Note 23 - Segment Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Information

NOTE 23: SEGMENT INFORMATION

Change in Segments

Effective January 1, 2020 Kodak changed its organizational structure. Prepress Solutions, formerly part of the Print Systems segment, operates as a separate segment named the Traditional Printing segment. Electrophotographic Printing Solutions, formerly part of the Print Systems segment, was combined with the Enterprise Inkjet Systems segment and Kodak Software segment to form the Digital Printing segment. The Brand, Film and Imaging segment, except for the licensing of the Kodak brand to third parties, was combined with the Advanced Materials and 3D Printing segment to form the Advanced Materials and Chemicals segment. The licensing of the Kodak brand to third parties operates as a separate segment named the Brand segment. The Eastman Business Park segment is no longer a reportable segment.  A description of Kodak’s reportable segments follows.

Traditional Printing: The Traditional Printing segment is comprised of Prepress Solutions.

Digital Printing: The Digital Printing segment is comprised of four lines of business: the Electrophotographic Printing Solutions business, the Prosper business, the Versamark business and the Kodak Software business.

Advanced Materials and Chemicals: The Advanced Materials and Chemicals segment is comprised of five lines of business: Industrial Film and Chemicals, Motion Picture, Advanced Materials and Functional Printing Technology and Kodak Services for Business.

Brand: The Brand segment contains the brand licensing business.

All Other: All Other is comprised of the operations of the Eastman Business Park, a more than 1,200-acre technology center and industrial complex.

Segment financial information is shown below:

Segment Revenues

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2020		2019		2020		2019
Traditional Printing	$	146	$	187	$	419	$	534
Digital Printing		56		70		173		211
Advanced Materials and Chemicals		44		53		124		153
Brand		3		3		8		8
All Other		3		2		8		7
Consolidated total	$	252	$	315	$	732	$	913

Segment Operational EBITDA and Consolidated Loss from Continuing Operations Before Income Taxes

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions)	2020			2019			2020			2019
Traditional Printing	$	5		$	21		$	7		$	36
Digital Printing		(3	)		(3	)		(8	)		(9	)
Advanced Materials and Chemicals		(6	)		(6	)		(22	)		(24	)
Brand		3			2			7			5
Total of reportable segments		(1	)		14			(16	)		8
All Other		—			—			—			(1	)
Depreciation and amortization		(9	)		(14	)		(29	)		(43	)
Restructuring costs and other		(1	)		(3	)		(9	)		(7	)
Stock based compensation		(17	)		(1	)		(18	)		(6	)
Consulting and other costs (1)		(4	)		(2	)		(5	)		(7	)
Idle costs (2)		(1	)		(1	)		(2	)		(4	)
Former CEO separation agreement compensation		—			—			—			(2	)
Other operating (loss) income, net, excluding income from    transition services agreement (3)		—			(12	)		6			(14	)
Interest expense (4)		(3	)		(4	)		(11	)		(12	)
Pension income excluding service cost component (4)		26			26			79			79
Loss on early extinguishment of debt (4)		(2	)		—			(2	)		—
Other charges, net (4)		(432	)		(6	)		(387	)		(7	)
Consolidated loss from continuing operations    before income taxes	$	(444	)	$	(3	)	$	(394	)	$	(16	)

Kodak increased workers’ compensation reserves by approximately $9 million and $2 million in the third quarters of 2020 and 2019, respectively, driven by changes in discount rates.  The increase in reserves in the third quarter of 2020 impacted gross profit by approximately $6 million, SG&A by approximately $2 million and R&D by approximately $1 million.  The increase in reserves in the third quarter of 2019 impacted gross profit by approximately $1 million and SG&A by approximately $1 million.

⁽¹⁾ Consulting and other costs are primarily professional services and internal costs associated with certain corporate strategic initiatives and investigations.

⁽²⁾ Consists of 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.

⁽³⁾ $1 million and $2 million of income from the transition services agreement with the Purchaser was recognized in the three months ended September 30, 2020 and 2019 Transition services income of $5 million and $4 million was recognized in the nine months ended September 30, 2020 and 2019, respectively.  The income was reported in Other operating (income) expense, net in the Consolidated Statement of Operations. Other operating (income) expense, net is typically excluded from the segment measure. However, the income from the transition services agreement was included in the segment measure.

⁽⁴⁾ As reported in the Consolidated Statement of Operations.

Segment Measure of Profit and Loss

Kodak’s segment measure of profit and loss is an adjusted earnings before interest, taxes, depreciation and amortization (“Operational EBITDA”).  

As demonstrated in the above table, Operational EBITDA represents the earnings (loss) from continuing operations excluding the provision for income taxes; non-service cost components of pension and OPEB income; depreciation and amortization expense; restructuring costs; stock-based compensation expense; consulting and other costs; idle costs; former Chief Executive Officer (“CEO”) separation agreement compensation; other operating (loss) income, net (unless otherwise indicated); interest expense; loss on early extinguishment of debt and other charges, net.

Kodak’s segments are measured using Operational EBITDA both before and after allocation of corporate selling, general and administrative expenses (“SG&A”).  The segment earnings measure reported is after allocation of corporate SG&A as this most closely aligns with U.S. GAAP.  Research and Development activities not directly related to the other segments are reported within the Advanced Materials and Chemicals segment.