8-K
EASTMAN KODAK CO (KODK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| ________________<br><br> <br><br><br> <br>Form 8-K<br><br> ________________ | ||
|---|---|---|
| CURRENT REPORT<br><br> <br>Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
| Date of Report (Date of earliest event reported): May 12, 2020 | ||
| EASTMAN KODAK COMPANY<br><br> (Exact name of registrant as specified in its charter) | ||
| NEW JERSEY<br><br> (State or other jurisdiction of incorporation) | 1-87<br><br> (Commission File Number) | 16-0417150<br><br> (IRS Employer<br><br> <br>Identification No.) |
| 343 State Street<br><br> <br>Rochester, NY 14650<br><br> (Address of principal executive offices with zip code) | ||
| (585) 724-4000<br><br> (Registrant’s telephone number, including area code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common stock, par value $0.01 per share | KODK | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company. ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
1
| Item 2.02 | Results of Operations and Financial Condition |
|---|
On May 12, 2020, Eastman Kodak Company (the "Company") issued a press release describing its first quarter 2020 financial results. A copy of the press release is furnished as Exhibit (99.l) to this report.
Within the Company's press release, reference is made to the following non-GAAP financial measures:
| • | Operational EBITDA; and |
|---|---|
| • | Revenues and Operational EBITDA on a constant currency basis. |
| --- | --- |
The Company believes that these non-GAAP financial measures represent important internal measures of performance as used by the Company's management. Accordingly, they are provided with the belief that this information will assist in properly assessing the underlying performance of the Company. In addition, the Company's management believes that the presentation of the non-GAAP financial measures allows the user of the information to assess the Company's financial results on a more comparable basis. Whenever such information is presented, the Company has complied with the provisions of the rules under Regulation G and Item 2.02 of Form 8-K.
| Item 9.01 | Financial Statements and Exhibits |
|---|---|
| (d) | Exhibits |
| --- | --- |
| (99.1) | Press release issued on May 12, 2020, regarding the Company's first quarter 2020<br> financial results furnished with this document. |
| --- | --- |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| EASTMAN KODAK COMPANY |
|---|
| (Registrant) |
| Eric Samuels |
| Chief Accounting Officer and Corporate |
| Controller |
| (Chief Accounting Officer and Authorized |
| Signatory) |
Date: May 12,2020
3
Exhibit 99.1
Kodak Reports First-Quarter 2020 Financial Results
ROCHESTER, N.Y.--(BUSINESS WIRE)--May 12, 2020--Eastman Kodak Company (NYSE: KODK) today reported financial results for the first quarter 2020, including consolidated revenues of $267 million.
Highlights include:
- Consolidated revenues for Q1 2020 of $267 million.
- GAAP net loss of $111 million for the quarter ended March 31, 2020.
- Current quarter net loss includes expense of $167 million related to the increase in deferred tax valuation allowances for locations outside the U.S. and income of $53 million related to the change in fair value of embedded derivatives in the Series A Preferred Stock and Convertible Notes.
- Operational EBITDA for the quarter of negative $8 million.
- The company ended the quarter with a cash balance of $209 million.
“Kodak started the quarter on a positive trajectory and the actions we took last year to strengthen our balance sheet are helping us manage through the slowdown,” said Jim Continenza, Kodak’s Executive Chairman. “Kodak employees have risen to the challenge of the pandemic, continuing to serve our customers and redirecting resources to produce isopropyl alcohol for hand sanitizer and manufacture face masks using our ESTAR film base. Looking forward, we will continue with our plans to double down on digital print, launch exciting new products and realign our business to focus on customers.”
For the quarter ended March 31, 2020, revenues decreased by approximately $24 million compared with the same period in 2019. Kodak ended the quarter with a cash balance of $209 million, down from the December 31, 2019 cash balance of $233 million.
“For the quarter we used $24 million of cash, after giving effect to the release of $25 million of restricted cash,” said David Bullwinkle, Kodak’s CFO. “During the economic slowdown caused by the COVID-19 situation, we are managing our working capital tightly to ensure sustainability for our customers and employees. We continue to pursue cost-reduction efforts to preserve cash and position Kodak for a strong rebound when business conditions start to improve.”
