Business Wire | Nov 9, 2021 04:10PM EST

Kodak Reports Third-Quarter 2021 Financial Results

Nov. 09, 2021

ROCHESTER, N.Y.--(BUSINESS WIRE)--Nov. 09, 2021--Eastman Kodak Company (NYSE: KODK) today reported financial results for the third quarter 2021, including consolidated revenues of $287 million and continued growth in key product areas.

Third-quarter 2021 highlights include:

* Consolidated revenues of $287 million * GAAP net income of $8 million * The Company ended the quarter with a cash balance of $380 million

"I'm pleased with our continued improvement in the third quarter despite challenges posed by supply chain issues, labor shortages and inflationary pressures," said Jim Continenza, Kodak's Executive Chairman and CEO. "Our core print business has achieved increased market share in environmentally-friendly process-free plates and we are well positioned to continue growing that important segment. Looking forward, we'll continue to execute our go-to-market strategy focused on driving profitable revenue and growth."

For the quarter ended September 30, 2021, revenues were $287 million, an improvement of $35 million compared to the prior-year quarter. Kodak ended the third quarter with a cash balance of $380 million, an increase of $184 million from December 31, 2020. GAAP net income was $8 million for the third quarter, compared to a net loss of $445 million in the third quarter 2020. The prior year quarter 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 for the quarter was $6 million compared to negative $1 million in the prior-year quarter.

"During the third quarter we continued to see strong growth in our key product areas, including SONORA Process Free Plates volume and PROSPER annuities which were up 35 and 17 percent respectively compared to the prior-year quarter," said David Bullwinkle, Kodak's CFO. "Kodak used $15 million in cash for the quarter, primarily driven by ongoing global cost increases which we are taking actions to address. We will continue to execute on our long-term plan - focusing on our core businesses and investing in future growth."

Revenue and Operational EBITDA by Reportable Segment Q3 2021 vs. Q3 2020

($ millions) AdvancedQ3 2021 Actuals Traditional Digital Materials Brand Total Printing Printing & ChemicalsRevenue $ 166 $ 58 $ 55 $ 4 $ 283

Operational EBITDA * $ 5 $ (2 ) $ - $ 3 $ 6

AdvancedQ3 2020 Actuals Traditional Digital Materials Brand Total Printing Printing & ChemicalsRevenue $ 146 $ 56 $ 44 $ 3 $ 249

Operational EBITDA * $ 5 $ (3 ) $ (6 ) $ 3 $ (1 )

AdvancedQ3 2021 vs. Q3 2020 Actuals Traditional Digital Materials Brand TotalB/(W) Printing Printing & ChemicalsRevenue $ 20 $ 2 $ 11 $ 1 $ 34

Operational EBITDA * $ - $ 1 $ 6 $ - $ 7

Q3 2021 Actuals on constant Advancedcurrency **^ vs. Q3 2020 Traditional Digital Materials Brand TotalActuals Printing Printing &B/(W) ChemicalsRevenue $ 19 $ 1 $ 11 $ 1 $ 32

Operational EBITDA * $ 1 $ 1 $ 6 $ - $ 8

* 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 2021 foreign exchange impact using average foreign exchange rates for the three months ended September 30, 2020, rather than the actual average exchange rates in effect for the three months ended September 30, 2021.

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, 2020 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, 2021, June 30, 2021 and September 30, 2021, 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 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 implemented to fight the COVID-19 pandemic, and Kodak's ability to effectively counteract or recoup associated increased costs of materials, labor, shipping and operations; the impact of the investigations, litigations and claims arising out of the circumstances surrounding the announcement by the U.S. International Development Finance Corporation in July 2020 of a potential loan to a subsidiary of Kodak to support the launch of a pharmaceutical initiative; changes in foreign currency exchange rates, commodity prices, interest rates and tariff 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 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; the potential impact of cyber-attacks and other data security incidents that disrupt Kodak's operations; and Kodak's ability to effect strategic transactions such as acquisitions, strategic alliances, divestitures 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 2021 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; loss on early extinguishment of debt, 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 expense (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 September 30, 2020, rather than the actual average exchange rates in effect for the three months ended September 30, 2021.

The following table reconciles the most directly comparable GAAP measure of Net Income (Loss) to Operational EBITDA and Operational EBITDA on a constant currency basis for the three months ended September 30, 2021 and 2020, respectively:

(in millions) Q3 2021 Q3 2020 $ ChangeNet Income (Loss) $ 8 $ (445 ) $ 453

Depreciation and amortization 7 9 (2 )

Restructuring costs and other ^(1) - 1 (1 )

Stock based compensation 2 17 (15 )

Consulting and other costs ^(2) 4 4 -

Idle costs ^(3) 1 1 -

Other operating expense, net, excluding income from 1 - 1 transition services agreement ^(4)Interest expense ^(1) 9 3 6

Pension income excluding service cost component^ (25 ) (26 ) 1 (1)Loss on early extinguishment of debt ^(1) - 2 (2 )

Other (income) charges, net ^(1) (2 ) 432 (434 )

Provision for income taxes ^(1) 1 1 -

Operational EBITDA $ 6 $ (1 ) $ 7

Impact of foreign exchange ^(5) 1 1

Operational EBITDA on a constant currency basis $ 7 $ (1 ) $ 8

Footnote Explanations:

(1) As reported in the Consolidated Statement of Operations. Consulting and other costs are primarily professional services and(2) internal costs associated with certain corporate strategic initiatives, investigations and litigation.

Consists of costs such as security, maintenance, and utilities required(3) 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 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. No income has been recognized in(4) 2021. The income was reported in Other operating expense (income), net in the Consolidated Statement of Operations. Other operating expense (income), net is typically excluded from the segment measure. However, the income from the transition services agreement was included in the segment measure.

