Eastman Kodak Co., undergoing a bumpy transition to digital photography, reported its fifth consecutive quarterly loss Monday but handily beat Wall Street forecasts. For the first time, the company said it generated more annual sales from digital imaging than from film-based technology.
Largely because of restructuring costs, Kodak lost $52 million, or 18 cents a share, in the October-December quarter, compared with a loss of $59 million, or 20 cents a share, a year ago.
Sales rose 12 percent to $4.197 billion, up from $3.76 billion in last year's fourth quarter.
Excluding restructuring and other one-time items, Kodak earned $151 million, or 51 cents a share. Analysts surveyed by Thomson Financial had forecast earnings of 39 cents a share on sales of $4.15 billion.
Kodak reached an income tax-refund settlement with the Internal Revenue Service in November that boosted its quarterly profit by $243 million, but it also racked up $283 million in after-tax restructuring charges.
While stung once more by the rapid slide in film sales, Kodak found solace in its steady drive into the digital era. Its overall digital sales in the quarter surged 45 percent to $2.67 billion, while revenues from film, paper and other chemical-based businesses slumped 21 percent to $1.51 billion.
For all of 2005, Kodak lost $1.37 billion, or $4.76 a share, versus a profit of $556 million, or $1.94 a share, in 2004. Revenue rose 6 percent to $14.27 billion from $13.52 billion.
Digital sales accounted for 54 percent of total revenue for the year, marking the first time in the company's 125-year history that digital exceeded traditional sales.
While digital sales could grow by 16 percent to 22 percent in 2006, Kodak expects its overall sales will range from a loss of 2 percent to a gain of 4 percent. And while digital profits could rise to $350 million to $450 million, Kodak projects an overall operating loss of $900 million to $1.1 billion this year.
"We are now more than halfway through our transformation, and we have proven our ability to drive sales in digital markets and to generate the cash necessary to fund our growth," Chief Executive Antonio Perez said. "We enter 2006 with solid momentum and a stronger emphasis on profitable growth."
Perez said Chief Financial Officer Robert Brust plans to retire next January when his employment contract expires. Brust joined Kodak in 2000 from Unisys Corp., the technology services company, after a 31-year career at General Electric Co.
In July, Kodak disclosed plans to lay off 10,000 employees on top of 12,000 to 15,000 job cuts targeted in January 2004. It had acknowledged in September 2003 that its analog businesses were in irreversible decline and outlined an ambitious strategy to become a digital heavyweight in photography, medical imaging and commercial printing by 2007.
The transition triggered nearly $3 billion in acquisitions but carried a high cost. The shutdown of film and other manufacturing operations around the world looks likely to drop its global work force below 50,000, down from 75,100 in 2001 and a peak of 145,300 in 1988.
By 2008, Kodak expects 80 percent of revenue will come from digital, and overall sales will top $17 billion, up from $13.52 billion in 2004.