ekc20220930_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, 2022

☐ 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)
(585) 724-4000
(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, 2022, the registrant had 79,101,776 shares of common stock, par value $0.01 per share, outstanding.

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Table of Contents

EASTMAN KODAK COMPANY

Form 10-Q

September 30, 2022

Table of Contents

		Page
	Part I.—Financial Information

Item 1.	Financial Statements
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive 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	33
	Liquidity and Capital Resources	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48

	Part II. —Other Information

Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 6.	Exhibits	50
	Index to Exhibits	50
	Signatures	51

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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,*
	*2022*			*2021*			*2022*			*2021*
Revenues
Sales	$	234		$	231		$	734		$	674
Services		55			56			166			169
Total revenues		289			287			900			843
Cost of revenues
Sales		208			206			662			595
Services		38			38			111			117
Total cost of revenues		246			244			773			712
Gross profit		43			43			127			131
Selling, general and administrative expenses		39			43			123			131
Research and development costs		8			8			26			24
Restructuring costs and other		3			—			3			1
Other operating expense (income), net		—			1			—			(6	)
Loss from operations before interest expense, pension income excluding service cost component, other (income) charges, net and income taxes		(7	)		(9	)		(25	)		(19	)
Interest expense		10			9			29			23
Pension income excluding service cost component		(20	)		(25	)		(77	)		(76	)
Other (income) charges, net		—			(2	)		2			(1	)
Earnings from operations before income taxes		3			9			21			35
Provision for income taxes		1			1			2			5
Net income	$	2		$	8		$	19		$	30

Basic net (loss) income per share attributable to Eastman Kodak Company common shareholders	$	(0.01	)	$	0.06		$	0.11		$	0.40
Diluted net (loss) income per share attributable to Eastman Kodak Company common shareholders	$	(0.01	)	$	0.06		$	0.11		$	0.39

Number of common shares used in basic and diluted net income per share
Basic		79.0			78.6			78.9			78.3
Diluted		79.0			80.6			80.7			80.5

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

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EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

(in millions)

	*Three Months Ended*					*Nine Months Ended*
	*September 30,*					*September 30,*
	*2022*			*2021*		*2022*			*2021*
NET INCOME	$	2		$	8	$	19		$	30
Other comprehensive income (loss), net of tax:
Currency translation adjustments		(1	)		—		(6	)		3
Pension and other postretirement benefit plan obligation activity, net of tax		2			7		112			21
Other comprehensive income, net of tax		1			7		106			24
COMPREHENSIVE INCOME, NET OF TAX	$	3		$	15	$	125		$	54

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)	*2022*			*2021*
ASSETS
Cash and cash equivalents	$	216		$	362
Trade receivables, net of allowances of $6 and $7, respectively		164			175
Inventories, net		273			219
Other current assets		44			49
Current assets held for sale		2			2
Total current assets		699			807
Property, plant and equipment, net of accumulated depreciation of $440 and $441, respectively		147			140
Goodwill		12			12
Intangible assets, net		30			34
Operating lease right-of-use assets		41			47
Restricted cash		57			54
Pension and other postretirement assets		1,198			1,022
Other long-term assets		75			55
TOTAL ASSETS	$	2,259		$	2,171

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
Accounts payable, trade	$	147		$	153
Short-term borrowings and current portion of long-term debt		1			1
Current portion of operating leases		12			13
Other current liabilities		137			142
Total current liabilities		297			309
Long-term debt, net of current portion		312			253
Pension and other postretirement liabilities		336			382
Operating leases, net of current portion		36			45
Other long-term liabilities		176			205
Total liabilities		1,157			1,194

Commitments and Contingencies (Note 8)

Redeemable, convertible preferred stock, no par value, $100 per share liquidation preference		201			196

Equity
Common stock, $0.01 par value		—			—
Additional paid in capital		1,162			1,166
Treasury stock, at cost		(11	)		(10	)
Accumulated deficit		(577	)		(596	)
Accumulated other comprehensive income		327			221
Total shareholders’ equity		901			781
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY	$	2,259		$	2,171

