Eastman Kodak Company (NYSE: KODK) today reported financial
results for the third quarter 2019, including a net loss of $5
million on revenues of $315 million and growth in key print and
film product areas.
Highlights include:
- GAAP net loss of $5 million for the quarter ended September 30,
2019, compared to GAAP net earnings of $19 million for the quarter
ended September 30, 2018.
- Revenues for Q3 2019 of $315 million compared to revenues for
Q3 2018 of $329 million.
- Operational EBITDA for the quarter of $14 million compared to
Operational EBITDA of $9 million in the prior-year period.
- The Company finalized the establishment of a strategic
relationship with Lucky HuaGuang Graphics Co, Ltd in the People’s
Republic of China, including the sale of Kodak’s offset printing
plates facility in Xiamen, China, a supply agreement to help Kodak
fulfill its customer demand, and an IP agreement under which Kodak
licenses its plates technology to HuaGuang to expand the market in
China. The current quarter Operational EBITDA includes $13 million
of license revenue received from this transaction.
- Key product lines achieved strong year-over-year growth for the
year to date:
- Volume for KODAK SONORA Process Free Plates grew by 22
percent.
- Annuities revenues for the KODAK PROSPER Inkjet Platform grew
by 5 percent.
- Revenues for the Company’s film business grew 21 percent year
over year for the year to date.
- The Company ended the quarter with a cash balance of $225
million.
“The Company will continue to concentrate on delivering
industry-leading solutions to customers in our core print and film
businesses,” said Jim Continenza, Kodak’s Executive Chairman.
“Looking ahead to 2020, we will focus on generating cash by growing
profitable revenue, making smart investments and eliminating
unnecessary spending.”
For the quarter ended September 30, 2019, revenues decreased by
approximately $14 million compared with the same period in 2018.
Kodak ended the quarter with a cash balance of $225 million, an
increase of $27 million from the June 30, 2019 cash balance of $198
million when adjusted for the assets associated with Kodak’s offset
printing plates facility in Xiamen, China being reported as assets
held for sale. The current quarter revenues and Operational EBITDA
include $13 million of license revenue related to the HuaGuang
Graphics Co. Ltd transaction.
“We have strengthened our financial position by eliminating
significant interest costs with the transactions completed earlier
in the year,” said David Bullwinkle, Kodak’s CFO. “For the year to
date we have delivered growth in SONORA Process Free Plates,
PROSPER Inkjet annuities and our film business. We plan to build on
those successes and drive further cost efficiencies to help achieve
our goal of generating cash.”
Revenue and Operational EBITDA Q3 2019 vs. Q3 2018
($
millions)
Q3 2019 Actuals
PSD EISD KSD
BFID AM3D EBPD Total
EK Revenue
$ 213
$
29
$
14
$
56
$
1
$
2
$ 315
Operational EBITDA *
$
20
$
(3)
$
2
$
(1)
$
(4)
$
-
$
14
Q3 2018 Actuals
PSD EISD KSD
BFID AM3D EBPD Total
EK Revenue
$ 217
$
39
$
15
$
54
$
1
$
3
$ 329
Operational EBITDA *
$
11
$
2
$
1
$
(3)
$
(2)
$
-
$
9
Q3 2019 vs. Q3 2018 Actuals
B/(W)
PSD EISD KSD
BFID AM3D EBPD Total
EK Revenue
$
(4)
$ (10)
$
(1)
$
2
$
-
$
(1)
$ (14)
Operational EBITDA *
$
9
$
(5)
$
1
$
2
$
(2)
$
-
$
5
Q3 2019 Actuals on constant
currency ** vs. Q3 2018 Actuals B/(W)
PSD EISD KSD
BFID AM3D EBPD Total
EK Revenue
$
(1)
$ (10)
$
-
$
3
$
-
$
(1)
$
(9)
Operational EBITDA *
$
8
$
(5)
$
1
$
2
$
(2)
$
-
$
4
* Total Operational EBITDA is a non-GAAP financial measure. The
reconciliation between GAAP and non-GAAP measures is provided in
Appendix A of this press release.
** The impact of foreign exchange represents the 2019 foreign
exchange impact using average foreign exchange rates for the three
months ended September 30, 2018, rather than the actual exchange
rates in effect for the three months ended September 30, 2019.
About Kodak
Kodak is a technology company focused on imaging. We provide –
directly and through partnerships with other innovative companies –
hardware, software, consumables and services to customers in
graphic arts, commercial print, publishing, packaging,
entertainment and commercial films, and consumer products markets.
With our world-class R&D capabilities, innovative solutions
portfolio and highly trusted brand, Kodak is helping customers
around the globe to sustainably grow their own businesses and enjoy
their lives. For additional information on Kodak, visit us at
kodak.com, follow us on Twitter @Kodak, or like us on Facebook at
Kodak.
