On April 28, Eastman Kodak Company (EK) reported its financial results for the first quarter of 2011. The company reported adjusted earnings per share loss from continuing operations of $1.13 compared with earnings per share of 74 cents in the year-ago comparable quarter. The quarter’s results also surpassed the Zacks Consensus Estimate of a loss of 61 cents per share.
Revenue
Kodak reported sales of $1,322 million, down 30.9% year over year and 31.4% sequentially. The year-over-year decline can be attributed to a 32.2% negative price/mix impact, which was partially offset by a 0.4% volume growth and 0.9% positive foreign currency impact. Reported sales also missed the Zacks Consensus Estimate of $1,375 million.
Revenue from Consumer Digital Imagine Group businesses totaled $330 million, down from $884 million in the first quarter of 2010. The year-ago quarter’s results included a $550 million revenue contribution from a non-recurring intellectual property licensing agreement. Excluding this impact, digital revenue increased by 2% year over year whiel total revenue declined only 3%.
Revenue from the Graphic Communication Group improved to $625 million from $601 million in the first quarter of fiscal 2010. Film, Photofinishing and Entertainment Group’s revenue dropped 14.5% year over year to $367 million.
Margins
Gross margin decreased to 9.5% from 41.4% in the year-ago quarter based on lower Consumer Digital Imagine Group revenue, higher silver and aluminum commodity costs, and increased pension expenses.
SG&A expenses as a percentage of revenue grew 800 basis points to 24%. R&D expense, as a percentage of revenue, expanded 200 basis points to 6%.
Balance Sheet
Exiting the first quarter, Kodak’s cash and cash equivalents decreased to $1,300 million from $1,624 million in the previous quarter. Long-term debt, net of current portion rose by 16.8% sequentially to $1,396 million compared with $1,195 million in the previous quarter due primarily to issuance of $250 million of senior secured notes. During the quarter, the company also repurchased $50 million of senior notes due 2013.
Cash Flow
Net cash used in continuing operating in the quarter were $515 million versus $471 million used in the previous quarter. Addition to properties amounted to $23 million versus $25 million in the year-ago comparable quarter.
In March 2011, the company completed acquiring all the assets of the relief plates business of Tokyo Ohka Kogyo Co., Ltd. The transactional value was $27 million, net of cash acquired.
Eastman Kodak provides imaging technology products and services to the photographic and graphic communications markets across the globe. The company faces stiff competition from its peers like Canon Inc. (CAJ) and Sony Corporation (SNE).
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