[X]
|
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
[ ]
|
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
NEW JERSEY
|
16-0417150
|
(State of incorporation)
|
(IRS Employer Identification No.)
|
343 STATE STREET, ROCHESTER, NEW YORK
|
14650
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
|
[ ]
|
Accelerated filer
|
[X]
|
Non-accelerated filer
|
[ ]
|
Smaller reporting company
|
[ ]
|
Title of each Class
|
Number of Shares Outstanding at
May 1, 2015
|
Common Stock, $0.01 par value
|
41,908,623
|
Page
|
||
Part I.—Financial Information
|
||
Item 1.
|
Financial Statements
|
3
|
Consolidated Statement of Operations (Unaudited)
|
3
|
|
Consolidated Statement of Comprehensive (Loss) Income (Unaudited)
|
4 | |
Consolidated Statement of Financial Position (Unaudited)
|
5
|
|
Consolidated Statement of Cash Flows (Unaudited)
|
6
|
|
Notes to Financial Statements (Unaudited)
|
7
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
21
|
Liquidity and Capital Resources
|
31
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
34
|
Item 4.
|
Controls and Procedures
|
34
|
Part II.—Other Information
|
||
Item 1.
|
Legal Proceedings
|
35
|
Item 2. | Unregistered Sales of Securities and Use of Proceeds | 35 |
Item 5.
|
Other Information
|
35 |
Item 6.
|
Exhibits
|
35
|
Signature
|
36
|
|
Index to Exhibits
|
37
|
Three Months Ended
March 31,
|
||||||||
|
2015
|
2014
|
||||||
Revenues
|
||||||||
Sales
|
$ | 337 | $ | 393 | ||||
Services
|
90 | 95 | ||||||
Total revenues
|
427 | 488 | ||||||
Cost of revenues
|
||||||||
Sales
|
284 | 325 | ||||||
Services
|
66 | 74 | ||||||
Total cost of revenues
|
350 | 399 | ||||||
Gross profit
|
77 | 89 | ||||||
Selling, general and administrative expenses
|
58 | 87 | ||||||
Research and development costs
|
19 | 27 | ||||||
Restructuring costs and other
|
17 | 13 | ||||||
Other operating expense, net
|
3 | - | ||||||
Loss from continuing operations before interest expense, other charges, net, reorganization items, net and income taxes
|
(20 | ) | (38 | ) | ||||
Interest expense
|
15 | 16 | ||||||
Other charges, net
|
(10 | ) | (1 | ) | ||||
Reorganization items, net
|
5 | 5 | ||||||
Loss from continuing operations before income taxes
|
(50 | ) | (60 | ) | ||||
Provision (benefit) for income taxes
|
4 | (7 | ) | |||||
Loss from continuing operations
|
(54 | ) | (53 | ) | ||||
Earnings from discontinued operations, net of income taxes
|
- | 19 | ||||||
Net loss
|
(54 | ) | (34 | ) | ||||
Less: Net income attributable to noncontrolling interests
|
4 | 2 | ||||||
NET LOSS ATTRIBUTABLE TO EASTMAN KODAK COMPANY
|
$ | (58 | ) | $ | (36 | ) | ||
Basic and diluted net (loss) earnings per share attributable to Eastman Kodak Company common shareholders:
|
||||||||
Continuing operations
|
$ | (1.38 | ) | $ | (1.32 | ) | ||
Discontinued operations
|
- | 0.46 | ||||||
Total
|
$ | (1.38 | ) | $ | (0.86 | ) | ||
Number of common shares used in basic and diluted net (loss) earnings per share
|
41.9 | 41.7 |
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
NET LOSS
|
$ | (54 | ) | $ | (34 | ) | ||
Less: net income attributable to noncontrolling interests
|
4 | 2 | ||||||
Net loss attributable to Eastman Kodak Company
|
(58 | ) | (36 | ) | ||||
Other comprehensive (loss) income, net:
|
||||||||
Currency translation adjustments
|
(7 | ) | 1 | |||||
Unrealized gains on available-for-sale securities, net
|
1 | - | ||||||
Pension and other postretirement benefit plan obligation activity, net
|
7 | - | ||||||
Other comprehensive income, net attributable to Eastman Kodak Company
|
1 | 1 | ||||||
COMPREHENSIVE LOSS, NET ATTRIBUTABLE TO EASTMAN KODAK COMPANY
|
$ | (57 | ) | $ | (35 | ) | ||
As of
March 31,
2015
|
As of
December 31,
2014
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 609 | $ | 712 | ||||
Receivables, net
|
359 | 414 | ||||||
Inventories, net
|
373 | 349 | ||||||
Deferred income taxes
|
25 | 31 | ||||||
Assets held for sale
|
13 | 14 | ||||||
Other current assets
|
32 | 30 | ||||||
Total current assets
|
1,411 | 1,550 | ||||||
Property, plant and equipment, net of accumulated depreciation of $258 and $231, respectively
|
482 | 524 | ||||||
Goodwill
|
90 | 96 | ||||||
Intangible assets, net of accumulated amortization of $39 and $33, respectively
|
176 | 182 | ||||||
Restricted cash
|
35 | 37 | ||||||
Deferred income taxes
|
32 | 38 | ||||||
Other long-term assets
|
127 | 129 | ||||||
TOTAL ASSETS
|
$ | 2,353 | $ | 2,556 | ||||
LIABILITIES AND EQUITY
|
||||||||
Current Liabilities
|
||||||||
Accounts payable, trade
|
$ | 197 | $ | 212 | ||||
Current portion of long-term debt
