Eastman Kodak Company (NYSE: KODK) today reported financial
results for the third quarter 2020, including consolidated revenues
of $252 million and a $13 million increase in cash.
Third-quarter highlights include:
- Consolidated revenues of $252 million
- A cash balance of $193 million at quarter-end
- Full conversion of the $100 million secured convertible notes
into common stock
“As the pandemic continued during the third quarter, Kodak
stayed focused on keeping our employees safe and serving customers
while carefully managing our costs and cash,” said Jim Continenza,
Kodak’s Executive Chairman and CEO. “We continue to invest in
leading-edge digital print technology and winning eight awards
recently in three prestigious print industry competitions provides
external validation of that commitment. Looking forward, we’ll
continue to build on our strengths in print and advanced materials
& chemicals, including our existing business in manufacturing
pharmaceutical ingredients.”
For the quarter ended September 30, 2020, revenues declined by
approximately $63 million compared with the same period in 2019.
Kodak ended the quarter with a cash balance of $193 million, up
from the June 30, 2020 cash balance of $180 million. GAAP net loss
was $445 million for the quarter ended September 30, 2020, which
included a charge of $416 million to reflect the increased value of
the derivative liability embedded in the convertible notes
immediately prior to conversion. Operational EBITDA was negative $1
million for the quarter ended September 30, 2020.
During the quarter, $100 million of the Company’s 5.00% Secured
Convertible Notes due 2021 were converted into shares of the
Company’s common stock. The Company’s delivery of the conversion
shares and its payment of the accrued interest satisfies the
Company’s obligations under the Notes. As a result of the
conversion of all of the Notes, the lien granted by the Company on
certain of its assets to secure the Notes was released.
“Kodak delivered improved revenue compared with the second
quarter of the year while improving its financial position,” said
David Bullwinkle, Kodak’s CFO. “During the third quarter, the
Company reduced its debt by $100 million due to the conversion of
the convertible notes and its cash balance increased by $13
million.”
Revenue and Operational EBITDA by Reportable Segment Q3 2020
vs. Q3 2019
($ millions) Q3 2020 Actuals
TraditionalPrinting DigitalPrinting
AdvancedMaterials &Chemicals Brand Total
Revenue
$
146
$
56
$
44
$
3
$
249
Operational EBITDA *
$
5
$
(3
)
$
(6
)
$
3
$
(1
)
Q3 2019 Actuals TraditionalPrinting
DigitalPrinting AdvancedMaterials &Chemicals
Brand Total Revenue
$
187
$
70
$
53
$
3
$
313
Operational EBITDA *
$
21
$
(3
)
$
(6
)
$
2
$
14
Q3 2020 vs. Q3 2019 ActualsB/(W)
TraditionalPrinting DigitalPrinting
AdvancedMaterials &Chemicals Brand Total
Revenue
$
(41
)
$
(14
)
$
(9
)
$
-
$
(64
)
Operational EBITDA *
$
(16
)
$
-
$
-
$
1
$
(15
)
Q3 2020 Actuals on constant currency ** vs. Q3 2019
ActualsB/(W) TraditionalPrinting DigitalPrinting
AdvancedMaterials &Chemicals Brand Total
Revenue
$
(44
)
$
(15
)
$
(9
)
$
-
$
(68
)
Operational EBITDA *
$
(16
)
$
-
$
-
$
1
$
(15
)
* 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 2020 foreign
exchange impact using average foreign exchange rates for the three
months ended September 30, 2019, rather than the actual average
exchange rates in effect for the three months ended September 30,
2020.
Eastman Business Park segment is not a reportable segment and is
excluded from the table above.
About Kodak
Kodak is a global technology company focused on print and
advanced materials & chemicals. We provide industry-leading
hardware, software, consumables and services primarily to customers
in commercial print, packaging, publishing, manufacturing and
entertainment. We are committed to environmental stewardship and
ongoing leadership in developing sustainable solutions. Our broad
portfolio of superior products, responsive support and world-class
R&D make Kodak solutions a smart investment for customers
looking to improve their profitability and drive growth. 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, 2019 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, 2020, June 30, 2020 and September
30, 2020, 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 asset based credit
facility; Kodak’s ability to fund continued investments, capital
needs and restructuring payments and service its Series A Preferred
Stock and debt; the impact of the global economic environment or
medical epidemics such as the COVID-19 pandemic; whether the U.S.
International Development Finance Corporation approves and makes
the potential $765 million loan to a subsidiary of Kodak to support
the launch of Kodak Pharmaceuticals and the impact of the
circumstances relating to such potential loan and any related
announcements, investigations, litigations and claims; 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 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.
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 2020 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”). Operational EBITDA represents the earnings
(loss) from continuing operations excluding the provision for
income taxes; non-service cost components of pension and OPEB
income; depreciation and amortization expense; restructuring costs;
stock-based compensation expense; consulting and other costs; idle
costs; other operating (expense) income, net (unless otherwise
indicated); interest expense; loss on early extinguishment of debt
and other charges, net.
