Eastman Kodak Company (NYSE: KODK) today reported financial
results for the third quarter 2017, delivering a net loss of $46
million on revenues of $379 million. Highlights include:
- GAAP net loss of $46 million for the
quarter ended September 30, 2017, compared with net earnings of $12
million for the quarter ended September 30, 2016.
- The GAAP results include $58 million,
net of tax, of non-cash impairments related to the write-off of
goodwill in the Print Systems segment and assets for the previously
announced exit from copper mesh touch screen products.
- Operational EBITDA for the quarter of
$15 million, compared with $22 million for the third quarter of
2016.
- Revenues for the quarter of $379
million compared with revenues of $411 million for the third
quarter of 2016, a decline of $32 million or 8 percent. On a
constant currency basis revenues were down $35 million or 9
percent.
- The company ended the third quarter
with a cash balance of $342 million, a decrease in cash of $28
million for the third quarter of 2017.
- Key product lines achieved strong
year-over-year growth for the quarter:
- Volume for KODAK SONORA Process Free
Plates grew by 24 percent.
- Volume for KODAK FLEXCEL NX Plates grew
by 11 percent.
- Annuities revenue for KODAK PROSPER
Inkjet grew by 9 percent.
- The company maintained its range for
2017 full year revenue of $1.5 billion to $1.6 billion and adjusted
its forecast for 2017 Operational EBITDA to be within a range of
$60 million to $65 million. Several factors are impacting the
Company’s 2017 outlook, including:
- A slowdown in the commercial printing
industry and higher costs adversely impacting Print Systems
Division, Software and Solutions Division and Enterprise Inkjet
Systems Division.
- Vendor transition and timing of brand
licensing affecting the Consumer and Film Division
performance.
- Time to commercialize certain Advanced
Material and 3D Printing Division projects.
“An overall print market slowdown and rising aluminum costs have
impacted our commercial print business,” said Jeff Clarke, Kodak
Chief Executive Officer. “We are taking immediate actions to
accelerate cost reduction and reduce investments to sharpen our
focus as we continue to actively pursue changes to the Kodak
product and divisional portfolio.”
Revenues in the third quarter of 2017 were $379 million, an 8
percent decline from the third quarter of 2016 or 9 percent on a
constant currency basis.
The company reported a GAAP net loss of $46 million for the
quarter ended September 30, 2017, a decline of $58 million compared
with the third quarter of 2016.
The company delivered third quarter Operational EBITDA of $15
million, down $7 million compared with the third quarter of 2016.
On a constant currency basis, Operational EBITDA was down $8
million.
The company ended the quarter with a cash balance of $342
million, down $28 million, or 8 percent, from the balance at the
end of the second quarter 2017 and down $92 million from the
balance at the beginning of 2017. The year to date decrease
reflects investments in new technologies, working capital changes,
capital expenditures including the construction of a new FLEXCEL NX
manufacturing line in Weatherford, OK and a contingent
consideration payment related to the divestiture of Kodak Alaris in
2013.
“We expect to generate cash in the fourth quarter of 2017,” said
David Bullwinkle, Kodak Chief Financial Officer. “We plan to
improve our cash balance through reducing working capital and
through cost actions including focusing investments in technologies
most likely to deliver near-term returns.”
Print Systems Division (PSD), Kodak’s largest division,
had Q3 revenues of $232 million, a decline of $18 million, or 7
percent, compared with Q3 2016. Operational EBITDA for the quarter
was $13 million, down $14 million compared with the same period a
year ago. The decline was primarily due to pricing pressures.
For the quarter, KODAK SONORA Plates delivered continued growth,
with volume increasing by 24 percent compared with the same period
a year ago. SONORA Plates now account for 19 percent of the
division’s total plate unit sales.
Enterprise Inkjet Systems Division (EISD), including the
KODAK PROSPER and KODAK VERSAMARK businesses and the investment in
ULTRASTREAM inkjet technology, delivered Q3 revenues of $33
million, compared with $47 million for the prior-year quarter.
Operational EBITDA was $1 million, an improvement of $9 million
compared with Q3 of 2016.
For the third quarter of 2017 the PROSPER business continued to
deliver solid performance with year-over-year annuity growth of 9
percent.
