UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~For the quarterly period ended September 30, 2020~~


For the quarterly period ended	June 30, 2021

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period fromto

~~Commission File Number 1-00087~~

~~EASTMAN KODAK COMPANY~~

~~(Exact name of registrant as specified in its charter)~~


~~NEW JERSEY~~Commission File Number
1-00087
EASTMAN KODAK COMPANY (Exact name of registrant as specified in its charter)
New Jersey		16-0417150
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

343 STATE STREET, ROCHESTER, ~~NEW YORK~~New York		14650
(Address of principal executive offices)		(Zip Code)
(585) 724-4000
(Registrant’s telephone number, including area code)

~~Registrant’s telephone number, including area code: 585-724-4000~~

Securities registered pursuant to Section 12-(b) of the Act:

Title of each class

Common

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

KODK

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter)duringthepreceding12months (or forsuch shorterperiod that the registrant wasrequired to submit such files)such files). Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 2, 2020,~~August 6, 2021, the registrant had ~~77,163,326~~78,573,655 shares of common stock, par value $0.01 per share, outstanding.

[1]

EASTMAN KODAK COMPANY

Form 10-Q

~~September~~June 30, ~~2020~~2021

Table of Contents

		Page
Part I.—Financial Information

Item 1.	Financial Statements	3
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive Income (Loss) ~~Income~~(Unaudited)	4
	Consolidated Statement of Financial Position (Unaudited)	5
	Consolidated Statement of Cash Flows (Unaudited)	6
	Consolidated Statement of Equity (Deficit) (Unaudited)	7
	Notes to Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3734
	Liquidity and Capital Resources	5042
Item 4.	Controls and Procedures	5345

Part II. —Other Information

Item 1.	Legal Proceedings	5446
Item 1A.	Risk Factors	5447
Item 2.	Unregistered Sales of EquitySecurities and Use of Proceeds	5547
Item 6.	Exhibits	5648

	Index to Exhibits	5648
	Signatures	5849

[2]

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

(in millions, except per share data)

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Revenues
Sales	$	195		$	249		$	568		$	713		$	234		$	163		$	443		$	373
Services		57			66			164			200			57			50			113			107
Total revenues		252			315			732			913			291			213			556			480
Cost of revenues
Sales		183			216			533			639			204			159			389			350
Services		38			46			111			139			39			33			79			73
Total cost of revenues		221			262			644			778			243			192			468			423
Gross profit		31			53			88			135			48			21			88			57
Selling, general and administrative expenses		56			48			138			161			42			34			88			82
Research and development costs		8			11			25			33			8			8			16			17
Restructuring costs and other		1			3			9			7			—			1			1			8
Other operating (income) expense, net		(1	)		10			(11	)		10
Loss from continuing operations before interest expense, pension income excluding service cost component, loss on early extinguishment of debt, other charges, net and income taxes		(33	)		(19	)		(73	)		(76	)
Other operating income, net														(6	)		(3	)		(7	)		(10	)
Earnings (loss) from operations before interest expense, pension income excluding service cost component, other charges (income), net and income taxes														4			(19	)		(10	)		(40	)
Interest expense		3			4			11			12			10			4			14			8
Pension income excluding service cost component		(26	)		(26	)		(79	)		(79	)		(26	)		(27	)		(51	)		(53	)
Loss on early extinguishment of debt		2			—			2			—
Other charges, net		432			6			387			7
Loss from continuing operations before income taxes		(444	)		(3	)		(394	)		(16	)
Other charges (income), net														1			8			1			(45	)
Earnings (loss) from operations before income taxes														19			(4	)		26			50
Provision for income taxes		1			7			167			12			3			1			4			166
Loss from continuing operations		(445	)		(10	)		(561	)		(28	)
Income from discontinued operations, net of income taxes		—			5			—			206
Net (loss) income	$	(445	)	$	(5	)	$	(561	)	$	178
Net income (loss)													$	16		$	(5	)	$	22		$	(116	)

Basic and diluted loss per share attributable to Eastman Kodak Company common shareholders:
Continuing operations	$	(6.94	)	$	(0.35	)	$	(11.34	)	$	(1.00	)
Discontinued operations		—			0.12			—			4.79
Total	$	(6.94	)	$	(0.23	)	$	(11.34	)	$	3.79
Basic net income (loss) per share attributable to Eastman Kodak Company common shareholders													$	0.17		$	(0.23	)	$	0.33		$	(2.88	)
Diluted net income (loss) per share attributable to Eastman Kodak Company common shareholders													$	0.16		$	(0.23	)	$	0.32		$	(2.88	)

Number of common shares used in basic and diluted net loss per share		64.8			43.0			50.8			43.0
Number of common shares used in basic and diluted net income (loss) per share
Basic														78.5			43.7			78.2			43.7
Diluted														100.6			43.7			93.9			43.7

The accompanying notes are an integral part of these consolidated financial statements.

[3]

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~ (Unaudited)

(in millions)

	Three Months Ended						Nine Months Ended						Three Months Ended					Six Months Ended
	September 30,						September 30,						June 30,					June 30,
	2020			2019			2020			2019			2021		2020			2021		2020
NET (LOSS) INCOME	$	(445	)	$	(5	)	$	(561	)	$	178
NET INCOME (LOSS)													$	16	$	(5	)	$	22	$	(116	)
Other comprehensive income (loss), net of tax:
Currency translation adjustments		(1	)		(2	)		(17	)		2			4		(4	)		3		(16	)
Pension and other postretirement benefit plan obligation activity, net of tax		3			(1	)		15			(2	)		8		9			14		12
Other comprehensive income (loss), net of tax		2			(3	)		(2	)		—			12		5			17		(4	)
COMPREHENSIVE (LOSS) INCOME, NET OF TAX	$	(443	)	$	(8	)	$	(563	)	$	178
COMPREHENSIVE INCOME (LOSS), NET OF TAX													$	28	$	—		$	39	$	(120	)

The accompanying notes are an integral part of these consolidated financial statements.

[4]

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

	September 30,			December 31,			June 30,			December 31,
(in millions)	2020			2019			2021			2020
ASSETS
Cash and cash equivalents	$	193		$	233		$	395		$	196
Trade receivables, net of allowances of $11 and $8, respectively		153			208
Trade receivables, net of allowances of $9 and $10, respectively								174			177
Inventories, net		232			215			234			206
Restricted cash - current portion		7			12
Other current assets		35			36			43			46
Current assets held for sale		2			2			2			2
Total current assets		622			706			848			627
Property, plant and equipment, net of accumulated depreciation of $424 and $423, respectively		150			181
Property, plant and equipment, net of accumulated depreciation of $438 and $430, respectively								148			152
Goodwill		12			12			12			12
Intangible assets, net		40			47			36			39
Operating lease right-of-use assets		50			49			49			48
Restricted cash		41			45			66			53
Deferred income taxes		—			147
Other long-term assets		305			228			375			317
TOTAL ASSETS	$	1,220		$	1,415		$	1,534		$	1,248

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
Accounts payable, trade	$	118		$	153		$	145		$	118
Short-term borrowings and current portion of long-term debt		2			2			2			2
Current portion of operating leases		12			12			18			12
Other current liabilities		163			201			144			164
Total current liabilities		295			368			309			296
Long-term debt, net of current portion		17			109			249			17
Pension and other postretirement liabilities		376			378			391			406
Operating leases, net of current portion		49			48			43			49
Other long-term liabilities		206			231			219			212
Total liabilities		943			1,134			1,211			980

Commitments and Contingencies (Note 11)
Commitments and Contingencies (Note 8)

Redeemable, convertible Series A preferred stock, no par value, $100 per share liquidation preference	189			182
Redeemable, convertible preferred stock, no par value, $100 per share liquidation preference							193			191

Equity (Deficit)
Equity
Common stock, $0.01 par value		—			—			—			—
Additional paid in capital		1,156			604			1,167			1,152
Treasury stock, at cost		(9	)		(9	)		(10	)		(9	)
Accumulated deficit		(640	)		(79	)		(598	)		(620	)
Accumulated other comprehensive loss		(419	)		(417	)		(429	)		(446	)
Total shareholders’ equity		88			99			130			77
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY	$	1,220		$	1,415		$	1,534		$	1,248

The accompanying notes are an integral part of these consolidated financial statements.

[5]

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

	Nine Months Ended						Six Months Ended
	September 30,						June 30,
(in millions)	2020			2019			2021			2020
Cash flows from operating activities:
Net (loss) income	$	(561	)	$	178
Net income (loss)							$	22		$	(116	)
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization		29			43			16			20
Pension income		(65	)		(72	)		(42	)		(43	)
Change in fair value of embedded derivatives in the Series A Preferred Stock and Convertible Notes		382			3
Loss on early extinguishment of debt		2			—
Change in fair value of embedded derivatives in the Series A, Series B and Series C Preferred Stock and Convertible Notes								—			(49	)
Net gain on sales of assets		(9	)		(202	)		—			(9	)
Asset impairments		3			—			—			3
Stock based compensation		18			6			4			1
Non-cash changes in workers' compensation reserves		9			2			(3	)		—
Provision for deferred income taxes		160			6			—			160
Decrease in trade receivables		53			30			1			64
Increase in inventories		(19	)		(18	)		(30	)		(17	)
(Decrease) increase in trade payables		(33	)		13
Increase in trade payables								27			(50	)
Decrease in liabilities excluding borrowings and trade payables		(24	)		(5	)		(20	)		(31	)
Other items, net		7			12			4			3
Total adjustments		513			(182	)		(43	)		52
Net cash used in operating activities		(48	)		(4	)		(21	)		(64	)
Cash flows from investing activities:
Additions to properties		(13	)		(11	)		(5	)		(9	)
Net proceeds from sales of assets/businesses		2			326			—			2
Net proceeds from return on equity investment		2			—			—			2
Net cash (used in) provided by investing activities		(9	)		315
Net cash used in investing activities								(5	)		(5	)
Cash flows from financing activities:
Proceeds from stock option exercises		29			—
Repayment of Term Credit Agreement		—			(395	)
Proceeds from Convertible Notes		—			98
Proceeds from borrowings		—			14
Repayment of finance leases		—			(2	)
Preferred stock dividend payments		(19	)		—
Payment of contingent consideration related to the sale of a business		—			(10	)
Net proceeds from Term Loan Credit Agreement								215			—
Net proceeds from Convertible Notes								25			—
Net proceeds from Series C Preferred Stock								99			—
Proceeds from sale of common stock								10			—
Repurchase of Series A Preferred Stock								(100	)		—
Debt issuance costs								(2	)		—
Preferred stock cash dividend payments								(5	)		(6	)
Treasury stock purchases								(1	)		—
Net cash provided by (used in) financing activities		10			(295	)		241			(6	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(2	)		(4	)		(2	)		(3	)
Net (decrease) increase in cash, cash equivalents, restricted cash and cash in assets held for sale		(49	)		12
Cash, cash equivalents, restricted cash and cash in assets held for sale, beginning of period		290			267
Net increase (decrease) in cash, cash equivalents and restricted cash								213			(78	)
Cash, cash equivalents and restricted cash, beginning of period								256			290
Cash, cash equivalents and restricted cash, end of period	$	241		$	279		$	469		$	212

The accompanying notes are an integral part of these consolidated financial statements.

[6]

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Unaudited)

(in millions)

Nine-Month Period Ending September 30, 2020

Eastman Kodak Company Common Shareholders

Common
Stock

Additional
Paid in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive Loss

Treasury
Stock

Total

Series A Redeemable Convertible Preferred Stock

Equity (deficit) as of December 31, 2019

$
—

$
604

$
(79
)

$
(417
)

$
(9
)

$
99

$
182

Net loss

—

—

(111
)

—

—

(111
)

—

Other comprehensive (loss) income (net of tax):

Currency translation adjustments

—

—

—

(12
)

—

(12
)

—

Pension and other postretirement
   liability adjustments

—

—

—

3

—

3

—

Series A preferred stock cash dividends

—

(3
)

—

—

—

(3
)

—

Series A preferred stock deemed dividends

—

(2
)

—

—

—

(2
)

2

Stock-based compensation

—

1

—

—

—

1

—

Equity (deficit) as of March 31, 2020

$
—

$
600

$
(190
)

$
(426
)

$
(9
)

$
(25
)

$
184

Net loss

—

—

(5
)

—

—

(5
)

—

Other comprehensive (loss) income (net of tax):

Currency translation adjustments

—

—

—

(4
)

—

(4
)

—

Pension and other postretirement
   liability adjustments

—

—

—

9

—

9

—

Series A preferred stock cash
   dividends

—

(3
)

—

—

—

(3
)

—

Series A preferred stock deemed
   dividends

—

(2
)

—

—

—

(2
)

2

Equity (deficit) as of June 30, 2020

$
—

$
595

$
(195
)

$
(421
)

$
(9
)

$
(30
)

$
186

Net loss

—

—

(445
)

—

—

(445
)

—

Other comprehensive (loss) income (net of tax):

Currency translation adjustments

—

—

—

(1
)

—

(1
)

—

Pension and other postretirement
   liability adjustments

—

—

—

3

—

3

—

Series A preferred stock cash
   dividends

—

(2
)

—

—

—

(2
)

—

Series A preferred stock deemed
   dividends

—

(3
)

—

—

—

(3
)

3

Conversion of Convertible Notes

—

520

—

—

—

520

—

Stock options exercised

—

29

—

—

—

29

—

Stock-based compensation

—

17

—

—

—

17

—

Equity (deficit) as of September 30, 2020

$
—

$
1,156

$
(640
)

$
(419
)

$
(9
)

$
88

$
189

	Six-Month Period Ending June 30, 2021
	Eastman Kodak Company Common Shareholders
	Common Stock		Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total			Redeemable Convertible Preferred Stock
Equity (deficit) as of December 31, 2020	$	—	$	1,152		$	(620	)	$	(446	)	$	(9	)	$	77		$	191
Net income		—		—			6			—			—			6			—
Other comprehensive income (loss) (net of tax):
Currency translation adjustments		—		—			—			(1	)		—			(1	)		—
Pension and other postretirement liability adjustments		—		—			—			6			—			6			—
Repurchase of Series A preferred stock		—		—			—			—			—			—			(100	)
Exchange of Series A preferred stock		—		92			—			—			—			92			(92	)
Expiration of Series A preferred stock embedded derivative		—		11			—			—			—			11			—
Issuance of convertible, redeemable Series B preferred stock, net				(95	)											(95	)		93
Issuance of common stock		—		10			—			—			—			10			—
Issuance of convertible, redeemable Series C preferred stock, net		—		—			—			—			—			—			97
Preferred stock cash dividends		—		(1	)		—			—			—			(1	)		—
Preferred stock deemed dividends		—		(2	)		—			—			—			(2	)		2
Series C Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Purchase of treasury stock ⁽¹⁾		—		—			—			—			(1	)		(1	)		—
Stock-based compensation		—		3			—			—			—			3			—
Equity (deficit) as of March 31, 2021	$	—	$	1,169		$	(614	)	$	(441	)	$	(10	)	$	104		$	192
Net income		—		—			16			—			—			16			—
Other comprehensive (loss) income (net of tax):
Currency translation adjustments		—		—			—			4			—			4			—
Pension and other postretirement liability adjustments		—		—			—			8			—			8			—
Series B Preferred stock cash dividends		—		(2	)		—			—			—			(2	)		—
Series C Preferred stock in-kind dividends		—		(1	)		—			—			—			(1	)		1
Stock-based compensation		—		1			—			—			—			1			—
Equity (deficit) as of June 30, 2021	$	—	$	1,167		$	(598	)	$	(429	)	$	(10	)	$	130		$	193

(1)

Represents purchases of common stock to satisfy tax withholding obligations.

[7]

EASTMAN KODAK COMPANY

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT) (Unaudited) (cont’d)

(in millions)

	Nine-Month Period Ending September 30, 2019																			Six-Month Period Ending June 30, 2020
	Eastman Kodak Company Common Shareholders																			Eastman Kodak Company Common Shareholders
	Common Stock		Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total			Series A Redeemable Convertible Preferred Stock		Common Stock		Additional Paid in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Treasury Stock			Total			Redeemable Convertible Preferred Stock
Equity (deficit) as of December 31, 2018	$	—	$	617		$	(200	)	$	(411	)	$	(9	)	$	(3	)	$	173
Equity (deficit) as of December 31, 2019																				$	—	$	604		$	(79	)	$	(417	)	$	(9	)	$	99		$	182
Net loss		—		—			(18	)		—			—			(18	)		—		—		—			(111	)		—			—			(111	)		—
Other comprehensive (loss) income (net of tax):
Other comprehensive income (loss) (net of tax):
Currency translation adjustments		—		—			—			3			—			3			—		—		—			—			(12	)		—			(12	)		—
Pension and other postretirement liability adjustments		—		—			—			(1	)		—			(1	)		—		—		—			—			3			—			3			—
Series A preferred stock cash dividends		—		(3	)		—			—			—			(3	)		—		—		(3	)		—			—			—			(3	)		—
Series A preferred stock deemed dividends		—		(2	)		—			—			—			(2	)		2		—		(2	)		—			—			—			(2	)		2
Stock-based compensation		—		3			—			—			—			3			—		—		1			—			—			—			1			—
Prior period adjustment due to adoption of ASU 2016-02		—		—			5			—			—			5			—
Equity (deficit) as of March 31, 2019	$	—	$	615		$	(213	)	$	(409	)	$	(9	)	$	(16	)	$	175
Net income		—		—			201			—			—			201			—
Equity (deficit) as of March 31, 2020																				$	—	$	600		$	(190	)	$	(426	)	$	(9	)	$	(25	)	$	184
Net loss																					—		—			(5	)		—			—			(5	)		—
Other comprehensive income (net of tax):
Currency translation adjustments		—		—			—			1			—			1			—		—		—			—			(4	)		—			(4	)		—
Pension and other postretirement liability adjustments		—		—			—			—			—			—			—		—		—			—			9			—			9			—
Series A preferred stock cash dividends		—		(3	)		—			—			—			(3	)		—		—		(3	)		—			—			—			(3	)		—
Series A preferred stock deemed dividends		—		(2	)		—			—			—			(2	)		2		—		(2	)		—			—			—			(2	)		2
Stock-based compensation		—		2			—			—			—			2			—
Equity (deficit) as of June 30, 2019	$	—	$	612		$	(12	)	$	(408	)	$	(9	)	$	183		$	177
Net earnings		—		—			(5	)		—			—			(5	)		—
Other comprehensive loss (net of tax):
Currency translation adjustments		—		—			—			(2	)		—			(2	)		—
Pension and other postretirement liability adjustments		—		—			—			(1	)		—			(1	)		—
Series A preferred stock cash dividends		—		(2	)		—			—			—			(2	)		—
Series A preferred stock deemed dividends		—		(3	)		—			—			—			(3	)		3
Stock-based compensation		—		1			—			—			—			1			—
Purchases of treasury stock		—		—			—			—			—			—			—
Equity (deficit) as of September 30, 2019	$	—	$	608		$	(17	)	$	(411	)	$	(9	)	$	171		$	180
Equity (deficit) as of June 30, 2020																				$	—	$	595		$	(195	)	$	(421	)	$	(9	)	$	(30	)	$	186

The accompanying notes are an integral part of these consolidated financial statements.

[8]

EASTMAN KODAK COMPANY

NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1: BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

BASIS OF PRESENTATION

The consolidated interim financial statements are unaudited, and certain information and footnote disclosures related thereto normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results of operations, financial position and cash flows of Eastman Kodak Company (“EKC” or the “Company”) and all companies directly or indirectly controlled, either through majority ownership or otherwise (collectively, “Kodak”). The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year. These consolidated interim statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~“2019~~“2020 Form 10-K”).

~~GOING CONCERN~~

The consolidated interim financial statements have been prepared on the going concern basis of accounting, which assumes Kodak will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

As of September 30, 2020 and December 31, 2019, Kodak had approximately $193 million and $233 million, respectively, of cash and cash equivalents. $108 million and $72 million were held in the United States (“U.S.”) as of September 30, 2020 and December 31, 2019, respectively, and $85 million and $161 million were held outside the U.S. Cash balances held outside the U.S. are generally required to support local country operations and may have high tax costs or other limitations that delay the ability to repatriate, and therefore may not be readily available for transfer to other jurisdictions. Outstanding inter-company loans to the U.S. as of September 30, 2020 and December 31, 2019 were $436 million and $408 million, respectively, which includes short-term intercompany loans from Kodak’s international finance center of $138 million and $110 million as of September 30, 2020 and December 31, 2019, respectively. In China, where approximately $23 million and $89 million of cash and cash equivalents was held as of September 30, 2020 and December 31, 2019, respectively, there are limitations related to net asset balances that may impact the ability to make cash available to other jurisdictions in the world. On May 12, 2020, a Chinese subsidiary of Kodak transferred approximately $70 million to a U.S. subsidiary of Kodak that was used in an inter-company transaction. Kodak had a net decrease in cash, cash equivalents, restricted cash and cash in assets held for sale of $49 million for the nine months ended September 30, 2020, and a net increase in cash, cash equivalents, restricted cash and cash in assets held for sale of $12 million and $23 million for the nine months ended September 30, 2019 and the year ended December 31, 2019, respectively. Kodak used cash of $48 million and $4 million in operating activities for the nine months ended September 30, 2020 and 2019, respectively, and generated cash from operating activities for the year ended December 31, 2019 of $12 million. Cash flow from operations in 2019 benefitted from working capital improvements and individual transactions that occurred during the year.

U.S. GAAP requires an evaluation of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date the financial statements are issued. Initially, this evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued or prior to the conditions or events that create the going concern risk.

~~Kodak~~ is facing liquidity challenges due to operating losses, low or negative cash flow from operations and collateral needs. Kodak has $87 million of letters of credit issued under the Amended and Restated Credit Agreement (the “ABL Credit Agreement”) which matures on May 26, 2021. The Company’s 5.50% Series A Convertible Preferred Stock (the “Series A Preferred Stock”) must be redeemed on November 15, 2021 if not converted prior to then. Additionally, Kodak has significant cash requirements to fund ongoing operations, restructuring programs, pension and other postretirement obligations, and other obligations. Kodak’s plans to return to sustainable positive cash flow include growing revenues profitably, reducing operating expenses, continuing to simplify the organizational structure, generating cash from selling and leasing underutilized assets and paring investment in new technology by eliminating or delaying product development programs as needed. Additionally, the Company looks to implement ways to reduce collateral needs in the U.S.

Kodak’s products are sold and serviced in numerous countries across the globe with more than half of sales generated outside the United States. Current global economic conditions are highly volatile due to the COVID-19 pandemic. The economic uncertainties surrounding the COVID-19 pandemic are adding complexity to Kodak’s plans to return to sustainable positive cash flow. To mitigate the economic impacts of the pandemic Kodak is employing temporary furloughs and pay reductions and modifying manufacturing volumes as expectations of demand change.

~~[9]~~

The recent history of negative operating cash flow, maturity of the ABL Credit Agreement in 2021, redemption date in 2021 for the Series A Preferred Stock, increased challenges in managing cash during the COVID-19 pandemic and general lack of certainty regarding the return to positive cash flow ~~raise substantial doubt about Kodak’s ability to continue as a going concern~~.

~~RECLASSIFICATIONS~~Reclassifications

Certain amounts for prior periods have been reclassified to conform to the current period classification ~~due to Kodak’s new organization structure as of January 2020. Refer to Note 23, “Segment Information”~~in the disaggregated revenue information for ~~additional information.~~the Advanced Materials and Chemicals segment.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In ~~November 2018,~~August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standard~~Standards Update (“ASU”) 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This guidance amended Topic 808 and Topic 606 to clarify that transactions in a collaborative arrangement should be accounted for under Topic 606 when the counterparty is a customer for a distinct good or service (i.e., unit of account). The amendments preclude an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The new standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019 (January 1, 2020 for Kodak). The amendments should be applied retrospectively to the date of initial application of Topic 606. ~~Kodak adopted this ASU on January 1, 2020, and it did not have any impact on Kodak’s consolidated financial statements.~~

In September 2018 the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amends the disclosure requirements in Topic 820 by adding, changing, or removing certain disclosures about recurring or nonrecurring fair value measurements. The additional and/or modified disclosures relate primarily to Level 3 fair value measurements while removing certain disclosures related to transfers between Level 1 and Level 2 of the fair value hierarchy. The ASU is effective retrospectively, for fiscal years beginning after December 15, 2019 (January 1, 2020 for Kodak) and interim periods within those fiscal years. Entities are permitted to early adopt any removed or modified disclosures but can delay adoption of the new disclosures until their effective date. Kodak retrospectively early adopted the provisions of the ASU that removed or modified disclosures in the fourth quarter of 2018 and prospectively adopted the provisions related to new disclosures January 1, 2020. The standard addresses disclosures only and did not have an impact on Kodak’s consolidated financial statements.

In September 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which amends the disclosure requirements in ASC 715-20 by adding, clarifying, or removing certain disclosures. ASU 2018-14 requires all entities to disclose (1) the weighted average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and (2) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The ASU also clarifies certain disclosure requirements for entities with two or more defined benefit pension plans when aggregate disclosures are presented. The ASU removes other disclosures from the existing guidance, such as the requirement to disclose the effects of a one-percentage-point change in the assumed health care cost trend rates. The ASU is effective retrospectively for fiscal years ending after December 15, 2020 (the year ended December 31, 2020 for Kodak). Kodak adopted this ASU on January 1, 2020. The standard addresses disclosures only and did not have an impact on Kodak’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which addresses how a customer should account for the costs of implementing a cloud computing service arrangement (also referred to as a “hosting arrangement”). Under ASU 2018-15, entities should account for costs associated with implementing a cloud computing arrangement that is considered a service contract in the same way as implementation costs associated with a software license; implementation costs incurred in the application development stage, such as costs for the cloud computing arrangement’s integration with on-premise software, coding, and configuration or customization, should be capitalized and amortized over the term of the cloud computing arrangement, including periods covered by certain renewal options. The ASU is effective in fiscal years beginning after December 15, 2019 (January 1, 2020 for Kodak) including interim periods within those fiscal years. The ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Kodak adopted this ASU prospectively on January 1, 2020, and it did not have any impact on Kodak’s consolidated financial statements.

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

~~In August 2020, the FASB issued ASU~~ 2020-06, ~~Debt—~~“Debt—Debt with Conversion and Other Options (Subtopic 470-20)” and ~~Derivatives~~“Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own ~~Equity,~~Equity”, which simplifies accounting for convertible instruments. More convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted EPS calculation in certain circumstances. The ASU is effective ~~for smaller reporting companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, (January~~January 1, 2024 for ~~Kodak).~~

~~[10]~~

Kodak. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2020. The ASU allows entities to use either a modified retrospective or full retrospective transition method. Kodak ~~is currently evaluating~~adopted this ASU on January 1, 2021 using the ~~impact~~modified retrospective method, under which companies apply the guidance to all financial instruments that are outstanding as of the beginning of the year of adoption with the cumulative effect recognized as an adjustment to the opening balance of retained earnings. The adoption of this ~~ASU.~~

~~In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform~~standard had no impact on Financial Reporting, which provides optional relief through specific exceptions and practical expedients for transitioning away from reference rates that are expected to be discontinued. The relief generally applies to eligible modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows related to replacement of a reference rate. The relief allows such modifications to be accounted for as continuations of existing contracts without additional analysis. The optional relief is available from March 2020 through December 31, 2022. Kodak is currently evaluating the impact of this ASU. Kodak’s financial statements.

In December 2019, the FASB issued ASU 2019-12, ~~Income~~“Income Taxes (Topic 740): Simplifying the Accounting for Income ~~Taxes,~~Taxes”, which removes certain exceptions related to intra-period tax allocations and deferred tax accounting on outside basis differences in foreign subsidiaries and equity method investments. Additionally, it provides other simplifying measures for the accounting for income taxes. The new standard is effective for fiscal years beginning after December 15, 2020 (January 1, 2021 ~~(January~~for Kodak). Kodak adopted this ASU prospectively on January 1, 2021 and it did not have any impact on Kodak’s consolidated financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2021, the FASB issued ASU 2021-05, “Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments”. Under this ASU, lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met: (1) the lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in Topic 842 and (2) the lessor would have otherwise recognized a day-one loss. The amendments are effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years for all public business entities (January 1, 2022 for Kodak) ~~with early~~. Entities that have adopted Topic 842 before the issuance date of this Update have the option to apply the amendments in this Update either (1) retrospectively to leases that commenced or were modified on or after the adoption of ASU 2016-02, “Leases (Topic 842)” or (2) prospectively to leases that commence or are modified on or after the date that an entity first applies the amendments. Earlier application is permitted. Kodak is currently evaluating the impact of this ASU.

[9]

In June 2016, the FASB issued ASU 2016-13, ~~Financial~~“Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Instruments.~~Instruments” . ASU 2016-13 (as amended by ASUs 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-02 and 2020-03) requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In addition, the ASU requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The ASU is effective January 1, 2023 for ~~smaller reporting companies for fiscal years,~~Kodak, and interim periods within ~~those~~that fiscal ~~years, beginning after December 15, 2022, (January 1, 2023 for Kodak).~~year. Early adoption is permitted. Kodak is currently evaluating the impact of this ASU.

NOTE 2: CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statement of Financial Position that sums to the total of such amounts shown in the Statement of Cash Flows:

	September 30,		December 31,		June 30,		December 31,
(in millions)	2020		2019		2021		2020
Cash and cash equivalents	$	193	$	233	$	395	$	196
Restricted cash - current portion		7		12
Restricted cash reported in Other current assets						8		7
Restricted cash		41		45		66		53
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows	$	241	$	290	$	469	$	256

Restricted cash -reported in Other current ~~portion~~assets on the Consolidated Statement of Financial Position primarily represents amounts that support hedging activities. In addition, as of December 31, 2019, it also contained collateral for a guaranty provided to MIR Bidco, SA (the “Purchaser”) who purchased Kodak’s Flexographic Packaging business (“FPD”). As of September 30, 2020 and December 31, 2019, the cash collateral supporting Kodak’s guaranty was $0 million and $4 million, respectively.

Restricted cash includes ~~$21 million and $22~~$46 million as of ~~September~~June 30, ~~2020 and~~2021 representing the cash collateral required to be posted by the Company under the Letter of Credit Facility (“L/C Cash Collateral”). Restricted cash included $35 million as of December 31, ~~2019, respectively,~~2020, supporting compliance with the Excess Availability threshold under the ABL Credit Agreement, as defined therein (Refer to Note 8,5, “Debt and Finance Leases” for information on the Restricted cash supporting the L/C Cash Collateral and the Excess Availability threshold). In addition, Restricted cash as of ~~both September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 includes an escrow of ~~$14~~$15 million and $12 million, respectively, in China to secure various ongoing obligations under the agreements for the strategic relationship with Lucky HuaGuang Graphics Co. Ltd. Restricted cash also included $3 million and $5$4 million of security posted related to Brazilian legal contingencies as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

NOTE 3: INVENTORIES, NET

	September 30,		December 31,		June 30,		December 31,
(in millions)	2020		2019		2021		2020
Finished goods	$	115	$	105	$	115	$	97
Work in process		57		54		62		54
Raw materials		60		56		57		55
Total	$	232	$	215	$	234	$	206

~~[11]~~

NOTE 4: OTHER LONG-TERM ASSETS

	September 30,		December 31,		June 30,		December 31,
(in millions)	2020		2019		2021		2020
Pension assets	$	252	$	173	$	319	$	262
Estimated workers' compensation recoveries		18		18		17		18
Long-term receivables, net of reserve of $4 and $4, respectively		11		11
Long-term receivables						12		11
Other		24		26		27		26
Total	$	305	$	228	$	375	$	317

The Other component above consists of other miscellaneous long-term assets that, individually, were less than 5% of the total assets component within the Consolidated Statement of Financial Position as of the end of the preceding year, and therefore have been aggregated in accordance with Regulation S-X.

