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

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

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 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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.

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 ~~August 3,~~November 2, 2020, the registrant had ~~75,684,110~~77,163,326 shares of common stock, par value $0.01 per share, outstanding.

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
	2020			2019			2020			2019			2020			2019			2020			2019
Revenues
Sales	$	163		$	240		$	373		$	464		$	195		$	249		$	568		$	713
Services		50			67			107			134			57			66			164			200
Total revenues		213			307			480			598			252			315			732			913
Cost of revenues
Sales		159			218			350			423			183			216			533			639
Services		33			47			73			93			38			46			111			139
Total cost of revenues		192			265			423			516			221			262			644			778
Gross profit		21			42			57			82			31			53			88			135
Selling, general and administrative expenses		34			54			82			113			56			48			138			161
Research and development costs		8			11			17			22			8			11			25			33
Restructuring costs and other		1			2			8			4			1			3			9			7
Other operating income, net		(3	)		—			(10	)		—
Loss from continuing operations before interest expense, pension income excluding service cost component, other charges (income), net and income taxes		(19	)		(25	)		(40	)		(57	)
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	)
Interest expense		4			5			8			8			3			4			11			12
Pension income excluding service cost component		(27	)		(26	)		(53	)		(53	)		(26	)		(26	)		(79	)		(79	)
Other charges (income), net		8			—			(45	)		1
(Loss) income from continuing operations before income taxes		(4	)		(4	)		50			(13	)
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	)
Provision for income taxes		1			2			166			5			1			7			167			12
Loss from continuing operations		(5	)		(6	)		(116	)		(18	)		(445	)		(10	)		(561	)		(28	)
Income from discontinued operations, net of income taxes		—			207			—			201			—			5			—			206
Net (loss) income	$	(5	)	$	201		$	(116	)	$	183		$	(445	)	$	(5	)	$	(561	)	$	178

Basic and diluted (loss) income per share attributable to Eastman Kodak Company common shareholders:
Basic and diluted loss per share attributable to Eastman Kodak Company common shareholders:
Continuing operations	$	(0.23	)	$	(0.25	)	$	(2.88	)	$	(0.65	)	$	(6.94	)	$	(0.35	)	$	(11.34	)	$	(1.00	)
Discontinued operations		—			4.81			—			4.67			—			0.12			—			4.79
Total	$	(0.23	)	$	4.56		$	(2.88	)	$	4.02		$	(6.94	)	$	(0.23	)	$	(11.34	)	$	3.79

Number of common shares used in basic and diluted net loss per share		43.7			43.0			43.7			43.0			64.8			43.0			50.8			43.0

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

	Three Months Ended					Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,					June 30,						September 30,						September 30,
	2020			2019		2020			2019			2020			2019			2020			2019
NET (LOSS) INCOME	$	(5	)	$	201	$	(116	)	$	183		$	(445	)	$	(5	)	$	(561	)	$	178
Other comprehensive income (loss), net of tax:
Currency translation adjustments		(4	)		1		(16	)		4			(1	)		(2	)		(17	)		2
Pension and other postretirement benefit plan obligation activity, net of tax		9			—		12			(1	)		3			(1	)		15			(2	)
Other comprehensive income (loss), net of tax		5			1		(4	)		3			2			(3	)		(2	)		—
COMPREHENSIVE INCOME (LOSS), NET OF TAX	$	—		$	202	$	(120	)	$	186
COMPREHENSIVE (LOSS) INCOME, NET OF TAX												$	(443	)	$	(8	)	$	(563	)	$	178

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

	June 30,			December 31,			September 30,			December 31,
(in millions)	2020			2019			2020			2019
ASSETS
Cash and cash equivalents	$	180		$	233		$	193		$	233
Trade receivables, net of allowances of $12 and $8, respectively		140			208
Trade receivables, net of allowances of $11 and $8, respectively								153			208
Inventories, net		228			215			232			215
Restricted cash - current portion		7			12			7			12
Other current assets		32			36			35			36
Current assets held for sale		2			2			2			2
Total current assets		589			706			622			706
Property, plant and equipment, net of accumulated depreciation of $418 and $423, respectively		157			181
Property, plant and equipment, net of accumulated depreciation of $424 and $423, respectively								150			181
Goodwill		12			12			12			12
Intangible assets, net		41			47			40			47
Operating lease right-of-use assets		51			49			50			49
Restricted cash		25			45			41			45
Deferred income taxes		—			147			—			147
Other long-term assets		285			228			305			228
TOTAL ASSETS	$	1,160		$	1,415		$	1,220		$	1,415

