kodk-10q_20200930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from            to            

Commission File Number 1-00087

 

EASTMAN KODAK COMPANY

(Exact name of registrant as specified in its charter)

 

NEW JERSEY

 

16-0417150

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

 

 

343 STATE STREET, ROCHESTER, NEW YORK

 

14650

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: 585-724-4000

 

Securities registered pursuant to Section 12-(b) of the Act:

 

Title of each class

 

Common

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

KODK

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No 

As of November 2, 2020, the registrant had 77,163,326 shares of common stock, par value $0.01 per share, outstanding.

[1]


 

EASTMAN KODAK COMPANY

Form 10-Q

September 30, 2020

Table of Contents

 

 

 

 

 

Page

Part I.—Financial Information

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

Consolidated Statement of Operations (Unaudited)

 

3

 

 

Consolidated Statement of Comprehensive (Loss) Income (Unaudited)

 

4

 

 

Consolidated Statement of Financial Position (Unaudited)

 

5

 

 

Consolidated Statement of Cash Flows (Unaudited)

 

6

 

 

Consolidated Statement of Equity (Deficit) (Unaudited)

 

7

 

 

Notes to Financial Statements (Unaudited)

 

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

37

 

 

Liquidity and Capital Resources

 

50

Item 4.

 

Controls and Procedures

 

53

 

 

 

 

 

Part II. —Other Information

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

54

Item 1A.

 

Risk Factors

 

54

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

55

Item 6.

 

Exhibits

 

56

 

 

 

 

 

 

 

Index to Exhibits

 

56

 

 

Signatures

 

58

 

 

[2]


Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(in millions, except per share data)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

195

 

 

$

249

 

 

$

568

 

 

$

713

 

Services

 

 

57

 

 

 

66

 

 

 

164

 

 

 

200

 

Total revenues

 

 

252

 

 

 

315

 

 

 

732

 

 

 

913

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

183

 

 

 

216

 

 

 

533

 

 

 

639

 

Services

 

 

38

 

 

 

46

 

 

 

111

 

 

 

139

 

Total cost of revenues

 

 

221

 

 

 

262

 

 

 

644

 

 

 

778

 

Gross profit

 

 

31

 

 

 

53

 

 

 

88

 

 

 

135

 

Selling, general and administrative expenses

 

 

56

 

 

 

48

 

 

 

138

 

 

 

161

 

Research and development costs

 

 

8

 

 

 

11

 

 

 

25

 

 

 

33

 

Restructuring costs and other

 

 

1

 

 

 

3

 

 

 

9

 

 

 

7

 

Other operating (income) expense, net

 

 

(1

)

 

 

10

 

 

 

(11

)

 

 

10

 

Loss from continuing operations before interest expense,

   pension income excluding service cost component,

   loss on early extinguishment of debt,

   other charges, net and income taxes

 

 

(33

)

 

 

(19

)

 

 

(73

)

 

 

(76

)

Interest expense

 

 

3

 

 

 

4

 

 

 

11

 

 

 

12

 

Pension income excluding service cost component

 

 

(26

)

 

 

(26

)

 

 

(79

)

 

 

(79

)

Loss on early extinguishment of debt

 

 

2

 

 

 

 

 

 

2

 

 

 

 

Other charges, net

 

 

432

 

 

 

6

 

 

 

387

 

 

 

7

 

Loss from continuing operations before

   income taxes

 

 

(444

)

 

 

(3

)

 

 

(394

)

 

 

(16

)

Provision for income taxes

 

 

1

 

 

 

7

 

 

 

167

 

 

 

12

 

Loss from continuing operations

 

 

(445

)

 

 

(10

)

 

 

(561

)

 

 

(28

)

Income from discontinued operations, net of

   income taxes

 

 

 

 

 

5

 

 

 

 

 

 

206

 

Net (loss) income

 

$

(445

)

 

$

(5

)

 

$

(561

)

 

$

178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted loss per share attributable to

   Eastman Kodak Company common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(6.94

)

 

$

(0.35

)

 

$

(11.34

)

 

$

(1.00

)

Discontinued operations

 

 

 

 

 

0.12

 

 

 

 

 

 

4.79

 

Total

 

$

(6.94

)

 

$

(0.23

)

 

$

(11.34

)

 

$

3.79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of common shares used in basic and diluted net

   loss per share

 

 

64.8

 

 

 

43.0

 

 

 

50.8

 

 

 

43.0

 

 

The accompanying notes are an integral part of these consolidated financial statements.

