S&P: Kodak outlook unchanged

Standard & Poor's said that Eastman Kodak Co.'s (BBB-/negative/A-3) announcement of stronger-than-expected first quarter results, while positive, would not affect its ratings or outlook.

Sales and EBITDA (adjusted for restructuring, impairments, and other charges) were both up about 11% in the seasonally slow quarter. However, core film sales remain under pressure, which is a significant threat to future earnings and cash flow.

S&P said it remains imperative that Kodak continue to manage its costs to maintain good profitability and the cash flow needed to fund its ongoing transition to digital technologies. The successful integration of its numerous acquisitions over the past several quarters and any future purchases are also critical.

Kodak plans to reduce debt by up to $800 million in 2004, up from its previous estimate of $600 million, and to materially slow its acquisition pace over the remainder of the year should help offset some near-term rating pressure.

In the intermediate to longer term, S&P said Kodak will be challenged to establish strong, profitable, and sustainable positions in digital markets, while maintaining good profitability in traditional imaging markets as sales of film and related products decline.

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