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT)
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
Accounts payable, trade	$	101		$	153		$	118		$	153
Short-term borrowings and current portion of long-term debt		2			2			2			2
Current portion of operating leases		11			12			12			12
Other current liabilities		161			201			163			201
Total current liabilities		275			368			295			368
Long-term debt, net of current portion		113			109			17			109
Pension and other postretirement liabilities		368			378			376			378
Operating leases, net of current portion		51			48			49			48
Other long-term liabilities		197			231			206			231
Total liabilities		1,004			1,134			943			1,134

Commitments and Contingencies (Note 11)

Redeemable, convertible Series A preferred stock, no par value, $100 per share liquidation preference	186			182			189			182

Equity (Deficit)
Common stock, $0.01 par value		—			—			—			—
Additional paid in capital		595			604			1,156			604
Treasury stock, at cost		(9	)		(9	)		(9	)		(9	)
Accumulated deficit		(195	)		(79	)		(640	)		(79	)
Accumulated other comprehensive loss		(421	)		(417	)		(419	)		(417	)
Total shareholders’ (deficit) equity		(30	)		99
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY (DEFICIT)	$	1,160		$	1,415
Total shareholders’ equity								88			99
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY							$	1,220		$	1,415

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

	Six Months Ended						Nine Months Ended
	June 30,						September 30,
(in millions)	2020			2019			2020			2019
Cash flows from operating activities:
Net (loss) income	$	(116	)	$	183		$	(561	)	$	178
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization		20			29			29			43
Pension income		(43	)		(45	)		(65	)		(72	)
Change in fair value of embedded derivatives in the Series A Preferred Stock and Convertible Notes		(49	)		(2	)		382			3
Loss on early extinguishment of debt								2			—
Net gain on sales of assets		(9	)		(209	)		(9	)		(202	)
Asset impairments		3			—			3			—
Stock based compensation		1			5			18			6
Non-cash changes in workers' compensation reserves								9			2
Provision for deferred income taxes		160			4			160			6
Decrease in trade receivables		64			22			53			30
Increase in inventories		(17	)		(14	)		(19	)		(18	)
(Decrease) increase in trade payables		(50	)		9			(33	)		13
Decrease in liabilities excluding borrowings and trade payables		(31	)		(5	)		(24	)		(5	)
Other items, net		3			10			7			12
Total adjustments		52			(196	)		513			(182	)
Net cash used in operating activities		(64	)		(13	)		(48	)		(4	)
Cash flows from investing activities:
Additions to properties		(9	)		(5	)		(13	)		(11	)
Net proceeds from sales of assets/businesses		2			302			2			326
Net proceeds from return on equity investment		2			—			2			—
Net cash (used in) provided by investing activities		(5	)		297			(9	)		315
Cash flows from financing activities:
Proceeds from stock option exercises								29			—
Repayment of Term Credit Agreement		—			(395	)		—			(395	)
Proceeds from Convertible Notes		—			98			—			98
Proceeds from borrowings		—			14			—			14
Repayment of finance leases		—			(1	)		—			(2	)
Preferred stock dividend payments		(6	)		—			(19	)		—
Payment of contingent consideration related to the sale of a business		—			(10	)		—			(10	)
Net cash used in financing activities		(6	)		(294	)
Net cash provided by (used in) financing activities								10			(295	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(3	)		1			(2	)		(4	)
Net decrease in cash, cash equivalents, restricted cash and cash in assets held for sale		(78	)		(9	)
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			290			267
Cash, cash equivalents, restricted cash and cash in assets held for sale, end of period	$	212		$	258
Cash, cash equivalents and restricted cash, end of period							$	241		$	279

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

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

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

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 (the “2019 Form 10-K”).

