News

Kodak's Q2 profit up: Helped by digital photography products

July 20, 2004

ROCHESTER, N.Y. - In a company news release, Eastman Kodak Company announced that second-quarter reported net income totaled 54 cents per share and revenue increased 6 percent, led by rising demand for the company's digital products and services as well as favorable foreign exchange. Digital and film imaging segment sales totaled $2.396 billion, up 2 percent. Earnings from operations for the segment were $230 million on a GAAP and an operational basis, compared with $119 million a year ago. Highlights for the quarter included a 93 percent increase in the sales of KODAK Picture Maker kiosks and related media; a 91 percent increase in consumer digital capture sales, which includes the KODAK EASYSHARE cameras; and strong sales of motion-picture origination and print film. The segment's earnings from operations increased largely because of administrative cost reductions, higher manufacturing productivity and an improved year-over-year earnings performance by retail and wholesale photofinishing operations. For the quarter, the company estimates that U.S. consumer film industry volume declined about 15 percent compared with the second quarter of 2003. "Kodak delivered solid earnings growth in the second quarter, reinforcing our confidence in the digitally oriented strategy we presented to investors last year," said Kodak chairman and chief executive officer, Daniel A. Carp. "Sales continue to increase, led by broad demand among consumers and commercial customers for our digital products and services. In fact, our digital revenue increased 48 percent, more than offsetting a decline of 8 percent in traditional revenue. At the same time, Kodak continues to cut costs as part of our commitment to reduce expenses faster than the decline in portions of our traditional portfolio. The performance of our acquisitions is on target, and our balance sheet remains strong." Kodak expects second-half operational earnings to be in the range of $1.25 to $1.55 per share, and GAAP earnings to range between $1.71 and $2.01 per share. For the full year, the company is raising its guidance for operational earnings to a range of $2.39 to $2.69 per share, compared with the previous guidance of $2.15 to $2.45 per share. The company expects full-year GAAP earnings to range between $2.35 and $2.65 per share. "Our second-quarter results demonstrate that we are successfully accelerating our participation in digital markets," said Kodak president and chief operating officer, Antonio Perez. "We also recognize that the trend in consumer film suggests that the volume decline will be greater than we expected at the start of the year. We now anticipate that worldwide volume industrywide will decline in the range of 10  to 12 percent this year, compared with the prior forecast of a decline of 7 to 9 percent. In the U.S., we now expect the decline to be in the range of 18 to 20 percent, compared with the prior forecast of a decline of 10 to 12 percent. "Consistent with the commitment we made in September, our ability to generate earnings growth demonstrates that we are managing the traditional business effectively," Perez said. "As we have stressed previously, we remain determined to reduce costs in our traditional business ahead of the pace of its decline."

To that end, Kodak is accelerating the cost reduction program announced in January. At that time, the company said it would reduce employment by a range of 12,000 to 15,000 worldwide through 2006, with reductions of 2,500 to 3,500 occurring in 2004. Under the January program, the company has already reduced employment by 2,700 positions through the second quarter, and plans an additional reduction of 800 to 1,300 positions for the balance of the year. These actions will result in charges this year of $315 million to $375 million.

"While our earnings outlook reflects a certain volatility that would be expected in any significant transformation, we are reassured by our performance thus far that we are on the right course," Perez said. "We fully intend to continue delivering annual sales and earnings growth, reducing costs, and introducing more market-leading products and services."