|
6 | 5 | ||||||
Liabilities held for sale
|
1 | 10 | ||||||
Other current liabilities
|
311 | 372 | ||||||
Total current liabilities
|
515 | 599 | ||||||
Long-term debt, net of current portion
|
671 | 672 | ||||||
Pension and other postretirement liabilities
|
609 | 662 | ||||||
Other long-term liabilities
|
311 | 324 | ||||||
Total Liabilities
|
2,106 | 2,257 | ||||||
Commitments and Contingencies (Note 5)
|
||||||||
Equity
|
||||||||
Common stock, $0.01 par value
|
- | - | ||||||
Additional paid in capital
|
623 | 621 | ||||||
Treasury stock, at cost
|
(5 | ) | (4 | ) | ||||
Accumulated deficit
|
(261 | ) | (204 | ) | ||||
Accumulated other comprehensive loss
|
(135 | ) | (136 | ) | ||||
Total Eastman Kodak Company shareholders’ equity
|
222 | 277 | ||||||
Noncontrolling interests
|
25 | 22 | ||||||
Total equity
|
247 | 299 | ||||||
TOTAL LIABILITIES AND EQUITY
|
$ | 2,353 | $ | 2,556 | ||||
Three Months Ended
March 31,
|
||||||||
2015
|
2014
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (54 | ) | $ | (34 | ) | ||
Adjustments to reconcile to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
38 | 56 | ||||||
Pension and other postretirement income
|
(25 | ) | (23 | ) | ||||
Net gain on sales of businesses/assets
|
(3 | ) | (21 | ) | ||||
Non-cash restructuring costs, asset impairments and other charges
|
6 | 1 | ||||||
Stock based compensation
|
7 | 2 | ||||||
Non-cash reorganization items, net
|
2 | - | ||||||
Payment of claims
|
(9 | ) | (2 | ) | ||||
Benefit for deferred income taxes
|
- | (10 | ) | |||||
Decrease in receivables
|
33 | 90 | ||||||
Increase in inventories
|
(35 | ) | (41 | ) | ||||
Decrease in liabilities excluding borrowings
|
(55 | ) | (59 | ) | ||||
Other items, net
|
6 | (3 | ) | |||||
Total adjustments
|
(35 | ) | (10 | ) | ||||
Net cash used in operating activities
|
(89 | ) | (44 | ) | ||||
Cash flows from investing activities:
|
||||||||
Additions to properties
|
(7 | ) | (4 | ) | ||||
Proceeds from sales of businesses/assets, net
|
2 | 14 | ||||||
(Funding) use of restricted cash
|
(1 | ) | 6 | |||||
Net cash (used in) provided by investing activities
|
(6 | ) | 16 | |||||
Cash flows from financing activities:
|
||||||||
Repayment of emergence credit facilities
|
(1 | ) | (1 | ) | ||||
Proceeds from VIE credit facility
|
1 | - | ||||||
Treasury stock purchases
|
(1 | ) | - | |||||
Net cash used in financing activities
|
(1 | ) | (1 | ) | ||||
Effect of exchange rate changes on cash
|
(7 | ) | (6 | ) | ||||
Net decrease in cash and cash equivalents
|
(103 | ) | (35 | ) | ||||
Cash and cash equivalents, beginning of period
|
712 | 844 | ||||||
Cash and cash equivalents, end of period
|
$ | 609 | $ | 809 | ||||
As of
|
||||||||
(in millions)
|
March 31,
2015
|
December 31,
2014
|
||||||
Trade receivables
|
$ | 311 | $ | 361 | ||||
Miscellaneous receivables
|
48 | 53 | ||||||
Total (net of allowances of $10 and $11 as of March 31, 2015 and December 31, 2014, respectively)
|
$ | 359 | $ | 414 | ||||
|
As of
|
||||||||
(in millions)
|
March 31,
2015
|
December 31,
2014
|
||||||
Finished goods
|
$ | 209 | $ | 204 | ||||
Work in process
|
79 | 73 | ||||||
Raw materials
|
85 | 72 | ||||||
Total
|
$ | 373 | $ | 349 | ||||
(in millions)
|
Print Systems
|
Micro 3D Printing and Packaging
|
Software and Solutions
|
Consumer and Film
|
Intellectual Property Solutions
|
Total
|
||||||||||||||||||
Balance as of January 1, 2015:
|
$ | 56 | $ | 26 | $ | 6 | $ | 6 | $ | 2 | $ | 96 | ||||||||||||
Impairment
|
- | (6 | ) | - | - | - | (6 | ) | ||||||||||||||||
Balance as of March 31, 2015:
|
$ | 56 | $ | 20 | $ | 6 | $ | 6 | $ | 2 | $ | 90 | ||||||||||||
Accrued warranty obligations as of December 31, 2014
|
$ | 5 | ||
Actual warranty experience during 2015
|
2 | |||
2015 warranty provisions
|
(2 | ) | ||
Accrued warranty obligations as of March 31, 2015
|
$ | 5 | ||
Deferred revenue on extended warranties as of December 31, 2014
|
$ | 27 | ||
New extended warranty and maintenance arrangements in 2015
|
44 | |||
Recognition of extended warranty and maintenance arrangement revenue in 2015
|
(45 | ) | ||
Deferred revenue on extended warranties as of March 31, 2015
|
$ | 26 | ||
Three Months Ended
March 31,
|
||||||||
(in millions)
|
2015
|
2014
|
||||||
Loss from continuing operations before income taxes
|
$ | (50 | ) | $ | (60 | ) | ||
Effective tax rate
|
-8.0 | % | 11.7 | % | ||||
Provision (benefit) for income taxes
|
4 | (7 | ) | |||||
Benefit for income taxes @ 35%
|
(18 | ) | (21 | ) | ||||
Difference between tax at effective vs. statutory rate
|
$ | 22 | $ | 14 | ||||
(in millions)
