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http://online.wsj.com/article/BT-CO-20091029-717925.html
FALLING SALES AT KODAK IN Q3 ,DOWN
$111M
ROCHESTER —
The Eastman Kodak Company said Thursday it lost $111 million in the
third quarter, its fourth consecutive quarterly loss, as sales fell 26
percent.
Eastman Kodak Co. (EK) swung to a loss
in the third quarter as the recession and tight credit markets
continued to hurt sales of its film, commercial printing supplies and
digital cameras.
With a steeper-than-expected 26% drop in sales in
the latest period, Kodak said full-year sales will decline at the worse
end of its previously forecast range. And Kodak reiterated full-year
earnings and cash targets despite a wider-than-expected third-quarter
loss, saying it expects significant improvement in fourth-quarter
results as end markets improve modestly and it generates more income
from intellectual-property licensing.”In general we expect a sequential
improvement in many of our core lines going into the fourth quarter,”
said Kodak Chairman and Chief Executive Antonio M. Perez during a
conference call to discuss results.Shares recently traded 0.43% higher
at $3.48 after trading lower earlier in the session. Kodak shares were
down 47% this year heading into Thursday’s results and have a 52-week
range of $2.01 to $11.74.Kodak’s third-quarter loss was $111
million, or 41 cents a share, compared with a profit of $101 million, or
35 cents a share, a year earlier. The latest quarter included $48
million, or 18 cents a share, in restructuring-related charges and other
items, while the year-earlier period had $40 million, or 13 cents per
share, in gains.Excluding items, the loss was 23 cents a share, compared
with a profit of 22 cents a share a year earlier.Revenue fell to $1.78
billion from $2.41 billion, including a 2% negative foreign-exchange
impact.Analysts surveyed by Thomson Reuters had expected a loss of 19
cents a share on $1.89 billion in revenue.For the full year,
Kodak now sees revenue declining at the high end of its earlier forecast
for a 12% to 18% drop, based on the results to date and an increased
focus on cash and earnings.But its segment earnings should be within its
previous forecast, which was a range of break-even to $200 million, and
Kodak continues to expect a loss from continuing operations under
generally-accepted accounting principles at the low end of between $200
million to $400 million.”Our sales are stabilizing and some businesses
are showing real signs of growth in the fourth quarter,” Perez said.
“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.”The company is
counting on a modest improvement in the market for its consumer and
commercial products, among other things, to achieve that
improvement.”The challenge for Kodak is that so much does rest on the
fourth quarter,” said analyst Shannon Cross of Cross Research. “Clearly
they are expecting to produce a significant rebound.”Kodak said its
consumer inkjet business gained market share, and it added new
commitments for its new commercial printing platform, scheduled for
delivery beginning in early 2010. Digital cameras and other consumer
products introduced in the third quarter have higher margins and are
also expected to help.The Rochester, N.Y., company on Sept. 16 said it
expected its three business segments to post a total operating loss of
$50 million to $60 million. The company Thursday reported a total
segment operating loss from continuing operations of $36 million.Kodak
last month raised $700 million: $300 million by issuing notes due 2017
from Kohlberg Kravis Roberts & Co. and $400 million in senior
unsecured convertible debt due 2017. As part of that deal, Kodak said it
would use $575 million of the proceeds to retire $575 million in
convertible notes, which investors had expected the company to retire in
2010 using cash balances.That has given the company some financial
breathing room, despite a potential 35% dilution to existing
shareholders.While declining to offer many specifics on fourth-quarter
results so far, Perez said “October was good.”September and October saw
Kodak’s first improvements in sales of entertainment imaging equipment,
Perez said, calling the change significant.In addition, about
half of Kodak’s business in the consumer space is generated in the
fourth quarter, and officials still expect Kodak can generate $250
million to $350 million in intellectual property royalty revenue for the
year even though such revenue has been lower so far this year. It cited
a number of transactions under discussion, but wouldn’t provide
specifics on the status of negotiations.Kodak late last year filed a
U.S. trade complaint against Samsung Electronics and LG Electronics,
seeking to ban imports of mobile phones with digital cameras that Kodak
claims violate its patents. It has also filed patent-infringement
lawsuits against the companies seeking cash and other sanctions.Kodak,
meanwhile, continues to negotiate with other parties wishing to license
its technology, executives said.Chief Financial Officer Frank Sklarsky
and Perez said they believe Kodak’s restructuring efforts since the
fourth quarter of 2008 will help the company leverage its sales into
profits as the economy improves. Kodak has cut 4,275 positions since the
fourth quarter of 2008, has trimmed its product portfolio and remains
on track to meet or exceed its cost-reduction targets for the year,
Sklarsky said.Kodak put off questions about longer term financial goals,
saying it must see fourth-quarter results before it provides a 2010
update in early February.
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