~~NOTE 5: GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~The following table presents the carrying value of goodwill by reportable segment.~~

(in millions)

Traditional Printing

Digital Printing

Advanced Materials and Chemicals

Brand

Total

As of December 31, 2019

Goodwill

$
56

$
6

$
14

$
—

$
76

Accumulated impairment losses

(56
)

—

(8
)

—

(64
)
Balance as of December 31, 2019

—

6

6

—

12

Goodwill reallocation

—

—

(6
)

6

—

Balance as of September 30, 2020

$
—

$
6

$
—

$
6

$
12

As a result of the change in segments that became effective as of January 1, 2020, Kodak’s goodwill reporting units changed. Refer to Note 22, “Segment Information” for additional information on the change to Kodak’s organizational structure. The Digital Printing segment has three goodwill reporting units: Electrophotographic Printing Solutions; Prosper and Versamark; and Software. The Advanced Materials and Chemicals segment has three goodwill reporting units: Motion Picture and Industrial Films and Chemicals; Advanced Materials and Functional Printing; and Kodak Services for Business. ~~The~~ ~~Traditional Printing~~ ~~segment and Brand segment each have one goodwill reporting unit.~~

As of December 31, 2019, the goodwill balance of $12 million under the prior year segment reporting structure was comprised of $6 million for the Brand, Film and Imaging segment and $6 million for the Kodak Software segment, which had only one reporting unit (Software). The goodwill in the Brand, Film and Imaging segment was reported in the Consumer Products reporting unit.

The goodwill previously reported in the Consumer Products goodwill reporting unit was transferred to the Brand goodwill reporting unit using a relative fair value allocation to affected reporting units. Goodwill previously reported in the Software reporting unit was transferred to the Digital Printing segment where it continues to remain its own reporting unit.

Kodak performed interim tests of impairment for goodwill as of June 30, 2020 due to the uncertainty regarding the negative impact of the COVID-19 pandemic on its operations, and as of March 31, 2020, due to the decline in market capitalization as of that date since the last goodwill impairment test (December 31, 2019) and the uncertainty regarding the negative impact of the COVID-19 pandemic at that time. Based on the results of the June 30, 2020 and March 31, 2020 analyses, no impairment of goodwill was indicated. As of June 30, 2020, the Brand reporting unit had negative carrying value. No interim impairment test for goodwill was deemed necessary as of September 30, 2020.

[~~12]~~10]

~~The gross carrying amount and accumulated amortization by major intangible asset category as of September 30, 2020 and December 31, 2019 were as follows~~:

September 30, 2020
(in millions)

Gross Carrying
Amount

Accumulated
Amortization

Net

Weighted-Average
Amortization Period
Technology-based

$
99

$
80

$
19

5 years
Kodak trade name

18

—

18

Indefinite life
Customer-related

11

8

3

3 years
Total

$
128

$
88

$
40

December 31, 2019
(in millions)

Gross Carrying
Amount

Accumulated
Amortization

Net

Weighted-Average
Amortization Period
Technology-based

$
99

$
76

$
23

5 years
Kodak trade name

21

—

21

Indefinite life
Customer-related

11

8

3

4 years
Total

$
131

$
84

$
47

In the first quarter of 2020, due to the uncertainty regarding the negative impact of the COVID-19 pandemic at that time, Kodak performed an interim test of impairment for the Kodak trade name. Based on the result of the interim impairment test, Kodak concluded the carrying value of the Kodak trade name exceeded its fair value. Pre-tax impairment charges of $3 million are included in Other operating income, net in the nine months ended September 30, 2020 in the Consolidated Statement of Operations.

Kodak also performed an interim test of impairment for the Kodak trade name as of June 30, 2020 due to the uncertainty regarding the negative impact of the COVID-19 pandemic. The interim impairment tests of the Kodak trade name used the income approach, specifically the relief from royalty method. Based on the result of the interim impairment tests as of June 30, 2020, Kodak concluded the fair value of the Kodak trade name exceeded its’ carrying value resulting in no additional impairment. No interim impairment test for the Kodak tradename was deemed necessary as of September 30, 2020.

~~Amortization expense related to intangible assets was $1 million for the three months ended September 30, 2020 and 2019 and $4 million for the nine months ended September 30, 2020 and 2019.~~

~~Estimated future amortization expense related to intangible assets that are currently being amortized as of September 30, 2020 is as follows:~~

(in millions)

Q4 2020

$
1

2021

5

2022

5

2023

4

2024

4

2025 and thereafter

3

Total

$
22

~~[13]~~

~~NOTE 6: OTHER CURRENT LIABILITIES~~

September 30,

December 31,

(in millions)

2020

2019

Deferred revenue

$
44

$
43

Employee related liabilities

42

38

Customer rebates ⁽¹⁾

18

23

Series A Preferred Stock dividends payable

3

14

Workers compensation

10

10

Restructuring liabilities

6

12

Deferred consideration on disposed businesses ⁽²⁾

—

14

Transition services agreement prepayment

—

3

Other ⁽³⁾

40

44

Total

$
163

$
201

~~(1)~~

~~The customer rebate amounts will potentially be settled through customer deductions applied to outstanding trade receivables in lieu of cash payments.~~

~~(2)~~

On September 3, 2013, Kodak consummated the sale of certain assets and the assumption of certain liabilities of the Personalized Imaging and Document Imaging Businesses (“PI/DI Businesses”) to the trustee of the U.K. pension plan (and/or its subsidiaries) for net cash consideration of $325 million. Up to $35 million in aggregate of the purchase price was subject to repayment if the PI/DI Business did not achieve certain annual adjusted EBITDA targets over the four-year period ending December 31, 2018. The PI/DI Business did not achieve the adjusted annual EBITDA target for any year in the four-year period. The amounts owed for 2015, 2016 and 2017 were paid in 2016, 2017 and 2019, respectively. The maximum potential payment related to the year ending December 31, 2018 of $14 million was accrued at the time of the divestiture of the business. The Company did not consider the procedural requirements giving rise to the obligation to pay the amount relating to the year ended December 31, 2018 to have been met. The PI/DI Businesses (operating as Kodak Alaris) filed suit against the Company alleging breach of contract based on the failure to pay the $14 million amount with respect to 2018. The Company filed counterclaims seeking contractual penalties related to late payments for goods and services provided by Kodak under various separate agreements. The Company and Kodak Alaris reached a settlement in June 2020 dismissing the actions and all claims and counterclaims asserted against each other and also amended existing supply agreements. As a part of the settlement agreement, $11 million of the deferred consideration on disposed businesses was offset against receivables of $11 million for goods and services owed to the Company by Kodak Alaris. Income of $3 million from the release of the remaining deferred consideration on disposed businesses will be recognized as revenue over the term of the amended supply agreements.

~~(3)~~

The Other component above consists of other miscellaneous current liabilities that, individually, were less than 5% of the current liabilities component within the Consolidated Statement of Financial Position as of the end of the preceding year, and therefore have been aggregated in accordance with Regulation S-X.

~~NOTE 7: OTHER LONG-TERM LIABILITIES~~

September 30,

December 31,

(in millions)

2020

2019

Workers compensation

$
89

$
84

Asset retirement obligations

41

48

Deferred brand licensing revenue

16

18

Deferred taxes

30

13

Environmental liabilities

9

10

Convertible Notes embedded conversion option
derivative liability

—

52

Preferred stock embedded conversion option
derivative liability

9

—

Other

12

6

Total

$
206

$
231

The Other component above consists of other miscellaneous long-term liabilities that, individually, were less than 5% of the total liabilities component within the Consolidated Statement of Financial Position as of the end of the preceding year, and therefore have been aggregated in accordance with Regulation S-X.

~~[14]~~

NOTE 8:5: DEBT AND FINANCE LEASES

Debt and finance leases and related maturities and interest rates were as follows at June 30, 2021 and December 31, 2020:

(in millions)	Type	Maturity	Weighted-Average Effective Interest Rate	September 30, 2020		December 31, 2019		Type	Maturity	Weighted-Average Effective Interest Rate	June 30, 2021		December 31, 2020
Current portion:
	RED-Rochester, LLC	2033	11.46%	$	1	$	1	RED-Rochester, LLC	2033	11.46%	$	1	$	1
	Finance leases	Various	Various		1		1	Finance leases	Various	Various		1		1
					2		2					2		2
Non-current portion:
	Convertible debt	2021	11.72%		—		91	Term note	2026	13.91%		219		—
	RED-Rochester, LLC	2033	11.46%		12		13	Convertible debt	2026	17.28%		14		—
	Finance leases	Various	Various		3		4	RED-Rochester, LLC	2033	11.46%		12		12
	Other debt	Various	Various		2		1	Finance leases	Various	Various		3		3
					17		109	Other debt	Various	Various		1		2
				$	19	$	111					249		17
											$	251	$	19

~~Convertible Notes~~Annual maturities of debt and finance leases outstanding at June 30, 2021 were as follows:

	Carrying Value		Maturity Value
Q3 -Q4 2021	$	1	$	1
2022		2		2
2023		1		1
2024		1		1
2025		1		1
2026 and thereafter		245		319
Total	$	251	$	325

Term Loan Credit Agreement

On ~~May 20, 2019,~~February 26, 2021, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) with certain funds affiliated with Kennedy Lewis Investment Management LLC (“KLIM”) as lenders (the “Term Loan Lenders”) and Alter Domus (US) LLC, as administrative agent. Pursuant to the Term Loan Credit Agreement, the Term Loan Lenders provided the Company with (i) an initial term loan in the amount of $225 million, which was drawn in full on the same date, and (ii) a commitment to provide delayed draw term loans in an aggregate principal amount of up to $50 million on or before February 26, 2023 (collectively, the “Term Loans”). Net proceeds from the Term Loan Credit Agreement were $215 million ($225 million aggregate principal less $10 million in debt transaction costs). The Term Loans have a five-year maturity and are non-amortizing.

The Term Loans bear interest at a rate of 8.5% per annum payable quarterly in cash and 4.0% per annum Paid-In-Kind interest(“PIK”) or in cash quarterly, at the Company’s option, for an aggregate interest rate of 12.5% per annum. The Company elected the 4.0% per annum in PIK which is being added to the carrying value of the debt through the term and interest expense will be recorded using the effective interest method. The Term Loans are guaranteed by the Company and ~~Longleaf Partners Small Cap Fund, C2W Partners Master Fund Limited~~certain of its domestic subsidiaries (the “Subsidiary Guarantors”), and ~~Deseret Mutual Pension Trust, which~~ are ~~investment funds managed~~secured by ~~Southeastern Asset Management, Inc.~~(i) a first priority lien on substantially all assets of the Company and the Subsidiary Guarantors (subject to certain exceptions) not constituting ABL Priority Collateral or L/C Cash Collateral (see below for definitions of ABL Priority Collateral and L/C Cash Collateral), including 100% of the stock of material U.S. subsidiaries and 65% of the stock of material foreign subsidiaries (the ~~“Notes Purchasers”~~“Term Loan Priority Collateral”) and (ii) a third priority lien on the ABL Priority Collateral and L/C Cash Collateral. The Term Loan Credit Agreement limits, among other things, the ability of the Company and its Restricted Subsidiaries (as defined in the Term Loan Credit Agreement) to (i) incur indebtedness, (ii) incur or create liens, (iii) dispose of assets, (iv) make restricted payments and (v) make investments, and also contains customary affirmative covenants including delivery of certain of the Company’s financial statements set forth therein. The Term Loan Credit Agreement does not include a financial maintenance covenant.

[11]

Board Rights Agreement

On February 26, 2021, in connection with the execution of the Term Loan Credit Agreement, the Company entered into a letter agreement with KLIM (the “Board Rights Agreement”). Pursuant to the Board Rights Agreement, the Company’s Board of Directors (“Board”) appointed an individual designated by KLIM as a member of the Board effective April 1, 2021. The individual appointed was elected to serve a one-year term at the annual meeting on May 19, 2021. KLIM has the right to nominate one (1) director at each annual or special meeting of the Company’s shareholders until the third anniversary of the execution of the Board Rights Agreement or until KLIM ceases to hold at least 50% of the original principal amount of the Term Loans and commitments under the Term Loan Credit Agreement, whichever is earlier.

Until KLIM ceases to hold at least 50% of the original principal amount of the Term Loans and commitments under the Term Loan Credit Agreement, at any time that KLIM’s designated director is not serving on the Board, KLIM will have the right to designate a non-voting observer to the Board. Such observer will have the right to attend meetings of the Board and, under certain circumstances, committees and subcommittees of the Board and to receive information and materials made available to the Board, in each case, subject to certain restrictions and exceptions.

Securities Purchase Agreement

On February 26, 2021, the Company and the Term Loan Lenders (the “Buyers”), entered into a ~~Notes~~Securities Purchase Agreement (the ~~“Purchase~~

“Securities Purchase Agreement”) pursuant to which the Company ~~agreed to issue and sell~~sold to the ~~Notes Purchasers,~~Buyers (i) an aggregate of 1,000,000 shares (the “Purchased Shares”) of the Company’s common stock (“Common Stock”) for a purchase price of $10.00 in cash per share for an aggregate purchase price of $10 million and ~~the Notes Purchasers agreed to purchase from the Company, $100~~(ii) $25 million aggregate principal amount of the Company’s ~~5.00% Secured~~newly issued 5.0% unsecured convertible promissory notes due May 28, 2026 (the “Convertible Notes”) in a private placement transaction. The issuance and sale of the Purchased Shares and Convertible Notes ~~due 2021 (the “Notes”).~~ were consummated on February 26, 2021.

Convertible Notes

The transaction closed on May 24, 2019. The proceeds were used to repay the remaining first lien term loans outstanding ($83 million) under the Senior Secured First Lien Term Credit Agreement (the “Term Credit Agreement”), which was terminated with the repayment. The remaining proceeds were used for general corporate purposes. TheConvertible Notes Purchasers also hold all outstanding shares of the Series A Preferred Stock, which vote with the shares of common stock on an as-converted basis, and one of the Note Purchasers is a holder of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”). The Notes borebear interest at a rate of ~~5.00%~~5.0% per annum, which ~~was~~will be payable in cash on ~~their~~the maturity date and ~~at the option of the Company,~~ in ~~either cash or~~ additional shares of Common Stock on any conversion date.The payment of interest only at the maturity date has the same effect as delivering additional debt instruments to the Holders of the Convertible Notes and therefore is considered PIK. Therefore, PIK will be added to the carrying value of the debt through the term and interest expense will be recorded using the effective interest method. The maturity date of the Convertible Notes ~~was November 1, 2021.~~is May 28, 2026.

~~On July 29, 2020,~~Conversion Features

The Buyers will have the ~~Company received conversion notices from holders of the Notes exercising their rights~~right to elect at any time to convert the Convertible Notes into shares of Common Stock at an ~~aggregate~~initial conversion rate equal to 100 shares of ~~$95 million of~~Common Stock per each $1,000 principal amount of the Convertible Notes ~~(the “Initial Converted Notes”)~~(based on an initial conversion price equal to $10.00 per share of Common Stock). The conversion rate and conversion price will be subject to certain customary anti-dilution adjustments.

If the closing price of the Common Stock equals or exceeds $14.50 (subject to adjustment in the same manner as the conversion price) for 45 trading days within any period of 60 consecutive trading days, the Company will have the right to cause the mandatory conversion of the Convertible Notes into shares of Common Stock.

In the ~~Company’s common stock, par value $.01 per share~~event of certain fundamental transactions, the Buyers will have the right, within a period of 30 days following the occurrence of such transaction (“~~Common Stock”~~Holder Fundamental Transaction Election Period”)~~. Under the terms~~, to elect to either require prepayment of the Convertible Notes ~~the conversion date~~at par plus accrued and unpaid interest or convert all or a portion of the ~~Initial Converted~~Convertible Notes ~~is July 29, 2020 (the “Initial Conversion Date”) and the Company was obligated to deliver an aggregate of 29,922,956~~into shares of Common Stock ~~(the “Initial Conversion Shares”) to~~at the holders of the Initial Converted Notes within five trading days after the Initial Conversion Date. The Company issued the Initial Conversion Shares on August 3, 2020 and paid the $5.6 million of accumulated interestconversion rate then in effect plus any additional shares based on the Initial Converted Notes in cash. As a result, the Company’s obligations under the Initial Converted Notes were fully discharged and the remaining outstanding principal amount of the Notes was $5 million.

On September 30, 2020, the Company announced its election to mandatorily convert the remaining $5 million outstanding principal amount of the Notes (the “Mandatory Converted Notes”) into shares of Common Stock. The conversion of the Mandatory Converted Notes was effective on September 30, 2020 (the “Mandatory Conversion Date”). The Company issued 1,574,892 sharesprice per share of Common Stock in connection with the fundamental transaction, or to receive the ~~holder~~shares of the Mandatory Converted Notes on September 30, 2020 (the “Mandatory Conversion Shares”). The Company paid the accrued interest on the Mandatory Converted Notes in the form of cash and interest ceased to accrue on the Mandatory Converted Notes on the Mandatory Conversion Date. As a ~~result of the conversion of all the Notes, the lien granted by the Company on certain of its assets to secure the Notes was released.~~successor entity, if any.

Embedded Derivatives

The Convertible Notes were considered more akin to a debt-type instrument and the economic characteristics and risks of the embedded conversion features are not considered clearly and closely related to the Convertible Notes. Accordingly, these embedded features were bifurcated from the Convertible Notes and separately accounted for on a combined basis at fair value as a singlederivative liability. Kodak allocated ~~$14~~$12 million of the net proceeds received to a derivative liability based on the aggregate fair value of the embedded features ~~and term extension~~ on the date of issuance which reduced the net carrying value of the Convertible Notes.The derivative is being accounted for at fair value with subsequent changes in the fair value being reported as part of Other charges (income), net in the Consolidated Statement of Operations. The fair value of the Convertible Notes ~~(refer~~embedded derivative as of June 30, 2021 was a liability of $10 million and is included in Other long-term liabilities in the accompanying Consolidated Statement of Financial Position.Refer to Note ~~25,~~20, “Financial Instruments”). for information on the valuation of the derivative.

The carrying value of the Convertible Notes at the time of issuance ~~$84~~and at June 30, 2021 was $13 million ($~~100~~25 million aggregate gross proceeds less ~~$14~~$12 million allocated to the derivative ~~liability and $2~~liability). The estimated fair value of the Convertible Notes as of June 30, 2021 was $25 million ~~in transaction costs), was~~(Level 3). The carrying value is being accreted to the ~~face~~aggregate principal amount using the effective interest method from the date of issuance through the maturity date.

[~~15]~~12]

Securities Registration Rights Agreement

~~Loss on Early Extinguishment~~

~~The calculation~~On February 26, 2021, the Company and the Buyers entered into a Registration Rights Agreement (the “Securities Registration Rights Agreement”) providing the Buyers with registration rights in respect of the ~~loss on early extinguishment of debt is shown below:~~

(in millions)

Fair value of Initial Conversion Shares

$
506

Fair value of Mandatory Conversion Shares

13

Carrying value of Notes

(92
)
Fair value of pro-rata share of embedded derivative at Initial Conversion

(416
)
Fair value of pro-rata share of embedded derivative at Mandatory Conversion

(9
)
Total

$
2

~~The fair value~~Purchased Shares and the Common Stock issuable upon conversion of the ~~Conversion Shares is reported in Additional paid in capital in~~Convertible Notes. The Securities Registration Rights Agreement contains other customary terms and conditions, including certain customary indemnification obligations; however, the ~~Consolidated Statement~~Securities Registration Rights Agreement does not obligate the Company to facilitate an underwritten offering of ~~Financial Position.~~the registered Common Stock by the Buyers.

Amended and Restated ~~Credit Agreement~~

~~On January 27, 2020 Kodak exercised its right under the~~ ABL Credit Agreementto permanently reduce lender commitments, reducing the commitments from $150 million to $120 million. As a result, the minimum Excess Availability decreased to $15 million from the previous minimum of $18.75 million.

On ~~March 27, 2020,~~February 26, 2021, the Company and the ~~subsidiaries~~Subsidiary Guarantors entered into an amendment to the Amended and Restated Credit Agreement, dated as of May 26, 2016, among the Company, ~~that are guarantors (the “Subsidiary Guarantors”) entered into Amendment No. 3 to~~ the ~~ABL Credit Agreement (the “Amendment”) with~~Subsidiary Guarantors, the lenders party thereto, ~~(the “Lenders”),~~ Bank of America, N.A., as ~~administrative and collateral~~ agent (the “Agent”), and Bank of America, N.A. and ~~each of~~JPMorgan Chase Bank, N.A., as arrangers (the “ABL Credit Agreement” and, as amended by the ~~parties to the~~Amended ABL Credit Agreement, ~~as lenders.~~the “Amended ABL Credit Agreement”), with the Agent and the Required Lenders. Each of the capitalized ~~but~~and undefined terms ~~used in the context of describing the ABL Credit Agreement and the Amendment~~ has the meaning ascribed to such term in the ABL Credit Agreement ~~and the Amendment.~~.

The ~~Amendment decreased~~Amended ABL Credit Agreement amends the ~~available asset-based revolving loans (the “ABL Loans”)~~ABL Credit Agreement to, among other things, (i) extend the maturity date to February 26, 2024 or the date that is 90 days prior to the earliest scheduled maturity date or mandatory redemption date of any of the Company’s Term Loan Credit Agreement, Convertible Notes, Series B Preferred Stock, Series C Preferred Stock or any refinancings of any of the foregoing and ~~letters of credit from an~~(ii) decrease the aggregate amount of ~~up to $120~~commitments from $110 million to ~~$110 million, subject~~$90 million. Commitments under the Amended ABL Credit Agreement continue to be able to be used in the ~~Borrowing Base. As a result~~form of ~~the additional reduction in lender commitments, the minimum Excess Availability decreased to $13.75 million from the previous amount~~revolving loans or letters of ~~$15 million.~~

The Amendment also changed Equipment Availability from (i) the lesser of 75% of Net Orderly Liquidation Value of Eligible Equipment or $6 million to (ii) the lesser of 70% of Net Orderly Liquidation Value of Eligible Equipment or $14.75 million as of March 31, 2020. The $14.75 million amount decreases by $1 million per quarter starting on July 1, 2020 until maturity or the amount is decreased to $0, whichever comes first. Equipment Availability was $13.75 million as of September 30, 2020.

The changes effected by the Amendment to the Excess Availability and Equipment Availability combined with increases in Available Accounts Receivable and Inventory allowed the Company to decrease Eligible Cash, at the time of the amendment, by $13 million without causing Excess Availability to fall below 12.5 % of lender commitments.

credit. The Company had issued approximately ~~$87~~$42 million letters of credit under the Amended ABL Credit Agreement as of June 30, 2021and ~~$80~~$90 million of letters of credit under the ABL Credit Agreement as of ~~September 30, 2020 and~~ December 31, ~~2019,~~2020.

The revolving loans bear interest at the rate of LIBOR plus 3.50%-4.00% per annum (subject to provisions providing for a replacement benchmark rate upon the discontinuation of LIBOR) or a floating Base Rate (as defined in the Amended ABL Credit Agreement) plus 2.50%-3.00% per annum, based on Excess Availability (as defined in the Amended ABL Credit Agreement).The Company will pay an unused line fee of 37.5-50 basis points per annum, depending on whether the unused portion of the maximum amount available is less than or equal to 50% or greater than 50%, respectively. The Company will pay a letter of credit fee of 3.50%-4.00% per annum, based on Excess Availability, on issued and outstanding letters of credit, in addition to a fronting fee of 25 basis points on such letters of credit.

Obligations under the Amended ABL Credit Agreement continue to be secured by: (i) a first priority lien on assets of the Company and the Subsidiary Guarantors constituting cash (other than L/C Cash Collateral, as defined below), accounts receivable, inventory, machinery and equipment and certain other assets (the “ABL Priority Collateral”) and (ii) a second priority lien on substantially all assets of the Company and the Subsidiary Guarantors (subject to certain exceptions) other than the ABL Priority Collateral, including the L/C cash collateral and 100% of the stock of material U.S. subsidiaries and 65% of the stock of material foreign subsidiaries.

The Amended ABL Credit Agreement continues to limit, among other things, the ability of the Company and its Restricted Subsidiaries (as defined in the Amended ABL Credit Agreement) to (i) incur indebtedness, (ii) incur or create liens, (iii) dispose of assets, (iv) make restricted payments and (v) make investments. The Amended ABL Credit Agreement leaves in place customary affirmative covenants, including delivery of certain of the Company’s financial statements set forth therein.

Under the Amended ABL Credit Agreement the Company is required to maintain Minimum Liquidity of at least $80 million, which is tested at the end of each quarter. Minimum Liquidity was $274 million at June 30, 2021. If Minimum Liquidity falls below $80 million an Event of Default would occur and the Agent has the right to declare the obligation of each Lender to make Revolving Loans and of the Issuing Banks to issue Letters of Credit to be terminated, and declare the Revolving Loans, all interest thereon and all other amounts payable under the Amended ABL Credit Agreement to be due and payable.

Under the Amended ABL Credit Agreement the Company is required to maintain Excess Availability above 12.5% of lender commitments ($~~13.75~~11.25 million and $13.75 million as of June 30, 2021 and December 31, 2020, respectively), which is tested at ~~September~~the end of each month. Excess Availability was $39 million and $20 million as of June 30, ~~2020).~~2021 and December 31, 2020, respectively. If Excess Availability isfalls below 12.5% of lender commitments a Fixed Charge Coverage Ratio Trigger Event would occur. During any Fixed Charge Coverage Ratio Trigger Event, the Company ~~has~~would be required to maintain a Fixed Charge Coverage Ratio of greater than or equal to 1.0 to 1.0. If Excess Availability falls below 12.5% of lender commitments, Kodak may, in addition to the ~~ability~~requirement to ~~fund~~be in compliance with the minimum Fixed Charge Coverage Ratio, become subject to cash dominion control. Since Excess Availability was greater than 12.5% of lender commitments at June 30, 2021 and December 31, 2020, Kodak was not required to have a minimum Fixed Charge Coverage Ratio of 1.0 to 1.0. The Amended ABL Credit Agreement also removed Eligible Cash from the Borrowing Base. Therefore, amounts funded into the Eligible Cash account ~~which~~ will no longer increase Excess Availability for purposes of ~~the previous month-end~~ compliance reporting. ~~The Company had approximately $20 million and $22 million~~As of ~~Excess Availability under the ABL Credit Agreement as of September 30, 2020 and~~ December 31, ~~2019, respectively. To~~2020, to maintain Excess Availability of greater than 12.5% of lender commitments, ~~($13.75 million and $18.75 million as of September 30, 2020 and December 31, 2019, respectively),~~ Kodak funded ~~$21 million and $22~~$35 million to the Eligible Cash account held with the ABL Credit Agreement Administrative Agent, ~~as of September 30, 2020 and December 31, 2019, respectively,~~ which iswas classified as Restricted Cash in the Consolidated Statement of Financial Position.

~~In addition~~[13]

If Excess Availability falls below 12.5% of lender commitments and the Fixed Charge Coverage Ratio is less than 1.0 to 1.0, an Event of Default would occur and the Agent has the right to declare the obligation of each Lender to make Revolving Loans and of the Issuing Banks to issue Letters of Credit to be terminated, and declare the Revolving Loans, all interest thereon and all other amounts payable under the Amended ABL Credit Agreement to be due and payable.

Letter of Credit Facility Agreement

On February 26, 2021, the Company and the Subsidiary Guarantors entered into a Letter of Credit Facility Agreement (the “L/C Facility Agreement”, and together with the Term Loan Credit Agreement and the Amended ABL Credit Agreement the “Credit Agreements”) among the Company, the Subsidiary Guarantors, the lenders party thereto (the “L/C Lenders”), Bank of America, N.A., as agent, and Bank of America, N.A., as issuing bank. Pursuant to the ~~changes discussed above,~~L/C Facility Agreement, the ~~Amendment increased the interest rate charged~~L/C Lenders committed to issue letters of credit on the Company’s behalf in an aggregate amount of up to $50 million, provided that the Company posts cash collateral in an amount greater than or equal to 103% of the aggregate amount of letters of credit issued and outstanding at any given time (the “L/C Cash Collateral”).

The term of the L/C Facility Agreement is three years, subject to the same automatic springing maturity as the Amended ABL ~~Loans.~~ Credit Agreement. The ~~interest rate~~Company had issued approximately $45 million letters of credit under the L/C Facility Agreement as of June 30, 2021. The current balance on deposit in the L/C Cash Collateral account is approximately $46 million, of which $14 million was deposited into the L/C Cash Collateral account from proceeds of the financing transactions described herein and the remainder of which was cash collateral previously used to secure letters of credit under the ABL ~~Loans (which~~Credit Agreement. The L/C Facility Agreement has the same requirement to maintain Minimum Liquidity of $80 million as is ~~based on Excess Availability) increased to LIBOR plus 3.50% - 4.00% per annum from LIBOR plus 2.25% - 2.75% per annum or~~contained in the ~~Base Rate plus 2.50% - 3.00% per annum from the Base Rate plus 1.25% - 1.75% per annum.~~Amended ABL Credit Agreement.

NOTE 6: REDEEMABLE, CONVERTIBLE PREFERRED STOCK

Redeemable convertible preferred stock was as follows at June 30, 2021 and December 31, 2020:

	June 30,		December 31,
(in millions)	2021		2020
Series A preferred stock	$	—	$	191
Series B preferred stock		94		—
Series C preferred stock		99		—
Total	$	193	$	191

~~[16]~~

~~NOTE 9: REDEEMABLE, CONVERTIBLE SERIES~~Series A ~~PREFERRED STOCK~~Preferred Stock

On November 15, 2016, the Company issued 2,000,000 shares of Series A Preferred Stock for an aggregate purchase price of $200 million, or $100 per share, pursuant to a Series A Preferred Stock Purchase Agreement with Southeastern Asset Management, Inc. (“Southeastern”) and Longleaf Partners Small-Cap Fund, C2W Partners Master Fund Limited and Deseret Mutual Pension Trust, which are investment funds managed by Southeastern (such investment funds, collectively, the “Purchasers”), dated November 7, 2016. The Company ~~has~~ classified the Series A Preferred Stock as temporary equity in the Consolidated Statement of Financial Position.

