ROCHESTER, N.Y. -- Eastman Kodak Company today reported third-quarter results that reflect continued momentum of the company’s major strategic digital growth businesses; improved operating efficiencies; and the successful conclusion of an intellectual property licensing agreement, all contributing to year-over-year improvement in profitability and positive cash generation.

Third-quarter sales were $1.758 billion, a 1% decrease from the year-ago quarter, including two percentage points of unfavorable foreign exchange impact. As a result, third-quarter revenue was up slightly in local currencies.

Revenue from the company’s digital businesses grew 10% in the third quarter, reflecting increased demand for the company’s consumer and commercial inkjet products, packaging solutions, and workflow software and services, along with a non-recurring intellectual property licensing agreement. Revenue from the company’s digital commercial printing businesses grew by 13% in the third quarter, including 23% growth in commercial inkjet printing. Consumer inkjet printer and ink revenue grew by 26% in the third quarter. Profits from the company’s digital portfolio showed year-over-year improvement for the fourth consecutive quarter. Third-quarter revenue from the company’s Film, Photofinishing and Entertainment Group declined by 25%.

On the basis of U.S. generally accepted accounting principles (GAAP), the company reported a third-quarter loss from continuing operations of $43 million, or $0.16 per share, compared with a loss from continuing operations on the same basis of $111 million, or $0.41 per share, in the year-ago period. Items of net expense that impacted comparability in the third quarter of 2010 totaled $38 million after tax, or $0.14 per share, primarily due to restructuring charges and tax-related items. Items of net expense that impacted comparability in the third quarter of 2009 totaled $48 million after tax, or $0.18 per share, due primarily to restructuring charges, asset sales, and tax related items. (Please refer to the attached Items of Comparability table for more information.)

“Our third-quarter performance was marked by continued acceleration in our strategic digital growth businesses, positive cash generation, improved profit margins, and continued operational improvements across the company,” said Antonio M. Perez, Chairman and Chief Executive Officer, Eastman Kodak Company. “I am particularly pleased with the performance of our core growth businesses -- Consumer Inkjet, Commercial Inkjet, Packaging Solutions, and Workflow Software and Services. Revenue growth in these businesses continues to accelerate and in the third-quarter grew by a combined 23%. We also enjoyed growth in equipment unit placements, which will drive future consumable sales. All of these factors give me increased confidence that we are on track for a strong fourth-quarter performance, and continued improvement as we move forward.”

Other third-quarter 2010 details:

• Earnings from continuing operations, before interest expense, other income (charges), net, and income taxes were $58 million, a $139 million improvement as compared to an $81 million loss in the year-ago quarter. This earnings improvement was driven by operational improvements, including cost and efficiency gains, and the impact of a non-recurring intellectual property transaction.
• Gross Profit improved to 27.1% of sales, as compared to 20.3% in the year-ago period. This increase in margin was driven by both a non-recurring intellectual property licensing agreement and continued operational improvements.
• Selling, General and Administrative (SG&A) expenses were $314 million in the third quarter, down 1%, from $318 million in the year-ago quarter.
• Research and Development expenses were $83 million in the third quarter, as compared to $81 million in the year-ago quarter.
• Third-quarter 2010 cash generation, before restructuring payments, was $123 million, a $94 million improvement from the year-ago quarter. This corresponds to net cash provided by continuing operations on a GAAP basis of $140 million in the third quarter, compared with net cash used in continuing operations on a GAAP basis of $16 million in the third quarter of 2009.
• Kodak held $1.4 billion in cash and cash equivalents as of September 30, 2010, compared with $1.1 billion as of September 30, 2009.
• The carrying value of the company’s debt stood at $1.25 billion as of September 30, 2010, with total debt maturities of approximately $1.37 billion, including amounts classified as equity.

Segment sales and earnings from continuing operations before interest, taxes, and other income and charges (segment earnings from operations), are as follows:

• Consumer Digital Imaging Group third-quarter sales were $670 million, compared with $535 million in the prior-year quarter. This performance was driven by increased unit volume in Digital Capture & Devices and Consumer Inkjet, and the successful completion of an intellectual property licensing agreement, partially offset by competitive pricing pressure. Third-quarter earnings from operations for the segment improved by $171 million to $82 million from an $89 million loss in the prior-year quarter.
• Graphic Communications Group third-quarter 2010 sales were $657 million, compared with $674 million in the prior-year quarter, a 2.5% decline. This decrease reflects negative foreign exchange impact of more than two percentage points. Price/mix-related revenue declines in Prepress Solutions were essentially offset by revenue growth in Commercial Inkjet Printing, Electrophotographic Printing Solutions, and Business Solutions and Services. Third-quarter loss from operations for the segment was $19 million, compared with earnings of $10 million in the year-ago quarter. This earnings decline includes increased investment to support future growth opportunities in Commercial Inkjet, Packaging Solutions, and Workflow Software and Services.
• Film, Photofinishing and Entertainment Group third-quarter sales were $431 million, a 25% decline from the year-ago quarter, driven by continuing industry-related declines. Third-quarter earnings from operations for the segment were $20 million, compared with earnings of $47 million in the year-ago period. This decrease in earnings was primarily driven by industry-related declines in volumes and increased raw material costs, partially offset by cost reductions across the segment.

2010 Outlook

For 2010, Kodak remains focused on three key financial goals, which the company first announced at its February investor meeting: digital revenue growth, earnings from operations, and cash generation. Kodak’s ability to achieve its full-year 2010 goals is predicated upon successful implementation of the company’s new product and marketing programs, continued growth in the company’s major strategic digital growth businesses, continued operational improvements, and ongoing execution of the company’s intellectual property licensing program.

• For 2010, Kodak continues to target total company revenue of $7.5 billion to $7.7 billion.
• Kodak is targeting 2010 segment earnings from operations that will be within the previously communicated range of $350 million to $450 million. This equates to GAAP earnings from continuing operations before interest expense, other income (charges), net and income taxes of $275 million to $375 million.
• Kodak continues to forecast 2010 GAAP loss from continuing operations in the range of $50 million to $150 million, including the impact of the $102 million net charge for early extinguishment of debt, related to the company’s financing transactions in the first quarter of 2010.
• For full-year 2010, the company remains focused on its goal of achieving positive cash generation before restructuring payments. On a GAAP basis, the company is targeting net cash provided by continuing operations from operating activities in the range of $50 million to $150 million.
• The company continues to target a year-end cash balance in the range of $1.8 billion to $2.0 billion.