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Kodak develops a big loss
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January 15, 1998: 4:12 p.m. ET
Photo film firm lost $744 million in fourth quarter due to restructuring
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NEW YORK (CNNfn) - Eastman Kodak said Thursday that it lost $744 million during the fourth quarter as a result of restructuring charges and a strong U.S. dollar, which hurt sales.
The photographic film maker said its loss equaled $2.29 per share. In the year-earlier quarter, the company earned $164 million, or 49 cents per share.
Investors moved away from its stock (EK) in afternoon trading Thursday, sending the Dow component 1-1/8 lower to 58-3/8.
Kodak attributed much of the lower results to a previously announced $1.5 billion restructuring charge it took against fourth- quarter results.
In November, the company announced a restructuring plan that eventually will cut about 16,600 workers from its total workforce of 100,500 in an effort to achieve an estimated $500 million in savings.
Kodak attempted to minimize the effect of the charge, saying that without it the company would have earned $246 million, or 76 cents per share, beating analysts' estimates by 2 cents per share.
It will be some time before Kodak realizes the benefits of the changes, film analyst Peter Enderlin of First Albany said.
"They have a major restructuring program under way," said Enderlin, "but it obviously takes time before the people leave and you start to get the savings of that."
Kodak's restructuring is an attempt to deal with its declining market share. Its earnings have slid recently because of aggressive cost-cutting by Japanese rival Fuji Photo Film Co. Ltd.
Kodak began to match those cuts and the effects have taken their toll on the bottom line. For all of 1997, Kodak's net income was a mere $5 million, or 1 cent per share.
However, Jack Kelly, analyst with Goldman Sachs, told CNNfn Kodak appeared to regain some market share in the fourth quarter (362K WAV) or (362K AIFF).
Fuji wasn't the only threat from Asia. As Pacific Rim nations' currencies have weakened the dollar has strengthened, making Kodak's products more expensive.
Kodak's sales fell almost 9 percent to $13.5 billion from $16 billion in 1996. Kodak estimated that the stronger dollar snapped off $558 million from its 1997 earnings results.
Kodak Chief Executive George Fisher had little to offer in the way of quick consolation to investors.
"1997 clearly was a disappointing year for Kodak's shareholders, its employees, and management," he said.
"Although our cost reduction efforts will position Kodak for an improved 1998, the growing strength of the U.S. dollar, continuing competitive pressures and the phased implementation of the cost reduction program will make it likely that results during the first quarter of 1998 will be below those of 1997," Fisher said.
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