Digital revenue totalled $1.888bn, up from $1.283bn in the same period last year, while traditional revenue totalled $1.661bn, a 20 per cent decline from $2.085bn.
CEO and president of Eastman Kodak Company, Antonio Perez, says it was the first time digital revenue exceeded traditional revenue on a quarterly basis, representing a milestone in the company’s digital transformation.
“As importantly, on the basis outlined above, our digital earnings were 3.5 times greater than in the year ago quarter, and September’s significant improvement increases our confidence for strong digital earnings in the fourth quarter,” says Perez.
Digital earnings were $10m, compared with $6m in the year ago quarter. This includes the favourable impact of $18 million in the third quarter of reallocating certain costs from the digital business to the traditional business, as well as a $5m charge for reducing the useful life of certain digital assets.
To calculate a common basis of comparison with the company’s full year digital earnings projection, as adjusted for the two accounting changes cited, required the exclusion of $44m of costs associated with Creo’s operating results and purchase accounting for the KPG and Creo acquisitions, as well as the exclusion of $12m of in-process research and development credits.
“Within the business units, we continue to see widespread evidence of the success of our digital transformation,” Perez says. “Our Graphic Communications Group continues to demonstrate strong growth, coming off a very successful Print05 trade show in September.”
Other third quarter results include a loss of $1.029bn, or $3.58 per share, largely stemming from a $900m ($3.13 per share) non-cash charge to record a valuation allowance against the net deferred tax assets in the US.
This reserve was an accounting requirement resulting from the company’s continuing losses in the US created by the accelerated and extensive restructuring activity required by the decline in the traditional business.
Perez says these results were in line with company forecasts that also predict the bulk of Kodak’s digital earnings in 2005 will be generated in the last four months of the year.
“For the quarter, our cash flow performance was consistent with our expectations, our cash balance increased, and our debt decreased sequentially from the second quarter. We are delivering on the three key metrics by which we are managing the company: digital revenue growth, digital earnings growth and the generation of cash.”
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