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Kodak Quarterly Report: Reduced Loss Increases Company’s Optimism

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May 4, 2006 – Kodak announced its first-quarter earnings this morning, with a net loss of $298 million mainly from restructuring costs. These numbers don’t reflect the health of their EasyShare digital camera sales though; those led the company’s profits with a 29 percent increase in sales. This is good news for Kodak, who is restructuring to accommodate the digital industry.

Between the gains from digital cameras and the losses of restructuring, Kodak came out with $1.077 billion of cash and $2.889 billion in sales at the end of the quarter. Revenue increased by 2 percent during the first quarter when sales jumped in March; this is compared with the same period last year. This performance "increases our confidence for a solid full-year performance," said Antonio Perez, Kodak’s Chairman and CEO, in today’s press release.

"Our first quarter results continue to show the expected strong seasonality of our business," he said. "Our results are essentially on plan, with some units ahead and some behind. We expect to achieve our 2006 performance targets in the areas of digital earnings growth, digital revenue growth, and cash generation."

The company reported that its digital earnings are in the red by $37 million, but that it is a significant improvement upon last year’s $51 million shortfall. Perez doesn’t expect the deficit to last much longer. "We now expect to achieve profitability in our entire digital portfolio during the third quarter, a full quarter sooner than last year," he said. Perez expects this profitability to pay off in large sums and company pride.

"The success of our digital products in the marketplace is more evidence of Kodak’s digital prowess," he said. The company is shifting its management and business structure; these changes are "aimed at improving its ability to compete in digital markets," stated the release. The changes, to be made by July 1, include assigning certain factories to very specific functions so they can be held more accountable for inventory and manufacturing.

"Kodak is now a digital company, and these actions are required to support our digital business model," Perez said. "These are all important steps toward completing the creation of the new Kodak. These planned actions are part of our broader digital transformation and will help us to better manage our digital and traditional businesses, achieve our digital business model, and reduce administrative costs company-wide for sustained success."

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Kodak, which just celebrated the fifth anniversary of its EasyShare system debut, saw promising sales in the Consumer Digital Imaging Group and its healthcare sector. As expected, its film business continues to wane in the "digital transformation." The film department’s earnings were $29 million in the first quarter, compared with $71 million at the same time last year. Kodak predicts its digital earnings to blossom and bring in $350-450 million this year, with digital revenue growth to hover around 16-22 percent.

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