Kodak Reports 2Q Earnings, No Signs of Economic Recovery
Press release from the issuing company
ROCHESTER, N.Y.--July 17, 2001--Eastman Kodak Company today reported revenues of $3.592 billion and net earnings of $36 million, or 12 cents per share, for the second quarter of 2001.
On an operational basis, excluding restructuring and other charges totaling $1.00 per share, earnings were $1.12 per share, within the guidance issued in April.
The after-tax charges total $289 million ($401 million pre-tax) and include $232 million ($316 million pre-tax) related to the restructuring actions announced in April and $52 million ($77 million pre-tax) for write-offs associated with the Wolf Camera Inc. bankruptcy. The second-quarter restructuring charge primarily covers severance for approximately 2,400 employees and write-downs associated with asset impairments and business exits. As previously indicated, additional restructuring charges will be recorded in the third quarter. The actions included in the total restructuring charge for both quarters will result in anticipated pre-tax savings of approximately $50 million in 2001 and $200-$250 million annually beginning in 2002.
For the second quarter:
- Sales totaled $3.592 billion, down 4% compared with $3.749 billion
in the second quarter of 2000. Sales declined 2% excluding foreign
exchange and portfolio changes.
- Net earnings were $36 million, or 12 cents per share, compared
with $506 million, or $1.62 per share, in the second quarter of
2000. Excluding the charges, earnings for the second quarter of
2001 were $325 million, or $1.12 per share. In the second quarter
of 2000, earnings excluding a charge related to the exit of a
manufacturing facility were $513 million, or $1.65 per share.
"Kodak's results in the second quarter reflect our pledge to achieve the commitments we make to investors,'' said Daniel A. Carp, Chairman and Chief Executive Officer. "As promised, we are reducing our debt and inventories while increasing our gross margins compared with the first quarter. We also generated positive cash flow in the quarter, a significant achievement given that negative cash flow is the seasonal pattern in the second quarter.''
"The quarter's results are consistent with the economic slowdown, and we have yet to see signs of economic recovery,'' Carp said. "We will continue to manage Kodak in recognition of this reality. This means cutting costs, strengthening our balance sheet and refining our digital strategy.''
Other highlights for the quarter:
- Cash flow was $141 million, which results in a $386 million
positive swing from the second quarter of 2000, when cash flow was
a negative $245 million.
- On an operational basis, second-quarter gross profit as a
percentage of sales rose to 39.1%, up from 36.2% in the first
- Inventories declined $267 million to $1.566 billion, down from
$1.833 billion at the end of the first quarter, and down from
$1.739 billion at the end of the second quarter of 2000.
- While the rate of contraction of the U.S. film industry has slowed
since the fourth quarter of 2000, industry volumes declined 2% in
the second quarter, with June's performance weaker than the
second-quarter average. Kodak's blended market share in the U.S.
during the second quarter increased.
- The EasyShare digital camera system, introduced in April, has been
met with strong acceptance in the consumer electronics and
Second-quarter segment results, on an operational basis:
- Consumer Imaging segment sales totaled $1.933 billion, a decline
of 9% compared with the second quarter of 2000. Adjusted for
currency impact, sales were down 6%. Earnings from operations for
the segment declined 23% to $357 million. The estimated U.S. film
industry contracted 2% in the second quarter, following the 1%
contraction in the first quarter.
- Health Imaging sales rose 6% to $586 million. Sales were up 10%
when adjusted for currency impact. Earnings from operations
declined 24% to $99 million. Earnings in the segment were crimped
by lower margins, stemming from lower prices, lower productivity
and adverse foreign exchange.
- Kodak Professional sales declined 10% to $392 million and by 8%
when adjusted for currency. Earnings from operations declined 9%
to $59 million. The new management team continued the successful
implementation of its operational improvement program, including a
positive earnings contribution from Kodak Polychrome Graphics
during the second quarter.
- Other Imaging segment sales rose 6% to $681 million and by 9% when
adjusted for currency. Earnings from operations declined $20
million to $36 million, as a result of modest decreases in each of
the business units, primarily related to lower margins.
- For the first two quarters of 2001, sales were $6.567 billion,
down 4% compared with $6.844 billion for the first two quarters of
2000, and down 1% excluding foreign exchange.
- Net earnings totaled $186 million, or 64 cents per share, compared
with $795 million, or $2.55 per share in the first two quarters of
2000. Excluding one-time charges, earnings were $482 million, or
$1.66 per share, in the first half of 2001, compared with $810
million, or $2.60 per share, in the same period of 2000.
- Of the 2,400 positions covered by the second-quarter restructuring
charge, about 1,100 will come from the U.S. and Canada, with the
balance from the rest of the world. Similar details on the
remainder of the total employment reduction of about 3,500 will be
announced with the third-quarter earnings release.
- Risk factors for the third quarter include continued economic
weakness in the U.S. and the potential that economic weakness will
intensify in other regions, especially Latin America. As a result,
Kodak anticipates that earnings in the third quarter will be in
the range of 90 cents per share to $1.20 per share.
"We remain optimistic about the long-term fundamental health of our industry and see that industry expanding as imaging and information technologies converge,'' Carp said. "Kodak intends to take full advantage of the opportunities created by the infoimaging industry, from OLED displays and digital cameras to digital radiography and aerial imagery. As we work to expand the infoimaging market and deal with a challenging business environment, we will continue to look for opportunities to reduce costs, cut inventories and pare debt, all driven by our commitment to deliver the consistent, predictable performance that generates shareholder value.''
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