The Flexographic Packaging Division (FPD) includes KODAK
FLEXCEL NX Systems and Plates as well as other packaging
businesses, such as analog flexographic plates and letterpress
plates, proofing products and services. FPD revenues for Q3 were
$34 million, flat with the same period a year ago. Operational
EBITDA was $7 million, also flat with the prior-year quarter.
For the quarter, FLEXCEL NX revenues increased 2 percent over
the prior-year period and FLEXCEL NX Plate volume continued to
grow, increasing by 11 percent year over year.
Software and Solutions Division (SSD) delivered Q3
revenues of $21 million, flat compared with the same period last
year. Operational EBITDA was $1 million, a $1 million increase
compared with the prior-year period.
Consumer and Film Division (CFD) revenues for Q3 were $55
million, flat compared with Q3 of 2016. Operational EBITDA was
negative $2 million, a decline of $3 million compared with the
prior-year period, driven primarily by lower volumes in industrial
film and chemicals, vendor transition costs in motion picture film
and the expected continued decline in the consumer inkjet business
offset by a payment of contractual minimum royalties from a brand
licensing arrangement.
The Advanced Materials and 3D Printing Technology
Division (AM3D) includes Kodak’s research lab, Micro 3D
Printing as well as intellectual property licensing not directly
related to the other business divisions. AM3D had Operational
EBITDA of negative $6 million, flat with Q3 2016.
Eastman Business Park Division (EBP) had revenues of $4
million, flat with third quarter 2016. Operational EBITDA of $1
million was also flat with the prior-year period.
Revenue and Operational EBITDA Q3 2017
vs. Q3 2016
($ millions)
Q3 2017 Actuals PSD EISD
FPD SSD CFD AM3D EBPD Total
EK Revenue $ 232 $ 33
$ 34 $ 21 $ 55 $
- $ 4 $ 379 Operational
EBITDA b/f corp costs* 24 3 8 3
1 (6 ) 1 $ 34
Corporate
SGA
11 2
1 2 3
- -
19 Operational EBITDA* 13
1 7 1 (2 ) (6 )
1 15 Q3 2016 Actuals PSD
EISD FPD SSD CFD AM3D
EBPD Total EK Revenue $ 250
$ 47 $ 34 $ 21 $
55 $ - $ 4 $ 411
Operational EBITDA b/f corp costs* 39 (5
) 9 2 3 (6 ) 1
43
Corporate
SGA
12 3
2 2 2
- -
21 Operational EBITDA* 27
(8 ) 7 - 1 (6 )
1 22
Q3 2017 Actuals vs. Q3 2016 Actuals
B/(W)
PSD EISD FPD SSD CFD AM3D
EBPD Total EK Revenue $ (18
) $ (14 ) $ - $
- $ - $ - $ -
$ (32 ) Operational EBITDA b/f corp
costs* (15 ) 8 (1 ) 1
(2 ) - - (9 )
Corporate
SGA
1 1
1 - (1
) - -
2 Operational EBITDA* (14
) 9 - 1 (3 ) -
- (7 )
Q3 2017 Actuals on constant
currency**vs. Q3 2016 Actuals B/(W)
PSD EISD FPD SSD CFD AM3D
EBPD Total EK Revenue $ (21
) $ (14 ) $ - $
- $ - $ - $ -
$ (35 ) Operational EBITDA* (14
) 9 (1 ) 1 (3 )
- - (8 ) * Total Operational EBITDA,
Operational EBITDA before Corporate Costs by segment and Total
Operational EBITDA before Corporate Costs are non-GAAP financial
measures. The reconciliation between GAAP and non-GAAP measures is
provided in Appendix A of this press release. ** The
impact of foreign exchange represents the 2017 foreign exchange
impact using average foreign exchange rates for the three months
ended September 30, 2016, rather than the actual exchange rates in
effect for the three months ended September 30, 2017.
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, 2016 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, 2017, June 30, 2017 and September
30, 2017, 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;
the ability of Kodak 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 discontinue, sell or spin-off
certain businesses or operations or otherwise monetize assets;
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.
