Market Overview

Kodak Reports First-Quarter 2019 Financial Results

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Eastman Kodak Company (NYSE:KODK) today reported financial results for
the first quarter 2019, including a net loss of $18 million on revenues
of $291 million and continued growth in key product areas.

Highlights include:

  • GAAP net loss of $18 million for the quarter ended March 31, 2019,
    compared to a GAAP net loss of $25 million for the quarter ended March
    31, 2018.
  • Revenues for Q1 2019 of $291 million compared to revenues for Q1 2018
    of $318 million.
  • Operational EBITDA for the quarter of negative $6 million compared to
    Operational EBITDA of negative $9 million in the prior-year period.
  • Key product lines achieved strong year-over-year growth for the first
    quarter 2019:
    • Volume for KODAK SONORA Process Free Plates grew by 22 percent.
    • Annuity revenues for the KODAK PROSPER inkjet platform grew by 12
      percent.
  • The company ended the quarter with a cash balance of $240 million.
  • The company completed the sale of its Flexographic Packaging Division
    to Montagu Private Equity LLP on April 8, 2019 and used the net
    proceeds to pay down $312 million of its term debt.

"Completing the sale of our Flexographic Packaging Division and using
the net proceeds to significantly pay down our term debt was a major
step toward strengthening our financial position," said Jim Continenza,
Kodak's Executive Chairman. "Our focus has shifted to completing the
refinancing of the remaining balance of our debt and realigning our
business to better serve customers and achieve our goal of generating
cash."

For the quarter ended March 31, 2019, revenues decreased by
approximately $27 million compared with the same period in 2018. Kodak
ended the quarter with a cash balance of $240 million, down from the
December 31, 2018 cash balance of $246 million.

"We significantly paid down our term debt and delivered continued strong
performance in our key growth areas of SONORA Process Free Plates and in
PROSPER inkjet annuities," said David Bullwinkle, Kodak's CFO. "We
expect to secure new financing for our remaining term debt by the end of
May, which will further strengthen our balance sheet."

Revenue and Operational EBITDA Q1 2019 vs. Q1 2018

($ millions)                  
 
Q1 2019 Actuals PSD EISD KSD BFID AM3D EBPD Total EK
Revenue $ 192 $ 32 $ 14 $ 49 $ 2 $ 2 $ 291
Operational EBITDA * $ 5 $ - $ (1 ) $ (7 ) $ (2 ) $ (1 ) $ (6 )
 
Q1 2018 Actuals PSD EISD KSD BFID AM3D EBPD Total EK
Revenue $ 216 $ 31 $ 16 $ 52 $ 1 $ 2 $ 318
Operational EBITDA * $ 3 $ - $ 1 $ (7 ) $ (4 ) $ (2 ) $ (9 )
 
Q1 2019 vs. Q1 2018 Actuals

B/(W)

PSD EISD KSD BFID AM3D EBPD Total EK
Revenue $ (24 ) $ 1 $ (2 ) $ (3 ) $ 1 $ - $ (27 )
Operational EBITDA * $ 2 $ - $ (2 ) $ - $ 2 $ 1 $ 3
 
Q1 2019 Actuals on constant currency ** vs.
Q1 2018 Actuals

B/(W)

PSD EISD KSD BFID AM3D EBPD Total EK
Revenue $ (15 ) $ 2 $ (2 ) $ (2 ) $ 1 $ - $ (16 )
Operational EBITDA * $ 1 $ - $ (2 ) $ 1 $ 2 $ 1 $ 3
 

* Total Operational EBITDA is a non-GAAP financial measure. The
reconciliation between GAAP and non-GAAP measures is provided in
Appendix A of this press release.

** The impact of foreign exchange represents the 2018 foreign exchange
impact using average foreign exchange rates for the three months ended
March 31, 2018, rather than the actual exchange rates in effect for the
three months ended March 31, 2019.

