The FINANCIAL — Eastman Kodak Company on March 15 reported financial results for the fourth quarter and full year 2017, delivering net earnings for the year of $94 million on revenues of $1.5 billion and continued growth in key product areas.
GAAP net earnings of $94 million for the year ended December 31, 2017. GAAP net earnings for the year includes a tax benefit of $101 million due to the release of a valuation allowance in the fourth quarter of 2017 as a result of increased profits in a location outside the U.S.
Operational EBITDA for the year of $57 million.
Revenues for 2017 of $1.5 billion, a decline of $112 million compared with the same period in 2016.
Key product lines achieved strong year-over-year growth for the full year 2017:
Volume for KODAK FLEXCEL NX Plates grew by 17 percent.
Volume for KODAK SONORA Process Free Plates grew by 21 percent.
Annuity revenues for the KODAK PROSPER inkjet platform grew by 13 percent.
The company ended the year with a cash balance of $344 million.
2018 guidance is for revenues of $1.5 billion to $1.6 billion and Operational EBITDA of $60 million to $70 million. Beginning in 2018 Operational EBITDA will only include the service cost component of pension income in conjunction with the adoption of a new accounting standard.1 If this change were made in 2017 Operational EBITDA would have been $49 million.
“2017 was a year of investment in our strategic growth priorities which bodes well for the future,” said Jeff Clarke, Kodak Chief Executive Officer. “We also eliminated several business initiatives while continuing to reduce cost and drive greater efficiency in the company. We enter 2018 with a stronger growth profile and more productive operations.”
Revenues for the full year 2017 were $1.5 billion, down 7 percent from 2016. The revenue decline was driven by volume and pricing declines within the company’s commercial print business and volume declines in the company’s consumer inkjet and industrial film and chemicals businesses.
The company’s cash balance was $344 million at the end of 2017, compared with $434 million at the end of 2016. The company used cash to invest in strategic growth businesses, fund working capital needs, meet legacy cash obligations and service and prepay debt.
“Our use of cash in 2017 included meaningful investments in the ULTRASTREAM inkjet platform, FLEXCEL NX packaging, SONORA X plates, advanced materials and brand licensing which will contribute to growth,” said David Bullwinkle, Kodak Chief Financial Officer. “In the fourth quarter of 2017, we reprioritized our investments to focus on shorter payback periods and reduced costs which will improve our ability to generate cash in 2018 and beyond.”
Print Systems Division (PSD), Kodak’s largest division, had Q4 revenues of $261 million, a 6 percent decline compared with Q4 in 2016. Operational EBITDA for the quarter was $16 million, compared with $39 million for the same period a year ago. Print Systems Division had full-year 2017 revenues of $942 million, a 7 percent decline compared with 2016. Full-year Operational EBITDA was $58 million, a decline of $48 million compared with the prior year. The decline was due primarily to industry pricing pressures, higher aluminum costs and an overall commercial print industry slowdown.
PSD’s environmentally-advantaged KODAK SONORA Process Free Plates had continued strong performance, delivering 21 percent year-over-year growth in unit sales. SONORA Plates now account for 19 percent of the division’s total plate unit sales.
Enterprise Inkjet Systems Division (EISD), including the KODAK PROSPER and KODAK VERSAMARK businesses and the investment in ULTRASTREAM inkjet technology, had fourth-quarter revenues of $39 million, down from $43 million in the same period in 2016. Operational EBITDA was $3 million, an increase of $1 million compared with the fourth quarter of 2016, according to Kodak.
For the full year 2017, EISD revenues were $144 million, compared with $166 million in 2016. Operational EBITDA for the full year 2017 increased by $21 million from 2016 to $5 million in 2017. The results reflect the positive impact of cost control actions and continued strong growth in PROSPER annuities.
The company continues to invest in the development of KODAK ULTRASTREAM, the next-generation inkjet writing system, which is scheduled for launch in 2019.
Flexographic Packaging Division (FPD) includes KODAK FLEXCEL NX Systems and Plates as well as other packaging businesses, such as analog flexographic plates and letterpress plates, proofing products and services. Revenues for Q4 were $41 million, up $7 million compared with the same period a year ago. Operational EBITDA for Q4 was $10 million, an improvement of $3 million compared with the fourth quarter of 2016.
For the full year 2017, revenues were $145 million, compared with $132 million in the prior year, or a 10 percent improvement. Full-year Operational EBITDA of $31 million is an improvement of $7 million compared with the prior year.
FLEXCEL NX products continue to deliver strong growth. Year over year, FLEXCEL NX plate volume increased 13% for the quarter and 17% for the full year. The division continues to invest in new product development and infrastructure, including a total investment of $16 million to build a plate manufacturing line in Weatherford, Oklahoma.
Software and Solutions Division (SSD) revenues for Q4 were $21 million, a $3 million decline compared with the same period last year. Operational EBITDA declined $1 million compared with the prior-year quarter. For the full year, SSD revenues were $85 million, down from $90 million last year. Full-year Operational EBITDA remained flat compared with the prior year.
Consumer and Film Division (CFD) revenues for the fourth quarter were $47 million, flat compared with Q4 of 2016. Operational EBITDA declined from negative $2 million to negative $6 million.
For the year, revenues for CFD were $198 million, down from $221 million in 2016. Operational EBITDA for the division was down $32 million for the year, driven by the continued expected decline in the consumer inkjet business and higher film manufacturing costs associated with a vendor transition.
CFD’s brand licensing business had continued growth in 2017, adding twelve brand licensing partners including the key areas of instant film photography and 3D printing for the educational market.
Advanced Materials and 3D (AM3D) had Operational EBITDA for the full year of negative $26 million, flat with the prior year. The division took significant cost actions in Q4 and sharpened its focus on investments in light-blocking particles, printed electronics and advanced materials.
Eastman Business Park Division (EBPD) had full-year 2017 revenues of $16 million, an increase of $1 million from the prior year. Operational EBITDA was $4 million, an increase of $2 million compared with 2016. The division increased the number of tenants in the Park from 94 in 2016 to 104 in 2017.