 |
||
 |
||
| Annual Report 1996 | ||
|
||
|
||
| Annual Report 1996 | ||
1996 Fourth Quarter Results
Worldwide sales for the fourth quarter of 1996 were $663 million, a 2% decrease compared with sales of $675 million in the fourth quarter of 1995. This decrease is attributable to substantially lower sales in Russia than in the same period in 1995. Excluding the decline in Russia, worldwide sales increased moderately.
U.S. sales increased 2% in the fourth quarter of 1996 to $335 million compared with $329 million in the same period last year. Excluding income from the Company's discontinued businesses and licensing income on patents, U.S. sales were up about 1%.
Retail sales of instant integral film declined moderately, resulting primarily from the Company's decision to use more cost-effective promotions in the fourth quarter of 1996 than the very aggressive programs used in the same period in 1995. Retail sales of instant cameras in the United States increased approximately 9% in the fourth quarter of 1996, compared with 1995's fourth quarter.
International sales were $329 million in the fourth quarter of 1996, compared with $346 million in the fourth quarter of 1995. International sales, excluding Russia which was down over 40 percent, increased including the negative impact of foreign currency translation. Excluding Russia, instant camera shipments increased significantly and film shipments were up moderately. Positive retail indicators continue in developed markets such as the U.K., Germany and Japan, and in developing markets such as Brazil and Mexico. While the Company believes that developing markets in total present particularly attractive opportunities, such markets tend to be significantly less stable than more established markets. There can be no assurance that developing markets will continue to produce favorable results.
Gross margins, excluding one-time costs (as described above in "1996 Worldwide Results Compared with 1995") as a percent of sales were 43% in the fourth quarter of 1996 compared to 41% in the fourth quarter of 1995. Operating expenses as a percent of sales were 31% in the fourth quarter of 1996 versus 36% in 1995. Gross margins and operating expenses as a percent of sales continue to reflect the improvements achieved from restructuring and lower losses in the Company's digital imaging businesses. The increase in gross margin in the fourth quarter of 1996 also reflects the impact of favorable pricing on instant film, licensing income on patents and more cost-effective promotions. The gross margin in the fourth quarter of 1996 was also negatively affected by foreign currency translation.
Excluding one-time costs, operating profit was $76 million for the fourth quarter of 1996, more than double the $29 million in the same period of 1995. Including one-time costs, operating profit was $36 million in the fourth quarter of 1996 compared to a loss from operations of $141 million in 1995.
The 1996 fourth quarter included other income of $.4 million compared to other expense of $1 million in the 1995 fourth quarter. Included in other income was a foreign currency loss of $.4 million and $2 million in the fourth quarter of 1996 and 1995, respectively, resulting from balance sheet translations. Interest expense was $12 million in the fourth quarter of 1996 compared to $13 million in the same period of 1995.
The worldwide effective tax rate for the fourth quarter was 47% in 1996 and 28% in 1995. The increase in the effective tax rate was primarily a result of the adverse effect of the strengthening U.S. dollar on the international tax rate. For purposes of determining the after-tax one-time costs, the Company assumed a tax rate of 40% and 35% in the fourth quarter of 1996 and 1995, respectively, to calculate the tax benefit. The net after-tax foreign currency exchange loss from balance sheet translation for the 1996 fourth quarter amounted to $.05 per common share, compared with a $.04 loss for the same period last year.
Excluding one-time costs and the related tax effect, earnings before extraordinary items in the fourth quarter of 1996 were $37 million, or $.81 primary earnings per common share, compared with a loss before extraordinary items of $.5 million, or $.01 primary loss per common share for the fourth quarter of 1995. As discussed above, the Company recorded an extraordinary loss of $1.6 million (net of the tax benefit of $1.1 million) or $.03 loss per common share due to the early extinguishment of the Debentures. Including one-time costs, net earnings in the fourth quarter of 1996 were $11 million, or $.25 primary earnings per common share, compared with a loss of $111 million, or $2.44 primary loss per common share in the fourth quarter of 1995. Fully diluted earnings per common share were not reported in the fourth quarter of 1996 and 1995 because they were greater than primary earnings per common share.
