Q1 2022 Eastman Kodak Co Earnings Call

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Good afternoon.

Thank you for attending today's Eastman Kodak first quarter 2022 earnings call. My name is Stephanie and I will be your moderator for today's call all lines will be muted during the presentation of the call.

I'd now like to pass the conference over to our host Paul Bill. Please go ahead. Thank.

Thank you and good afternoon, everyone I am Paul Dils, Eastman Kodak Company's Chief tax Officer, and director of Investor Relations Welcome to <unk> first quarter 2022 earnings call.

At 415 P. M. This afternoon Kodak filed its Form 10-Q and issued its release on financial results for the first quarter 2022, you may access the presentation and the webcast for today's call Honor Investor Center, Investor Kodak Dot com.

During today's call.

We will be making certain forward looking statements as defined by the private Securities Litigation Reform Act of 1095.

All forward looking statements 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 imports.

Important factors that could cause actual events or results to differ materially.

From these forward looking statements include among others the risks uncertainties and other factors described in more detail.

Filings with the U S Securities Exchange Commission from time to time, there may be other factors that may cause kodak's actual results to differ materially from the forward looking statements.

Forward looking statements attributable to Kodak or persons acting on its behalf apply it.

As of the date of this presentation and are expressly qualified in their entirety by the cautionary statements 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 unanticipated events.

In addition, the release just issued and the presentation provided contains certain measures that are deemed 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 Investor deck <unk> Dot com.

Speakers on today's call are Jim.

Codex Chief Executive Officer, and Executive Chairman, and David Bullwinkle, Chief Financial Officer of Kodak.

Will not be holding a 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 and thank you.

In the first quarter investor call for Kodak.

We started 2018 with a strong balance sheet.

<unk> $390 million of cash and cash equivalents as of.

At March 31 2014.

We are building off the successful 2021.

Or 9% compared to the prior year quarter.

Which demonstrate.

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To our customers from a multiple a challenging economic environment.

When excluding the impact of foreign exchange revenue increased 45, a growth year in 2021.

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Including products and Nora process free plates, and total prosper annuities and overall volume increase in our businesses.

Volume of Sonora process free plates.

Grew by 24%.

And the annuity revenue for prosper.

Global impact associated with.

COVID-19 pandemic.

Warranty claims and other global events.

<unk> is experiencing supply chain disruption shortages in distribution materials, and labor and increased cost of distribution of materials.

We have implemented numerous measures to mitigate these challenges.

Moving increasing safety stock materials.

Increasing.

And implementing pricing actions.

Despite the bulk shortages and cost increases we have taken unprecedented steps to me.

Sure supply for our customers.

Our long term strategy continues to focus on our core competencies in advanced materials and chemicals total Basel key focus on innovation growth and profitability.

We remain committed to continued innovation and digital tools, including a revolutionary new product.

Enterprise with.

This is aimed at the retail point of purchase and packaging market.

As discussed on our last call. We are working on new initiatives within our AMG group to leverage our deep expertise in chemistry.

Both strength and lowering and potent and multiple substrates, while telecom overall essentially of experience until manufacturing.

These new initiatives are in various stages of commercialization and include.

EV energy storage battery material manufacturing.

We have started totally substrates for EV and energy storage materials.

We will continue to apply our extensive expertise to produce coated substrates of the U S.

Light blocking technology, we plan to commercialize a targeted list fabric coating branded total what's the product is designed to offer superior light management properties.

Coating capabilities with an unmatched range of leverage.

First Eric on Telus, we are leveraging our proprietary technology and high resolution firstly to manufacturer of custom transparent antennas for the automotive and other applications.

Reagent manufacturing as we continue to leverage our trusted brand and expertise in chemicals. We have started the construction of an approximately $20 million lab and manufacturing facility to produce reagents for healthcare applications.

We will now turn it over to Dave to discuss the first quarter of 2022 financial results.

Thanks, Jim and good afternoon, before we get into the details for the quarter I would like to make a few general comments.

The company's performance for the first quarter reflects the results of strategic efforts, we have taken based on our long term strategy.

This is evidenced by revenue growth that we have reported.

However, the ongoing global impacts associated with the COVID-19 pandemic the war in Ukraine, and other global events continue to impact the company's operations.

