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ROCHESTER — Eastman Kodak Co. said Thursday it lost $189 million in the second quarter, its third consecutive quarterly deficit, as the global economic downturn hurt sales of digital cameras, film and other photography products.
The results missed Wall Street expectations, and its stock slumped more than 10 percent.
The photography pioneer lost the equivalent of 70 cents a share in the April-June period, compared with profit of $495 million, or $1.62 a share, in the same quarter a year earlier. But it expects a batch of new electronics products will lift its performance in the second half of the year.
The latest quarter included one-time charges of $75 million, or 28 cents per share, mainly related to restructuring and taxes. Excluding one-time items, Kodak lost $116 million, or 42 cents per share, in the latest period.
Sales plunged 29 percent to $1.77 billion.
Analysts polled by Thomson Reuters expected Kodak to post a loss of 37 cents per share on sales of $1.83 billion.
"They definitely need the economy to improve and they need to very carefully manage the assets they have left," said analyst Shannon Cross of Cross Research in Livingston, N.J. "This quarter was OK, factoring all that in."
Kodak finished the quarter with $1.1 billion in cash reserves versus $1.3 billion in debt.
"This is a company that's continuing to undergo dramatic transformation," Shannon said. "The challenge is going to be can they generate enough cash to get them through both the economic turmoil we're undergoing as well as all the challenges ... as they move to more of a digital business plan?"
Revenue from digital businesses dropped 28 percent to $1.17 billion and traditional film-based revenue fell 30 percent to $593 million.
The latest results reflected investments in new higher-margin digital cameras, video cameras and other consumer products — moves that will help lead to improved cash and earnings in the second half, Kodak said.
"Our strategy remains on track," Chief Executive Antonio Perez said in a conference call with analysts. "We are sustaining our leading market-share position in our key products" — notably digital cameras, retailer kiosks and commercial digital printing — "and continue to improve our cost structure."
Kodak should end the year with a cash balance of at least $1.8 billion, Chief Financial Officer Frank Sklarsky said. "It is predicated upon having a modest improvement in the economic environment" during the end-of-year holiday season, Kodak's seasonal peak.
Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York, said Kodak is cutting costs "in a great big hurry. As sales start improving, margins will start expanding. It will become evidence in the third quarter and very evident in the fourth that there is improvement under way."
Kodak spent $3.4 billion from 2004 through 2007 converting the bulk of its 129-year-old business from high-margin film to more competitive electronic technology.
Until the fourth quarter of 2008, Kodak's digital businesses were picking up speed, posting six straight quarters of growth. But it reverted to job cuts in January. It is eliminating 3,500 to 4,500 jobs this year, which could reduce its work force to a 1930s-era low of 19,900 from a 1988 peak of 145,300.
Its consumer digital imaging division absorbed a $99 million operating loss in the quarter compared with a year-ago loss of $49 million as sales fell 33 percent to $503 million.
Hurt by a softer commercial printing market, graphic communications posted a $28 million operating loss, compared with a $13 million profit a year earlier, as sales fell 24 percent to $670 million.
The film, photofinishing and entertainment unit had an operating profit of $51 million, down from $54 million, as sales fell 30 percent to $593 million.
Kodak is bracing for an estimated 12 percent to 18 percent slump in sales this year because of the recession. Based on 2008 sales of $9.4 billion, Kodak's estimate implies 2009 sales of $7.7 billion to $8.3 billion. Analysts, on average, expect sales of $7.45 billion.
The company now expects its 2009 loss from continuing operations will come in at the low end of its forecast of $200 million to $400 million. In the second half, it is targeting digital sales growth of 1 percent to 3 percent but said overall revenue to decline by 4 percent to 6 percent.
Through 2012, Kodak expects revenue to rise 4 percent a year on average, driven by an 8 percent to 10 percent increase in digital sales.
Shares of Kodak fell 34 cents, or 10.4 percent, to $2.94. Its shares have traded in a 52-week range of $2.01 to $17.71.
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