Kodak Reports 17 Percent Decrease in Revenues

Other third-quarter 2011 details:

Excluding the prior-year non-recurring patent licensing revenue and certain higher raw material costs, Gross Profit improved 3 percentage points. On a GAAP basis, Gross Profit was 14% of sales, as compared to 27% of sales in the year-ago period. This decrease in margin was primarily driven by the timing of the patent licensing revenue, increased raw material costs, partially offset by improvement in the gross margins of the company's strategic growth businesses as a group.

Operating expenses, on a GAAP basis, continue to decline as a result of company-wide cost reductions:

Selling, General and Administrative (SG&A) expenses were $284 million, a $29 million decline from the prior-year quarter.

Research and Development (R&D) expenses were $68 million, a $14 million decline from the prior-year quarter.

Primarily reflecting the timing of patent licensing revenue, third-quarter 2011 cash usage, before restructuring payments, was $189 million, compared with the cash generation of $123 million in the year-ago quarter. This corresponds to net cash used in continuing operations from operating activities on a GAAP basis of $191 million in the third quarter, compared with net cash generated in continuing operations from operating activities on a GAAP basis of $140 million in the third quarter of 2010, which included $269 million from non-recurring intellectual property licensing receipts.

Kodak held $862 million in cash and cash equivalents as of September 30, 2011.

Segment sales and earnings from continuing operations before interest, taxes, and other income and charges (segment earnings from operations), are as follows:

Reflecting the strategic decision this year to focus on earnings in the digital camera market and to accept lower camera revenue, Consumer Digital Imaging Group third-quarter sales were $408 million, compared with $664 million in the prior-year quarter. This decline also reflects the timing of patent licensing revenue, which was partly offset by growth in the Consumer Inkjet business. Excluding the year-ago patent licensing revenue, the segment's results improved by $53 million, reflecting the continued growth of ink gross profit within Consumer Inkjet, reduced operating costs stemming from the participation choices in Digital Cameras & Devices, as well as improved operational performance across the entire group. The segment's third-quarter loss from operations was $90 million, compared with earnings of $67 million in the prior-year quarter, which included the benefit of the non-recurring patent licensing revenue.