About Kodak

Kodak is a technology company focused on imaging. We provide – directly
and through partnerships with other innovative companies – hardware,
software, consumables and services to customers in graphic arts,
commercial print, publishing, packaging, entertainment and commercial
films, and consumer products markets. With our world-class R&D
capabilities, innovative solutions portfolio and highly trusted brand,
Kodak is helping customers around the globe to sustainably grow their
own businesses and enjoy their lives. For additional information on
Kodak, visit us at kodak.com,
follow us on Twitter @Kodak,
or like us on Facebook at Kodak.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes "forward-looking statements" as that term is
defined under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning Kodak's plans,
objectives, goals, strategies, future events, future revenue or
performance, capital expenditures, liquidity, investments, financing
needs and business trends and other information that is not historical
information. When used in this press release, the words "estimates,"
"expects," "anticipates," "projects," "plans," "intends," "believes,"
"predicts," "forecasts," "strategy," "continues," "goals," "targets" or
future or conditional verbs, such as "will," "should," "could," or
"may," and similar expressions, as well as statements that do not relate
strictly to historical or current facts, are intended to identify
forward-looking statements. All forward-looking statements, including
management's examination of historical operating trends and data, are
based upon Kodak's expectations and various assumptions.

Future events or results may differ from those anticipated or expressed
in the forward-looking statements. Important factors that could cause
actual events or results to differ materially from the forward-looking
statements include, among others, the risks and uncertainties described
in more detail in Kodak's Annual Report on Form 10-K for the year ended
December 31, 2018 under the headings "Business," "Risk Factors," "Legal
Proceedings" and/or "Management's Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources," in
the corresponding sections of Kodak's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2019, and in other filings Kodak makes with
the U.S. Securities and Exchange Commission from time to time, as well
as the following: Kodak's ability to improve and sustain its operating
structure, cash flow, profitability and other financial results; Kodak's
ability to achieve cash forecasts, financial projections and projected
growth; Kodak's ability to achieve the financial and operational results
contained in its business plans; Kodak's ability to comply with the
covenants in its various credit facilities; Kodak's ability to repay,
refinance or extend the maturity of its outstanding first lien term
loans prior to their maturity date of September 3, 2019 or prior to June
5, 2019, the date on which Kodak's revolving credit facility will
terminate unless such repayment, refinancing or extension has occurred
or the revolving credit facility has been amended; Kodak's ability to
discontinue, sell or spin-off certain businesses or operations or
otherwise monetize assets, including the completion of the deferred sale
of the China assets of Kodak's Flexographic Packaging segment that was
sold, and the ability of the Flexographic Packaging segment that was
sold to perform during 2019 and 2020 at levels that will entitle Kodak
to earn-out payments; Kodak's ability to fund continued investments,
capital needs and restructuring payments and service its debt and Series
A Preferred Stock; changes in foreign currency exchange rates, commodity
prices and interest rates; Kodak's ability to effectively anticipate
technology trends and develop and market new products, solutions and
technologies; Kodak's ability to effectively compete with large,
well-financed industry participants; continued sufficient availability
of borrowings and letters of credit under Kodak's revolving credit
facility, Kodak's ability to obtain additional financing if and as
needed and Kodak's ability to provide or facilitate financing for its
customers; the performance by third parties of their obligations to
supply products, components or services to Kodak; and the impact of the
global economic environment on Kodak.

There may be other factors that may cause Kodak's actual results to
differ materially from the forward-looking statements. All
forward-looking statements attributable to Kodak or persons acting on
its behalf apply only as of the date of this press release and are
expressly qualified in their entirety by the cautionary statements
included or referenced in this press release. Kodak undertakes no
obligation to update or revise forward-looking statements to reflect
events or circumstances that arise after the date made or to reflect the
occurrence of unanticipated events, except as required by law.

APPENDICES

A. NON-GAAP MEASURES

In this first-quarter 2019 financial results news release, reference is
made to the following non-GAAP financial measures:

  • Operational EBITDA; and
  • Revenues and Operational EBITDA on a constant currency basis.

Kodak believes that these non-GAAP measures represent important internal
measures of performance. Accordingly, where they are provided, it is to
give investors the same financial data management uses with the belief
that this information will assist the investment community in properly
assessing the underlying performance of Kodak, its financial condition,
results of operations and cash flow.

Kodak's segment measure of profit and loss is an adjusted earnings
before interest, taxes, depreciation and amortization ("Operational
EBITDA"). The change in revenues and Operational EBITDA on a constant
currency basis, as presented in this financial results news release, is
calculated by using average foreign exchange rates for the three months
ended March 31, 2018, rather than the actual exchange rates in effect
for the three months ended March 31, 2019.

