Kodak rolls up earnings of $34M

(November 2, 2007) — Since the start of 2004, Eastman Kodak Co. has focused on reinventing itself as a digitally based firm, launching new products and demolishing swaths of its huge Kodak Park industrial park.

That work is showing some dividends, as digital sales and lower manufacturing costs helped push the area's second-largest employer into the black for the third quarter of 2007. Kodak also slightly scaled back the estimated price tag — and estimated size of layoffs — in its restructuring plans.

It marked only the third profitable quarter for Kodak since 2004. The Fortune 500 photo and imaging company released its third-quarter financial results on Thursday.

Kodak netted $34 million in income on sales of $2.581 billion. For the comparable quarter a year ago, Kodak lost $83 million.

Overall sales for the quarter were down minutely from $2.595 billion the company saw in last year's third quarter. But sales in digital products were up 12 percent to $1.589 billion. Earnings on the digital side of the business were $82 million, up from $28 million the same quarter last year.

"We had good market success with our new digital products," Kodak CEO Antonio Perez said in a conference call with Wall Street analysts. "Everything is in motion to achieve our key objectives."

Analysts polled by Thomson Financial had expected earnings of 27 cents per share. Kodak well exceeded that with an operating profit of 45 cents a share.

Kodak stock finished the day at $27.76 a share, down 90 cents, on a day when all the major market indexes dropped notably.

With its financial filings, Kodak also announced it expects its four-year restructuring ultimately will cost $3.4 billion to $3.6 billion as it sheds 27,000 to 28,000 jobs worldwide. The company previously had estimated restructuring would mean 28,000 to 30,000 job cuts and spending $3.6 billion to $3.8 billion on severance packages and demolitions.

During the third quarter, the company cut about 775 jobs in the United States and Canada and 650 elsewhere.

"It looks like after a difficult four years Kodak's digital plan is coming through," said Bill Shaheen, CEO of Rochester investment firm Whitney & Co. "The implementation of it is showing higher sales, stable margins and lower need for cost cuts to deal with the restructuring. If they can continue this over the next few quarters the turnaround could be well on its way."

Overall, $1 invested a year ago in Kodak would have netted $1.17, vs. a $1.10 return on a $1 invested with the S&P 500, according to Economic Investor analysis service.

Almost all of Kodak's film production is in Rochester. And that side of the business had mixed results for the quarter. Its Film Products Group saw sales of $488 million, down $105 million from the same quarter a year ago. Sales of consumer film, disposable cameras and related products were down 32 percent. But Kodak said the Film Products Group's earnings went up $7 million, to $122 million, for the quarter largely because of decreased manufacturing costs.

The ongoing demolitions at Kodak Park also added to the bottom line. According to the company, its gross profit margin was 26.4 percent, up 1.3 percentage points from a year ago, largely the result of lower costs from what the company calls its "manufacturing footprint reductions."

The company's 2006 figures do not reflect income or sales from its health group, which it sold earlier this year.

(Source: http://www.rochesterdandc.com/apps/pbcs.dll/article?AID=/20071102/BUSINESS/711020354)