Improved Earnings for Kodak in Second Quarter, Smaller Loss
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Eastman Kodak has reported a net loss of $62 million for its second-quarter 2014; however, this loss is a $162 million improvement from the $224 million net loss that Kodak reported for second-quarter 2013.
The firm says that key products in packaging, digital plates, digital printing, and workflow software are helping it increase revenue growth. Overall, Kodak says it expects to meet its projections for full-year 2014 with revenue of between $2.1 and $2.3 billion and Operational EBITDA between $145 and $165 million. It also expects to return to year-over-year revenue growth for the second half of 2014.
Revenue for the second-quarter was $525 million, a decline of 10 percent from the $583 million of the previous-year quarter, with more than two-thirds of the decline attributable to declines in the Consumer Inkjet and Entertainment and Commercial Films mature businesses.
“Our progress continues. Kodak’s overarching imperative is to achieve the growth potential of our strategic technology businesses,” commented Kodak CEO Jeff Clarke. “Our products in packaging, digital printing, digital plates and workflow software form the foundation of the new Kodak, and are meeting our expectations for sales and margin growth. We have taken significant steps to simplify processes and reduce costs, which also will contribute to Kodak’s long-term success.
“In cooperation with our partners UniPixel and Kingsbury, we have made significant progress toward bringing our functional printing products into commercial production. We have also worked with our motion-picture film customers to better position that business going forward. While we are currently behind our expectations in these businesses, these actions will position us well for 2015 and beyond.
“Based on a detailed review of first-half results, product and service pipelines, brand licensing and intellectual property opportunities, and anticipated cost savings, we believe we will be within the range of our projections of between $2.1 and $2.3 billion in revenue and Operational EBITDA of $145 to $165 million for the year.”
“For the second half, we expect Kodak to return to year-over-year revenue growth on the strength of anticipated double-digit growth in our strategic technology businesses.”
John McMullen, Kodak’s Chief Financial Officer, noted that liquidity remains strong with cash of $768 million. Net cash used in operating activities was $88 million for the second quarter, an improvement of $55 million from the previous-year quarter. Year-to-date, net cash used in operating activities is $270 million less than in 2013. Operational cash flow is expected to be positive for the second half of the year.
The GECF segment had sales of $357 million, down 4% from the previous year.
Kodak says steep declines in sales of film more than offset gains in key areas of the digital plates and workflow software businesses. Unit volume in the digital plates business was up for the first time in a quarter since 2011, led by KODAK SONORA Process Free Plates.
Kodak expects to quadruple the number of customers and volume for its SONORA Plates in 2014, as customers continue to switch to this technology platform. SONORA Plates remove the processing step – providing environmental and economic benefits of saving water, waste and electricity – without sacrificing quality, productivity or print capability of traditional processed plates. The Workflow Solutions business, which includes KODAK PRINERGY Workflow, the industry-leading workflow software, continued to enjoy strong performance with revenues up 9 percent in the quarter. Placements of CTP devices also increased for the first time since 2011.
Sales of motion-picture film continued an accelerated and sharp decline in the quarter, challenging profitability of the business. Kodak has worked with leaders of the motion picture industry to form a plan which is designed to sustain the business while optimizing cash flow.
Operational EBITDA for GECF improved from $21 million to $33 million in the quarter, an increase of 57 percent due to a gain in intellectual property licensing, as well as volume increases in the Graphics business, cost reductions and improved manufacturing productivity.
Digital Printing and Enterprise (DP&E): The DP&E Segment consists of Digital Printing, Packaging and Functional Printing, Enterprise Services & Solutions, and Consumer Inkjet Systems businesses.
Placements of KODAK FLEXCEL NX Systems for package printing continued to enjoy robust growth, says Kodak, and are on track with guidance for a 25 percent increase in the installed base during 2014. Volume for FLEXCEL NX Plates in the quarter was up by 26 percent. During the quarter, Kodak announced an extension of the availability of the FLEXCEL NX System to the corrugated packaging category, which makes up nearly 40 percent of the printed packaging market.
Revenue from the KODAK PROSPER Portfolio increased 10 percent in the quarter, with equipment placements on track to meet the projection of more than 40 press systems in place by end of year. The market has shown strong interest in the recently announced KODAK PROSPER 6000 Presses, which provide high levels of reliability, application flexibility and print speeds up to 1,000 feet per minute, the fastest of any full-color commercial inkjet press.
Operational EBITDA for the DP&E Segment declined from earnings of $4 million to a loss of $9 million in the quarter, largely as a result of the decrease in consumer-inkjet ink sales, as well as declines in the legacy digital printing businesses that offset gains in the PROSPER and FLEXCEL Systems portfolios.
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