Aug. 2, 2007--Eastman Kodak Company today reported a $121 million year-over-year improvement in pre-tax results from continuing operations, reflecting gross profit margin improvements across all of its major business units. The company achieved a $97 million improvement in digital earnings and a $31 million improvement in traditional earnings, as expenses declined. In addition, the company reported a $135 million after-tax loss from continuing operations, or $0.47 per share, an improvement of $220 million, or $0.77 per share, as compared to the prior year.
Kodak also reaffirmed its plan to achieve its full-year financial goals for net cash generation, digital revenue growth and digital earnings.
"Our second-quarter results reinforce our confidence in our full-year performance," said Antonio M. Perez, Chairman and Chief Executive Officer, Eastman Kodak Company. "Revenues during the second quarter were in line with our expectations. Earnings improved across all of our major business units, reflecting our strong focus on cost reduction and operational efficiencies. We continue to expect a strong second half, with double-digit sales growth in both of our major digital businesses, driven by a stronger-than-ever portfolio of digital products, including our revolutionary consumer inkjet printing system, new image sensors, workflow software, and an expanded line of NEXPRESS digital color printing presses. I'm pleased with our first-half results, and I remain confident in our ability to achieve our 2007 key strategic objectives."
On the basis of generally accepted accounting principles in the U.S. (GAAP), the company reported a second-quarter loss from continuing operations of $173 million pre-tax, $135 million after tax, or $0.47 per share, compared with a loss of $294 million pre-tax, $355 million after tax, or $1.24 per share in the year-ago period. Items of expense impacting comparability in the second quarter of 2007 totaled $266 million after tax, or $0.92 per share. The most significant item was restructuring costs of $316 million before tax and $248 million after tax, or $0.86 per share. In the second quarter of 2006, items that impacted comparability totaled $206 million after tax, or $0.72 per share, primarily reflecting restructuring costs.
Graphic Communications Group earnings from operations were $44 million, compared with $16 million in the year-ago quarter. This earnings increase was primarily driven by manufacturing productivity improvements and lower SG&A expenses, partially offset by higher aluminum costs. Sales for the second quarter were $929 million, a 2% increase from the year-ago quarter. Revenues from digital products improved by 6% for the quarter versus the prior year, driven by favorable foreign exchange and increased sales of digital plates. In addition, the Enterprise Solutions business achieved a 40% revenue increase,driven by strong sales of workflow software.
"The performance of our business units this quarter is more evidence of the progress that we are making in positioning Kodak for sustainable success," said Perez. "I am proud of my team's performance and I am encouraged by the enthusiastic market response to our new products. We continue to make great strides in transforming Kodak into a growing, profitable digital company."
2007 Outlook Reaffirmed
Kodak remains focused on three financial metrics as it continues to transform its business: net cash generation, digital earnings from operations and digital revenue growth.
As indicated during its first-quarter conference call with investors, the company's goal for net cash generation this year is in excess of $100 million after restructuring disbursements of approximately $600 million. This outlook corresponds to expected net cash provided by continuing operations from operating activities, on a GAAP basis, in the range of $200 million to $450 million.
Additionally, the company's goal for 2007 full-year digital earnings from operations is $150 million to $250 million, which corresponds to a GAAP loss from continuing operations before interest, other income (charges), net, and income taxes for the full year of $550 million to $650 million.
Finally, the company continues to forecast 2007 digital revenue growth of 3% to 5%, with total 2007 revenue expected to be down between 4% and 7%.