Cautionary Statement Regarding Forward-Looking
Statements
This press release includes “forward-looking statements” as that
term is defined under the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include statements concerning
Kodak’s plans, objectives, goals, strategies, future events, future
revenue or performance, capital expenditures, liquidity,
investments, financing needs and business trends and other
information that is not historical information. When used in this
press release, the words “estimates,” “expects,” “anticipates,”
“projects,” “plans,” “intends,” “believes,” “predicts,”
“forecasts,” “strategy,” “continues,” “goals,” “targets” or future
or conditional verbs, such as “will,” “should,” “could,” or “may,”
and similar expressions, as well as statements that do not relate
strictly to historical or current facts, are intended to identify
forward-looking statements. All forward-looking statements,
including management’s examination of historical operating trends
and data, are based upon Kodak’s expectations and various
assumptions.
Future events or results may differ from those anticipated or
expressed in the forward-looking statements. Important factors that
could cause actual events or results to differ materially from the
forward-looking statements include, among others, the risks and
uncertainties described in more detail in Kodak’s Annual Report on
Form 10-K for the year ended December 31, 2018 under the headings
“Business,” “Risk Factors,” “Legal Proceedings” and/or
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources,” in the
corresponding sections of Kodak’s Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2019, June 30, 2019 and September
30, 2019, and in other filings Kodak makes with the U.S. Securities
and Exchange Commission from time to time, as well as the
following: Kodak’s ability to improve and sustain its operating
structure, cash flow, profitability and other financial results;
Kodak’s ability to achieve cash forecasts, financial projections
and projected growth; Kodak’s ability to achieve the financial and
operational results contained in its business plans; Kodak’s
ability to comply with the covenants in its various credit
facilities; Kodak’s ability to fund continued investments, capital
needs and restructuring payments and service its debt and Series A
Preferred Stock; Kodak’s ability to effect strategic transactions,
such as divestitures, acquisitions, strategic alliances and similar
transactions, or to achieve the benefits sought to be achieved from
such strategic transactions; changes in foreign currency exchange
rates, commodity prices and interest rates; Kodak’s ability to
effectively anticipate technology trends and develop and market new
products, solutions and technologies; Kodak’s ability to
effectively compete with large, well-financed industry
participants; continued sufficient availability of borrowings and
letters of credit under Kodak’s revolving credit facility, Kodak’s
ability to obtain additional financing if and as needed and Kodak’s
ability to provide or facilitate financing for its customers; the
performance by third parties of their obligations to supply
products, components or services to Kodak; and the impact of the
global economic environment on Kodak.
There may be other factors that may cause Kodak’s actual results
to differ materially from the forward-looking statements. All
forward-looking statements attributable to Kodak or persons acting
on its behalf apply only as of the date of this press release and
are expressly qualified in their entirety by the cautionary
statements included or referenced in this press release. Kodak
undertakes no obligation to update or revise forward-looking
statements to reflect events or circumstances that arise after the
date made or to reflect the occurrence of unanticipated events,
except as required by law.
APPENDICES
A. NON-GAAP MEASURES
In this third-quarter 2019 financial results news release,
reference is made to the following non-GAAP financial measures:
- Operational EBITDA; and
- Revenues and Operational EBITDA on a constant currency
basis.
Kodak believes that these non-GAAP measures represent important
internal measures of performance. Accordingly, where they are
provided, it is to give investors the same financial data
management uses with the belief that this information will assist
the investment community in properly assessing the underlying
performance of Kodak, its financial condition, results of
operations and cash flow.
Kodak’s segment measure of profit and loss is an adjusted
earnings before interest, taxes, depreciation and amortization
(“Operational EBITDA”). The change in revenues and Operational
EBITDA on a constant currency basis, as presented in this financial
results news release, is calculated by using average foreign
exchange rates for the three months ended September 30, 2018,
rather than the actual exchange rates in effect for the three
months ended September 30, 2019.
The following table reconciles the most directly comparable GAAP
measure of Net (Loss) Income to Operational EBITDA and Operational
EBITDA on a constant currency basis for the three months ended
September 30, 2019 and 2018, respectively:
(in millions) Q3 2019 Q3 2018 $
Change Net (Loss) Income
$
(5)
$
19
$
(24)
Depreciation and amortization
14
17
(3)
Restructuring costs and other (1)
3
9
(6)
Stock based compensation
1
2
(1)
Consulting and other costs (2)
2
4
(2)
Idle costs (3)
1
1
-
Other operating expense (income), net, excluding income from
transition services agreement (4)
12
(10)
22
Interest expense (1)
4
2
2
Pension income excluding service cost component (1)
(26)
(35)
9
Other (income) charges, net (1)
6
(4)
10
(Income) loss from discontinued operations, net of income tax (1)
(5)
1
(6)
Provision for income taxes (1)
7
3
4
Operational EBITDA
$
14
$
9
$
5
Impact of foreign exchange (5)
(1)
(1)
Operational EBITDA on a constant currency basis
$
13
$
9
$
4
Footnote Explanations:
(1)
As reported in the Consolidated Statement
of Operations.
