Kodak Posts Loss, Misses Estimates
Eastman Kodak Co., rushing to fortify its digital businesses as film-based photography wanes, swung to a loss and missed Wall Street forecasts by a wide margin largely because its makeover proved costlier than expected in the first quarter.
Its shares tumbled 9.4% on Friday as a major credit watchdog cut its rating on Kodak’s swollen debt to junk status.
The world’s biggest film manufacturer recorded a loss of $142 million, or 50 cents a share, in the first quarter. That contrasted with a profit of $21 million, or 7 cents, a year earlier.
Excluding a one-time charge of 53 cents related to cost reductions, Kodak posted a profit of 3 cents. Analysts surveyed by Thomson Financial had forecast earnings of 33 cents a share.
Sales fell 3% to $2.83 billion. Analysts had expected revenue to be flat.
“This quarter wasn’t what we wanted,” Kodak Chief Executive Daniel Carp told analysts. “But we know what we have to do. [There’s] a lot of moving parts in this company but a world-class team to manage them and that’s why we’re going to deliver the year we said we’d deliver.”
Standard & Poor’s lowered Kodak’s debt rating from BBB- to BB+, which will make it more difficult for the company to borrow money because some big investors are prohibited from investing in speculative-grade bonds.
In January, Kodak wrapped up a nearly $3-billion shopping spree to expand its reach as a digital heavyweight in photography, medical imaging and commercial printing. It had debts of $2.4 billion at the end of March.
“We kind of anticipated” the downgrade, said Robert Brust, Kodak’s chief financial officer, adding that “the S&P; action is not going to cause us a problem with funding” a $980-million buyout of Canada’s Creo Inc., the world’s biggest maker of printer software.
Kodak shares fell $2.85 to $27.55 on the New York Stock Exchange.
With the era of soaring sales and fat profits from silver-halide film now departed, Kodak expects digital technology this year to be its biggest source of revenue for the first time. Despite the weak quarter, the company reiterated its full-year forecast of $2.60 to $2.90 a share in operating profit. Analysts had been forecasting 2005 earnings of $2.61 a share in 2005.
Kodak plans to eliminate 12,000 to 15,000 jobs by 2007, leaving a work force of about 50,000. It has axed more than 11,000 employees already, including 1,650 this year.