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 ~~June~~September 30, 2020 and December 31, 2019, Kodak had approximately ~~$180~~$193 million and $233 million, respectively, of cash and cash equivalents. ~~$95~~$108 million and $72 million were held in the United States (“U.S.”) as of ~~June~~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 ~~June~~September 30, 2020 and December 31, 2019 were ~~$429~~$436 million and $408 million, respectively, which includes short-term intercompany loans from Kodak’s international finance center of ~~$130~~$138 million and $110 million as of ~~June~~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 ~~June~~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 ~~associated with~~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 ~~$78 million and $9~~$49 million for the ~~six~~nine months ended ~~June~~September 30, 2020, ~~and 2019, respectively,~~ 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.~~2019, respectively. Kodak used cash of ~~$64~~$48 million and ~~$13~~$4 million in operating activities for the ~~six~~nine months ended ~~June~~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 ~~$80~~$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, resulting in market size contractions in many countries due to economic slowdowns and government restrictions on movement.~~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 ~~scaling~~modifying manufacturing volumes ~~due to~~as expectations of ~~reduced demand.~~

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.

On July 29, 2020, the Company received conversion notices from holders of the Company’s 5.00% Secured Convertible Notes due 2021 (the “Notes”) exercising their rights to convert an aggregate of $95 million of principal amount of the Notes (the “Converted Notes”) into shares of the Company’s common stock, par value $.01 per share (“Common Stock”). Under the terms of the Notes, the conversion date of the Converted Notes is July 29, 2020 (the “Conversion Date”) and the Company was obligated to deliver an aggregate of 29,922,956 shares of Common Stock (the “Conversion Shares”) to the holders of the Converted Notes within five trading days after the Conversion Date. The Company issued the Conversion Shares on August 3, 2020 and has paid the $5.6 million of accumulated interest on the Converted Notes in cash. As a result, the Company’s obligations under the Converted Notes were fully discharged and the remaining outstanding principal amount of the Notes is $5 million.

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 provide for immediate vesting or vesting upon conversion of the Notes. The terms of 0.6 million of those options provide for vesting terms of between two and three years. As 95% of the Notes were converted on August 3, 2020, 1.7 million of the 1.8 million options with the accelerated vesting terms (all the options which vested immediately and 95% of the of the options that vested upon conversion of the Notes) vested by August 3, 2020. The valuation of the stock options granted on July 27, 2020 could result in material compensation expense being recognized in the three months ended September 30, 2020.

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 ~~22,~~23, “Segment Information” for additional information.

In November 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard 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.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own 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 1, 2024 for 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 the impact of this ASU.

In March 2020, the FASB issued ASU 2020-04, ~~“Reference~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ~~Reporting”~~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.

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, 2021 (January 1, 2022 for Kodak) with early adoption permitted. Kodak is currently evaluating the impact of this ASU.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial 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 for smaller reporting companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, (January 1, 2023 for Kodak). Early adoption is permitted. Kodak is currently evaluating the impact of this ASU.

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:

	June 30,		December 31,		September 30,		December 31,
(in millions)	2020		2019		2020		2019
Cash and cash equivalents	$	180	$	233	$	193	$	233
Restricted cash - current portion		7		12		7		12
Restricted cash		25		45		41		45
Total cash, cash equivalents and restricted cash shown in the Statement of Cash Flows	$	212	$	290	$	241	$	290

Restricted cash - current portion 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”). On April 16, 2019 the Purchaser of FPD paid Kodak $15 million in the U.S. as a prepayment for transition services and products and services to be provided by Kodak to the Purchaser. Kodak provided a $15 million guaranty, supported by cash collateral in China, to the Purchaser. The Purchaser had the option to satisfy its payment obligations to Kodak through a reduction of the prepayment balance or in cash. When the Purchaser satisfied its payment obligations to Kodak by utilizing its prepayment balance, Kodak followed a guaranty amendment process to reduce the amount of its guaranty and cash collateral supporting the prepayment balance. As of ~~June~~September 30, 2020 and December 31, 2019, ~~the remaining prepayment balance was $0 million and $3 million, respectively, and~~ the cash collateral supporting Kodak’s guaranty was $0 million and $4 million, respectively.

