Q2 2021 Eastman Kodak Co Earnings Call

August 10, 2021

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Thank you for standing by and welcome to the Eastman Kodak Q2, 2021earnings conference call at this time, all participants on the listen only mode.

We will not be harmed the fullness of interaction on today's conference call.

I would now the kind of call the somebody of host Mr. Paul deal. Please go ahead.

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Thank you and good afternoon, everyone I am Paul Dils, Eastman Kodak Company's Chief tax officer, and director of Investor Relations welcome to Kodak second quarter.

The 21 earnings call net.

For 15 P. M. This afternoon Kodak filed its form 10-Q and issued its release on financial results for the second quarter 2021, you may access the presentation and the webcast for today's call on our Investor Center at Investor Kodak Dot Com.

On today's call will be made concerning forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

All forward looking statements are based upon kodak's expectations and various assumptions on sure.

For 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 material from these forward looking statements include among others the risks.

Uncertainties and other factors described in more detail in Kodak's filings with the U S Securities and Exchange Commission from time to time.

Kind of maybe 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 presentation and are expressly qualified in their entirety by the cautionary statement.

Included or referenced in this presentation.

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.

Anticipated events.

In addition, the release just issued and the presentation provided contains certain measures that are the non-GAAP measures reconciliations to the most directly comparable GAAP measures have been provided with the release.

And within the presentation on our website in our Investor Center at Investor Day at Kodak Dot Com.

Speakers on today's call are Jim continents Kodak.

<unk> Executive Chairman and David Bullwinkle, Chief Financial Officer of Kodak, We will not be holding the formal Q&A during today's call as always the Investor Relations team is available for follow up I will now turn the call over to Jim.

Welcome everyone on.

Thank you for joining the second quarter Investor call for Kodak.

Turning to slide for <unk>.

I'm pleased with our strong second quarter performance, reflecting the execution of our long term plan that we put in place 2 and a half years ago.

We are focused on our strengths and core competencies of the industrial manufacturer establish the customer first model.

De levered, our balance sheet and raise additional capital.

We're winning and the key marketplaces with on <unk>.

Innovative products solutions and sales of service execution the rig.

It was improved performance in our businesses and a solid foundation, we continue to execute on our long term plan. Despite the challenges of uncertainties related to supply chain commodity and labor costs created by the pandemic.

We plan to continue to focus on our strengths as an industrial manufacturer.

To drive long term value of sustainability.

Or change the culture to a customer first model and our simplified organizational structure.

<unk>, a 1 kodak customer first experience.

The improvements we have made the includes automation of our front end CRM customer facing applications alignment and consolidation of our service organization.

Proved cost structure and balance sheet focused on core competencies raised additional capital to be used for investing in the future innovation and growth.

We are recognizing strong growth in our businesses.

Clothing, Sonora process free plates, and prosper annuities of this quarter and overall volume increase in our other businesses.

Our strategy continues to focus on our core competencies and leveraging our deep knowledge base.

The continued product innovation to meet our customers' needs and provide environmentally sustainable solutions.

I will now turn it over to Dave to discuss the second quarter 2021 financial results.

Thanks, Jim and good afternoon.

Today the company filed its form 10-Q for the quarter ended June 32021, with the Securities and Exchange Commission as always I recommend you read this filing in its entirety.

Before I get into the details for the quarter.

I would like to reiterate that the company is executing on the plan, we put in place 2 and a half years ago to create a growing sustainable company, which provides employment for future generations.

We have made improvements in our core businesses by focusing on the areas of print advanced materials and chemicals.

We've created a strong balance sheet with the capacity for investment in growth.

We continue to explore areas for growth, where we can leverage our expertise and print advanced materials and chemicals.

We are pleased with the progress we have made and plan to continue to execute on our long term plan.

I will now share further details on the company results operational EBITDA and cash flow for the second quarter and first half of 2021.

And then progressed through the slides we prepared it is worth noting that the company has shown significant improvement and each metrics year over year for the quarter and first half of 2021.

On slide 5 for the second quarter of 2021 for you.

Reported revenues of $291 million compared to $213 million in the prior year quarter for an improvement of $78 million.

Adjusting for the favorable impact of foreign exchange of $10 million on the current year quarter revenue increased by $68 million compared to the prior year quarter.

On the U S. GAAP basis, we reported net income of $16 million for the second quarter compared to a net loss of $5 million in the prior year quarter.

The 2021 and 2022nd quarter results include income of $1 million in expense of $4 million, respectively related to changes in the fair value of embedded derivative liabilities.

The second quarter of 2021 results also include income of $6 million related to legal settlements and the income of $3 million related to noncash changes in workers' compensation reserves.

