The FINANCIAL — Eastman Kodak Company on October 22 reported financial results for the third quarter of 2015, ended September 30.
Highlights of the quarter include:
GAAP net loss of $21 million compared with net earnings of $19 million in Q3 of 2014. Total SG&A and R&D expenses totaled $74 million for Q3 of 2015.
Key product lines achieved strong sales growth:
Volume for KODAK SONORA Process Free Plates increased by 41%.
Volume for KODAK FLEXCEL NX Plates grew by 32%.
Revenues from the KODAK PROSPER Portfolio increased by 36% on a constant currency basis or 27% as reported.
Revenues for the Software and Solutions Division products and services increased by 22% on a constant currency basis or 11% as reported.
Q3 Operational EBITDA of $39 million improved by $9 million over the same period in 2014, excluding foreign exchange and non-recurring intellectual property revenues.
Operating Expenses were $83 million for the quarter, a 15% improvement from the prior-year period – on track to achieve a greater than $100 million improvement in 2015.
The company reiterated 2015 guidance for revenue of $1.8 – $2.0 billion and Operational EBITDA of $100 – $120 million.
The cash balance at the end of Q3 was $521 million. The company expects to generate cash in the fourth quarter of 2015 and in 2016, and to end 2015 with a cash balance of $550 – $600 million.
“Q3 marked significant progress in Kodak’s transformation,” said Jeff Clarke, Kodak Chief Executive Officer. “I’m pleased with the strong growth of our strategic product lines. Further, Kodak is on track to improve comparable operational EBITDA by 50% to 80% versus last year.”
Revenues in the third quarter of 2015 were $446 million, a decline of 21% from the third quarter of 2014. This decline was in large part due to the adverse impact of currency exchange, as well as expected declines in revenues from legacy consumer inkjet printer cartridge sales and a one-time gain of $52 million from patent licenses in the third quarter of 2014. When adjusted for foreign exchange and these items, revenues decreased 4% year over year, according to Kodak.
“We expect to generate cash in Q4 2015 and in 2016, with the majority of restructuring and legacy payments behind us,” said John McMullen, Kodak Chief Financial Officer. “We have substantially reduced our cost structure and are in line to achieve a greater than $100 million improvement in 2015. Like many U.S. companies, we are challenged by foreign currency exchange and other macro-economic factors, but we see strong growth opportunities ahead.”
Print Systems Division (PSD), Kodak’s largest division, had Q3 2015 revenues of $278 million, a 13% decline compared to Q3 of 2014. Operational EBITDA for the quarter was $28 million, down from $31 million in the same period a year ago.
Without the unfavorable impact of foreign exchange rates, PSD’s Q3 Operational EBITDA would have increased by $1 million.
Enterprise Inkjet Systems Division (EISD) had Q3 revenues of $39 million, down from $43 million in the same period last year. On a constant currency basis revenues were flat. Our PROSPER business grew by 27% and was offset by declines in KODAK VERSAMARK Printing System sales. Operational EBITDA was negative $4 million, compared with negative $12 million in the third quarter of 2014, for an improvement of $8 million. On a constant currency basis, Operational EBITDA improved by $9 million. Results for this division also reflected investments in a new generation of printer systems which will be unveiled in 2016.
Micro 3D Printing and Packaging Division (MPPD) had Q3 revenues of $32 million, flat with the same period a year ago. Operational EBITDA improved on a constant currency basis to $6 million from $1 million in Q3 2014, driven by the continued growth of the KODAK FLEXCEL NX System and the gain from the termination of the relationship with UniPixel. FLEXCEL NX Plate volume increased by 32% year over year, and the installed base is now over 450 FLEXCEL NX CTPs.
Software and Solutions Division (SSD) had a strong quarter. Q3 revenues were $30 million, up 11% from $27 million in the same period last year. Operational EBITDA doubled from $1 million to $2 million.
A highlight of the quarter was the completion of a $5 million contract to produce ballots for the presidential election in Argentina.
Consumer and Film Division (CFD) had revenues of $64 million, down from $92 million in Q3 of 2014. Operational EBITDA declined from $24 million to $12 million. These declines were expected and built into the plan for the year with anticipated continued reduction in revenues and earnings from the consumer inkjet printer cartridge business. For the third quarter in a row, film recorded a profitable quarter on an Operational EBITDA before corporate cost basis. We are continuing to find new opportunities in brand licensing. During Q3, we signed deals with several new partners including manufacturers of LED lighting and flash drives.
Kodak’s Intellectual Property Solutions Division (IPSD) had no revenues in Q3 and Operational EBITDA of negative $4 million. In the third quarter of 2014, this division recorded $52 million of revenue from the license of patents. Kodak inventions ranging from anti-microbial particles to unique material solutions for 3D printing to light-blocking materials will create new growth opportunities.
The highlight of the quarter for the Eastman Business Park Division (EBP) was news that EBP will be the manufacturing site for a Federal and New York State supported hub for the development of Photonics technologies.