Eastman Kodak Company (NYSE: KODK) today reported financial
results for the second quarter 2023.
Second quarter 2023 highlights include:
- Consolidated revenues of $295 million, compared with $321
million for Q2 2022, a decrease of $26 million or 8 percent
- Gross profit of $63 million, compared to $51 million for Q2
2022, an increase of $12 million or 24 percent
- Gross profit percentage of 21 percent, compared with 16 percent
for Q2 2022
- GAAP net income of $35 million, compared with $20 million for
Q2 2022, an increase of $15 million
- Operational EBITDA of $22 million, compared with $11 million
for Q2 2022, an increase of $11 million
- A quarter-end cash balance of $223 million, compared with $217
million on December 31, 2022; an increase of $6 million in the six
months ended June 30, 2023, compared with a decrease of $73 million
in the prior-year period, an improvement in cash of $79
million
“Kodak delivered strong results in the second quarter, once
again increasing our gross profit and Operational EBITDA year over
year despite challenging business conditions affecting the markets
we serve,” said Jim Continenza, Kodak’s Executive Chairman and CEO.
“A number of factors have contributed to our success: a strong
leadership team, dedicated employees and a clearly defined
long-term plan focused on driving innovation, productivity and
smart revenue in our core businesses of print and advanced
materials & chemicals. We are proud to be an industrial
manufacturer and we are concentrating on what we do best. As part
of the controlled introduction of our new inkjet presses, we placed
our first two new machines during the quarter, one KODAK PROSPER
ULTRA 520 Press and one PROSPER 7000 Turbo Press, and we expect
them to be in production in the third quarter. We also continued to
invest in our print business, acquiring Graphic Systems Services,
Inc. (GSS), whose expertise and resources will help us provide our
customers with more complete inkjet solutions. More recently, we
proactively refinanced our term debt to strengthen our financial
foundation and we announced a perpetual brand licensing agreement
with EssilorLuxottica, a global vision care industry leader.
Looking forward, we will continue to focus on executing our
strategic plan and serving our customers, which is the key to
building long-term value for our employees and shareholders.”
For the quarter ended June 30, 2023, revenues were $295 million,
a decline of $26 million or 8 percent compared to the same period
in 2022. GAAP net income was $35 million for the quarter, compared
with $20 million in Q2 2022, an increase of $15 million.
Operational EBITDA for the second quarter 2023 was $22 million,
compared with $11 million in the prior-year period. The increase
was primarily driven by improved profitability related to pricing
passthrough and improved operational efficiency, partially offset
by continued global cost increases.
The company ended the second quarter with a cash balance of $223
million, compared with $217 million on December 31, 2022, an
increase of $6 million compared with a decrease of $73 million in
the prior-year period. The improvement in cash of $79 million was
primarily driven by changes in working capital strategies.
“Kodak improved its year-over-year cash performance for the
first half of 2023,” said David Bullwinkle, Kodak’s CFO. “Our
quarter-end balance of $223 million reflects a year-over-year
improvement in cash flow from operations of $124 million for the
first half of 2023. We also increased our year-over-year gross
profit in Q2 for the third consecutive quarter while continuing to
invest in print technology and the emerging businesses in our
Advanced Materials & Chemicals group. For the second half of
2023 we’ll continue to execute our long-term strategic plan with an
emphasis on driving innovation, productivity and smart
revenue.”
Revenue and Operational EBITDA by Reportable Segment Q2 2023
vs. Q2 2022
($ millions) Q2 2023 Actuals Print
AdvancedMaterials &Chemicals Brand Total
Revenue
$
215
$
72
$
4
$
291
Operational EBITDA *
$
8
$
11
$
3
$
22
Q2 2022 Actuals Print AdvancedMaterials
&Chemicals Brand Total Revenue
$
252
$
61
$
4
$
317
Operational EBITDA *
$
6
$
1
$
4
$
11
Q2 2023 vs. Q2 2022 ActualsB/(W) Print
AdvancedMaterials &Chemicals Brand Total
Revenue
$
(37
)
$
11
$
-
$
(26
)
Operational EBITDA *
$
2
$
10
$
(1
)
$
11
Q2 2023 Actuals on constant currency ** vs. Q2 2022
ActualsB/(W) Print AdvancedMaterials
&Chemicals Brand Total Revenue
$
(37
)
$
11
$
-
$
(26
)
Operational EBITDA *
$
2
$
10
$
(1
)
$
11
*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.
**Foreign currency had no impact on revenues or Operational
EBITDA for the three months ended June 30, 2023.
Effective February 2023 Kodak changed its organizational
structure. The Traditional Printing segment and the Digital
Printing segment were combined into one segment, named the Print
segment. No changes were made to Kodak's other segments. Eastman
Business Park segment is not a reportable segment and is excluded
from the table above.