|
Severance Reserve
(1)
|
Exit
Costs
Reserve
(1)
|
Long-lived Asset Impairments and Inventory
Write-downs
(1)
|
Accelerated Depreciation
(1)
|
Total
|
|||||||||||||||
Balance as of December 31, 2014
|
$ | 22 | $ | 5 | $ | - | $ | - | $ | 27 | ||||||||||
Q1 2015 charges
|
16 | 1 | - | 3 | 20 | |||||||||||||||
Q1 utilization/cash payments
|
(10 | ) | (1 | ) | - | (3 | ) | (14 | ) | |||||||||||
Q1 2015 other adjustments & reclasses
(2)
|
(6 | ) | - | - | - | (6 | ) | |||||||||||||
Balance as of March 31, 2015
|
$ | 22 | $ | 5 | $ | - | $ | - | $ | 27 | ||||||||||
(1)
|
The severance and exit costs reserves require the outlay of cash, while long-lived asset impairments, accelerated depreciation and inventory write-downs represent non-cash items.
|
(2)
|
The $(6) million includes $(4) million of severance related charges for pension plan special termination benefits, which are reflected in Pension and other postretirement liabilities in the Consolidated Statement of Financial Position, and $(2) million of foreign currency translation adjustments.
|
Three Months Ended
March 31,
|
||||||||||||||||
(in millions)
|
2015
|
2014
|
||||||||||||||
U.S.
|
Non-U.S.
|
U.S.
|
Non-U.S.
|
|||||||||||||
Major defined benefit plans:
|
||||||||||||||||
Service cost
|
$ | 4 | $ | 1 | $ | 4 | $ | 2 | ||||||||
Interest cost
|
37 | 4 | 47 | 8 | ||||||||||||
Expected return on plan assets
|
(68 | ) | (8 | ) | (77 | ) | (10 | ) | ||||||||
Amortization of:
|
||||||||||||||||
Prior service cost
|
(2 | ) | - | - | - | |||||||||||
Net pension income before special termination benefits
|
(29 | ) | (3 | ) | (26 | ) | - | |||||||||
Special termination benefits
|
4 | - | - | - | ||||||||||||
Net pension income
|
(25 | ) | (3 | ) | (26 | ) | - | |||||||||
Other plans including unfunded plans
|
- | 2 | - | 2 | ||||||||||||
Total net pension (income) expense
|
$ | (25 | ) | $ | (1 | ) | $ | (26 | ) | $ | 2 | |||||
(in millions)
|
Three Months Ended
March 31,
|
|||||||
2015
|
2014
|
|||||||
Service cost
|
$ | - | $ | - | ||||
Interest cost
|
1 | 1 | ||||||
Total net postretirement benefit expense
|
$ | 1 | $ | 1 | ||||
(in millions of shares)
|
Three Months Ended
March 31,
|
|||||||
2015
|
2014
|
|||||||
Unvested share-based awards
|
0.1 | 0.2 | ||||||
Detachable warrants to purchase common shares
|
0.7 | 1.9 | ||||||
Total
|
0.8 | 2.1 | ||||||
(in millions)
|
Three Months Ended
March 31,
|
|||||||
2015
|
2014
|
|||||||
Currency translation adjustments
|
$ | (7 | ) | $ | 1 | |||
Unrealized gains on available-for-sale securities, before tax
|
1 | - | ||||||
Tax provision
|
- | - | ||||||
Unrealized gains on available-for-sale securities, net of tax
|
1 | - | ||||||
Pension and other postretirement benefit plan changes
|
||||||||
Newly established prior service credit
|
4 | - | ||||||
Newly established net actuarial gain
|
5 | - | ||||||
Tax provision
|
- | - | ||||||
Newly established prior service credit and net actuarial gain, net of tax
|
9 | - | ||||||
Reclassification adjustments:
|
||||||||
Amortization of prior-service credit
|
(a) | (2 | ) | - | ||||
Total reclassification adjustments
|
(2 | ) | - | |||||
Tax provision
|
- | - | ||||||
Reclassification adjustments, net of tax
|
(2 | ) | - | |||||
Pension and other postretirement benefit plan changes, net of tax
|
7 | - | ||||||
Other comprehensive income
|
$ | 1 | $ | 1 | ||||
As of
|
||||||||
(in millions)
|
March 31,
2015
|
December 31, 2014
|
||||||
Currency translation adjustments
|
$ | (39 | ) | $ | (32 | ) | ||
Unrealized gains on investments
|
1 | - | ||||||
Pension and other postretirement benefit plan changes
|
(97 | ) | (104 | ) | ||||
Ending balance
|
$ | (135 | ) | $ | (136 | ) | ||
NOTE 14: SEGMENT INFORMATION
|
Three Months Ended March 31,
|
||||||||
(in millions)
|
2015
|
2014
|
||||||
Revenue
|
Revenue
|
|||||||
Revenues from continuing operations:
|
||||||||
Print Systems
|
$ | 254 | $ | 288 | ||||
Enterprise Inkjet Systems
|
39 | 48 | ||||||
Micro 3D Printing and Packaging
|
31 | 29 | ||||||
Software and Solutions
|
28 | 24 | ||||||
Consumer and Film
|
72 | 86 | ||||||
Intellectual Property Solutions
|
- | 9 | ||||||
Eastman Business Park
|
3 | 4 | ||||||
Consolidated total
|
$ | 427 | $ | 488 | ||||
Three Months Ended
March 31,
|
||||||||
(in millions)
|
2015
|
2014
|
||||||
Segment (loss) earnings and Consolidated (loss) earnings from continuing operations before income taxes
|
||||||||
Print Systems
|
$ | 13 | $ | 12 | ||||
Enterprise Inkjet Systems
|
(13 | ) | (12 | ) | ||||
Micro 3D Printing and Packaging
|
- | (2 | ) | |||||
Software and Solutions
|
2 | (1 | ) | |||||
