Eastman Kodak Company (NYSE: KODK) today reported financial
results for the second quarter 2022, including consolidated
revenues of $321 million and continued growth in key product KODAK
SONORA Process Free Plates.
Second-quarter 2022 highlights include:
- Consolidated revenues of $321 million, compared with $291
million for Q2 2021
- GAAP net income of $20 million, compared with $16 million for
Q2 2021
- Operational EBITDA of $11 million, compared with $10 million
for Q2 2021
- A quarter-end cash balance of $289 million, compared with $362
million at the end of 2021
“Kodak delivered year-over-year growth in revenues and
quarter-sequential growth in gross profit for the second quarter of
2022, despite ongoing inflationary and supply chain challenges,”
said Jim Continenza, Kodak’s Executive Chairman and CEO. “We
continue to invest in digital print technologies designed to help
our customers mitigate cost and supply risks associated with
traditional prepress. We have launched the KODAK PROSPER 7000 Turbo
Press, the world’s fastest inkjet press, and the KODAK ASCEND
Digital Press, the perfect solution for the growing retail/point of
purchase and high-end packaging markets. We have also officially
launched two products powered by our groundbreaking ULTRASTREAM
inkjet technology: the KODAK PROSPER ULTRA 520 Press, which offers
offset print quality in a smaller footprint, and the first flexible
package printing system, the UTECO Sapphire EVO W Press. In
addition, we continue to make significant investments in recently
announced growth initiatives in our Advanced Materials &
Chemicals business, expanding our pilot coating facility and taking
a minority stake in Wildcat Discovery Technologies, Inc., a private
technology company that uses proprietary methods to research and
develop new battery materials and is developing a breakthrough EV
‘super cell’ battery technology. Looking forward, we’ll continue to
focus on driving profitable revenue by concentrating on our core
businesses and helping our customers build theirs.”
For the quarter ended June 30, 2022, revenues were $321 million,
an improvement of $30 million compared to the same period in 2021.
The Company had GAAP net income of $20 million for the quarter,
compared to $16 million in the prior-year quarter. Operational
EBITDA for the second quarter was $11 million, compared to $10
million in Q2 2021. Operational EBITDA was favorably impacted by
the growth in revenue due to improved pricing and volume, partially
offset by higher continued ongoing global cost increases.
On June 15, 2022, Kodak exercised its right to draw down in full
an additional $50 million in aggregate principal pursuant to the
Term Loan Credit Agreement and received net proceeds of $49
million. Kodak ended the second quarter with a cash balance of $289
million, a net decrease of $73 million from December 31, 2021. The
decrease is primarily attributable to increases in working capital,
the impact of higher costs and increased capital investment. In
July 2022, Kodak invested $25 million of the proceeds received from
the delayed draw term loans to acquire the minority stake in
Wildcat.
“The use of cash in the second quarter primarily reflects higher
inventory levels which strengthen our ability to serve our
customers and support increased revenues. As planned, the Company
also continues to invest in new product innovations and growth
areas,” said David Bullwinkle, Kodak’s CFO. “Key metrics from the
second quarter, such as increasing revenues and gross profit on
both a year-over-year and quarter-sequential basis, reflect the
successful ongoing execution of our long-term strategy.”
Revenue and Operational EBITDA by Reportable Segment Q2 2022
vs. Q2 2021
($ millions) Q2 2022 Actuals Traditional
Printing Digital Printing Advanced Materials &
Chemicals Brand Total Revenue
$
194
$
58
$
61
$
4
$
317
Operational EBITDA *
$
10
$
(4
)
$
1
$
4
$
11
Q2 2021 Actuals Traditional Printing
Digital Printing Advanced Materials & Chemicals
Brand Total Revenue
$
169
$
62
$
54
$
3
$
288
Operational EBITDA *
$
6
$
-
$
1
$
3
$
10
Q2 2022 vs. Q2 2021 ActualsB/(W) Traditional
Printing Digital Printing Advanced Materials &
Chemicals Brand Total Revenue
$
25
$
(4
)
$
7
$
1
$
29
Operational EBITDA *
$
4
$
(4
)
$
-
$
1
$
1
Q2 2022 Actuals on constant currency ** vs. Q2 2021
ActualsB/(W) Traditional Printing Digital
Printing Advanced Materials & Chemicals Brand
Total Revenue
$
40
$
(1
)
$
8
$
1
$
48
Operational EBITDA *
$
6
$
(4
)
$
1
$
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 June 30, 2021, rather than the actual average exchange
rates in effect for the three months ended June 30, 2022.
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
31,000 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-second 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, 2021 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, 2022 and June
30, 2022, 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 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 B Preferred Stock and Series C Preferred Stock;
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; the impact of the global economic environment or medical
epidemics such as the COVID-19 pandemic, including the restrictions
and other actions taken in response to the COVID-19 pandemic, and
Kodak’s ability to effectively mitigate or recoup associated
increased costs of materials, labor, shipping and operations; the
impacts of the war in Ukraine and the international response
thereto on Kodak’s business and operations, including the cost of
and availability of aluminum and other raw materials and
components, shipping costs, transit times and energy costs; changes
in foreign currency exchange rates, commodity prices, interest
rates and tariff rates; 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; 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; continued
sufficient availability of borrowings and letters of credit under
Kodak’s asset based credit facility and letter of 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; 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; 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
A. NON-GAAP MEASURES
In this second quarter 2022 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 income
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 (income) 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 June 30, 2021, rather than the actual
average exchange rates in effect for the three months ended June
30, 2022.