[3]


EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(in millions)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

NET (LOSS) INCOME

 

$

(445

)

 

$

(5

)

 

$

(561

)

 

$

178

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

(1

)

 

 

(2

)

 

 

(17

)

 

 

2

 

Pension and other postretirement benefit plan obligation activity,

   net of tax

 

 

3

 

 

 

(1

)

 

 

15

 

 

 

(2

)

Other comprehensive income (loss), net of tax

 

 

2

 

 

 

(3

)

 

 

(2

)

 

 

 

COMPREHENSIVE (LOSS) INCOME, NET OF TAX

 

$

(443

)

 

$

(8

)

 

$

(563

)

 

$

178

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

[4]


EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

 

 

 

September 30,

 

 

December 31,

 

(in millions)

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

193

 

 

$

233

 

Trade receivables, net of allowances of $11 and $8, respectively

 

 

153

 

 

 

208

 

Inventories, net

 

 

232

 

 

 

215

 

Restricted cash - current portion

 

 

7

 

 

 

12

 

Other current assets

 

 

35

 

 

 

36

 

Current assets held for sale

 

 

2

 

 

 

2

 

Total current assets

 

 

622

 

 

 

706

 

Property, plant and equipment, net of accumulated depreciation of $424 and $423,

   respectively

 

 

150

 

 

 

181

 

Goodwill

 

 

12

 

 

 

12

 

Intangible assets, net

 

 

40

 

 

 

47

 

Operating lease right-of-use assets

 

 

50

 

 

 

49

 

Restricted cash

 

 

41

 

 

 

45

 

Deferred income taxes

 

 

 

 

 

147

 

Other long-term assets

 

 

305

 

 

 

228

 

TOTAL ASSETS

 

$

1,220

 

 

$

1,415

 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY

 

 

 

 

 

 

 

 

Accounts payable, trade

 

$

118

 

 

$

153

 

Short-term borrowings and current portion of long-term debt

 

 

2

 

 

 

2

 

Current portion of operating leases

 

 

12

 

 

 

12

 

Other current liabilities

 

 

163

 

 

 

201

 

Total current liabilities

 

 

295

 

 

 

368

 

Long-term debt, net of current portion

 

 

17

 

 

 

109

 

Pension and other postretirement liabilities

 

 

376

 

 

 

378

 

Operating leases, net of current portion

 

 

49

 

 

 

48

 

Other long-term liabilities

 

 

206

 

 

 

231

 

Total liabilities

 

 

943

 

 

 

1,134

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable, convertible Series A preferred stock, no par value, $100 per share liquidation preference

 

189

 

 

182

 

 

 

 

 

 

 

 

 

 

Equity (Deficit)

 

 

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

Additional paid in capital

 

 

1,156

 

 

 

604

 

Treasury stock, at cost

 

 

(9

)

 

 

(9

)

Accumulated deficit

 

 

(640

)

 

 

(79

)

Accumulated other comprehensive loss

 

 

(419

)

 

 

(417

)

Total shareholders’ equity

 

 

88

 

 

 

99

 

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY

 

$

1,220

 

 

$

1,415

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 


[5]


EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(in millions)

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(561

)

 

$

178

 

Adjustments to reconcile to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

29

 

 

 

43

 

Pension income

 

 

(65

)

 

 

(72

)

Change in fair value of embedded derivatives in the Series A Preferred Stock and

   Convertible Notes

 

 

382

 

 

 

3

 

      Loss on early extinguishment of debt

 

 

2

 

 

 

 

Net gain on sales of assets

 

 

(9

)

 

 

(202

)

Asset impairments

 

 

3

 

 

 

 

Stock based compensation

 

 

18

 

 

 

6

 

Non-cash changes in workers' compensation reserves

 

 

9

 

 

 

2

 

Provision for deferred income taxes

 

 

160

 

 

 

6

 

Decrease in trade receivables

 

 

53

 

 

 

30

 

Increase in inventories

 

 

(19

)

 

 

(18

)

(Decrease) increase in trade payables

 

 

(33

)

 

 

13

 

Decrease in liabilities excluding borrowings and trade payables

 

 

(24

)

 

 

(5

)

Other items, net

 

 

7

 

 

 

12

 

Total adjustments

 

 

513

 

 

 

(182

)

Net cash used in operating activities

 

 

(48

)

 

 

(4

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to properties

 

 

(13

)

 

 

(11

)

Net proceeds from sales of assets/businesses

 

 

2

 

 

 

