The FINANCIAL — Eastman Kodak Company on May 7 reported financial results for the first quarter of 2015 which reflect continued improvement in operating performance. Results are being reported for the first time under the new corporate organizational structure, which was implemented on Jan. 1, 2015, to make the company faster-moving, more competitive and more entrepreneurial.
Operational EBITDA totaled $12 million, an improvement of $21 million year-over-year on a comparable basis, after adjusting for currency exchange and non-recurring intellectual property revenue. The loss from continuing operations before income taxes improved to a $50 million loss from a $60 million loss in the 2014 first quarter. The 2015 first quarter net loss was $54 million, compared to a net loss of $34 million in the first quarter of 2014, which included $19 million in income from discontinued operations related to Kodak Alaris.
Sales in the first quarter of 2015 were $427 million, a decline of $61 million or 13% from $488 million in the first quarter of 2014, as a result of the adverse impacts of currency exchange and the expected declines in revenue from legacy products. The currency impact and decline in legacy products more than offset significant increases in sales of key strategic products, including KODAK SONORA Process Free Plates, KODAK FLEXCEL NX Plates and the KODAK PROSPER Portfolio, according to Kodak.
“I am pleased with our first quarter performance and we are clearly seeing the benefits of our new divisional structure,” said Jeff Clarke, Kodak Chief Executive Officer. “Our continued progress in improving productivity and reengineering our cost structure, with $35 million in year-over-year operating expense savings in the first quarter, is reflected in the improved performance. Our transition to sustained growth and profitability will become more evident in the second half of the year as we continue to drive revenue growth in key strategic products and leverage our improved operating performance.”
Print Systems Division (PSD), Kodak’s largest division, had first quarter 2015 sales of $254 million, a decline of $34 million or 12%, from $288 million in the prior-year quarter, driven by the impact of currency exchange and competitive industry pricing. For the fourth straight quarter, unit volume of digital plates increased, led by strong continuing demand for KODAK SONORA Process Free Plates. At the end of the first quarter, the number of customers using SONORA Plates reached 2,274, up 12% from year-end 2014.
The Operational EBITDA for PSD increased to $13 million in the first quarter of 2015 from $12 million in the 2014 first quarter. Increases in aluminum costs and competitive pricing pressures were more than offset by cost reductions and manufacturing productivity improvements.
Enterprise Inkjet Systems Division (EISD) had sales of $39 million for the first quarter of 2015, a decrease of $9 million or 19% from the first quarter of 2014. The decrease was attributable to the expected decline in revenues from legacy inkjet printing systems and the impact of currency exchange in the first quarter of last year. Operational EBITDA for EISD was negative $13 million for the quarter, essentially flat with negative $12 million in the first quarter of 2014.
Five PROSPER Press Systems were added to the installed base during the first quarter, and agreements have been reached with customers for the installation of five additional press systems. In the first quarter, total pages produced on PROSPER Presses increased by 46%, as customers continue to take advantage of Kodak’s unique Stream inkjet technology.
Micro 3D Printing and Packaging Division (MPPD) had revenue of $31 million in the first quarter of 2015, compared to $29 million in the 2014 first quarter, an increase of $2 million or 7%, driven by a 27% increase in unit volume for KODAK FLEXCEL NX Plates, which was partially offset by the negative impact of currency exchange.
MPPD Operational EBITDA for the quarter was breakeven compared to negative $2 million in the prior year, with the benefit of increased sales of consumables and cost reductions partially offset by the impact of currency exchange and investments in Micro 3D Printing.
Commercial production of silver mesh film for touch screen sensors is expected to begin during the second quarter at the Eastman Business Park manufacturing facility. Kodak is building a similar facility to produce the silver-based sensor film at its plant in Xiamen, China, where it expects to begin production by late in the year. Kodak also recently announced it will independently pursue development and production of copper mesh film for touch sensors.
Software & Solutions Division (SSD) had sales of $28 million in the first quarter of 2015, compared to $24 million in 2014, an increase of $4 million, or 17%, despite the negative impact from currency exchange. The increase was largely attributable to increased government contracts in the Kodak Services for Business unit. Operational EBITDA was $2 million for the quarter compared to negative $1 million in the prior year, driven by cost reductions as well as business mix in the Unified Workflow Solutions business.
Consumer and Film Division (CFD) had sales of $72 million in the first quarter of 2015, compared to $86 million in the prior-year quarter, a decline of $14 million or 16%. The decline was primarily due to the expected volume declines for consumer inkjet printer cartridges and motion picture film.
CFD had Operational EBITDA of $18 million for the first quarter, an improvement of $8 million from $10 million in the 2014 first quarter. The improvement was primarily due to improved inventory management and increased production efficiency for Entertainment & Commercial Films.
Kodak’s two other operating divisions are Eastman Business Park Division (EBPD) and Intellectual Property Solutions Division (IPSD). EBPD had revenue of $3 million in the quarter and Operational EBITDA of negative $1 million. IPSD had no revenue and Operational EBITDA of negative $7 million, compared to breakeven last year when there was a $9 million non-recurring intellectual property payment. IPSD includes the costs for Kodak Research Labs.
“Continuing robust growth in the customer base for our key PROSPER, FLEXCEL and SONORA product lines provides a foundation for Kodak’s future success,” Clarke said. “Our momentum is clear and we are on a path to drive future growth and sustained profitability.”
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