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 June 30,
2022 and 2021, respectively:
(in millions) Q2 2022 Q2 2021 $ Change
Net Income
$
20
$
16
$
4
All other
(1
)
(1
)
-
Depreciation and amortization
7
8
(1
)
Stock based compensation
1
1
-
Consulting and other costs (1)
3
4
(1
)
Other operating income, net
-
(6
)
6
Interest expense (2)
10
10
-
Pension income excluding service cost component (2)
(27
)
(26
)
(1
)
Other (income) charges, net (2)
(1
)
1
(2
)
(Benefit) Provision for income taxes (2)
(1
)
3
(4
)
Operational EBITDA
$
11
$
10
$
1
Impact of foreign exchange (3)
3
3
Operational EBITDA on a constant currency basis
$
14
$
10
$
4
Footnote Explanations:
(1)
Consulting and other costs are primarily
professional services and internal costs associated with certain
corporate strategic initiatives, investigations and litigation
(2)
As reported in the Consolidated Statement
of Operations.
(3)
The impact of foreign exchange is
calculated by using average foreign exchange rates for the three
months ended June 30, 2021, rather than the actual average exchange
rates in effect for the three months ended June 30, 2022.
B. FINANCIAL STATEMENTS
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
OPERATIONS (Unaudited) (in millions) Three Months
Ended June 30, Six Months Ended June 30,
2022
2021
2022
2021
Revenues Sales
$
266
$
234
$
500
$
443
Services
55
57
111
113
Total revenues
321
291
611
556
Cost of revenues Sales
234
204
454
389
Services
36
39
73
79
Total cost of revenues
270
243
527
468
Gross profit
51
48
84
88
Selling, general and administrative expenses
41
42
84
88
Research and development costs
9
8
18
16
Restructuring costs and other
—
—
—
1
Other operating income, net
—
(6
)
—
(7
)
Earnings (loss) from continuing operations before interest expense,
pension income excluding service cost component, other (income)
charges, net and income taxes
1
4
(18
)
(10
)
Interest expense
10
10
19
14
Pension income excluding service cost component
(27
)
(26
)
(57
)
(51
)
Other (income) charges, net
(1
)
1
2
1
Earnings from continuing operations before income taxes
19
19
18
26
(Benefit) Provision for income taxes
(1
)
3
1
4
Net income
$
20
$
16
$
17
$
22
The notes accompanying the financial statements contained in the
Company’s second quarter 2022 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,
2022
2021
ASSETS Cash and cash equivalents
$
289
$
362
Trade receivables, net of allowances of $7 and $7, respectively
191
175
Inventories, net
262
219
Other current assets
44
49
Current assets held for sale
2
2
Total current assets
788
807
Property, plant and equipment, net of accumulated depreciation of
$443 and $441, respectively
145
140
Goodwill
12
12
Intangible assets, net
32
34
Operating lease right-of-use assets
43
47
Restricted cash
57
54
Pension and other postretirement assets
1,181
1,022
Other long-term assets
51
55
TOTAL ASSETS
$
2,309
$
2,171
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY Accounts payable, trade
$
168
$
153
Short-term borrowings and current portion of long-term debt
1
1
Current portion of operating leases
12
13
Other current liabilities
137
142
Total current liabilities
318
309
Long-term debt, net of current portion
308
253
Pension and other postretirement liabilities
358
382
Operating leases, net of current portion
39
45
Other long-term liabilities
186
205
Total liabilities
1,209
1,194
Commitments and Contingencies (Note 7) Redeemable,
convertible preferred stock, no par value, $100 per share
liquidation preference
199
196
Equity Common stock, $0.01 par value
—
—
Additional paid in capital
1,164
1,166
Treasury stock, at cost
(10
)
(10
)
Accumulated deficit
(579
)
(596
)
Accumulated other comprehensive income
326
221
Total shareholders' equity
901
781
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY
$
2,309
$
2,171
The notes accompanying the financial statements contained in the
Company’s second quarter 2022 Form 10-Q are an integral part of
these consolidated financial statements.
EASTMAN KODAK COMPANY CONSOLIDATED STATEMENT OF
CASH FLOWS (Unaudited) (in millions) Six
Months Ended June 30,
2022
2021
Cash flows from operating activities: Net income
$
17
$
22
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization
14
16
Pension income
(49
)
(42
)
Change in fair value of the Preferred Stock and Convertible Notes
embedded derivatives
(1
)
-
Non-cash changes in workers' compensation reserves
(8
)
(3
)
Stock based compensation
3
4
Increase in deferred taxes
(2
)
-
(Increase) decrease in trade receivables
(26
)
1
Increase in inventories
(54
)
(30
)
Increase in trade payables
17
27
Decrease in liabilities excluding borrowings and trade payables
(17
)
(20
)
Other items, net
3
4
Total adjustments
(120
)
(43
)
Net cash used in operating activities
(103
)
(21
)
Cash flows from investing activities: Additions to properties
(9
)
(5
)
Net cash used in investing activities
(9
)
(5
)
Cash flows from financing activities: Net proceeds from Term Loan
Credit Agreement
49
215
Net proceeds from Convertible Notes
-
25
Net proceeds from Series C Preferred Stock
-
99
Proceeds from sale of common stock
-
10
Repurchase of Series A Preferred Stock
-
(100
)
Debt issuance costs
-
(2
)
Preferred stock cash dividend payments
(2
)
(5
)
Treasury stock purchases
-
(1
)
Net cash provided by financing activities
47
241
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(5
)
(2
)
Net (decrease) increase in cash, cash equivalents and restricted
cash
(70
)
213
Cash, cash equivalents and restricted cash, beginning of period
423
256
Cash, cash equivalents and restricted cash, end of period
$
353
$
469
The notes accompanying the financial statements contained in the
Company’s second quarter 2022 Form 10-Q are an integral part of
these consolidated financial statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220809005871/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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