APPENDICES
A. NON-GAAP MEASURES
In this third quarter 2017 financial results news release,
reference is made to the following non-GAAP financial measures:
- Operational EBITDA;
- Revenues and Operational EBITDA on a
constant currency basis; and
- Operational EBITDA before Corporate
Costs.
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, 2016,
rather than the actual exchange rates in effect for the three
months ended September 30, 2017.
This press release also contains a forward-looking estimate of
full-year 2017 Operational EBITDA. Kodak is unable to provide a
reconciliation of full-year 2017 Operational EBITDA to a
forward-looking estimate of GAAP net income / loss because
projected GAAP net income / loss for the full year would require
inclusion of the projected impact of future excluded items,
including items that are not currently determinable or dependent on
future events which may be uncertain or outside of Kodak’s control,
such as assets sales, asset impairments, foreign exchange gains /
losses, changes in the fair value of the conversion option
derivative liability, unanticipated items not reflective of ongoing
operations, or other items. Due to the uncertainty of the
likelihood, amount and timing of any such items, Kodak does not
have information available to provide a quantitative reconciliation
of full-year 2017 projected net income / loss to an Operational
EBITDA projection.
The following table reconciles the most directly comparable GAAP
measure of Net (Loss) Earnings Attributable to Eastman Kodak
Company to Operational EBITDA and Operational EBITDA on a constant
currency basis for the three months ended September 30, 2017 and
2016, respectively:
(in millions)
Q3 2017 Q3
2016
$ Change
% Change Net (Loss) Earnings Attributable to Eastman
Kodak Company (GAAP basis) $ (46 )
$ 16 $ (62 ) -388
% Net loss attributable to noncontrolling interests (1)
- (4 ) 4 -100 % Net (loss)
earnings $ (46 )
$ 12 $ (58 ) -483 % All Other (2) - 2 (2 ) -100 % Corporate
components of pension and OPEB income (3) (37 ) (40 ) 3 -8 %
Depreciation and amortization 21 25 (4 ) -16 % Restructuring costs
and other (4) 5 2 3 150 % Stock based compensation 2 3 (1 ) -33 %
Consulting and other costs (5) 2 3 (1 ) -33 %
Manufacturing costs originally planned to
be absorbed by silver metal mesh touchscreen production (6)
- 1 (1 ) -100 % Other operating expense (income), net (1) 20 (6 )
26 -433 % Goodwill impairment loss (1) 56 - 56 n/a Interest expense
(1) 8 16 (8 ) -50 % Other (income) charges, net (1) (4 ) 1 (5 )
-500 % (Benefit) provision for income taxes (1) (13 ) 3 (16 ) -533
% Equity in loss of equity method investment, net of income taxes
(1) 1 - 1 n/a
Operational EBITDA $ 15 $ 22
$ (7 ) -32 % Impact of foreign
exchange (7) (1 ) (1 )
Operational
EBITDA on a constant currency basis $ 14
$ 22 $ (8 ) -36
%
The following tables reconcile the most directly comparable GAAP
measure of Operational EBITDA (Segment Measure) to Operational
EBITDA before Corporate Costs for each Division for the three
months ended September 30, 2017 and 2016, respectively:
(in millions)
For the Three Months Ended September 30,
2017
PrintSystems
EnterpriseInkjetSystems
FlexographicPackaging
Software andSolutions
Consumerand Film
AdvancedMaterials and3D
PrintingTechnology
EastmanBusinessPark
Total Operational EBITDA (Segment Measure)
$ 13 $ 1 $ 7 $
1 $ (2 ) $ (6 )
$ 1 $ 15 Corporate SG&A 11
2 1 2 3 -
- 19
Operational EBITDA Before Corporate Costs
$ 24 $ 3 $ 8
$ 3 $ 1 $ (6
) $ 1 $ 34 (in millions)
For the Three Months Ended September 30, 2016
PrintSystems
EnterpriseInkjetSystems
FlexographicPackaging
Software andSolutions
Consumerand Film
AdvancedMaterials and3D
PrintingTechnology
EastmanBusinessPark
Total Operational EBITDA (Segment Measure) $
27 $ (8 ) $ 7 $
- $ 1 $ (6 ) $
1 $ 22 Corporate SG&A 12 3
2 2 2 - -
21
Operational EBITDA Before Corporate Costs $
39 $ (5 ) $ 9 $
2 $ 3 $ (6 )
$ 1 $ 43 Footnote Explanations:
(1) As reported in the Consolidated Statement of Operations.
