Eastman Kodak Company — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are primarily with 2020. This is an annual filing, not a standalone fourth-quarter report. Kodak is a global manufacturer focused on commercial printing, advanced materials and chemicals, and brand licensing.
Financial performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $1.150 billion | $1.029 billion |
| Gross profit / margin | $164 million / 14% | $135 million / 13% |
| Income (loss) from continuing operations | $24 million | $(544) million |
| Net earnings (loss) | $24 million | $(541) million |
| Net cash used in operating activities | $(47) million | $(35) million |
| Net cash used in investing activities | $(20) million | $(13) million |
| Net cash provided by financing activities | $238 million | $10 million |
| Cash and cash equivalents at year-end | $362 million | $196 million |
Revenue rose 12%, reflecting recovering demand and volumes, pricing improvements, and $16 million of favorable currency impact. Gross margin improved modestly, but higher aluminum costs and increased interest expense weighed on results. The return to net income was substantially influenced by non-operating items, including $102 million of pension income excluding service cost; operating cash flow remained negative.
Segment revenue and Operational EBITDA (Kodak’s segment performance measure): Traditional Printing, $659 million and $9 million (versus $592 million and $21 million); Digital Printing, $249 million and $(5) million (versus $241 million and $(10) million); Advanced Materials and Chemicals, $212 million and $(6) million (versus $172 million and $(23) million); Brand, $15 million and $13 million (versus $13 million and $11 million). Traditional Printing remained the largest segment, but its EBITDA declined, primarily from higher aluminum and administrative costs.
Financial position, debt and liquidity
- Year-end cash was $362 million; cash, cash equivalents and restricted cash totaled $423 million. Restricted cash is not fully available for general operations.
- Debt carrying value was approximately $254 million, including $1 million current and $253 million long-term. Contractual maturity value was $322 million, principally due in 2026; the maturity schedule includes paid-in-kind interest.
- 2021 financing transactions generated approximately $247 million of net proceeds, including a $225 million term loan, convertible notes and Series C preferred stock, partly offset by the repurchase of Series A preferred stock. Term loans carry 8.5% cash interest plus 4% paid-in-kind interest; the notes carry 5% paid-in-kind interest.
- Minimum Liquidity was $250 million against an $80 million covenant threshold; Excess Availability was $27 million against an $11.25 million threshold. The fixed-charge coverage ratio was below 1.0, but the trigger was not active at year-end because Excess Availability exceeded its threshold.
- Management stated that cash, expected operating cash flows, borrowing resources and other liquidity actions should meet short- and long-term requirements. However, Kodak reported negative operating cash flow and disclosed that it had not generated positive operating cash flow without financing or monetization transactions in recent years.
Changes, outlook and material risks
- Revenue recovered across all segments from pandemic-affected 2020 levels. Traditional Printing revenue increased 11%; SONORA process-free plate volume rose 31%. Advanced Materials and Chemicals revenue grew 23%, while Digital Printing revenue increased 3%.
- Kodak expects supply-chain disruption, labor and material shortages, and higher aluminum, energy, packaging and transportation costs to remain challenges in 2022. Plate surcharges and price actions are intended to offset some cost increases.
- No consolidated revenue or earnings guidance is provided in the supplied filing text. Kodak forecast 2022 capital expenditures of $45–$60 million and expects approximately $12 million in annual cash savings from 2021 restructuring actions, with most savings expected by the end of the second quarter of 2022.
- Growth initiatives include battery-material coating, KODALUX fabric coatings, transparent antennas and diagnostic test reagents. These projects require execution and, for significant battery-business expansion, further capital investment. The filing describes the DFC’s previously discussed potential $765 million pharmaceutical loan as unlikely to proceed as originally envisioned.
- Key risks include the ability to generate sustained positive operating cash flow, debt and preferred-stock obligations, covenant and collateral requirements, limited or single-source supplies, commodity inflation, competition and digital substitution, and the impact of the war in Ukraine. Kodak also cited continuing litigation and government investigations related to the 2020 DFC announcement; outcomes and potential effects are uncertain.
- Convertible preferred stock and notes could dilute existing shareholders; Kodak estimated that conversion of all outstanding convertible securities, based on December 31, 2021 capitalization, would represent approximately 22% of common shares after conversion. The company also registered up to 44.5 million shares for resale.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified embedded-derivative accounting and pension private-equity valuations as critical audit matters.
Important facts for investors to verify
- Whether Kodak can turn its negative operating cash flow into sustained positive cash generation without repeated financing or asset monetizations.
- Available, unrestricted liquidity and ongoing compliance with minimum-liquidity, excess-availability and other credit-facility requirements.
- 2022 performance against the stated capital-expenditure outlook, restructuring savings expectations and cost-recovery plans for aluminum and other inputs.
- Progress, customer commitments, funding needs and commercial returns for the advanced-materials growth initiatives.
- Developments in DFC-related investigations and litigation, Brazilian contingencies, and any resulting costs or settlements.
- Potential dilution, preferred-stock redemption obligations and the effect of registered resales on common shareholders.