Repurchase and Exchange Agreement

On February 26, 2021 the Company entered into a Series A Preferred Stock Repurchase and Exchange Agreement (the “Repurchase and Exchange Agreement”) with Southeastern and the Purchasers. The Company repurchased 1 million shares of the Series A Preferred Stock under the terms of the Repurchase and Exchange Agreement for $100,641,667, representing the liquidation value of the Series A Preferred Stock plus accrued and unpaid dividends. In addition, the Company and the Purchasers agreed to exchange the remaining 1 million shares of Series A Preferred Stock held by the Purchasers for shares of the Company’s newly created 4.0% Series B Convertible Preferred Stock, no par value (the “Series B Preferred Stock”) on a one-for-one basis plus accrued and unpaid dividends of $641,667. The exchange of shares of Series A Preferred Stock for shares of Series B Preferred Stock is a noncash financing activity.

Embedded Conversion Features

Kodak allocated $43 million of the net proceeds ~~received~~from the issuance of the Series A Stock to a derivative liability based on the aggregate fair value of the embedded conversion features on the date of issuance, which reduced the net carrying value of the Series A Preferred Stock (see Note ~~25,~~20, “Financial Instruments”). The carrying value of the Series A Preferred Stock at the time of issuance, $155 million ($200 million aggregate gross proceeds less $43 million allocated to the derivative liability and $2 million in transaction costs), iswas being accreted to the mandatory redemption amount using the effective interest method to Additional paid in capital in the Consolidated Statement of Financial Position as a deemed dividend from the date of issuance through the mandatory redemption date, November 15, 2021.

[14]

Extinguishment of Series A Preferred Stock

The carrying value, including the fair value of the embedded derivative liability, of the Series A Preferred Stock prior to extinguishment approximated $203 million. Upon repurchase and exchange of the Series A Preferred Stock, Kodak recorded $8 million as a deemed dividend to Additional paid in capital in the Consolidated Statement of Financial Position, representing the difference between the fair value of consideration transferred and the carrying value of the Series A Preferred Stock.

Dividend and Other Rights

The holders of Series A Preferred Stock were entitled to cumulative dividends payable quarterly in cash at a rate of 5.50% per annum.

Series B Preferred Stock

The fair value of the Series B Preferred Stock at the time of issuance approximated $95 million. The Company has classified the Series B Preferred Stock as temporary equity in the Consolidated Statement of Financial Position.

Dividend and Other Rights

On February 25, 2021, the Company filed with the Department of Treasury of the State of New Jersey a Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (the “Series B Certificate of Designations”) which established the designation, number of shares, rights, preferences and limitations of the Series B Preferred Stock which became effective upon filing. The Series B Preferred Stock ranks senior to the Common Stock and pari passu with the Series C Preferred Stock with respect to dividend rights and rights on liquidation, winding-up and dissolution. The Series B Preferred Stock has a liquidation preference of $100 per share, and the holders of Series B Preferred Stock are entitled to cumulative dividends payable quarterly in cash at a rate of ~~5.50%~~4.0% per annum. Until the third quarter of 2018 all dividends owed on the Series A Preferred Stock were declared and paid when due. No quarterly dividend was declared in the third or fourth quarters of 2018 or the first and second quarters of 2019. The Company declared quarterly cash dividends in the third and fourth quarters of 2019 and the first and second quarters of 2020 that were paid when due. In July 2020, the Company declared and paid the four quarterly dividends that were in arrears. The total amount of dividends in arrears was $11 million. The Company declared the third quarter 2020 quarterly cash dividend in September 2020 and it was paid in October 2020.

The Purchasers have the right to nominate members to the Company’s board of directors proportional to their ownership on an as converted basis, which initially allowed the Purchasers to nominate two members to the board.

If dividends on any Series AB Preferred Stock are in arrears for six or more consecutive or non-consecutive dividend periods, the holders of the Series AB Preferred Stock ~~voting with holders of all other preferred stock of the Company whose voting rights are then exercisable,~~ will be entitled to ~~vote for the election of two additional directors in~~nominate one director at the next annual shareholder meeting and all subsequent shareholder meetings until all accumulated dividends on such Series AB Preferred Stock ~~and other voting preferred stock~~ have been paid or set aside. ~~The nomination right~~Dividends owed on the Series B Preferred Stock have been declared and paid when due. Holders of Series B Preferred Stock will have certain limited special approval rights, including with respect to the issuance of pari passu or senior equity securities of the ~~Purchasers will be reduced by two nominees~~Company.

Conversion Features

Each share of Series B Preferred Stock is convertible, at the option of each holder at any time, into shares of Common Stock at the ~~holders~~initial conversion rate of 9.5238 shares of Common Stock for each share of Series AB Preferred Stock (equivalent to an initial conversion price of $10.50 per share of Common Stock). The initial conversion rate and the corresponding conversion price will be subject to certain customary anti-dilution adjustments. If a holder elects to convert any shares of Series B Preferred Stock during a specified period in connection with a fundamental change (as defined in the Series B Certificate of Designations), such holder can elect to have the conversion rate adjusted and can elect to receive a cash payment in lieu of shares for a portion of the shares. Such holder will also be entitled to a payment in respect of accumulated dividends. In addition, the Company will have the right to ~~elect, or participate~~require holders to convert any shares of Series B Preferred Stock in connection with certain reorganization events in which case the ~~election of, two additional directors. Two of~~conversion rate will be adjusted, subject to certain limitations.

The Company will have the ~~directors on~~right to cause the ~~Company’s current board of directors were nominated by the Purchasers although the holders~~mandatory conversion of the Series AB Preferred Stock ~~currently have the contractual right to nominate only one director based on the results of the ownership formula.~~

~~As of September 30, 2020, the Series A Preferred Stock has not been converted and none of the anti-dilution provisions have been triggered. Any~~into shares of ~~Series A Preferred~~Common Stock ~~not converted prior to the fifth anniversary of~~at any time after the initial issuance of the Series AB Preferred Stock ~~are~~if the closing price of the Common Stock has equaled or exceeded $14.50 (subject to adjustment in the same manner as the conversion price) for 45 trading days within a period of 60 consecutive trading days.

Embedded Conversion Features

The Company concluded that the Series B Preferred Stock is considered more akin to a debt-type instrument and that the economic characteristics and risks of the conversion option upon a fundamental change by the holder was not considered clearly and closely related to the Series B Preferred Stock. Accordingly, this embedded conversion feature was bifurcated from the Series B Preferred Stock and separately accounted for at fair value as a derivative. The Company allocated $1 million to the derivative liability based on the aggregate fair value of the embedded conversion feature on the date of issuance which reduced the original carrying value of the Series B Preferred Stock. The derivative is being accounted for at fair value with subsequent changes in the fair value being reported as part of Other charges (income), net in the Consolidated Statement of Operations. The fair value of the Series B Preferred Stock embedded derivative as of June 30, 2021 was a liability of $1 million and is included in Other long-term liabilities in the accompanying Consolidated Statement of Financial Position. Refer to Note 20, “Financial Instruments” for information on the valuation of the derivative.

The carrying value of the Series B Preferred Stock at the time of issuance, $93 million ($95 million fair value of Series B Preferred Stock on February 26, 2021 less $1 million allocated to the derivative liability and $1 million of transaction costs) is being accreted to the mandatory redemption amount using the effective interest method to Additional paid in capital in the Consolidated Statement of Financial Position as a deemed dividend from the date of issuance through the mandatory redemption date, May 28, 2026.

[15]

Redemption Features

If any shares of Series B Preferred Stock have not been converted prior to May 28, 2026 (the “Redemption Date”), the Company is required to ~~be redeemed~~redeem such shares at $100 per share plus the amount of accrued and unpaid dividends. As the Company concluded that the Series B Preferred Stock is considered more akin to a debt-type instrument, the redemption feature is considered to be clearly and closely related to the host contract and therefore was not required to be separated from the Series B Preferred Stock.

Series C Preferred Stock

Purchase Agreement

On February 26, 2021, the Company and GO EK Ventures IV, LLC (the “Investor”) entered into a Series C Preferred Stock Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell to the Investor, and the Investor agreed to purchase from the Company, an aggregate of 1,000,000 shares of the Company’s newly created 5.0% Series C Convertible Preferred Stock, no par value per share (the

“Series C Preferred Stock”), for a purchase price of $100 per share, representing $100 million of gross proceeds to the Company. The initial issuance and sale of 750,000 shares ($75 million gross proceeds) closed on February 26, 2021, and the final issuance and sale of the remaining 250,000 shares ($25 million gross proceeds) closed on March 30, 2021 after expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The Investor is a fund managed by Grand Oaks Capital. The Company intends to use the proceeds from the sale of the Series C Preferred Stock for general corporate purposes including the funding of growth initiatives. The Company has classified the Series C Preferred Stock as temporary equity in the Consolidated Statement of Financial Position.

Dividend and Other Rights

On February 25, 2021, the Company filed with the Department of Treasury of the State of New Jersey a Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the Company (the “Series C Certificate of Designations”) which established the designation, number of shares, rights, preferences and limitations of the Series C Preferred Stock and became effective upon filing. The Series C Preferred Stock ranks senior to the Common Stock and pari passu with the Series B Preferred Stock with respect to dividend rights and rights on liquidation, winding-up and dissolution. The Series C Preferred Stock has an initial liquidation preference of $100 per share, and holders of Series C Preferred Stock are entitled to cumulative dividends payable quarterly “in-kind” in the form of additional shares of Series C Preferred Stock at a rate of 5.0% per annum. If dividends on the Series C Preferred Stock are not declared and paid for any given fiscal quarter, the liquidation preference is automatically increased by the amount of such unpaid dividends. Holders of the Series C Preferred Stock will also be entitled to participate in any dividends paid on the Common Stock (other than stock dividends) on an as-converted basis, with such dividends on any shares of the Series C Preferred Stock being payable upon conversion of such shares of Series C Preferred Stock to Common Stock. Dividends owed on the Series C Preferred Stock have been declared and additional Series C shares issued when due.

Holders of Series C Preferred Stock are entitled to vote together with the holders of the Common Stock as a single class, in each case, on an

as-converted basis, except where a separate class vote is required by law. Holders of Series C Preferred Stock have certain limited special approval rights, including with respect to the issuance of pari passu or senior equity securities of the Company.

Pursuant to the Purchase Agreement, the Investor has the right to nominate one (1) director at each annual or special meeting of the Company’s shareholders until the earlier of the third anniversary of the execution of the Purchase Agreement and such time as the Investor and its Affiliates (as defined in the Purchase Agreement) do not hold at least a majority of the Series C Preferred Stock purchased under the Purchase Agreement. The Investor’s nominee pursuant to this right was elected at the Company’s annual meeting held on May 19, 2021 to serve a one-year term.

Conversion Features

Each share of Series C Preferred Stock is convertible, at the option of each holder at any time, into shares of Common Stock at the initial conversion price of $10 per share of Common Stock. The initial conversion price and the corresponding conversion rate will be subject to certain customary anti-dilution adjustments and to proportional increase in the event the liquidation preference of the Series C Preferred Stock is automatically increased as described above. If a holder elects to convert any shares of Series C Preferred Stock during a specified period in connection with a fundamental change (as defined in the Series C Certificate of Designations), such holder can elect to have the conversion rate adjusted and can elect to receive a cash payment in lieu of shares for a portion of the shares of Common Stock. Such holder will also be entitled to a payment in respect of accumulated dividends and a payment based on the present value of all required remaining dividend payments through May 28, 2026, the mandatory redemption date. Such additional payments will be payable at the Company’s option in cash or in additional shares of Common Stock. In addition, the Company will have the right to require holders to convert any shares of Series C Preferred Stock in connection with certain reorganization events in which case the conversion rate will be adjusted, subject to certain limitations.

The Company will have the right to cause the mandatory conversion of the Series C Preferred Stock into shares of Common Stock (i) at any time after February 26, 2023 if the closing price of the Common Stock has equaled or exceeded 200% of the then-effective conversion price for 45 trading days within a period of 60 consecutive trading days, or (ii) at any time after February 26, 2024 if the closing price of the Common Stock has equaled or exceeded 150% of the then-effective conversion price for 45 trading days within a period of 60 consecutive trading days.

[16]

Embedded Conversion Features

The Company concluded that the Series C Preferred Stock is considered more akin to a debt-type instrument and that the economic characteristics and risks of the conversion option upon a fundamental change by the holder is not considered clearly and closely related to the Series C Preferred Stock. Accordingly, this embedded conversion feature was bifurcated from the Series C Preferred Stock and separately accounted for as a derivative. The Company allocated $2 million of the net proceeds received to the derivative liability based on the aggregate fair value of the embedded conversion features on the dates of issuance which reduced the original carrying value of the Series C Preferred Stock. The derivative is being accounted for at fair value with subsequent changes in the fair value being reported as part of Other charges (income), net in the Consolidated Statement of Operations. The fair value of the Series C Preferred Stock derivative as of June 30, 2021 was a liability of $2 million and is included in Other long-term liabilities in the accompanying Consolidated Statement of Financial Position. Refer to Note 20, “Financial Instruments” for information on the valuation of the derivative.

The carrying value of the Series C Preferred Stock at the time of issuance, $97 million ($100 million aggregate gross proceeds less $2 million allocated to the derivative liability and $1 million in transaction costs) is being accreted to the mandatory redemption amount using the effective interest method to Additional paid in capital in the Consolidated Statement of Financial Position as a deemed dividend from the date of issuance through the mandatory redemption date.

Redemption Features

If any shares of Series C Preferred Stock have not been converted prior to the Redemption Date, the Company is required to redeem such shares at $100 per share plus the amount of accrued and unpaid dividends thereon; provided that the holders of the Series C Preferred Stock have the right to extend such redemption date by up to two years. As the Company concluded that the Series C Preferred Stock is considered more akin to a debt-type instrument, the redemption feature is considered to be clearly and closely related to the host contract and therefore was not required to be separated from the Series C Preferred Stock.

Series C Registration Rights Agreement

On February 26, 2021, the Company and the Investor entered into a Registration Rights Agreement (the “Series C Registration Rights Agreement”) which provides the Investor with customary registration rights in respect of the shares of Common Stock issuable upon conversion of the Series C Preferred Stock. The Series C Registration Rights Agreement contains other customary terms and conditions, including certain customary indemnification obligations.

NOTE ~~10:~~7: LEASES

Income recognized on operating lease arrangements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 is presented ~~below (income~~below. Income recognized for sales-type lease arrangements is $0 million and $1 million for ~~all periods):~~the three and six months ended June 30, 2021, respectively and $0 million for both the three and six months ended June 30, 2020.

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(in millions)	2020		2019		2020		2019		2021		2020		2021		2020
Lease income - operating leases:
Lease income	$	2	$	3	$	6	$	7	$	2	$	2	$	4	$	4
Sublease income		—		1		2		5		—		—		—		2
Variable lease income		1		1		3		3		1		1		2		2
Total lease income	$	3	$	5	$	11	$	15	$	3	$	3	$	6	$	8

NOTE ~~11:~~8: COMMITMENTS AND CONTINGENCIES

As of ~~September~~June 30, ~~2020,~~2021, the Company had outstanding letters of credit of ~~$87~~$42 million and $45 million issued under the Amended ABL Credit Agreement and the L/C Facility Agreement, respectively, as well as bank guarantees and letters of credit of $2 million, surety bonds in the amount of $29 million, and restricted cash of ~~$48~~$74 million, primarily related to ~~address~~cash collateral for the outstanding letters of credit under the L/C Facility Agreement, to ensure payment of possible casualty and workers’ compensation claims, ~~support~~ legal contingencies, hedging activities, ~~compliance with the Excess Availability threshold under the ABL Credit Agreement,~~ environmental liabilities, rental payments and to support various customs, tax and trade activities.

~~[17]~~

[17]

Kodak routinely assesses all these matters as to the probability of ultimately incurring a liability in its Brazilian operations and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.

As of ~~September~~June 30, ~~2020,~~2021, the unreserved portion of these contingencies, inclusive of any related interest and penalties, for which there was at least a reasonable possibility that a loss may be incurred, amounted to approximately $5$4 million.

In connection with assessments in Brazil, local regulations may require Kodak’s Brazilian operations to post security for a portion of the amounts in dispute. As of ~~September~~June 30, ~~2020,~~2021, Kodak’s Brazilian operations have posted security composed of $3 million of pledged cash reported within Restricted cash in the Consolidated Statement of Financial Position and liens on certain Brazilian assets with a net book value of approximately ~~$40~~$45 million. Generally, any encumbrances on the Brazilian assets would be removed to the extent the matter is resolved in Kodak's favor.

On July 28, 2020, the U.S. International Development Finance Corporation (the “DFC”) announced (the “DFC Announcement”) the signing of a non-binding letter of interest to provide a subsidiary of the Company with a potential $765 million loan (the “DFC Loan”) to support the launch of Kodak Pharmaceuticals, an initiative that would manufacture pharmaceutical ingredients for essential generic drugs (the “DFC Pharmaceutical Project”).

On August 13, 2020 Tiandong Tang commenced a class action lawsuit against the Company, its Executive Chairman and Chief Executive Officer and its Chief Financial Officer in Federal District Court in the District of New Jersey, and on August 26, 2020 Jimmie A. McAdams and Judy P. McAdams commenced a class action lawsuit against the Company and its Executive Chairman and Chief Executive Officer in Federal District Court in the Southern District of New York (collectively, the “Securities Class Actions”). The Securities Class Actions seek damages and other relief based on alleged violations of federal securities laws in the context of the DFC Announcement of the potential DFC Loan and DFC Pharmaceutical Project. The Securities Class Actions were transferred to the Federal District Court for the Western District of New York and were consolidated into a single proceeding (the “Consolidated Securities Class Action”) on June 22, 2021. On August 2, 2021, Les Investissements Kiz Inc. and UAT Trading Service, Inc. were appointed by the court to serve as lead plaintiff for the Consolidated Securities Class Action.

On December 29, 2020 Robert Garfield commenced a class action lawsuit against the Company and current and former members of its Board of Directors in the Superior Court of Mercer County, New Jersey seeking equitable relief and damages in favor of the Company based on alleged breaches of fiduciary duty by the Company’s Board of Directors associated with alleged false and misleading proxy statement disclosures (the “Fiduciary Class Action”). The Company and each of the individual defendants filed motions to dismiss theFiduciary Class Action on April 13, 2021. On May 26, 2021, the plaintiff in the Fiduciary Class Action voluntarily dismissed the Fiduciary Class Action without prejudice.

The Company has also received four requests under New Jersey law demanding, among other things, that the Company take certain actions in response to alleged breaches of fiduciary duty relating to option grants and securities transactions in the context of the DFC Announcement and alleged proxy statement disclosure deficiencies (the “Derivative Demands”). On May 19, 2021 Louis Peters, one of the persons making a Derivative Demand, commenced a derivative lawsuit on behalf of the Company against certain officers and current and former directors of the Company and the Company as a nominal defendant in the Supreme Court of the State of New York in Monroe County seeking damages and equitable relief based on alleged breaches of fiduciary duty and unjust enrichment resulting from stock trades, option grants and a charitable contribution in the context of the DFC Announcement of the potential DFC Loan and DFC Pharmaceutical Project (the “Derivative Lawsuit”). The parties have stipulated that the plaintiff will file an amended complaint, to which the Company and the individual defendants may respond within 60 days after its filing. Additional shareholder derivative lawsuits may be brought based on the other Derivative Demands (any such lawsuits, collectively with the Derivative Lawsuit and any successor to the Fiduciary Class Action, the “Fiduciary Matters”). The Company, acting through a Special Committee of Independent Directors, previously determined that there was no merit to the claims alleged by the Derivative Demands (except with respect to the charitable contribution, which was not fully considered by the Special Committee). See the Company’s Current Report on Form 8-K filed with the SEC on September 16, 2020.

The DFC Announcement has also prompted investigations by several congressional committees, the SEC and the New York Attorney General’s office.

As previously reported, the Attorney General of the State of New York (the “NYAG”) has threatened to file a lawsuit against the Company and its Chief Executive Officer alleging violations of New York State’s Martin Act (the “Threatened Claim”). In connection with the Threatened Claim, on June 1, 2021 the NYAG filed an ex parte application in the Supreme Court of the State of New York in New York County seeking additional document production and the taking of investigative testimony of the Company’s Chief Executive Officer and General Counsel. This ex parte application was granted on June 15, 2021, as expected. The Company is producing the documents pursuant to the court order granting the application and intends to make its officers available to give testimony as required by such order. The Company intends to vigorously defend itself against the Threatened Claim should it be filed.

The Securities Class Actions, Fiduciary Matters and investigations by several congressional committees, the SEC and the New York Attorney General’s office pertaining to the DFC Announcement remain ongoing. The Company intends to vigorously defend itself against the Securities Class Actions and Fiduciary Matters and is cooperating in the investigations related to the DFC Announcement.

[18]

Kodak is involved in various lawsuits, claims, investigations, remediations and proceedings, including, from time to time, commercial, customs, employment, environmental, tort and health and safety matters, which are being handled and defended in the ordinary course of business. Kodak is also subject, from time to time, to various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in a broad spectrum of Kodak’s products and claims arising out of Kodak’s licensing its brand. These matters are in various stages of investigation and litigation and are being vigorously defended. Based on information currently available, Kodak does not believe that it is probable that the outcomes in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations. Litigation is inherently unpredictable, and judgments could be rendered or settlements entered that could adversely affect Kodak’s operating results or cash flows in a particular period. Kodak routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.

NOTE ~~12:~~9: GUARANTEES

In connection with the settlement of certain of the Company’s historical environmental liabilities at Eastman Business Park, a more than 1,200-acre technology center and industrial complex in Rochester, New York, in the event the historical liabilities exceed $99 million, the Company will become liable for 50% of the portion above $99 million with no limitation to the maximum potential future payments. There is no0 liability recorded for this guarantee.

Extended Warranty Arrangements

Kodak offers its customers extended warranty arrangements that are generally one year, but may range from three months to six years after the original warranty period. The change in Kodak’s deferred revenue balance in relation to these extended warranty and maintenance arrangements from December 31, ~~2019~~2020 to ~~September~~June 30, ~~2020,~~2021, which is reflected in Other current liabilities in the accompanying Consolidated Statement of Financial Position, was as follows:

(in millions)

Deferred revenue on extended warranties as of December 31, 2019

$
21

Extended warranty and maintenance arrangements deferred in 2020

68

Recognition of extended warranty and maintenance arrangement
revenue in 2020

(70
)
Deferred revenue on extended warranties as of September 30, 2020

$
19

(in millions)
Deferred revenue on extended warranties as of December 31, 2020	$	19
New extended warranty and maintenance arrangements deferred		45
Recognition of extended warranty and maintenance arrangement revenue		(45	)
Deferred revenue on extended warranties as of June 30, 2021	$	19

[~~18]~~19]

NOTE ~~13:~~10: REVENUE

Disaggregation of Revenue

The following tables present revenue disaggregated by major product, portfolio summary and geography.

Major Product:

Three Months Ended	Three Months Ended													Three Months Ended
September 30, 2020
June 30, 2021														June 30, 2021

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Plates, inks and other consumables		$	114	$	15	$	1	$	—	$	—	$	130		$	135	$	16	$	5	$	—	$	—	$	156
Ongoing service arrangements ⁽¹⁾			20		33		—		—		—		53			20		33		2		—		—		55
Total annuities			134		48		1		—		—		183			155		49		7		—		—		211
Equipment & software			12		8		—		—		—		20			14		13		—		—		—		27
Film and chemicals			—		—		39		—		—		39			—		—		47		—		—		47
Other ₍₂₎			—		—		4		3		3		10			—		—		—		3		3		6
Total		$	146	$	56	$	44	$	3	$	3	$	252		$	169	$	62	$	54	$	3	$	3	$	291


Nine Months Ended
September 30, 2020
Six Months Ended														Six Months Ended													��
June 30, 2021														June 30, 2021

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Plates, inks and other consumables		$	330	$	45	$	4	$	—	$	—	$	379		$	256	$	33	$	10	$	—	$	—	$	299
Ongoing service arrangements ⁽¹⁾			60		97		—		—		—		157			40		67		3		—		—		110
Total annuities			390		142		4		—		—		536			296		100		13		—		—		409
Equipment & software			29		31		—		—		—		60			21		26		—		—		—		47
Film and chemicals			—		—		112		—		—		112			—		—		86		—		—		86
Other ₍₂₎					—		8		8		8		24			—		—		1		6		7		14
Total		$	419	$	173	$	124	$	8	$	8	$	732		$	317	$	126	$	100	$	6	$	7	$	556

[~~19]~~20]

Three Months Ended	Three Months Ended													Three Months Ended
September 30, 2019
June 30, 2020														June 30, 2020

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Plates, inks and other consumables		$	138	$	20	$	3	$	—	$	—	$	161		$	90	$	12	$	8	$	—	$	—	$	110
Ongoing service arrangements ⁽¹⁾			22		38		1		—		—		61			20		29		1		—		—		50
Total annuities			160		58		4		—		—		222			110		41		9		—		—		160
Equipment & software			14		12		—		—		—		26			9		11		—		—		—		20
Film and chemicals			—		—		44		—		—		44			—		—		26		—		—		26
Other⁽²⁾			13		—		5		3		2		23			—		—		3		2		2		7
Total		$	187	$	70	$	53	$	3	$	2	$	315		$	119	$	52	$	38	$	2	$	2	$	213

Nine Months Ended
September 30, 2019
Six Months Ended														Six Months Ended
June 30, 2020														June 30, 2020

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Plates, inks and other consumables		$	421	$	61	$	9	$	—	$	—	$	491		$	216	$	31	$	13	$	—	$	—	$	260
Ongoing service arrangements ⁽¹⁾			65		117		2		—		—		184			41		64		1		—		—		106
Total annuities			486		178		11		—		—		675			257		95		14		—		—		366
Equipment & software			35		33		—		—		—		68			16		22		—		—		—		38
Film and chemicals			—		—		125		—		—		125			—		—		61		—		—		61
Other⁽²⁾			13		—		17		8		7		45			—		—		5		5		5		15
Total		$	534	$	211	$	153	$	8	$	7	$	913		$	273	$	117	$	80	$	5	$	5	$	480

⁽¹⁾	Service revenue in the Consolidated Statement of Operations includes the ongoing service revenue shown above as well as revenue from project-based document management and managed print services businesses, which is included in Other above.

⁽²⁾	Other includes revenue from professional services, non-recurring engineering services, print and managed media services, tenant rent and related property management services and licensing.

[~~20]~~21]

Product Portfolio Summary:

Three Months Ended	Three Months Ended													Three Months Ended
September 30, 2020
June 30, 2021														June 30, 2021

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Growth engines ⁽¹⁾		$	41	$	32	$	1	$	3	$	—	$	77		$	53	$	36	$	—	$	—	$	—	$	89
Strategic other businesses ⁽²⁾			105		12		42		—		3		162			116		15		54		3		3		191
Planned declining businesses ⁽³⁾			—		12		1		—		—		13			—		11		—		—		—		11
Total		$	146	$	56	$	44	$	3	$	3	$	252		$	169	$	62	$	54	$	3	$	3	$	291

Nine Months Ended
September 30, 2020
Six Months Ended														Six Months Ended
June 30, 2021														June 30, 2021

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Growth engines ⁽¹⁾		$	112	$	98	$	2	$	8	$	—	$	220		$	100	$	73		—		—	$	—	$	173
Strategic other businesses ⁽²⁾			307		37		115		—		8		467			217		28		100		6		7		358
Planned declining businesses ⁽³⁾			—		38		7		—		—		45			—		25		—		—		—		25
Total		$	419	$	173	$	124	$	8	$	8	$	732		$	317	$	126	$	100	$	6	$	7	$	556

Three Months Ended	Three Months Ended													Three Months Ended
September 30, 2019
June 30, 2020														June 30, 2020

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Growth engines⁽¹⁾		$	44	$	32	$	—	$	3	$	—	$	79		$	27	$	30	$	—	$	—	$	—	$	57
Strategic other businesses ⁽²⁾			143		20		47		—		2		212			92		10		36		2		2		142
Planned declining businesses ⁽³⁾			—		18		6		—		—		24			—		12		2		—		—		14
Total		$	187	$	70	$	53	$	3	$	2	$	315		$	119	$	52	$	38	$	2	$	2	$	213

Nine Months Ended
September 30, 2019
Six Months Ended														Six Months Ended
June 30, 2020														June 30, 2020

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
Growth engines⁽¹⁾		$	128	$	99	$	2	$	8	$	—	$	237		$	71	$	66	$	—	$	—	$	—	$	137
Strategic other businesses ⁽²⁾			406		56		130		—		7		599			202		25		76		5		5		313
Planned declining businesses ⁽³⁾			—		56		21		—		—		77			—		26		4		—		—		30
Total		$	534	$	211	$	153	$	8	$	7	$	913		$	273	$	117	$	80	$	5	$	5	$	480

[~~21]~~22]

⁽¹⁾	Growth engines consist of Sonora in the Traditional Printing segment, PROSPER and Software in the Digital Printing segment, ~~brand licensing~~ and Advanced Materials and Functional Printing in the Advanced Materials and Chemicals segment, excluding intellectual property ~~(IP)~~(“IP”) licensing.

⁽²⁾

Strategic other businesses include plates in the Traditional Printing segment; Computer to Plate (“CTP”) equipment and related service and Nexpress and related toner business in the Digital Printing segment and Motion Picture and Industrial Film and Chemicals (including external inks) and IP licensing in the Advanced Materials and Chemicals segment and the Brand segment.

⁽³⁾

Planned declining businesses are product lines where the decision has been made to stop new product development and manage an orderly expected decline in the installed product and annuity base or are otherwise not strategic to Kodak. These product families consist of ~~Consumer Inkjet,~~ Kodak Services for Business ~~and Kodakit~~ in the Advanced Materials and Chemicals segment and Versamark and Digimaster in the Digital Printing segment.

