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Kodak today issued its Q2 2003 earnings statement, in that the company states that overall sales declined by 6% and that earnings were down to $112 million in Q2 2003 compared to $284 million in Q2 2002. Sales for Q2 2003 totalled $3.3 billion, virtually unchanged compared to the same quarter last year. "Kodak expects to reduce employment by a range of 4,500 to 6,000, beginning later this year." This on top of the 7,000 jobs lost last year. Chairman and CEO Daniel A. Carp said "We are evolving from a historical film company into one that is aggressively pursuing the vast potential of digital imaging across all of our operations. We are extending the Kodak brand into the digital age so that we become known as the world's leading imaging company, building on our proud heritage as the world's leading picture company"
EPS from Continuing Operations, Excluding Charges and Other Items, Total 60 Cents
ROCHESTER, N.Y., July 23 -- Eastman Kodak Company today said that second-quarter net income, in accordance with Generally Accepted Accounting Principles (GAAP) in the U.S., totaled 39 cents per share and that sales were unchanged compared with the year-ago period.
Excluding the impact of previously announced focused cost reductions and other non-operational items, earnings from continuing operations were 60 cents per share, higher than the forecast of 25 cents to 35 cents per share that the company issued on June 18. Relative to the June 18 forecast, the actual results primarily reflect a more favorable sales mix of health imaging and traditional consumer products and services. Better-than-expected performance from joint ventures and a lower-than-expected tax rate also contributed to the difference between actual and forecasted results.
For the second quarter of 2003:
"We are pleased to report quarterly earnings that are stronger than we had previously expected," said Kodak Chairman and Chief Executive Officer Daniel A. Carp. "Most of our businesses continue to perform well in a difficult economic environment. We are encouraged by the market's acceptance of the innovative products and services Kodak is creating from our latest computed radiography systems and Vision2 motion-picture film, to the newest EasyShare consumer digital cameras and the well-received EasyShare Printer Dock."
"Our traditional consumer film and processing operations continue to face challenges associated with the increasing popularity of digital photography as well as persistent economic weakness, continuing price pressure and an associated decline in travel and tourism," Carp said. "Consumer adoption of digital photography is growing at a more rapid pace than a year ago, and this is trimming demand for consumer film. At the same time, we are seeing evidence that more consumers want to print their digital photos at retail and at home. This trend presents a huge opportunity for Kodak to generate profitable sales of our market-leading Picture Maker kiosks and inkjet paper, which will help offset declining sales from traditional film.
"Given these developments, we remain cautious about a material upturn in the traditional consumer products and services for the balance of 2003," Carp said. "In this environment, we remain committed to reducing costs aggressively, strengthening our balance sheet and bringing to market more innovative products for the benefit of our customers."
Other second-quarter 2003 details from continuing operations:
The segment results from continuing operations for the second quarter of 2003 are as follows:
"As the results today indicate, our employees are succeeding in a marketplace where change is constant and rapid," Carp said. "For example, we expect that sales of our Digital & Applied Imaging products and services which include inkjet paper, the Ofoto online photo service and EasyShare cameras and docks will top more than $1 billion this year. Our Health Imaging segment continues to post strong results as digital products and services account for an increasing share of its sales."
"The performance of these businesses point to a fundamental shift at Kodak," Carp said. "We are evolving from a historical film company into one that is aggressively pursuing the vast potential of digital imaging across all of our operations. We are extending the Kodak brand into the digital age so that we become known as the world's leading imaging company, building on our proud heritage as the world's leading picture company. And during this evolution, we will create new products and services with different business models but with a potential for growth that is far beyond that of our more mature operations.
"We will do this in markets that are global and intensely competitive," Carp said. "They reward companies that increase productivity, reduce costs and move fast to take advantage of marketplace opportunities. Additionally, our historical consumer business is getting smaller, so it is vital that the cost structure of this business reflects that reality. We will continue to shape our company so that we remain competitive for a future in a digital world."
Consistent with this business reality, Kodak plans to reduce its cost structure. The reductions will occur primarily in corporate administrative departments, manufacturing, and research and development. In addition, reductions will occur in the infrastructure and administration supporting the Consumer Imaging and Kodak Professional operations.
Based on preliminary plans, Kodak expects to reduce employment by a range of 4,500 to 6,000, beginning later this year. This estimated reduction represents about 6% to 9% of the company's worldwide employment base of about 70,000 at the end of 2002. In keeping with past practice and consistent with requirements in various countries, the company will offer severance packages and outplacement services to those affected.
The company will take charges during the next twelve months in the range of $350 million to $450 million to cover the costs associated with the new reductions. The company expects to generate annual savings of $300 million to $400 million from the new reductions, with $275 million to $325 million expected to be realized in 2004.
"Being a global company means taking actions that maintain and extend our competitive position," Carp said. "While we can't know for certain when the economy will rebound, we do know that the market forces demanding lower costs, flexible manufacturing strategies and speed to market will not abate. We also are looking at a wide range of alternative cost reduction efforts, including health care, travel and general budget reductions. The combination of these actions will help Kodak become more profitable and more agile as we compete for a larger slice of the $385 billion infoimaging market that we serve."
Operational items are non-GAAP financial measures as defined by the Securities and Exchange Commission's final rules under "Conditions for Use of Non-GAAP Financial Measures." Reconciliations of operational items included in this press release to the most directly comparable GAAP financial measures can be found in the Financial Discussion Document attached to this press release.
Certain statements in this press release may be forward looking in nature, or "forward-looking statements" as defined in the United States Private Securities Litigation Reform Act of 1995. For example, references to the Company's second half 2003 revenue, earnings, cash flow expectations and future focused cost reductions are forward-looking statements.
Actual results may differ from those expressed or implied in forward-looking statements. In addition, any forward-looking statements represent our estimates only as of July 23, 2003, and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. The forward-looking statements contained in this press release are subject to a number of risk factors, including the successful:
Implementation of product strategies (including category expansion, digitization, OLED, and digital products);
The forward-looking statements contained in this press release are subject to the following additional risk factors:
Any forward-looking statements in this press release should be evaluated in light of these important risk factors.