Eastman Kodak Company (NYSE:KODK) today reported a net loss of $62
million for the second quarter of 2014, a $162 million improvement from
the $224 million net loss in the previous-year quarter.
Revenue in the quarter was $525 million, a decline of 10% from the $583
million of the previous-year quarter, with more than two-thirds of the
decline attributable to declines in the Consumer Inkjet and
Entertainment and Commercial Films mature businesses.
"Our progress continues. Kodak's overarching imperative is to achieve
the growth potential of our strategic technology businesses," said Jeff
Clarke, Chief Executive Officer. "Our products in packaging, digital
printing, digital plates and workflow software form the foundation of
the new Kodak, and are meeting our expectations for sales and margin
growth. We have taken significant steps to simplify processes and reduce
costs, which also will contribute to Kodak's long-term success.
"In cooperation with our partners UniPixel and Kingsbury, we have made
significant progress toward bringing our functional printing products
into commercial production. We have also worked with our motion picture
film customers to better position that business going forward. While we
are currently behind our expectations in these businesses, these actions
will position us well for 2015 and beyond.
"Based on a detailed review of first-half results, product and service
pipelines, brand licensing and intellectual property opportunities, and
anticipated cost savings, we believe we will be within the range of our
projections of between $2.1 and $2.3 billion in revenue and Operational
EBITDA of $145 to $165 million for the year."
"For the second half, we expect Kodak to return to year-over-year
revenue growth on the strength of anticipated double-digit growth in our
strategic technology businesses."
John McMullen, Chief Financial Officer, noted that liquidity remains
strong with cash of $768 million. Net cash used in operating activities
was $88 million for the second quarter, an improvement of $55 million
from the previous-year quarter. Year-to-date, net cash used in
operating activities is $270 million less than in 2013. Operational cash
flow is expected to be positive for the second half of the year.
Table 1: Kodak Earnings Summary
1Operational EBITDA is defined as Total Segment Earnings
(Loss) plus depreciation and amortization expense, and excluding the
reallocation of costs previously allocated to discontinued businesses,
the impact of fresh start accounting, stock-based compensation expense
and certain consulting costs. Total Segment Earnings (Loss) represents
the company's measure of segment earnings which excludes Restructuring
costs, Reorganization items, net, the Corporate components of pension
and OPEB expenses / income (as defined in the company's public filings
with regard to segment earnings information), other operating income
(expense), net, and other income and expenses.
Graphics, Entertainment & Commercial Films (GECF): The GECF
segment consists of the Graphics and Entertainment &
Commercial Films groups, as well as Kodak's intellectual property
and brand licensing activities.
Table 2: GECF Segment Financial Overview
The GECF segment had sales of $357 million, down 4% from the previous
year. Steep declines in sales of film more than offset gains in key
areas of the digital plates and workflow software businesses. Unit
volume in the digital plates business was up for the first time in a
quarter since 2011, led by KODAK SONORA Process Free Plates.
Kodak expects to quadruple the number of customers and volume for SONORA
Plates in 2014, as customers continue to switch to this breakthrough
technology platform. SONORA Plates remove the processing step -
providing environmental and economic benefits of saving water, waste and
electricity - without sacrificing quality, productivity or print
capability of traditional processed plates. The Workflow Solutions
business, which includes KODAK PRINERGY Workflow, the industry-leading
workflow software, continued to enjoy strong performance with revenues
up 9% in the quarter. Placements of CTP devices also increased for the
first time since 2011.
Sales of motion picture film continued an accelerated and sharp decline
in the quarter, challenging profitability of the business. Kodak has
worked with leaders of the motion picture industry to form a plan which
is designed to sustain the business while optimizing cash flow.
Operational EBITDA for GECF improved from $21 million to $33 million in
the quarter, an increase of 57% due to a gain in intellectual property
licensing, as well as volume increases in the Graphics business,
cost reductions and improved manufacturing productivity.
Digital Printing and Enterprise (DP&E): The DP&E Segment
consists of Digital Printing, Packaging and Functional Printing,
Enterprise Services & Solutions, and Consumer
Inkjet Systems businesses.
Table 3: Digital Printing & Enterprise Segment Financial
DP&E had sales of $168 million in the second quarter of 2014, a decline
of 15% from the $198 million of the previous-year quarter. A majority of
the decline was related to lower sales in the Consumer Inkjet
business. Revenues from legacy digital print systems also declined.
Placements of KODAK FLEXCEL NX Systems for package printing continued to
enjoy robust growth, on track with guidance for a 25% increase in the
installed base during 2014. Volume for FLEXCEL NX Plates in the quarter
was up by 26%. During the quarter, Kodak announced an extension of the
availability of the FLEXCEL NX System to the corrugated packaging
category, which makes up nearly 40% of the printed packaging market.
