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Kodak in Red for 1st Time on Record : Instant Photography Pullout Blamed for $194-Million Loss

February 19, 1986|Associated Press

ROCHESTER, N.Y. — Eastman Kodak reported a $194-million loss for the fourth quarter of 1985, the first time in the company's modern history that it failed to post a quarterly profit, a spokesman said Tuesday.

The company's earnings for all of 1985 were down 64%, Kodak spokesman Charles Smith said.

Kodak attributed the losses to costs associated with its withdrawal from the instant photography market, estimating those costs at $494 million.

"For the records we have that go back to 1930, this would be the company's first quarterly loss," Smith said. George Eastman founded the company in 1880, but Smith said records for the first 50 years were not available.

For the fourth quarter of 1985 ended Dec. 31, Kodak reported a loss of $194 million. For the same period in 1984, the company earned $204 million.

Kodak was ordered out of the instant photography business last month by a federal judge in Boston, who ruled that the company had violated seven Polaroid patents.

Adverse Factors Cited

"A variety of adverse factors, most notably the unusual charge relating to our withdrawal from instant photography, had a very negative impact on the company's financial performance," said Kodak Chairman Colby Chandler and President Kay R. Whitmore in a joint statement.

Stock analyst Peter Enderlin of Smith Barney, Harris Upham in New York, said the announcement was worse than he expected, particularly in terms of the instant photography loss.

"I was using $400 million," he said, "but it may be that they are writing off everything they possibly can to give them a kind of cushion for 1986."

He said it was clear that the results triggered last week's announcement of a cost-cutting program that, among other things, will reduce all operating and expense budgets by 5% and cut the work force worldwide by about 13,000 employees.

Chandler and Whitmore noted that program and said: "We believe the Kodak stage is set for several years of solid gains in sales and earnings."

Analyst Eugene Glazer of Dean Witter Reynolds in New York said he expects 1986 to be another poor earnings year because the cost-cutting program may turn out to be "pretty expensive" in terms of laying off workers.

"But 1987 has the potential to be a big earnings year," he said.

About Tuesday's announcement, Glazer said it was in line with his predictions. He termed it a "disaster within expectations."

Kodak listed $551 million in unusual charges, or costs that do not occur on a regular basis, for the fourth quarter--$494 million for costs from closing its instant photography plant and for offering consumers a refund on their instant cameras and $57 million for the shutdown of a photographic plant in Vincennes, France, and some Verbatim facilities in the United States.

The company also had an additional $12 million in unusual charges for the third quarter, Smith said, bringing the year's total to $563 million.

Don't Include Damages

The unusual charges do not include damages that the company may be ordered to pay Polaroid for violating its patents.

Chandler and Whitmore's statement said: "The company does not believe that it is likely the amount of damages that might result will have a material adverse effect on the financial condition of the company."

Net income for the year was $332 million. In 1984, net income was $923 million. Revenue of $10.63 billion was essentially level with 1984's $10.60 billion.

Without the costs of the withdrawal from instant photography, Kodak said its earnings would have been down only 31%, Smith said.

The instant photography business aside, Kodak said its profits were down because of a continued combined effect of pressure on selling prices and the adverse impact of currency exchange rates.

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