Eastman Kodak Company reported a net loss of $36 million for the first quarter of 2014. On a comparable basis, the net loss in 2013 would have been $85 million, or $54 million greater than the comparable net loss in 2014 of $31 million. On a GAAP basis, the net earnings in 2013 were $283 million, which included Other Operating Income, net of $494 million, primarily from a gain of $535 million from the sale of the digital imaging patent portfolio.
Sales for the first quarter of 2014 were $482 million, compared to $594 million in the prior-year quarter, a decline of 19%, more than half attributable to continuing declines in the film and consumer inkjet products. In addition, non-recurring licensing revenue was $24 million lower than in the first quarter of 2013.
“Kodak’s transformation continues. The path to sustainable growth and profitability is not a straight line, but we continue to progress, especially in the strategic technology businesses1 which will constitute the new Kodak,” said Jeff Clarke, CEO. “Our results, while within expectations, reflect the steep declines in our mature businesses, which are currently offsetting the increasing momentum we are seeing in our strategic technology businesses.
“We saw significant increases in sales for our key new products in packaging, digital printing and digital plates, as increasing numbers of customers embraced our solutions,” Clarke added.
Clarke noted the company’s strong liquidity, with cash of $809 million exceeding debt of $677 million, or by more than $130 million, provides flexibility to continue investing in the business to support future growth.
“In 2014, we will invest about $100 million in R&D and about $40 million in capital improvements to continue bringing innovative solutions to market for our customers, and improving the efficiency of our operations,” Clarke said. “I’m pleased with our first-quarter reduction in SG&A. This improvement in Kodak’s cost structure will provide operating leverage to projected growth in our strategic technology businesses in the second half of the year.”
“As we’ve seen in the past, sales in several of our businesses are weighted toward later quarters,” Becky Roof, CFO, added. “We fully expect to see such a pattern again this year, driving revenue and profitability growth.”
Kodak operates under two business segments: Graphics, Entertainment & Commercial Films (GECF) and Digital Printing & Enterprise (DP&E).
The GECF segment consists of the Graphics and Entertainment & Commercial Films groups, as well as Kodak’s intellectual property and brand licensing activities. The GECF segment had sales of $316 million in the first quarter of 2014, a decline of 18% from the $386 million of the prior-year quarter. Most of this decline was due to the reduction in motion picture film and one-time licensing revenue.
Although the Graphics business had a 4% decline in revenue, the Workflow Solutions business grew by 8%, while the decline in the digital plates business narrowed significantly. Recent sales momentum in the digital plates business provides confidence in expectations for continuing improvement in performance in that business through 2014.
DP&E Segment consists of four product/service groups, Digital Printing, Packaging and Functional Printing, Enterprise Services & Solutions, and Consumer Inkjet Systems. DP&E had sales of $166 million in the first quarter of 2014, a decline of 16% from the $197 million of the prior-year quarter. Nearly two-thirds of the decline was related to lower sales in the Consumer Inkjet business.
The decline in gross profit percent for DP&E was primarily due to consumer inkjet ink sales constituting a lower percentage of the segment’s gross profit dollars, and higher manufacturing costs due primarily to the application of fresh start accounting.