Consumer and Film
|
18 | 10 | ||||||
Intellectual Property Solutions
|
(7 | ) | - | |||||
Eastman Business Park
|
(1 | ) | - | |||||
Total of reportable segments
|
12 | 7 | ||||||
All Other
|
3 | 1 | ||||||
Restructuring costs and other
|
(17 | ) | (13 | ) | ||||
Corporate components of pension and
OPEB income
(1)
|
33 | 30 | ||||||
Depreciation and amortization
|
(38 | ) | (56 | ) | ||||
Stock-based compensation
|
(7 | ) | (2 | ) | ||||
Consulting and other costs
|
(2 | ) | (2 | ) | ||||
Idle costs
(2)
|
(1 | ) | (1 | ) | ||||
Costs previously allocated to discontinued operations
|
- | (3 | ) | |||||
Fresh start adjustments
|
- | 1 | ||||||
Other operating expense, net
|
(3 | ) | - | |||||
Interest expense
|
(15 | ) | (16 | ) | ||||
Other charges, net
|
(10 | ) | (1 | ) | ||||
Reorganization items, net
|
(5 | ) | (5 | ) | ||||
Consolidated loss from continuing
operations before income taxes
|
$ | (50 | ) | $ | (60 | ) | ||
(1)
|
Composed of interest cost, expected return on plan assets, amortization of actuarial gains and losses and curtailments and settlement components of pension and other postretirement benefit expenses.
|
(2)
|
Consists of third party costs such as security, maintenance, and utilities required to maintain land and buildings in certain locations not used in any Kodak operations.
|
As of
|
||||||||
(in millions)
|
March 31,
2015
|
December 31,
2014
|
||||||
Inventories, net
|
$ | 2 | $ | 2 | ||||
Property, plant and equipment, net
|
4 | 4 | ||||||
Intangible assets and other
|
7 | 6 | ||||||
Assets held for sale
|
$ | 13 | $ | 12 | ||||
Trade payables
|
$ | 1 | $ | 1 | ||||
Liabilities held for sale
|
$ | 1 | $ | 1 | ||||
(in millions)
|
Three Months Ended
March 31,
|
|||||||
2015
|
2014
|
|||||||
Revenues from Personalized and Document Imaging
|
$ | 1 | $ | 30 | ||||
Revenues from other discontinued operations
|
- | 1 | ||||||
Total revenues from discontinued operations
|
$ | 1 | $ | 31 | ||||
Pre-tax earnings from Personalized and Document Imaging
|
$ | - | $ | 19 | ||||
Pre-tax earnings from other discontinued operations
|
- | 1 | ||||||
Provision for income taxes related to discontinued operations
|
- | (1 | ) | |||||
Earnings from discontinued operations, net of income taxes
|
$ | - | $ | 19 | ||||
Value Of Items Recorded At Fair Value
|
|||||||||||||||||
(in millions)
|
As of March 31, 2015
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
ASSETS
|
|||||||||||||||||
Derivatives
|
|||||||||||||||||
Short-term foreign exchange contracts
|
Receivables, net
|
$ | 4 | $ | - | $ | 4 | $ | - | ||||||||
Marketable securities
|
|||||||||||||||||
Long-term available-for-sale securities
|
Other long-term assets
|
4 | 4 | - | - | ||||||||||||
LIABILITIES
|
|||||||||||||||||
Derivatives
|
|||||||||||||||||
Short-term foreign exchange contracts
|
Other current liabilities
|
2 | - | 2 | - |
(in millions)
|
Value Of Items Not Recorded At Fair Value
|
|||||||||||||||||
As of March 31, 2015
|
||||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||||
LIABILITIES
|
||||||||||||||||||
Debt
|
||||||||||||||||||
Short-term debt
|
Short-term borrowings and current portion of long-term debt
|
Carrying value
|
$ | 6 | $ | - | $ | 6 | $ | - | ||||||||
Fair value
|
6 | - | 6 | - | ||||||||||||||
Long-term debt
|
Long-term debt, net of current portion
|
Carrying value
|
671 | - | 671 | - | ||||||||||||
Fair value
|
698 | - | 698 | - | ||||||||||||||
Value Of Items Recorded At Fair Value
|
|||||||||||||||||
(in millions)
|
As of December 31, 2014
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||
ASSETS
|
|||||||||||||||||
Derivatives
|
|||||||||||||||||
Short-term foreign exchange contracts
|
Receivables, net
|
$ | 2 | $ | - | $ | 2 | $ | - | ||||||||
Marketable securities
|
|||||||||||||||||
Long-term available-for-sale securities
|
Other long-term assets
|
3 | 3 | - | - | ||||||||||||
LIABILITIES
|
|||||||||||||||||
Derivatives
|
|||||||||||||||||
Short-term foreign exchange contracts
|
Other current liabilities
|
1 | - | 1 | - | ||||||||||||
Value Of Items Not Recorded At Fair Value
|
||||||||||||||||||
(in millions)
|
As of December 31, 2014
|
|||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||||
LIABILITIES
|
||||||||||||||||||
Debt
|
||||||||||||||||||
Short-term debt
|
Short-term borrowings and current portion of long-term debt
|
Carrying value
|
$ | 5 | $ | - | $ | 5 | $ | - | ||||||||
Fair value
|
5 | - | 5 | - | ||||||||||||||
Long-term debt
|
Long-term debt, net of current portion
|
Carrying value
|
672 | - | 672 | - | ||||||||||||
Fair value
|
681 | - | 681 | - |
