Eastman Kodak Company has reported its financial results for the first quarter 2017, delivering net earnings of $7 million and continued strong growth in its KODAK SONORA Process Free Plates, KODAK FLEXCEL NX Packaging and KODAK PROSPER Inkjet businesses.
Highlights include:
- GAAP net earnings of $7 million for the quarter ended March 31, 2017, an improvement of $22 million compared with the quarter ended March 31, 2016.
- Operational EBITDA for the quarter of $8 million compared with $19 million for the first quarter of 2016.
- Revenues for the quarter of $357 million compared with revenues of $377 million for the first quarter of 2016, down $20 million or 5 percent. On a constant currency basis revenues were down $14 million or 4 percent.
- The company ended the first quarter with a cash balance of $378 million, a decrease in cash of $56 million for the first quarter of 2017. This reflects the use of cash in working capital items such as seasonal inventory increases for revenues during the remainder of the year.
- Key product lines achieved strong growth for the quarter:
The company also announced that the annuities revenue for KODAK PROSPER Inkjet grew by 26 percent. Volume for KODAK SONORA Process Free Plates grew by 24 percent. Volume for KODAK FLEXCEL NX Plates grew by 22 percent.
As previously announced the company made a strategic decision to retain the PROSPER business and has recast financial results to reclassify PROSPER into continuing operations of the company within the Enterprise Inkjet Systems Division.
The company announced a revision to its reporting structure, moving the Micro 3D Printing business within the Micro 3D Printing and Packaging Division (MPPD) into a new division named Advanced Materials and 3D Printing Technology (AM3D), which also includes the operations of the prior Intellectual Property Solutions Division, and creating the standalone Flexographic Packaging Division (FPD), formerly part of MPPD.
The company adjusted 2017 guidance to reflect the retention of PROSPER as well as supplier price increases in aluminum impacting Kodak’s largest division. The company now expects revenues of $1.5 billion to $1.6 billion and Operational EBITDA of $105 million to $120 million. Net earnings for 2016 was $16 million. The adjusted 2017 guidance reflects a 40 to 60 percent improvement over 2016 comparable Operational EBITDA of $75 million.
“I’m pleased with our continued profitability and by the strong performance of our growth engines — SONORA Plates, FLEXCEL NX Packaging and the PROSPER Inkjet business” said Jeff Clarke, Kodak Chief Executive Officer. “We expect continued strong execution in these growth businesses, which will continue to increase our quality of earnings.”
Revenues in the first quarter of 2017 were $357 million, a 5 percent decline from the first quarter of 2016 or 4 percent on a constant currency basis. The decrease was primarily driven by pricing pressures in the pre-press plates business and the expected continued decline in legacy consumer inkjet printer cartridge sales. Partially offsetting these impacts was growth in PROSPER annuities, SONORA Plates and FLEXCEL NX Plates.
GAAP net earnings were $7 million for the quarter ended March 31, 2017, an improvement of $22 million compared with the first quarter 2016. The company delivered first quarter Operational EBITDA of $8 million, consistent with the company’s expectations but down $11 million compared with the first quarter of 2016, or $9 million on a constant currency basis. The company ended the quarter with a cash balance of $378 million, down $56 million from the December 31, 2016, balance of $434 million.
“The increased use of cash in the first quarter compared with the prior year is consistent with our expectations” said David Bullwinkle, Kodak Chief Financial Officer. “Our higher use of cash in Q1 2017 primarily reflects an increased seasonal build of inventory, year-over-year reduction in Operational EBITDA and non-recurring items last year. In total for the remaining 9 months of 2017, we expect to generate cash.”
Print Systems Division (PSD), Kodak’s largest division, had Q1 revenues of $213 million, an 8 percent decline compared with Q1 2016. Operational EBITDA for the quarter was $13 million, a 28 percent decline compared with the same period a year ago. The decline was due primarily to pricing pressures in digital plates.
For the quarter, the KODAK SONORA Plates line delivered strong performance, with volume increasing by 24 percent compared with the same period a year ago. Total year-over-year plate volume remained stable, due to SONORA Plates growth and the success of new products, including SONORA UV Process Free Plates.
Enterprise Inkjet Systems Division (EISD), including the KODAK VERSAMARK and KODAK PROSPER businesses, had Q1 revenues of $37 million, compared with $34 million in the same period in 2016, an increase of 9 percent. Operational EBITDA was negative $1 million, an improvement of $4 million compared with Q1 of 2016. On a constant currency basis, operational EBITDA improved by $5 million.
For the first quarter of 2017 the PROSPER business continued to deliver improved performance with year-over-year annuity growth of 26 percent.
In April, Kodak also announced it will continue to invest in its next-generation ULTRASTREAM inkjet writing technology, and expects products built with ULTRASTREAM technology to go to market in 2019.
The newly established Flexographic Packaging Division (FPD) includes KODAK FLEXCEL NX Systems and Plates as well as other packaging businesses, which include SR and letterpress plates, proofing products and services. FPD had strong performance for the quarter, driven by consistent growth in KODAK FLEXCEL NX Plates. Revenues for Q1 were $33 million, an increase of $4 million or 14 percent over the same period a year ago. Operational EBITDA was $6 million, an increase of $2 million compared with the first quarter of 2016.
In April, Kodak commenced the $15 million expansion of its Weatherford, Oklahoma manufacturing facility to accommodate the production of KODAK FLEXCEL NX Plates. For the quarter, FLEXCEL NX revenues were $24 million, a 19 percent improvement over the prior-year period and FLEXCEL NX Plate volume continued to deliver strong growth in all regions, increasing by 22 percent year over year.
Software and Solutions Division (SSD) delivered Q1 revenues of $21 million, down from $22 million in the same period last year. Operational EBITDA was $1 million, down $1 million compared with the prior-year period.
Consumer and Film Division (CFD) revenues for Q1 were $49 million, down 14 percent from $57 million in Q1 of 2016. Operational EBITDA declined from $7 million in the same period last year to negative $3 million, primarily driven by a $5 million revenue decline in consumer inkjet. Additionally, the prior year included $3 million related to the fulfillment of motion picture film commitments.
The newly established Advanced Materials and 3D Printing Technology Division (AM3D) represents Kodak’s research lab and associated new business opportunities including touch sensor films with copper mesh technology and intellectual property licensing not directly related to other business divisions. AM3D had Operational EBITDA of negative $8 million, compared to negative $7 million for Q1 2016. The division continues to expand its efforts in developing new materials for 3D printing and light- blocking materials.
In Micro 3D printing, the division continued to progress favorably with several customer technical evaluations of touch sensors for industrial designs.
Eastman Business Park Division (EBP) had revenues of $4 million, flat with revenues for the first quarter 2016. Operational EBITDA was flat compared with the same period a year ago. During the quarter, the division signed lease agreements with the Park’s first photonics company tenant and an energy storage company.