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, 2019, rather than the actual
average exchange rates in effect for the three months ended
September 30, 2020.
The following table reconciles the most directly comparable GAAP
measure of Net Loss to Operational EBITDA for the three months
ended September 30, 2020 and 2019, respectively:
(in millions) Q3 2020 Q3 2019 $
Change Net Loss
$
(445
)
$
(5
)
$
(440
)
Depreciation and amortization
9
14
(5
)
Restructuring costs and other (1)
1
3
(2
)
Stock based compensation
17
1
16
Consulting and other costs (2)
4
2
2
Idle costs (3)
1
1
-
Other operating (Income) loss, net, excluding income from
transition services agreement (4)
-
12
(12
)
Interest expense (1)
3
4
(1
)
Pension income excluding service cost component (1)
(26
)
(26
)
-
Loss on early extinguishment of debt (1)
2
-
2
Other charges, net (1)
432
6
426
Income from discontinued operations, net of income tax (1)
-
(5
)
5
Provision for income taxes (1)
1
7
(6
)
Operational EBITDA
$
(1
)
$
14
(15
)
Footnote Explanations:
- As reported in the Consolidated Statement of Operations.
- Consulting and other costs are primarily professional services
and internal costs associated with certain corporate strategic
initiatives and investigations.
- 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.
- $1 million and $2 million of income from the transition
services agreement related to the sale of the Flexographic
Packaging Business was recognized in the three months ended
September 30, 2020 and 2019, respectively. The income was reported
in Other operating (income) expense, net in the Consolidated
Statement of Operations. Other operating (income) expense, net is
typically excluded from the segment measure. However, the income
from the transition services agreement was included in the segment
measure.
B. FINANCIAL STATEMENTS
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited) (in millions)
Three Months Ended September
30,
2020
2019
Revenues Sales
$
195
$
249
Services
57
66
Total revenues
252
315
Cost of revenues Sales
183
216
Services
38
46
Total cost of revenues
221
262
Gross profit
31
53
Selling, general and administrative expenses
56
48
Research and development costs
8
11
Restructuring costs and other
1
3
Other operating (income) expense, net
(1
)
10
Loss from continuing operations before interest expense, pension
income excluding service cost component, loss on early
extinguishment of debt, other charges, net and income taxes
(33
)
(19
)
Interest expense
3
4
Pension income excluding service cost component
(26
)
(26
)
Loss on early extinguishment of debt
2
—
Other charges, net
432
6
Loss from continuing operations before income taxes
(444
)
(3
)
Provision for income taxes
1
7
Loss from continuing operations
(445
)
(10
)
Income from discontinued operations, net of income taxes
—
5
Net loss
$
(445
)
$
(5
)
The notes accompanying the financial statements contained in the
Company’s third quarter 2020 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,
2020
2019
ASSETS Cash and cash equivalents
$
193
$
233
Trade receivables, net of allowances of $11 and $8, respectively
153
208
Inventories, net
232
215
Restricted cash - current portion
7
12
Other current assets
35
36
Current assets held for sale
2
2
Total current assets
622
706
Property, plant and equipment, net of accumulated depreciation of
$424 and $423, respectively
150
181
Goodwill
12
12
Intangible assets, net
40
47
Operating lease right-of-use assets
50
49
Restricted cash
41
45
Deferred income taxes
—
147
Other long-term assets
305
228
TOTAL ASSETS
$
1,220
$
1,415
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY Accounts payable, trade
$
118
$
153
Short-term borrowings and current portion of long-term debt
2
2
Current portion of operating leases
12
12
Other current liabilities
163
201
Total current liabilities
295
368
Long-term debt, net of current portion
17
109
Pension and other postretirement liabilities
376
378
Operating leases, net of current portion
49
48
Other long-term liabilities
206
231
Total liabilities
943
1,134
Commitments and Contingencies (Note 11) Redeemable,
convertible Series A preferred stock, no par value, $100 per share
liquidation preference
189
182
Equity (Deficit) Common stock, $0.01 par value
—
—
Additional paid in capital
1,156
604
Treasury stock, at cost
(9
)
(9
)
Accumulated deficit
(640
)
(79
)
Accumulated other comprehensive loss
(419
)
(417
)
Total shareholders' equity
88
99
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY
$
1,220
$
1,415
The notes accompanying the financial statements contained in the
Company’s third quarter 2020 Form 10-Q are an integral part of
these consolidated financial statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201110006056/en/
Media Contact: Kurt Jaeckel, Kodak, +1 585-490-8646,
kurt.jaeckel@kodak.com Investor Contact: Paul Dils, Kodak,
+1 585-724-4053, shareholderservices@kodak.com
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