(2)
Consulting and other costs are primarily
professional services and internal costs associated with certain
corporate strategic initiatives.
(3)
Consists of costs such as security,
maintenance and utilities required to maintain land and buildings
in certain locations not used in any Kodak operations and the
costs, net of any rental income received, of underutilized portions
of certain properties.
(4)
$2 million of income from the transition
services agreement related to the sale of the Flexographic
Packaging Business was recognized in the quarter ended September
30, 2019. The income was reported in Other operating
(expense) income, net in the Consolidated Statement of Operations.
Other operating (expense) income, net is typically excluded from
the segment measure. However, the income from the transition
services agreement was included in the segment measure.
(5)
The impact of foreign exchange represents
the 2019 foreign exchange impact using average foreign exchange
rates for the three months ended September 30, 2018, rather than
the actual exchange rates in effect for the three months ended
September 30, 2019.
B. FINANCIAL STATEMENTS
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited) (in millions)
Three Months Ended September
30,
2019
2018
Revenues Sales
$
249
$
259
Services
66
70
Total revenues
315
329
Cost of revenues Sales
216
232
Services
46
47
Total cost of revenues
262
279
Gross profit
53
50
Selling, general and administrative expenses
48
53
Research and development costs
11
12
Restructuring costs and other
3
9
Other operating expense (income), net
10
(10
)
Loss from continuing operations before interest expense, pension
income excluding service cost component, other charges (income),
net, and income taxes
(19
)
(14
)
Interest expense
4
2
Pension income excluding service cost component
(26
)
(35
)
Other charges (income), net
6
(4
)
(Loss) earnings from continuing operations before income taxes
(3
)
23
Provision for income taxes
7
3
(Loss) earnings from continuing operations
(10
)
20
Income (loss) from discontinued operations, net of income taxes
5
(1
)
Net (Loss) Income
$
(5
)
$
19
The notes accompanying the financial statements
contained in the Company’s third quarter 2019 Form 10-Q are an
integral part of these consolidated financial statements.
EASTMAN KODAK COMPANY CONSOLIDATED
STATEMENT OF FINANCIAL POSITION (Unaudited) (in
millions)
September 30,
December 31,
2019
2018
ASSETS Cash and cash
equivalents
$
225
$
233
Trade receivables, net of allowances of $8 and $9,
respectively
195
232
Inventories,
net
242
231
Other current assets
57
47
Current assets held for sale
2
167
Total current assets
721
910
Property, plant and equipment, net of accumulated depreciation of
$419 and $395,
respectively
186
216
Goodwill
12
12
Intangible assets, net
53
58
Operating lease right-of-use assets
49
—
Restricted cash
36
11
Deferred income taxes
147
160
Other long-term
assets
205
143
TOTAL ASSETS
$
1,409
$
1,510
LIABILITIES, REDEEMABLE, CONVERTIBLE PREFERRED
STOCK AND EQUITY (DEFICIT) Accounts payable, trade
$
140
$
130
Short-term borrowings and current portion of long-term
debt
2
396
Current portion of operating leases
26
—
Other current liabilities
203
209
Current liabilities held for sale
—
43
Total current liabilities
371
778
Long-term debt, net of current
portion
106
5
Pension and other postretirement
liabilities
352
379
Operating leases, net of current portion
34
—
Other long-term
liabilities
195
178
Total liabilities
1,058
1,340
Commitments and Contingencies (Note 10)
Redeemable, convertible Series A preferred stock, no par
value, $100 per share liquidation preference
180
173
Equity (Deficit) Common stock, $0.01
par
value
—
—
Additional paid in
capital
608
617
Treasury stock, at cost
(9
)
(9
)
Accumulated
deficit
(17
)
(200
)
Accumulated other comprehensive loss
(411
)
(411
)
Total shareholders' equity (deficit)
171
(3
)
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY (DEFICIT)
$
1,409
$
1,510
The notes accompanying the financial statements contained in the
Company’s third quarter 2019 Form 10-Q are an integral part of
these consolidated financial statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107006095/en/
Media: Nick Rangel, Kodak, +1 585-615-0549,
nicholas.rangel@kodak.com
Investor: Bill Love, Kodak, +1 585-724-4053,
shareholderservices@kodak.com
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