Eastman Kodak(KODK) - 2021 Q1 - Quarterly Report

Part I Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Q1 2021, showing improved net income and increased assets due to new financing Financial Performance Overview | Financial Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Total Revenues | $265 | $267 | | Gross Profit | $40 | $36 | | Loss from Operations | ($14) | ($21) | | Net Income (Loss) | $6 | ($111) | | Diluted EPS | $0.16 | ($2.66) | Balance Sheet Highlights | Balance Sheet Item | March 31, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $401 | $196 | | Total Current Assets | $834 | $627 | | Total Assets | $1,489 | $1,248 | | Long-term debt, net | $246 | $17 | | Total Liabilities | $1,193 | $980 | | Total Shareholders' Equity | $104 | $77 | - Net cash used in operating activities was $16 million, an improvement from $41 million in the prior-year period, while net cash provided by financing activities was $242 million, compared to a $3 million use of cash in Q1 2020[14] Notes to Financial Statements These notes detail significant accounting policies, major financing transactions, segment performance, and legal contingencies - On February 26, 2021, the company entered into a $225 million Term Loan Credit Agreement with a five-year maturity, bearing interest at 8.5% cash and 4.0% PIK, yielding net proceeds of $215 million[31] - The company issued $25 million in 5.0% unsecured convertible promissory notes and 1 million shares of common stock for $10 million in a private placement[35] - The company repurchased 1 million shares of Series A Preferred Stock for $100.6 million and exchanged the remaining 1 million shares for new Series B Preferred Stock, also issuing 1 million shares of new Series C Preferred Stock for $100 million[56][70] - The company is involved in Securities Class Actions and Fiduciary Matters, cooperating with investigations by the SEC and other bodies, all stemming from the July 2020 DFC loan announcement[87][89][90] Revenue by Segment | Revenue by Segment (in millions) | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Traditional Printing | $148 | $154 | | Digital Printing | $64 | $65 | | Advanced Materials and Chemicals | $46 | $42 | | Brand | $3 | $3 | | Total | $265 | $267 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, highlighting revenue trends, profitability improvements, and the impact of new financing on liquidity Results of Operations Q1 2021 saw a slight revenue decrease, improved gross profit, and a significant swing to net income, primarily due to lower operating costs and a prior-year tax provision - Revenue declined $2 million year-over-year, driven by volume and pricing declines in Traditional and Digital Printing, partially offset by growth in Advanced Materials and Chemicals and a $9 million favorable currency impact[177] - Gross profit improved by $4 million year-over-year, reflecting cost improvements of $5 million and lower depreciation, which offset volume and pricing pressures[178] - SG&A expenses decreased by $2 million due to cost reduction efforts and lower bad debt expense, partially offset by $5 million in costs for investigations and a $2 million increase in stock-based compensation[179] - The significant swing from a $111 million net loss in Q1 2020 to a $6 million net income in Q1 2021 was primarily due to a $167 million tax provision recorded in the prior-year quarter and a $53 million gain on an embedded derivative in 2020 that did not recur[176][181][182] Segment Analysis Q1 2021 segment analysis reveals revenue declines in Traditional and Digital Printing with improved EBITDA, while Advanced Materials and Chemicals saw revenue growth and a narrowed EBITDA loss - Traditional Printing: Revenue decreased $6 million due to volume/pricing declines, but Operational EBITDA improved $4 million, reflecting lower manufacturing and SG&A costs[183][184][185] - Digital Printing: Revenue decreased $1 million, while Operational EBITDA improved by $2 million to break-even, driven by higher equipment volume and lower SG&A expenses[186][187][188] - Advanced Materials and Chemicals: Revenue increased $4 million, and Operational EBITDA loss improved by $5 million, mainly due to volume and pricing gains in Industrial Film and Chemicals[189][190][191] Liquidity and Capital Resources Q1 2021 financing transactions significantly improved liquidity, increasing cash and enabling the company to meet minimum liquidity requirements, with the DFC loan not expected to proceed - Financing transactions in Q1 2021 provided significant liquidity to fund operations, obligations, and growth initiatives[197] Cash Flow Activities | Cash Flow Activity (in millions) | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($16) | ($41) | | Net cash used in investing activities | ($1) | ($1) | | Net cash provided by (used in) financing activities | $242 | ($3) | - As of March 31, 2021, the company held $401 million in cash and cash equivalents, with $284 million in the U.S. and $117 million held internationally[13][204] - The company is operating on the basis that the potential $765 million DFC loan will not proceed and is exploring other options for its pharmaceuticals initiative[214] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - Management concluded that as of the end of the quarter, the company's disclosure controls and procedures were effective[217] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[218] Part II Item 1. Legal Proceedings The company faces multiple legal challenges, including class-action lawsuits and ongoing investigations by regulatory bodies, all stemming from the July 2020 DFC loan announcement - The company is defending against Securities Class Actions alleging violations of federal securities laws related to the DFC loan announcement[220] - A Fiduciary Class Action and other shareholder demands allege breaches of fiduciary duty by the Board of Directors[221] - The company is cooperating with ongoing investigations by several congressional committees, the SEC, and the New York Attorney General's office regarding the DFC announcement[222] Item 1A. Risk Factors This section states that the risk factors disclosed in the 2020 Form 10-K remain applicable, with no new risk factors introduced in this quarterly report - The report references the Risk Factors set forth in the 2020 Form 10-K, indicating they remain applicable[225] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2021, the company had no unregistered equity sales but purchased shares to satisfy tax withholding for employee equity awards - The company purchased 71,201 of its own shares during the quarter to satisfy tax withholding obligations for employee equity awards[226] Item 6. Exhibits This section indexes all exhibits filed with the Form 10-Q, including corporate governance documents, financing agreements, and CEO/CFO certifications - Lists various agreements filed as exhibits, including the new Credit Agreements, Securities Purchase Agreements, and CEO employment agreement[234][237][238]