Location of Gain or (Loss) Recognized in Income
|
Three Months Ended
March 31,
|
||||||||
(in millions)
|
2015
|
2014
|
|||||||
Foreign exchange gains (losses), net
|
Other charges, net
|
$ | (10 | ) | $ | (1 | ) |
Location of Gain or (Loss) Recognized in Income on Derivative
|
Gain (Loss) Recognized in Income on Derivative
|
|||||||
Three Months Ended
|
||||||||
March 31,
|
||||||||
2015
|
2014
|
|||||||
Other charges, net
|
$ | 18 | $ | 4 | ||||
·
|
Print Systems’ digital plate offerings include traditional digital plates and KODAK SONORA Process Free Plates. SONORA Process Free Plates yield environmental benefits for customers by removing the need for the plate processor, eliminating the associated use of chemicals, water and energy. While traditional digital plate offerings are experiencing pricing pressure, innovations in Kodak product lines, such as SONORA Process Free Plates, that command premium prices as well as drive increases in unit volumes are expected to offset some of the long-term price erosion in the market. Total plate volumes increased 2% year over year in the first quarter of 2015. Print Systems’ revenues declined $34 million compared with the prior year quarter, with approximately $24 million of the decline attributable to the adverse impact of foreign currency.
|
·
|
In Enterprise Inkjet Systems, the legacy Versamark business is expected to continue to decline as a percentage of the segment’s total revenue as the Prosper business scales up. Kodak expects Prosper products will represent the majority of the revenue in this business by the end of 2015, driven by the placement of Prosper press Systems, S-series printing heads and the related annuities. Kodak’s Prosper Inkjet Systems business is early in its lifecycle but is expected to build scale and profitability, placing equipment with direct customers as well as a growing base of original equipment manufacturer (“OEM”) partners. Revenues from the Kodak Prosper portfolio increased 23% in the first quarter of 2015 versus the prior year quarter. Enterprise Inkjet Systems’ revenue declined $9 million compared with the prior year quarter, with approximately $4 million of the decline attributable to the adverse impact of foreign currency.
|
·
|
In Micro 3D Printing and Packaging the earnings contribution from Packaging offsets the cost of developing the Micro 3D Printing business. Within Micro 3D Printing, Kodak is developing solutions in two technologies – silver halide mesh and copper mesh. Following the end of its partnership with Unipixel, Kodak is moving forward independently with development of copper mesh touch sensor technology and performing a comprehensive review of the market and sales opportunities for this technology. Kodak expects continued growth in Packaging, as well as the transition from investment to commercialization of product in Micro 3D Printing, will result in revenue and earnings growth in this segment. Growth in Packaging revenue is driven by an increasing installed base of Flexcel NX Systems which drives growth in Flexcel NX plate volumes. Flexcel NX plate volume improved by 27% in the first quarter of 2015 versus the prior year quarter. Micro 3D Printing and Packaging revenue increased $2 million compared with the prior year quarter despite an adverse impact of foreign currency of approximately $3 million compared to the prior year quarter.
|
·
|
The Consumer and Film segment’s revenues are expected to continue to decline primarily due to a continued decline in the existing installed base of Kodak’s consumer inkjet printers. Consumer and Film’s revenue declined $14 million compared with the prior year quarter.
|
·
|
SG&A and research and development (“R&D”) expenses declined a combined $37 million from the first quarter of 2014 to the first quarter of 2015 as the result of a number of actions including headcount reductions, reduced overhead costs, savings from global benefit changes, facilities consolidations and renegotiations of vendor contracts.
|
·
|
CTP thermal output devices write the desired image for offset printing onto an aluminum digital plate. These digital plates provide a consistent, high quality image carrier for various offset print applications.. Kodak’s CTP products include the KODAK MAGNUS Platesetter and TRENDSETTER Platesetter with SQUAREspot Imaging Technology, which provides high resolution, consistency and stability in thermal imaging, as well as the ACHIEVE Platesetter with TH5 imaging technology which provides a highly efficient and cost effective imaging solution for entry level customer needs.
