Eastman Kodak Company (NYSE: KODK) today reported financial
results for the third quarter 2023.
Third quarter 2023 highlights include:
- Consolidated revenues of $269 million, compared with $289
million for Q3 2022, a decrease of $20 million or 7 percent
- Gross profit of $50 million, compared to $43 million for Q3
2022, an increase of $7 million or 16 percent
- Gross profit percentage of 19 percent, compared with 15 percent
for Q3 2022
- GAAP net income of $2 million, flat compared with Q3 2022
- Operational EBITDA of $12 million, compared with $7 million for
Q3 2022, an increase of $5 million or 71 percent
- A quarter-end cash balance of $246 million, compared with $217
million on December 31, 2022, an increase of $29 million. Cash flow
from operations improved $151 million in the nine months ended
September 30, 2023, compared with the prior-year period
“Kodak continued to execute its long-term plan and deliver
strong results in the third quarter despite ongoing, extraordinary
challenges including inflation, high interest rates, bank failures,
labor shortages and now a new war,” said Jim Continenza, Kodak’s
Executive Chairman and CEO. “As business conditions continued to
worsen, we continued to improve our performance, adapting to
circumstances never encountered before and making the changes
necessary to deliver increases in gross profit and Operational
EBITDA year over year for the fourth consecutive quarter. Through
it all, we have continued to focus on driving operational
efficiency and smart revenue and investing in initiatives that
leverage our strengths as an industrial manufacturer. Our
investments in growth initiatives in our Advanced Materials &
Chemicals group have resulted in increasing contributions from
those businesses, and our investments in print have resulted in the
introduction of groundbreaking inkjet presses capable of replacing
offset technology. I’m extremely proud of our remarkable ability to
build a strong foundation and continue our momentum in the face of
unprecedented headwinds, and I’d like to thank our employees for
their hard work and resilience and our customers for their loyalty
and support during this period.”
For the quarter ended September 30, 2023, revenues were $269
million, a decline of $20 million or 7 percent compared to the same
period in 2022. GAAP net income was $2 million for the quarter,
flat compared with Q3 2022. Operational EBITDA for the third
quarter of 2023 was $12 million, compared with $7 million in the
prior-year period. The increase was primarily driven by improved
profitability related to pricing rationalization and improved
operational efficiency executing on cost controls partially offset
by higher continued ongoing global cost increases and lower
volumes.
The company ended the third quarter with a cash balance of $246
million, compared with $217 million on December 31, 2022, an
increase of $29 million. Cash flow from operations improved $151
million in the nine months ended September 30, 2023 compared with
the prior-year period, primarily driven by improved profitability
and changes in working capital strategies.
“Kodak’s cash performance continued to show improvement for the
year-to-date period,” said David Bullwinkle, Kodak’s CFO. “For the
nine-months ended September 30, 2023, cash increased $29 million,
compared with a decrease of $146 million in the prior-year period,
an improvement of $175 million in cash flow. Following two years of
revenue growth, we’ve shifted our focus to generating smart revenue
which, along with productivity gains, enabled us to improve our
year-over-year gross profit percentage for the third quarter from
15% to 19%. Although there are more headwinds on the horizon, we
will stay committed to executing our long-term strategic plan:
investing in innovation, improving efficiency and focusing on
meeting the needs of our customers.”