Restricted cash includes $9$21 million and $22 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively, supporting compliance with the Excess Availability threshold under the ABL Credit Agreement, as defined therein (Refer to Note 8, “Debt and Finance Leases” for information on the ~~decrease in~~ Restricted cash supporting the Excess Availability threshold). In addition, Restricted cash as of both ~~June~~September 30, 2020 and December 31, 2019 includes an escrow of ~~$10 million and~~ $14 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 million of security posted related to Brazilian legal contingencies as of ~~June~~September 30, 2020 and December 31, 2019, respectively.

	June 30,		December 31,		September 30,		December 31,
(in millions)	2020		2019		2020		2019
Finished goods	$	107	$	105	$	115	$	105
Work in process		60		54		57		54
Raw materials		61		56		60		56
Total	$	228	$	215	$	232	$	215

	June 30,		December 31,		September 30,		December 31,
(in millions)	2020		2019		2020		2019
Pension assets	$	225	$	173	$	252	$	173
Estimated workers' compensation recoveries		18		18		18		18
Long-term receivables, net of reserve of $4 and $4, respectively		10		11		11		11
Series A Preferred Stock embedded conversion option derivative asset		5		—
Other		27		26		24		26
Total	$	285	$	228	$	305	$	228

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.

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

(in millions)	Traditional Printing			Digital Printing		Advanced Materials and Chemicals			Brand		Total			Traditional Printing			Digital Printing		Advanced Materials and Chemicals			Brand		Total
As of December 31, 2019
Goodwill	$	56		$	6	$	14		$	—	$	76		$	56		$	6	$	14		$	—	$	76
Accumulated impairment losses		(56	)		—		(8	)		—		(64	)		(56	)		—		(8	)		—		(64	)
Balance as of December 31, 2019		—			6		6			—		12			—			6		6			—		12
Goodwill reallocation		—			—		(6	)		6		—			—			—		(6	)		6		—
Balance as of June 30, 2020	$	—		$	6	$	—		$	6	$	12
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 ~~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. 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, ~~and March 31, 2020,~~ the Brand reporting unit had negative carrying value. No interim impairment test for goodwill was deemed necessary as of September 30, 2020.

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

	June 30, 2020							September 30, 2020
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Weighted-Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net		Weighted-Average Amortization Period
Technology-based	$	99	$	79	$	20	5 years	$	99	$	80	$	19	5 years
Kodak trade name		18		—		18	Indefinite life		18		—		18	Indefinite life
Customer-related		11		8		3	3 years		11		8		3	3 years
Total	$	128	$	87	$	41		$	128	$	88	$	40

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 ~~six~~nine months ended ~~June~~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 ~~continued~~ 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 ~~test~~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 $2$1 million for the three months ended ~~June~~September 30, 2020 and 2019 and $3$4 million for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

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

(in millions)
Q3 - Q4 2020	$	3
Q4 2020			$	1
2021		5		5
2022		4		5
2023		4		4
2024		4		4
2025 and thereafter		3		3
Total	$	23	$	22

	June 30,		December 31,		September 30,		December 31,
(in millions)	2020		2019		2020		2019
Deferred revenue	$	40	$	43	$	44	$	43
Employee related liabilities		37		38		42		38
Customer rebates ⁽¹⁾		17		23		18		23
Series A Preferred Stock dividends payable		14		14		3		14
Workers compensation		10		10		10		10
Restructuring liabilities		8		12		6		12
Deferred consideration on disposed businesses ⁽²⁾		—		14		—		14
Transition services agreement prepayment		—		3		—		3
Other ⁽³⁾		35		44		40		44
Total	$	161	$	201	$	163	$	201

	June 30,		December 31,		September 30,		December 31,
(in millions)	2020		2019		2020		2019
Workers compensation	$	81	$	84	$	89	$	84
Asset retirement obligations		40		48		41		48
Deferred brand licensing revenue		16		18		16		18
Deferred taxes		30		13		30		13
Environmental liabilities		9		10		9		10
Convertible Notes embedded conversion option derivative liability		9		52		—		52
Preferred stock embedded conversion option derivative liability						9		—
Other		12		6		12		6
Total	$	197	$	231	$	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.