|
·
|
Kodak’s digital plate offerings include traditional digital plates and KODAK SONORA Process Free Plates. KODAK SONORA Process Free Plates deliver cost savings and efficiency and promote sustainability practices and credentials because they do not require processing chemistry, processing equipment, or chemical disposal.
|
·
|
The PROSPER Press features Stream Inkjet Technology, which delivers a continuous flow of ink that enables constant and consistent operation, with uniform ink droplet size and accurate placement, even at very high print speeds. Applications of the PROSPER Press include publishing, commercial print, direct mail, and packaging. The business also includes a large base of customers who continue to use KODAK VERSAMARK Products, the predecessor products to the PROSPER Press. Users of KODAK VERSAMARK Products continue to purchase ink and other consumables as well as service from Kodak.
|
·
|
PROSPER System Hybrid Components are also integrated into original equipment manufacturer partner portfolios where the manufacturer combines PROSPER Writing Systems with its press systems that transport webs of paper and other substrates through the press. Sales of equipment that incorporate the PROSPER Writing Systems result in recurring revenue from sales of ink and other consumables and equipment service. The level of recurring revenue depends on the application for which the equipment is used, which drives the total number of pages printed and ink usage.
|
·
|
Kodak’s DFEs drive personalized content to digital presses while controlling color and print consistency.
|
·
|
The Packaging business includes Kodak’s FLEXCEL NX System and FLEXCEL Direct Platform, which offer digitization into the flexographic print market. The FLEXCEL NX System uses Kodak’s proprietary SQUAREspot laser imaging technology to produce high resolution imaging that reduces waste and ink usage. The FLEXCEL Direct Platform delivers processless high productivity and the environmental benefits of a processless solution. These print production capabilities leverage a portfolio of offset, flexographic, and digital products and services, which help enable customers to preserve brand equity, enhance shelf appeal, and drive efficiency from design to solution.
|
·
|
The Micro 3D Printing business focuses on leveraging Kodak’s expertise in imaging and materials science and deposition processes to create products using printing processes instead of traditional manufacturing techniques. Micro 3D Printing offers many advantages over traditional manufacturing, including cost, conductivity and environmental impact. The Micro 3D Printing business is in a start-up phase. Kodak’s first initiatives in Micro 3D Printing are focusing on two separate solutions that are expected to provide touch panel sensor films to the touchscreen industry. These solutions consist of a silver
halide-based solution and a copper mesh solution. The silver halide-based solution is being commercialized in collaboration with a business partner. Following the end of its partnership with Unipixel, Kodak is moving forward independently with development of copper mesh touch sensor technology and performing a comprehensive review of the market and sales opportunities for this technology.
|
·
|
Kodak Technology Solutions has the mandate to continually ensure the monetization of Kodak’s advances in material science and digital technologies. Kodak Technology Solutions assists organizations
with challenges and opportunities created by the worldwide digital transformation. Kodak Technology Solutions provides print and managed media services that provide customers with solutions for their printing requirements using Kodak technologies; brand protection technologies and services to help brand owners combat counterfeiters and diverters; web-based solutions for managing brand assets and content creation; and document management services, including expertise in the capture, archiving, retrieval and delivery of documents. Kodak Technology Solutions serves customers in numerous sectors, including governments, pharmaceuticals and life sciences, consumer and luxury product goods and retail and financial services.
|
·
|
United Workflow Solutions is used by customers to manage digital and conventional print content from file creation to output. Kodak’s Unified Workflow Solutions includes KODAK PRINERGY Workflow Software, KODAK PREPS Imposition Software, KODAK COLORFLOW Software and the KODAK INSITE Software family of products. Unified Workflow Solutions manages content and color, reduces manual errors and helps customers manage the collaborative creative process. Unified Workflow Solutions is sold globally to customers both directly by Kodak and indirectly through dealers.
|
·
|
Consumer Inkjet Solutions includes the sale of ink to Kodak’s existing installed base of consumer inkjet printers.
|
·
|
Entertainment Imaging and Commercial Films includes the motion picture film business serving the entertainment and advertising industries. Motion picture products are sold directly to studios, laboratories and independent filmmakers. The group also offers industrial films, including films used by the electronics industry to produce printed circuit boards. Entertainment Imaging and Commercial Films also includes related component businesses: Polyester Film; Specialty Chemicals, Inks & Dispersions, and Solvent Recovery.
|
·
|
Brand Licensing includes licensing of Kodak brands to third parties for certain branded products that Kodak no longer produces.