Revenue and Operational EBITDA by Reportable Segment Q3 2023
vs. Q3 2022
($ millions)
Q3 2023 Actuals
Print
Advanced
Materials &
Chemicals
Brand
Total
Revenue
$
196
$
64
$
4
$
264
Operational EBITDA *
$
4
$
4
$
4
$
12
Q3 2022 Actuals
Print
Advanced
Materials &
Chemicals
Brand
Total
Revenue
$
224
$
58
$
3
$
285
Operational EBITDA *
$
1
$
3
$
3
$
7
Q3 2023 vs. Q3 2022
Actuals
B/(W)
Print
Advanced
Materials &
Chemicals
Brand
Total
Revenue
$
(28
)
$
6
$
1
$
(21
)
Operational EBITDA *
$
3
$
1
$
1
$
5
Q3 2023 Actuals on constant
currency ** vs. Q3 2022 Actuals
B/(W)
Print
Advanced
Materials &
Chemicals
Brand
Total
Revenue
$
(33
)
$
5
$
1
$
(27
)
Operational EBITDA *
$
3
$
-
$
1
$
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 foreign
exchange impact using average foreign exchange rates for the three
months ended September 30, 2022, rather than the actual average
exchange rates in effect for the three months ended September 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, June
30, 2023 and September 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 COVID-19,
geopolitical issues such as the war in Ukraine and conflict
involving Israel, 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; Kodak’s ability to effectively compete
with large, well-financed industry participants or with competitors
whose cost structure is lower than Kodak’s; 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 COVID-19, the war in Ukraine and the conflict
involving Israel; 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
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 third quarter 2023 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 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
from continuing operations excluding the (benefit) 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; loss on extinguishment of debt; interest
expense; 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, 2022, rather than the actual
average exchange rates in effect for the three months ended
September 30, 2023.
The following table reconciles the most directly comparable GAAP
measure of Net Income to Operational EBITDA and Operational EBITDA
on a constant currency basis for the three months ended September
30, 2023 and 2022, respectively:
(in millions) Q3 2023 Q3 2022 $ Change
% Improvement Net Income
$
2
$
2
$
-
0
%
All other
(2
)
(1
)
(1
)
Depreciation and amortization
7
8
(1
)
Restructuring costs and other (1)
3
3
-
Stock based compensation
1
1
-
Consulting and other costs (2)
1
2
(1
)
Idle costs (3)
-
1
(1
)
Interest expense (4)
14
10
4
Pension income excluding service cost component (4)
(41
)
(20
)
(21
)
Loss in extinguishment of debt (4)
27
-
27
Other charges, net (4)
2
-
2
(Benefit) provision for income taxes (4)
(2
)
1
(3
)
Operational EBITDA
$
12
$
7
$
5
71
%
Impact of foreign exchange (5)
(1
)
(1
)
Operational EBITDA on a constant currency basis
$
11
$
7
$
4
57
%
Footnote Explanations:
(1)
Restructuring costs and other for
the three months ended September 30, 2023 included $1 million
reported as Restructuring costs and other and $2 million
representing inventory write-downs which were reported as Cost of
revenues.
(2)
Consulting and other costs are
primarily professional services and internal costs associated with
certain corporate strategic initiatives, investigations and
litigation. Consulting and other costs includes $1 million of
income in the three months ended September 30, 2023 representing
insurance reimbursement of legal costs previously paid by the
Company associated with investigations and litigation matters.
(3)
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.
(4)
As reported in the Consolidated
Statement of Operations.
(5)
The impact of foreign exchange is
calculated by using average foreign exchange rates for the three
months ended September 30, 2022, rather than the actual average
exchange rates in effect for the three months ended September 30,
2023.
A. FINANCIAL STATEMENTS
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited) (in millions, except per share
data)
Three Months Ended Nine Months Ended
September 30, September 30,
2023
2022
2023
2022
Revenues Sales
$
220
$
234
$
688
$
734
Services
49
55
154
166
Total revenues
269
289
842
900
Cost of revenues Sales
183
208
571
662
Services
36
38
108
111
Total cost of revenues
219
246
679
773
Gross profit
50
43
163
127
Selling, general and administrative expenses
40
39
114
123
Research and development costs
7
8
25
26
Restructuring costs and other
1
3
7
3
Earnings (loss) from operations before interest expense, pension
income excluding service cost component, loss on extinguishment,
other charges (income), net and income taxes
2
(7
)
17
(25
)
Interest expense
14
10
36
29
Pension income excluding service cost component
(41
)
(20
)
(122
)
(77
)
Loss on extinguishment of debt
27
—
27
—
Other charges (income), net
2
—
(2
)
2
Earnings from operations before income taxes
—
3
78
21
(Benefit) provision for income taxes
(2
)
1
8
2
NET EARNINGS
$
2
$
2
$
70
$
19
Basic net (loss) earnings per share attributable to Eastman
Kodak Company common shareholders
$
-
$
(0.01
)
$
0.68
$
0.11
Diluted net (loss) earnings per share attributable to
Eastman Kodak Company common shareholders
$
-
$
(0.01
)
$
0.64
$
0.11
The notes accompanying the financial statements contained in the
Company’s third quarter 2023 Form 10-Q are an integral part of
these consolidated financial statements.