About Kodak
Kodak (NYSE: KODK) is a leading global manufacturer focused on
commercial print and advanced materials & chemicals. With
79,000 worldwide patents earned over 130 years of R&D, we
believe in the power of technology and science to enhance what the
world sees and creates. Our innovative, award-winning products,
combined with our customer-first approach, make us the partner of
choice for commercial printers worldwide. Kodak is committed to
environmental stewardship, including industry leadership in
developing sustainable solutions for print. For additional
information on Kodak, visit us at kodak.com, or follow us on
Twitter @Kodak and LinkedIn.
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 words and
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 current expectations and
assumptions. Forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to
differ materially from historical results or those expressed in or
implied by such 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, 2022 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, 2023 and June
30, 2023, 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 strategic objectives, 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 obtain additional or alternate
financing if and as needed, Kodak’s continued ability to manage
world-wide cash through inter-company loans, distributions and
other mechanisms, and Kodak’s ability to provide or facilitate
financing for its customers; Kodak’s ability to fund continued
investments, capital needs, collateral requirements and
restructuring payments and service its debt and Series B Preferred
Stock and Series C Preferred Stock; changes in foreign currency
exchange rates, commodity prices, interest rates and tariff rates;
the impact of the global economic environment, including
inflationary pressures, medical epidemics such as the COVID-19
pandemic, geopolitical issues such as the war in Ukraine, and
Kodak’s ability to effectively mitigate the associated increased
costs of aluminum and other raw materials, energy, labor, shipping,
delays in shipment and production times, and fluctuations in
demand; the performance by third parties of their obligations to
supply products, components or services to Kodak and Kodak’s
ability to address supply chain disruptions and continue to obtain
raw materials and components available from single or limited
sources of supply, which may be adversely affected by the COVID-19
pandemic and the war in Ukraine; Kodak’s ability to comply with the
covenants in its various credit facilities; Kodak’s ability to
effectively anticipate technology and industry trends and develop
and market new products, solutions and technologies, including
products based on its technology and expertise that relate to
industries in which it does not currently conduct material
business; Kodak’s ability to effectively compete with large,
well-financed industry participants; Kodak’s ability to effect
strategic transactions, such as investments, acquisitions,
strategic alliances, divestitures and similar transactions, or to
achieve the benefits sought to be achieved from such strategic
transactions; Kodak’s ability to discontinue, sell or spin-off
certain non-core businesses or operations, or otherwise monetize
assets; the impact of the investigations, litigation and claims
arising out of the circumstances surrounding the announcement on
July 28, 2020, by the U.S. International Development Finance
Corporation of the signing of a non‐binding letter of interest to
provide a subsidiary of Kodak with a potential loan to support the
launch of an initiative for the manufacture of pharmaceutical
ingredients for essential generic drugs; and the potential impact
of force majeure events, cyber‐attacks or other data security
incidents that could disrupt or otherwise harm Kodak’s
operations.
Future events and other factors 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
In this second quarter 2023 financial results news release,
reference is made to the following non-GAAP financial measure of
Operational EBITDA.
Kodak believes that this non-GAAP measure represents an
important internal measure of performance. Accordingly, where it is
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 income
(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
and other; stock-based compensation expense; consulting and other
costs; idle costs; other operating income, net; interest expense;
and other charges (income), net.
The following table reconciles the most directly comparable GAAP
measure of Net Income to Operational EBITDA for the three months
ended June 30, 2023 and 2022, respectively:
(in millions) Q2 2023 Q2 2022 $ Change
% Improvement Net Income
$
35
$
20
$
15
75
%
All other
(1
)
(1
)
-
Depreciation and amortization
8
7
1
Restructuring costs and other (3)
5
-
5
Stock based compensation
1
1
-
Consulting and other costs (1)
(1
)
3
(4
)
Idle costs (2)
1
-
1
Other operating income, net
(1
)
-
(1
)
Interest expense (3)
11
10
1
Pension income excluding service cost component (3)
(41
)
(27
)
(14
)
Other charges (income), net (3)
3
(1
)
4
Provision (benefit) for income taxes (3)
2
(1
)
3
Operational EBITDA
$
22
$
11
$
11
100
%
Footnote Explanations:
(1)
Consulting and other costs are
primarily professional services and internal costs associated with
certain corporate strategic initiatives, investigations and
litigation. Consulting and other costs include $1 million of income
in the three months ended June 30, 2023 representing insurance
reimbursement of legal costs previously paid by the Company
associated with investigations and litigation matters.
(2)
Consists of third-party 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.
(3)
As reported in the Consolidated
Statement of Operations.
