Kodak says it is making “steady progress” towards profitability, despite a third-quarter loss which blew out to US$222 million.
The loss is attributed to the absence of sizable patent licensing revenue and “continued secular decline of traditional products”.
In a statement yesterday, the company says digital earnings improved, excluding non-recurring patent licensing revenue in the prior-year period, and sales increased in its core digital growth businesses.
But total company revenue declined largely because of lower sales of traditional products, a planned reduction in digital camera sales, and the absence, compared to the year-ago period, of significant non-recurring patent licensing revenue.
Third-quarter sales were US$1.462 billion, a 17 per cent decrease from the year-ago quarter or five per cent when excluding the benefit of a $210 million non-recurring patent licensing transaction in the year-ago period.
Third-quarter digital revenue grew three per cent excluding that year-ago intellectual property revenue and a 25 per cent decline in the company's Digital Cameras & Devices business, which reflects the strategic decision this year to trade revenue for improved earnings.
Revenue from the core digital growth businesses - Consumer and Commercial Inkjet, Workflow Software & Services, and Packaging Solutions - increased 13 per cent, fuelled by 44 per cent revenue growth in Consumer Inkjet printers and ink, and 89 per cent revenue growth in Packaging Solutions. The revenue decline rate for the company's Film, Photofinishing and Entertainment Group slowed to ten per cent in the third quarter.
On the basis of US generally accepted accounting principles (GAAP), the company reported a third-quarter loss from continuing operations of $222 million, or $0.83 per share, compared with a loss from continuing operations on the same basis of $43 million, or $0.16 per share, in the year-ago period. The results largely reflect the absence of sizable patent licensing revenue in this year's third quarter versus the year-ago period and the continued secular decline of traditional products partially offset by better operating performance, excluding non-recurring intellectual property revenue, in the company's digital businesses.
Non-operational items of net benefit in the third quarter of 2011 totaled $2 million after tax, or $0.00 per share, primarily due to tax-related items, substantially offset by restructuring charges, impairments, and corporate components of pension and other post-employment benefit costs. Non-operational items of net expense in the third quarter of 2010 totalled $13 million after tax, or $0.05 per share, primarily due to restructuring charges and tax-related items, partially offset by corporate components of pension and other post-employment benefit costs.
"More than anything, the results of this quarter reflect our continued progress toward establishing digital growth businesses that will form the nucleus of a new Kodak," said Antonio M. Perez, Chairman and Chief Executive Officer.
"In Consumer Inkjet, ink gross profit dollars doubled in the third quarter and year-to-date. Our installed base of printers is now sufficiently large that we expect to meet a key milestone in the fourth quarter - achieving positive gross profit for this business as a whole, driven by ink gross profit. Packaging Solutions sales increased 89 per cent in the quarter and more than 130 per cent year-to-date.
“In Commercial Inkjet, revenue for the entire Prosper product line rose 40 per cent in the third quarter, and we anticipate that revenue recognition for Prosper presses will accelerate in the fourth quarter, based on installations already in the field and continued success in the marketplace.
“That said, we continued to incur higher-than-planned start-up costs for Prosper systems in the third quarter and associated delays in revenue recognition, while demand declined for legacy Versamark inkjet presses. Of particular note is that customers of the Prosper press are beginning to place additional orders as they experience the revolutionary value proposition of offset-class quality and productivity combined with the flexibility and speed of digital.”
Perez says the eventual sale of its digital patent portfolios will materially increase its cash balance and help to accelerate efforts to complete the transformation. “What's more, 2011 represents the peak year for cash usage by our business units during this transformation,” he says. “In 2012, we expect cash usage attributed to the operating businesses to decline notably, stemming from significant profitability improvements in consumer and commercial inkjet as well as digital cameras.”