The impact of foreign exchange is calculated by using average foreign(5) exchange rates for the three months ended September 30, 2020, rather than the actual average exchange rates in effect for the three months ended September 30, 2021.

B. FINANCIAL STATEMENTS

EASTMAN KODAK COMPANYCONSOLIDATED STATEMENT OF OPERATIONS(Unaudited)(in millions) Three Months Nine Months Ended Ended September September 30, 30, 2021 2020 2021 2020

RevenuesSales $ 231 $ 195 $ 674 $ 568

Services 56 57 169 164

Total revenues 287 252 843 732

Cost of revenuesSales 206 183 595 533

Services 38 38 117 111

Total cost of revenues 244 221 712 644

Gross profit 43 31 131 88

Selling, general and administrative 43 56 131 138 expensesResearch and development costs 8 8 24 25

Restructuring costs and other - 1 1 9

Other operating (expense) income, net 1 (1 ) (6 ) (11 )

Loss from continuing operations beforeinterest expense, pension income (9 ) (33 ) (19 ) (73 )excluding service cost component, loss onearly extinguishment of debt, other(income) charges, net and income taxesInterest expense 9 3 23 11

Pension income excluding service cost (25 ) (26 ) (76 ) (79 )componentLoss on early extinguishment of debt - 2 - 2

Other (income) charges, net (2 ) 432 (1 ) 387

Earnings (loss) from continuing 9 (444 ) 35 (394 )operations before income taxesProvision for income taxes 1 1 5 167

Net income (loss) $ 8 $ (445 ) $ 30 $ (561 )

The notes accompanying the financial statements contained in the Company's third quarter 2021 Form 10-Q are an integral part of these consolidated financial statements.

EASTMAN KODAK COMPANYCONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)(in millions) September December 30, 31, 2021 2020

ASSETSCash and cash equivalents $ 380 $ 196

Trade receivables, net of allowances of $8 and $10, 167 177 respectivelyInventories, net 240 206

Other current assets 47 46

Current assets held for sale 2 2

Total current assets 836 627

Property, plant and equipment, net of accumulated 140 152 depreciation of $440 and $430, respectivelyGoodwill 12 12

Intangible assets, net 35 39

Operating lease right-of-use assets 46 48

Restricted cash 64 53

Other long-term assets 402 317

TOTAL ASSETS $ 1,535 $ 1,248

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK ANDEQUITYAccounts payable, trade $ 151 $ 118

Short-term borrowings and current portion of long-term 2 2 debtCurrent portion of operating leases 18 12

Other current liabilities 141 164

Total current liabilities 312 296

Long-term debt, net of current portion 250 17

Pension and other postretirement liabilities 384 406

Operating leases, net of current portion 40 49

Other long-term liabilities 210 212

Total liabilities 1,196 980

Commitments and Contingencies (note 8) Redeemable, convertible preferred stock, no par value, 195 191 $100 per share liquidation preference EquityCommon stock, $0.01 par value - -

Additional paid in capital 1,166 1,152

Treasury stock, at cost (10 ) (9 )

Accumulated deficit (590 ) (620 )

Accumulated other comprehensive loss (422 ) (446 )

Total shareholders' equity 144 77

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK $ 1,535 $ 1,248 AND EQUITY The notes accompanying the financial statements contained in the Company's third quarter 2021 Form 10-Q are an integral part of these consolidated financial statements.

EASTMAN KODAK COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)(in millions) Nine Months Ended September 30, 2021 2020

Cash flows from operating activities:Net income (loss) $ 30 $ (561 )

Adjustments to reconcile to net cash used in operatingactivities:Depreciation and amortization 23 29

Pension income (63 ) (65 )

Change in fair value of embedded derivatives in the Series (3 ) 382 A, Series B and Series CPreferred Stock and Convertible NotesLoss on early extinguishment of debt - 2

Net loss (gain) on sales of assets 1 (9 )

Asset impairments - 3

Stock based compensation 6 18

Non-cash changes in workers' compensation reserves (4 ) 9

(Benefit) provision for deferred income taxes (1 ) 160

Decrease in trade receivables 6 53

Increase in inventories (38 ) (19 )

Increase (decrease) in trade payables 33 (33 )

Decrease in liabilities excluding borrowings and trade (26 ) (24 )payablesOther items, net 3 7

Total adjustments (63 ) 513

Net cash used in operating activities (33 ) (48 )

Cash flows from investing activities:Additions to properties (10 ) (13 )

Net proceeds from sales of assets 1 2

Net proceeds from return on equity investment - 2

Net cash used in investing activities (9 ) (9 )

Cash flows from financing activities:Net proceeds from Term Loan Credit Agreement 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 ) -

Proceeds from stock option exercises - 29

Preferred stock cash dividend payments (6 ) (19 )

Treasury stock purchases (1 ) -

Net cash provided by financing activities 240 10

Effect of exchange rate changes on cash, cash equivalents (3 ) (2 )and restricted cashNet increase (decrease) in cash, cash equivalents and 195 (49 )restricted cashCash, cash equivalents and restricted cash, beginning of 256 290 periodCash, cash equivalents and restricted cash, end of period $ 451 $ 241

The notes accompanying the financial statements contained in the Company's third quarter 2021 Form 10-Q are an integral part of these consolidated financial statements.

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CONTACT: Media Contact: Kurt Jaeckel, Kodak, +1 585-490-8646, kurt.jaeckel@kodak.com

CONTACT: Investor Contact: Paul Dils, Kodak, +1 585-724-4053, shareholderservices@kodak.com