Kodak’s Quarterly Report Highlights Progress in Business Transformation

“That said, we continued to incur higher-than-planned start-up costs for PROSPER systems in the third quarter and associated delays in revenue recognition, while demand declined for legacy VERSAMARK inkjet presses. Of particular note is that customers of the PROSPER press are beginning to place additional orders as they experience the revolutionary value proposition of offset-class quality and productivity combined with the flexibility and speed of digital,” Perez continued.

“As for our cash-generating businesses, the digital product lines, led by Digital Cameras & Devices, significantly improved their cash and earnings performance in the quarter on an operational basis, and we expect the improved performance to continue in the fourth quarter and through 2012,” he aded. “Our traditional business also generated a profit despite significant headwinds from high raw material costs, especially silver.

“We now expect to end the year with as much as $1.4 billion in cash, before any proceeds from the sale of our digital imaging patent portfolios, reflecting the company’s seasonal generation of cash in the fourth quarter,” Perez noted. “Remember as well that the eventual sale of our digital patent portfolios will materially increase our cash balance and help to accelerate our efforts to complete the transformation.

“What’s more, 2011 represents the peak year for cash usage by our business units during this transformation. In 2012, we expect cash usage attributed to the operating businesses to decline notably, stemming from significant profitability improvements in consumer and commercial inkjet as well as digital cameras. We remain confident that we are creating a digital Kodak that will help our customers grow their business through high-quality and innovative products and services. We continue to make progress against that goal, and we look forward to reporting additional progress in the months ahead.”

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 percent of sales, as compared to 27 percent 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.

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