The FINANCIAL — Eastman Kodak Company on August 9 reported financial results for the second quarter 2017, delivering net earnings of $4 million and continued strong growth in its KODAK SONORA Process Free Plates, KODAK FLEXCEL NX Packaging and KODAK PROSPER Inkjet annuities.
Highlights include:
GAAP net earnings of $4 million for the quarter ended June 30, 2017, compared with $8 million for the quarter ended June 30, 2016.
Operational EBITDA for the quarter of $14 million compared with $23 million for the second quarter of 2016.
Revenues for the quarter of $381 million compared with revenues of $423 million for the second quarter of 2016, down $42 million or 10 percent. On a constant currency basis revenues were down $36 million or 9 percent.
The company ended the second quarter with a cash balance of $370 million, a decrease in cash of $8 million for the second quarter of 2017.
Key product lines achieved strong year-over-year growth for the quarter:
Volume for KODAK FLEXCEL NX Plates grew by 22 percent.
Volume for KODAK SONORA Process Free Plates grew by 18 percent.
Annuities revenue for KODAK PROSPER Inkjet grew by 14 percent.
The company updated its 2017 outlook to reflect the impact of an expected advanced technology transaction. Kodak adjusted its forecast for the full year change in cash balance to a range of $0 to $10 million of cash generation. Kodak continues to expect revenues of $1.5 billion to $1.6 billion and adjusted its forecast for Operational EBITDA to a range of $90 million to $105 million, according to Kodak.
“Our FLEXCEL NX Plates, SONORA Plates and PROSPER Inkjet businesses continue to deliver impressive performance and contribute a growing percentage of Kodak’s total revenues,” Jeff Clarke, Kodak’s chief executive officer, said. “We continue to invest significantly in new inkjet and advanced materials technologies for the future.”
Revenues in the second quarter of 2017 were $381 million, a 10 percent decline from the second quarter of 2016 or 9 percent on a constant currency basis.
GAAP net earnings were $4 million for the quarter ended June 30, 2017, a decline of $4 million compared with the second quarter of 2016. An embedded derivative related to the convertible preferred stock investment by Southeastern Asset Management positively impacted net earnings by $14 million for the quarter.
The company delivered second quarter Operational EBITDA of $14 million, consistent with the company’s expectations, down $9 million compared with the second quarter of 2016. On a constant currency basis, Operational EBITDA was down $8 million.
The company ended the quarter with a cash balance of $370 million, down $8 million, or 2 percent, from the balance at the end of the first quarter, 2017 and down $64 million from the balance at the beginning of 2017. This reflects the use of cash in working capital items such as inventory increases for sequential revenue growth during the second half of the year, partially offset by the release of restricted cash.
“Our cash position is in line with our expectations for the quarter and we are on track for our plan for the year,” David Bullwinkle, Kodak’s chief financial officer, said. “In the first half of 2017, we invested in working capital to support sequential growth in the second half of the year.”
Print Systems Division (PSD), Kodak’s largest division, had Q2 revenues of $236 million, a 9 percent decline compared with Q2 2016. Operational EBITDA for the quarter declined by $6 million compared with the same period a year ago. The decline was largely due to pricing pressures and the higher cost of aluminum, the primary material for the division’s plate products.
For the quarter, KODAK SONORA Plates delivered continued strong performance, with volume increasing by 18 percent compared with the same period a year ago. SONORA Plates now account for 18 percent of the division’s total plate unit sales.
Enterprise Inkjet Systems Division (EISD), including the KODAK PROSPER and KODAK VERSAMARK businesses, had Q2 revenues of $35 million, compared with $44 million for the prior-year quarter, a decline of 20 percent.
Operational EBITDA was $1 million, an improvement of $7 million compared with Q2 of 2016. On a constant currency basis, operational EBITDA improved by $8 million.
For the second quarter of 2017 the PROSPER business continued to deliver solid performance with year-over-year annuity growth of 14 percent.
Kodak continues to invest in next-generation ULTRASTREAM inkjet technology, working with a number of prospective OEM partners toward commercializing the technology in 2019.
The 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. FPD continued to deliver strong performance for the quarter, driven by consistent growth in KODAK FLEXCEL NX Plates. Revenues for Q2 were $37 million, an increase of $2 million or 6 percent over the same period a year ago. Operational EBITDA was $8 million, an increase of $2 million or 33 percent compared with the second quarter of 2016.
For the quarter, FLEXCEL NX revenues increased 12 percent over the prior-year period and FLEXCEL NX Plate volume continued to deliver strong growth, increasing by 22 percent year over year. In April, Kodak broke ground on an expansion of its manufacturing facility in Weatherford, Oklahoma, to accommodate a new line for the production of KODAK FLEXCEL NX Plates.
Software and Solutions Division (SSD) delivered Q2 revenues of $22 million, an increase of $1 million compared with the same period last year. Operational EBITDA increased $1 million compared with the prior-year period. Licensing revenue in Unified Workflow Solutions grew 6 percent for the first half of 2017.
Consumer and Film Division (CFD) revenues for Q2 were $47 million, down 24 percent from $62 million in Q2 of 2016. Operational EBITDA was negative $5 million, primarily driven by the expected continued decline in consumer inkjet and a reduction in Industrial Films & Chemicals primarily due to a significant customer order in the prior year.
The division recently entered into multiyear supply agreements with three major Hollywood studios for motion picture film.
The Advanced Materials and 3D Printing Technology Division (AM3D) includes Kodak’s research lab, Micro 3D Printing as well as intellectual property licensing not directly related to the other business divisions. AM3D had Operational EBITDA of negative $7 million, compared with negative $8 million for Q2 2016.
Eastman Business Park Division (EBP) had revenues of $4 million, an increase of $1 million over the prior-year second quarter. Operational EBITDA increased by $1 million from the prior period. During the quarter, the division added a controlled environment agriculture company as a tenant.
