Kodak Reports Q1: Revenue up 11%, Commercial Printing Sales up 51%
Press release from the issuing company
ROCHESTER, N.Y.--April 21, 2004-- Eastman Kodak Company today said first-quarter reported net income totaled 10 cents per share and revenue increased 11%, led by increased demand across the company's portfolio of digital products and services, and favorable foreign exchange.
Kodak's net income for the quarter included income from discontinued operations of 4 cents per share and reported net income from continuing operations of 6 cents per share. Excluding the impact of previously announced focused cost reductions and other non-operational items, earnings from continuing operations were 26 cents per share. The operational earnings also include a tax benefit totaling 11 cents per share, offset in part by an inventory adjustment related to the acquisition of Scitex Digital Printing (Kodak Versamark) totaling 3 cents per share. Operational earnings excluding these two items were 18 cents per share, a 64% increase from the year-ago quarter. The company's operational earnings guidance for the quarter was approximately 14 cents per share, which included earnings from discontinued operations of 2 cents per share.
For the first quarter of 2004:
Sales totaled $2.919 billion, an increase of 11% from $2.640 billion in the first quarter of 2003. Excluding foreign exchange, sales increased 5%.
The company reported net income of $28 million, or 10 cents per share, compared with reported net income of $12 million, or 4 cents per share, in the first quarter of 2003. The net income from discontinued operations of 4 cents per share in the first quarter of 2004 primarily reflects income from the company's Remote Sensing Systems operation, which Kodak has agreed to sell to ITT Industries Inc.
Earnings from continuing operations, excluding the impact of focused cost reductions and other non-operational items, were $74 million, or 26 cents per share. The non-operational items include a charge of 18 cents per share related to the previously announced focused cost reductions and a charge of 2 cents per share for purchased in-process R&D. In the first quarter of 2003, earnings from continuing operations, excluding restructuring and other non-operational items, were $31 million, or 11 cents per share.
"The first-quarter results provide more evidence that Kodak is delivering on its growth strategy," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "Sales have increased consistent with our plan for two consecutive quarters as we strengthen our position worldwide in both our digital and traditional businesses. In fact, our digital revenue increased 44% while traditional revenue declined just 2% -- both better than our expectations. The companies we have acquired since the beginning of 2003 are performing on, or ahead of, plan. At the same time, we are continuing our push to reduce cost throughout the organization, which will help us generate sufficient cash flow this year to reduce debt while funding our strategic objectives."
Other first-quarter 2004 details from continuing operations:
For the quarter, operating cash flow excluding acquisitions was a negative $140 million, a decrease of $117 million from the first quarter of 2003. The decline in cash flow reflects a smaller decrease in receivables in the first quarter of 2004 relative to the decrease in the same period a year ago, driven by stronger sales late in the first quarter of 2004. (Kodak defines operating cash flow excluding acquisitions as net cash provided by continuing operations, as determined under Generally Accepted Accounting Principles in the U.S. (U.S. GAAP), plus proceeds from the sale of assets minus capital expenditures, investments in unconsolidated affiliates and dividends.)
Debt decreased $282 million from the year-end level to $2.966 billion, consistent with the company's goal of reducing debt, and the debt-to-capital ratio decreased to 48.0% from 49.9% at the end of 2003. The company held $510 million in cash on its balance sheet at the end of the quarter, down from $1.25 billion at the end of 2003, primarily reflecting completed acquisitions and debt reduction.
Gross Profit on an operational basis declined to 28.6%, down from the year-ago level of 30.9%, in line with the company's expectations.
Selling, General and Administrative expenses on an operational basis were 18.9% of sales, down from 20.7% in the year-ago quarter.
"Based on expectations for the balance of the year, we have raised by $100 million this year's target for operating cash flow excluding acquisitions," said Robert Brust, Kodak's Chief Financial Officer. "Excluding the impact of the sale of the Remote Sensing Systems business, we now expect operating cash flow excluding acquisitions in 2004 to range from $585 million to $715 million, compared with the earlier forecast of $485 million to $615 million. We also have increased our debt-reduction estimate for this year. We now expect to pay down debt by as much as $800 million, compared with the previous estimate of $600 million."
Separately, to better align the dividend declaration date with the payment date in July, the board of directors this year and henceforth will address the declaration of the July dividend at its May meeting.
The segment results from continuing operations for the first quarter of 2004 are as follows:
Digital & Film Imaging segment sales totaled $1.931 billion, up 7%. Earnings from operations for the segment were $16 million on a GAAP and an operational basis, compared with a loss on an operational basis of $25 million a year ago. On a GAAP basis, the loss in the year-ago period was $46 million. Highlights for the quarter included a 98% increase in consumer digital capture sales, which includes the KODAK EASYSHARE cameras, and a 55% increase in the sales of KODAK Picture Maker kiosks and related media. During the quarter, sales of EASYSHARE Printer Docks and related media on a full-year basis exceeded $100 million, consistent with the company's forecast. For the quarter, the company estimates that U.S. consumer film industry volume declined about 15% compared with the first quarter of 2003.
Health Imaging sales were $631 million, up 15%. Earnings from operations for the segment were $93 million on a GAAP and operational basis, compared with $109 million a year ago. Highlights included a 24% increase in sales of digital products and services.
Commercial Imaging sales were $196 million, up 5%. Earnings from operations were $31 million on a GAAP and operational basis, compared with $20 million a year ago. The segment's results reflect in part strong sales of aerial films as well as imaging services.
Commercial Printing sales were $133 million, up 51%. The loss from operations was $16 million on an operational basis, compared with earnings from operations of $9 million a year ago. On a GAAP basis, the loss from operations was $25 million in the first quarter of 2004. The revenue increase largely reflects sales by Kodak Versamark, and the profit swing reflects lower earnings from graphics materials and the inventory adjustment related to the Scitex acquisition.
All Other sales were $28 million, up 47% from the year-ago quarter. Losses from operations totaled $28 million on a GAAP and an operational basis, compared with losses of $16 million a year ago. The All Other category includes the Display & Components operation and other miscellaneous businesses.
Kodak expects second-quarter operational earnings to be in the range 55 cents to 65 cents per share. For the full year, the company is raising its guidance for operational earnings to a range of $2.15 to $2.45 per share, compared with the previous guidance of $2.05 to $2.35 per share, primarily reflecting the tax benefits recorded in the first quarter.
"The results of the first quarter reinforce our confidence that we will demonstrate continued earnings and revenue growth in the quarters ahead, consistent with our strategy," Carp said. "We will build on our momentum in the marketplace by introducing exciting new products in the weeks ahead, supported by a cost structure that will allow us to become even more competitive in all the markets we serve."
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