The following table reconciles the most directly comparable GAAP measure
of Net Loss to Operational EBITDA for the three months ended March 31,
2019 and 2018, respectively:

         
(in millions)
Q1 2019 Q1 2018

$ Change

Net Loss $ (18 ) $ (25 ) $ 7
Depreciation and amortization 15 18 (3 )
Restructuring costs and other (1) 2 2 -
Stock based compensation 3 2 1
Consulting and other costs (2) 3 3 -
Idle costs (3) 1 1 -

Former CEO separation agreement compensation

2 - 2
Interest expense (1) 3 2 1
Pension income excluding service cost component (1) (27 ) (32 ) 5
Other charges, net (1) 1 16 (15 )
Loss from discontinued operations, net of income tax (1) 6 - 6
Provision for income taxes (1)   3     4     (1 )
Operational EBITDA $ (6 ) $ (9 ) $ 3  
 

Footnote Explanations:

(1)   As reported in the Consolidated Statement of Operations.
(2) Consulting and other costs are primarily professional services and
internal costs associated with certain corporate strategic
initiatives.
(3) Consists of third-party costs such as security, maintenance and
utilities required to maintain land and buildings in certain
locations not used in any Kodak operations and the costs, net of any
rental income received, of underutilized portions of certain
properties.
(4) The impact of foreign exchange represents the foreign exchange
impact using average foreign exchange rates for the three months
ended March 31, 2018, rather than the actual exchange rates in
effect for the three months ended March 31, 2019.
 

B. FINANCIAL STATEMENTS

EASTMAN KODAK COMPANY        
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(in millions)
Three Months Ended March 31,
2019 2018
Revenues
Sales $ 224 $ 248
Services   67     70  
Total net revenues   291     318  
Cost of revenues
Sales 205 231
Services   46     49  
Total cost of revenues   251     280  
Gross profit 40 38
Selling, general and administrative expenses 59 58
Research and development costs 11 13
Restructuring costs and other 2 2
Other operating expense, net        
Loss from continuing operations before interest expense, pension
income excluding service cost component, other charges (income),
net, and income taxes
(32 ) (35 )
Interest expense 3 2
Pension income excluding service cost component (27 ) (32 )
Other charges, net   1     16  
Loss from continuing operations before income taxes (9 ) (21 )
Provision for income taxes   3     4  
Loss from continuing operations (12 ) (25 )
Loss from discontinued operations, net of income tax   (6 )    
NET LOSS $ (18 ) $ (25 )

The notes accompanying the Company's first quarter 2019 Form 10-Q are an
integral part of these consolidated financial statements.

       
EASTMAN KODAK COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)
(in millions)
 
March 31, December 31,
2019 2018
ASSETS
Cash and cash equivalents $ 240 $ 246
Trade receivables, net of allowances of $8 and $9, respectively 201 232
Inventories, net 249 236
Other current assets 53 51
Current assets held for sale   116     113  
Total current assets 859 878
Property, plant and equipment, net of accumulated depreciation of
$431 and $422, respectively
233 246
Goodwill 12 12
Intangible assets, net 58 60
Operating lease right-of-use assets 49 -
Restricted cash 8 11
Deferred income taxes 155 160
Other long-term assets   164     144  
TOTAL ASSETS $ 1,538   $ 1,511  
 
LIABILITIES, REDEEMABLE, CONVERTIBLE PREFERRED STOCK AND EQUITY
(DEFICIT)
Accounts payable, trade $ 160 $ 149
Short-term borrowings and current portion of long-term debt 396 396
Current portion of operating leases 23 -
Other current liabilities 191 213
Current liabilities held for sale   25     20  
Total current liabilities 795 778
Long-term debt, net of current portion 18 5
Pension and other postretirement liabilities 368 379
Operating leases, net of current portion 35 -
Other long-term liabilities   163     179  
Total liabilities   1,379     1,341  
 
Commitments and Contingencies (Note 10)
 
Redeemable, convertible Series A preferred stock, no par value, $100
per share liquidation preference
175 173
 
Equity (Deficit)
Common stock, $0.01 par value
Additional paid in capital 615 617
Treasury stock, at cost (9 ) (9 )
Accumulated deficit (213 ) (200 )
Accumulated other comprehensive loss   (409 )   (411 )
Total shareholders' deficit   (16 )   (3 )
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
EQUITY (DEFICIT)
$ 1,538   $ 1,511  

The notes accompanying the Company's first quarter 2019 Form 10-Q are an
integral part of these consolidated financial statements.

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