Geography ^(1):

Three Months Ended	Three Months Ended													Three Months Ended
September 30, 2020
June 30, 2021														June 30, 2021

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
United States		$	29	$	25	$	30	$	3	$	3	$	90		$	36	$	26	$	38	$	3	$	3	$	106
Canada			5		3		—		—		—		8			4		2		1		—		—		7
North America			34		28		30		3		3		98			40		28		39		3		3		113
Europe, Middle East and Africa			64		19		4		—		—		87			76		22		5		—		—		103
Asia Pacific			41		8		10		—		—		59			46		11		10		—		—		67
Latin America			7		1		—		—		—		8			7		1		—		—		—		8
Total		$	146	$	56	$	44	$	3	$	3	$	252		$	169	$	62	$	54	$	3	$	3	$	291

Nine Months Ended
September 30, 2020
Six Months Ended														Six Months Ended
June 30, 2021														June 30, 2021

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
United States		$	90	$	77	$	85	$	8	$	8	$	268		$	65	$	53	$	71	$	6	$	7	$	202
Canada			11		6		1		—		—		18			6		5		1		—		—		12
North America			101		83		86		8		8		286			71		58		72		6		7		214
Europe, Middle East and Africa			181		61		9		—		—		251			144		41		8		—		—		193
Asia Pacific			116		26		29		—		—		171			88		25		20		—		—		133
Latin America			21		3		—		—		—		24			14		2		—		—		—		16
Total		$	419	$	173	$	124	$	8	$	8	$	732		$	317	$	126	$	100	$	6	$	7	$	556

[~~22]~~23]

Three Months Ended	Three Months Ended													Three Months Ended
September 30, 2019
June 30, 2020														June 30, 2020

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
United States		$	48	$	36	$	33	$	3	$	2	$	122		$	26	$	24	$	25	$	2	$	2	$	79
Canada			4		2		1		—		—		7			3		1		1		—		—		5
North America			52		38		34		3		2		129			29		25		26		2		2		84
Europe, Middle East and Africa			71		21		6		—		—		98			49		18		2		—		—		69
Asia Pacific			53		10		13		—		—		76			36		8		10		—		—		54
Latin America			11		1		—		—		—		12			5		1		—		—		—		6
Total		$	187	$	70	$	53	$	3	$	2	$	315		$	119	$	52	$	38	$	2	$	2	$	213

Nine Months Ended
September 30, 2019
Six Months Ended														Six Months Ended
June 30, 2020														June 30, 2020

(in millions)		Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total			Traditional Printing		Digital Printing		Advanced Materials and Chemicals		Brand		All Other		Total
United States		$	125	$	107	$	95	$	8	$	7	$	342		$	61	$	52	$	55	$	5	$	5	$	178
Canada			9		6		2		—		—		17			6		3		1		—		—		10
North America			134		113		97		8		7		359			67		55		56		5		5		188
Europe, Middle East and Africa			218		64		16		—		—		298			117		42		5		—		—		164
Asia Pacific			149		29		39		—		—		217			75		18		19		—		—		112
Latin America			33		5		1		—		—		39			14		2		—		—		—		16
Total		$	534	$	211	$	153	$	8	$	7	$	913		$	273	$	117	$	80	$	5	$	5	$	480

⁽¹⁾

Sales are reported in the geographic area in which they originate.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed trade receivables, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) in the Consolidated Statement of Financial Position. The contract assets are transferred to trade receivables when the rights to consideration become unconditional. The amounts recorded for contract assets at ~~September~~both June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were $2 million ~~and $4 million, respectively,~~ and are reported in Other current assets in the Consolidated Statement of Financial Position. The contract liabilities primarily relate to prepaid service contracts, upfront payments for certain equipment purchases or prepaid royalties on intellectual property arrangements. The amounts recorded for contract liabilities at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were ~~$60~~$61 million and ~~$61~~$64 million, respectively, of which ~~$44~~$45 million and ~~$43~~$47 million are reported in Other current liabilities, respectively, and $16 million and ~~$18~~$17 million, respectively, are reported in Other long-term liabilities in the Consolidated Statement of Financial Position.

Revenue recognized for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 that was included in the contract liability balance at the beginning of the year was $4$6 million and ~~$35~~$31 million in ~~2020,~~2021, respectively, and $4$5 million and ~~$34~~$31 million in ~~2019,~~2020, respectively, and primarily represented revenue from prepaid service contracts and equipment revenue recognition. Contract liabilities as of ~~September~~June 30, ~~2020~~2021 included ~~$21~~$22 million and ~~$31~~$26 million of cash payments received during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively. Contract liabilities as of ~~September~~June 30, ~~2019~~2020 included ~~$26~~$19 million and ~~$43~~$21 million of cash payments received during the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively.

[~~23]~~24]

Kodak does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less or for which revenue is recognized at the amount to which Kodak has the right to invoice for services performed. Performance obligations with an original expected length of greater than one year generally consist of deferred service contracts, operating leases and licensing arrangements. As of ~~September~~June 30, ~~2020,~~2021, there was approximately $70 million of unrecognized revenue from unsatisfied performance obligations. Approximately ~~10%~~15% of the revenue from unsatisfied performance obligations is expected to be recognized in the ~~rest~~remainder of ~~2020,~~2021, 30% in ~~2021, 20%~~2022, 30% in ~~2022~~2023 and ~~40% thereafter.~~2024 and 25% thereafter.

NOTE ~~14:~~11: OTHER OPERATING ~~(INCOME) EXPENSE,~~INCOME, NET

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(in millions)	2020			2019			2020			2019			2021			2020			2021			2020
Expense (income):
(Gain) loss on sale of assets ⁽¹⁾	$	—		$	12		$	(9	)	$	13
Legal settlements													$	(6	)	$	—		$	(7	)	$	—
Gain on sale of assets ⁽¹⁾														—			(1	)		—			(9	)
Asset impairments⁽²⁾		—			—			3			—			—			—			—			3
Transition services agreement income		(1	)		(2	)		(5	)		(4	)		—			(2	)		—			(4	)
Other		—			—			—			1
Total	$	(1	)	$	10		$	(11	)	$	10		$	(6	)	$	(3	)	$	(7	)	$	(10	)

⁽¹⁾

In March 2020 Kodak sold a property in the U.S.

⁽²⁾

~~Refer to Note 5, “Goodwill and Other Intangible Assets”.~~In the first quarter of 2020 Kodak recorded a pre-tax impairment charge of the Kodak trade name.

NOTE ~~15:~~12: OTHER CHARGES (INCOME), NET

	Three Months Ended					Nine Months Ended					Three Months Ended					Six Months Ended
	September 30,					September 30,					June 30,					June 30,
(in millions)	2020		2019			2020			2019		2021			2020		2021		2020
Loss on foreign exchange transactions											$	1		$	3	$	1	$	5
Change in fair value of embedded conversion features derivative liability ⁽¹⁾	$	431	$	4		$	382		$	3		(1	)		4		—		(49	)
Loss on foreign exchange transactions		1		3			6			4
Other		—		(1	)		(1	)		—		1			1		—		(1	)
Total	$	432	$	6		$	387		$	7	$	1		$	8	$	1	$	(45	)

⁽¹⁾

Refer to Note ~~25,~~20, “Financial Instruments”.

NOTE ~~16:~~13: INCOME TAXES

Kodak’s income tax provision and effective tax rate were as follows:

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(in millions)	2020			2019			2020			2019			2021			2020			2021			2020
Loss from continuing operations before income taxes	$	(444	)	$	(3	)	$	(394	)	$	(16	)
Earnings (loss) from operations before income taxes													$	19		$	(4	)	$	26		$	50
Effective tax rate		(0.2	)%		(233.3	)%		(42.4	)%		(75.0	)%		15.8	%		(25.0	)%		15.4	%		332.0	%
Provision for income taxes		1			7			167			12			3			1			4			166
(Benefit) for income taxes at U.S. statutory tax rate		(93	)		(1	)		(83	)		(3	)
Provision (benefit) for income taxes at U.S. statutory tax rate														4			(1	)		5			11
Difference between tax at effective vs. statutory rate	$	94		$	8		$	250		$	15		$	(1	)	$	2		$	(1	)	$	155

For the three months ended ~~September~~June 30, 2021, the difference between Kodak’s effective tax rate and the U.S. statutory rate of 21.0% is primarily attributable to: (1) the impact related to existing valuation allowances associated with changes in net deferred tax assets from current earnings and losses and (2) the results from operations in jurisdictions outside the U.S.

[25]

For the six months ended June 30, 2021, the difference between Kodak’s effective tax rate and the U.S. statutory rate of 21.0% is primarily attributable to: (1) the impact related to existing valuation allowances associated with changes in net deferred tax assets from current earnings and losses, (2) the results from operations in jurisdictions outside the U.S., (3) a benefit associated with foreign withholding taxes on undistributed earnings and (4) changes in audit reserves, including a settlement with a taxing authority in a location outside the U.S.

During the quarter ended March 31, 2021, Kodak agreed to terms with a taxing authority outside the U.S. and settled open tax audits for years through 2014. For these years, Kodak originally recorded liabilities for unrecognized tax positions totaling $3 million (plus interest of approximately $4 million), which were substantially offset by pre-paid assets.

For the three months ended June 30, 2020, the difference between Kodak’s effective tax rate and the U.S. statutory rate of 21.0% is primarily attributable to: (1) the impact related to existing valuation allowances associated with changes in net deferred tax assets from current earnings and losses, (2) the results from operations in jurisdictions outside the U.S. and (3) a provision associated with foreign withholding taxes on undistributed earnings.

~~[24]~~

For the ~~nine~~six months ended ~~September~~June 30, 2020, the difference between Kodak’s effective tax rate and the U.S. statutory rate of 21.0% is primarily attributable to: (1) a provision of $167 million associated with the establishment of valuation allowances in certain outside U.S. jurisdictions, (2) the impact related to existing valuation allowances associated with changes in net deferred tax assets from current earnings and losses and (3) the results from operations in jurisdictions outside the ~~U.S, (4) a provision associated with foreign withholding taxes on undistributed earnings and (5) changes in audit reserves.~~U.S.

Kodak establishes valuation allowances for deferred income tax assets in accordance with U.S. GAAP, which provides that such valuation allowances shall be established unless realization of the income tax benefits is more likely than not. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. At each reporting period, Kodak considers the scheduled reversal of deferred tax liabilities and assets, available taxes in carryback periods, tax planning strategies and projected future taxable income in making this assessment.

As of December 31, 2019, Kodak’s deferred tax asset valuation allowance was $821 million. Of this amount, $168 million was attributable to the Company’s net deferred tax assets outside the U.S. of $322 million, and $653 million related to the Company’s net deferred tax assets in the U.S. of $633 million, for which Kodak believed it was more likely than not that the assets would not be realized.

~~As of~~ March 31, 2020, Kodak determined that it was more likely than not that deferred tax assets outside the U.S. which were not offset with valuation allowances as of March 31, 2020 would not be realized due to reductions in estimates of future profitability as a result of the COVID-19 pandemic in locations outside the U.S. Accordingly, Kodak recorded a provision of $167 million associated with the establishment of a valuation allowance on those deferred tax assets.

OnAdditionally, on February 21, 2020, Kodak agreed to terms with the IRS and settled the federal audit for calendar years 2013 and 2014. For these years, Kodak originally recorded a federal unrecognized tax position totaling $41 million, which was fully offset by tax attributes. This settlement resulted in an increase in net deferred tax assets and was fully offset by a corresponding increase in Kodak’s U.S. valuation allowance, resulting in no net tax benefit.

For the three months ended September 30, 2019, the difference between Kodak’s effective tax rate and the U.S. statutory rate of 21.0% is primarily attributable to: (1) the impact related to existing valuation allowances associated with changes in net deferred tax assets from current earnings and losses, (2) the results from operations in jurisdictions outside the U.S., (3) a provision associated with the establishment of a deferred tax asset valuation allowance outside the U.S. and (4) a benefit associated with foreign withholding taxes on undistributed earnings.

For the nine months ended September 30, 2019, the difference between Kodak’s effective tax rate and the U.S. statutory rate of 21.0% is primarily attributable to: (1) the impact related to existing valuation allowances associated with changes in net deferred tax assets from current earnings and losses, (2) the results from operations in jurisdictions outside the U.S., (3) a provision associated with the establishment of a deferred tax asset valuation allowance outside the U.S. and (4) changes in audit reserves.

~~NOTE 17: RESTRUCTURING LIABILITIES~~

Charges for restructuring activities are recorded in the period in which Kodak commits to a formalized restructuring plan, or executes the specific actions contemplated by the plan, and all criteria for liability recognition under the applicable accounting guidance have been met. Restructuring actions taken in the first nine months of 2020 were initiated to reduce Kodak’s cost structure as part of its commitment to drive sustainable profitability and included various targeted reductions in manufacturing, service, sales and other administrative functions.

~~[25]~~

~~Restructuring Reserve Activity~~

~~The activity in the accrued balances and the non-cash charges and credits incurred in relation to restructuring activities for the nine months ended September 30, 2020 were as follows:~~

(in millions)

Severance
Reserve ⁽¹⁾

Exit
Costs
Reserve ⁽¹⁾

Long-lived Asset
Impairments and
Inventory
Write-downs ⁽¹⁾

Total

Balance as of December 31, 2019

$
11

$
1

$
—

$
12

Q1 charges

6

1

—

7

Q1 utilization/cash payments

(7
)

—

—

(7
)
Q1 other adjustments and reclasses ⁽²⁾

(1
)

(1
)

—

(2
)
Balance as of March 31, 2020

$
9

$
1

$
—

$
10

Q2 charges

$
1

$
—

$
—

$
1

Q2 utilization/cash payments

(3
)

—

—

(3
)
Balance as of June 30, 2020

$
7

$
1

$
—

$
8

Q3 charges

$
1

$
—

$
—

$
1

Q3 utilization/cash payments

(3
)

—

—

(3
)
Balance as of September 30, 2020

$
5

$
1

$
—

$
6

⁽¹⁾	~~The severance and exit costs reserves require the outlay of cash, while long-lived asset impairments and inventory write-downs represent non-cash items.~~

⁽²⁾	~~Includes $(1) million of severance charges funded from pension plan assets, which were reclassified to Pension and other postretirement liabilities and $(1) million of currency translation impacts.~~

The $1 million and $9 million of charges for the three and nine months ended September 30, 2020, respectively, were reported as Restructuring costs and other in the Consolidated Statement of Operations.

The severance costs for the 3 months ended September 30, 2020 related to the elimination of approximately 40 positions including approximately 5 manufacturing/service positions and 35 administrative positions. The geographic composition of these positions includes approximately 35 in the U.S. and Canada and 5 throughout the rest of the world. The severance costs for the nine months ended September 30, 2020 related to the elimination of approximately 130 positions including approximately 25 manufacturing/service positions, and 105 administrative and sales positions. The geographic composition of these positions includes approximately 75 in the U.S. and Canada and 55 throughout the rest of the world.

~~As a result of these initiatives, the majority of the severance will be paid during periods through the end of the year.~~

[26]

NOTE ~~18:~~14: RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

Components of the net periodic benefit cost for all major U.S. and non-U.S. defined benefit plans are as follows:

	Three Months Ended												Nine Months Ended												Three Months Ended												Six Months Ended
	September 30,												September 30,												June 30,												June 30,
	2020						2019						2020						2019						2021						2020						2021						2020
(in millions)	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Major defined benefit plans:
Service cost	$	2		$	1		$	3		$	—		$	8		$	3		$	8		$	2		$	2		$	1		$	3		$	1		$	5		$	2		$	6		$	2
Interest cost		21			2			30			3			64			6			91			9			12			1			22			2			24			2			43			4
Expected return on plan assets		(48	)		(5	)		(53	)		(6	)		(146	)		(14	)		(160	)		(17	)		(42	)		(4	)		(49	)		(4	)		(84	)		(7	)		(98	)		(9	)
Amortization of:
Prior service credit		(2	)		—			(2	)		—			(5	)		—			(5	)		—			(1	)		—			(1	)		—			(3	)		—			(3	)		—
Actuarial loss		4			2			—			2			11			5			—			4			8			2			3			1			15			4			7			3
Net pension income before special termination benefits		(23	)		—			(22	)		(1	)		(68	)		—			(66	)		(2	)
Net pension (income) expense before special termination benefits																										(21	)		—			(22	)		—			(43	)		1			(45	)		—
Special termination benefits		1			—			—			—			2			—			2			—			—			—			—			—			—			—			1			—
Curtailment gain		—			—			—			—			—			—			(2	)		—
Net pension income from major plans		(22	)		—			(22	)		(1	)		(66	)		—			(66	)		(2	)
Net pension (income) expense from major plans																										(21	)		—			(22	)		—			(43	)		1			(44	)		—
Other plans		—			—			—			—			—			1			—			(4	)		—			—			—			—			—			—			—			1
Total net pension (income) expense	$	(22	)	$	—		$	(22	)	$	(1	)	$	(66	)	$	1		$	(66	)	$	(6	)	$	(21	)	$	—		$	(22	)	$	—		$	(43	)	$	1		$	(44	)	$	1

For the ~~three and nine~~six months ended ~~September~~June 30, 2020 ~~and 2019~~ the special termination benefits ~~charges~~ were incurred as a result of Kodak’s restructuring actions and have been included in Restructuring costs and other in the Consolidated Statement of Operations for ~~those periods.~~that period.

~~[27]~~

NOTE ~~19:~~15: EARNINGS PER SHARE

Basic earnings per share computations are based on the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share include any dilutive effect of potential common shares. In periods with a net loss ~~from continuing operations~~ available to common shareholders, diluted earnings per share are calculated using weighted-average basic shares for that period, as utilizing diluted shares would be anti-dilutive to loss per share.

A reconciliation of the amounts used to calculate basic and diluted earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2020

2019

2020

2019

Loss from continuing operations

$
(445
)

$
(10
)

$
(561
)

$
(28
)
Less: Series A convertible preferred stock cash dividend

(2
)

(2
)

(8
)

(8
)
Less: Series A convertible preferred stock deemed dividend

(3
)

(3
)

(7
)

(7
)
Loss from continuing operations available to common
shareholders - basic and diluted

$
(450
)

$
(15
)

$
(576
)

$
(43
)

Net (loss) income

$
(445
)

$
(5
)

$
(561
)

$
178

Less: Series A convertible preferred stock cash dividend

(2
)

(2
)

(8
)

(8
)
Less: Series A convertible preferred stock deemed dividend

(3
)

(3
)

(7
)

(7
)
Net (loss) income available to common shareholders
- basic and diluted

$
(450
)

$
(10
)

$
(576
)

$
163

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in millions)	2021			2020			2021			2020
Net income (loss)	$	16		$	(5	)	$	22		$	(116	)
Less: Series B preferred stock cash and deemed dividends		(1	)		—			(2	)		—
Less: Series C preferred stock in-kind and deemed dividends		(2	)		—			(2	)		—
Less: Series A preferred stock cash and deemed dividends		—			(5	)		(3	)		(10	)
Plus: Expiration of Series A preferred stock embedded derivative		—			—			11			—
Net income (loss) available to common shareholders - basic	$	13		$	(10	)	$	26		$	(126	)

Effect of dilutive securities:
Add back: Series B preferred stock cash and deemed dividends	$	1		$	—		$	2			—
Add back: Series C preferred stock cash and deemed dividends		2			—			2			—
Net income (loss) available to common shareholders - diluted	$	16		$	(10	)	$	30		$	(126	)

[27]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions of shares)	2021		2020		2021		2020
Weighted average shares — basic		78.5		43.7		78.2		43.7
Effect of dilutive securities
Series B preferred stock		9.5		—		6.5		—
Series C preferred stock		10.0		—		6.4		—
Employee stock options		2.0		—		2.2		—
Unvested restricted stock units		0.6		—		0.6		—
Weighted average shares — diluted		100.6		43.7		93.9		43.7

(in millions of shares)

Weighted average shares — basic and diluted

64.8

43.0

50.8

43.0

The computation of diluted earnings per share for the three and six months ended June 30, 2021 excluded the impact of (1) the assumed conversion of $25 million of Convertible Notes issued in 2021, (2) the assumed exercise of 3.2 million of outstanding employee stock options in both periods and (3) the assumed vesting of 0.3 million unvested restricted stock units in both periods because the effects would have been anti-dilutive.

As a result of the net loss ~~from continuing operations~~ available to common shareholders for the three and ~~nine~~six months ended ~~September~~June 30, 2020, ~~and 2019,~~ Kodak calculated diluted earnings per share using weighted-average basic shares outstanding. If Kodak reported ~~earnings from continuing operations~~income available to common shareholders for the three and ~~nine~~six months ended ~~September~~June 30, 2020 ~~and 2019,~~ the calculation of diluted earnings per share for both periods would have included the assumed ~~conversion~~vesting of ~~0.6 million and~~ 0.5 million unvested restricted stock units for the three and nine months ended September 30, 2020, respectively and 0.6 million unvested restricted stock units for the both periods in 2019. The calculation of diluted earnings per share would have also included the assumed conversion of 1.2 million outstanding employee stock options.units.

The computation of diluted earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, 2020 ~~and 2019~~ also excluded the impact of (1) the assumed conversion of 2.0 million shares of Series A Preferred Stock, (2) the assumed ~~conversion~~exercise of 7.1 million outstanding employee stock options ~~of 3.1 million~~in both periods and ~~3.6 million for three and nine months ended September 30, 2020, respectively and 8.9 million and 9.0 million for the three and nine months ended 2019, respectively and the~~ (3) ~~for the three and nine months ended September 30, 2019~~ the assumed conversion of $100 million of Convertible Notes issued in 2019 because the effects would have been anti-dilutive.

NOTE ~~20:~~16: STOCK-BASED COMPENSATION

~~Kodak’s~~On February 26, 2021 James V. Continenza, Executive Chairman and Chief Executive Officer of Kodak, and the Company entered into an Executive Chairman and CEO Agreement (the “New Employment Agreement”). The New Employment Agreement is effective for a three-year period beginning on February 26, 2021. Pursuant to the New Employment Agreement, Mr. Continenza will not have the right to exercise any stock ~~incentive plan~~options granted to him in February 2019 or July 2020 to the extent that, after giving effect to the issuance of the Company’s common stock resulting from such exercise, Mr. Continenza (together with his affiliates and any person acting as a group), would beneficially own more than 4.99% of the then issued and outstanding shares of Common Stock (the “Beneficial Ownership Limitation”). The Beneficial Ownership Limitation shall cease and be of no further force and effect upon a Change of Control (as such term is defined in the Company’s Amended and Restated 2013 Omnibus Incentive ~~Plan (the “2013 Plan”)~~Plan).The ~~2013 Plan is administered by the Compensation Nominating and Governance Committee of the Board of Directors.~~

Officers, directors and employees of the Company and its consolidated subsidiaries are eligible to receive awards. Stock options are generally non-qualified, are at exercise prices equal to or greater than the closing price of Kodak’s stockrestrictions on the ~~date~~exercisability of grant and expire seven years after the grant date. Stock-based compensation awards granted under Kodak’s stock incentive plan are generally subject to a three-year vesting period from the date of grant, or a later date as determined by the Compensation Nominating and Governance Committee. Awards are subject to settlement in newly-issued shares of common stock. Unless sooner terminated by the Compensation Nominating and Governance Committee, no awards may be granted under the 2013 Plan after May 20, 2030.

The maximum number of shares of common stock subject to awards under the 2013 Plan is 8.0 million. In addition, under the 2013 Plan, the maximum number of shares available for the grant of incentive stock options is 2.0 million shares. The maximum number of shares as to which stock options or stock appreciation rights may be granted to any one person under the 2013 Plan in any calendar year is 2.5 million shares.

The maximum number of awards that may be granted to any non-employee director under the 2013 Plan in any calendar year may not exceed a number of awards with a grant date fair value of $450,000, computed as of the grant date.

~~[28]~~

Compensation expense is recognized on a straight-line basis over the service or performance period for each separately vesting tranche of the award and is adjusted for actual forfeitures before vesting. Kodak assesses the likelihood that performance-based shares will be earned based on the probability of meeting the performance criteria. For those performance-based awards that are deemed probable of achievement, expense is recorded, and for those awards that are deemed not probable of achievement, no expense is recorded. Kodak assesses the probability of achievement each quarter.

~~Restricted Stock Units~~

Restricted stock units are payable in shares of the Company common stock upon vesting. The fair value is based on the closing market price of the Company’s stock on the grant date. Compensation cost related to restricted stock units was $1 million and $2 million for the nine months ended September 30, 2020 and 2019, respectively.

The weighted average grant date fair value of restricted stock unit awards granted for the nine months ended September 30, 2020 and 2019 was $2.91 and $2.85, respectively. The total fair value of restricted stock units that vested was $2 million for both the nine months ended September 30, 2020 and 2019. As of September 30, 2020 , there was $0.4 million of unrecognized compensation cost related to restricted stock units. The cost is expected to be recognized over a weighted average period of 0.3 years.

~~The following table summarizes information about restricted stock unit activity for the nine months ended September 30, 2020:~~

Number of
Restricted
Stock Units

Weighted-Average
Grant Date
Fair Values

Outstanding on December 31, 2019

721,801

$
3.25

Granted

351,909

$
2.91

Vested

692,751

$
3.05

Outstanding on September 30, 2020

380,959

$
3.31

~~Stock Options~~

~~The following table summarizes information about~~previous stock option ~~activity for the nine months ended September 30, 2020:~~

Shares
Under
Option

Weighted Average
Exercise
Price
Per Share

Weighted Average
Remaining
Contractual Life
(Years)

Aggregate
Intrinsic
Value
($ millions)

Outstanding on December 31, 2019

6,843,079

$
10.96

Granted

2,917,464

$
5.86

Exercised

2,019,187

$
14.51

Forfeited

27,075

$
12.50

Outstanding on September 30, 2020

7,714,281

$
8.09

5.09

$
23

Exercisable on September 30, 2020

6,858,431

$
8.49

4.91

$
19

Expected to vest September 30, 2020

855,850

$
4.91

6.52

$
4

The aggregate intrinsic value represents the total pretax intrinsic value that option holders would have received had all option holders exercised their options on the last trading day of the period. The aggregate intrinsic valueawards is ~~the difference between the Kodak closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options.~~

The Company issued stock-based compensation grants for 2.4 million stock options on July 27, 2020. The terms of 1.8 million of the options awarded on July 27, 2020 provided for immediate vesting or vesting upon conversion of the Notes. As 100% of the Notes were converted during the three months ended September 30, 2020, the 1.8 million options with accelerated vesting terms vested in that same period. The remaining 0.6 million options provide for vesting terms of between two and three years. The valuation of the stock options granted on July 27, 2020 resulted in approximately $11.8 million of compensation expense being recognized in the three months ended September 30, 2020, which was reported in Selling, general and administrative expenses in the Consolidated Statement of Operations.

There were approximately 2.0 million options exercised in the nine months ended September 30, 2020. The options exercised in 2020 included 0.3 million options exercised by ex-employees of Kodak that had previously been forfeited. The Company issued shares to the ex-employees in exchange for proceeds based on the exercise prices of the forfeited options. The Company is accounting for the exercise of the forfeited options as a modification of the original awards.

As the February 2019 and July 2020 stock options were fully vested prior to the modification date and there was 0 incremental value provided in the modification, 0 additional compensation expense was recognized. Also pursuant to the New Employment Agreement, Mr. Continenza was granted 200,000 fully vested restricted stock units. The Company recognized $2 million of stock-based compensation expense associated with the grant of approximately $5.1 million in the three months ended September 30, 2020, related to the 0.3 million previously forfeited options representing the fair value of the shares issued to the ex-employees less the exercise proceeds received from the ex-employees, which is reported in Selling, general and administrative expenses in the Consolidated Statement of Operations.

~~[29]~~

~~The Company is seeking to recover the fair value of the shares at the time of the sale of the shares by the ex-employees less the exercise proceeds and withholding (approximately $3.9~~ million) and the right to retain any refund of the withholding taxes the Company is seeking to obtain on behalf of the ex-employees (approximately $3.0 million). There are no assurances the Company will be successful in its claims against the ex-employees or in its recovery of the withholding taxes.

The weighted average grant date fair value of options granted for the nine months ended September 30, 2020 and 2019 was $8.91 and $2.47, respectively. The total fair value of options that vested during the nine months ended September 30, 2020 and 2019 was $13 million and $7 million, respectively. Compensation cost related torestricted stock ~~options for the nine months ended September 30, 2020 and 2019 was $18 million and $4 million, respectively.~~units.

~~As of September 30, 2020, there was $3.9 million of unrecognized compensation cost related to stock options. The cost is expected to be recognized over a weighted average period of 1.7 years.~~

~~Other than for the awards granted on July 27, 2020, Kodak utilizes the Black-Scholes option valuation model to estimate the fair value of stock options.~~

The expected term of options granted is the period of time the options are expected to be outstanding and is calculated using a simplified method based on the option’s vesting period and original contractual term. The Company used only the historical volatility of the Company’s stock to estimate expected volatility. The risk-free rate was based on the yield on U.S. Treasury notes with a term equal to the option’s expected term.

~~The following inputs were used in the Black-Scholes valuation of option grants issued in each period:~~

Nine Months Ended

September 30,

2020

2019

Weighted-average fair value of options granted

$
1.50

$
1.73

Risk-free interest rate

2.43%

2.47%

Expected option lives

3.7 years

4.5 years

Expected volatility

98%

90%

Expected dividend yield

0.00%

0.00%

Given the recent volatility of the Company’s stock price, the Company utilized a lattice-based valuation model to value the time-based vesting awards granted July 27, 2020 and a Monte Carlo simulation valuation model to value the options granted on July 27, 2020 which vested upon conversion of the Notes.

~~The following inputs were used in the lattice-based valuation of the July 27, 2020 option grants:~~

July 27, 2020

Option Awards

Weighted-average fair value of options granted

$
6.57

Range of risk-free interest rates

0.11% -0.30%

Weighted-average term

5.57 years

Weighted-average volatility

98%

Weighted-average expected dividend yield

0.00%

NOTE ~~21:~~17: SHAREHOLDERS’ EQUITY

The Company has 560 million shares of authorized stock, consisting of: (i) 500 million shares of common stock, par value $0.01 per share and (ii) 60 million shares of preferred stock, no par value, issuable in one or more series.

Common Stock

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~77.3~~78.5 million and ~~43.2~~77.2 million shares of common stock outstanding, ~~respectively,~~respectively. In the three months ended March 31, 2021 the Company issued 1.0 million shares of common stock pursuant to the Securities Purchase Agreement. Refer to Note 5, “Debt and Finance Leases” for information on the Securities Purchase Agreement.

Preferred Stock

Preferred stock issued and outstanding as of June 30, 2021 consisted of 1.0 million shares of Series B Preferred Stock and 1.0 million shares of Series C Preferred Stock. Preferred stock issued and outstanding as of December 31, 2020 consisted of 2.0 million shares of Series A Preferred ~~Stock issued and outstanding. In~~Stock. Refer to Note 6, “Redeemable, Convertible Preferred Stock” for information on the ~~three months ended September 30, 2020 the Company issued a total of 31.5 million shares for the conversion of the Notes and 2.0 million shares with the exercise of stock options.~~ changes in preferred stock.

Treasury Stock

Treasury stock consisted of approximately 0.8 million shares and 0.7 million shares as of ~~both September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

[~~30]~~28]

NOTE ~~22:~~18: OTHER COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

The changes in Other comprehensive income (loss) ~~income,~~, by component, were as follows:

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(in millions)	2020			2019			2020			2019			2021			2020			2021			2020
Currency translation adjustments	$	(1	)	$	(2	)	$	(17	)	$	2		$	4		$	(4	)	$	3		$	(16	)
Pension and other postretirement benefit plan changes
Newly established net actuarial gain		—			—			6			5
Newly established net actuarial (loss) gain														—			5			(1	)		6
Tax Provision		—			—			—			(2	)		—			—			—			—
Newly established net actuarial gain, net of tax		—			—			6			3
Newly established net actuarial (loss) gain, net of tax														—			5			(1	)		6
Reclassification adjustments:
Amortization of prior service credit ^(a)(1)		(2	)		(2	)		(6	)		(6	)		(2	)		(2	)		(4	)		(4	)
Amortization of actuarial losses ^(a)(1)		5			1			15			3			10			5			19			10
Recognition of losses (gains) due to curtailments and settlements		—			—			1			(2	)		—			1			—			1
Total reclassification adjustments		3			(1	)		10			(5	)		8			4			15			7
Tax provision		—			—			(1	)		—			—			—			—			(1	)
Reclassification adjustments, net of tax		3			(1	)		9			(5	)		8			4			15			6
Pension and other postretirement benefit plan changes, net of tax		3			(1	)		15			(2	)		8			9			14			12
Other comprehensive income (loss)	$	2		$	(3	)	$	(2	)	$	—		$	12		$	5		$	17		$	(4	)

^(a)(1)

Reclassified to Total Net Periodic Benefit Cost - refer to Note ~~18,~~14, "Retirement Plans and Other Postretirement Benefits".