Excluding these current and prior quarter items income for 2021 was $6 million compared to a loss of $1 million on the prior year quarter, reflecting an improvement of $7 million.

Operational EBITDA for the quarter was a positive $10 million compared to a negative $7 million in the prior year quarter.

Operational EBITDA for the second quarter was favorably impacted by foreign exchange and a decrease in workers compensation reserves when.

When excluding these items operational EBITDA improved by $13 million.

Operational EBITDA for 2021 was favorably impacted by growth in key product areas and improved manufacturing costs from favorable cost absorption due to increases in sales volume, partially offset by savings from temporary furloughs and pay cuts in the prior year period at largely ended in January.

The 2021.

During the second quarter volumes for Sonora process free plates improved by 84% and the annuity revenue for prosper improved by 50%, which was attributable to the market turnaround as the COVID-19 pandemic impacts lessen.

We continue to invest in future growth areas of ultra stream and advanced materials.

Turning to slide 6 for the first half of 2021, we reported revenues of $556 million compared to $480 million in the prior year period for an improvement of $76 million.

Adjusting for the favorable impact of foreign exchange of $19 million in the current year revenue increased by $57 million compared to the prior year.

We reported net income of $22 million for the first half compared to a net loss of $116 million from the prior year.

The 2021 first half results include income of $7 million related to legal settlements and income of $3 million related to noncash charges in worker's compensation reserves.

The 2021st half results include income of $49 million related to changes in the fair value of embedded derivative liabilities.

The first half of 2020 also includes the impact of the trade name impairment for $3 million.

An increase in accounts receivable reserves of $3 million.

A $167 million non cash expense as a result of the increase in deferred tax valuation allowances outside the U S.

And income of $9 million related to the net gain on the sale of assets.

Excluding these current and prior year items.

Income for 2021 was $12 million compared to a loss of $1 million in the prior year period, reflecting an improvement of $13 million from the prior year period.

Operational EBITDA for the period for the positive $13 million compared to a negative $15 million in the prior year period.

Excluding the favorable impact of foreign exchange and a decrease in workers compensation reserves in the current year and an increase in accounts receivable reserves in the prior year operational EBITDA improved by $21 million.

The ended in January 2021.

On the year to date basis volumes for Sonora process free plates improved by 38% and the annuity revenue for prosper improves by 28%, which was attributable to the market turnaround related to the COVID-19 pandemic, we continued to invest in future growth areas of other.

Interest dream and advanced materials.

Moving on to the company cash performance presented on slide 7 the company ended the second quarter with $395 million on cash and cash equivalents, an increase of $199 million from December 31.2020.

During the second quarter, we used $6 million on cash and improvement of more than $20 million compared to the prior year quarter driven.

Driven by increases in revenue and profit as I have just described.

For the 6 months ending June 32021 cash used in operating activities was $21 million driven primarily by cash used from net earnings of $3 million and of cash used from balance sheet changes of $18 million, including achieved in working capital of $2 million and a decrease in other liabilities.

<unk> of $20 million.

Accounts payable increased by $27 million.

Tori increased by $30 million and accounts receivable decreased by $1 million.

These changes in working capital are expected with the increase in sales and manufacturing volumes. The company has experienced in 2021.

Included in the decrease in other liabilities on our restructuring payments pension contributions for plans outside the U S and changes in various accruals and liabilities.

Cash used in investing activities was $5 million in the first half flat when compared to the prior year cash provided by financing activities was $241 million in the first half of 2021 co.

Impaired to cash used in financing activities of $6 million on the prior year period.

Cash provided by financing activities included $247 million of incremental cash in the first half of 2021 after fees and expenses driven by the financial transactions announced on March 1.

Restricted cash at the end of the quarter was $74 million, an increase of $14 million from December 31.2020.

This increase was primarily a result of cash collateral required under the new letter of credit facility.

We will continue to focus on alternatives to reduce restrictions on cash and we view this as an upside opportunity for incremental liquidity for the company.

Finally, we remain in compliance with all applicable financial covenants and I will now turn the discussion back to Jim.

Thank you Dave.

In summary.

Our strong second quarter performance reflects the impact of the improvements we've made debt. Our continued focus on our core competencies as part of our long term plan over the last 2 of half years, we have concentrated on our strength as of industrial manufacturer. The established the customer first model 1 Kodak day.

Levered our balance sheet for us.

The additional capital the.

Result of improved performance.

And on our businesses and a solid foundation for the future.

Thank you for attending the call and your continued interest in Kodak have a great evening.

Thank you.

Ladies and gentlemen, this does conclude today's conference. Thank you all participating the have a great day you may all disconnect.

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Q2 2021 Eastman Kodak Co Earnings Call

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