Kodak on track, expecting strong second half

Despite a year-over-year drop in revenues, Kodak expects a second-half rebound pointing Tuesday to strong sales of emerging product lines and potential growth — particularly centered around Eastman Business Park.

“We have a big second half ahead of us, and (we had) a stronger first half than expected,” Jeff Clarke, chief executive for Eastman Kodak Co., said in a conference call with investors, calling 2015 “a pivotal year for the company.”

The iconic Rochester business released its quarterly earnings showing $458 million in sales for the three months ending June 30. That is down 13 percent from the same period last year, a dip blamed primarily on unfavorable currency exchange rates and an expected decline of legacy products such as replacement cartridges for discontinued inkjet printers.

Clarke opened the call addressing Kodak’s falling stock price — down 28.5 percent over the past two months, to close at $13.82 on Tuesday. “Obviously, we do not manage for stock price,” he said, but went on to tout investments, cost cutting and other measures being taken that have Kodak ahead of its internal projections for 2015.

Adjusting for the negative effects of the exchange rate, non-recurring revenues and the expected decline in legacy inkjet sales, year-over-year revenues are essentially flat, officials said.

“We are making the progress necessary,” CFO John McMullen said, as investors offered their congratulations Tuesday.

After expenses, Kodak lost $23 million — a negative that looks positive considering the company lost $62 million in the same period last year, and $224 million in the second quarter of 2013. Much of those prior-year expenses related to its bankruptcy and reorganization costs. Reorganization and legacy costs were down to just $2 million in the most recent quarter. Shedding those and getting beyond significant capital investments should see cash flow improve in future years, company officials said.

For the immediate future, Kodak is banking on continued strong sales of Sonora printing plates, packaging equipment and growth of its high-speed Prosper inkjet presses. Clarke expects the biggest shift in the inkjet business, moving to break-even and soon into solid profitability. He also pointed to continued refinement of its silver halide mesh and copper mesh films for touch sensor applications.

Asked if Kodak can afford to do both silver and copper, Clarke insisted it could. The company’s capital investment is largely behind it, and improving efficiency or transmission of the less-expensive copper film soon could allow expansion into the mobile tablet market. That is one of the products produced at Eastman Business Park, a 1,250-acre tech park that Clarke and McMullen separately praised for its potential.

“We have a lot of people behind us for the future success of the park,” McMullen said. “It is an asset for the company. We are going to run it like a business.”

Occupancy is increasing, Clarke said, and noted the area’s designation for a federally backed photonics initiative, saying: “There will be many opportunities for spinoffs of that or maybe labs,” though details still have to be worked out. As for how the park figures into Kodak’s future and its finances, the focus for now is getting the park filled up and operating at a strong profit.

“Right now,” Clarke said, “we have an under-utilization issue.”

Kodak claims to be on track to hit its 2015 goals for revenues of between $1.8 billion and $2 billion, and operational earnings minus certain expenses of between $100 million and $120 million. Revenues in the first six months are $885 million, with operational earnings of $35 million. Clarke said the company’s business is heavily weighted to the second half of the year.

BDSHARP@DemocratandChronicle.com