Eastman Kodak(KODK) - 2024 Q2 - Quarterly Report

Part I. Financial Information This section details the company's unaudited consolidated financial statements and management's analysis for the period ended June 30, 2024 Financial Statements The unaudited consolidated financial statements for the period ended June 30, 2024, show a decrease in total revenues and net earnings, with stable total assets and decreased cash flow from operations Consolidated Statement of Operations Revenues and net earnings declined for both the three and six-month periods ended June 30, 2024, compared to the prior year Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $267 | $295 | $516 | $573 | | Gross Profit | $58 | $63 | $107 | $113 | | Net Earnings | $26 | $35 | $58 | $68 | | Diluted EPS | $0.23 | $0.32 | $0.52 | $0.63 | Consolidated Statement of Comprehensive Income (Loss) For the second quarter of 2024, the company reported comprehensive income of $13 million, a significant turnaround from a comprehensive loss in the same period of 2023 Comprehensive Income (Loss) Summary (in millions) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings | $26 | $35 | $58 | $68 | | Other Comprehensive Loss | ($13) | ($134) | ($25) | ($141) | | Comprehensive Income (Loss) | $13 | ($99) | $33 | ($73) | Consolidated Statement of Financial Position As of June 30, 2024, total assets were $2.359 billion, nearly unchanged from December 31, 2023, while total liabilities decreased Financial Position Summary (in millions) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $251 | $255 | | Total current assets | $660 | $712 | | Total Assets | $2,359 | $2,355 | | Total current liabilities | $278 | $283 | | Total Liabilities | $1,184 | $1,214 | | Total Shareholders' Equity | $961 | $931 | Consolidated Statement of Cash Flows For the first six months of 2024, net cash provided by operating activities was $10 million, down from $21 million in the prior-year period, with increased cash usage in financing activities Cash Flow Summary for Six Months Ended June 30 (in millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $10 | $21 | | Net cash used in investing activities | ($2) | ($11) | | Net cash used in financing activities | ($20) | ($2) | | Net (decrease) increase in cash | ($17) | $6 | Notes to Financial Statements The notes provide detailed disclosures on accounting policies, financial statement components, and other key information, including revenue disaggregation and litigation details - Total cash, cash equivalents, and restricted cash was $360 million as of June 30, 2024, a decrease from $377 million at December 31, 2023, with restricted cash including collateral for workers' compensation, letters of credit, and legal contingencies[22][23] - The company is involved in derivative lawsuits related to the 2020 DFC loan announcement and has ongoing tax litigation in Brazil, with accrued liabilities of approximately $3 million for claims aggregating $85 million[43][46][47] - Revenue from unsatisfied performance obligations, primarily from long-term service, lease, and licensing contracts, was approximately $92 million as of June 30, 2024, with 55% expected to be recognized after 2027[68] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a revenue decline of 9% for Q2 and 10% for H1 2024, primarily due to lower volumes and pricing pressures in the Print segment, while navigating a volatile global economy and supply chain issues Financial Performance Summary (in millions) | Metric | Q2 2024 | Q2 2023 | Change | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $267 | $295 | (9%) | $516 | $573 | (10%) | | Net Earnings | $26 | $35 | (26%) | $58 | $68 | (15%) | - The company is pursuing strategic growth initiatives in advanced materials, including EV battery material manufacturing, light-blocking technology, transparent antennas, and reagent manufacturing[122][123][124] - Kodak filed petitions with U.S. authorities seeking anti-dumping and countervailing duties on printing plates from China and Japan to combat low-priced competition, with preliminary duties imposed[114] Results of Operations Revenue for Q2 2024 decreased by $28 million, primarily from a $23 million decline in Print segment volume, leading to a $5 million fall in gross profit and a $7 million increase in SG&A expenses - Q2 2024 revenue decline of $28 million was primarily driven by lower volume ($23 million) and unfavorable pricing/mix ($1 million) in the Print segment, along with unfavorable foreign currency impact ($4 million)[128] - Q2 2024 gross profit decreased by $5 million, mainly due to a $5 million increase in manufacturing costs, partially offset