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    Tuesday, August 05, 2014

    Kodak Shows Earnings Improvement in Second Quarter; Key Strategic Technology Products Generate Solid Growth

    About Kodak

    Media Contacts

    • Christopher Veronda
      Eastman Kodak Company
      christopher.veronda@kodak.com
      +1 585-724-2622

    • David Bullwinkle
      Investor Contact
      shareholderservices@kodak.com
      +1 585-724-4053

    Rochester, NY, August 05 -- 

    Highlights:  

    • Net loss of $62 million is a $162 million improvement from $224 million net loss in the previous-year quarter.
    • Key products in packaging, digital plates, digital printing and workflow software are meeting expectations for growth in revenue and margins.
    • Liquidity remains strong with cash of $768 million.
    • The company continues to expect that it will meet projections for 2014 of revenue between $2.1 and $2.3 billion and Operational EBITDA between $145 and $165 million.
    • Kodak expects to return to year-over-year revenue growth for the second half of 2014.

    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  
    Millions of dollars   2Q 2014   2Q 2013   6 Months
    2014
     
    6 Months
    2013
     
    Sales  $ 525  $ 583  $ 1,009  $ 1,177
    Gross Profit  $ 102  $ 133  $ 191  $ 282
    Percent of Revenue  19%  23%  19%  24%
    Net (Loss) Income   $ (62)  $ (224)  $ (98)  $ 59
    Operational EBITDA 1  $ 24  $ 25  $ 30  $ 74

    1 Operational 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  
    Millions of dollars   2Q 2014   2Q 2013   6 Months
    2014
     
    6 Months
    2013
     
    Revenue  $ 357  $ 371  $ 675  $ 757
    Gross Profit  $ 50  $ 61  $ 81  $ 147
    Percent of Revenue 14% 16% 12% 19%
    Selling, General and Administrative (“SG&A”)  $ 53  $ 63  $ 106  $ 127
    Research and Development (“R&D”)  $ 5  $ 4  $ 10  $ 10
    Segment (Loss) Earnings  $ (8)  $ (6)  $ (35)  $ 10
    Operational EBITDA 1  $ 33  $ 21  $ 45  $ 72

    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 Overview  
    Millions of dollars   2Q 2014   2Q 2013   6 Months
    2014
     
    6 Months
    2013
     
    Revenue  $ 168  $ 198  $ 334  $ 395
    Gross Profit  $ 39  $ 58  $ 81  $ 111
    Percent of Revenue 23% 29% 24% 28%
    Selling, General and Administrative (“SG&A”)  $ 42  $ 49  $ 84  $ 99
    Research and Development (“R&D”)  $ 24  $ 20  $ 49  $ 41
    Segment (Loss) Earnings  $ (27)  $ (11)  $ (52)  $ (29)
    Operational EBITDA 1  $ (9)  $ 4  $ (15)  $ 2

    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.

    #

    About Kodak

    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.


    Download PDFs:
    Second Quarter 2014 Non-GAAP Reconciliation
    Financial Discussion Document

    2014