The move underlined Kodak's faith in its makeover as a digital technology company, analysts said, and appeared timed to take advantage of a steep slide in its stock price to 30-year lows.
"Your stock is in the dumps and that's when you buy back. This was a masterful way of doing it," said Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York. "Besides everything else, this demonstrates confidence that they're doing well on their (latest four-year) program."
After completing a $3.4 billion overhaul from 2004 to 2007, Kodak predicted at its annual investor meeting in February that revenues would rise 5 percent a year through 2011, driven by a 10 percent to 12 percent annual rise in digital sales. Operating profits will more than triple to $1 billion, it said.
Kodak shares jumped $1.69 to $14.03 Tuesday. Kodak currently has about 288.2 million shares outstanding.
The refund from the Internal Revenue Service resulted from an audit of claims filed for 1993 to 1998, the company said. It will fund the buyback plan, together with cash on hand, and it will boost second-quarter net profit by $574 million.
"Our board's decision to authorize this repurchase initiative underscores the rising confidence we have in Kodak's product portfolio, in our current financial position, and in the execution of our strategy," Kodak's chef executive, Antonio Perez, said in a statement.
The repurchase program is authorized through the end of 2009.
Converting the bulk of its business from high-profit film to more highly competitive digital photography and commercial printing technology dramatically reduced Kodak's work force from 64,000 in 2003 to 26,900 in 2007, a level not seen since the 1930s.
Kodak's payroll peaked at 145,300 in 1988.
Among the jobs that vanished were 8,100 tied to a 110-year-old health-imaging unit created after the discovery of X-rays in 1895.
Kodak sold it to Canadian investment firm Onex Corp. for $2.35 billion in April 2007 and used that cash to pay down about $1.15 billion in debt.
In 2006, Kodak had $1.47 billion in cash and equivalents but $2.7 billion in long-term debt. At the start of this year, its available cash had swelled to $2.9 billion against $1.6 billion in total debt.
"They've always had a strong cash position but they owed quite a bit before they sold the health division, and that's what tipped the scales," Yannas said.
"Perez has been under pressure to buy back stock for the last year and a half," Yannas said. "He's waited it out and now he's buying it at a small fraction above book value, which makes sense.
"When you're buying stock at three or four times book value, all you're doing is essentially diluting the remaining shareholder value and helping out the traders. When you're buying stock at prices that are 20 percent to 30 percent premium to book value, it's a small amount but you're retiring a quarter of the stock."
