KODAK POST $1.03 BILLION LOSS
KODAK POST $1.03 BILLION LOSS
2005-10-19 at 10:58:00 am #14306
Kodak Posts Loss of $1.03 Billion
(Oct.05) – Eastman Kodak Co., stung by a slide in film sales midway through its painful shift from traditional photography to digital imaging, posted a loss of $1.03 billion in the third quarter largely because of one-time tax charges related to its massive restructuring.
Its shares sank 5.5 percent after Wednesday’s report to its lowest level in about two years. Kodak shares dropped $1.26 to $21.88 in early trading on the New York Stock Exchange.
Kodak said it lost the equivalent of $3.58 a share in the July-September quarter, compared with a profit of $458 million, or $1.60 a share, a year ago.
Sales rose 5 percent to $3.55 billion, up from $3.37 billion in last year’s third quarter.
For the first time, Kodak generated more quarterly revenues from digital than from film, paper and other chemical-based products. But while digital sales soared 47 percent to $1.89 billion, traditional revenues slumped 20 percent to $1.66 billion.
The quarter included a non-cash charge of $900 million, or $3.13 a share, for a valuation allowance against net-deferred U.S. tax assets. That reserve was an accounting requirement resulting from continuing losses created by its accelerated overhaul.
The company’s loss from continuing operations, excluding one-time charges, was $103 million.
Kodak warned last month that a sluggish economy and shortfalls in its health-imaging business would likely crimp its digital profits this year, forcing it to build fewer digital cameras and home printers for the end-of-year holiday season. It had projected profits of around $275 million to $325 million.
Kodak is also battling a steep drop in demand for photographic film and paper. In July, it disclosed plans to lay off 10,000 employees on top of 12,000 to 15,000 job cuts targeted in January 2004.
Sales of conventional silver-halide film – Kodak’s cash cow for the last century – look set to drop by more than 30 percent in the United States this year.
In the third quarter, Kodak benefited from a 20 percent jump in sales of digital cameras and a 45 percent surge in sales of home printers and accessories. Helped in part by a reallocation of certain costs to its traditional business, its digital profit rose to $10 million from $6 million a year ago.
“We continue to see widespread evidence of the success of our digital transformation,” said Kodak’s chief executive, Antonio Perez.
Health imaging sales eased 1 percent to $635 million, and operating earnings fell to $90 million from $106 million.
But graphic communications sales nearly tripled to $886 million, helped in part by its $980 million buyout of Canada’s Creo Inc., and operating earnings were $15 million, compared with a loss of $16 million a year ago.
Two years ago, Kodak acknowledged that its analog businesses were in irreversible decline and outlined an ambitious strategy to become a digital heavyweight in photography, medical imaging and commercial printing by 2007.
The transition triggered nearly $3 billion in acquisitions but has carried a high cost. The shutdown of film and other manufacturing operations around the world looks likely to drop its global work force below 50,000, down from 75,100 in 2001 and a peak of 145,300 in 1988.