On May 20, 2019, the Company and Longleaf Partners Small Cap Fund, C2W Partners Master Fund Limited and Deseret Mutual Pension Trust, which are investment funds managed by Southeastern Asset Management, Inc. (the “Notes Purchasers”), entered into a Notes Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to issue and sell to the Notes Purchasers, and the Notes Purchasers agreed to purchase from the Company, $100 million aggregate principal amount of the Company’s 5.00% Secured Convertible Notes due 2021 (the “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. The 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 bore interest at a rate of 5.00% per annum, which was payable in cash on their maturity date and, at the option of the Company, in either cash or additional shares of Common Stock on any conversion date. The maturity date of the Notes was November 1, 2021.

On July 29, 2020, the Company received conversion notices from holders of the Notes exercising their rights to convert an aggregate of $95 million of principal amount of the Notes (the “Initial Converted Notes”) into shares of the Company’s common stock, par value $.01 per share (“Common Stock”). Under the terms of the Notes, the conversion date of the Initial Converted Notes is July 29, 2020 (the “Initial Conversion Date”) and the Company was obligated to deliver an aggregate of 29,922,956 shares of Common Stock (the “Initial Conversion Shares”) to 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 interest 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 shares of Common Stock to the holder 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.

Kodak allocated $14 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 Notes (refer to Note 25, “Financial Instruments”).

The carrying value of the Notes at the time of issuance, $84 million ($100 million aggregate gross proceeds less $14 million allocated to the derivative liability and $2 million in transaction costs), was being accreted to the face amount using the effective interest method from the date of issuance through the maturity date.

The fair value of the Conversion Shares is reported in Additional paid in capital in the Consolidated Statement of Financial Position.

On January 27, 2020 Kodak exercised its right under the ABL Credit Agreement to 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, the Company and the subsidiaries of the Company that are guarantors (the “Subsidiary Guarantors”) entered into Amendment No. 3 to the ABL Credit Agreement (the “Amendment”) with the lenders party thereto (the “Lenders”), Bank of America, N.A., as administrative and collateral agent, and Bank of America, N.A. and each of the parties to the ABL Credit Agreement as lenders. Each of the capitalized but 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 the available asset-based revolving loans (the “ABL Loans”) and letters of credit from an aggregate amount of up to $120 million to $110 million, subject to 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.

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 ~~Equipment Availability was $14.75 million for June 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. 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. ~~Available Accounts Receivable and Inventory and Eligible Equipment have the meaning ascribed to these terms in the ABL Credit Agreement.~~

The Company had issued approximately $87 million and $80 million of letters of credit under the ABL Credit Agreement as of ~~both June~~September 30, 2020 and December 31, ~~2019.~~2019, respectively. Under the ABL Credit Agreement the Company is required to maintain Excess Availability above 12.5% of lender commitments ($13.75 million at ~~June~~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. ~~On July 20, 2020 the Company funded $5 million to the Eligible Cash account. Including the July 20, 2020 Eligible Cash funding in the June 30, 2020 compliance calculation the~~The Company had approximately ~~$17~~$20 million ~~of Excess Availability under the ABL Credit Agreement for the June 30, 2020 compliance reporting~~ and $22 million of Excess Availability under the ABL Credit Agreement as of September 30, 2020 and December 31, ~~2019.~~2019, respectively. To maintain Excess Availability of greater than 12.5% of lender commitments ($13.75 million and $18.75 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively), ~~incremental to the $5 million funding of the Eligible Cash account on July 20, 2020,~~ Kodak funded $9$21 million and $22 million to the Eligible Cash account held with the ABL Credit Agreement Administrative Agent as of ~~June~~September 30, 2020 and December 31, 2019, respectively, which is classified as Restricted Cash in the Consolidated Statement of Financial Position.

