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Restructuring costs pushed

Kodak

(EK)

to its latest quarter loss Tuesday as sales fell 10% from a year ago.

The company, attempting a so-called digital transformation as consumers move away from old-fashioned film, said it hopes to meet cash and digital earnings goals for the year. But Kodak trimmed its full-year sales growth targets, saying it hopes to focus on more profitable sales.

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The Rochester, N.Y.-based photo company lost $37 million, or 13 cents a share, for the quarter ended Sept. 30, compared with a year-ago loss of $914 million, or $3.18 a share. The latest quarter included $202 million, or 70 cents a share, in restructuring charges, while the year-ago quarter $778 million, or $2.71 a share, in tax deferred asset valuation allowance charges.

Sales fell to $3.2 billion from $3.55 billion a year earlier, as traditional sales fell 19% from a year ago. Digital revenue slipped to $1.79 billion from $1.81 billion a year earlier.

Analysts surveyed by Thomson Finanical were looking for a 19-cent profit on sales of $3.29 billion.

"We measure our progress against three important metrics -- cash generation, digital earnings and digital revenue," said CEO Antonio Perez. "Our year-over-year digital revenues were down slightly during the quarter, reflecting our strong focus on margin expansion and willingness to pursue more profitable sales, the universe of which expands as our cost structure improves. Our digital earnings were vastly improved this quarter and our cash balance continues to exceed $1 billion. While I am fully aware of the challenges to largely complete our restructuring by the end of next year, this performance represents clear progress toward our goals and gives us good momentum to carry into the fourth quarter and 2007."

Digital earnings were $105 million, compared with $7 million in the year-ago quarter, marking the first time that the company's quarterly digital earnings growth exceeded the quarterly decline in traditional earnings. This performance was primarily due to operational improvements throughout the digital portfolio, the impact of a non-recurring licensing arrangement within the Consumer Digital Group, and strong results in the Graphic Communications Group.

Based on its third-quarter 2006 performance, Kodak said it is confident of achieving its 2006 cash and digital earnings goals, and expects digital revenue growth somewhat below its 10% target, as a result of the company's focus on margin expansion. This corresponds to a total revenue decline of approximately 6%.