Q3 2021 Eastman Kodak Co Earnings Call
Ladies and gentlemen, thank you for standing by and walk into the Eastern Kodak Q3, 2021 earnings call. At this time all participants are in a listen only mode. If you require operator assistance. Please first stars zero I would now like to turn the call over to your host Paul Bills you may begin.
Thank you and good afternoon, everyone I am Paul Bills easily clinic company's Chief tax officer, and director of Investor Relations Welcome to Codex third quarter 2020.
One earnings call.
At 315 P. M. This afternoon Kodak issued its release in financial results for the third quarter of 2021.
May access the presentation and webcast for today's call.
Or Investor Center, Investor that Kodak Dot com.
During today's call will be making certain forward looking statements as defined by the private Securities Litigation Reform Act of 1995.
All forward looking statements are based upon codecs expectations and various assumptions.
Future events or results may differ from those anticipated or expressed in the floor looking statements important factors that could cause actual events Ah results to differ materially from these forward looking statements include among others. The risks uncertainties and other factors described in more detail and Kodak.
Filings with the U S Securities and Exchange Commission from time to time.
There may be other factors that may cost codecs actual results to differ materially from the forward looking statements.
All forward looking statements attributable to Kodak.
Or persons acting on its behalf only apply as of the date of this presentation and are expressing qualified in their entirety by the cautionary statements included our records 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 an unanticipated event.
In addition to release just issued and the presentation provided is contained certain measures that are being non-GAAP measures.
Reconciliations to the most directly comparable GAAP measures have been provided with the release and within the presentation on our website and our Investor Center at Investor that Kodak Dot com.
Speakers on today's call, our gym continents, Codex executive Chairman and Chief Executive Officer, and David Bowling go Chief Financial Officer, a Kodak.
We will not be holding a formal Q&A during today's call as always the Investor relations teams is available for follow up.
Now turn the call over to Jim.
Thank you Paul a welcome everyone to the third quarter of 2021 and bolster call for Kovac.
I am happy with the third quarter results. The plan, we put in place two and a half years ago will continue to execute on it and.
And we've had some additional challenges despite the rapid inflationary pressures, including the rising cost of raw materials shipping supply chain additional challenges of labor.
We will continue to focus as one Kodak and on our customer the conditions are the same for everyone and we all have to work noodles and we have to execute.
We are taken action to mitigate these impacts.
We're looking to make sure that we buy core products.
That we need to continue our manufacturing process.
I'm proud to say, our revenues were up $111 million a year to date $90 million after effects year over year.
We are committed to continue innovation in digital while holding changed we're going to meet customer needs. We're going to innovate. Some examples we continue to innovate with the prosper platform.
Green and ultra stream.
We are also opening up new opportunities for our printers with the announcement of the Kodak ascend digital press it opens up new profitable applications and opportunities in retail point of sale and small packaging for printers.
I will also continue to invest in print on demand, making the printing industry, most secure and highest performing software platform affordable for more printers.
I want to discuss plates strategic.
Strategically quite we are well positioned we manufactured in the Us Asia and Europe.
And to be clear, we are novel left standing large UF manufacturer in please.
Please also say that we saw strong growth and our Sonora process replace up 35% for the quarter So extra.
Well accepted in the marketplace hour, thank the printers for supporting sustainability and printing by using the eco friendly slower process replaced.
I also want to note our growth was also coming from new customer growth as we moved into one Kodak a customer first model. We're seeing as you saw the growth in revenues. We're also seeing our customer base grow and plates.
I'm also pleased to announce that we received the 2021 clinical Intertek award for Kodak Sonora extra process replace.
I want to talk a little bit about film I am pleased to report that we're seeing a resurgence in our film business more people are shooting still fell in the motion picture industry is choosing film as the ideal medium for their productions. As a result, we are increasing the capacity of our film factory.
As we continue to execute on a long term strategy.
We're going to continue to focus on our core competencies and print the vast materials and chemicals.
Provided environmentally sustainable solutions, both products and internally turning the business to focus on innovation growth and profitability.
Now I'd like to turn it over to David Bowling Ball R. CFO.
Thanks, Jimmy Good afternoon today, the company filed its Form 10-Q for the quarter ended September 32021, with the Securities and Exchange Commission.
As always I recommend you read this filing in its entirety.
I will now share further details on the full company results operational EBITDA in cash flow for the third quarter and nine month period ending September 32021.
On slide five for the third quarter of 2021 reported revenues of $287 million compared to $252 million in the prior year quarter or an increase of $35 million.
Adjusting for the favorable impact of foreign exchange of $2 million in the current year quarter revenue increased by $33 million compared to the prior year quarter.
On the US GAAP basis, we reported net income of $8 million for the third quarter compared to a net loss of $445 million in the prior year quarter.
2021, and 2023rd quarter results include income of $3 million, an expense of $431 million respectively.
Related to changes in the fair value of embedded derivative liabilities.
The third quarter of 2021 results also include income of $1 million related to non-cash changes in workers compensation reserves.
And $1 million related to a net loss on the sale of assets.
The third quarter of 2020 results include expense of $9 million related to non-cash changes in workers compensation reserves $2 million related to the loss in extinguishment of debt.
