Kodak Reports Earnings for Second Quarter, Issues ‘Going Concern Assessment’

On August 9th, Eastman Kodak reported net earnings of $4 million on revenues of $372 million for its second quarter that ended on June 30, 2018. It also reported that it had retained UBS Investment Bank as its financial adviser for its proposed sales of its Flexographic Packaging Division, and that it had entered into a non-binding letter-of-intent for a $400 million, 18-month loan which would be used to refinance its existing debt during the sale process for its Flexographic Packaging Division.

Kodak also included a disclosure in its Q2 Form 10-Q filing regarding its going-concern assessment, which suggests that it does not have sufficient financing to pay its debt. Kodak stated that it is “optimistic about the potential sale of its Flexographic Packaging Division, as well as the anticipated refinancing of its term debt, these plans are not solely within Kodak’s control and therefore are not deemed ‘probable’ under U.S. accounting rules.”

Kodak also reported that these key product lines achieved strong year-over-year growth for the quarter:

• Volume for KODAK SONORA Process-Free Plates grew by 19 percent.
• Volume for KODAK FLEXCEL NX Plates grew by 8 percent.
• Annuity revenues for the KODAK PROSPER inkjet platform grew by 3 percent.

The company ended the quarter with a cash balance of $275 million and expects to generate cash in the second half of 2018. Its 2018 revenue guidance remains at $1.5 billion to $1.6 billion

Revenues of $372 million for the quarter were done $9 million compared with second-quarter of 2017. Kodak says the decline was primarily driven by the $7 million year-over-year adverse impact of the cost of aluminum, which was partially offset by growth in key products as well as cost reductions in Kodak’s Advanced Materials and 3D Printing Technology Division.

Kodak CEO Jeff Clarke commented: “We continue to see growth in our SONORA plates, FLEXCEL NX and PROSPER annuities businesses. When adjusted for aluminum and foreign exchange, Operational EBITDA increased 33 percent year over year. For the second half of 2018 our priorities will be focused on the sale process for the Flexographic Packaging Division, improving efficiency of our operations through the announced restructuring actions and continuing to deliver growth in strategic areas.”

Kodak’s Print Systems Division (PSD), Kodak’s largest division, had Q2 revenues of $227 million, a decrease of $9 million compared with Q2 2017. Operational EBITDA for the quarter was $8 million, compared with $15 million for the same period a year ago. The decline was due to higher costs for aluminum, the primary material used to manufacture the division’s offset printing plate products, and continued industry pricing pressures.

PSD’s KODAK SONORA Process Free Plates had continued strong performance for the quarter, delivering 19 percent year-over-year growth in unit sales. SONORA Plates now account for 22 percent of the division’s total plate unit sales.

During the quarter, PSD continued its rollout of new SONORA X Process-Free Plates, supplying over 100 customers in Asia and Europe. The new product is expected to increase the reach of Kodak’s process-free plates from 30 to 80 percent of market applications.

Kodak’s Enterprise Inkjet Systems Division (EISD), including the KODAK PROSPER and KODAK VERSAMARK businesses and the investment in ULTRASTREAM inkjet technology, had second-quarter revenues of $33 million, down from $35 million in the same period in 2017. Operational EBITDA was $1 million, which was flat when compared with the same period in the prior year.

For the second quarter of 2018 the PROSPER business continued to deliver strong performance with year-over-year annuity growth of 3 percent.

The company continues to invest in the development of KODAK ULTRASTREAM, the next-generation inkjet writing system, which is scheduled to launch in 2019.

Kodak’s Flexographic Packaging Division (FPD) includes KODAK FLEXCEL NX Systems and Plates as well as other packaging products, such as analog flexographic plates and letterpress plates, proofing products, and services. FPD’s performance for the quarter was driven by continued growth in KODAK FLEXCEL NX Plates. Revenues for Q2 were $38 million, up $1 million compared with the same period a year ago. Operational EBITDA for Q2 was $9 million, an increase of $1 million compared with the second quarter of 2017.

For the quarter, FLEXCEL NX plate volume continued to grow, increasing 8 percent year-over-year. The division continues to invest in new product development and infrastructure, including a plate manufacturing line in Weatherford, Oklahoma scheduled to be on-line in early 2019.

Kodak’s Software and Solutions Division (SSD) revenues for Q2 were $20 million, a $2 million decline compared with the same period last year. Operational EBITDA was negative $1 million, flat when compared to Q2 2017.

Kodak’s Consumer and Film Division (CFD) revenues for the second quarter were $48 million, an increase of $1 million over Q2 2017. Operational EBITDA was negative $4 million for the quarter, compared with negative $5 million in Q2 2017. CFD’s Industrial Film & Chemicals business experienced strong order volume in the quarter which more than offset the expected decline in Consumer Inkjet. The division’s brand licensing business continues to perform well, adding three new licensees during the quarter.

Kodak’s Advanced Materials and 3D Print Technology Division (AM3D) had revenue of $1 million for the quarter and Operational EBITDA of negative $5 million, an improvement of $2 million compared with the same period in the prior year. The division continues to focus on investments in light-blocking particles and printed electronics.

The Eastman Business Park Division (EBPD) had Q2 2018 revenues of $5 million, an increase of $1 million compared with the same prior year period. Operational EBITDA was flat compared with the second quarter of 2017.

According to the Rochester Democrat & Chronicle, Kodak is also looking to shed some 325 jobs across the company.

More Resources

• May 2018: Kodak Reports First-Quarter 2018 Results
• November 2017: Kodak Introduces First 3D Printer, the Portrait 3D Printer
• November 2017: Kodak Slips in Third Quarter, Reporting Net Loss
• August 2017: Kodak Reports $4 Million in Second-Quarter Net Earnings, ‘Strong Performance in Growth Products’
• May 2017: Kodak Reports $7 Million in Net Earnings, ‘Continued Growth in Key Product Areas’
• April 2017: Kodak Won’t Be Selling its PROSPER Commercial Inkjet-Printing Businesses
• March 2017: Kodak Reports Much Improved Earnings for 2016
• November 2016: Kodak Posts Third-Quarter Earnings of $12 Million