Eastman Kodak Co. reported third-quarter net earnings of $19 million on $366 million revenues, compared to $379 million revenues and $13 million earnings the prior year. The Consumer and Film Division continues to struggle, with third-quarter revenues dropping $7 million to $48 million and a loss of $2 million. The company said the revenue decline was primarly due to a “$6 million royalty payment from the modification of a brand licensing agreement in the prior-year quarter.”
Press release reproduced below:
Kodak Reports Q3 Net Earnings of $19 Million and Continued Strong Performance of SONORA Plates, FLEXCEL NX Plates and PROSPER Inkjet
ROCHESTER, N.Y.–(BUSINESS WIRE)–Eastman Kodak Company (NYSE: KODK) today reported financial results for the third quarter 2018, delivering net earnings of $19 million on revenues of $366 million and continued growth in its KODAK SONORA Process-Free Plates, KODAK FLEXCEL NX Packaging and KODAK PROSPER Inkjet businesses.
Third-quarter highlights include:
- GAAP net earnings of $19 million for the quarter ended September 30, 2018.
- Operational EBITDA for the quarter of $20 million, an increase of $7 million compared with the third quarter of 2017.
- Revenues for the quarter of $366 million, compared with $379 million in the prior-year quarter.
- Key product lines achieved strong year-over-year growth for the quarter:
- Volume for KODAK SONORA Process-Free Plates grew by 17 percent.
- Volume for KODAK FLEXCEL NX Plates grew by 17 percent.
- Annuity revenues for the KODAK PROSPER inkjet platform grew by 8 percent.
- The company ended the quarter with a cash balance of $238 million and expects to generate cash in the fourth quarter 2018.
- 2018 revenue guidance revised to $1.475 billion to $1.525 billion; Operational EBITDA guidance remains at $55 million to $60 million.
- Additional development: Kodak is in advanced negotiations on an exclusive basis to sell its Flexographic Packaging Division. The net proceeds from the transaction will be used to reduce the Company’s outstanding term debt.
Revenues for the quarter ending September 2018 were $366 million, a decline of $13 million compared with the third quarter of 2017. The company reported third-quarter GAAP net earnings of $19 million and Operational EBITDA of $20 million, an increase of $7 million compared with the third quarter of 2017. The increase was driven by continued strong performance in key product lines, cost reductions in Kodak’s Advanced Materials and 3D Printing Technology Division and changes in employee-related reserves, offset by the $6 million year-over-year adverse impact of the cost of aluminum.
“I’m pleased with the continued strong performance of our growth engines, including SONORA Plates, FLEXCEL NX Plates and PROSPER annuities, which contribute an increasing share of our revenues,” said Jeff Clarke, Kodak Chief Executive Officer. “For the fourth quarter of 2018, the Company will focus on the expected sale of our Flexographic Packaging Division and improving productivity by completing cost actions announced earlier this year.”
The company revised 2018 guidance for revenues to $1.475 billion to $1.525 billion and reiterated Operational EBITDA guidance of $55 million to $60 million.
Kodak ended the quarter with a cash balance of $238 million, down $37 million from the June 30, 2018 cash balance of $275 million. The decrease reflects investments in new technologies, working capital, capital expenditures including the construction of a new FLEXCEL NX manufacturing line in Weatherford, OK, interest payments and costs of strategic transactions. The company expects to generate cash in the fourth quarter of 2018 and to end the year with a cash balance of $260 million to $265 million.
“The Company’s use of cash in Q3 primarily reflects our investment in working capital to support sequential growth in Q4,” said David Bullwinkle, Kodak Chief Financial Officer. “We have made significant progress reducing our cost structure and we will continue to strengthen our liquidity by completing actions to reduce operating costs and monetization activities. We expect to generate cash in Q4 through increased EBITDA, working capital and non-recurring transactions.”
Print Systems Division (PSD), Kodak’s largest division, had Q3 revenues of $217 million, a decrease of $15 million compared with Q3 2017. Operational EBITDA for the quarter was $12 million, flat when compared with the same period a year ago, or an increase of $1 million on a constant currency basis.
PSD’s environmentally-advantaged KODAK SONORA Process-Free Plates had continued strong performance for the quarter, delivering 17 percent year-over-year growth in unit sales. SONORA Plates accounted for 24 percent of the division’s total plate unit sales in the third quarter.