326

 

Net proceeds from return on equity investment

 

 

2

 

 

 

 

Net cash (used in) provided by investing activities

 

 

(9

)

 

 

315

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

29

 

 

 

 

Repayment of Term Credit Agreement

 

 

 

 

 

(395

)

Proceeds from Convertible Notes

 

 

 

 

 

98

 

Proceeds from borrowings

 

 

 

 

 

14

 

Repayment of finance leases

 

 

 

 

 

(2

)

Preferred stock dividend payments

 

 

(19

)

 

 

 

Payment of contingent consideration related to the sale of a business

 

 

 

 

 

(10

)

Net cash provided by (used in) financing activities

 

 

10

 

 

 

(295

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(2

)

 

 

(4

)

Net (decrease) increase in cash, cash equivalents, restricted cash and cash in assets held

   for sale

 

 

(49

)

 

 

12

 

Cash, cash equivalents, restricted cash and cash in assets held for sale, beginning of period

 

 

290

 

 

 

267

 

Cash, cash equivalents and restricted cash, end of period

 

$

241

 

 

$

279

 

 

The accompanying notes are an integral part of these consolidated financial statements. 


[6]


EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Unaudited)

 

 

 

Nine-Month Period Ending September 30, 2020

 

 

 

Eastman Kodak Company Common Shareholders

 

 

 

 

 

 

 

Common

Stock

 

 

Additional

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive Loss

 

 

Treasury

Stock

 

 

Total

 

 

Series A Redeemable Convertible Preferred Stock

 

Equity (deficit) as of December 31, 2019

 

$

 

 

$

604

 

 

$

(79

)

 

$

(417

)

 

$

(9

)

 

$

99

 

 

$

182

 

Net loss

 

 

 

 

 

 

 

 

(111

)

 

 

 

 

 

 

 

 

(111

)

 

 

 

Other comprehensive (loss) income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

 

 

 

Pension and other postretirement

   liability adjustments

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

 

 

 

Series A preferred stock cash dividends

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

Series A preferred stock deemed dividends

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

2

 

Stock-based compensation

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

Equity (deficit) as of March 31, 2020

 

$

 

 

$

600

 

 

$

(190

)

 

$

(426

)

 

$

(9

)

 

$

(25

)

 

$

184

 

Net loss

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

 

 

 

Other comprehensive (loss) income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

 

 

 

Pension and other postretirement

   liability adjustments

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

 

 

 

Series A preferred stock cash

   dividends

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

Series A preferred stock deemed

   dividends

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

2

 

Equity (deficit) as of June 30, 2020

 

$

 

 

$

595

 

 

$

(195

)

 

$

(421

)

 

$

(9

)

 

$

(30

)

 

$

186

 

Net loss

 

 

 

 

 

 

 

 

(445

)

 

 

 

 

 

 

 

 

(445

)

 

 

 

Other comprehensive (loss) income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

 

 

 

Pension and other postretirement

   liability adjustments

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

 

 

 

Series A preferred stock cash

   dividends

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

Series A preferred stock deemed

   dividends

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

3

 

Conversion of Convertible Notes

 

 

 

 

 

520

 

 

 

 

 

 

 

 

 

 

 

 

520

 

 

 

 

Stock options exercised

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

Stock-based compensation

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

17

 

 

 

 

Equity (deficit) as of September 30, 2020

 

$

 

 

$

1,156

 

 

$

(640

)

 

$

(419

)

 

$

(9

)

 

$

88

 

 

$

189

 

 

 

[7]


EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Unaudited) (cont’d)

 

 

 

Nine-Month Period Ending September 30, 2019

 

 

 

Eastman Kodak Company Common Shareholders

 

 

 

 

 

 

 

Common

Stock

 

 

Additional

Paid in

Capital

 

 

Accumulated

Deficit

 

 

Accumulated

Other

Comprehensive Loss

 

 

Treasury

Stock

 

 

Total

 

 

Series A Redeemable Convertible Preferred Stock

 

Equity (deficit) as of December 31, 2018

 

$

 

 

$

617

 

 

$

(200

)

 

$

(411

)

 

$

(9

)

 

$

(3

)

 

$

173

 

Net loss

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

 

 

 

(18

)

 

 

 

Other comprehensive (loss) income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

 

 

 

Pension and other postretirement

   liability adjustments

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

 

 

 

Series A preferred stock cash dividends

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

Series A preferred stock deemed dividends

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

2

 

Stock-based compensation

 

 

 

 

 

3