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Kodak: Preliminary 2nd-Quarter Earnings Exceed Guidance

Friday, July 12, 2002

Press release from the issuing company

2nd-Qtr Operating Cash Flow Expected to Total $285 Million ROCHESTER, N.Y.--July 11, 2002--Eastman Kodak Company said that it expects to report second-quarter earnings of approximately 97 cents per share, compared with reported earnings of 12 cents per share in the second quarter of 2001, driven by improved manufacturing productivity and operational performance, as well as the earlier-than-anticipated realization of the cost benefits of a restructuring begun last year. The reported earnings of 97 cents per share include 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. Excluding those items, Kodak expects to report earnings on an operational basis of approximately 85 cents per share, exceeding its previous guidance of 60 cents to 70 cents per share. In the second quarter of 2001, earnings on an operational basis were $1.12 per share, including goodwill amortization. Kodak also expects to generate operating cash flow of approximately $285 million in the second quarter. For the first half of 2002, operating cash flow improved by approximately $650 million versus the first half of 2001, driven by higher earnings, restrained capital spending, lower receivables and the previously announced change in dividend policy to make payments in the second half of the year. Excluding dividend payments made in the first half of 2001, the operating cash flow improvement in the first half of 2002 is approximately $395 million. Kodak said that sales in the second quarter declined across virtually all businesses versus the year-ago quarter, on a percentage basis, in the mid-single digits, somewhat more than originally expected. This is due primarily to continuing weakness in the economy, which Kodak now expects will drive sales for full-year 2002 slightly below 2001. "We're doing what we said we would do - cutting costs, achieving manufacturing improvements, generating cash and introducing new products and services, while sustaining our investments in R&D," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "Most importantly, the preliminary results we've released today show that Kodak's earnings recovery is on track with the projections provided to investors in January." "Like most other businesses, we are unable to predict the timing of the economic recovery. When we release our results in two weeks, we will most likely leave the second-half earnings guidance on an operational basis unchanged at $1.35 to $1.75 per share. Achieving the upper half of that range will require better economic performance than we've seen to date." In the second half of 2001, Kodak's earnings per share on an operational basis totaled 64 cents, including goodwill amortization. Kodak's gross profit margin improved to approximately 37% in the second quarter. Typically, the second quarter's gross margin represents the seasonal peak of the year. In the first quarter, gross profit margin was 31.7%. Cost reductions had a significant impact on the margin performance, as did improvements in Health Imaging - Kodak's second-largest business - whose gross margin continued to improve in the second quarter. Kodak's share performance in the U.S. consumer film market improved sequentially from the first quarter, reflecting the expected benefits of share-management programs implemented this year. Kodak is on track to hold full-year average U.S. market share for a fifth consecutive year. On an industry-wide basis, consumer film sales in the U.S. continue to be softer than expected, declining approximately 5% in the second quarter, primarily reflecting continued economic weakness.




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