Kodak’s Quarterly Report Highlights Progress in Business Transformation

ROCHESTER, NY—Nov. 03, 2011—Eastman Kodak reported steady progress toward becoming a profitable and sustainable digital company as third-quarter digital earnings improved, excluding non-recurring patent licensing revenue in the prior-year period, and sales increased in its core digital growth businesses. Total company revenue declined largely because of lower sales of traditional products, a planned reduction in digital camera sales, and the absence—compared to the year-ago period—of significant non-recurring patent licensing revenue.

Third-quarter sales were $1.462 billion, a 17 percent decrease from the year-ago quarter or only 5 percent when excluding the benefit of a $210 million non-recurring patent licensing transaction in the year-ago period. Third-quarter digital revenue grew 3 percent, excluding that year-ago intellectual property revenue and a 25 percent decline in the company’s Digital Cameras & Devices business, which reflects the strategic decision this year to trade revenue for improved earnings.

Revenue from the core digital businesses—Consumer and Commercial Inkjet, Workflow Software & Services, and Packaging Solutions—increased 13 percent, fueled by 44 percent revenue growth in Consumer Inkjet printers and ink, and 89 percent revenue growth in Packaging Solutions. The revenue decline rate for the company’s Film, Photofinishing and Entertainment Group slowed to 10 percent in the third quarter.

On the basis of U.S. generally accepted accounting principles (GAAP), the company reported a third-quarter loss from continuing operations of $222 million, compared with a loss from continuing operations on the same basis of $43 million in the year-ago period. The results largely reflect the absence of sizable patent licensing revenue in this year’s third quarter versus the year-ago period and the continued secular decline of traditional products¸ partially offset by better operating performance, excluding non-recurring intellectual property revenue, in the company’s digital businesses.

“More than anything, the results of this quarter reflect our continued progress toward establishing digital growth businesses that will form the nucleus of a new Kodak,” said Antonio M. Perez, chairman and CEO, Eastman Kodak. “In Consumer Inkjet, ink gross profit dollars doubled in the third quarter and year-to-date. Our installed base of printers is now sufficiently large that we expect to meet a key milestone in the fourth quarter—achieving positive gross profit for this business as a whole, driven by ink gross profit. Packaging Solutions sales increased 89 percent in the quarter and more than 130 percent year-to-date. In Commercial Inkjet, revenue for the entire PROSPER product line rose 40 percent in the third quarter, and we anticipate that revenue recognition for PROSPER presses will accelerate in the fourth quarter, based on installations already in the field and continued success in the marketplace.

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