Red ink at Kodak turning into flood

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Date: Tuesday May 1, 2012 08:11:28 am
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    Red ink at Kodak turning into flood

    Kodak sales fall 27%; first-quarter loss grows to $366 million
    Loss grows to $366M as revenue falls 27%
    Cutting costs in hopes of returning to profitability has become a way of life at Eastman Kodak Co.

    The first months in bankruptcy for the printing and imaging company were no different. But its moves — including deep cuts to the worldwide workforce — have yet to improve its struggling finances.

    Kodak released first-quarter results Friday, and they showed no reversal of the long-running trends of sliding sales and gaping losses.

    The company’s total revenue of $965 million was down 27 percent from the first quarter of 2011.

    According to Kodak, that drop comes from the ongoing evaporation of its traditional film-based business, declining digital camera and pocket video camera sales as Kodak exits that line of business, and a one-time $61 million revenue cut regarding a tax refund.

    The company lost $366 million, or $1.35 per share, during the quarter, compared with a loss of $249 million, or 91 cents, during the first quarter of 2011.

    The last time Kodak made a profit was three consecutive quarters in 2007 in the brief interlude between a massive four-year restructuring and the onset of the 2007-09 recession.

    Kodak’s U.S. operations filed for Chapter 11 bankruptcy protection in January. In the three months since then, the company has been cutting costs and selling or trying to sell assets as it looks to return to profitability and exit bankruptcy in 2013.

    Kodak noted Friday that administrative and general expenses were down $84 million in the first quarter from a year earlier. Pointing in part to that improvement, CEO Antonio M. Perez said the company’s reorganization “is proceeding according to plan.”

    “Kodak is focusing on its opportunities, reducing costs and fine tuning the balance between liquidity and growth to enable the enterprise to emerge from its Chapter 11 restructuring in 2013 as a leaner, stronger and sustainable business,” Perez said in a statement.

    During the quarter, Kodak said it cut 1,700 positions globally, including more than 1,000 in North America. That represents 10 percent of its worldwide workforce of 17,000.

    Kodak ended 2011 with about 5,100 workers in the Rochester region, where it employed more than 60,000 in the early 1980s. So far this year, the company has notified the state Labor Department of five separate layoffs totaling about 200 local employees.

    There were some hopeful signs in Kodak’s latest financial numbers, such as smaller losses in its consumer business segment, thanks in part to cost cutting and to growing sales in the desktop inkjet business. The company is counting on its consumer and commercial inkjet businesses to be a new cornerstone of the company as it gets out of digital cameras and as the traditional film business teeters.

    On the other hand, the commercial segment was in the red because of that film business decline, a price war in the digital printing plate industry due to overcapacity, and a slow commercial printing industry as companies wait to see the new offerings at the upcoming Drupa trade show in Germany.

    The financial state of Kodak’s U.S. operations continues to be problematic three months into the bankruptcy. Separate from its quarterly results, Kodak on Friday filed with U.S. Bankruptcy Court its latest required monthly operating report.

    Those numbers, covering March, show revenue declining to $108.6 million from $168.1 million in February and $143.9 million in March. Losses increased to $128.7 million in March from $97.3 million in February and $100.3 million in January.

    Shrinking cash reserves were one of Kodak’s chief financial problems in 2011. The company ended 2011 with only $170 million in cash in the U.S. and with $700 million held overseas, according to U.S. Securities and Exchange Commission filings.

    Kodak’s cash cushion was recharged in January and February when the U.S. Bankruptcy Court approved $950 million in borrowing to get it through bankruptcy — $650 million up front, plus $300 million available incrementally.

    The company ended March with $1.4 billion in cash and cash equivalents, or about 60 percent more than it had at the end of 2011.

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