Kodak Posts Q1 Loss of $151M

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Eastman Kodak Co. today reported a net loss of $151 million, or 53 cents a share, on sales of $2.1 billion for the first quarter of 2007, which is nearly half the deficit the company posted in the same quarter last year, but still much larger than analysts were forecasting.

Much of the losses stem from the company's on-going downsizing and restructuring efforts as it continues its rough transition from film to digital photography. Net losses a year ago were $298 million, or $1.04 a share. The first-quarter 2007 loss from continuing operations was $174 million, or 61 cents per share, compared with a loss of $346 million, or $1.21 per share, a year ago. Excluding restructuring costs and other one-time charges, the loss was 35 cents a share.

This was Kodak's ninth loss in the past 10 quarters. According to published reports, analysts surveyed by Thomson Financial had forecast a loss for the first quarter of 2 cents a share on sales of $2.1 billion.

Kodak first announced its restructuring plan in January 2004, saying it would cut 15,000 jobs worldwide. In October 2005 the plan was revised, with job cuts increased to 25,000 and the announcement that the company would close one-third of its facilities by mid-2007. Earlier this year, the company again updated the plan, saying it now expects job cuts to total between 28,000 and 30,000 (See "Kodak to Cut Up to 3000 More Jobs"), with the associated costs ranging from $3.6 billion to $3.8 billion.

The reductions will put Kodak's global work force at approximately 30,000, the lowest it has been since the 1950s. At its peak in 1988, Kodak employed more than 145,000.

"When we conclude the recently announced sale of our manufacturing facility in Xiamen, China, we will have completed the last, significant step in our manufacturing restructuring," Kodak Chairman and CEO Antonio M. Perez said in a statement today. In a regulatory filing Wednesday, the company said it will sell its plant and public-utility equipment in Xiamen for approximately $40 million to Xiamen Land Development Co. (See "Kodak Selling Plant for $40M")

The company reported today that its consumer Digital Imaging Group sales for the quarter were $778 million, down 14 percent, which Kodak said was attributable to its strategy to reduce the number of low-end cameras it makes, decreases in retail photofinishing services and an industry-wide decline in snapshot printing. Loss from operations for the segment was $114 million, compared to $167 million a year ago.

Those losses were partially offset by growth in its Kodak Picture kiosks and related media -- which saw a 13 percent increase -- as well as imaging sensors and royalty revenues, the company said. Its online Kodak Gallery sales were up 23 percent for the quarter.

Graphic Communications Group sales were $864 million, essentially flat from a year ago, the company said. Film Products Group sales were down eight percent from a year ago to $458 million.

“I’m very pleased with our first-quarter performance, in which we made significant progress on our two key objectives for 2007 -- new product success and cost reduction. Thus far the year is proceeding on plan,” Perez said.

Perez said the company ended the quarter with more than $1 billion in cash, the result of having closed the sale of its Health Group to Onex Corp. for $2.55 billion April 30 (See "Kodak Selling Health Group for $2.5B"). Kodak used approximately $1.15 billion of the proceeds to pay down its debt and is considering options for spending the remaining cash with its board of directors, the company said.

Kodak also said today that it will expand its investment in its inkjet printer line, launched in March, by as much as $50 million.

“I am encouraged by the enthusiastic consumer and retail response to our new line of inkjet printers. At this point we are selling all that we can make and we are bringing on retailers as quickly as we can supply them,” said Perez. The company's goal is to sell 500,000 printers this year.

Overall for 2007, the company said it expects digital revenue growth of 3 to 5 percent, with total 2007 revenue expected to be down between 4 and 7 percent.

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Published: May 2007
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