Revenue from the KODAK PROSPER Portfolio increased 10% in the quarter,
with equipment placements on track to meet the projection of more than
40 press systems in place by end of year. The market has shown strong
interest in the recently announced KODAK PROSPER 6000 Presses, which
provide high levels of reliability, application flexibility and print
speeds up to 1,000 feet per minute, the fastest of any full-color
commercial inkjet press.
Operational EBITDA for the DP&E Segment declined from earnings of $4
million to a loss of $9 million in the quarter, largely as a result of
the decrease in consumer inkjet ink sales, as well as declines in the
legacy digital printing businesses that offset gains in the PROSPER and
FLEXCEL Systems portfolios.
Kodak is a technology company focused on imaging for business. We
provide innovative hardware, software, consumables and services to
customers in graphic communications, packaging and functional printing.
We also serve entertainment and commercial films markets. With our
world-class R&D organization and extensive product portfolio, Kodak is
helping customers around the globe to grow their own businesses in a
sustainable way. For additional information on Kodak, visit us at kodak.com,
follow us on Twitter @Kodak,
or like us on Facebook at KodakNow.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document includes "forward-looking statements" as that term is
defined under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning the Company's
plans, objectives, goals, strategies, future events, future revenue or
performance, capital expenditures, liquidity, investments, financing
needs, business trends, and other information that is not historical
information. When used in this document, the words "estimates,"
"expects," "anticipates," "projects," "plans," "intends," "believes,"
"predicts", "forecasts," or future or conditional verbs, such as "will,"
"should," "could," or "may," and variations of such words or similar
expressions are intended to identify forward-looking statements. All
forward-looking statements, including, without limitation, management's
examination of historical operating trends and data are based upon the
Company's expectations and various assumptions. Future events or results
may differ from those anticipated or expressed in these forward-looking
statements. Important factors that could cause actual events or results
to differ materially from these forward-looking statements include,
among others, the risks and uncertainties described in more detail in
the Company's Annual Report on Form 10-K for the year ended December 31,
2013, under the headings "Business," "Risk Factors," and/or
"Management's Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources," and those described in
other filings the Company makes with the SEC from time to time, as well
as the following: the Company's ability to improve and sustain its
operating structure, financial results and profitability; the ability of
the Company to achieve cash forecasts, financial projections, and
projected growth; our ability to achieve the financial and operational
results contained in our business plans; the ability of the Company to
discontinue or sell certain non-core businesses or operations; the
Company's ability to comply with the covenants in its credit facilities;
our ability to obtain additional financing if and as needed; any
potential adverse effects of the Chapter 11 proceedings on the Company's
brand or business prospects; the Company's ability to fund continued
investments, capital needs, restructuring payments and service its debt;
changes in foreign currency exchange rates, commodity prices and
interest rates; the resolution of claims against the Company; our
ability to attract and retain key executives, managers and employees;
our ability to maintain product reliability and quality and growth in
relevant markets; our ability to effectively anticipate technology
trends and develop and market new products, solutions and technologies;
and the impact of the global economic environment on the Company. There
may be other factors that may cause the Company's actual results to
differ materially from the forward-looking statements. All
forward-looking statements attributable to the Company or persons acting
on its behalf apply only as of the date of this document and are
expressly qualified in their entirety by the cautionary statements
included in this document. The Company 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.
A. NON-GAAP MEASURES
In this second quarter financial results news release, reference is made
to certain non-GAAP financial measures of Operational EBITDA.
The Company 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 the company, its
financial condition, results of operations and cash flow.
The following reconciliations are provided with respect to terms used in
this second quarter financial results news release.
The following tables reconcile Operational EBITDA, Graphics,
Entertainment and Commercial Films ("GECF") Operational EBITDA, and
Digital Printing and Enterprise ("DP&E") Operational EBITDA to the most
directly comparable GAAP measure of net loss (earnings) attributable to
Eastman Kodak Company for the three months and six months ended June 30,
2014 and 2013, respectively:
Restructuring costs and other (including restructuring related
reported in cost of sales)
(1) Composed of interest cost, expected return on plan assets,
amortization of actuarial gains and losses, amortization of prior
service credits related to the U.S. Postretirement Benefit Plan and
special termination benefits, curtailments and settlement components of
pension and other postretirement benefit expenses, except for
settlements in connection with the Chapter 11 bankruptcy proceedings
that are recorded in Reorganization items, net and curtailments and
settlements included in Earnings (loss) from discontinued operations,
net of income taxes in the Consolidated Statement of Operations.
B. FINANCIAL STATEMENTS
Segment (Loss) Earnings and Consolidated (Loss) Earnings from
Continuing Operations before Income Taxes
The notes accompanying the Company's second quarter 2014 Form 10-Q are
an integral part of these consolidated financial statements.
(Loss) earnings from continuing operations before
interest expense, other income (charges), net,
reorganization items, net and income taxes
NET (LOSS) EARNINGS ATTRIBUTABLE TO
EASTMAN KODAK COMPANY
Property, plant and equipment, net of accumulated depreciation of
and $67, respectively
Intangible assets, net of accumulated amortization of $21 and $8,
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