A. FINANCIAL STATEMENTS
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited) (in millions)
Three Months
Ended Six Months Ended June 30, June 30,
2023
2022
2023
2022
Revenues Sales
$
242
$
266
$
468
$
500
Services
53
55
105
111
Total revenues
295
321
573
611
Cost of revenues Sales
195
234
388
454
Services
37
36
72
73
Total cost of revenues
232
270
460
527
Gross profit
63
51
113
84
Selling, general and administrative expenses
40
41
74
84
Research and development costs
9
9
18
18
Restructuring costs and other
5
—
6
—
Other operating income
(1
)
—
—
—
Earnings (loss) from operations before interest expense, pension
income excluding service cost component, other charges (income),
net and income taxes
10
1
15
(18
)
Interest expense
11
10
22
19
Pension income excluding service cost component
(41
)
(27
)
(81
)
(57
)
Other charges (income), net
3
(1
)
(4
)
2
Earnings from operations before income taxes
37
19
78
18
Provision (benefit) for income taxes
2
(1
)
10
1
NET EARNINGS
$
35
$
20
$
68
$
17
The notes accompanying the financial statements contained in the
Company’s second quarter 2023 Form 10-Q are an integral part of
these consolidated financial statements.
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF FINANCIAL
POSITION (Unaudited) (in millions)
June
30, December 31, (in millions)
2023
2022
ASSETS Cash and cash equivalents
$
223
$
217
Trade receivables, net of allowances of $8 and $7, respectively
161
177
Inventories, net
252
237
Other current assets
36
48
Current assets held for sale
—
2
Total current assets
672
681
Property, plant and equipment, net of accumulated depreciation of
$463 and $450, respectively
155
154
Goodwill
12
12
Intangible assets, net
26
28
Operating lease right-of-use assets
36
39
Restricted cash
62
62
Pension and other postretirement assets
1,179
1,233
Other long-term assets
79
76
TOTAL ASSETS
$
2,221
$
2,285
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY Accounts payable, trade
$
129
$
134
Short-term borrowings and current portion of long-term debt
1
1
Current portion of operating leases
14
15
Other current liabilities
148
143
Total current liabilities
292
293
Long-term debt, net of current portion
324
316
Pension and other postretirement liabilities
231
230
Operating leases, net of current portion
28
31
Other long-term liabilities
172
171
Total liabilities
1,047
1,041
Commitments and Contingencies (Note 7) Redeemable,
convertible preferred stock, no par value, $100 per share
liquidation preference
207
203
Equity Common stock, $0.01 par value
—
—
Additional paid in capital
1,159
1,160
Treasury stock, at cost
(11
)
(11
)
Accumulated deficit
(502
)
(570
)
Accumulated other comprehensive income
321
462
Total shareholders’ equity
967
1,041
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY
$
2,221
$
2,285
The notes accompanying the financial statements contained in the
Company’s second quarter 2023 Form 10-Q are an integral part of
these consolidated financial statements.
Six Months Ended June 30, (in millions)
2023
2022
Cash flows from operating activities: Net earnings
$
68
$
17
Adjustments to reconcile to net cash provided by (used in)
operating activities: Depreciation and amortization
16
14
Pension income
(72
)
(49
)
Change in fair value of the Preferred Stock and ConvertibleNotes
embedded derivatives
2
(1
)
Non-cash changes in workers' compensation and otheremployee benefit
reserves
—
(8
)
Stock based compensation
5
3
Gain on sale of assets
(1
)
—
Increase (decrease) in deferred taxes
1
(2
)
Decrease (increase) in trade receivables
17
(26
)
Decrease in miscellaneous receivables
7
2
Increase in inventories
(11
)
(54
)
(Decrease) increase in trade accounts payable
(7
)
17
Decrease in liabilities excluding borrowings and trade payables
(9
)
(17
)
Other items, net
5
1
Total adjustments
(47
)
(120
)
Net cash provided by (used in) operating activities
21
(103
)
Cash flows from investing activities: Additions to
properties
(11
)
(9
)
Net cash used in investing activities
(11
)
(9
)
Cash flows from financing activities: Net Proceeds from Term
Loan Credit Agreement
-
49
Preferred stock cash dividend payments
(2
)
(2
)
Net cash (used in) provided by financing activities
(2
)
47
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(2
)
(5
)
Net increase (decrease) in cash, cash equivalents and restricted
cash
6
(70
)
Cash, cash equivalents and restricted cash, beginning of period
286
423
Cash, cash equivalents and restricted cash, end of period
$
292
$
353
The notes accompanying the financial statements contained in the
Company’s second quarter 2023 Form 10-Q are an integral part of
these consolidated financial statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808822222/en/
Media: Kurt Jaeckel, Kodak, +1 585-490-8646,
kurt.jaeckel@kodak.com
Investor: Anthony Redding, Kodak, +1 585-726-3506,
shareholderservices@kodak.com
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