NOTE ~~23:~~19: SEGMENT INFORMATION

~~Change in Segments~~

~~Effective January 1, 2020~~ Kodak ~~changed its organizational structure. Prepress Solutions, formerly part of the Print Systems segment, operates as a separate segment named the~~has four reportable segments: Traditional Printing, ~~segment. Electrophotographic Printing Solutions, formerly part of the Print Systems segment, was combined with the Enterprise Inkjet Systems segment and Kodak Software segment to form the~~ Digital Printing, ~~segment. The Brand, Film and Imaging segment, except for the licensing of the Kodak brand to third parties, was combined with the Advanced Materials and 3D Printing segment to form the~~ Advanced Materials and Chemicals ~~segment. The licensing of the Kodak brand to third parties operates as a separate segment named the Brand segment. The Eastman Business Park segment is no longer a reportable segment.~~and Brand. A description of Kodak’s reportable segments follows.

Traditional Printing: The Traditional Printing segment is comprised of Prepress Solutions.

Digital Printing: The Digital Printing segment is comprised of four lines of business: the Electrophotographic Printing Solutions business, the Prosper business, the Versamark business and the Kodak Software business.

Advanced Materials and Chemicals: The Advanced Materials and Chemicals segment is comprised of ~~five~~four lines of business: Industrial Film and Chemicals, Motion Picture, Advanced Materials and Functional Printing ~~Technology~~ and Kodak Services for Business. Kodak Services for Business was sold to Swiss Post Solutions in December 2020.

Brand: The Brand segment contains the brand licensing business.

All Other: All Other is comprised of the operations of the Eastman Business Park, a more than 1,200-acre technology center and industrial ~~complex.~~complex.

~~[31]~~

Segment financial information is shown below:

Segment Revenues

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(in millions)	2020		2019		2020		2019		2021		2020		2021		2020
Traditional Printing	$	146	$	187	$	419	$	534	$	169	$	119	$	317	$	273
Digital Printing		56		70		173		211		62		52		126		117
Advanced Materials and Chemicals		44		53		124		153		54		38		100		80
Brand		3		3		8		8		3		2		6		5
All Other		3		2		8		7		3		2		7		5
Consolidated total	$	252	$	315	$	732	$	913	$	291	$	213	$	556	$	480

[29]

Segment Operational EBITDA and Consolidated ~~Loss~~Income (Loss) from ~~Continuing~~ Operations Before Income Taxes

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(in millions)	2020			2019			2020			2019			2021			2020			2021			2020
Traditional Printing	$	5		$	21		$	7		$	36		$	6		$	1		$	11		$	2
Digital Printing		(3	)		(3	)		(8	)		(9	)		—			(3	)		—			(5	)
Advanced Materials and Chemicals		(6	)		(6	)		(22	)		(24	)		1			(7	)		(3	)		(16	)
Brand		3			2			7			5			3			2			5			4
Total of reportable segments		(1	)		14			(16	)		8			10			(7	)		13			(15	)
All Other		—			—			—			(1	)		1			1			1			—
Depreciation and amortization		(9	)		(14	)		(29	)		(43	)		(8	)		(10	)		(16	)		(20	)
Restructuring costs and other		(1	)		(3	)		(9	)		(7	)		—			(1	)		(1	)		(8	)
Stock based compensation		(17	)		(1	)		(18	)		(6	)		(1	)		—			(4	)		(1	)
Consulting and other costs ⁽¹⁾		(4	)		(2	)		(5	)		(7	)		(4	)		(1	)		(9	)		(1	)
Idle costs ⁽²⁾		(1	)		(1	)		(2	)		(4	)		—			(1	)		(1	)		(1	)
Former CEO separation agreement compensation		—			—			—			(2	)
Other operating (loss) income, net, excluding income from transition services agreement ⁽³⁾		—			(12	)		6			(14	)
Other operating income, net, excluding income from transition services agreement ⁽³⁾														6			—			7			6
Interest expense ⁽⁴⁾		(3	)		(4	)		(11	)		(12	)		(10	)		(4	)		(14	)		(8	)
Pension income excluding service cost component ⁽⁴⁾		26			26			79			79			26			27			51			53
Loss on early extinguishment of debt ⁽⁴⁾		(2	)		—			(2	)		—
Other charges, net ⁽⁴⁾		(432	)		(6	)		(387	)		(7	)
Consolidated loss from continuing operations before income taxes	$	(444	)	$	(3	)	$	(394	)	$	(16	)
Other (charges) income net ⁽⁴⁾														(1	)		(8	)		(1	)		45
Consolidated income (loss) from operations before income taxes													$	19		$	(4	)	$	26		$	50

Kodak increased workers’ compensation reserves by approximately $9 million and $2 million in the third quarters of 2020 and 2019, respectively, driven by changes in discount rates. The increase in reserves in the third quarter of 2020 impacted gross profit by approximately $6 million, SG&A by approximately $2 million and R&D by approximately $1 million. The increase in reserves in the third quarter of 2019 impacted gross profit by approximately $1 million and SG&A by approximately $1 million.

⁽¹⁾

Consulting and other costs are primarily professional services and internal costs associated with certain corporate strategic initiatives and investigations.

⁽²⁾

Consists of costs such as security, maintenance and utilities required to maintain land and buildings in certain locations not used in any Kodak operations and the costs, net of any rental income received, of underutilized portions of certain properties.

⁽³⁾

$12 million and $2$4 million of income from the transition services agreement with the ~~Purchaser~~purchaser of Kodak’s Flexographic Packaging Business was recognized in the three and six months ended ~~September~~June 30, 2020, ~~and 2019 Transition services~~respectively. NaN income ~~of $5 million and $4 million was~~has been recognized in ~~the nine months ended September 30, 2020 and 2019, respectively.~~2021. The income was reported in Other operating ~~(income) expense,~~income, net in the Consolidated Statement of Operations. Other operating ~~(income) expense,~~income, net is typically excluded from the segment measure. However, the income from the transition services agreement was included in the segment measure.

⁽⁴⁾

As reported in the Consolidated Statement of Operations.

~~[32]~~

Kodak decreased workers’ compensation reserves by approximately $3 million in the second quarter of 2021 driven by changes in discount rates. The decrease in reserves in the second quarter of 2021 impacted gross profit by approximately $2 million and selling, general and administrative expenses (“SG&A”) by approximately $1 million.

Segment Measure of Profit and Loss

Kodak’s segment measure of profit and loss is an adjusted earnings before interest, taxes, depreciation and amortization (“Operational EBITDA”).

As demonstrated in the above table, Operational EBITDA represents the earnings (loss) from ~~continuing~~ operations excluding the provision for income taxes; non-service cost components of pension and ~~OPEB~~other postemployment benefits (“OPEB”) income; depreciation and amortization expense; restructuring costs; stock-based compensation expense; consulting and other costs; idle costs; ~~former Chief Executive Officer (“CEO”) separation agreement compensation;~~ other operating ~~(loss)~~ income, net (unless otherwise indicated); interest ~~expense; loss on early extinguishment of debt~~expense and other ~~charges,~~(charges) income, net.

Kodak’s segments are measured using Operational EBITDA both before and after allocation of corporate ~~selling, general and administrative expenses (“~~SG~~&A”).~~&A. The segment earnings measure reported is after allocation of corporate SG&A as this most closely aligns with U.S. GAAP. Research and Development activities not directly related to the other segments are reported within the Advanced Materials and Chemicals segment.

[30]

~~NOTE 24: DISCONTINUED OPERATIONS~~

~~Discontinued operations of Kodak include the former Flexographic Packaging segment comprised of Kodak’s Flexographic Packaging Business (“FPD”).~~

Kodak consummated the sale of certain assets of FPD to the Purchaser on April 8, 2019 for net cash consideration at closing, in addition to the assumption by Purchaser of certain liabilities of FPD, of $320 million, pursuant to the Stock and Asset Purchase Agreement (“SAPA”) signed in November 2018 and amended in March 2019. Assets and liabilities of FPD in China were transferred at a deferred closing on July 1, 2019 for net cash consideration of $5.9 million at closing and a promissory note for $1.4 million in addition to the assumption by Purchaser of certain liabilities of FPD, in accordance with the SAPA. Kodak operated FPD in China, subject to certain covenants, until the deferred closing occurred. The promissory note was reduced by a true-up payment of $0.2 million owed by Kodak to the Purchaser which reflected the actual economic benefit attributable to the operation of FPD in China from the time of the initial closing through the time of the deferred closing.

~~Kodak recognized an after- tax gain on the sale of FPD of $212 million in the nine months ended September 30, 2019 and the year ended December 31, 2019.~~

The results of operations of FPD are classified as discontinued operations in the Consolidated Statement of Operations for all periods presented. Direct operating expenses of the discontinued operations are included in the results of discontinued operations. Indirect expenses that were historically allocated to the discontinued operations have been included in the results of continuing operations.

~~The results of operations of FPD are presented below:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2020

2019

2020

2019

Revenues

$
—

$
—

$
—

$
44

Cost of revenues

—

—

—

28

Selling, general and administrative expenses

—

—

—

10

Research and development costs

—

—

—

2

Interest expense

—

—

—

7

Gain on divestiture

—

(4
)

—

(214
)
Income from discontinued operations before taxes

—

4

—

211

Provision for income taxes

—

(1
)

—

5

Income from discontinued operations

$
—

$
5

$
—

$
206

After the initial closing, Kodak was required to use a portion of the proceeds from the sale of FPD to repay $312 million of the loans under the Term Credit Agreement. Interest expense on debt that was required to be repaid as a result of the sale was allocated to discontinued operations.

NOTE ~~25:~~20: FINANCIAL INSTRUMENTS

Kodak, as a result of its global operating and financing activities, is exposed to changes in foreign currency exchange rates and interest rates, which may adversely affect its results of operations and financial position. Kodak manages such exposures, in part, with derivative financial instruments. Foreign currency forward contracts are used to mitigate currency risk related to foreign currency denominated assets and liabilities. Kodak’s exposure to changes in interest rates results from its investing and borrowing activities used to meet its liquidity needs. Kodak does not utilize financial instruments for trading or other speculative purposes.

Kodak’s foreign currency forward contracts are not designated as hedges and are marked to market through net income (loss) ~~earnings~~ at the same time that the exposed assets and liabilities are remeasured through net income (loss) ~~earnings~~ (both in Other ~~(income) charges,~~income, net in the Consolidated Statement of Operations).

~~[33]~~

The notional amount of such contracts open at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was approximately ~~$350~~$330 million and ~~$332~~$361 million, respectively. The majority of the contracts of this type held by Kodak as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are denominated in euros, ~~Japanese yen,~~ Chinese renminbi and ~~Swiss francs.~~Japanese yen.

The net effect of foreign currency forward contracts in the results of operations is shown in the following table:

	Three Months Ended					Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,					September 30,						June 30,						June 30,
(in millions)	2020			2019		2020			2019			2021			2020			2021		2020
Net (gain) loss from derivatives not designated as hedging instruments	$	(4	)	$	1	$	(6	)	$	(2	)	$	(1	)	$	(1	)	$	2	$	(2	)

Kodak had no0 derivatives designated as hedging instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

In the event of a default under the ~~ABL~~Company’s Credit ~~Agreement,~~Agreements, or a default under any derivative contract or similar obligation of Kodak, subject to certain minimum thresholds, the derivative counterparties would have the right, although not the obligation, to require immediate settlement of some or all open derivative contracts at their then-current fair value, but with liability positions netted against asset positions with the same counterparty.

As discussed in Note 8,5, “Debt and Finance Leases”, the Company concluded that the Convertible Notes ~~were~~are considered more akin to a debt-type instrument and that the economic characteristics and risks of the embedded conversion features ~~and term extension option were~~are not considered clearly and closely related to the Convertible Notes. The embedded conversion features not considered clearly and closely related are the conversion at the option of the holder (“Optional Conversion”), the mandatory conversion by Kodak (“Mandatory Conversion”) and the conversion in the event of a fundamental ~~change or reorganization~~transaction by the holder at the then applicable conversion rate (“Fundamental ~~Change or Reorganization Conversion”~~Change”). Accordingly, these embedded conversion features ~~and term extension option~~ were bifurcated from the Convertible Notes and separately accounted for on a combined basis as a single derivative asset or liability. The embedded conversion features and term extension option were revalued as of August 3, 2020, when the Initial Conversion Shares were issued, resulting in the recognition of $407 million of expense for a pro-rata portion of the embedded conversion features and term extension option. The remaining embedded conversion features and term extension option were revalued again as of the Mandatory Conversion date, resulting in the recognition of $9 million of net expense. With the conversion of the Notes in the third quarter of 2020, the embedded conversion features and term extension option expired. The derivative was in a liability position at ~~December 31, 2019~~June 30, 2021 and was reported in Other long-term liabilities in the Consolidated Statement of Financial Position. The derivative ~~was~~is being accounted for at fair value with changes in fair value reported in Other charges (income), net in the Consolidated Statement of Operations.

As discussed in Note 9,6, “Redeemable, Convertible, Preferred Stock”, the Company concluded that the Series AB Preferred Stock and the Series C Preferred Stock are considered more akin to a debt-type instrument and that the economic characteristics and risks of the conversion in the event of a Fundamental Change is not considered clearly and closely related to the Series B and Series C Preferred Stock. Accordingly, this embedded conversion feature was bifurcated from both the Series B and Series C Preferred Stock and both are separately accounted for as a single derivative asset or liability. Both derivatives were in a liability position at June 30, 2021 and were reported in Other long-term liabilities in the Consolidated Statement of Financial Position. The derivatives are being accounted for at fair value with changes in fair value reported in Other charges (income), net in the Consolidated Statement of Operations.

As discussed in Note 6, “Redeemable, Convertible, Preferred Stock”, the Company concluded that the Series A Preferred Stock iswas considered more akin to a debt-type instrument and that the economic characteristics and risks of the embedded conversion features, except where the conversion price was increased to the liquidation preference, were not considered clearly and closely related to the Series A Preferred Stock. The embedded conversion features not considered clearly and closely related are the conversion at the option of the holder (“Optional Conversion”); the ability of Kodak to automatically convert the stock after the second anniversary of issuance (“Mandatory Conversion”) and the conversion in the event of a fundamental change or reorganization (“Fundamental Change or Reorganization Conversion”). Accordingly, these embedded conversion features were bifurcated from the Series A Preferred Stock and separately accounted for on a combined basis as a single derivative asset or liability. The embedded conversion features were revalued as of February 26, 2021 when the Company repurchased 1 million of the Series A Preferred Stock and exchanged the remaining 1 million shares of Series A Preferred Stock for Series B Preferred Stock. The revaluation as of February 26, 2021 resulted in the recognition of $2 million of net expense which was reported in Other charges (income), net in the Consolidated Statement of Operations. With the repurchase and exchange of the shares of the Series A Preferred Stock the embedded conversion features derivative liability expired.

[31]

The derivative was in a liability position at ~~September 30, 2020 and~~ December 31, ~~2019~~2020 and was reported in Other ~~long-term~~current liabilities in the Consolidated Statement of Financial Position. The derivative iswas being accounted for at fair value with changes in fair value being reported in Other charges (income), net in the Consolidated Statement of Operations.

Fair Value

Fair values of Kodak’s foreign currency forward contracts are determined using observable inputs (Level 2 fair value measurements) and are based on the present value of expected future cash flows (an income approach valuation technique) considering the risks involved and using discount rates appropriate for the duration of the contracts. The gross fair value of foreign currency forward contracts in an asset position are reported in Other current assets and the gross fair value of foreign currency forward contracts in a liability position are reported in Other current liabilities in the Consolidated Statement of Financial Position. The gross fair value of forward contracts in an asset position as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$2 million and~~ $1 million ~~respectively.~~for both periods. The gross fair value of foreign currency forward contracts in a liability position as of ~~both September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was $1 million and $0 ~~million.~~ million, respectively.

Transfers between levels of the fair value hierarchy are recognized based on the actual date of the event or change in circumstances that caused the transfer. There were no transfers between levels of the fair value hierarchy during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

~~[34]~~

The fair value of the embedded conversion features ~~and term extension option for the Notes were revalued as of August 3, 2020, and again at September 30, 2020. The fair value of the embedded derivative at each conversion date~~derivatives was calculated based on the fair value of the shares issued less the fair value of debt. The fair value of shares issued is based on the weighted average stock price on the time of day the shares were transferred for August 3, 2020, and the closing stock price as of September 30, 2020. The fair value of debt is based on pricing models based on the value of related cash flows discounted at current market interest rates.

~~The following table presents the key inputs in the determination of fair value for the embedded conversion features and termination option derivatives at each conversion date:~~

Valuation Date

September 30,

August 3,

2020

2020

Total value of embedded derivative liability immediately
prior to any extinguishment ($ millions)

$
9

$
429

Value of embedded derivative that expired ($ million)

$
9

$
416

Value of remaining embedded derivative liability ($ million)

$
—

$
13

Kodak's stock price⁽¹⁾

$
8.82

$
16.91

Risk free rate

0.12
%

0.12
%
Yield on the Notes

8.93
%

9.47
%

⁽¹⁾

The closing stock price was used for the September 30, 2020 valuation. The weighted average stock price based on the time of day the shares were transferred was used for the August 3, 2020 valuation.

~~Except as discussed above for the fair value determined at the time of conversion, the fair value of the embedded conversion features and term extension option derivatives were~~ calculated using unobservable inputs (Level 3 fair measurements). The value of the ~~Optional Conversion~~embedded derivatives associated with ~~both~~ the Convertible Notes and Series A, Series B and Series C Preferred Stock ~~was~~were calculated using a binomial lattice model. The value of the term extension option reflected the probability weighted average value of the Notes using the original maturity date and a hypothetical extended maturity date, with all other contractual terms unchanged.

The following tables present the key inputs in the determination of fair value for the embedded conversion ~~features and termination option derivatives:~~features:

Convertible Notes:

	Valuation Date			Valuation Date
	December 31,						February 26,
	2019			June 30,			2021
Value of embedded derivative liability ($ million)	$	51
				2021			(Inception)
Total value of embedded derivative liability ($ millions)				$	10		$	12
Kodak's closing stock price	$	4.65		$	8.32		$	8.62
Expected stock price volatility		104.61	%		51.50	%		70.00	%
Risk free rate		1.58	%		0.86	%		0.80	%
Yield on the Notes		11.52	%
Implied credit spread on the Convertible Notes					17.57	%		18.25	%

Series B Preferred Stock:

	Valuation Date
				February 26,
	June 30,			2021
	2021			(Inception)
Total value of embedded derivative liability ($ millions)	$	1		$	1
Kodak's closing stock price	$	8.32		$	8.62
Expected stock price volatility		51.50	%		70.00	%
Risk free rate		0.86	%		0.80	%
Implied credit spread on the preferred stock		19.07	%		19.75	%

[32]

Series C Preferred Stock:

	Valuation Date
				March 30,			February 26,
				2021			2021
	June 30, 2021			(Inception - Final Sale)			(Inception - Initial Sale)
Total value of embedded derivative liability ($ millions)	$	2		$	1		$	1
Kodak's closing stock price	$	8.32		$	8.05		$	8.62
Expected stock price volatility		51.50	%		70.00	%		70.00	%
Risk free rate		0.86	%		0.94	%		0.80	%
Implied credit spread on the preferred stock		21.07	%		21.75	%		21.75	%

Series A Preferred Stock:

	Valuation Date						Valuation Date
	September 30,			December 31,			February 26,			December 31,
	2020			2019			2021			2020
Total value of embedded derivative liability ($ millions)	$	9		$	1		$	11		$	9
Kodak's closing stock price	$	8.82		$	4.65		$	8.62		$	8.14
Expected stock price volatility		146.96	%		104.61	%		137.53	%		133.44	%
Risk free rate		0.12	%		1.58	%		0.07	%		0.10	%
Yield on the preferred stock		13.13	%		16.27	%
Implied credit spread on the preferred stock								14.02	%		11.97	%

~~[35]~~

The Fundamental Change ~~and Reorganization Conversion~~ values at issuance were calculated as the difference between the total value of the Convertible Notes, Series B or Series AC Preferred Stock, as applicable, and the sum of the net present value of the cash flows if the Convertible Notes are repaid at their ~~initial~~ maturity date or Series AB and Series C Preferred Stock isare redeemed on ~~its fifth anniversary~~their redemption date and the values of the other embedded derivatives. The Fundamental Change ~~and Reorganization Conversion~~ values reduce the value of the embedded conversion features ~~and term extension option~~ derivative liability. Other than events that alter the likelihood of a fundamental change or reorganization event, the value of the Fundamental Change ~~and Reorganization Conversion~~ reflects the value as of the issuance date, amortized for the passage of time.

The fair values of long-term debt (Level 2 fair value measurements) are determined by reference to quoted market prices of similar instruments, if available, or by pricing models based on the value of related cash flows discounted at current market interest rates. The fair values of long-term borrowings were $277 million and $17 million ~~and $111 million~~ at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

The carrying values of cash and cash equivalents, restricted cash and the current portion of long-term debt approximate their fair values at both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

[~~36]~~33]

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report on Form 10-Q includes “forward–looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995.

Forward–looking statements include statements concerning Kodak’s plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, liquidity, investments, financing needs and business trends and other information that is not historical information. When used in this document, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “predicts,” “forecasts,” “strategy,” “continues,” “goals,” “targets,” or future or conditional verbs, such as “will,” “should,” “could,” or “may,” and similar expressions, as well as statements that do not relate strictly to historical or current facts, are intended to identify forward–looking statements. All forward–looking statements, including management’s examination of historical operating trends and data, 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. Important factors that could cause actual events or results to differ materially from the forward-looking statements include, among others, the risks and uncertainties described in more detail in the Company’s Annual Report on Form 10–K for the year ended December 31, ~~2019~~2020 under the headings “Business,” “Risk Factors,” “Legal Proceedings,” and/or “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources,” in the corresponding sections of this report on Form 10-Q and the Company’s quarterly ~~reports~~report on Form 10-Q for the ~~quarters~~quarter ended March 31, ~~2020 and June 30, 2020,~~2021, and in other filings the Company makes with the SEC from time to time, as well as the following:

~~Kodak’s ability to improve and sustain its operating structure, cash flow, profitability and other financial results;~~

•

Kodak’s ability to improve and sustain its operating structure, cash flow, profitability and other financial results;

~~Kodak’s ability to achieve cash forecasts, financial projections, and projected growth;~~

•

Kodak’s ability to achieve cash forecasts, financial projections, and projected growth;

~~Kodak’s ability to achieve the financial and operational results contained in its business plans;~~

•

Kodak’s ability to achieve the financial and operational results contained in its business plans;

~~Kodak’s ability to comply with the covenants in its ABL Credit Agreement;~~

•

Kodak’s ability to comply with the covenants in its various credit facilities;

~~Kodak’s ability to fund continued investments, capital needs and restructuring payments and service its Series A Preferred Stock and debt;~~

•

Kodak’s ability to fund continued investments, capital needs and restructuring payments and service its debt and Series B Preferred Stock and Series C Preferred Stock;

~~The impact of the global economic environment or medical epidemics such as the COVID-19 pandemic;~~

•

The impact of the global economic environment or medical epidemics such as the COVID-19 pandemic, including the restrictions and other actions implemented to fight the COVID-19 pandemic;

Whether the U.S. Development Finance Corporation approves and makes the potential $765 million loan to a subsidiary of the Company to support the launch of Kodak Pharmaceuticals and the impact of the circumstances relating to such potential loan and any related announcements, investigations, litigations and claims;

•

The impact of the investigations, litigations and claims arising out of the circumstances surrounding the DFC Announcement;

~~Changes in foreign currency exchange rates, commodity prices and interest rates;~~

•

The performance by third parties of their obligations to supply products, components or services to Kodak and the ability to address supply chain disruptions and continue to obtain raw materials and components available from single or limited sources of supply, which may be adversely affected by the COVID-19 pandemic;

~~Kodak’s ability to effectively anticipate technology trends and develop and market new products, solutions and technologies;~~

•

Changes in foreign currency exchange rates, commodity prices, interest rates and tariff rates;

~~Kodak’s ability to effectively compete with large, well-financed industry participants;~~

•

Kodak’s ability to effectively anticipate technology trends and develop and market new products, solutions and technologies;

Continued sufficient availability of borrowings and letters of credit under the ABL Credit Agreement, Kodak’s ability to obtain additional financing if and as needed and Kodak’s ability to provide or facilitate financing for its customers;

•

Kodak’s ability to effectively compete with large, well-financed industry participants;

~~The performance by third parties of their obligations to supply products, components or services to Kodak; and~~

•

Continued sufficient availability of borrowings and letters of credit under the Amended ABL Credit Agreement and L/C Facility Agreement, Kodak’s ability to obtain additional financing if and as needed and Kodak’s ability to provide or facilitate financing for its customers;

•

The potential impact of cyber-attacks and other data security incidents that disrupt Kodak’s operations; and

Kodak’s ability to effect strategic transactions, such as divestitures, acquisitions, strategic alliances and similar transactions, or to achieve the benefits sought to be achieved from such strategic transactions.

•

Kodak’s ability to effect strategic transactions such as acquisitions, strategic alliances, divestitures and similar transactions, or to achieve the benefits sought to be achieved from such strategic transactions.

There may be other factors that may cause Kodak’s actual results to differ materially from the forward–looking statements. All forward–looking statements attributable to Kodak or persons acting on its behalf apply only as of the date of this report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included or referenced in this document. 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, except as required by law.

[34]

OVERVIEW

Kodak is a global technology company focused on print, ~~and~~ advanced materials and chemicals. Kodak provides industry-leading hardware, software, consumables and services primarily to customers in commercial print, packaging, publishing, manufacturing and entertainment. Kodak is committed to environmental stewardship and ongoing leadership in developing sustainable solutions. ~~Its~~Kodak’s broad portfolio of superior products, responsive support and world-class research and development (“R&D”) make Kodak solutions a smart investment for customers looking to improve their profitability and drive growth.

~~[37]~~

Revenue ~~decreased $63~~increased $78 million (37%) and ~~$181~~$76 million (16%) when compared to the prior year quarter and year-to-date periods, respectively, ~~(20% in each period),~~ including the favorable impact of currency ($410 million and $19 million) in the current year quarter and ~~unfavorable impact of currency ($1 million) in the year- to-date period.~~year-to-date periods, respectively.

The film industry and segments within the print industry face competition from digital substitution. Kodak’s strategy is to:

Focus product investment in core competency areas of print and advanced materials, leveraging Kodak’s proprietary technologies to deliver technologically advanced products in the product goods packaging, graphic communications, and functional printing markets;

•

~~Grow revenues through a focus on customers across Kodak’s print divisions, increasing overall share;~~

•

Grow revenues through a focus on customers across Kodak’s print divisions, increasing overall share;

~~Promote the use of film and expand the applications of Kodak’s film and chemicals to best utilize the existing infrastructure; and~~

•

Promote the use of film and expand the applications of Kodak’s film and chemicals to best utilize the existing infrastructure; and

~~Continue to streamline processes to drive cost reductions and improve operating leverage.~~

•

Continue to streamline processes to drive cost reductions and improve operating leverage.

A discussion of opportunities and challenges related to Kodak’s strategy follows:

The COVID-19 pandemic had a material impact on current quarter and year-to-date sales. The duration and extent of demand declines and then recovery is unclear. Kodak has worked closely with government officials in the jurisdictions where it operates to keep its manufacturing facilities open. The manufacturing facilities have generally been operating at below normal capacity during the pandemic to date. Kodak has endeavored to address the recommended actions of government and health authorities to protect employees world-wide, with particular measures in place for those working in plants and distribution facilities. Kodak intends to continue to work with government authorities and implement employee safety measures so that the manufacturing and distribution of products during the pandemic can continue. However, uncertainty resulting from the pandemic could result in an unforeseen disruption to Kodak’s operations or supply chain. Kodak reduced operating costs, largely beginning in the second quarter of 2020, through the use of temporary furloughs and pay cuts (approximately $20 million) for its employees while operations are being negatively impacted by the COVID-19 pandemic.

The Company’s ABL Credit Agreement matures on May 26, 2021 and the Series A Preferred Stock must be redeemed on November 15, 2021 if not converted prior to then. Additionally, Kodak has significant ongoing cash requirements to fund operations, restructuring programs, pension and other postretirement obligations, and other obligations. Kodak’s plans to return to positive cash flow include growing revenues profitably, reducing operating expenses, continuing to simplify the organizational structure, generating cash from selling and leasing underutilized assets and paring investment in new technology by eliminating or delaying product development programs as needed.

Traditional Printing’s digital plate products include traditional digital plates and KODAK SONORA Process Free Plates.  SONORA Process Free Plates allow Kodak customers to skip the plate processing step prior to mounting plates on a printing press.  This improvement in the printing process saves time and costs for customers.  Also, SONORA Process Free Plates reduce the environmental impact of the printing process because they eliminate the use of chemicals (including solvents), water and power that is otherwise required to process a traditional plate.  While traditional digital plate offerings are experiencing pricing pressure, innovations in Kodak product lines which command premium prices, such as SONORA Process Free Plates, are expected to offset some of the long-term price erosion in the market and manufacturing efficiencies, excluding the negative impacts during the COVID-19 pandemic, are expected to mitigate the impact of revenue declines on earnings.  Traditional Printing revenues accounted for approximately 58% and 57%
•
The COVID-19 pandemic continues to impact Kodak’s operations.  While Kodak has experienced a substantial recovery of customer demand and volumes when compared to the prior year quarter, certain businesses are experiencing supply chain disruptions, shortages in materials and labor, and increased commodity and distribution costs. While these businesses have been able to meet current demand and have implemented numerous measures to mitigate these challenges, the full impact of the COVID-19 pandemic on Kodak’s operations and financial performance remains uncertain and will depend on the duration of the pandemic as well as other factors including, vaccination coverage, infection rates, the duration and effectiveness of the vaccines and their effectiveness against future variants.  Kodak continued to work closely with government and health officials in the jurisdictions where it operates to protect employees world-wide, with particular measures in place for those working in plants and distribution facilities. The manufacturing facilities have returned or are at close to normal capacity.  None of Kodak’s revenues for the three and nine months ended September 30, 2020.  Traditional Printing’s revenues decreased $41 million (22%) and $115 million (22%) compared with the prior year quarter and year-to-date periods, respectively.  The prior year period included $13 million of intellectual property licensing revenue associated with the strategic relationship established with HuaGuang in September 2019.  Excluding the $13 million of licensing revenue, revenues for the three and nine months ended September 30, 2020 declined $28 million and $102 million, primarily reflecting volume and pricing declines.  Segment earnings declined by $16 million (76%) and $29 million (81%) compared to the prior year quarter and year-to-date periods, respectively, reflecting the license revenue in the prior year, the impact of reduced volumes on manufacturing costs and revenue partially offset by operating cost reductions through the use of temporary furloughs and pay cuts.
~~None of the Traditional Printing segment’s~~ manufacturing facilities were ordered to close by governmental authorities.

