,
taxes, and other income and charges (segment earnings from operations), are as
follows:
- Consumer Digital Imaging Group third-quarter sales were $535 million, a 35%
decline from the prior-year quarter, including a decrease in intellectual
property royalties. Third-quarter loss from operations for the segment was $89
million, compared with a profit of $24 million in the year-ago quarter. The
year-over-year variance was driven by lower intellectual property licensing
royalties of $157 million. Excluding the impact of intellectual property
royalties, segment earnings improved. This was driven by improved profitability
in consumer inkjet systems, including a 128% revenue increase in consumer
inkjet printer hardware and ink and lower costs as a result of the company’s
move to a more efficient product platform; improved operating performance in
Digital Capture & Devices; and reduced SG&A and R&D expenses across
the segment.
- Graphic Communications Group third-quarter 2009 sales were $674 million, an
18% decline from the third quarter of 2008. This revenue decrease was primarily
driven by a market-related decline of 16% in Prepress Solutions as well as
associated declines in workflow. Third-quarter earnings from operations for the
segment totaled $10 million, compared with earnings of $22 million in the
year-ago quarter. This earnings decline was primarily driven by lower volume,
which resulted in unfavorable factory absorption and negative price/mix across
several product lines, along with a negative impact from foreign exchange,
partially offset by cost reduction efforts across all product lines and
significant operational improvements in Electrophotographic Printing
Solutions.
- Film, Photofinishing and Entertainment Group third-quarter sales were $572
million, a 25% decline from the year-ago quarter. Third-quarter earnings from
operations for the segment were $47 million, compared with earnings of $77
million in the year-ago period. The decrease in earnings was driven by
industry-related declines in volumes, negative price/mix, and unfavorable
foreign exchange, partially offset by significant operational improvements in
Traditional Photofinishing, cost reductions across the segment, and improvement
in raw material costs.
2009 Outlook
Kodak today provided an updated outlook regarding its targets for 2009
performance, recognizing the ongoing uncertainty created by the global economic
environment.
- For the full year, Kodak now expects its total revenue decline rate to be
at the high end of the previously forecasted range of 12% to 18%, due, in part,
to results to date and to the company’s increased focus on cash and
earnings.
- Kodak is targeting 2009 segment earnings that will be within the previously
communicated range of $0 to $200 million. Correspondingly, the company
previously forecasted 2009 GAAP loss from continuing operations of $200 million
to $400 million, and continues to forecast that GAAP results will be at the low
end of that range, reflecting its latest assessment of restructuring charges,
interest expense, and interest income.
- For full-year 2009, the company reiterates its goal to achieve positive
cash generation before restructuring payments. This corresponds to a 2009 goal
of net cash used in continuing operations from operating activities on a GAAP
basis of not more than $250 million.
Form 10-Q and Conference Call Information
The Management Discussion & Analysis document that typically is filed
with the company's earnings news release is included as part of the company's
Form 10-Q filing. You may access this document one of two ways:
- Visit Kodak's Investor Center page at: www.kodak.com/go/invest and click on
SEC filings
- Visit the U.S. Securities and Exchange Commission EDGAR website at: www.sec.gov/edgar.shtml and access
Eastman Kodak under Company Filings
In addition, Antonio Perez and Kodak Chief Financial Officer Frank Sklarsky
will host a conference call with investors at 11:00 a.m. Eastern Time today. To
access the call, please use the direct dial-in number: +1 480-629-9771, ID
4161485#. There is no need to pre-register.
The call will be recorded and available for playback by 2:00 p.m. Eastern
Time on Thursday, October 29 by dialing +1 303-590-3030, ID 4161485#. The
playback number will be active until Thursday, November 5 at 5:00 p.m. Eastern
Time.
For those wishing to participate via the webcast, please access our
kodak.com Investor Relations webpage at: http://www.kodak.com/go/invest. The
webcast audio will be archived and available for replay on this site
approximately one hour following the live broadcast.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this press release may be forward-looking in nature,
or "forward-looking statements" as defined in the United States Private
Securities Litigation Reform Act of 1995. For example, references to the
Company's expectations regarding the following are forward-looking statements:
revenue; revenue growth; earnings; cash generation; increased demand for Kodak
products, including commercial printing products, and digital cameras and
devices; new product introductions; and potential revenue, cash and earnings
from intellectual property licensing.
Actual results may differ from those expressed or implied in forward-looking
statements. Important factors that could cause actual results to differ
materially from the forward-looking statements include, among others, the
risks, uncertainties, assumptions and factors specified in Kodak's Annual
Report on Form 10-K for the year ended December 31, 2008 and Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009, September
30, 2009 and the 8-K filed on September 16, 2009 under the headings "Risk
Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Cautionary Statement Pursuant to Safe
Harbor Provisions the Private Litigation Reform Act of 1995" and in other
filings Kodak makes with the SEC from time to time. Kodak cautions readers to
carefully consider such factors. Many of these factors are beyond Kodak's
control. In addition, any forward-looking statements represent Kodak 's
estimates only as of the date they are made, and should not be relied upon as
representing Kodak 's estimates as of any subsequent date. While Kodak may
elect to update forward-looking statements at some point in the future, Kodak
specifically disclaims any obligation to do so, even if its estimates
change.
Any forward-looking statements in this press release should be evaluated in
light of the factors and uncertainties referenced above and should not be
unduly relied upon.
Download an ADOBE Acrobat version of the
Third Quarter 2009 Results Non-GAAP Reconciliations (pdf).