|
Three Months Ended March 31,
|
||||||||
(in millions)
|
2015
|
2014
|
||||||
Revenues from continuing operations:
|
||||||||
Print Systems
|
$ | 254 | $ | 288 | ||||
Enterprise Inkjet Systems
|
39 | 48 | ||||||
Micro 3D Printing and Packaging
|
31 | 29 | ||||||
Software and Solutions
|
28 | 24 | ||||||
Consumer and Film
|
72 | 86 | ||||||
Intellectual Property Solutions
|
- | 9 | ||||||
Eastman Business Park
|
3 | 4 | ||||||
Consolidated total
|
$ | 427 | $ | 488 | ||||
Three Months Ended
March 31,
|
||||||||
(in millions)
|
2015
|
2014
|
||||||
Segment Operational EBITDA and Consolidated (loss) earnings from continuing operations before income taxes
|
||||||||
Print Systems
|
$ | 13 | $ | 12 | ||||
Enterprise Inkjet Systems
|
(13 | ) | (12 | ) | ||||
Micro 3D Printing and Packaging
|
- | (2 | ) | |||||
Software and Solutions
|
2 | (1 | ) | |||||
Consumer and Film
|
18 | 10 | ||||||
Intellectual Property Solutions
|
(7 | ) | - | |||||
Eastman Business Park
|
(1 | ) | - | |||||
Total of reportable segments
|
12 | 7 | ||||||
All Other
|
3 | 1 | ||||||
Restructuring costs and other
|
(17 | ) | (13 | ) | ||||
Corporate components of pension and
OPEB income
(1)
|
33 | 30 | ||||||
Depreciation and amortization
|
(38 | ) | (56 | ) | ||||
Stock-based compensation
|
(7 | ) | (2 | ) | ||||
Consulting and other costs
|
(2 | ) | (2 | ) | ||||
Idle costs
(2)
|
(1 | ) | (1 | ) | ||||
Costs previously allocated to discontinued operations
|
- | (3 | ) | |||||
Fresh start adjustments
|
- | 1 | ||||||
Other operating expense, net
|
(3 | ) | - | |||||
Interest expense
|
(15 | ) | (16 | ) | ||||
Other charges, net
|
(10 | ) | (1 | ) | ||||
Reorganization items, net
|
(5 | ) | (5 | ) | ||||
Consolidated loss from continuing
operations before income taxes
|
$ | (50 | ) | $ | (60 | ) | ||
(1)
|
Composed of interest cost, expected return on plan assets, amortization of actuarial gains and losses, and curtailments and settlement components of pension and other postretirement benefit expenses.
|
(2)
|
Consists of third party costs such as security, maintenance, and utilities required to maintain land and buildings in certain locations not used in any Kodak operations.
|
(in millions)
|
Three Months Ended March 31,
|
|||||||||||||||||||
|
2015
|
% of Sales
|
2014
|
% of Sales
|
% Change
|
|||||||||||||||
Revenues
|
$ | 427 | $ | 488 | -13 | % | ||||||||||||||
Cost of revenues
|
350 | 399 | -12 | % | ||||||||||||||||
Gross profit
|
77 | 18 | % | 89 | 18 | % | -13 | % | ||||||||||||
Selling, general and administrative expenses
|
58 | 14 | % | 87 | 18 | % | -33 | % | ||||||||||||
Research and development costs
|
19 | 4 | % | 27 | 6 | % | -30 | % | ||||||||||||
Restructuring costs and other
|
17 | 4 | % | 13 | 3 | % | 31 | % | ||||||||||||
Other operating expense, net
|
3 | - | ||||||||||||||||||
Loss from continuing operations before interest expense, other charges, net, reorganization items, net and income taxes
|
(20 | ) | -5 | % | (38 | ) | -8 | % | 47 | % | ||||||||||
Interest expense
|
15 | 16 | -6 | % | ||||||||||||||||
Other charges, net
|
(10 | ) | (1 | ) | ||||||||||||||||
Reorganization items, net
|
5 | 5 | ||||||||||||||||||
Loss from continuing operations before income taxes
|
(50 | ) | -12 | % | (60 | ) | -12 | % | 17 | % | ||||||||||
Provision (benefit) for income taxes
|
4 | 1 | % | (7 | ) | -1 | % | 157 | % | |||||||||||
Loss from continuing operations
|
(54 | ) | -13 | % | (53 | ) | -11 | % | -2 | % | ||||||||||
Earnings from discontinued operations, net of
income taxes
|
- | 19 | ||||||||||||||||||
Net loss
|
(54 | ) | -13 | % | (34 | ) | -7 | % | -59 | % | ||||||||||
Less: Net earnings attributable to noncontrolling interests
|
4 | 2 | ||||||||||||||||||
NET LOSS ATTRIBUTABLE TO EASTMAN KODAK COMPANY
|
$ | (58 | ) | -14 | % | $ | (36 | ) | -7 | % | -61 | % | ||||||||
Three Months Ended March 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
Revenues
|
$ | 254 | $ | 288 | -12 | % | ||||||
Operational EBITDA before allocation of corporate SG&A costs
|
25 | 31 | -21 | % | ||||||||
Allocation of corporate SG&A costs
|
12 | 19 | -38 | % | ||||||||
Operational EBITDA
|
13 | 12 | 8 | % | ||||||||
Operational EBITDA as a % of revenues
|
5 | % | 4 | % |
Three Months Ended March 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
Revenues
|
$ | 39 | $ | 48 | -19 | % | ||||||
Operational EBITDA before allocation of corporate SG&A costs
|
(10 | ) | (8 | ) | -25 | % | ||||||
Allocation of corporate SG&A costs
|
3 | 4 | -25 | % | ||||||||
Operational EBITDA
|
(13 | ) | (12 | ) | -8 | % | ||||||
Operational EBITDA as a % of revenues
|
-33 | % | -25 | % | ||||||||
Three Months Ended March 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
Revenues
|
$ | 31 | $ | 29 | 7 | % | ||||||
Operational EBITDA before allocation of corporate SG&A costs
|
2 | - | N/A | |||||||||
Allocation of corporate SG&A costs
|
2 | 2 | 0 | % | ||||||||
Operational EBITDA