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF FINANCIAL
POSITION (Unaudited)
September 30,
December 31,
(in millions)
2023
2022
ASSETS Cash and cash equivalents
$
246
$
217
Trade receivables, net of allowances of $7 in both periods
191
177
Inventories, net
239
237
Other current assets
34
48
Current assets held for sale
2
2
Total current assets
712
681
Property, plant and equipment, net of accumulated depreciation of
$458 and $450, respectively
161
154
Goodwill
12
12
Intangible assets, net
25
28
Operating lease right-of-use assets
33
39
Restricted cash
119
62
Pension and other postretirement assets
1,212
1,233
Other long-term assets
83
76
TOTAL ASSETS
$
2,357
$
2,285
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY Accounts payable, trade
$
124
$
134
Short-term borrowings and current portion of long-term debt
1
1
Current portion of operating leases
13
15
Other current liabilities
131
143
Current liabilities held for sale
2
—
Total current liabilities
271
293
Long-term debt, net of current portion
451
316
Pension and other postretirement liabilities
225
230
Operating leases, net of current portion
26
31
Other long-term liabilities
217
171
Total liabilities
1,190
1,041
Commitments and Contingencies (Note 8) Redeemable,
convertible preferred stock, no par value, $100 per share
liquidation preference
208
203
Equity Common stock, $0.01 par value
—
—
Additional paid in capital
1,158
1,160
Treasury stock, at cost
(11
)
(11
)
Accumulated deficit
(500
)
(570
)
Accumulated other comprehensive income
312
462
Total shareholders’ equity
959
1,041
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY
$
2,357
$
2,285
The notes accompanying the financial statements contained in the
Company’s third quarter 2023 Form 10-Q are an integral part of
these consolidated financial statements.
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited) Nine Months Ended September
30, (in millions)
2023
2022
Cash flows from operating activities: Net earnings
$
70
$
19
Adjustments to reconcile to net cash provided by (used in)
operating activities: Depreciation and amortization
23
22
Pension income
(109
)
(64
)
Change in fair value of the Preferred Stock and Convertible Notes
embedded derivatives
2
(1
)
Non-cash changes in workers' compensation and other employee
benefit reserves
(3
)
(13
)
Stock based compensation
6
4
Gain on sale of assets
(1
)
—
Loss on extinguishment of debt
27
—
Decrease in deferred taxes
—
(3
)
Increase in trade receivables
(16
)
(7
)
Decrease in miscellaneous receivables
10
1
Increase in inventories
(4
)
(74
)
(Decrease) increase in trade accounts payable
(15
)
5
Increase (decrease) in liabilities excluding borrowings and trade
payables
23
(26
)
Other items, net
8
7
Total adjustments
(49
)
(149
)
Net cash provided by (used in) operating activities
21
(130
)
Cash flows from investing activities: Additions to
properties
(15
)
(19
)
Purchase of equity interest
—
(25
)
Net cash used in investing activities
(15
)
(44
)
Cash flows from financing activities: Net proceeds from
Amended and Restated Term Loan Credit Agreement
435
—
Net proceeds from Original Term Loan Credit Agreement
—
49
Repayment of Original Term Loan Credit Agreement
(316
)
—
Repayment of Convertible Notes
(28
)
—
Other debt acquisition costs
(1
)
—
Preferred stock cash dividend payments
(3
)
(3
)
Treasury stock purchases
—
(1
)
Net cash provided by financing activities
87
45
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(5
)
(14
)
Net increase (decrease) in cash, cash equivalents and restricted
cash
88
(143
)
Cash, cash equivalents and restricted cash, beginning of period
286
423
Cash, cash equivalents and restricted cash, end of period
$
374
$
280
The notes accompanying the financial statements contained in the
Company’s third 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/20231108705404/en/
Media: Kurt Jaeckel, Kodak, +1 585-490-8646,
kurt.jaeckel@kodak.com
Investors: Anthony Redding, Kodak, +1 585-726-3506,
shareholderservices@kodak.com
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