In addition to the changes discussed above, the Amendment increased the interest rate charged on the ABL Loans. The interest rate on the ABL Loans (which 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 the Base Rate plus 2.50% - 3.00% per annum from the Base Rate plus 1.25% - 1.75% per annum.

On May 20, 2019, the Company and Longleaf Partners Small Cap Fund, C2W Partners Master Fund Limited and Deseret Mutual Pension Trust, which are investment funds managed by Southeastern Asset Management, Inc. (the “Notes Purchasers”), entered into a Notes Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company agreed to issue and sell to the Notes Purchasers, and the Notes Purchasers agreed to purchase from the Company, $100 million aggregate principal amount of the 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. The 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 are holders of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”).

The Convertible Notes bear interest at a rate of 5.00% per annum, which will be payable in cash on their 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 paid-in-kind interest (“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 is initially November 1, 2021. The Company has the option to extend the maturity of the Convertible Notes by up to three years in the event that the Series A Preferred Stock is refinanced with debt or equity or the mandatory redemption date of the Series A Preferred Stock is extended.

~~Kodak~~ allocated $14 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 (refer to Note 24, “Financial Instruments”).

~~The carrying value of the~~ ~~Convertible~~ Notes at the time of issuance, $84 million ($100 million aggregate gross proceeds less $14 million allocated to the derivative liability and $2 million in transaction costs), is being accreted to the face amount using the effective interest method from the date of issuance through the maturity date.

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.

Kodak allocated $43 million of the net proceeds received 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 ~~24,~~25, “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), 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, November 15, 2021.

The holders of Series A Preferred Stock are entitled to cumulative dividends payable quarterly in cash at a rate of 5.50% 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 A Preferred Stock are in arrears for six or more consecutive or non-consecutive dividend periods, the holders of Series A 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 the next annual meeting and all subsequent meetings until all accumulated dividends on such Series A Preferred Stock and other voting preferred stock have been paid or set aside. The nomination right of the Purchasers will be reduced by two nominees at any time the holders of Series A Preferred Stock have the right to elect, or participate in the election of, two additional directors. Two of the directors on the Company’s current board of directors were nominated by the Purchasers although the holders of the Series A Preferred Stock currently have the contractual right to nominate only one director based on the results of the ownership formula.

As of ~~June~~September 30, 2020, the Series A Preferred Stock has not been converted and none of the anti-dilution provisions have been triggered. Any shares of Series A Preferred Stock not converted prior to the fifth anniversary of the initial issuance of the Series A Preferred Stock are required to be redeemed at $100 per share plus the amount of accrued and unpaid dividends.

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

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019
Lease income - operating leases:
Lease income	$	2	$	2	$	4	$	4	$	2	$	3	$	6	$	7
Sublease income		—		2		2		4		—		1		2		5
Variable lease income		1		1		2		2		1		1		3		3
Total lease income	$	3	$	5	$	8	$	10	$	3	$	5	$	11	$	15

As of ~~June~~September 30, 2020, the Company had outstanding letters of credit of ~~$80~~$87 million issued under the ABL Credit Agreement, as well as bank guarantees and letters of credit of $2 million, surety bonds in the amount of ~~$38~~$29 million, and restricted cash of ~~$32~~$48 million, primarily to address the 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.

As of ~~June~~September 30, 2020, 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 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 ~~June~~September 30, 2020, 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 ~~$41~~$40 million. Generally, any encumbrances on the Brazilian assets would be removed to the extent the matter is resolved in Kodak's favor.

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.

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 no liability recorded for this guarantee.