The company is experiencing supply chain disruptions.

Mortgages in materials and shortages of labor.

Cost for labor material and distribution are rising rapidly as well.

We have implemented numerous measures to mitigate these challenges, including increasing safety stock on certain materials, increasing lead times.

Riding suppliers with longer forecast of future demand.

Certifying additional sources of substitute materials, where possible and implementing pricing actions.

These countermeasures are providing us the opportunity to continued levels of supply to our customers.

I will now share details on the full company results operational EBITDA and cash flow results for the first quarter.

Turning to slide seven as.

As we reported in our earnings release for the first quarter of 2022, we reported revenues of $290 million compared to $265 million in the prior year quarter or an improvement of $25 million.

On a constant currency basis revenue improved by $35 million.

On a U S. GAAP basis, we reported net loss of $3 million for the first quarter compared to net income of $6 million in the prior year quarter.

The 2022 and 2021 first quarter results include expense of $3 million and $1 million, respectively related to changes in the fair value of embedded derivative liabilities.

The first quarter of 2022 also includes income of $4 million related to noncash changes in workers' compensation reserves.

Excluding these current and prior year items.

Loss for 2022 was $4 million.

Compared to income of $7 million in the prior year quarter.

Operational EBITDA for the quarter was a negative $7 million compared to a positive $3 million in the prior year quarter.

Excluding the unfavorable impact of foreign exchange and adjusting for noncash changes in workers' compensation reserves in the current year operational EBITDA decreased $13 million from the prior year quarter.

Operational EBITDA for the first quarter of 2022 was favorably impacted by growth in revenue due to increased pricing and volume offset by higher ongoing global cost increases.

During the first quarter volumes for Sonora process free plates grew by 24% and the annuity revenue for prosper improved by 2%.

We continued to invest in our core competencies and future growth areas of ultra stream in advanced materials and chemicals.

Moving on to the company cash performance presented on slide eight.

The company ended the first quarter with $309 million in cash and cash equivalents.

A decrease of $53 million from December 31, 2021.

As presented on the bottom portion of the slide excluding the prior year impact of net proceeds from refinancing transactions.

<unk> of the letter of credit facility.

And the effect of exchange rates on cash.

Year to date decrease in cash and cash equivalents.

$29 million, primarily driven by a use of cash from working capital.

Cash used in operating activities was $43 million driven.

Primarily by cash used from net earnings of $21 million in cash used from balance sheet changes of $22 million, including a change in working capital of $10 million and a decrease in other liabilities of $13 million.

Accounts payable increased by $31 million.

Centaury increased by $32 million.

Accounts receivable increased by $9 million compared to December 31, 2021.

We used cash and working capital in order to strengthen our ability to supply our customers.

We have increased safety stock on certain materials increased lead times provided suppliers with longer forecast future demand and certified additional sources or substitute materials.

Cash used in investing activities was $5 million in the first quarter, an increase of $4 million when compared to the prior year period.

The increase is primarily attributable to increased capital expenditures as we invest in the growth areas previously described.

Cash used by financing activities was $1 million.

In the quarter compared to cash provided by financing activities of $242 million in the prior year period.

Cash provided by financing activities in the prior year period included $247 million of incremental cash after fees and expenses driven by the financial transactions announced on March <unk> 2021.

Restricted cash at the end of the quarter was $65 million, an increase of $4 million from December 31, 2021, mainly related to legal contingency collateral required outside the U S.

Restricted cash primarily represents cash collateral required under the new letter of credit facility. In addition to escrow to secure various ongoing obligations.

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 applicable financial covenants.

I will now turn the discussion back to Jim.

Thank you Dave.

In summary, we continue to navigate through from a legal challenging business environment.

Glen will deliver overall growth. We also continue to see increase in customer satisfaction and market share in key businesses achievements, which reflect the success of our ongoing strategy.

As we stated we plan to continue to focus our commercial front.

As well as a number of long term growth initiatives in advanced materials and chemicals.

We also continue to invest in product innovations, we have product will continue to execute.

Q on our customer first with one product model.

Thank you all for attending the call and your continued interest in Eastman Kodak.

Good evening.

That concludes the Eastman Kodak first quarter 2022 earnings call I Hope you all enjoy the rest of your day you may now disconnect your lines.

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