Third-quarter unit sales of SONORA X Plates increased 93 percent compared with Q2, and over 600 customers have been converted to continuous supply. SONORA X is expected to be fully commercialized by the end of the year. SONORA X improvements in run lengths, durability and imaging speeds allow more printers to benefit from the environmental and cost-savings advantages of process-free plates without compromising productivity and efficiency.
Enterprise Inkjet Systems Division (EISD), including the KODAK PROSPER and KODAK VERSAMARK businesses and the investment in ULTRASTREAM inkjet technology, had third-quarter revenues of $39 million, an increase of $6 million compared with the same period in 2017. The increase was a result of higher volume in PROSPER equipment and consumables, partially offset by the expected volume decline in the division’s VERSAMARK Printing System line. Operational EBITDA was $2 million, an increase of $2 million compared with the same period in the prior year.
For the third quarter of 2018 the PROSPER business continued to deliver strong performance with year-over-year annuity growth of 8 percent.
The company continues to invest in the development of KODAK ULTRASTREAM, the next-generation inkjet writing system, which is on track for commercialization in 2019.
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 Q3 were $36 million, up $2 million compared with the same period a year ago, or $4 million on a constant currency basis. Operational EBITDA for Q3 was $8 million, an increase of $1 million compared with the third quarter of 2017, or $3 million on a constant currency basis.
For the quarter, FLEXCEL NX plate volume had strong performance, increasing 17 percent year over year. Kodak’s new manufacturing line in Weatherford, OK has begun shipping test product and is on track to move into full production in early 2019.
During the quarter, the division introduced the next-generation FLEXCEL NX Ultra Solution. Enabled by new and patent-pending KODAK Ultra Clean technology, FLEXCEL NX Ultra is the first aqueous solution to provide consistent, high-performing flexo plates in a high-volume, low-maintenance environment.
Software and Solutions Division (SSD) revenues for Q3 were $21 million, flat compared with the same period last year. Operational EBITDA was $0, flat when compared with Q3 2017.
Consumer and Film Division (CFD) revenues for the third quarter were $48 million, a decline of $7 million compared with Q3 2017 primarily driven by a $6 million royalty payment from the modification of a brand licensing agreement in the prior-year quarter. Operational EBITDA was negative $2 million for the quarter, flat compared with Q3 2017.
Advanced Materials and 3D Print Technology Division (AM3D) had revenues of $1 million for the quarter and Operational EBITDA of negative $2 million, an improvement of $4 million compared with the same period the prior year. The division continues to focus on investments in light-blocking particles and printed electronics.
Eastman Business Park Division (EBPD) had Q3 2018 revenues of $4 million, flat with the third quarter 2017. Operational EBITDA was flat compared with the prior year quarter.
Going Concern Assessment
Consistent with the prior quarter, Kodak has included a disclosure regarding its going concern assessment in its Q3 Form 10-Q filing. Please read Footnote 1 to the financial statements contained in the company’s 10-Q to see the precise disclosure and planned mitigating actions.
Revenue and Operational EBITDA Q3 2018 vs. Q3 2017
|Q3 2018 Actuals||
|Operational EBITDA *||$||12||$||2||$||8||$||–||$||(2||)||$||(2||)||$||2||$||20|
|Q3 2017 Actuals||PSD||EISD||FPD||SSD||CFD||AM3D||EBPD||Total EK|
|Operational EBITDA *||$||12||$||–||$||7||$||–||$||(2||)||$||(6||)||$||2||$||13|
|Q3 2018 Actuals vs. Q3 2017 Actuals
|Operational EBITDA *||$||–||$||2||$||1||$||–||$||–||$||4||$||–||$||7|
|Q3 2018 Actuals on constant currency ** vs. Q3 2017 Actuals
|Operational EBITDA *||$||1||$||2||$||3||$||–||$||–||$||4||$||–||$||10|
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 2017 foreign exchange impact using average foreign exchange rates for the three months ended September 30, 2017, rather than the actual exchange rates in effect for the three months ended September 30, 2018.
Kodak is a technology company focused on imaging. We provide – directly and through partnerships with other innovative companies – hardware, software, consumables and services to customers in graphic arts, commercial print, publishing, packaging, electronic displays, entertainment and commercial films, and consumer products markets. With our world-class R&D capabilities, innovative solutions portfolio and highly trusted brand, Kodak is helping customers around the globe to sustainably grow their own businesses and enjoy their lives. For additional information on Kodak, visit us at kodak.com, follow us on Twitter @Kodak, or like us on Facebook at Kodak.