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Kodak Reports Q2 Results: Commercial Imaging Earns $49 Million

Friday, July 26, 2002

Press release from the issuing company

ROCHESTER, N.Y., July 25 -- Eastman Kodak Company today said second-quarter reported net income totaled 97 cents per share and that first-half operating cash flow improved by $661 million from the first half of 2001. Earnings excluding one-time items totaled 85 cents per share, compared with the operational earnings guidance of 60 cents to 70 cents per share that the company issued in January. For the second quarter of 2002: * Sales totaled $3.339 billion, a decline of 7% from $3.592 billion in the second quarter of 2001, reflecting the continuing economic weakness. Excluding the impact of foreign exchange, sales declined 8%. * The company had reported net income of $284 million, or 97 cents per share, compared with reported net income of $36 million, or 12 cents per share, in the second quarter of 2001. Excluding a one-time tax benefit totaling 15 cents per share resulting from the closure of a subsidiary, and a one-time write-down of assets associated with venture investments totaling 3 cents per share, the company had second-quarter earnings on an operational basis of $248 million, or 85 cents per share. In the second quarter of 2001, earnings on an operational basis were $325 million, or $1.12 per share, including goodwill amortization of 11 cents. "As we said in January, we are managing this company with a long-term view in these tough economic times," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "We're generating cash, cutting costs, reducing debt, improving our manufacturing productivity while introducing new products and services. Because of these actions, the earnings recovery we forecasted at the start of the year is on track." Other second-quarter 2002 highlights: * Cash Flow * Operating cash flow in the quarter was $298 million, an improvement of $157 million from the second quarter of 2001, when operating cash flow was $141 million. Due to a previously announced change in the timing of Kodak's dividend payments, the operating cash flow for the second quarter of 2002 did not include a dividend payment, while $128 million was paid in the second quarter of 2001. (Kodak defines operating cash flow as net cash provided by operating activities, as determined under Generally Accepted Accounting Principles in the U.S. [U.S. GAAP], plus proceeds from the sale of assets minus capital expenditures, acquisitions and dividends.) * In the first half of 2002, operating cash flow was $250 million, an improvement of $661 million from the first half of 2001, when operating cash flow was a negative $411 million. The operating cash flow for the first half of 2002 did not include a dividend payment, while $256 million was paid in the first half of 2001. Net cash provided by operating activities, as determined under U.S. GAAP, for the six months ended June 30, 2002 and 2001, respectively, was $460 million and $455 million. * Balance sheet management strengthened, reflected in lower receivables, inventories and capital expenditures, on a year-over-year basis. * Debt declined $796 million from the year-ago level to $3.053 billion, driven by the cash flow improvements. The segment results for the second quarter of 2002 are compared with the second-quarter results of 2001, which include goodwill amortization. The second-quarter 2002 segment results are as follows: * Photography segment sales totaled $2.378 billion, down 9%. Earnings from operations for the segment were $257 million, down from $401 million a year ago, which included goodwill amortization of $26 million. U.S. consumer film sales to dealers declined 20%, reflecting a combination of lower industry volumes, retailer inventory drawdowns, lower prices and lower market share. As expected, Kodak's share of the U.S. consumer film market increased quarter sequentially. * Health Imaging sales were $569 million, down 3%. Earnings from operations for the segment were $112 million, up from $98 million a year ago, which included goodwill amortization of $7 million. Margins based on earnings from operations in the Health Imaging segment continue to improve, rising to 19.7% in the second quarter, up from last year's low of 9.4%, which occurred in the third quarter of 2001. * Commercial Imaging sales were $364 million, down 2%. Earnings from operations were $49 million, up from $43 million, which included goodwill amortization of $4 million. * All Other sales were $28 million, down from $36 million. Losses from operations totaled $6 million, compared with earnings of $1 million, which included no goodwill amortization. The All Other category includes the Kodak Display business, Sensors, and Optics, as well as miscellaneous businesses. Earnings Outlook: * Providing future earnings guidance is made difficult by the continuing weakness of the economy. Therefore, Kodak's second-half earnings guidance remains unchanged at $1.35 to $1.75 per share. Current revenue assumptions are for low single-digit revenue growth in the second half of the year (excluding exchange), which, if realized, would bring second-half earnings into the lower half of the guidance range. "The weak economy continues to present business challenges," Carp said. "As we anticipated, we improved share in the U.S. consumer film market in the second quarter compared with the first quarter, consistent with our share recovery plans, and we fully expect by year's end to report a fifth consecutive year of steady share. In Health Imaging, we continued to improve our performance, as evidenced by another quarter-sequential increase in profitability. The 19.7% margin reported in the second quarter for Health Imaging represents the seasonal peak in that measure, and will decline to a level in the mid- to upper teens in future quarters as we invest more resources in the business. "In these difficult economic times, we are succeeding in managing those things within our control," Carp said. "We're improving our cash flow, boosting manufacturing productivity and introducing new products and services. Once the economy strengthens, we expect these actions and others to help Kodak accelerate its earnings recovery."

 

 

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