•

Many of the segment’s customers around the globe continued to operate during the COVID-19 pandemic but at decreased volumes. ~~Therefore, demand for the segment’s products declined.~~ The Traditional Printing segment ~~may also be~~was impacted by supply chain disruptions and travel ~~restrictions. With~~restrictions and manufacturing volumes were reduced, primarily in 2020, in response to the decline in customer demand ~~manufacturing~~for the segment’s products. The segment has seen some recovery of volumes ~~were reduced.~~ ~~The~~starting in the later part of 2020 and continued improvement in customer demand in the first six months of 2021. However, certain markets in the printing industry are expectedto take longer to recover to pre-pandemic levels which makes the duration and extent of demand declines and then recovery is unclear. Manufacturing employees are being temporarily furloughed, as necessary, under reduced production plans. The segment is utilizing furloughs and pay-cuts for non-manufacturing employees in a way which will allow continued operation and product development.

~~[38]~~

In Digital Printing, the legacy VERSAMARK business is expected to continue to decline as a percentage of the segment’s total revenue as the PROSPER business grows. The PROSPER Inkjet Systems business is expected to continue to build profitability, excluding the negative impacts during the COVID-19 pandemic. Investment in the next generation technology, Ultrastream, is focused on the ability to ~~place~~ ~~Ultrastream writing systems in original equipment manufacturers~~offset increased commodity and ~~hybrid applications. Digital~~ Printing’s revenues decreased $14 million (20%) and $38 million (18%) compared with the prior year quarter and year-to-date periods, respectively, primarily reflecting volume declines. Despite the revenue declines, segment loss was flat compared to the prior year quarter and improved by $1 million (11%) compared to the prior year -to-date period driven by cost reductions.distribution costs through surcharges uncertain.

[35]

•

In Digital Printing, the PROSPER business is expected to grow as the legacy VERSAMARK business continues to decline as a percentage of the segment’s total revenue. The PROSPER Inkjet Systems business is expected to continue to build profitability, excluding the negative impacts during the COVID-19 pandemic. Investment in the next generation technology, Ultrastream, is focused on the ability to place Ultrastream writing systems in Kodak branded presses and in various original equipment manufacturers in applications ranging from commercial print to packaging. Digital Printing’s revenues improved compared with the prior year quarter, $10 million (19%) and year-to-date, $9 million (8%) periods primarily due to the impact of the pandemic on the prior year periods. Segment operations also improved by $3 million (100%) and $5 million (100%) compared to the prior year quarter and year-to-date periods.

~~None~~Many of the Digital Printing ~~segment’s manufacturing facilities were ordered to close by governmental authorities. Many of the segment’s~~segment customers around the globe continued to operate during the COVID-19 pandemic but at decreased volumes. ~~Therefore, demand for the segment’s products declined.~~ The Digital Printing segment ~~may also be~~was impacted by supply chain disruptions and travel ~~restrictions. With~~restrictions and manufacturing volumes were reduced, primarily in 2020, in response to the decline in customer demand ~~manufacturing~~for the segment’s products. The segment has seen some recovery of volumes ~~were reduced.~~ ~~The~~starting in the later part of 2020 and continued improvement in customer demand in the first six months of 2021; however, certain markets in the printing industry are expectedto take longer to recover to pre-pandemic levels which makes the duration and extent of demand declines and then recovery is unclear. Manufacturing employees are being temporarily furloughed, as necessary, under reduced production plans. The segment is utilizing furloughs and pay-cuts for non-manufacturing employees in a way which will allow continued operation and product development.uncertain.

Advanced Materials and Chemicals revenues declined $9 million (17%) and $29 million (19%) compared with the prior year quarter and year-to-date periods, respectively. The segment loss was flat compared to the prior year quarter and improved $2 million (8%) compared to the prior year year-to-date period, due to price increases on professional and consumer still photographic film and solvents as well as operating cost reductions. Kodak plans to continue promoting the use of film and chemicals to utilize as much manufacturing capacity as possible.

•

Advanced Materials and Chemicals revenues increased $16 million (42%) and $20 million (25%) compared with the prior year quarter and year-to-date periods, primarily due to the impact of the pandemic on the prior year periods. The segment results improved $8 million (114%) and $13 million (81%) compared to the prior year quarter and year-to-date periods, respectively. Kodak plans to continue promoting the use of film and chemicals to utilize as much manufacturing capacity as possible.

Advanced Materials and Chemicals ~~has~~ experienced adverse impacts from the COVID-19 pandemic in 2020, most notably in Motion Picture where the industry ~~has been~~was heavily impacted and productions in affected regions ~~have been~~were suspended. ~~None of the~~ ~~Advanced Materials and Chemicals~~ ~~segment’s manufacturing facilities were ordered to close by governmental authorities.~~ ~~However, each~~Each of the segment’s product lines was impacted by lowered demand and ~~may also be impacted by~~travel restrictions. The segment has seen a recovery of customer demand starting in the later part of 2020 for Motion Picture film and other Advanced Materials and Chemicals product lines, which continued in the first six months of 2021 with volume improvements compared with the prior year quarter and year-to-date periods. Advanced Materials and Chemicals has experienced supply chain disruptions and ~~travel restrictions.~~ shortages associated with raw materials as well as labor shortages in certain manufacturing areas. The segment has implemented numerous measures to mitigate these challenges while meeting current demand, however, the duration and extent of ~~demand declines~~supply chain distributions and ~~then recovery is~~labor shortages remain unclear. ~~Manufacturing volumes were reduced due to the customer demand decline in the near-term. Manufacturing employees are being temporarily furloughed, as necessary, under reduced production plans.~~

In connection with exploring an expansion of its chemical operations which currently produces unregulated key starting materials (“KSMs”) for pharmaceuticals, Kodak applied for a loan from the U.S. International Development Finance Corporation (the “DFC”) to support the launch of Kodak Pharmaceuticals, an initiative that would manufacture pharmaceutical ingredients for essential generic drugs. On July 28, 2020, the DFC announced the signing of a non-binding letter of interest to provide a subsidiary of the Company with a potential $765 million loan (the “DFC Loan”), indicating Kodak’s successful completion of DFC’s initial screening, which would be followed by standard due diligence conducted by the DFC before financing is formally committed. As further described under Part II, Item 1A. Risk Factors, there can be no assurances that the DFC Loan will be approved or made. If the DFC Loan is not made, Kodak intends to continue organic expansion of its KSM production at Eastman Business Park in Rochester, New York while attempting to obtain necessary cGMP and FDA certification to make regulated KSMs and active pharmaceutical ingredients (“APIs”). Depending on its assessment of the business opportunity and availability of capital, Kodak may also explore alternative means to expand its chemical manufacturing operations for purposes of producing KSMs and APIs.

•

Kodak is working to organically expand its key starting materials (“KSM”) production at Eastman Business Park in Rochester, New York while exploring alternatives to obtain necessary Current Good Manufacturing Practices (“cGMP”) and FDA certification to make regulated KSMs and active pharmaceutical ingredients (“APIs”) and otherwise utilize its assets and technology in the healthcare space. Depending on its assessment of the business opportunity and availability of capital, Kodak may also explore alternative means to further expand its chemical manufacturing operations for purposes of producing materials to support the healthcare industry. A portion of the capital raised by the Company on February 26, 2021 is being used to fund these exploratory activities and may be used to fund expansion opportunities that the Company considers attractive.

Film and related component manufacturing operations and Kodak Research Laboratories utilize capacity at Eastman Business Park, which helps cost absorption for both Kodak operations and tenants at Eastman Business Park.

•

Kodak plans to capitalize on its intellectual property through new business or licensing opportunities in 3D printing materials, smart material applications, and printed electronics markets.

~~Kodak plans to capitalize on its intellectual property through new business or licensing opportunities in 3D printing materials, smart material applications, and printed electronics markets.~~

[36]

CURRENT KODAK OPERATING MODEL AND REPORTING STRUCTURE

~~Change in Segments~~

Effective January 1, 2020 Kodak changed its organizational structure. Prepress Solutions, formerly part of the Print Systems segment, now operates as a separate segment named the Traditional Printing segment. Electrophotographic Printing Solutions, formerly part of the Print Systems segment, was combined with the Enterprise Inkjet Systems segment and Kodak Software segment to form the Digital Printing segment. The Brand, Film and Imaging segment, except for the licensing of the Kodak brand to third parties, was combined with the Advanced Materials and 3D Printing segment to form the Advanced Materials and Chemicals segment. The licensing of the Kodak brand to third parties operates as a separate segment named the Brand segment. The Eastman Business Park segment is no longer a reportable segment. A description of the reportable segments follows.

~~[39]~~

REPORTABLE SEGMENTS

Kodak has four reportable segments: Traditional Printing, Digital Printing, Advanced Materials and Chemicals, and Brand. The balance of Kodak’s ~~continuing~~ operations, which do not meet the criteria of a reportable segment, are reported in All Other and primarily represent the Eastman Business Park operations. Refer to the 2020 Form 10-K for a description of the Company’s segments.

~~Traditional Printing~~

The Traditional Printing segment is comprised of Prepress Solutions, which includes Kodak’s digital offset plate offerings and computer-to-plate imaging solutions. The Traditional Printing segment provides digital and traditional product and service offerings to a variety of commercial industries, including commercial print, direct mail, book publishing, newspapers and magazines and packaging.

While the businesses in this segment are experiencing competitive pricing pressures, innovations in Kodak product lines that can command premium prices offset some of the long-term market price erosion. Additionally, Kodak seeks to mitigate the impact of market dynamics on pricing and volume pressures and of increases in manufacturing costs, including aluminum prices, through a combination of price increases, commodity contracts, improved production efficiency and cost reduction initiatives.

Prepress Solutions capitalizes on a contract-based, stable and recurring cash flow-generative business model. The average duration of customer contracts is two years. These contracts offer stability and generate recurring revenue. The core of the business is the manufacturing of aluminum digital printing plates of varying sizes. These plates can be as small as 23cm x 27cm and as large as 126cm x 287cm. Unexposed plates are sold to commercial printing companies for use in the offset printing process. Kodak also manufactures equipment, known as Computer to Plate (“CTP”) equipment, which images the plates with a laser. The plates are used in the offset printing process, which transfers ink from the plate onto a rubber blanket and then onto the substrate to be printed. Due to the nature of the imaging and printing process, a new plate must be used for each printing run. As a result, there is a recurring revenue stream from the sale of these plates.

~~The Traditional Printing products and services are sold globally to customers through both a direct sales team as well as indirectly through dealers.~~

~~Prepress Solutions:~~Segment Revenues

Digital offset plates includes KODAK SONORA Process Free Plates. KODAK SONORA Process Free Plates are prepared directly with a CTP thermal output device and do not require subsequent processing chemistry, processing equipment or chemical disposal. As a result, the plates deliver cost savings and efficiency for customers and promote environmental sustainability practices.

CTP output devices that are used by customers to transfer images onto aluminum offset printing plates and provide consistent and high-quality imaging for offset press applications. CTP products provide high resolution, consistency and stability in thermal imaging. Kodak also offers a lower cost CTP system using TH5 imaging technology, which provides a highly efficient and cost-effective imaging solution at a lower price point.

~~The Traditional Printing segment also provides service and support related to these products.~~

~~Digital Printing~~

The Digital Printing segment contains Electrophotographic Printing Solutions, Prosper, Versamark and Software. Digital Printing products include high-quality digital printing solutions using electrically charged toner-based technology, ~~production press systems, consumables (primarily ink), inkjet components, software and services. Digital Printing products are distributed directly by Kodak and indirectly through dealers.~~

~~Electrophotographic Printing Solutions:~~

~~NEXFINITY printers produce high-quality, differentiated printing of short-run, personalized print applications, such as direct mail, books, marketing collateral and photo products.~~

DIGIMASTER printers use monochrome electrophotographic printing technology for transactional printing, short-run books, corporate documentation, manuals and direct mail. Kodak has ceased manufacturing Digimaster printers but continues to sell consumables into the installed base.

~~Prosper:~~

~~The Prosper business product offerings, including the PROSPER Press systems and PROSPER Components, feature ultrafast inkjet droplet generation.~~

~~[40]~~

This includes the PROSPER 6000 Press, which delivers a continuous flow of ink that enables constant and consistent operation, with uniform ink droplet size and accurate placement, even at very high print speeds. Applications of the PROSPER Press include publishing, commercial print, direct mail and packaging. PROSPER System Components are integrated into original equipment manufacturer (“OEM”) partner products and systems. Sales of equipment that incorporate the PROSPER Writing Systems result in recurring revenue from sales of ink and other consumables and equipment service. The level of recurring revenue depends on the application for which the equipment is used, which drives the total number of pages printed and, therefore, the amount of ink usage. The business model is further supplemented by consumption of other consumables including refurbished jetting modules and service.

The focus of the Prosper business is on developing the next generation platform, Ultrastream, with solutions that place writing systems in OEMs as well as direct sale press products that widens its reach into applications for packaging and décor and expands the substrate range to include plastics. The Prosper business closed on the first sale of an Ultrastream writing system for use in a packaging application in December of 2019 with Uteco Group. Uteco Group has integrated Ultrastream in a packaging press solution.

The Prosper business includes Kodak Print Services. Kodak Print Services prints the Jersey Evening Post as well as the majority of U.K. national newspapers for distribution in both Jersey and Guernsey islands. The business is used to demonstrate the value of the Kodak Prosper presses to customers around the world.

~~Versamark:~~

The KODAK VERSAMARK Products are the predecessor products to the PROSPER business. Kodak has ceased manufacturing VERSAMARK Press Systems. Users of KODAK VERSAMARK products continue to purchase ink and other consumables as well as related service from Kodak. Applications of the VERSAMARK products include publishing, transactional, commercial print and direct mail.

~~Software~~

The Software business offers a leading suite of solutions for print production workflow, including the PRINERGY workflow production software, by providing customer value through automation, web integration and integration with other Kodak products and third-party offerings. Production workflow software is used by customers to manage digital and conventional print content from file creation to output. Production workflow software manages content and color, reduces manual errors and helps customers manage the collaborative creative process. Kodak believes it is a leader in production workflow solutions for the commercial print and packaging industries with over 15,000 systems installed in some of the largest printing and packaging establishments around the world

~~The Software business includes digital front-end controllers which manage the delivery of personalized content to digital presses while controlling color and print consistency.~~

~~Advanced Materials and Chemicals~~

The Advanced Materials and Chemicals segment is comprised of four lines of business: Industrial Film and Chemicals, Motion Picture, Advanced Materials and Functional Printing and Kodak Services for Business (“KSB”). Kodak’s Advanced Materials and Chemicals products are distributed directly by Kodak and indirectly through dealers. Kodak Alaris, a professional and consumer still photographic film and chemicals customer, represented approximately 25% and 20% of total Advanced Materials and Chemicals segment revenues for the nine months ending September 30, 2020 and the year ending December 31, 2019, respectively.

~~Industrial Film and Chemicals:~~

~~Offers industrial film, including films used by the electronics industry to produce printed circuit boards, as well as professional and consumer still photographic film.~~

~~Includes related component businesses: Polyester Film; Solvent Recovery; and Specialty Chemicals.~~

~~Offers specialty inks and dispersions to third parties.~~

Includes Consumer Inkjet Solutions. Starting in 2013, Kodak stopped manufacturing consumer inkjet printers and focused on the sale of ink to its installed printer base. Kodak’s final build of ink inventory was depleted in the second quarter of 2020.

~~[41]~~

~~Motion Picture:~~

~~Includes the motion picture film business serving the entertainment industry. Motion picture products are sold directly to studios, external laboratories and independent filmmakers.~~

~~Kodak motion picture film processing laboratories offering onsite processing services at strategic locations in the U.S. and Europe.~~

~~Advanced Materials and Functional Printing~~

~~Advanced Materials~~

Advanced Materials develops solutions for component smart materials based on the materials science inventions and innovations from the research laboratories. There are multiple applications that Kodak contemplates addressing in this category. Currently, the primary focus is on light blocking particles (Kodalux) for the textile market. In addition, a specialty material is manufactured by this group for use by a 3D printing customer.

~~Functional Printing:~~

Functional Printing concentrates on contract manufacturing, development partnerships, and/or licensing opportunities in very high-resolution 3D printing solutions such as printed electronics. Also, a portfolio of products is offered to enable others to utilize functional printing.

~~IP Licensing:~~

Kodak actively seeks opportunities to leverage its patents and associated technology in licensing and/or cross-licensing deals to support both revenue growth and its ongoing businesses. While revenues from these licensing activities tend to be unpredictable in nature, this segment still carries the potential for revenue generation from intellectual property licensing and new materials businesses.

~~Kodak Services for Business~~:

KSB assists organizations with challenges and opportunities created by the worldwide digital transformation. It provides business process outsourcing services, scan and capture solutions, records conversion services, workflow solutions, content management, and print and managed media services that assist customers with solutions that meet their business requirements. KSB has expertise in the capture, archiving, retrieval and delivery of documents including in depth knowledge of handling legacy media. KSB serves enterprise customers primarily in the banking, insurance and government sectors. Sales in KSB are project-based and can vary from year to year depending on the nature and number of projects in existence that year. KSB currently operates exclusively in Asia, primarily in China and Hong Kong.

~~KSB is under contract for sale to Swiss Post Solutions.~~

~~Kodakit~~

Kodakit was a platform that connected businesses with professional photographers to cater to their photography needs. Customers included global hotels and online travel agencies, real estate companies, marketplaces, advertising agencies and global brands.

~~Kodak decided to discontinue the operations of Kodakit in October 2019.~~

~~Brand~~

The Brand segment Includes licensing of the Kodak brand to third parties. Kodak currently licenses its brand for use with a range of products including batteries, digital and instant print cameras and camera accessories, printers, and apparel. Kodak intends to continue efforts to grow its portfolio of brand licenses to generate both ongoing royalty streams and upfront payments. Brand licensees use the Kodak brand on their products and use their own distribution channels.

~~[42]~~

~~Segment Revenues~~

	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(in millions)	2020		2019		2020		2019		2021		2020		2021		2020
Traditional Printing	$	146	$	187	$	419	$	534	$	169	$	119	$	317	$	273
Digital Printing		56		70		173		211		62		52		126		117
Advanced Materials and Chemicals		44		53		124		153		54		38		100		80
Brand		3		3		8		8		3		2		6		5
All Other		3		2		8		7		3		2		7		5
Consolidated total	$	252	$	315	$	732	$	913	$	291	$	213	$	556	$	480

Segment Operational EBITDA and Consolidated ~~Loss~~Income (Loss) from ~~Continuing~~ Operations Before Income Taxes

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
(in millions)	2020			2019			2020			2019			2021			2020			2021			2020
Traditional Printing	$	5		$	21		$	7		$	36		$	6		$	1		$	11		$	2
Digital Printing		(3	)		(3	)		(8	)		(9	)		—			(3	)		—			(5	)
Advanced Materials and Chemicals		(6	)		(6	)		(22	)		(24	)		1			(7	)		(3	)		(16	)
Brand		3			2			7			5			3			2			5			4
All Other		—			—			—			(1	)		1			1			1			—
Depreciation and amortization		(9	)		(14	)		(29	)		(43	)		(8	)		(10	)		(16	)		(20	)
Restructuring costs and other		(1	)		(3	)		(9	)		(7	)		—			(1	)		(1	)		(8	)
Stock based compensation		(17	)		(1	)		(18	)		(6	)		(1	)		—			(4	)		(1	)
Consulting and other costs ⁽¹⁾		(4	)		(2	)		(5	)		(7	)		(4	)		(1	)		(9	)		(1	)
Idle costs ⁽²⁾		(1	)		(1	)		(2	)		(4	)		—			(1	)		(1	)		(1	)
Former CEO separation agreement compensation		—			—			—			(2	)
Other operating (expense) income, net, excluding income from transition services agreement ⁽³⁾		—			(12	)		6			(14	)
Other operating income, net, excluding income from transition services agreement ⁽³⁾														6			—			7			6
Interest expense ⁽⁴⁾		(3	)		(4	)		(11	)		(12	)		(10	)		(4	)		(14	)		(8	)
Pension income excluding service cost component ⁽⁴⁾		26			26			79			79			26			27			51			53
Loss on early extinguishment of debt ⁽⁴⁾		(2	)		—			(2	)		—
Other charges, net ⁽⁴⁾		(432	)		(6	)		(387	)		(7	)
Consolidated loss from continuing operations before income taxes	$	(444	)	$	(3	)	$	(394	)	$	(16	)
Other (charges) income, net ⁽⁴⁾														(1	)		(8	)		(1	)		45
Consolidated income (loss) from operations before income taxes													$	19		$	(4	)	$	26		$	50

Kodak increased workers’ compensation reserves by approximately $9 million and $2 million in the third quarters of 2020 and 2019, respectively, driven by changes in discount rates The increase in reserves in the third quarter of 2020 impacted gross profit by approximately $5 million, SG&A by approximately $3 million and R&D by approximately $1 million. The increase in reserves in the third quarter of 2019 impacted gross profit by approximately $1 million and SG&A by approximately $1 million.

⁽¹⁾

Consulting and other costs are primarily professional services and internal costs associated with certain corporate strategic initiatives and investigations.

⁽²⁾

⁽³⁾

$12 million and $2$4 million of income from the transition services agreement with the ~~Purchaser~~purchaser of Kodak’s Flexographic Packaging Business was recognized in the three and six months ended ~~September~~June 30, 2020, ~~and 2019,~~ respectively. ~~Transition services~~No income ~~of $5 million and $4 million was~~has been recognized in ~~the nine months ended September 30, 2020 and 2019, respectively.~~2021. The income was reported in Other operating ~~(expense)~~ income, net in the Consolidated Statement of Operations. Other operating income, ~~(expense),~~ net is typically excluded from the segment measure. However, the income from the transition services agreement was included in the segment measure.

⁽⁴⁾

As reported in the Consolidated Statement of Operations.

[~~43]~~37]

Segment Measure of Profit and Loss

Kodak’s segment measure of profit and loss is an adjusted earnings before interest, taxes, depreciation and amortization (“Operational EBITDA”). Operational EBITDA represents the earnings (loss) from ~~continuing~~ operations excluding the provision for income taxes; non-service cost components of pension and OPEB income; depreciation and amortization expense; restructuring costs; stock-based compensation expense; consulting and other costs; idle costs; ~~former CEO separation agreement compensation;~~ other operating ~~(expense)~~ income, net (unless otherwise indicated); interest ~~expense; loss on early extinguishment of debt~~expense and other ~~charges,~~(charges) income, net.

Kodak’s segments are measured using Operational EBITDA both before and after the allocation of corporate SG&A expenses. The segment earnings measure reported is after allocation of corporate SG&A as this most closely aligns with U.S. GAAP. Research and development activities not directly related to the other segments are reported within the Advanced Materials and Chemicals segment.

~~2020~~2021 COMPARED WITH ~~2019~~2020

~~THIRD~~SECOND QUARTER RESULTS OF OPERATIONS

	Three Months Ended September 30,															Nine Months Ended September 30,															Three Months Ended June 30,															Six Months Ended June 30,
(in millions)	2020			% of Sales			2019			% of Sales			$ Change			2020			% of Sales			2019			% of Sales			$ Change			2021			% of Sales			2020			% of Sales			$ Change			2021			% of Sales			2020			% of Sales			$ Change
Revenues	$	252					$	315					$	(63	)	$	732					$	913					$	(181	)	$	291					$	213					$	78		$	556					$	480					$	76
Cost of revenues		221						262						(41	)		644						778						(134	)		243						192						51			468						423						45
Gross profit		31			12	%		53			17	%		(22	)		88			12	%		135			15	%		(47	)		48			16	%		21			10	%		27			88			16	%		57			12	%		31
Selling, general and administrative expenses		56			22	%		48			15	%		8			138			19	%		161			18	%		(23	)		42			14	%		34			16	%		8			88			16	%		82			17	%		6
Research and development costs		8			3	%		11			3	%		(3	)		25			3	%		33			4	%		(8	)		8			3	%		8			4	%		0			16			3	%		17			4	%		(1	)
Restructuring costs and other		1			0	%		3			1	%		(2	)		9			1	%		7			1	%		2			—			0	%		1			0	%		(1	)		1			0	%		8			2	%		(7	)
Other operating (income) expense, net		(1	)		(0	)%		10			3	%		(11	)		(11	)		(2	)%		10			1	%		(21	)
Loss from continuing operations before interest expense, other charges, net and income taxes		(33	)		(13	)%		(19	)		(6	)%		(14	)		(73	)		(10	)%		(76	)		(8	)%		3
Other operating income, net																																(6	)		(2	)%		(3	)		(1	)%		(3	)		(7	)		(1	)%		(10	)		(2	)%		3
Earnings (loss) from operations before interest expense, pension income excluding service cost component, other charges (income), net and income taxes																																4			1	%		(19	)		(9	)%		23			(10	)		(2	)%		(40	)		(8	)%		30
Interest expense		3			1	%		4			1	%		(1	)		11			2	%		12			1	%		(1	)		10			3	%		4			2	%		6			14			3	%		8			2	%		6
Pension income excluding service cost component		(26	)		(10	)%		(26	)		(8	)%		—			(79	)		(11	)%		(79	)		(9	)%		—			(26	)		(9	)%		(27	)		(13	)%		1			(51	)		(9	)%		(53	)		(11	)%		2
Loss on early extinguishment of debt		2			1	%		—			0	%		2			2			0	%		—			0	%		2
Other charges, net		432			171	%		6			2	%		426			387			53	%		7			1	%		380
Loss from continuing operations before income taxes		(444	)		(176	)%		(3	)		(1	)%		(441	)		(394	)		(54	)%		(16	)		(2	)%		(378	)
Other charges (income), net																																1			0	%		8			4	%		(7	)		1			0	%		(45	)		(9	)%		46
Earnings (loss) from operations before income taxes																																19			7	%		(4	)		(2	)%		23			26			5	%		50			10	%		(24	)
Provision for income taxes		1			0	%		7			2	%		(6	)		167			23	%		12			1	%		155			3			1	%		1			0	%		2			4			1	%		166			35	%		(162	)
Loss from continuing operations		(445	)		(177	)%		(10	)		(3	)%		(435	)		(561	)		(77	)%		(28	)		(3	)%		(533	)
Income from discontinued operations, net of income taxes		—			0	%		5			2	%		(5	)		—			0	%		206			23	%		(206	)
Net (loss) income	$	(445	)		(177	)%	$	(5	)		(2	)%	$	(440	)	$	(561	)		(77	)%	$	178			19	%	$	(739	)
Net income (loss)																															$	16			5	%	$	(5	)		(2	)%	$	21		$	22			4	%	$	(116	)		(24	)%	$	138

[~~44]~~38]

Revenue

Current Quarter

For the three months ended ~~September~~June 30, ~~2020~~2021 revenues ~~declined $63~~improved $78 million compared with the same period in ~~2019,~~2020, driven by increased volume ~~declines and unfavorable pricing~~ within Traditional Printing ($~~28 million~~41 million), Advanced Materials and ~~$4 million, respectively)~~Chemicals ($17 million) and ~~volume declines~~Digital Printing ($9 million) as well as favorable foreign currency ($10 million). The revenue improvements were offset by unfavorable pricing and product mix in Digital Printing and Advanced Materials and Chemicals ~~($16 million and $11 million, respectively). The revenue declines were offset by improved pricing and product mix in Advanced Materials and Chemicals ($3 million) and favorable foreign currency ($4~~(each $1 million). ~~The prior year period also included intellectual property licensing revenue ($13 million) associated with the HuaGuang relationship entered into in September 2019.~~ See segment discussions for additional details.

Year-to-Date

For the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 revenues ~~declined $181~~improved $76 million compared with the same period in ~~2019,~~2020, driven by increased volume ~~declines~~within Traditional Printing ($31 million), Advanced Materials and Chemicals ($19 million), Digital Printing ($8 million) and Other ($2 million) as well as favorable foreign currency ($19 million). The revenue improvements were offset by unfavorable pricing and product mix ~~within~~in Traditional Printing ~~($90 million~~ and ~~$11 million, respectively), volume declines in~~ Digital Printing ~~and Advanced Materials and Chemicals ($43 million and $40 million, respectively) and unfavorable foreign currency ($1~~(each $3 million). The revenue declines were offset by improved pricing and product mix in Advanced Materials and Chemicals ($11 million) and favorable mix of products in Digital Printing ($5 million). The prior year period also included intellectual property licensing revenue ($13 million) associated with the HuaGuang relationship entered into in September 2019. See segment discussions for additional details.

Gross Profit

Current Quarter

Gross profit for the three months ended ~~September~~June 30, ~~2020 declined~~2021 improved approximately ~~$22~~$27 million compared with the same period in ~~2019 reflecting~~2020 primarily due to improved manufacturing costs driven by more favorable cost absorption ($15 million) from improved volume, increased volume within Advanced Materials and Chemicals and Traditional Printing ($6 million and $1 million, respectively) and lower depreciation and amortization expenses ($2 million) partially offset by higher aluminum costs ($5 million). See segment discussions for additional details.

Year-to-Date

Gross profit for the six months ended June 30, 2021 improved approximately $31 million compared with the same period in 2020 primarily due to improved manufacturing costs driven by more favorable cost absorption ($20 million) from improved volume, increased volume in Advanced Materials and Chemicals ($7 million), lower depreciation and amortization expenses ($4 million) and favorable foreign currency ($1 million) partially offset by higher aluminum costs ($6 million), volume declines and unfavorable pricing and product mix in Digital Printing ($2 million and $1 million, respectively) and unfavorable pricing and product mix in Traditional Printing ~~(each $4~~($1 million), volume declines in Advanced Materials and Chemicals and Digital Printing (each $3 million) and an increase in workers’ compensation reserves ($4 million) partially offset by favorable pricing and product mix in Advanced Materials and Chemicals ($4 million) and lower depreciation and amortization expenses ($5 million) across all segments. The prior year period also included intellectual property licensing revenue ($13 million) associated with the HuaGuang relationship entered into in September 2019.. See segment discussions for additional details.

~~Year-to-Date~~

Gross profit for the nine months ended September 30, 2020 declined approximately $47 million compared with the same period in 2019 reflecting volume declines, unfavorable pricing and product mix as well as increased costs in Traditional Printing ($11 million, $13 million and $8 million, respectively), volume declines and increased costs Advanced Materials and Chemicals ($11 million and $8 million, respectively), volume declines and unfavorable costs in Digital Printing ($3 million and $5 million) and an increase in workers’ compensation reserves ($4 million) partially offset by favorable pricing and product mix in Advanced Materials and Chemicals ($11 million), favorable mix of products in Digital Printing ($3 million) and lower depreciation and amortization expenses ($14 million). The prior year period also included intellectual property licensing revenue ($13 million) associated with the HuaGuang relationship entered into in September 2019. See segment discussions for additional details.

