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Kodak warns about 3Q
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September 19, 2001: 11:58 a.m. ET
Photo products maker sees earnings below forecast, cites attack
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NEW YORK (CNNfn) - Eastman Kodak Co. said Wednesday it will fall short of already-lowered third-quarter earnings estimates and will have to eliminate jobs in order to cut costs as the world's largest maker of photographic products struggles with lower sales in the face of a sluggish economy and last week's terrorist attacks.
Kodak's (EK: down $4.88 to $34.95, Research, Estimates) shares slumped 12 percent to $35.08 in morning trading Wednesday following the announcement. Kodak stock shed 90 cents Tuesday.
The company, which warned July 17 that third-quarter results would miss forecasts, said its earnings will not exceed 65 cents a share excluding charges, less than the 90 cents to $1.20 a share range it previously expected. The consensus estimate of analysts surveyed by First Call is $1.03 a share.
Kodak (EK: down $4.88 to $34.95, Research, Estimates), a component of the Dow Jones industrial average, cited weak sales, particularly in its health imaging business, and the anticipated impact of last week's attacks in which terrorists destroyed the World Trade Center in New York and a section of the Pentagon using hijacked commercial jets.
"This soft revenue performance is seen virtually through all of our businesses," Robert Brust, Kodak's chief financial officer, told analysts during a telephone conference Wednesday. "While we are not yet seeing any precipitous decline, we certainly see no signs of a recovery."
Film and photography companies have been struggling with the adjustment to a shift to digital photography as the market for traditional film continues to shrink.
"As we pursue cost reductions, we will continue to go after
non-people-related expenses," Brust said in an earlier statement. "However, it is inevitable that we will have to eliminate additional jobs."
Even before last Tuesday's terrorist attacks, Kodak's sales were down 7 percent in August compared with the year-earlier period, marking the third consecutive quarter of declining revenue. Sales in its health imaging unit, the only segment that recorded higher sales in the second quarter, faced pricing pressure in both the digital and traditional segments of the business.
"Unfortunately, the U.S. economy is showing signs of further slowing, exacerbated by the Sept. 11 attack," Brust said. "We are also beginning to see weakening economic conditions in other countries around the world. In addition, pricing pressures in our health imaging business intensified during the quarter, which combined with operational issues to reduce expected earnings for the quarter."
Brust said he expects the U.S. film market to be volatile in the near term, but remains confident that Kodak will maintain its U.S. market share for the year.
The company also said it gained market share in medical x-ray film, laser printers and computed radiography, helping improve the company's position in increasingly competitive markets.
During the first two months of the quarter, Kodak generated about $200 million in operating cash flow after dividends. Inventories remain more than $300 million below year-ago levels, the company said.
The company is still trying to gauge what effect last week's attacks are likely to have on its business. Already major retailers, which the company declined to identify, have put Kodak "on notice" that they plan to reduce orders for consumer film.
"While the full impact is impossible to gauge at this time, it will clearly have an impact in the current quarter and beyond," Brust said. 
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Eastman Kodak
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