EASTMAN KODAK CO [KODK] Filings

10-Q 1 ekc20230930_10q.htm FORM 10-Q ekc20230930_10q.htm

Table of Contents

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, 2023

☐ 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)
(800) 356-3259
(Registrant’s telephone number, including area code)

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 1, 2023, the registrant had 79,552,966 shares of common stock, par value $0.01 per share, outstanding.

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EASTMAN KODAK COMPANY

Form 10-Q

September 30, 2023

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	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52

	Part II. —Other Information

Item 5.	Other Information	53
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 6.	Exhibits	54
	Index to Exhibits	54
	Signatures	56

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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,*
	*2023*			*2022*			*2023*			*2022*
Revenues
Sales	$	220		$	234		$	688		$	734
Services		49			55			154			166
Total revenues		269			289			842			900
Cost of revenues
Sales		183			208			571			662
Services		36			38			108			111
Total cost of revenues		219			246			679			773
Gross profit		50			43			163			127
Selling, general and administrative expenses		40			39			114			123
Research and development costs		7			8			25			26
Restructuring costs and other		1			3			7			3
Earnings (loss) from operations before interest expense, pension income excluding service cost component, loss on extinguishment of debt, other charges (income), net and income taxes		2			(7	)		17			(25	)
Interest expense		14			10			36			29
Pension income excluding service cost component		(41	)		(20	)		(122	)		(77	)
Loss on extinguishment of debt		27			—			27			—
Other charges (income), net		2			—			(2	)		2
Earnings from operations before income taxes		—			3			78			21
(Benefit) provision for income taxes		(2	)		1			8			2
NET EARNINGS	$	2		$	2		$	70		$	19

Basic net (loss) earnings per share attributable to Eastman Kodak Company common shareholders	$	—		$	(0.01	)	$	0.68		$	0.11
Diluted net (loss) earnings per share attributable to Eastman Kodak Company common shareholders	$	—		$	(0.01	)	$	0.64		$	0.11

Number of common shares used in basic and diluted net earnings per share
Basic		79.5			79.0			79.3			78.9
Diluted		79.5			79.0			90.5			80.7

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

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EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

(in millions)

	*Three Months Ended*						*Nine Months Ended*
	*September 30,*						*September 30,*
	*2023*			*2022*			*2023*			*2022*
NET EARNINGS	$	2		$	2		$	70		$	19
Other comprehensive (loss) income, net of tax:
Currency translation adjustments		(3	)		(1	)		(15	)		(6	)
Pension and other postretirement benefit plan obligation activity, net of tax		(6	)		2			(135	)		112
Other comprehensive (loss) income, net of tax		(9	)		1			(150	)		106
COMPREHENSIVE (LOSS) INCOME, NET OF TAX	$	(7	)	$	3		$	(80	)	$	125

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

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EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

	*September 30,*			*December 31,*
(in millions)	*2023*			*2022*
ASSETS
Cash and cash equivalents	$	246		$	217
Trade receivables, net of allowances of $7 in both periods		191			177
Inventories, net		239			237
Other current assets		34			48
Current assets held for sale		2			2
Total current assets		712			681
Property, plant and equipment, net of accumulated depreciation of $458 and $450, respectively		161			154
Goodwill		12			12
Intangible assets, net		25			28
Operating lease right-of-use assets		33			39
Restricted cash		119			62
Pension and other postretirement assets		1,212			1,233
Other long-term assets		83			76
TOTAL ASSETS	$	2,357		$	2,285

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
Accounts payable, trade	$	124		$	134
Short-term borrowings and current portion of long-term debt		1			1
Current portion of operating leases		13			15
Other current liabilities		131			143
Current liabilities held for sale		2			—
Total current liabilities		271			293
Long-term debt, net of current portion		451			316
Pension and other postretirement liabilities		225			230
Operating leases, net of current portion		26			31
Other long-term liabilities		217			171
Total liabilities		1,190			1,041

Commitments and Contingencies (Note 8)

Redeemable, convertible preferred stock, no par value, $100 per share liquidation preference		208			203

Equity
Common stock, $0.01 par value		—			—
Additional paid in capital		1,158			1,160
Treasury stock, at cost		(11	)		(11	)
Accumulated deficit		(500	)		(570	)
Accumulated other comprehensive income		312			462
Total shareholders’ equity		959			1,041
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY	$	2,357		$	2,285

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

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EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