Selling, General and Administrative Expenses

Consolidated SG&A increased $8 million and ~~decreased $23~~$6 million ~~for~~in the ~~three-and nine-month periods~~three and six months ended ~~September~~June 30, ~~2020,~~2021, respectively. The $8 million increase in ~~Consolidated SG&A for~~ the three months ended ~~September~~June 30, ~~2020~~2021 was driven by increased ~~stock compensation expense~~investment in segment selling and marketing activities ($175 million) primarily due to temporary furloughs and pay cuts that were instituted in the second quarter of 2020 ($3 million) that largely ended in January 2021 as ~~discussed in Note 20, Stock-Based Compensation, an increase of $4 million in~~well as higher consulting and project costs associated with the internal and external investigations that started in the third quarter ~~as well as~~of 2020 ($3 million). The $6 million increase in the $2six months ended June 30, 2021 was driven by higher consulting and project costs associated with the internal and external investigations that started in the third quarter of 2020 ($8 million) and a $3 million ~~impact~~increase in stock-based compensation expense primarily attributable to equity awards granted to the Company’s Executive Chairman and Chief Executive Officer in the current year. The increases in consolidated SG&A ofin the ~~increase in workers’ compensation reserves. These increases~~six-month period were partially offset by a lower investment in segment selling and marketing activities ($4 million) driven by cost reduction efforts ($12 million for the quarter and $34 million year-to-date). The temporary furloughs and pay cuts in the current quarter provided approximately $7 million of the $17 million savings in the three months ending September 30, 2020 and $18 million of the $34 million in the nine months ending September 30, 2020. The nine-month period ended September 30, 2019 also included $2 million of compensation related to the former CEO separation agreement while the nine-month period ending September 30, 2020 included increasedas well as higher bad debt expense ~~primarily attributed to~~in the prior year period reflecting the increased collection risk ~~related to~~associated with the COVID-19 pandemic ($3 million).

Research and Development Costs

Consolidated R&D expenses ~~decreased $3 million and $8 million~~remained flat for the quarter and ~~year-to-date periods ended September 30, 2020, respectively,~~decreased $1 million for the year, primarily due to cost reduction efforts.

Other Charges (Income), Net

The change in Other charges (income), net was primarily driven by the embedded conversion features derivative liability associated with the ~~Notes.~~Convertible Notes in 2020. Refer to Note ~~15,~~12, “Other Charges (Income), Net” and Note ~~25,~~20, “Financial Instruments”.

Provision for Income Taxes

The change in Provision for income taxes infor the ~~year-to-date period~~six months ended June 30, 2021 was ~~primarily~~ driven by the $167 million provision associated with the establishment of a valuation allowance on deferred tax assets outside the U.S. in 2020. Refer to Note ~~16,~~13, “Income Taxes”.

[~~45]~~39]

~~Income from Discontinued Operations~~

The Income from discontinued operations in the prior year periods primarily represents the gain recognized on the sale of the FPD business in April 2019. Refer to Note 24, “Discontinued Operations”.

TRADITIONAL PRINTING SEGMENT

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2020			2019			$ Change			2020			2019			$ Change			2021		2020		$ Change		2021		2020		$ Change
Revenues	$	146		$	187		$	(41	)	$	419		$	534		$	(115	)	$	169	$	119	$	50	$	317	$	273	$	44

Operational EBITDA	$	5		$	21		$	(16	)	$	7		$	36		$	(29	)	$	6	$	1	$	5	$	11	$	2	$	9
Operational EBITDA as a % of revenues		3	%		11	%					2	%		7	%

Revenues

Current Quarter

The ~~decrease~~increase in Traditional Printing revenues for the three months ended ~~September~~June 30, ~~2020~~2021 of approximately ~~$41~~$50 million reflected improved volume in Prepress Solutions consumables and ~~pricing declines~~equipment ($2238 million and $3 million, respectively) as the prior year period was impacted by the COVID-19 pandemic and favorable foreign currency ($7 million).

Year-to-Date

The increase in Traditional Printing revenues for the six months ended June 30, 2021 of approximately $44 million reflected improved volume in Prepress Solutions consumables and equipment ($29 million and $4 million, respectively) ~~in Prepress Solutions consumables~~as the prior year period was impacted by the COVID-19 pandemic and favorable foreign currency ($14 million). The favorable impacts were partially offset by volume declines in Prepress Solutions service ($2 million) ~~and Prepress equipment ($4 million)~~, partially offset by favorable foreign currency ($3 million). In addition, the prior year period included $13 million of intellectual property licensing revenue associated with the HuaGuang relationship. The volume declines were primarily driven by COVID-19 pandemic related declines in customer demand.

~~Year-to-Date~~

~~The decrease in Traditional Printing revenues for the nine months ended September 30, 2020 of approximately $115 million primarily reflected volume and~~ pricing declines ~~($76 million and $14 million, respectively)~~ in Prepress Solutions consumables ($1 million) and ~~volume declines~~unfavorable product mix in Prepress Solutions ~~service ($5 million) and Prepress~~ equipment ($91 million) offset by favorable pricing and product mix ($3 million) in Prepress equipment. In addition, the prior year period included $13 million of intellectual property licensing revenue associated with the HuaGuang relationship. The volume declines were primarily driven by COVID-19 pandemic related declines in customer demand..

Operational EBITDA

Current Quarter

Traditional Printing Operational EBITDA for the three months ended ~~September~~June 30, ~~2020 declined $16~~2021 improved $5 million reflecting improved manufacturing costs ($14 million) primarily due to more favorable cost absorption combined with volume and pricing ~~declines ($2 million and $4 million, respectively)~~improvements (each $1 million) in Prepress Solutions ~~consumables, volume declines in Prepress service ($1 million), and higher manufacturing costs ($3 million) driven by unfavorable cost absorption from the volume declines~~consumables. The improvements were partially offset by ~~lower SG&A~~higher aluminum costs ($5 million), higher sales and marketing expenses ($64 million) primarily due to temporary furloughs and ~~lower aluminum costs~~pay cuts in ~~the current year ($2 million). In addition,~~ the prior year period ~~included $13 million of intellectual property licensing revenue associated with the HuaGuang relationship~~and unfavorable foreign currency ($1 million).

Year-to-Date

Traditional Printing Operational EBITDA for the ~~nine~~six months ended ~~September~~June 30, ~~2020 declined $29~~2021 improved $9 million reflecting improved manufacturing costs ($19 million) primarily due to ~~volume and~~more favorable cost absorption. The cost improvements were partially offset by higher aluminum costs ($6 million), pricing declines ($~~8 million and $14 million, respectively)~~1 million) in Prepress Solutions consumables ~~volume declines in Prepress service~~and unfavorable foreign currency ($2 million), higher manufacturing costs driven by unfavorable cost absorption from the volume declines ($9 million), aluminum tariff refunds received in 2019 ($2 million) and an increase in bad debt expense ($1 million) partially offset by lower SG&A expenses ($17 million) and lower aluminum costs in the current year ($6 million). ~~In addition, the prior year period included $13 million of intellectual property licensing revenue associated with the HuaGuang relationship.~~

During 2018 U.S. tariffs imposed on aluminum purchases were included as part of the cost of printing plates sold. In January 2019, Kodak received retroactive exemptions from U.S. tariffs on aluminum. Due to the exemptions, all aluminum tariffs paid by Kodak in prior periods were recognized as a cost reduction in the prior year-to-date period.

DIGITAL PRINTING SEGMENT

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,							Six Months Ended June 30,
(in millions)	2020			2019			$ Change			2020			2019			$ Change			2021		2020			$ Change		2021		2020			$ Change
Revenues	$	56		$	70		$	(14	)	$	173		$	211		$	(38	)	$	62	$	52		$	10	$	126	$	117		$	9

Operational EBITDA	$	(3	)	$	(3	)	$	—		$	(8	)	$	(9	)	$	1		$	—	$	(3	)	$	3	$	—	$	(5	)	$	5
Operational EBITDA as a % of revenues		(5	)%		(4	)%					(5	)%		(4	)%

~~[46]~~

Revenues

Current Quarter

The ~~decline~~improvement in Digital Printing revenues for the three months ended ~~September~~June 30, ~~2020~~2021 of approximately ~~$14~~$10 million primarily reflected volume ~~declines~~improvements in Prosper consumables and service ($5 million), Prosper systems ($2 million), Electrophotographic Printing Solutions consumables and service ($73 million) and Electrophotographic Printing Solutions equipment ($42 million) ~~which were driven by~~in part due to the ~~decline in customer demand with~~impact of the COVID-19 ~~pandemic. There~~pandemic in the prior year quarter and favorable foreign currency ($2 million). The improvements were ~~also~~partially offset by volume declines in ~~VERSAMARK service and consumables~~Prosper components ($2 million) ~~due to both~~and pricing declines in ~~the installed base of VERSAMARK systems and the COVID 19 pandemic.~~Electrophotographic Printing Solutions equipment ($1 million).

Year-to-Date

The ~~decline~~improvement in Digital Printing revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 of approximately ~~$38~~$9 million primarily reflected volume and pricing improvements ($5 million and $1 million, respectively) in Prosper consumables and service, improved volume in Prosper systems and Electrophotographic Printing Solutions equipment ($2 million and $5 million, respectively) and favorable foreign currency ($4 million).

[40]

The improvements, which were largely due to the impact of COVID-19 pandemic in the prior year period, were partially offset by volume and pricing declines in Prosper components ($3 million and $1 million, respectively) and Electrophotographic Printing Solutions consumables and service ~~($22~~(both $1 million), as well as pricing declines in Electrophotographic Printing Solutions equipment ($82 million), PROSPER consumables and service ($5 million), PROSPER systems ($3 million) and Software ($3 million) which were driven by the decline in customer demand with the COVID-19 pandemic. There were also volume declines in VERSAMARK service and consumables ($8 million) due to both declines in the installed base of VERSAMARK systems and the COVID 19 pandemic. The impact of the volume declines was partially offset by improved volume in PROSPER components ($7 million) and improved pricing in PROSPER components and PROSPER systems ($2 million and $1 million, respectively).

Operational EBITDA

Current Quarter

Digital Printing Operational EBITDA for the three months ended ~~September~~June 30, ~~2020 was flat~~2021 improved $3 million reflecting ~~higher~~improved manufacturing costs ($3 million), volume improvements in ~~Electrophotographic Printing Solutions~~Prosper consumables and service ($2 million), and favorable foreign currency ($1 million) partially offset by volume declines and unfavorable product mix in Prosper components (each $1 million) and volume declines in Electrophotographic Printing Solutions ~~consumables and service~~equipment ($1 million), volume declines in VERSAMARK service and consumables ($1 million) and an increase in workers’ compensation reserves ($2 million) offset by improved volume in PROSPER components ($1 million), inventory write-downs driven by pricing declines in PROSPER systems in the prior year quarter ($1 million) and lower SG&A costs ($3 million).

Year-to-Date

Digital Printing Operational EBITDA for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 improved $1$5 million ~~driven by~~reflecting improved ~~volume in PROSPER components~~manufacturing costs ($4 million), improved volume ~~changes~~and pricing in Prosper consumables and service ($2 million and $1 million, respectively), lower sales and marketing and R&D expenses ($2 million) and favorable foreign currency ($2 million) partially offset by volume declines and unfavorable product mix in Prosper components (each $2 million) as well as pricing declines in Electrophotographic Printing Solutions equipment ($2 million) and Prosper Systems ($1 million), improved pricing in PROSPER systems ($1 million) and PROSPER components ($1 million) and lower SG&A costs ($9 million) offset by higher manufacturing costs in Electrophotographic Printing Solutions ($9 million), volume declines in Electrophotographic Printing Solutions consumables and service ($4 million), PROSPER consumables and service ($2 million), VERSAMARK service and consumables ($3 million) and an increase in workers’ compensation reserves ($2 million).

ADVANCED MATERIALS AND CHEMICALS SEGMENT

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,							Six Months Ended June 30,
(in millions)	2020			2019			$ Change			2020			2019			$ Change			2021		2020			$ Change		2021			2020			$ Change
Revenues	$	44		$	53		$	(9	)	$	124		$	153		$	(29	)	$	54	$	38		$	16	$	100		$	80		$	20

Operational EBITDA	$	(6	)	$	(6	)	$	—		$	(22	)	$	(24	)	$	2		$	1	$	(7	)	$	8	$	(3	)	$	(16	)	$	13
Operational EBITDA as a % of revenues		(14	)%		(11	)%					(18	)%		(16	)%

Revenues

Current Quarter

Advanced Materials and Chemicals revenues for the three months ended ~~September~~June 30, ~~2020 declined $9~~2021 improved $16 million primarily from volume ~~declines~~improvements in ~~Motion Picture ($5 million) driven by productions halted as a result of the COVID 19 pandemic,~~ Industrial Film and Chemicals ($310 million) ~~primarily~~and Motion Picture ($8 million) as well as favorable foreign currency ($1 million). These improvements (which were largely due to the impact of COVID-19 ~~pandemic’s impacts on its customers and Consumer Inkjet Solutions ($2 million) driven~~pandemic in the prior year period) were partially offset by ~~lower sales of ink to the existing installed base of printers.~~

~~Additionally, current year revenues for~~volume declines from Kodak Services for Business ~~declined~~(“KSB”) ($2 million) as the business was sold in December 2020.

Year-to-Date

Advanced Materials and Chemicals revenues for the six months ended June 30, 2021 improved $20 million primarily from volume improvements in Industrial Film and Chemicals ($14 million) and Motion Picture ($9 million) due to the impact of COVID-19 pandemic in the prior year period as well as favorable foreign currency ($1 million) ~~primarily due to operations~~. Partially offsetting these impacts was volume declines in ~~Asia being impacted by~~Consumer Inkjet Solutions ($1 million) as the ~~COVID-19 pandemic, and~~final build of inventory was sold in the first half of 2020. Additionally, the prior year period included revenues from ~~Kodakit~~KSB ($13 million) which ~~ceased operating~~was sold in ~~January~~December 2020. ~~Partially offsetting these impacts was~~

Operational EBITDA

Current Quarter

Advanced Materials and Chemicals Operational EBITDA improved ~~pricing~~$8 million for the three months ended June 30, 2021 reflecting favorable volume in Industrial Film and Chemicals and Motion Picture ($4 million and $3 million, respectively) and improved manufacturing costs in Industrial Film and Chemicals ($3 million) ~~driven~~reflecting more favorable cost absorption partially offset by higher ~~pricing for professional~~selling and ~~consumer still photographic film.~~

~~[47]~~

~~Year-to-Date~~

~~Advanced Materials and Chemicals revenues for the nine months ended September 30, 2020 declined $29 million primarily from volume declines in Motion Picture~~administrative expenses ($~~17 million) driven by productions halted as a result of the pandemic, Industrial Film and Chemicals ($9~~1 million) primarily due to ~~COVID-19 pandemic’s impacts on its customers,~~the cessation of temporary furloughs and ~~Consumer Inkjet Solutions ($6 million) driven by lower sales~~pay cuts that were instituted in the second quarter of ink to the existing installed base of printers. Additionally, current year revenues for Kodak Services for Business declined ($5 million) primarily due to operations in Asia being impacted by the COVID-19 pandemic, and the prior year period included revenues from Kodakit ($3 million) which ceased operations in January 2020. Partially offsetting these impacts was improved pricing and improved product mix in Industrial Film and Chemicals ($11 million) driven by higher pricing and favorable product mix in professional and consumer still photographic film and higher pricing for solvents.

~~Operational EBITDA~~

~~Current Quarter~~

Advanced Materials and Chemicals Operational EBITDA remained flat for the three months ended September 30, 2020 as lower selling and administrative expenses ($4 million), favorable pricing ($3 million) in Industrial Film and Chemicals, and lower R&D costs ($1 million) offset volume declines in Motion Picture ($2 million) and Consumer Inkjet Solutions ($1 million), unfavorable cost impacts in Motion Picture ($1 million) and an increase in workers’ compensation reserves ($2 million).

Year-to-Date

Advanced Materials and Chemicals Operational EBITDA improved $2$13 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 primarily due to~~2021 reflecting favorable pricing ($11 million) in Industrial Film and Chemicals. Also contributing to the improvement were lower selling and administrative expenses ($11 million) and lower R&D costs ($3 million). Partially offsetting were volumes declines in Motion Picture ($6 million), Industrial Film and Chemicals ($2 million) and Consumer Inkjet Solutions ($3 million) as well as unfavorable cost impactsvolume in Industrial Film and Chemicals ~~($5 million)~~ and Motion Picture ($24 million and $3 million, respectively), improved manufacturing costs in Industrial Film and Chemicals ($3 million) ~~driven by unfavorable~~reflecting more favorable cost absorption, lower R&D expenses and ~~an increase in workers’ compensation reserves ($2~~favorable foreign currency (each $1 million). Also contributing were lower selling and marketing expenses primarily related to cost reductions in the first quarter 2020 ($1 million).

[41]

BRAND SEGMENT

	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2020			2019			$ Change		2020			2019			$ Change		2021		2020		$ Change		2021		2020		$ Change
Revenues	$	3		$	3		$	—	$	8		$	8		$	—	$	3	$	2	$	1	$	6	$	5	$	1

Operational EBITDA	$	3		$	2		$	1	$	7		$	5		$	2	$	3	$	2	$	1	$	5	$	4	$	1
Operational EBITDA as a % of revenues		100	%		67	%				88	%		63	%

Revenues

Brand revenues ~~for~~and EBITDA improved $1 million in both the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 remained flat~~2021 compared to the prior year quarter and year-to-date periods. ~~The $2 million improvement in Brand EBITDA for the nine months ended September 30, 2020 was primarily driven by lower selling and marketing costs.~~

RESTRUCTURING COSTS AND OTHER

Kodak recorded no restructuring costs for the three months ended June 30, 2021. Kodak recorded $1 ~~million and $9~~ million of charges for the ~~three and nine~~six months ended ~~September~~June 30, ~~2020, respectively,~~2021 in Restructuring costs and other in the Consolidated Statement of Operations.

Kodak made cash payments related to restructuring of approximately $3$2 million and ~~$13~~$6 million during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively.

The restructuring actions implemented in the first ~~nine~~six months of ~~2020~~2021 are expected to generate future annual cash savings of approximately ~~$13~~$3 million. These savings are expected to reduce future annual Cost of revenues and SG&A expenses by $2$1 million and ~~$11~~$2 million, respectively. Kodak began realizing a portion of these savings in the first ~~nine~~six months of ~~2020~~2021 and expects the majority of the annual savings to be in effect by the end of ~~the year~~2021 as these actions are completed.

~~[48]~~

~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES UPDATE~~

Updates to critical accounting policies and estimates in Kodak’s 2019 Annual Report on Form 10-K are presented in this section. Refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2019 Annual Report on Form 10-K for a complete discussion of all Kodak’s critical accounting policies.

~~Valuation and Useful Lives of Long-Lived Assets, Including Goodwill and Intangible Assets~~

Goodwill is tested for impairment at a level of reporting referred to as a reporting unit, which is an operating segment or one level below an operating segment (a component) if the component constitutes a business for which discrete financial information is available and regularly reviewed by segment management. As a result of the change in segments that became effective as of January 1, 2020, Kodak’s goodwill reporting units changed. The Digital Printing segment has three goodwill reporting units: Electrophotographic Printing Solutions, Prosper and Versamark, and Software. The Advanced Materials and Chemicals segment has three goodwill reporting units: Motion Picture and Industrial Films and Chemicals, Advanced Materials and Functional Printing and Kodak Services for Business. The Traditional Printing segment, Brand segment and Eastman Business Park segment each have one goodwill reporting unit.

Kodak performed interim tests of impairment for goodwill as of June 30, 2020 due to the continued uncertainty regarding the negative impact of the COVID-19 pandemic on its operations, and as of March 31, 2020, due to the decline in market capitalization as of that date since the last goodwill impairment test (December 31, 2019) and the uncertainty regarding the negative impact of the COVID-19 pandemic at that time. Kodak utilized the discounted cash flow method to estimate the fair value of all reporting units for both tests. Kodak established an estimate of future cash flows for the period ranging from July 1, 2020 to December 31, 2024 for the June 30, 2020 interim test, and April 1, 2020 to December 31, 2024 for the March 31, 2020 interim test. The future cash flows were discounted to present value. The expected cash flows were derived from earnings forecasts and assumptions regarding the timing and impact of the COVID-19 pandemic on each reporting unit as of each applicable interim test date. The discount rates are estimated based on an after-tax weighted average cost of capital (“WACC”) for each reporting unit reflecting the rate of return that would be expected by a market participant. The WACC also takes into consideration a company specific risk premium for each reporting unit reflecting the risk associated with the overall uncertainty of the financial projections. Discount rates of 16% to 55% were utilized in the June 30, 2020 valuation, and 21% to 55% for the March 31, 2020 valuation, both based on Kodak’s best estimates of the after-tax weighted-average cost of capital of each reporting unit as of the applicable valuation date.

A terminal value was included for all reporting units at the end of the cash flow projection period to reflect the remaining value that the reporting unit is expected to generate. The terminal value was calculated using either the constant growth method based on the cash flows of the final year of the discrete period or the H-model, which assumes the growth during the terminal period starts at a higher rate and declines in a linear manner over a specified transition period toward a stable growth rate.

Based upon the results of Kodak’s June 30, 2020 and March 31, 2020 analyses, no impairment of goodwill was indicated. No interim impairment test for goodwill was deemed necessary as of September 30, 2020. Impairment of goodwill could occur in the future if a reporting unit’s fair value changes significantly, if Kodak’s market capitalization significantly declines, if a reporting unit’s carrying value changes materially compared with changes in its fair value, or as a result of changes in operating segments or reporting units.

Kodak updated the fair value of the Kodak trade name as of June 30, 2020 and March 31, 2020. The fair value of the Kodak trade name was valued using the income approach, specifically the relief from royalty method based on the following significant assumptions: (a) forecasted revenues ranging from July 1, 2020 to December 31, 2024 for the June 30, 2020 interim test, and April 1, 2020 to December 31, 2024 for the March 31, 2020 interim test, both valuations included a terminal year with growth rates ranging from -3% to 2.5% (b) an after-tax royalty rate of 0.4% of expected net sales, and (c) discount rates ranging from 16% to 25% for the June 30, 2020 interim test, and 23% to 32% for the March 31, 2020 interim test. The discount rates are based on the after-tax weighted-average cost of capital.

~~Based on the results of Kodak’s March 31, 2020 assessment, the carrying value of the Kodak trade name exceeded its fair value and Kodak recorded a pre-tax impairment charge of $3 million.~~

~~[49]~~

Based on the results of Kodak’s June 30, 2020 assessment, the fair value of the Kodak trade name exceeded its’ carrying value. No interim impairment test for the Kodak tradename was deemed necessary as of September 30, 2020. Impairment of the Kodak trade name could occur in the future if estimated revenues decline or if there are significant changes in the discount or royalty rates. A one percent increase in the discount rate and a 10 percent miss in expected revenues would impact the fair value of the Kodak trade name by $2 million as of June 30, 2020.

Long-lived assets other than goodwill and indefinite-lived intangible assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. When evaluating long-lived assets for impairment, the carrying value of an asset group is compared to its estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset group. The impairment is the excess of the carrying value over the fair value of the long-lived asset group.

Kodak updated its estimate of undiscounted cash flows for each asset group as of June 30, 2020 and March 31, 2020 using a probability weighted approach in determining the likelihood of possible adverse impacts from the COVID-19 pandemic as of each applicable interim test date. Based on the results of the interim impairment tests, no impairment indicators were noted. Impairment of long-lived assets other than goodwill and indefinite lived intangible assets could occur in the future if expected estimated future cash flows decline or if there are significant changes in the estimated useful life of the assets.

LIQUIDITY AND CAPITAL RESOURCES

~~Kodak~~ ~~is facing~~The financing transactions entered into during the first quarter of 2021 provided additional liquidity ~~challenges due~~ to ~~operating losses and low or negative cash flow from~~the Company to fund on-going operations and collateral needs. Kodak has $87 million of letters of credit issued under the ABL Credit Agreement which matures on May 26, 2021. The Series A Preferred Stock must be redeemed on November 15, 2021 if not converted prior to then. Kodak has ongoing significant cash requirements to fund operations, restructuring programs, pension and other postretirement obligations, and ~~other obligations.~~to invest in growth opportunities in Kodak’s core businesses of print, advanced materials and chemicals as well as corporate infrastructure investments expected to contribute to improvements in cash flow. Kodak’s plans to return to sustainable positive cash flow include growing revenues profitably, reducing operating expenses, continuing to simplify the organizational structure, generating cash from selling and leasing underutilized assets and ~~paring investment in new technology by eliminating or delaying product development programs. Additionally, the Company looks to implement~~implementing ways to reduce cash collateral ~~needs in the U.S.~~ needs.

Kodak’s products are sold and serviced in numerous countries across the globe with more than half of sales generated outside the U.S. Current global economic conditions ~~are~~remain highly volatile due to the on-going COVID-19 pandemic. The conversion of accounts receivable to cash is ~~taking longer and~~improving but collection risk ~~has increased since before~~remains high. To mitigate the ~~pandemic.~~economic impacts of the pandemic Kodak reduced operating costs, largely beginning in the second quarter of 2020, through the use of temporary furloughs and pay reductions and adjusted manufacturing volumes to meet changing expectations around production requirements. The furloughs and pay-cuts largely ended in January 2021. While manufacturing volumes have improved for certain businesses the economic uncertainty surrounding the COVID-19 pandemic isrepresents an additional element of complexity in Kodak’s plans to return to sustainable positive cash flow. ~~To mitigate~~The Company cannot predict the ~~economic impacts~~duration and scope of the COVID-19 pandemic, ~~Kodak is employing temporary furloughs~~the severity of the virus, the emergence and ~~pay reductions~~spread of new variants, or how quickly and ~~adjusting manufacturing volumes~~ to ~~meet changing expectations around production requirements.~~what extent normal economic and operating conditions can resume. The Company ~~is also seeking~~continues to take advantage of any available government incentives around the world in response to the COVID-19 pandemic such as ~~employee related~~employee-related tax deferrals or holidays, wage subsidies and loan programs including those under the U.S. CARES Act, although the Company has not yet been able to take advantage of any loan programs and may not qualify for any loans under the programs created under the U.S. CARES Act.programs. Many of the available government incentives for which the Company qualifies are in the form of deferrals of payments that will be required to be paid in the future.

Refer to the Going Concern section of Note 1, “Basis of Presentation and Recent Accounting Pronouncements”; Note 8, "Debt and Finance Leases," and Note 9, “Redeemable, Convertible Series A Preferred Stock” in the Notes to Financial Statements for further discussion. Refer to Note 2, “Cash, Cash Equivalents and Restricted Cash” for a reconciliation of cash, cash equivalents and restricted cash.

	September 30,		December 31,		June 30,		December 31,
(in millions)	2020		2019		2021		2020
Cash, cash equivalents and restricted cash	$	241	$	290	$	469	$	256

[~~50]~~42]

Cash Flow Activity

	Nine Months Ended									Six Months Ended
	September 30,									Six Months Ended June 30,
(in millions)	2020			2019			Change			2021			2020			Year-Over-Year Change
Cash flows from operating activities:
Net cash used in operating activities	$	(48	)	$	(4	)	$	(44	)	$	(21	)	$	(64	)	$	43
Cash flows from investing activities:
Net cash (used in) provided by investing activities		(9	)		315			(324	)
Net cash used in investing activities											(5	)		(5	)		—
Cash flows from financing activities:
Net cash provided by (used in) financing activities		10			(295	)		305			241			(6	)		247
Effect of exchange rate changes on cash and restricted cash		(2	)		(4	)		2			(2	)		(3	)		1
Net (decrease) increase in cash, cash equivalents, restricted cash and cash in assets held for sale	$	(49	)	$	12		$	(61	)
Net increase (decrease) in cash, cash equivalents and restricted cash										$	213		$	(78	)	$	291

Operating Activities

Net cash used in operating activities ~~increased $44~~decreased $43 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared with the corresponding period in ~~2019~~2020 primarily due to ~~increased~~improved earnings, decreases in cash ~~use~~used for accounts payable and ~~other liabilities, including the payment of $6 million of interest upon the conversion of the Notes,~~proceeds from legal settlements partially offset by ~~higher~~lower reductions of accounts receivable and increased investment in ~~2020. Additionally, cash used~~inventory in operations in 2019 benefitted from the allocation of $10 million of the proceeds from the divestiture of FPD as consideration for a brand license, the allocation of $13 million of the proceeds from entering the relationship with HuaGuang as consideration for an intellectual property license receipt and the receipt of a $15 million prepayment for transition services, products, and other services as a part of the divestiture of FPD.2021.

Investing Activities

Net cash ~~provided by~~used in investing activities ~~decreased $324 million~~remained flat for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared with the corresponding period in ~~2019 due to the proceeds from the sale of FPD in the prior year.~~2020.

Financing Activities

Net cash provided by financing activities infor the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 improved ~~$305~~$247 million ~~favorably~~compared to the corresponding period in ~~2019~~2020 driven by the ~~current year~~net proceeds of $247 million received from option exercises, the prior year repayment of the Term Credit Agreement and the prior year payment of contingent consideration partially offset by the issuance of the Notes and the proceeds from the RED – Rochester borrowing and the current year ~~payment of preferred stock dividends.~~refinancing transactions.

Sources of Liquidity

Available liquidity includes cash balances and the unused portion of the Amended ABL Credit Agreement. The amount of available liquidity is subject to fluctuations and includes cash balances held by various entities worldwide. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 approximately ~~$108~~$274 million and ~~$72~~$99 million, respectively, of cash and cash equivalents were held within the U.S. and approximately ~~$85~~$121 million and ~~$161~~$97 million, respectively, of cash and cash equivalents were held outside the U.S. Cash balances held outside the U.S. are generally required to support local country operations and may have high tax costs or other limitations that delay the ability to repatriate, and therefore may not be readily available for transfer to other jurisdictions. Kodak utilizes cash balances outside the U.S. to fund needs in the U.S. through the use of inter-company loans. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, outstanding inter-company loans to the U.S. were ~~$436~~$410 million and ~~$408~~$449 million, respectively, which includes short-term inter-company loans from Kodak’s international finance center of ~~$138~~$111 million and ~~$110~~$150 million, respectively.In China, where approximately ~~$22~~$35 million and ~~$89~~$34 million of cash and cash equivalents was held as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, there are limitations related to net asset balances that may impact the ability to make cash available to other jurisdictions in the world. ~~On May 12, 2020, a Chinese subsidiary of Kodak transferred approximately $70 million to a U.S. subsidiary of Kodak that was used in an inter-company transaction.~~ Under the terms of the Amended ABL Credit Agreement, the Company is permitted to invest up to ~~$100~~$75 million in ~~subsidiaries~~Restricted Subsidiaries that are not Loan Parties and in joint ventures or Unrestricted Subsidiaries that are not party to the Amended ABL Credit Agreement.