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 to ~~June~~September 30, 2020, 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		$	21
Extended warranty and maintenance arrangements deferred in 2020		45			68
Recognition of extended warranty and maintenance arrangement revenue in 2020		(47	)		(70	)
Deferred revenue on extended warranties as of June 30, 2020	$	19
Deferred revenue on extended warranties as of September 30, 2020				$	19

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

Three Months Ended	Three Months Ended													Three Months Ended
June 30, 2020
September 30, 2020														September 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		$	90	$	12	$	1	$	—	$	—	$	103		$	114	$	15	$	1	$	—	$	—	$	130
Ongoing service arrangements ⁽¹⁾			20		29		—		—		—		49			20		33		—		—		—		53
Total annuities			110		41		1		—		—		152			134		48		1		—		—		183
Equipment & software			9		11		—		—		—		20			12		8		—		—		—		20
Film and chemicals			—		—		33		—		—		33			—		—		39		—		—		39
Other ₍₂₎			—		—		4		2		2		8			—		—		4		3		3		10
Total		$	119	$	52	$	38	$	2	$	2	$	213		$	146	$	56	$	44	$	3	$	3	$	252


Six Months Ended
June 30, 2020
Nine Months Ended														Nine Months Ended
September 30, 2020														September 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		$	216	$	31	$	3	$	—	$	—	$	250		$	330	$	45	$	4	$	—	$	—	$	379
Ongoing service arrangements ⁽¹⁾			41		64		—		—		—		105			60		97		—		—		—		157
Total annuities			257		95		3		—		—		355			390		142		4		—		—		536
Equipment & software			16		22		—		—		—		38			29		31		—		—		—		60
Film and chemicals			—		—		71		—		—		71			—		—		112		—		—		112
Other ₍₂₎					—		6		5		5		16					—		8		8		8		24
Total		$	273	$	117	$	80	$	5	$	5	$	480		$	419	$	173	$	124	$	8	$	8	$	732

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

(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		$	146	$	21	$	3	$	—	$	—	$	170		$	138	$	20	$	3	$	—	$	—	$	161
Ongoing service arrangements ⁽¹⁾			22		39		1		—		—		62			22		38		1		—		—		61
Total annuities			168		60		4		—		—		232			160		58		4		—		—		222
Equipment & software			13		9		—		—		—		22			14		12		—		—		—		26
Film and chemicals			—		—		42		—		—		42			—		—		44		—		—		44
Other⁽²⁾			—		—		6		2		3		11			13		—		5		3		2		23
Total		$	181	$	69	$	52	$	2	$	3	$	307		$	187	$	70	$	53	$	3	$	2	$	315

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

(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		$	283	$	42	$	6	$	—	$	—	$	331		$	421	$	61	$	9	$	—	$	—	$	491
Ongoing service arrangements ⁽¹⁾			43		79		2		—		—		124			65		117		2		—		—		184
Total annuities			326		121		8		—		—		455			486		178		11		—		—		675
Equipment & software			21		20		—		—		—		41			35		33		—		—		—		68
Film and chemicals			—		—		80		—		—		80			—		—		125		—		—		125
Other⁽²⁾			—		—		12		5		5		22			13		—		17		8		7		45
Total		$	347	$	141	$	100	$	5	$	5	$	598		$	534	$	211	$	153	$	8	$	7	$	913

Three Months Ended	Three Months Ended													Three Months Ended
June 30, 2020
September 30, 2020														September 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⁾		$	27	$	30	$	1	$	2	$	—	$	60		$	41	$	32	$	1	$	3	$	—	$	77
Strategic other businesses ⁽²⁾			92		10		35		—		2		139			105		12		42		—		3		162
Planned declining businesses ⁽³⁾			—		12		2		—		—		14			—		12		1		—		—		13
Total		$	119	$	52	$	38	$	2	$	2	$	213		$	146	$	56	$	44	$	3	$	3	$	252

Six Months Ended
June 30, 2020
Nine Months Ended														Nine Months Ended
September 30, 2020														September 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⁾		$	71	$	66	$	1	$	5	$	—	$	143		$	112	$	98	$	2	$	8	$	—	$	220
Strategic other businesses ⁽²⁾			202		25		74		—		5		306			307		37		115		—		8		467
Planned declining businesses ⁽³⁾					26		5		—		—		31			—		38		7		—		—		45
Total		$	273	$	117	$	80	$	5	$	5	$	480		$	419	$	173	$	124	$	8	$	8	$	732

