Kodak Announces 4Q Results
January 30, 2006
Eastman Kodak Company reported that revenue rose 12% in the fourth quarter, led
by a 45% increase in the sale of digital products and services. The performance
includes strong demand for the market-leading offerings from the company’s
consumer digital portfolio and the successful completion of the company’s
acquisition program to support its Graphic Communications business. For all of
2005, digital sales represented 54% of total revenue, marking the first time in
the company’s history that digital revenue exceeded traditional.
On the basis of generally accepted accounting principles in the U.S. (GAAP),
the company reported a fourth-quarter loss of $52 million, or $0.18 per share.
This largely stems from $283 million in after-tax restructuring charges, partially
offset by the previously announced tax audit settlement between the company
and the Internal Revenue Service that resulted in the reversal of certain tax
accruals totaling $243 million.
For the fourth quarter of 2005:
- Sales totaled $4.197 billion, an increase of 12% from $3.759 billion in
the fourth quarter of 2004. Digital revenue totaled $2.674 billion, a 45%
increase from $1.850 billion. Traditional revenue totaled $1.514 billion,
a 21% decline from $1.905 billion.
- The GAAP net loss was $52 million, or $0.18 per share, compared with a GAAP
loss of $59 million, or $0.20 per share, in the year-ago period.
- The company’s fourth-quarter loss from continuing operations, before
interest, other income, net, and income taxes was $162 million, compared with
a loss of $236 million in the year-ago quarter.
- Digital earnings were $161 million, and were favorably impacted by a number
of items, including a year-over-year increase in royalty income, which reflects
the company’s continuing progress in the monetization of its intellectual
property, as well as the favorable impact resulting from the company’s
Graphic Communications Group acquisition program.
“Kodak is now a thriving digital company,” said Antonio M. Perez,
Chairman and Chief Executive Officer, Eastman Kodak Company. “The fourth
quarter marked the first time that we managed the company as it will be run
in 2006, and the digital earnings performance was exceptional. And for all of
2005, we made tremendous progress on our digital transformation. We completed
an aggressive acquisition program that established Kodak as a powerhouse in
the graphic communications market, we strengthened our market position in consumer
digital with several innovative new product introductions, and we made substantial
progress on our goal of reducing our traditional manufacturing footprint, while
benefiting from the strong cash flows available from that business. We enjoy
a solid cash position, and we are determined to expand profit margins in the
sizable digital businesses that we have assembled.”
Other fourth-quarter 2005 details:
- Net cash provided by operating activities from continuing operations totaled
$1.240 billion in the fourth quarter, compared with $702 million in the year-ago
quarter.
- Gross Profit was 22.8%, down from 25.9%, primarily due to increased restructuring
and the cost of accelerated depreciation and asset useful life changes.
- Selling, General and Administrative expenses were $748 million, up from
$710 million, reflecting costs related to acquisitions, partially offset by
cost reduction activities.
- Debt decreased $35 million from the third-quarter level, to $3.528 billion
as of Dec. 31. In 2005, debt increased $1.207 billion, reflecting more than
$1.5 billion relating to acquisitions, partially offset by $300 million in
scheduled debt repayments.
- Kodak held $1.665 billion in cash as of Dec. 31, up from $610 million on
Sept. 30, and up from $1.255 billion at the end of 2004.
Segment sales and results from continuing operations, before interest, other
income, net, and income taxes (earnings from operations) for the fourth quarter
of 2005, are as follows:
- Digital & Film Imaging System sales totaled $2.513 billion, down 3%.
Earnings from operations for the segment were $76 million, compared with $135
million a year ago. Highlights for the quarter included a 65% increase in
sales of home printing products and inkjet media, including a 95% increase
in the sales of KODAK EASYSHARE Printer Docks; a 41% increase in consumer
digital capture sales, which includes KODAK EASYSHARE digital cameras; and
a 23% increase in the sales of KODAK PICTURE MAKER kiosks and related media.
- Graphic Communications Group sales were $942 million, up 141% largely reflecting
the acquisition of KPG and Creo, as well as a 38% increase in Kodak Versamark
sales. Earnings from operations in the fourth quarter were $40 million, compared
with a loss of $15 million in the year-ago quarter.
- Health Group sales were $700 million, down 6%. Earnings from operations
for the segment were $83 million, compared with $113 million a year ago. Highlights
for the quarter included a 45% increase in Healthcare Information System sales.
- All Other sales were $42 million, up 17% from the year-ago quarter. The
loss from operations totaled $43 million, compared with a loss of $72 million
a year ago. The All Other category includes the Display & Components operation
as well as investments in new technologies.
2005 full-year results:
- For the year, sales were $14.268 billion, up 6% from $13.517 billion in
2004.
- Reported net loss for the year totaled $1.371 billion, or $4.76 per share,
compared with net earnings of $556 million, or $1.94 per share, in 2004, largely
stemming from a $1.1 billion non-cash charge in 2005 to record a valuation
allowance against the net deferred tax assets in the U.S. The establishment
of the valuation allowance was required due to the company’s continuing
losses in the U.S. resulting from the accelerated and extensive restructuring
activity required by the decline in the traditional businesses. Also contributing
to the decrease in earnings relative to 2004 is the year-over-year increase
in restructuring charges of $245 million, a year-over-year decrease in earnings
from discontinued operations of $325 million, due primarily to the gain in
2004 from the sale of the company’s Remote Sensing Systems unit, and
a charge for a cumulative effect of an accounting change of $57 million in
2005.
- Net cash provided by operating activities from continuing operations totaled
$1.180 billion for the year, compared with $1.146 billion in 2004.