Revenue and Operational EBITDA by Reportable Segment Q1 2020 vs. Q1 2019
| ( millions) | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q1 2020 Actuals | Digital Printing | Advanced Materials & Chemicals | Brand | Total | |||||||||
| Revenue | 154 | $ | 65 | $ | 42 | $ | 3 | $ | 264 | ||||
| Operational EBITDA * | 1 | $ | (2 | ) | $ | (9 | ) | $ | 2 | $ | (8 | ) | |
| Q1 2019 Actuals | Digital Printing | Advanced Materials & Chemicals | Brand | Total | |||||||||
| Revenue | 166 | $ | 72 | $ | 48 | $ | 3 | $ | 289 | ||||
| Operational EBITDA * | 6 | $ | (1 | ) | $ | (11 | ) | $ | 1 | $ | (5 | ) | |
| Q1 2020 vs. Q1 2019 Actuals<br> B/(W) | Digital Printing | Advanced Materials & Chemicals | Brand | Total | |||||||||
| Revenue | (12 | ) | $ | (7 | ) | $ | (6 | ) | $ | - | $ | (25 | ) |
| Operational EBITDA * | (5 | ) | $ | (1 | ) | $ | 2 | $ | 1 | $ | (3 | ) | |
| Q1 2020 Actuals on constant currency ** vs. Q1 2019 Actuals<br> B/(W) | Digital Printing | Advanced Materials & Chemicals | Brand | Total | |||||||||
| Revenue | (10 | ) | $ | (6 | ) | $ | (6 | ) | $ | - | $ | (22 | ) |
| Operational EBITDA * | (5 | ) | $ | (1 | ) | $ | 2 | $ | 1 | $ | (3 | ) |
All values are in US Dollars.
* 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 2020 foreign exchange impact using average foreign exchange rates for the three months ended March 31, 2019, rather than the actual average exchange rates in effect for the three months ended
March 31, 2020.
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, 2019 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 Report on Form 10-Q for the quarter ended March 31, 2020, 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 A Preferred Stock; the impact of the global economic environment or medical epidemics such as the COVID-19 pandemic; changes in foreign currency exchange rates, commodity prices and interest 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 revolving 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 performance by third parties of their obligations to supply products, components or services to Kodak; and Kodak’s ability to effect strategic transactions, such as divestitures, acquisitions, strategic alliances 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 first quarter 2020 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”). 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 March 31, 2019, rather than the actual average exchange rates in effect for the three months ended March 31, 2020.
The following table reconciles the most directly comparable GAAP measure of Net Loss to Operational EBITDA for the three months ended March 31, 2020 and 2019, respectively:
| (in millions) | ||||||||
|---|---|---|---|---|---|---|---|---|
| Q1 2020 | Q1 2019 | Change | ||||||
| Net Loss | $ | (111 | ) | $ | (18 | ) | ) | |
| All Other | 1 | 1 | ||||||
| Depreciation and amortization | 10 | 15 | ) | |||||
| Restructuring costs and other ^(1)^ | 7 | 2 | ||||||
| Stock based compensation | 1 | 3 | ) | |||||
| Consulting and other costs ^(2)^ | - | 3 | ) | |||||
| Idle costs ^(3)^ | - | 1 | ) | |||||
| Former CEO separation agreement compensation | - | 2 | ) | |||||
| Other operating income, net, excluding income from transition services agreement ^(4)^ | (6 | ) | - | ) | ||||
| Interest expense^(1)^ | 4 | 3 | ||||||
| Pension income excluding service cost component ^(1)^ | (26 | ) | (27 | ) | ||||
| Other (income) charges, net ^(1)^ | (53 | ) | 1 | ) | ||||
| Loss from discontinued operations, net of income tax ^(1)^ | - | 6 | ) | |||||
| Provision for income taxes ^(1)^ | 165 | 3 | ||||||
| Operational EBITDA | $ | (8 | ) | $ | (5 | ) | ) |
All values are in US Dollars.
Footnote Explanations:
- As reported in the Consolidated Statement of Operations.
- Consulting and other costs are primarily professional services and internal costs associated with certain corporate strategic initiatives.
- Consists of costs such as security, maintenance and utilities required 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.
- $2 million of income from the transition services agreement related to the sale of the Flexographic Packaging Business was recognized in the quarter ended March 31, 2020. The income was reported in Other operating income, net in the Consolidated Statement of Operations. Other operating income, net is typically excluded from the segment measure. However, the income from the transition services agreement was included in the segment measure.
