Rochester - Eastman Kodak Company today reported 2010 results which reflect the success of the focused investments that Kodak is making in new products and growth businesses; digital revenue growth in key emerging markets around the world; intellectual property licensing agreements; improved profit margins; and a lean cost structure.

Full-year 2010 sales were $7.187 billion, a 6% decrease from the prior year. Full-year revenue from digital businesses grew by 1%, reflecting an 18% revenue increase in the company’s core growth businesses -- Consumer and Commercial inkjet, Packaging Solutions, and Workflow Software and Services -- and an increase in non-recurring intellectual property licensing agreements. Full-year 2010 consumer inkjet printer and ink revenue grew by 35%. Traditional revenue for 2010 decreased 22% from the prior year to $1.767 billion.

On the basis of U.S. generally accepted accounting principles (GAAP), the company reported a full-year 2010 loss from continuing operations of $58 million, or $0.22 per share, reflecting a $174 million improvement as compared with a loss of $232 million, or $0.87 per share in the year-ago period. The company’s digital businesses delivered $301 million in earnings from operations for the year, a $308 million improvement from 2009.

For the fourth quarter of 2010, the company reported revenues of $1.927 billion, a 25% decrease from the year-ago quarter. Revenue from the company’s core growth businesses increased by 23%, while overall digital revenue totaled $1.488 billion, a 25% decrease from $1.991 billion in the prior-year quarter. This revenue decline largely reflects the timing of intellectual property licensing revenues as well as industry-related pricing pressures in Prepress Solutions and Digital Capture & Devices, partially offset by the revenue increase in the company’s core growth businesses. Revenue from the company’s traditional business decreased 25% to $439 million for the fourth quarter.

For the fourth quarter, the company reported earnings from continuing operations of $33 million, or $0.12 per share, compared with earnings on the same basis of $430 million, or $1.36 per share, in the year-ago period, primarily reflecting lower intellectual property licensing revenues in the fourth quarter of 2010. Items of net benefit that impacted comparability in the fourth quarter of 2010 totaled $132 million after tax, or $0.49 per share, primarily due to tax-related items, partially offset by restructuring charges. Items of net benefit that impacted comparability in the fourth quarter of 2009 totaled $90 million after tax, or $0.28 per share, primarily related to benefits from asset sales and tax-related items, partially offset by restructuring charges. (Please refer to the attached Items of Comparability table for more information.)

“In a year with significant external headwinds affecting a number of industries in which we participate, I am very encouraged by the performance of our key digital growth businesses, which will form the basis of Kodak’s digital future,” said Antonio M. Perez, Chairman and Chief Executive Officer, Eastman Kodak Company. “During 2010, these new businesses grew by a combined 18%, and all of our digital businesses as a group delivered more than $300 million in earnings for the year. This was our best digital earnings performance ever, and in line with our segment earnings forecast for the year. We also delivered positive cash generation in the fourth quarter and ended the year with more than $1.6 billion in cash on our balance sheet. That said, there were particular business challenges in 2010 that we are aggressively addressing. We enter the new year with a highly competitive digital portfolio, a strong presence in key markets, a continued commitment to effective cash management, and a significant amount of positive momentum in our key growth initiatives. All of this positions us well to continue our progress as a profitable, digital company.”

Other 2010 details:

- For full-year 2010, Gross Profit margin was 27.1% of sales, an increase from 23.2% in 2009. This increase was primarily driven by intellectual property licensing transactions.  Fourth-quarter 2010 Gross Profit margin was 19.4%, a decrease from 34.4% in the year-ago period, primarily the result of a significant intellectual property licensing transaction in the fourth quarter of 2009.

- Selling, General and Administrative expenses were $1.279 billion for full-year 2010, down 2%, from $1.302 billion in 2009.

- Research and Development expenses were $322 million for full-year 2010, down from $356 million in 2009.

- For full-year 2010, cash used before restructuring payments was $248 million, compared with $45 million cash generated in 2009, primarily due to lower proceeds from asset sales and a higher net use of cash for settlement of assets and liabilities. This corresponds to net cash used in operating activities of $219 million for 2010, compared with net cash used in operating activities of $136 million for 2009. Fourth-quarter cash generation, before restructuring payments, was $255 million, compared with $909 million in the year-ago quarter, primarily the result of a significant intellectual property licensing transaction in the fourth quarter of 2009. This corresponds to net cash provided by operating activities of $285 million for the fourth quarter of 2010 and $822 million for the year-ago period.

- Kodak held $1.6 billion in cash and cash equivalents as of December 31, 2010, up from $1.4 billion on September 30, 2010.

- The carrying value of the company’s debt stood at $1.2 billion as of December 31, 2010, with total debt maturities of approximately $1.4 billion.

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

- Consumer Digital Imaging Group full-year 2010 sales were $2.739 billion, a 5% increase from the prior year. Full-year earnings from operations for the segment were $330 million, a $295 million increase from the prior year. The year-over-year improvement was driven by intellectual property licensing transactions and improving profitability in Consumer Inkjet, which doubled gross profit dollars from ink during 2010. This was partially offset by declines in Retail Systems Solutions. For the fourth quarter, sales for the segment were $731 million, a decrease from $1.212 billion in the prior-year quarter. Fourth-quarter loss from operations was $57 million, compared with earnings on the same basis of $380 million in the prior-year quarter. These earnings results were primarily driven by a non-recurring intellectual property licensing transaction in the prior-year quarter.

- Graphic Communications Group full-year 2010 sales were $2.681 billion, a 2% decline from the prior year. Full-year loss from operations for the segment was $29 million, a $13 million improvement from the prior-year. The year-over-year earnings improvement was driven by cost improvements in electrophotographic products and lower raw material costs. Fourth-quarter 2010 sales were $757 million, a 3% decline from the fourth quarter of 2009. Fourth-quarter earnings from operations for the segment were $12 million, as compared with $36 million in the year-ago quarter. This earnings decline includes increased investment to support future growth opportunities in Commercial Inkjet and Workflow Software and Services, as well as negative price/mix in digital plates.

- Film, Photofinishing and Entertainment Group full-year 2010 sales were $1.767 billion, a 22% decline from the prior year. Full-year 2010 earnings from operations for the segment were $62 million, compared with $159 million in the prior year. Fourth-quarter sales were $439 million, a 25% decline from the year-ago quarter. Fourth-quarter loss from operations for the segment was $3 million, compared with earnings on the same basis of $53 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.

- For full-year 2010, total segment earnings were $362 million, within the company’s previously communicated range of $350 million to $450 million. This corresponds to earnings from continuing operations before interest expense, other income (charges), net and income taxes of $283 million, which was within the company’s previously communicated range of $275 million to $375 million.