Kodak reports 3rd Quarter 2011 results

On the basis of U.S. generally accepted accounting principles (GAAP), the company reported a third-quarter loss from continuing operations of US$ 222 million, or US$ 0.83 per share, compared with a loss from continuing operations on the same basis of US$ 43 million, or US$ 0.16 per share, in the year-ago period. The results largely reflected the absence of sizable patent licensing revenue in this year’s third quarter versus the year-ago period and the continued secular decline of traditional products, partially offset by better operating performance in the company’s digital businesses, Kodak said. Third-quarter 2011 cash usage, before restructuring payments, was US$ 189 million, compared with the cash generation of US$ 123 million in the year-ago quarter, including US$ 269 million from non-recurring intellectual property licensing receipts.

Third-quarter digital revenue grew 3% excluding the year-ago intellectual property revenue and a 25% decline in the company’s Digital Cameras & Devices business, which reflected the strategic decision this year to trade revenue for improved earnings, according to Kodak. Revenue from the core digital growth businesses – Consumer and Commercial Inkjet, Workflow Software & Services, and Packaging Solutions – increased 13%, fueled by 44% revenue growth in Consumer Inkjet printers and ink, and 89% revenue growth in Packaging Solutions. The revenue decline rate for the company’s Film, Photofinishing and Entertainment Group slowed to 10% in the third quarter.

“We now expect to end the year with as much as US$ 1.4 billion in cash, before any proceeds from the sale of our digital imaging patent portfolios, reflecting the company’s seasonal generation of cash in the fourth quarter,” said Antonio M. Perez, Chairman and Chief Executive Officer, Eastman Kodak Company. “2011 represents the peak year for cash usage by our business units during this transformation. In 2012, we expect cash usage attributed to the operating businesses to decline notably, stemming from significant profitability improvements in consumer and commercial inkjet as well as digital cameras.”

Third-quarter sales of Kodak’s Consumer Digital Imaging Group were US$ 408 million, compared with US$ 664 million in the prior-year quarter. This decline also reflects the timing of patent licensing revenue, which was partly offset by growth in the Consumer Inkjet business. Excluding the year-ago patent licensing revenue, the segment’s results improved by US$53 million, reflecting the continued growth of ink gross profit within Consumer Inkjet, reduced operating costs stemming from the participation choices in Digital Cameras & Devices, as well as improved operational performance across the entire group. The segment’s third-quarter loss from operations was US$ 90 million, compared with earnings of US$ 67 million in the prior-year quarter, which included the benefit of the non-recurring patent licensing revenue.

Kodak’s Film, Photofinishing and Entertainment Group recorded third-quarter sales of US$ 389 million, a 10% decline from the year-ago quarter, driven by continuing industry-related volume declines. Third-quarter earnings from operations for the segment were $15 million, compared with earnings of $28 million in the year-ago period. This decrease in earnings was primarily driven by significantly increased raw material costs, particularly silver, and industry-related declines in volumes, largely offset by cost reductions and price actions across the segment.

As the company previously announced, Kodak intends to explore strategic alternatives for approximately 1,100 U.S. digital imaging patents, which represent about 10% of its patent portfolio and which are not core to its future. The company said it is pleased with the progress and level of interest in the portfolios.

For the full year, Kodak now expects its total revenue to be in the range of US$ 6.3 billion to 6.4 billion. Previously, the company forecasted full-year revenue to be in the range of US$ 6.4 billion to 6.7 billion. Kodak now expects 2011 segment losses to be closer to US$ 300 million, which is within the previously forecasted segment loss range of US$ 100 million to 300 million, excluding the proceeds of any sale of its digital imaging patent portfolios, which are expected to reach US$250 million to $350 million in cash this year.