B. FINANCIAL STATEMENTS
| EASTMAN KODAK COMPANY | ||||||
|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | ||||||
| (in millions) | ||||||
| Three Months Ended March 31, | ||||||
| 2020 | 2019 | |||||
| Revenues | ||||||
| Sales | $ | 210 | $ | 224 | ||
| Services | 57 | 67 | ||||
| Total revenues | 267 | 291 | ||||
| Cost of revenues | ||||||
| Sales | 191 | 205 | ||||
| Services | 40 | 46 | ||||
| Total cost of revenues | 231 | 251 | ||||
| Gross profit | 36 | 40 | ||||
| Selling, general and administrative expenses | 48 | 59 | ||||
| Research and development costs | 9 | 11 | ||||
| Restructuring costs and other | 7 | 2 | ||||
| Other operating income, net | (7 | ) | — | |||
| Loss from continuing operations before interest expense, pension income excluding service cost component, other (income)<br> charges, net and income taxes | (21 | ) | (32 | ) | ||
| Interest expense | 4 | 3 | ||||
| Pension income excluding service cost component | (26 | ) | (27 | ) | ||
| Other (income) charges, net | (53 | ) | 1 | |||
| Earnings (loss) from continuing operations before income taxes | 54 | (9 | ) | |||
| Provision for income taxes | 165 | 3 | ||||
| Loss from continuing operations | (111 | ) | (12 | ) | ||
| Loss from discontinued operations, net of income taxes | — | (6 | ) | |||
| Net loss | $ | (111 | ) | $ | (18 | ) |
The notes accompanying the financial statements contained in the Company’s first quarter 2020 Form 10-Q are an integral part of these consolidated financial statements.
| EASTMAN KODAK COMPANY | |||||
|---|---|---|---|---|---|
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited) | |||||
| (in millions) | |||||
| December 31, | |||||
| 2019 | |||||
| ASSETS | |||||
| Cash and cash equivalents | 209 | $ | 233 | ||
| Trade receivables, net of allowances of 12 and 8, respectively | 183 | 208 | |||
| Inventories, net | 236 | 215 | |||
| Restricted cash - current portion | 8 | 12 | |||
| Other current assets | 31 | 36 | |||
| Current assets held for sale | 2 | 2 | |||
| Total current assets | 669 | 706 | |||
| Property, plant and equipment, net of accumulated depreciation of 413 and 423, respectively | 165 | 181 | |||
| Goodwill | 12 | 12 | |||
| Intangible assets, net | 43 | 47 | |||
| Operating lease right-of-use assets | 49 | 49 | |||
| Restricted cash | 24 | 45 | |||
| Deferred income taxes | — | 147 | |||
| Other long-term assets | 258 | 228 | |||
| TOTAL ASSETS | 1,220 | $ | 1,415 | ||
| LIABILITIES, REDEEMABLE, CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT) | |||||
| Accounts payable, trade | 152 | $ | 153 | ||
| Short-term borrowings and current portion of long-term debt | 2 | 2 | |||
| Current portion of operating leases | 11 | 12 | |||
| Other current liabilities | 175 | 201 | |||
| Total current liabilities | 340 | 368 | |||
| Long-term debt, net of current portion | 111 | 109 | |||
| Pension and other postretirement liabilities | 372 | 378 | |||
| Operating leases, net of current portion | 48 | 48 | |||
| Other long-term liabilities | 190 | 231 | |||
| Total liabilities | 1,061 | 1,134 | |||
| Commitments and Contingencies (Note 11) | |||||
| Redeemable, convertible Series A preferred stock, no par value, 100 per share liquidation preference | 184 | 182 | |||
| Equity (Deficit) | |||||
| Common stock, 0.01 par value | — | — | |||
| Additional paid in capital | 600 | 604 | |||
| Treasury stock, at cost | (9 | ) | (9 | ) | |
| Accumulated deficit | (190 | ) | (79 | ) | |
| Accumulated other comprehensive loss | (426 | ) | (417 | ) | |
| Total shareholders' equity (deficit) | (25 | ) | 99 | ||
| TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT) | 1,220 | $ | 1,415 |
All values are in US Dollars.
The notes accompanying the financial statements contained in the Company’s first quarter 2020 Form 10-Q are an integral part of these consolidated financial statements.
Contacts
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