Kodak reports third-quarter sales down $63 million
Eastman Kodak Co. reported financial results for the third quarter 2020, including consolidated revenues of $252 million and a $13 million increase in cash. Revenues declined by approximately $63 million compared with the same period in 2019. Kodak ended the quarter with a cash balance of $193 million, up from the June 30, 2020 cash balance of $180 million. GAAP net loss was $445 million for the quarter ended Sept. 30, 2020, which included a charge of $416 million to reflect the increased value of the derivative liability embedded in the convertible notes immediately prior to conversion.
“As the pandemic continued during the third quarter, Kodak stayed focused on keeping our employees safe and serving customers while carefully managing our costs and cash,” said Jim Continenza, Kodak’s Executive Chairman and CEO. “We continue to invest in leading-edge digital print technology and winning eight awards recently in three prestigious print industry competitions provides external validation of that commitment. Looking forward, we’ll continue to build on our strengths in print and advanced materials & chemicals, including our existing business in manufacturing pharmaceutical ingredients.”
During the quarter, $100 million of the Company’s 5.00% Secured Convertible Notes due 2021 were converted into shares of the Company’s common stock.
Financial controls are a concern, company says
In other Kodak news, the Financial Times reports Kodak handed five former executives stock worth millions of dollars this July in exchange for options they did not own, raising questions about the company’s controls.
The company said internal “deficiencies” allowed five former officers and employees to exercise 300,000 options they had previously forfeited, according to a filing with the Securities and Exchange Commission. Kodak said it took a $5.1m expense in the third quarter related to the options. Errors in the accounts of other current and former employees could have resulted in additional “inappropriate exercises”, it warned. Kodak said it would seek to recover $3.9m from the five former executives for the fair value of the shares, as well as the right to retain $3m worth of withholding taxes on behalf of the ex-employees. Kodak added that it could not be certain its claims would succeed.
David Bullwinkle, CFO, Kodak, told investors on Tuesday the company’s “controls were inadequate with regard to the timely input and verification of master data updates for equity grants and therefore, resulted in errors or misstatements in employee equity account balances”.
Revenue and Operational EBITDA by Reportable Segment Q3 2020 vs. Q3 2019
| ($ millions) | |||||
| Q3 2020 Actuals | Traditional Printing | Digital Printing | Advanced Materials & Chemicals | Brand | Total |
| Revenue | $ 146 | $ 56 | $ 44 | $ 3 | $ 249 |
| Operational EBITDA * | $ 5 | $ (3) | $ (6) | $ 3 | $ (1) |
| Q3 2019 Actuals | Traditional Printing | Digital Printing | Advanced Materials & Chemicals | Brand | Total |
| Revenue | $ 187 | $ 70 | $ 53 | $ 3 | $ 313 |
| Operational EBITDA * | $ 21 | $ (3) | $ (6) | $ 2 | $ 14 |
| Q3 2020 vs. Q3 2019 Actuals
B/(W) |
Traditional Printing | Digital Printing | Advanced Materials & Chemicals | Brand | Total |
| Revenue | $ (41) | $ (14) | $ (9) | $ – | $ (64) |
| Operational EBITDA * | $ (16) | $ – | $ – | $ 1 | $ (15) |
| Q3 2020 Actuals on constant currency ** vs. Q3 2019 Actuals
B/(W) |
Traditional Printing | Digital Printing | Advanced Materials & Chemicals | Brand | Total |
| Revenue | $ (44) | $ (15) | $ (9) | $ – | $ (68) |
| Operational EBITDA * | $ (16) | $ – | $ – | $ 1 | $ (15) |