Kodak Says Reorganization on Track as Net Loss Increases

ROCHESTER, NY—April 27, 2012—Eastman Kodak reported that its strategy of focusing on its most profitable businesses and strengthened cost controls resulted in profitability improvements in both of its business segments during the quarter and an increased cash balance at the end of the quarter.

Kodak’s revenue of $965 million in the quarter represented a decline of 27 percent from the same period in the prior year, reflecting the exit of digital cameras, continued secular decline of the traditional businesses, and a $61 million reduction in revenue associated with a tax refund sharing agreement with intellectual property licensees. This reduction is the result of a refund of Korean withholding taxes recorded in the quarter as a $122 million income tax benefit.

On the basis of GAAP, the company reported a first-quarter net loss of $366 million vs. a net loss of $246 million from the prior-year quarter. The results reflect the improvement in segment profitability discussed below, reorganization costs associated with the Chapter 11 case, the absence of a gain from an asset sale in the prior-year quarter, and higher restructuring charges, partially offset by the tax benefit from the net impact of the Korean tax refund.

Selling, general and administrative (SG&A) expenses decreased by $84 million compared to the first quarter of 2011, as Kodak reduced its investment in unprofitable business lines and consolidated into two business segments—Commercial and Consumer. Kodak’s liquidity improved, ending the first quarter with a cash balance of $1.4 billion, up $500 million from year-end 2011, as a result of $600 million in net new financing, utilization of the Chapter 11 process, and reduced year-over-year cash usage for continuing operations.

“During the quarter, we took decisive steps—including filing for Chapter 11 and exiting unprofitable businesses—to accelerate our transformation and emerge in 2013 as a profitable, sustainable business,” said Antonio M. Perez, chairman and CEO. “As a result, during the quarter we saw improved profitability of our Commercial and Consumer business segments. We will continue to exploit our competitive advantage at the intersection of materials science, digital imaging, and deposition technologies. Our commercial and consumer products and services continue to offer unique technologies and market-leading value propositions.

“With the support of our valuable suppliers, we continued to serve our customers with the same high-quality products and services that they have come to expect from Kodak. As demonstrated by our performance in the first quarter, Kodak’s reorganization is proceeding according to plan.

“As we move forward, we are continuing to make progress in realizing each of these fundamental objectives in our Chapter 11 filing. We have exceptionally talented and dedicated employees, and I am proud of the way they managed the immediate impact of the filing. I also want to extend appreciation to our customers for their continued loyalty.”

Kodak noted that since filing for Chapter 11 reorganization in January, the company has bolstered its liquidity, and made good progress in the process of monetizing its non-strategic intellectual property, right-sizing its legacy liabilities, and focusing the company on a core set of businesses that most profitably leverage Kodak’s exceptional technology and brand strengths.

By Segment

The Consumer Segment’s loss improved by $23 million in the first quarter of 2012 to $164 million from $187 million in the same period in the prior year. Excluding the impact of the Korean tax refund, the Consumer Segment generated an $84 million year-over-year improvement in profitability. Driving this improvement were several factors, including enhanced cost controls, solid revenue growth in the retail systems solutions business driven by higher demand for consumables, a 34 percent increase in consumer inkjet ink revenues, and the decision to phase out of the digital capture business.

The profitability of the Commercial Segment modestly improved, driven by a reduction in operating expenses, with a segment loss of $64 million. The improvement in operating expenses was partially offset by continued decline in the traditional business, price erosion on plates due to industry overcapacity, and the slowdown in industry activity prior to the start of the drupa trade show.

At the drupa trade show, Kodak will present one of the broadest, most integrated portfolios in the graphic communications industry. Among the new products Kodak will highlight are the 1,000 fpm Kodak Prosper 6000XL press, the 3,000 fpm Kodak Prosper S30 imprinting system, the Kodak Flexcel direct platemaking system, and Kodak Sonora XP process-free plates.

“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 concluded.

Source: Kodak.