|
- | (2 | ) | 100 | % | |||||||
Operational EBITDA as a % of revenues
|
0 | % | -7 | % |
Three Months Ended March 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
Revenues
|
$ | 28 | $ | 24 | 17 | % | ||||||
Operational EBITDA before allocation of corporate SG&A costs
|
4 | 1 | 100 | % | ||||||||
Allocation of corporate SG&A costs
|
2 | 2 | -33 | % | ||||||||
Operational EBITDA
|
2 | (1 | ) | 300 | % | |||||||
Operational EBITDA as a % of revenues
|
7 | % | -4 | % |
Three Months Ended March 31,
|
||||||||||||
2015
|
2014
|
% Change
|
||||||||||
Revenues
|
$ | 72 | $ | 86 | -16 | % | ||||||
Operational EBITDA before allocation of corporate SG&A costs
|
21 | 16 | 31 | % | ||||||||
Allocation of corporate SG&A costs
|
3 | 6 | -50 | % | ||||||||
Operational EBITDA
|
18 | 10 | 80 | % | ||||||||
Operational EBITDA as a % of revenues
|
25 | % | 12 | % |
(in millions)
|
As of
March 31,
2015
|
As of
December 31,
2014
|
||||||
Cash and cash equivalents
|
$ | 609 | $ | 712 | ||||
Three Months Ended
|
||||||||||||
March 31,
|
||||||||||||
(in millions)
|
2015
|
2014
|
Change
|
|||||||||
Cash flows from operating activities:
|
||||||||||||
Net cash used in operating activities
|
$ | (89 | ) | $ | (44 | ) | $ | (45 | ) | |||
Cash flows from investing activities:
|
||||||||||||
Net cash (used in) provided by investing activities
|
(6 | ) | 16 | (22 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Net cash used in financing activities
|
(1 | ) | (1 | ) | - | |||||||
Effect of exchange rate changes on cash
|
(7 | ) | (6 | ) | (1 | ) | ||||||
Net decrease in cash and cash equivalents
|
$ | (103 | ) | $ | (35 | ) | $ | (68 | ) | |||
·
|
Kodak’s ability to improve and sustain its operating structure, financial results and profitability;
|
·
|
the ability of Kodak 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 discontinue, sell or spin-off certain non-core businesses or operations;
|
·
|
Kodak’s ability to comply with the covenants in its credit facilities;
|
·
|
Kodak’s ability to obtain additional financing if and as needed;
|
·
|
the potential adverse effects of the concluded Chapter 11 proceedings on Kodak’s brand or business prospects;
|
·
|
Kodak’s ability to fund continued investments, capital needs and restructuring payments and service its debt;
|
·
|
changes in foreign currency exchange rates, commodity prices and interest rates;
|
·
|
the resolution of claims against Kodak;
|
·
|
Kodak’s ability to attract and retain key executives, managers and employees;
|
·
|
Kodak’s ability to maintain product reliability and quality and growth in relevant markets;
|
·
|
Kodak’s ability to effectively anticipate technology trends and develop and market new products, solutions and technologies; and
|
·
|
the impact of the global economic environment on Kodak.
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum That May Be Purchased under the Plans or Programs
|
|||||||||||||
March 1 through 31
|
17,408 | 18.46 | n/a | n/a | ||||||||||||
Total
|
17,408 | |||||||||||||||
(1)
|
These repurchases are made pursuant to the terms of the 2013 Omnibus Incentive Plan providing the Company the right to withhold amounts deliverable under the plan in order to satisfy minimum statutory tax withholding requirements.
|
(a)
|
Exhibits required as part of this report are listed in the index appearing below.
|
EASTMAN KODAK COMPANY
(Registrant)
|
|||
|
|||
Date:
May 7, 2015
|
/s/ Eric Samuels
|
||
Eric Samuels
Chief Accounting Officer and Corporate Controller
|
|||
(Chief Accounting Officer and Authorized Signatory)
|
(a)
|
Exhibits required as part of this report are listed in the index appearing below.
|
Vesting Date
|
Percentage Vesting
|
33
1
/
3
%
|
|
33
1
/
3
%
|
|
33
1
/
3
%
|
|
(i)
|
in cash or its equivalent (e.g., by cashier’s check);
|
|
(ii)
|
to the extent permitted by the Committee, in Shares previously owned by the Grantee having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee;
|
|
(iii)
|
any combination of the foregoing; or
|
|
(iv)
|
in consideration received by the Company under a cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan.
|
|
(i)
|
by having the Company withhold Shares; or
|
|
(ii)
|
through an independent broker-dealer arrangement to sell a sufficient number of Shares;
|
|
Exhibit (31.1)
|
1)
|
I have reviewed this Form 10-Q;
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5)
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
Chief Executive Officer
|
|
Exhibit (31.2)
|
1)
|
I have reviewed this Form 10-Q;
|
2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4)
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5)
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
Exhibit (32.1)
|
CERTIFICATION PURSUANT TO
|
18 U.S.C. Section 1350,
|
AS ADOPTED PURSUANT TO
|
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
|
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
|
|
|
|
/s/John N. McMullen
|