	*Nine Months Ended*
	*September 30,*
(in millions)	*2023*			*2022*
Cash flows from operating activities:
Net earnings	$	70		$	19
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization		23			22
Pension income		(109	)		(64	)
Change in fair value of the Preferred Stock and Convertible Notes embedded derivatives		2			(1	)
Non-cash changes in workers' compensation and employee benefit reserves		(3	)		(13	)
Stock based compensation		6			4
Gain on sale of assets		(1	)		—
Loss on extinguishment of debt		27			—
Decrease in deferred taxes		—			(3	)
Increase in trade receivables		(16	)		(7	)
Decrease in miscellaneous receivables		10			1
Increase in inventories		(4	)		(74	)
(Decrease) increase in trade payables		(15	)		5
Increase (decrease) in liabilities excluding borrowings and trade payables		23			(26	)
Other items, net		8			7
Total adjustments		(49	)		(149	)
Net cash provided by (used in) operating activities		21			(130	)
Cash flows from investing activities:
Additions to properties		(15	)		(19	)
Purchase of equity interest		—			(25	)
Net cash used in investing activities		(15	)		(44	)
Cash flows from financing activities:
Net proceeds from Amended and Restated Term Loan Agreement		435			—
Net proceeds from Original Term Loan Credit Agreement		—			49
Repayment of Original Term Loan Credit Agreement		(316	)		—
Repayment of Convertible Notes		(28	)		—
Other debt acquisition costs		(1	)		—
Preferred stock cash dividend payments		(3	)		(3	)
Treasury stock purchases		—			(1	)
Net cash provided by financing activities		87			45
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(5	)		(14	)
Net increase (decrease) in cash, cash equivalents and restricted cash		88			(143	)
Cash, cash equivalents and restricted cash, beginning of period		286			423
Cash, cash equivalents and restricted cash, end of period	$	374		$	280

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

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EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Unaudited)

(in millions)

	*Nine-Month Period Ending September 30, 2023*
	*Eastman Kodak Company Common Shareholders*
	*Common Stock*		*Additional Paid in Capital*			*Accumulated Deficit*			*Accumulated Other Comprehensive Income*			*Treasury Stock*			*Total*			*Redeemable Convertible Preferred Stock*
Equity (deficit) as of December 31, 2022	$	—	$	1,160		$	(570	)	$	462		$	(11	)	$	1,041		$	203
Net earnings		—		—			33			—			—			33			—
Other comprehensive (loss) income, (net of tax):
Currency translation adjustments		—		—			—			(1	)		—			(1	)		—
Pension and other postretirement liability adjustments		—		—			—			(6	)		—			(6	)		—
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Preferred stock deemed dividends		—		(1	)		—			—			—			(1	)		1
Stock-based compensation		—		4			—			—			—			4			—
Equity (deficit) as of March 31, 2023	$	—	$	1,161		$	(537	)	$	455		$	(11	)	$	1,068		$	205
Net earnings		—		—			35			—			—			35			—
Other comprehensive (loss) income (net of tax):
Currency translation adjustments		—		—			—			(11	)		—			(11	)		—
Pension and other postretirement liability adjustments		—		—			—			(123	)		—			(123	)		—
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock in-kind dividends		—		(2	)		—			—			—			(2	)		2
Stock-based compensation		—		1			—			—			—			1			—
Equity (deficit) as of June 30, 2023	$	—	$	1,159		$	(502	)	$	321		$	(11	)	$	967		$	207
Net earnings		—		—			2			—			—			2			—
Other comprehensive (loss) income (net of tax):
Currency translation adjustments		—		—			—			(3	)		—			(3	)		—
Pension and other postretirement liability adjustments		—		—			—			(6	)		—			(6	)		—
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Stock-based compensation		—		1			—			—			—			1			—
Equity (deficit) as of September 30, 2023	$	—	$	1,158		$	(500	)	$	312		$	(11	)	$	959		$	208

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EASTMAN KODAK COMPANY

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

(in millions)