~~On January 27, 2020 Kodak exercised its right~~The Company issued approximately $42 million letters of credit under the Amended ABL Credit Agreement ~~to permanently reduce lender commitments, reducing the commitments from $150~~and $45 million ~~to $120 million. As a result, the minimum Excess Availability decreased to $15 million from the previous minimum of $18.75 million.~~

On March 27, 2020, the Company and the Subsidiary Guarantors entered into the Amendment with the Lenders and Bank of America, N.A., as administrative and collateral agent. The Amendment decreased the available asset-based revolving loans (the “ABL Loans”) and letters of credit ~~from an aggregate amount~~under the L/C Facility Agreement as of ~~up to $120 million to $110 million, subject to~~June 30, 2021. The letters of credit under the ~~Borrowing Base.~~

~~As a result of the additional reduction in lender commitments, the minimum Excess Availability decreased to $13.75 million from the previous amount of $15 million.~~

~~[51]~~

L/C Facility Agreement are collateralized by cash collateral (L/C Cash Collateral). The ~~changes provided by the Amendment to the Excess Availability and Equipment Availability combined with increases in Eligible Receivables and Eligible Inventory allowed the Company to decrease Eligible~~L/C Cash ~~by $13~~Collateral was $46 million at ~~the time of the amendment without causing Excess Availability to fall below 12.5% of lender commitments.~~

The Amendment also changed Equipment Availability from (i) the lesser of 75% of Net Orderly Liquidation Value of Eligible Equipment or $6 million to (ii) the lesser of 70% of Net Orderly Liquidation Value of Eligible Equipment or $14.75 millionJune 30, 2021 which was classified as of March 31, 2020. The Equipment Availability was $14.75 million for September 30, 2020. The $14.75 million amount decreases by $1 million per quarter starting on July 1, 2020 until maturity or the amount is decreased to $0, whichever comes first.

Restricted Cash. The Company ~~had~~ issued approximately ~~$87~~$90 million ~~and $80 million of~~ letters of credit under the ABL Credit Agreement as of ~~September 30, 2020 and~~ December 31, ~~2019, respectively.~~ 2020.

Under the Amended ABL Credit Agreement and L/C Facility Agreement the Company is required to maintain Minimum Liquidity of at least $80 million, which is tested on the last day of each fiscal quarter. Minimum Liquidity was $274 million at June 30, 2021. If Minimum Liquidity falls below $80 million an Event of Default would occur and the Agent has the right to declare the obligation of each Lender to make Revolving Loans and of the Issuing Banks to issue Letters of Credit to be terminated, and declare the Revolving Loans, all interest thereon and all other amounts payable under the Amended ABL Credit Agreement to be due and payable.

Under the Amended ABL Credit Agreement the Company is required to maintain Excess Availability above 12.5% of lender commitments ($13.75 million at September 30, 2020). If Excess Availability is below 12.5% of lender commitments the Company has the ability to fund amounts into the Eligible Cash account which will increase Excess Availability for purposes of the previous month-end compliance reporting. The Company had approximately $20 million of Excess Availability under the ABL Credit Agreement for the September 30, 2020 compliance reporting and $22 million of Excess Availability under the ABL Credit Agreement as of December 31, 2019. To maintain Excess Availability of greater than 12.5% of lender commitments ($13.7511.25 million and ~~$18.75~~$13.75 million as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively), ~~Kodak funded $21~~which is tested at the end of each month. Excess Availability was $39 million and ~~$22~~$20 million ~~to the Eligible Cash account held with the ABL Credit Agreement Administrative Agent~~ as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively, which is classified as Restricted Cash in the Consolidated Statement of Financial Position.~~

~~Under the ABL Credit Agreement, if~~2020, respectively. If Excess Availability falls below 12.5% of lender ~~commitments), Kodak~~commitments a Fixed Charge Coverage Ratio Trigger Event would occur. During any Fixed Charge Coverage Ratio Trigger Event, the Company would be required to maintain a Fixed Charge Coverage Ratio of greater than or equal to 1.0 to 1.0.

[43]

If Excess Availability falls below 12.5% of lender commitments, Kodak may, in addition to the requirement to be in compliance with the minimum Fixed Charge Coverage Ratio, ~~(the only financial covenant in the ABL Credit Agreement) and could~~ become subject to cash dominion control. In addition to Eligible Cash, the borrowing base is supported by Eligible Receivables, Eligible Inventory and Eligible Equipment. To the extent the assets supporting the borrowing base decline and/or letters of credit issued under the ABL Credit Agreement increase, if the remaining assets included in the borrowing base are not sufficient to support the required Excess Availability amount, funding of Eligible Cash may be required. Eligible Receivables, Eligible Inventory and Eligible Equipment have the meaning ascribed to these terms in the ABL Credit Agreement. Kodak intends to maintain Excess Availability above the minimum threshold. Since Excess Availability was greater than 12.5% of lender commitments ~~the September~~at June 30, 2021 and December 31, 2020, ~~month-end compliance reporting date,~~ Kodak is not required to have a minimum Fixed Charge Coverage Ratio of 1.0 to 1.0. The Amended ABL Credit Agreement also removed Eligible Cash from the Borrowing Base. Therefore, amounts funded into the Eligible Cash account will no longer increase Excess Availability for purposes of compliance reporting. As of ~~September 30,~~December 31, 2020, ~~Fixed Charges exceeded EBITDA (as defined in~~to maintain Excess Availability of greater than 12.5% of lender commitments, Kodak funded $35 million to the Eligible Cash account held with the ABL Credit ~~Agreement) by approximately $39 million, therefore,~~Agreement Administrative Agent, which was classified as Restricted Cash in the Consolidated Statement of Financial Position.

If Excess Availability falls below 12.5% of lender commitments and the Fixed Charge Coverage Ratio ~~was~~is less than 1.0 to ~~1.0.~~1.0, an Event of Default would occur and the Agent has the right to declare the obligation of each Lender to make Revolving Loans and of the Issuing Banks to issue Letters of Credit to be terminated, and declare the Revolving Loans, all interest thereon and all other amounts payable under the Amended ABL Credit Agreement to be due and payable.

Other Uses of Cash Related to Financing Transactions

The holders of the Term Loans are entitled to quarterly cash interest payments at a rate of 8.5% per annum and holders of the Series B Preferred Stock are entitled to cumulative dividends payable quarterly in cash at a rate of 4.0% per annum. The Convertible Notes do not require any debt service until maturity on May 28, 2026 and holders of the Series C Preferred Stock are entitled to cumulative dividends payable quarterly “in-kind” in the form of additional shares of Series C Preferred Stock at a rate of 5.0% per annum. All dividends have been paid when due.

Other Collateral Requirements

The New York State Workers’ Compensation Board (“NYSWCB”) requires security deposits related to self-insured workers’ compensation obligations. The security deposit required by NYSWCB is based on actuarial calculations of the Company’s obligations and company specific factors such as its declining workforce and reducing exposure. The NYSWCB calculation also includes a financial contingency based on the employer’s credit rating and a calculation of unallocated loss adjustment expenses. In 2020 the NYSWCB waived these charges to provide employers some relief while they endure the economic impacts of the COVID-19 pandemic. The waived security deposits amounted to $16.7 million in 2020. The increase to the security deposit required by NYSWCB in 2020, not including the waived amounts, was $14.9 million. The Company has agreed to post additional collateral of approximately $3 million for each of the next five years to satisfy the current security deposit obligation. The collateral obligation can be satisfied by issuing letters of credit or through other means. The amount of security deposit required by NYSWCB will be re-calculated annually. Therefore, the amount of additional collateral required may change each year.

As a result of the Company’s current credit ratings, during the second quarter of 2020 two surety bond holders notified the Company they required approximately $9 million of incremental collateral. The Company reduced the surety bond value by approximately $9 million in July 2020 with an equivalent increase to an existing letter of credit with the New York Workers’ Compensation board. The Company could be required to provide up to $3 million of letters of credit to the issuers of certain surety bonds in the future to fully collateralize the bonds.

~~The holders~~U.S. International Development Finance Corporation Non-Binding Letter of Series A Preferred Stock are entitled to cumulative dividends payable quarterly in cash at a rate of 5.5% per annum. Until the third quarter of 2018 all dividends owed on the Series A Preferred Stock were declared and paid when due. No quarterly dividend was declared in the third or fourth quarters of 2018 or the first and second quarters of 2019. The Company declared quarterly cash dividends in the third and fourth quarters of 2019 and the first and second quarters of 2020 that were paid when due. In July 2020, the Company declared and paid the four quarterly dividends that were in arrears in the aggregate amount of $11 million. The Company declared a quarterly dividend in the third quarter of 2020 that was paid in October 2020.

Interest

On July 28, 2020 the U.S. International Development Finance Corporation ~~signed~~(the “DFC”) announced (the “DFC Announcement) the signing of a non-binding letter of interest to provide ~~up to~~ a ~~$765 million loan to Kodak Pharmaceuticals, Inc. (“KPI”), which would be a wholly owned~~ subsidiary of the Company with a potential $765 million loan (the “DFC Loan”) to support the launch of Kodak Pharmaceuticals, an initiative that would ~~produce~~manufacture pharmaceutical ~~ingredients.~~ingredients for essential generic drugs (the “DFC Pharmaceutical Project”). The ~~loan~~DFC Loan would be for facility upgrades and construction, provide working capital, and finance other necessary direct expenditures supporting the launch of ~~KPI. As further described under Part II, Item 1A. Risk Factors, there can~~Kodak Pharmaceuticals. The signing of the letter of interest indicated Kodak’s successful completion of the DFC’s initial screening, which would be ~~no assurances~~followed by standard due diligence conducted by the DFC before financing would be formally committed. The application process for the DFC Loan was put on hold when investigations were commenced with respect to the circumstances surrounding the DFC Announcement. While the letter of interest with the DFC has never been formally terminated and the Company has not received any communication from the DFC rejecting its application, given the time that has elapsed and the recent changes in administration at the federal government and the DFC, the Company is operating on the basis that the DFC Loan as envisioned at the time of the DFC Announcement will ~~be approved or made.~~

~~Due~~not proceed. The Company remains interested in working with the DFC and other governmental agencies to ~~exercises~~leverage its assets and technology to on-shore manufacturing of ~~stock options primarily by ex-employees,~~pharmaceutical and other healthcare materials. As described under “Overview” above, the Company ~~received approximately $29 million, net~~is also continuing to explore expanding further into the pharmaceutical space on a smaller scale than contemplated by the DFC Loan using other sources of ~~tax payments, in July and August 2020.~~capital, including a portion of the capital raised by the Company on February 26, 2021.

Defined Benefit Pension and Postretirement Plans

Kodak made net contributions (funded plans) or paid benefits (unfunded plans) totaling approximately $9$6 million to its defined benefit pension and postretirement benefit plans in the first ~~nine~~six months of ~~2020.~~2021. For the balance of ~~2020,~~2021, the forecasted contribution (funded plans) and benefit payment (unfunded plans) requirements for its pension and postretirement plans are approximately $8$11 million.

Capital Expenditures

Cash flow from investing activities included ~~$13~~$5 million of capital expenditures for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Kodak expects approximately ~~$15~~$20 million to $30 million of total capital expenditures for ~~2020.~~2021, before consideration of any investment Kodak may make utilizing proceeds from the first quarter 2021 financing transactions.

[44]

~~[52]~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Kodak maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Kodak’s reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including Kodak’s Executive Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Kodak’s management, with the participation of Kodak’s Executive Chairman and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Kodak’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q and have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, Kodak’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were ~~not effective as a result of a material weakness that existed in Kodak’s internal control over financial reporting described below.~~

Notwithstanding the material weakness discussed below, Kodak’s management, including Kodak’s Executive Chairman and Chief Executive Officer and Chief Financial Officer, has concluded that the consolidated financial statements included in this report fairly present, in all material respects, Kodak’s financial condition, results of operations and cash flows for the periods presented, and all prior periods, in conformity with accounting principles generally accepted in the United States.

During the quarter ended September 30, 2020 the Company discovered deficiencies in controls required to safeguard Company assets. The Company did not prevent the unauthorized issuance of the Company’s common stock when previously forfeited non-qualified stock options were exercised by five former officers and employees in July 2020. Errors existed in employee equity accounts for the five former officers and employees as well as other current and former officers and employees which could have resulted in additional inappropriate exercises. Controls were inadequate with regard to the timely input and verification of master data updates for equity grants, the maintenance of audit documentation of grant activity in the repository of grants serviced by a third-party administrator, and the performance of independent reconciliations of the repository to supporting company records for the detection of errors or misstatements in employee equity account balances.

The Company has made progress towards remediation of the material weakness as of November 10, 2020 and expects to have these deficiencies remediated by December 31, 2020. Documentation and supervisory review controls around master data are being strengthened and an audit trail of stock-based compensation award additions and modifications is now being maintained. A complete reconciliation of the repository of equity grants is being performed and controls are being strengthened by employing an independent reconciliation process and ensuring appropriate segregation of duties. The Company is also working to correct the transactions and recover value for the options exercised in error. effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in Kodak’s internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, Kodak’s internal control over financial reporting. ~~As noted above, the Company is in the process of strengthening controls to address a material weakness.~~

[~~53]~~45]

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

On August 13, 2020 Tiandong Tang commenced a class action lawsuit against the Company, its Executive Chairman and Chief Executive Officer and its Chief Financial Officer in Federal District Court in the District of New Jersey, and on August 26, 2020 Jimmie A. McAdams and Judy P. McAdams commenced a class action lawsuit against the Company and its Executive Chairman and Chief Executive Officer in Federal District Court in the Southern District of New York (collectively, the “Securities Class Actions”). The Securities Class Actions seek damages and other relief based on alleged violations of federal securities laws in the context of the ~~announcement~~DFC Announcement of the potential DFC Loan and DFC Pharmaceutical ~~Initiative discussed under Item 1A. Risk Factors below~~Project. The Securities Class Actions were transferred to the Federal District Court for the Western District of New York and were consolidated into a single proceeding (the ~~“Pharmaceutical Announcement”~~“Consolidated Securities Class Action”). on June 22, 2021. On August 2, 2021, Les Investissements Kiz Inc. and UAT Trading Service, Inc. were appointed by the court to serve as lead plaintiff for the Consolidated Securities Class Action. The Company intends to vigorously defend itself against the Consolidated Securities Class ~~Actions.~~Action.

~~In addition to the Securities Class Actions,~~On December 29, 2020 Robert Garfield commenced a class action lawsuit against the Company and current and former members of its Board of Directors in the Superior Court of Mercer County, New Jersey seeking equitable relief and damages in favor of the Company based on alleged breaches of fiduciary duty by the Company’s Board of Directors associated with alleged false and misleading proxy statement disclosures (the “Fiduciary Class Action”). The Company and each of the individual defendants filed motions to dismiss theFiduciary Class Action on April 13, 2021. On May 26, 2021, the plaintiff in the Fiduciary Class Action voluntarily dismissed the Fiduciary Class Action without prejudice.

The Company has also received ~~two~~four requests under New Jersey law demanding, among other things, that the Company take certain actions in response to alleged breaches of fiduciary duty relating to option grants and securities transactions in the context of the ~~Pharmaceutical~~DFC Announcement and alleged proxy statement disclosure ~~deficiencies. The~~deficiencies (the “Derivative Demands”). On May 19, 2021 Louis Peters, one of the persons making a Derivative Demand, commenced a derivative lawsuit on behalf of the Company isagainst certain officers and current and former directors of the Company and the Company as a nominal defendant in the ~~process~~Supreme Court of ~~responding~~the State of New York in Monroe County seeking damages and equitable relief based on alleged breaches of fiduciary duty and unjust enrichment resulting from stock trades, option grants and a charitable contribution in the context of the DFC Announcement of the potential DFC Loan and DFC Pharmaceutical Project (the “Derivative Lawsuit”). The parties have stipulated that the plaintiff will file an amended complaint, to ~~these requests,~~which the Company and the individual defendants may respond within 60 days after its ~~response may serve as the basis for the requestors to bring~~filing. Additional shareholder derivative lawsuits may be brought based on the other Derivative Demands (any such lawsuits, collectively with the Derivative Lawsuit and any successor to the Fiduciary Class Action, the “Fiduciary Matters”). The Company, acting through a Special Committee of Independent Directors, previously determined that there was no merit to the claims alleged by the Derivative Demands (except with respect to the charitable contribution, which was not fully considered by the Special Committee). See the Company’s Current Report on Form 8-K filed with the SEC on September 16, 2020. The Company ~~intends to vigorously defend.~~will carefully review the amended complaint in the Derivative Lawsuit when it is filed and any other additional complaints constituting Fiduciary Matters which may be filed.

The ~~Pharmaceutical~~DFC Announcement has also ~~given rise to~~prompted investigations by several congressional committees and the SEC. The Company is cooperating in those investigations.

Kodak’s Brazilian operations are involved in various litigation matters in Brazil and have received or been the subject of numerous governmental assessments related to indirect and other taxes in various stages of litigation, as well as civil litigation and disputes associated with former employees and contract labor. The tax matters, which comprise the majority of the litigation matters, are primarily related to federal and state value-added taxes and income taxes. Kodak’s Brazilian operations are disputing these matters and intend to vigorously defend their position. Kodak routinely assesses these matters as to the probability of ultimately incurring a liability in its Brazilian operations and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable. As of ~~September~~June 30, ~~2020,~~2021, Kodak’s Brazilian Operations maintained accruals of approximately $2$3 million for claims aggregating approximately ~~$107~~$123 million inclusive of interest and penalties where appropriate. In connection with assessments and litigation in Brazil, local regulations may require Kodak’s Brazilian Operations to post security for a portion of the amounts in dispute. Generally, any encumbrances on the Brazilian assets would be removed to the extent the matter is resolved in Kodak’s favor.

In addition, Kodak is involved in various lawsuits, claims, investigations, remediations and proceedings, including, from time to time, commercial, customs, employment, environmental, tort and health and safety matters, which are being handled and defended in the ordinary course of business. Kodak is also subject, from time to time, to various assertions, claims, proceedings and requests for indemnification concerning intellectual property, including patent infringement suits involving technologies that are incorporated in a broad spectrum of Kodak’s products.

[46]

These matters are in various stages of investigation and litigation and are being vigorously defended. Based on information currently available, Kodak does not believe that it is probable that the outcomes in any of these matters, individually or collectively, will have a material adverse effect on its financial condition or results of operations. Litigation is inherently unpredictable, and judgments could be rendered or settlements entered that could adversely affect Kodak’s operating results or cash flows in a particular period. Kodak routinely assesses all of its litigation and threatened litigation as to the probability of ultimately incurring a liability and records its best estimate of the ultimate loss in situations where it assesses the likelihood of loss as probable.

In addition to matters relating to Kodak’s operations, Kodak is involved in investigations being conducted by several congressional committees and the SEC stemming from events related to the announcement of the potential DFC Loan and Pharmaceutical Initiative discussed under Item 1A. Risk Factors below.

Item 1A. Risk Factors

Reference is made to the Risk Factors set forth in Part I, Item 1A. of the ~~2019~~2020 Form 10-K. The Risk Factors remain applicable from the ~~2019~~2020 Form 10-K. In particular, Kodak continues to face risks associated with the COVID-19 pandemic as described in the 2019 Form 10-K under the captions “Risk Factors—Risks Relating to Kodak’s Business—Weakness or worsening of global economic conditions could adversely affect Kodak’s financial performance and liquidity” and “—Business disruptions could seriously harm Kodak’s future revenue and financial condition and increase its costs and expenses”. Certain known consequences to Kodak from the COVID-19 pandemic are disclosed in the financial statements contained in this Form 10-Q and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation.” The full extent to which the COVID-19 pandemic will impact Kodak’s results will depend on future developments, which are highly uncertain and cannot be predicted at the time of this filing, including new information which may emerge concerning the scope and duration of the pandemic and the restrictions and other actions implemented to fight it, among others. Direct and indirect effects from the COVID-19 pandemic could have a material adverse effect on the continuity of Kodak’s business operations and its results of operations and financial position, particularly if such effects have an extended duration.

On July 28, 2020, the U.S. International Development Finance Corporation (the “DFC”) announced the signing of a non-binding letter of interest to provide a subsidiary of the Company with a potential $765 million loan (the “DFC Loan”) to support the launch of Kodak Pharmaceuticals, an initiative that would manufacture pharmaceutical ingredients for essential generic drugs (the “Pharmaceutical Initiative”).

~~[54]~~

As referenced in the DFC’s announcement, the signing of the letter of interest indicates Kodak’s successful completion of the DFC’s initial screening and will be followed by standard due diligence conducted by the DFC before financing is formally committed. The letter of interest is non-binding, and there can be no assurance that the DFC’s standard due diligence will be successfully completed or that, even if the due diligence is successfully completed, the DFC will proceed with the potential DFC Loan. Congressional investigations and an SEC investigation have been commenced which could affect the likelihood of the consummation of the DFC Loan. The DFC has tweeted that it will not proceed any further with the potential DFC Loan unless the recent allegations raised in the context of the potential DFC Loan have been cleared and has reported that its inspector general is conducting an internal investigation with respect to the potential DFC Loan. The potential DFC Loan has sparked intense media interest and coverage. If the DFC Loan is not made or if the findings of the investigations are unfavorable, Kodak’s reputation could be damaged and its existing business could be adversely affected.

If the DFC Loan is ultimately consummated or Kodak proceeds with the Pharmaceutical Initiative by raising alternative capital, the Pharmaceutical Initiative will be subject to the risks associated with Kodak’s business generally as described in the 2019 Form 10-K under the caption “Risk Factors—Risks Relating to Kodak’s Business”. Based on the developmental nature of the Pharmaceutical Initiative, if the project proceeds Kodak will face heightened risks relating to talent acquisition, construction, obtaining regulatory approvals, cost overruns, delays, product development and market development, among others. In particular, the economic success of the Pharmaceutical Initiative will depend in large part on products produced by the Pharmaceutical Initiative being able to successfully compete with pharmaceutical ingredients supplied by low-cost countries such as China and India through manufacturing and operating efficiencies, “buy American” initiatives or mandates, or otherwise. If the Pharmaceutical Initiative is not able to compete effectively or otherwise generate positive cash flow, the subsidiary operating the Pharmaceutical Initiative (the “Pharmaceutical Subsidiary”) may not be able to distribute profits to the Company or repay the DFC Loan. It is contemplated that if the Pharmaceutical Subsidiary defaults on the DFC Loan, the Company will lose its equity interest in the Pharmaceutical Subsidiary (and, indirectly, the buildings and assets contributed by Kodak to the Pharmaceutical Subsidiary in connection with the Pharmaceutical Initiative). It is not contemplated that the Company will be a guarantor of the DFC Loan or responsible to repay the DFC Loan should the Pharmaceutical Subsidiary default on the DFC Loan.

As described in the 2019 Form 10-K under the caption “Risk Factors—Risks Related to the Company’s Common Stock—The Company’s stock price has been and may continue to be volatile”, there have been and may continue to be significant fluctuations in the market price of the Company’s common stock. For example, there have been significant market price fluctuations following the recent announcement of the potential DFC Loan and Pharmaceutical Initiative. The market price of the Company’s common stock may be particularly susceptible to additional significant fluctuations based on future announcements or disclosures concerning the potential DFC Loan, the Pharmaceutical Initiative, the related congressional and SEC investigations and the related litigations and claims.

As described in the 2019 Form 10-K under the caption “Risk Factors—Risks Related to the Company’s Common Stock—The Company has registered the resale of a large portion of its outstanding securities. The resale of the Company’s common stock, or the perception that such resale may occur, may adversely affect the price of its common stock, the resale of a substantial number of shares of common stock in the public market, or the perception that such resale might occur, could cause the market price of the Company’s common stock to decline. On August 3, 2020, the Company issued the 29,922,956 Conversion Shares to the holders of the Converted Notes (the “Converting Holders”). Based on filings made by the Converting Holders with the SEC, the Converting Holders have sold into the market all of the 29,922,956 Conversion Shares as well as an additional 4,000,000 shares of common stock previously registered for resale by one of the Converting Holders.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Sales of unregistered securities during the quarter ended ~~September~~June 30, ~~2020~~2021

~~None~~None.

(b)	Issuer purchases of equity securities during the quarter ended ~~September~~June 30, ~~2020~~2021 ⁽¹⁾

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs ⁽²⁾

Maximum Number of Shares That May Yet
Be Purchased
under the Plans or
Programs
July 1 through 31

—

—

n/a

n/a
August 1 through 31

—

—

n/a

n/a
September 1 through 30

23,131

6.46

n/a

n/a
Total

23,131

$
6.46

None.

⁽¹⁾

~~These purchases were made to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.~~

⁽²⁾

~~Kodak does not have a publicly announced repurchase plan or program.~~

~~[55]~~

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

[47]

Item 6. Exhibits

~~[56]~~

Eastman Kodak Company

Index to Exhibits

Exhibit Number

(3.1)		Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit ~~(4.1)~~4.1 of the Company’s Registration Statement on Form S-8 as filed on September 3, 2013).

(3.2)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Eastman Kodak ~~Company~~Company. (Incorporated by reference to Exhibit ~~(3.1)~~3.1 of the Company’s Current Report on Form 8-K as filed November 16, 2016).

(3.3)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit (3.1) of the Company’s Current Report on Form 8-K as filed September 12, 2019).

(3.4)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit (3.2) of the Company’s Current Report on Form 8-K as filed September 12, 2019).

(3.5)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K as filed December 29, 2020).

(3.6)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K as filed March 1, 2021).

(3.7)		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K as filed March 1, 2021).

(3.8)		Fourth Amended and Restated By-Laws of Eastman Kodak Company (Incorporated by reference to Exhibit (3.5) of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 as filed on May 12, 2020).

*(10.1)		First Amendment to the Eastman Kodak Company 2013 Omnibus Incentive Plan, as amended and restated, filed herewith.

~~(10.1)~~	~~James V. Continenza Nonqualified Stock Option Award Agreement, dated July 27, 2020, filed herewith.~~

*(10.2)	~~Eastman Kodak Company 2013 Omnibus Incentive Plan Form of Executive Nonqualifed Stock Option Award Agreement (multiple tranches), filed herewith~~.

~~(10.3)~~	Eastman Kodak Company 2013 Omnibus Incentive Plan Form of Director ~~Nonqualifed Stock Option~~Restricted Share Award Agreement, ~~(multiple tranches),~~ filed herewith.

(31.1)		Certification signed by James V. Continenza, filed herewith.

(31.2)		Certification signed by David E. Bullwinkle, filed herewith.

(32.1)		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by James V. Continenza, filed herewith.

(32.2)		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by David E. Bullwinkle, filed herewith.

(101.CAL)		Inline XBRL Taxonomy Extension Calculation Linkbase.

(101.INS)		Inline XBRL Instance Document.

(101.LAB)		Inline XBRL Taxonomy Extension Label Linkbase.

(101.PRE)		Inline XBRL Taxonomy Extension Presentation Linkbase.

(101.SCH)		Inline XBRL Taxonomy Extension Schema Linkbase.

(101.DEF)		Inline XBRL Taxonomy Extension Definition Linkbase

(104)		Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

* Management contract or compensatory plan or arrangement.

[~~57]~~48]

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EASTMAN KODAK COMPANY

(Registrant)

Date: ~~November~~August 10, ~~2020~~2021		/s/ ~~Eric Samuels~~Richard T. Michaels
		~~Eric Samuels~~Richard T. Michaels
		Chief Accounting Officer and Corporate Controller
		(Chief Accounting Officer and Authorized Signatory)

[~~58]~~49]

	September 30, 2020
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Weighted-Average Amortization Period
Technology-based	$	99	$	80	$	19	5 years
Kodak trade name		18		—		18	Indefinite life
Customer-related		11		8		3	3 years
Total	$	128	$	88	$	40

(in millions)
Q4 2020	$	1
2021		5
2022		5
2023		4
2024		4
2025 and thereafter		3
Total	$	22

(in millions)
Fair value of Initial Conversion Shares	$	506
Fair value of Mandatory Conversion Shares		13
Carrying value of Notes		(92	)
Fair value of pro-rata share of embedded derivative at Initial Conversion		(416	)
Fair value of pro-rata share of embedded derivative at Mandatory Conversion		(9	)
Total	$	2

(in millions)
Deferred revenue on extended warranties as of December 31, 2019	$	21
Extended warranty and maintenance arrangements deferred in 2020		68
Recognition of extended warranty and maintenance arrangement revenue in 2020		(70	)
Deferred revenue on extended warranties as of September 30, 2020	$	19

(in millions)	Severance Reserve ⁽¹⁾			Exit Costs Reserve ⁽¹⁾			Long-lived Asset Impairments and Inventory Write-downs ⁽¹⁾		Total
Balance as of December 31, 2019	$	11		$	1		$	—	$	12
Q1 charges		6			1			—		7
Q1 utilization/cash payments		(7	)		—			—		(7	)
Q1 other adjustments and reclasses ⁽²⁾		(1	)		(1	)		—		(2	)
Balance as of March 31, 2020	$	9		$	1		$	—	$	10
Q2 charges	$	1		$	—		$	—	$	1
Q2 utilization/cash payments		(3	)		—			—		(3	)
Balance as of June 30, 2020	$	7		$	1		$	—	$	8
Q3 charges	$	1		$	—		$	—	$	1
Q3 utilization/cash payments		(3	)		—			—		(3	)
Balance as of September 30, 2020	$	5		$	1		$	—	$	6

(in millions of shares)
Weighted average shares — basic and diluted			64.8				43.0				50.8				43.0

	Number of Restricted Stock Units		Weighted-Average Grant Date Fair Values
Outstanding on December 31, 2019		721,801	$	3.25
Granted		351,909	$	2.91
Vested		692,751	$	3.05
Outstanding on September 30, 2020		380,959	$	3.31

	Shares Under Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value ($ millions)
Outstanding on December 31, 2019		6,843,079	$	10.96
Granted		2,917,464	$	5.86
Exercised		2,019,187	$	14.51
Forfeited		27,075	$	12.50
Outstanding on September 30, 2020		7,714,281	$	8.09	5.09	$	23
Exercisable on September 30, 2020		6,858,431	$	8.49	4.91	$	19
Expected to vest September 30, 2020		855,850	$	4.91	6.52	$	4

	July 27, 2020
	Option Awards
Weighted-average fair value of options granted	$	6.57
Range of risk-free interest rates	0.11% -0.30%
Weighted-average term	5.57 years
Weighted-average volatility	98%
Weighted-average expected dividend yield	0.00%

	Valuation Date
	September 30,			August 3,
	2020			2020
Total value of embedded derivative liability immediately prior to any extinguishment ($ millions)	$	9		$	429
Value of embedded derivative that expired ($ million)	$	9		$	416
Value of remaining embedded derivative liability ($ million)	$	—		$	13
Kodak's stock price⁽¹⁾	$	8.82		$	16.91
Risk free rate		0.12	%		0.12	%
Yield on the Notes		8.93	%		9.47	%