An income of $1 million related to a decrease in accounts receivable reserves. Excluding these current and prior quarter items income for 2021 was $5 million compared to a loss of $4 million in the prior year quarter, reflecting an improvement of $9 million.
Operational EBITDA for the quarter was a positive $6 million compared to a negative $1 million in the prior year quarter.
Excluding the impact of foreign exchange and changes in workers compensation reserves in the current year quarter and changes in accounts receivable and workers compensation reserves in the prior year quarter operational EBITDA decreased by $1 million when compared to the prior year quarter.
Operational EBITDA for 2021 was favorably impacted by growth and key product areas and improved manufacturing costs from favorable cost absorption, resulting from increases in volume, partially offset by savings from temporary furloughs and pay cuts in the prior year period at largely ended.
In January 2021.
Ongoing global cost increases and changes in workers compensation reserves.
We are taking actions to address the current inflationary pressures.
During the third quarter volume <unk> processed replace improved by 35% and the annuity revenue for prosper improved by 17%.
Selecting volume growth with our customers, including growth in our customer base.
We continued to invest in future growth areas ultra stream and advanced materials.
Also as Jim discussed the newly announced product innovations, reflecting kodak's continued commitment to developing breakthrough solutions that support codex customer first model.
We continued to deliver on our promise to provide a complete range of solutions that offer print that pays.
Turning to slide six for the nine months ending September 32021, we reported revenues of $843 million compared to $732 million in the prior year period, or an increase of $111 million.
Adjusting for the favorable impact of foreign exchange of $21 million in the current year period.
Increased by $90 million compared to the prior year.
We reported net income of $30 million for the year to date period compared to a net loss of $561 million in the prior year period.
The 2021 and 2020 year to date results include income of $3 million, an expense of $382 million, respectively related to changes in fair value for the embedded derivative liabilities.
The year to date period of 2021 results also include income of $7 million related to legal settlements income a $4 million related to non-cash changes in workers compensation reserves and a net loss in the sale of assets for $1 million.
The year to date period of 2020 results also include the impact of a trade name impairment for $3 million, an increase in accounts receivable reserves of $3 million expense of $9 million related to non-cash changes in workers compensation reserves $2 million related to a loss on the extinguishment of debt.
Income of $9 million related to a net gain on the sale of assets.
And the $167 million non-cash expense as a result of the increase in deferred tax valuation allowances outside of the U S.
Excluding these current and prior year items results for 2021, net income of $17 million compared to a loss of $4 million in the prior year period, reflecting an improvement of $21 million from the prior year.
Operational EBITDA for the year to date period was a positive $19 million compared to a negative $16 million in the prior year period.
Excluding the impact of changes in workers compensation reserves in both the year to date periods of 2021, and 2020 and the increase in accounts receivable reserves in the year to date period of 2020.
Operational EBITDA increased by $20 million year over year.
Operational EBITDA for 2021 was favorably impacted by growth and 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 that largely ended in January.
21.
I am going global cost increases and changes in workers compensation reserves.
We are taking actions to address the current inflationary pressures and supply chain challenges.
On a year to date basis volumes for Sonora processed replace improved by 37% and the annuity revenue for prosper improved by 24%, reflecting the return to pre COVID-19 sales volume levels.
In addition to growth and our customer base.
We continue to invest in future growth areas of ultra stream and advanced materials.
Moving on to the company cash performance presented on slide seven.
The company ended the third quarter with $380 million in cash and cash equivalents, an increase of $184 million from December 31 2020.
Or the nine months ending September 32021 cash used in operating activities was $33 million cash.
Cash used for operating activities in the prior year period was $48 million, representing an improvement of $15 million.
Current year cash used in operating activities is driven primarily by cash use from net earnings of $11 million in cash use from balance sheet changes of $22 million, including a change in working capital of $1 million and a decrease in other liabilities of $26 million.
Accounts payable increased by $33 million.
Tori increased by $38 million in accounts receivable decreased by $6 million.
These changes in working capital are expected with the increase in sales in manufacturing volumes the company is experiencing.
Included in the decrease in other liabilities are restructuring payments pension contributions for plans outside the U S and changes in various accruals and liabilities.
Cash used in investing activities was $9 million in the current year period flat when compared to the prior year period.
Cash provided by financing activities was $240 million in the current year period compared to $10 million in the prior year period.
Ash provided by financing activities included $247 million of incremental cash after fees and expenses driven by the financial transactions announced on March 1st of 2021.
Restricted cash at the end of the quarter was $71 million, an increase of $11 million from December 31 2020.
This increase was primarily a results 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 to invest in growth.
Finally, our Form 10-Q disclosures that we remain in compliance with applicable financial covenants.
I will now turn the discussion back to gym.
In summary.
Long third quarter performance reflects the impact of our business, we've made as we mitigate inflationary pressures.
Our continued focus on our core competencies as part of a long term plan over the past two years, we have concentrated on our strengths as an industrial manufacturer.
Established customer first bottle on Kodak Delevered, our balance sheet and raise additional capital Hill.
The result is improved performance on our business on a solid foundation.
Well aware of the challenging times ahead of us, but we are committed to continue to work through them.
Thank you all for attending the call and your interest in Kodak.
Ladies and gentlemen, so that concludes today's presentation. You may now disconnect and have a wonderful day.
[music].
[music].
[music].