	*Nine-Month Period Ending September 30, 2022*
	*Eastman Kodak Company Common Shareholders*
	*Common Stock*		*Additional Paid in Capital*			*Accumulated Deficit*			*Accumulated Other Comprehensive Income*			*Treasury Stock*			*Total*			*Redeemable Convertible Preferred Stock*
Equity (deficit) as of December 31, 2021	$	—	$	1,166		$	(596	)	$	221		$	(10	)	$	781		$	196
Net loss		—		—			(3	)		—			—			(3	)		—
Other comprehensive income (net of tax):
Currency translation adjustments		—		—			—			5			—			5			—
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Preferred stock deemed dividends		—		(1	)		—			—			—			(1	)		1
Stock-based compensation		—		2			—			—			—			2			—
Equity (deficit) as of March 31, 2022	$	—	$	1,165		$	(599	)	$	226		$	(10	)	$	782		$	198
Net earnings		—		—			20			—			—			20			—
Other comprehensive (loss) income (net of tax):
Currency translation adjustments		—		—			—			(10	)		—			(10	)		—
Pension and other postretirement liability adjustments		—		—			—			110			—			110			—
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Stock-based compensation		—		1			—			—			—			1			—
Equity (deficit) as of June 30, 2022	$	—	$	1,164		$	(579	)	$	326		$	(10	)	$	901		$	199
Net earnings		—		—			2			—			—			2			—
Other comprehensive (loss) income (net of tax):
Currency translation adjustments		—		—			—			(1	)		—			(1	)		—
Pension and other postretirement liability adjustments		—		—			—			2			—			2			—
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock in-kind dividends		—		(2	)		—			—			—			(2	)		2
Stock-based compensation		—		1			—			—			—			1			—
Treasury stock purchases ⁽¹⁾		—		—			—			—			(1	)		(1	)		—
Equity (deficit) as of September 30, 2022	$	—	$	1,162		$	(577	)	$	327		$	(11	)	$	901		$	201

^₍₁₎ Represents purchases of common stock to satisfy tax withholding obligations.

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

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EASTMAN KODAK COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1: BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

BASIS OF PRESENTATION

The consolidated interim financial statements are unaudited, and certain information and footnote disclosures related thereto normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results of operations, financial position and cash flows of Eastman Kodak Company and all companies directly or indirectly controlled, either through majority ownership or otherwise (“Kodak” or the “Company”). The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. These consolidated interim statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

Reclassifications

Certain amounts from previous periods have been reclassified to conform to the current period classification due to Kodak's new organization structure as of February 2023. Refer to Note 18, "Segment Information" and Note 10, "Revenue" for additional information.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016‐13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016‐13 (as amended by ASUs 2018‐19, 2019‐04, 2019‐05, 2019‐10, 2019‐11, 2020‐02, 2020‐03 and 2022‐02) requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In addition, the ASU requires credit losses relating to available‐for‐sale debt securities to be recorded through an allowance for credit losses. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The ASU is effective for Kodak for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 ( January 1, 2023 for Kodak). Kodak adopted the new standard on January 1, 2023 using the modified retrospective approach and it did not have a material impact on Kodak’s consolidated financial statements.

Allowance for Credit Losses

Kodak records allowance for credit losses for the current expected credit losses inherent in the asset over its expected life. The allowance for credit losses is maintained based on historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. Kodak records a specific reserve for individual accounts when Kodak becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer's operating results or financial position.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

There are no recently issued accounting pronouncements that are applicable to Kodak.

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NOTE 2: CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statement of Financial Position that sums to the total of such amounts shown in the Consolidated Statement of Cash Flows:

	*September 30,*		*December 31,*
(in millions)	*2023*		*2022*
Cash and cash equivalents	$	246	$	217
Restricted cash reported in Other current assets		9		7
Restricted cash		119		62
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows	$	374	$	286

Restricted cash reported in Other current assets on the Consolidated Statement of Financial Position primarily represented amounts that support hedging activities.

Restricted cash included $32 million and $44 million as of September 30, 2023 and December 31, 2022, respectively, representing the cash collateral required to be posted by the Company under the Letter of Credit Facility (“L/C Cash Collateral”). In addition, restricted cash as of September 30, 2023 included $68 million representing cash collateral supporting the Company’s undiscounted actuarial workers’ compensation obligations with the New York State Workers’ Compensation Board ("NYS WCB"). Restricted cash as of both September 30, 2023 and December 31, 2022 also included an escrow of $5 million in China to secure various ongoing obligations under the agreements for a strategic relationship with Lucky HuaGuang Graphics Co. Ltd., $6 million of security posted related to Brazilian legal contingencies and $5 million of cash collateral posted in the United Kingdom for a letter of credit for aluminum purchases.

NOTE 3: INVENTORIES, NET

	*September 30,*		*December 31,*
(in millions)	*2023*		*2022*
Finished goods	$	104	$	98
Work in process		70		64
Raw materials		65		75
Total	$	239	$	237

NOTE 4: LONG-TERM LIABILITIES