The Wall Street Journal-20080131-Kodak-s Fourth-Quarter Profit Soared

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Kodak's Fourth-Quarter Profit Soared

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Eastman Kodak Co.'s net income soared in the fourth quarter as the imaging company wound up a painful $3.4 billion four-year restructuring program that it said "positions us well for strong performance in 2008."

Sales rose 3.7 % in the latest period to $3.22 billion, aided by foreign-currency translation that added five percentage points to revenue.

But Kodak stock declined on concerns about the continued steep decline in film revenue and profits, and earnings from continuing operations that trailed analysts' forecasts. Kodak stock was down 3.4%, or 70 cents, to $19.75 in New York Stock Exchange 4 p.m. composite trading.

Antonio Perez, Kodak's chairman and chief executive, said in a conference call with analysts that "the large, expensive and difficult corporate restructuring is over." He said he is confident that Kodak can "sustain profitable growth," this year and beyond, although he didn't make specific forecasts. He said the Rochester, N.Y., company hasn't seen any signs of economic slowdown.

Earnings from Kodak's continuing operations were $92 million, or 13 cents a share. In the year-earlier period, Kodak had a loss from continuing operations of $15 million, or five cents a share. The latest quarter's results were aided by a much lower provision for taxes.

Ulysses Yannas, a broker with Buckman, Buckman & Reid, said that the results show Kodak's potential to generate higher earnings as key digital products -- such as a consumer inkjet printer and a commercial inkjet press that will be introduced this year -- boost sales. But he said he was surprised by the steep 29% drop in sales of consumer film and disposable cameras.

The film-product group's revenue fell 17% to $463 million and movie- industry sales slid 7%, reflecting fewer blockbuster movies and the beginning of the writers' strike. Increased silver costs also contributed to slashing the profitability of the business.

Revenue in Kodak's consumer digital imaging group rose 17% to $1.37 billion, led by digital cameras and new categories like digital picture frames and inkjet printers.

Kodak said it sold 520,000 of its new inkjet printers last year, which Mr. Perez said topped its goal of 500,000 units. He said Kodak needs to boost manufacturing capacity to keep the printers on retailers' shelves. Inkjet sales are important because most of the profit comes on future sales of inkjet cartridges.

Sales at Kodak's other major business, making presses and supplies for the commercial-printing industry, rose 7% to $998 million, but pretax earnings in this segment fell due to rising costs of aluminum and silver.

Kodak strengthened its balance sheet during the year with cash and equivalents nearly doubling to $2.95 billion at year end while long- term debt fell to $1.29 billion from $2.71 billion.