(2) RED utilities variable interest entity, which was
deconsolidated on December 31, 2016 (interest and depreciation of
RED are included in the respective lines in the table). (3)
Composed of interest cost, expected return on plan assets,
amortization of actuarial gains and losses, and curtailment and
settlement components of pension and other postretirement benefit
expenses. (4) Restructuring costs and other as reported in the
Consolidated Statement of Operations plus $1 million of inventory
write-downs included in cost of revenues for the three months ended
September 30, 2017. (5) Consulting and other costs are professional
services and internal costs associated with certain corporate
strategic initiatives. (6) Consists of manufacturing costs
originally planned to be absorbed by silver metal mesh touch screen
production that are excluded from the segment measure of profit and
loss. (7) The impact of foreign exchange represents the foreign
exchange impact using average foreign exchange rates for the three
months ended September 30, 2016, rather than the actual exchange
rates in effect for the three months ended September 30, 2017.
B. FINANCIAL STATEMENTS
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited) (in millions)
Three Months
Ended September 30, 2017 2016 Revenues
Sales $ 303 $ 333 Services 76 78 Total
net revenues 379 411 Cost of revenues
Sales 243 268 Services 49 50 Total cost
of revenues 292 318 Gross profit 87 93
Selling, general and administrative expenses 49 50 Research and
development costs 12 15 Restructuring costs and other 4 2 Other
operating expense (income), net 20 (6 ) Goodwill impairment loss
56 -
(Loss) earnings from continuing operations
before interest expense, other (income) charges,net, and income
taxes
(54 ) 32 Interest expense 8 16 Other (income) charges, net
(4 ) 1 (Loss) earnings from continuing operations
before income taxes (58 ) 15 (Benefit) provision for income taxes
(13 ) 3 Equity in loss of equity method investment, net of income
tax 1 - (Loss) earnings from continuing
operations (46 ) 12 Loss from discontinued operations, net of
income taxes - - Net (loss) earnings
(46 ) 12 Less: Net loss attributable to noncontrolling interests
— (4 ) NET (LOSS) EARNINGS ATTRIBUTABLE TO
EASTMAN KODAK COMPANY $ (46 ) $ 16
The notes accompanying the Company’s third quarter 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, 2017 December 31, 2016 ASSETS Cash and cash
equivalents $ 342 $ 434 Receivables, net 299 311 Inventories, net
316 271 Other current assets 31 23
Total current assets 988 1,039 Property, plant and equipment, net
of accumulated depreciation of $381 and $343, respectively 309 342
Goodwill 32 88 Intangible assets, net 92 121 Restricted cash 11 36
Deferred income taxes 65 35 Other long-term assets 121
115
TOTAL ASSETS $ 1,618
$ 1,776 LIABILITIES,
REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT)
Accounts payable, trade $ 191 $ 200 Short-term borrowings and
current portion of long-term debt 8 6 Other current liabilities
212 211 Total current liabilities 411
417 Long-term debt, net of current portion 402 405 Pension and
other postretirement liabilities 544 603 Other long-term
liabilities 216 268 Total liabilities
1,573 1,693 Commitments and
contingencies (Note 8) Redeemable, convertible Series A
preferred stock, no par value, $100 per share liquidation
preference 162 156
Equity (Deficit) Common stock,
$0.01 par value — — Additional paid in capital 633 641 Treasury
stock, at cost (9 ) (8 ) Accumulated deficit (303 ) (268 )
Accumulated other comprehensive loss (438 ) (438 )
Total shareholders’ deficit (117 ) (73 )
TOTAL
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND DEFICIT
$ 1,618 $ 1,776
The notes accompanying the Company’s third quarter Form 10-Q are
an integral part of these consolidated financial statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20171108006562/en/
Media:KodakNick
Rangel, +1 585-615-0549nicholas.rangel@kodak.comorInvestor:KodakBill Love, +1
585-724-4053shareholderservices@kodak.com
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