Eastman Kodak(KODK) - 2023 Q2 - Quarterly Report

Part I. Financial Information Presents the company's consolidated financial statements and management's discussion and analysis of financial condition Financial Statements Presents the unaudited consolidated financial statements for Eastman Kodak Company, including operations, comprehensive income, financial position, cash flows, and equity Consolidated Statement of Operations (Unaudited) Net earnings increased to $35 million in Q2 2023 and $68 million year-to-date, driven by higher gross profit and pension income despite revenue decline Consolidated Statement of Operations Highlights (in millions, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $295 | $321 | $573 | $611 | | Gross Profit | $63 | $51 | $113 | $84 | | Earnings from Operations before Income Taxes | $37 | $19 | $78 | $18 | | Net Earnings | $35 | $20 | $68 | $17 | | Diluted EPS | $0.32 | $0.19 | $0.63 | $0.12 | Consolidated Statement of Comprehensive (Loss) Income (Unaudited) The company recorded a comprehensive loss of $99 million in Q2 2023, primarily due to a significant negative adjustment for pension and other postretirement benefit plan obligations Comprehensive (Loss) Income (in millions) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings | $35 | $20 | $68 | $17 | | Other Comprehensive (Loss) Income | $(134) | $100 | $(141) | $105 | | Comprehensive (Loss) Income | $(99) | $120 | $(73) | $122 | Consolidated Statement of Financial Position (Unaudited) Total assets slightly decreased to $2.221 billion as of June 30, 2023, while total shareholders' equity declined due to changes in accumulated other comprehensive income Key Balance Sheet Items (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $223 | $217 | | Total current assets | $672 | $681 | | Total Assets | $2,221 | $2,285 | | Total current liabilities | $292 | $293 | | Total Liabilities | $1,047 | $1,041 | | Total shareholders' equity | $967 | $1,041 | Consolidated Statement of Cash Flows (Unaudited) Net cash provided by operating activities significantly improved to $21 million for the first six months of 2023, leading to a $6 million net increase in cash Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $21 | $(103) | | Net cash used in investing activities | $(11) | $(9) | | Net cash (used in) provided by financing activities | $(2) | $47 | | Net increase (decrease) in cash | $6 | $(70) | Notes to Financial Statements (Unaudited) Provides detailed explanations of accounting policies and financial data, covering debt, preferred stock, revenue disaggregation, segment information, and financial instruments - In February 2023, Kodak combined its Traditional Printing and Digital Printing segments into a single 'Print' segment. Other segments (Advanced Materials and Chemicals, Brand) were unchanged[20][144] - On July 21, 2023 (subsequent to the reporting period), the company completed a major refinancing, borrowing $450 million in new Refinancing Term Loans to repay existing debt, terminate its ABL facility, and provide additional working capital[31][237] - The company is involved in various legal proceedings, including derivative lawsuits related to the 2020 DFC loan announcement and tax litigation in Brazil[86][88][89] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, highlighting a 6% year-to-date revenue decline, improved gross profit, and ongoing navigation of a volatile global economic environment Financial Performance Summary (Six Months Ended June 30) | Metric (in millions) | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Revenues | $573 | $611 | $(38) | | Gross Profit | $113 | $84 | $29 | | Gross Profit % | 20% | 14% | +6 p.p. | | Net Earnings | $68 | $17 | $51 | - The company's strategy focuses on core areas of print and advanced materials, growing revenue in the print division, promoting film use, and driving cost reductions[190] - Kodak is experiencing supply chain disruptions, material and labor shortages, and increased costs. It has implemented pricing actions and surcharges to mitigate these impacts, but notes a resulting slowdown in customer demand for plates[180][182][184] - New growth initiatives include investments in EV battery material manufacturing, light-blocking fabric technology, transparent antennas, and reagent manufacturing[192] Results of Operations by Segment The Print segment's revenue declined due to lower volumes, while Advanced Materials and Chemicals saw revenue growth, both segments showing improved Operational EBITDA Segment Performance - Six Months Ended June 30, 2023 vs 2022 (in millions) | Segment | Revenue 2023 | Revenue 2022 | Operational EBITDA 2023 | Operational EBITDA 2022 | | :--- | :--- | :--- | :--- | :--- | | Print | $424 | $480 | $14 | $(1) | | Advanced Materials and Chemicals | $133 | $115 | $11 | $(2) | | Brand | $8 | $8 | $6 | $7 | - Print segment revenue decline was driven by lower volumes in Prepress consumables ($70 million), partially offset by improved pricing ($29 million)[216] - Advanced Materials and Chemicals revenue growth was primarily from pricing improvements in Industrial Film and Chemicals ($19 million) and Motion Picture ($2 million)[221] Liquidity and Capital Resources Kodak ended Q2 2023 with $223 million in cash and completed a major post-quarter refinancing, securing a new $450 million term loan to repay existing debt and provide working capital - On July 21, 2023, the company completed a major refinancing, securing a new $450 million term loan. The new loan bears interest at 7.5% cash and 5.0% PIK/cash option, maturing in August 2028[236][237][241] - The refinancing proceeds were used to repay the existing term loan ($318M), the Convertible Notes ($28M), terminate the ABL facility, and add approximately $29M to cash for general corporate purposes[237][238][239] Cash and Liquidity (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $223 | $217 | | Restricted cash | $69 | $69 | | Total Cash, cash equivalents and restricted cash | $292 | $286 | Quantitative and Qualitative Disclosures About Market Risk The company states its exposure to market risks, primarily from fluctuations in foreign currency exchange rates and interest rates, due to its global operations - Kodak is exposed to market risks from foreign currency exchange rates and interest rates due to its global business activities[260] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[261] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[264] Part II. Other Information Provides additional disclosures on legal proceedings, risk factors, equity sales, and filed exhibits Legal Proceedings This section refers to Note 7 of the financial statements for information regarding the company's ongoing legal proceedings - For information on legal proceedings, the report directs readers to Note 7, "Commitments and Contingencies" in the financial statements[265] Risk Factors This section refers to the detailed discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - For a detailed discussion of risk factors, the report directs readers to Item 1A of the 2022 Form 10-K[266] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the quarter, only purchasing shares to satisfy tax withholding obligations for employee restricted stock units - There were no sales of unregistered securities during the quarter ended June 30, 2023[267] - The company purchased 2,068 shares at an average price of $3.30 per share to satisfy tax withholding obligations for employees. Kodak does not have a publicly announced repurchase plan[268][269] Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including amendments to credit agreements, CEO/CFO certifications, and XBRL data files - Key exhibits filed include the First Amendment to the Credit Agreement and Amendment No. 2 to the Letter of Credit Facility Agreement, both dated June 30, 2023[272] - Certifications by CEO James V. Continenza and CFO David E. Bullwinkle pursuant to Sarbanes-Oxley Sections 302 and 906 are included as exhibits[274]