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)	*2022*			*2021*
Cash flows from operating activities:
Net income	$	19		$	30
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization		22			23
Pension income		(64	)		(63	)
Change in fair value of the Preferred Stock and Convertible Notes embedded derivatives		(1	)		(3	)
Net loss on sales of assets		—			1
Non-cash changes in workers' compensation reserves		(13	)		(4	)
Stock based compensation		4			6
Benefit from deferred income taxes		(3	)		(1	)
(Increase) decrease in trade receivables		(7	)		6
Increase in inventories		(74	)		(38	)
Increase in trade payables		5			33
Decrease in liabilities excluding borrowings and trade payables		(26	)		(26	)
Other items, net		8			3
Total adjustments		(149	)		(63	)
Net cash used in operating activities		(130	)		(33	)
Cash flows from investing activities:
Additions to properties		(19	)		(10	)
Purchase of preferred equity interest		(25	)		—
Net proceeds from sales of assets		—			1
Net cash used in investing activities		(44	)		(9	)
Cash flows from financing activities:
Net proceeds from Term Loan Credit Agreement		49			215
Net proceeds from Convertible Notes		—			25
Net proceeds from Series C Preferred Stock		—			99
Proceeds from sale of common stock		—			10
Repurchase of Series A Preferred Stock		—			(100	)
Debt issuance costs		—			(2	)
Preferred stock cash dividend payments		(3	)		(6	)
Treasury stock purchases		(1	)		(1	)
Net cash provided by financing activities		45			240
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(14	)		(3	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(143	)		195
Cash, cash equivalents and restricted cash, beginning of period		423			256
Cash, cash equivalents and restricted cash, end of period	$	280		$	451

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, 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 (loss), (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 income		—		—			20			—			—			20			—
Other comprehensive income (loss) (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 income		—		—			2			—			—			2			—
Other comprehensive income (loss) (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

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EASTMAN KODAK COMPANY

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

(in millions)

	*Nine-Month Period Ending September 30, 2021*
	*Eastman Kodak Company Common Shareholders*
	*Common Stock*		*Additional Paid in Capital*			*Accumulated Deficit*			*Accumulated Other Comprehensive Loss*			*Treasury Stock*			*Total*			*Redeemable Convertible Preferred Stock*
Equity (deficit) as of December 31, 2020	$	—	$	1,152		$	(620	)	$	(446	)	$	(9	)	$	77		$	191
Net income		—		—			6			—			—			6			—
Other comprehensive income (loss) (net of tax):
Currency translation adjustments		—		—			—			(1	)		—			(1	)		—
Pension and other postretirement liability adjustments		—		—			—			6			—			6			—
Repurchase of Series A preferred stock		—		—			—			—			—			—			(100	)
Exchange of Series A preferred stock		—		92			—			—			—			92			(92	)
Expiration of Series A preferred stock embedded derivative		—		11			—			—			—			11			—
Issuance of convertible, redeemable Series B preferred stock, net		—		(95	)		—			—			—			(95	)		93
Issuance of common stock		—		10			—			—			—			10			—
Issuance of convertible, redeemable Series C preferred stock, net		—		—			—			—			—			—			97
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock deemed dividends		—		(2	)		—			—			—			(2	)		2
Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Purchase of treasury stock ⁽¹⁾		—		—			—			—			(1	)		(1	)		—
Stock-based compensation		—		3			—			—			—			3			—
Equity (deficit) as of March 31, 2021	$	—	$	1,169		$	(614	)	$	(441	)	$	(10	)	$	104		$	192
Net income		—		—			16			—			—			16			—
Other comprehensive income (loss) (net of tax):
Currency translation adjustments		—		—			—			4			—			4			—
Pension and other postretirement liability adjustments		—		—			—			8			—			8			—
Preferred stock cash dividends		—		(2	)		—			—			—			(2	)		—
Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Stock-based compensation		—		1			—			—			—			1			—
Equity (deficit) as of June 30, 2021	$	—	$	1,167		$	(598	)	$	(429	)	$	(10	)	$	130		$	193
Net income		—		—			8			—			—			8			—
Other comprehensive income (loss) (net of tax):
Pension and other postretirement liability adjustments		—		—			—			7			—			7			—
Series B Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Series C Preferred stock in-kind dividends		—		(