by a $2 million reduction in aluminum costs[130] - SG&A expenses for Q2 2024 increased by $7 million, reflecting the absence of a prior-year insurance reimbursement and higher spending on IT systems, the drupa trade show, and litigation[132] Reportable Segments The Print segment's revenue and operational EBITDA fell significantly in Q2 2024, while the Advanced Materials and Chemicals segment saw a slight revenue increase but a $3 million drop in EBITDA Print Segment Performance (Q2 2024 vs Q2 2023, in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $186 | $215 | ($29) | | Operational EBITDA | $0 | $8 | ($8) | Advanced Materials and Chemicals Segment Performance (Q2 2024 vs Q2 2023, in millions) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $73 | $72 | $1 | | Operational EBITDA | $8 | $11 | ($3) | - The Brand segment's revenue and Operational EBITDA were materially unchanged for the three and six months ended June 30, 2024, compared to the prior year[151] Liquidity and Capital Resources Kodak ended Q2 2024 with a cash balance of $251 million, down $4 million from year-end 2023, with net cash from operations decreasing by $11 million year-over-year - The company's cash balance was $251 million at June 30, 2024, with $107 million held outside the U.S. and limitations on repatriation[153][155] Cash Flow Activity (Six Months Ended June 30, in millions) | Metric | 2024 | 2023 | Year-Over-Year Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $10 | $21 | ($11) | | Net cash used in investing activities | ($2) | ($11) | $9 | | Net cash used in financing activities | ($20) | ($2) | ($18) | - Capital expenditures for 2024 are expected to be between $40 million and $55 million, with $19 million spent in the first six months[175] Quantitative and Qualitative Disclosures About Market Risk The company acknowledges its exposure to market risks, particularly foreign currency exchange rate fluctuations, due to its extensive international operations, referring to its 2023 Annual Report on Form 10-K for detailed discussion - Kodak is exposed to market risk from fluctuations in foreign currency exchange rates due to its global business operations[177] - The report directs readers to the 2023 Form 10-K for a detailed analysis of market risks and how they are managed[177] Controls and Procedures Based on management's evaluation, the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the second quarter of 2024[178] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[179] Part II. Other Information This section covers legal proceedings, risk factors, equity sales, and other disclosures, referring to prior filings for detailed information Legal Proceedings This section refers to Note 6 of the financial statements for details on legal proceedings, including ongoing derivative lawsuits and various tax and civil litigation in Brazil - For information regarding legal proceedings, the report refers to Note 6, "Commitments and Contingencies" in the financial statements[179] Risk Factors The company directs readers to the detailed discussion of risk factors in its 2023 Annual Report on Form 10-K, which could materially impact its business, financial condition, and operational results - The report refers to the Risk Factors section of the 2023 Form 10-K for a detailed discussion of potential risks[180] Unregistered Sales of Equity Securities and Use of Proceeds During the second quarter of 2024, Kodak did not have any unregistered sales of equity securities, with share repurchases solely for tax withholding obligations related to employee restricted stock unit vesting - There were no unregistered sales of equity securities during the quarter ended June 30, 2024[180] Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30 | 103,732 | $4.58 | | May 1-31 | 70,334 | $4.97 | | June 1-30 | — | — | - Share purchases were made to satisfy tax withholding obligations for employee RSU vesting and not as part of a publicly announced repurchase plan[180] Other Information The company reported that none of its directors or executive officers adopted or terminated a Rule 10b5-1 trading plan during the second quarter of 2024 - No Rule 10b5-1 trading plans were adopted or terminated by directors or executive officers during the quarter[181] Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including required certifications from the CEO and CFO and interactive data files - The filing includes required certifications from the CEO (James V. Continenza) and CFO (David E. Bullwinkle) under Sections 302 and 906 of the Sarbanes-Oxley Act[184] - Interactive data files (Inline XBRL) are included as exhibits 101 and 104[184]