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

(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⁾		$	45	$	32	$	—	$	2	$	—	$	79		$	44	$	32	$	—	$	3	$	—	$	79
Strategic other businesses ⁽²⁾			136		19		44		—		3		202			143		20		47		—		2		212
Planned declining businesses ⁽³⁾			—		18		8		—		—		26			—		18		6		—		—		24
Total		$	181	$	69	$	52	$	2	$	3	$	307		$	187	$	70	$	53	$	3	$	2	$	315

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

(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⁾		$	84	$	67	$	2	$	5	$	—	$	158		$	128	$	99	$	2	$	8	$	—	$	237
Strategic other businesses ⁽²⁾			263		36		83		—		5		387			406		56		130		—		7		599
Planned declining businesses ⁽³⁾			—		38		15		—		—		53			—		56		21		—		—		77
Total		$	347	$	141	$	100	$	5	$	5	$	598		$	534	$	211	$	153	$	8	$	7	$	913

Three Months Ended	Three Months Ended													Three Months Ended
June 30, 2020
September 30, 2020														September 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		$	26	$	24	$	25	$	2	$	2	$	79		$	29	$	25	$	30	$	3	$	3	$	90
Canada			3		1		1		—		—		5			5		3		—		—		—		8
North America			29		25		26		2		2		84			34		28		30		3		3		98
Europe, Middle East and Africa			49		18		2		—		—		69			64		19		4		—		—		87
Asia Pacific			36		8		10		—		—		54			41		8		10		—		—		59
Latin America			5		1		—		—		—		6			7		1		—		—		—		8
Total		$	119	$	52	$	38	$	2	$	2	$	213		$	146	$	56	$	44	$	3	$	3	$	252

Six Months Ended
June 30, 2020
Nine Months Ended														Nine Months Ended
September 30, 2020														September 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		$	61	$	52	$	55	$	5	$	5	$	178		$	90	$	77	$	85	$	8	$	8	$	268
Canada			6		3		1		—		—		10			11		6		1		—		—		18
North America			67		55		56		5		5		188			101		83		86		8		8		286
Europe, Middle East and Africa			117		42		5		—		—		164			181		61		9		—		—		251
Asia Pacific			75		18		19		—		—		112			116		26		29		—		—		171
Latin America			14		2		—		—		—		16			21		3		—		—		—		24
Total		$	273	$	117	$	80	$	5	$	5	$	480		$	419	$	173	$	124	$	8	$	8	$	732

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

(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		$	41	$	32	$	32	$	2	$	3	$	110		$	48	$	36	$	33	$	3	$	2	$	122
Canada			3		3		—		—		—		6			4		2		1		—		—		7
North America			44		35		32		2		3		116			52		38		34		3		2		129
Europe, Middle East and Africa			75		23		6		—		—		104			71		21		6		—		—		98
Asia Pacific			51		9		13		—		—		73			53		10		13		—		—		76
Latin America			11		2		1		—		—		14			11		1		—		—		—		12
Total		$	181	$	69	$	52	$	2	$	3	$	307		$	187	$	70	$	53	$	3	$	2	$	315

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

(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		$	77	$	71	$	62	$	5	$	5	$	220		$	125	$	107	$	95	$	8	$	7	$	342
Canada			5		4		1		—		—		10			9		6		2		—		—		17
North America			82		75		63		5		5		230			134		113		97		8		7		359
Europe, Middle East and Africa			147		43		10		—		—		200			218		64		16		—		—		298
Asia Pacific			96		19		26		—		—		141			149		29		39		—		—		217
Latin America			22		4		1		—		—		27			33		5		1		—		—		39
Total		$	347	$	141	$	100	$	5	$	5	$	598		$	534	$	211	$	153	$	8	$	7	$	913

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 ~~June~~September 30, 2020 and December 31, 2019 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 ~~June~~September 30, 2020 and December 31, 2019 were ~~$55~~$60 million and $61 million, respectively, of which ~~$40~~$44 million and $43 million are reported in Other current liabilities, respectively, and ~~$15~~$16 million and $18 million, respectively, are reported in Other long-term liabilities in the Consolidated Statement of Financial Position.

Revenue recognized for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 that was included in the contract liability balance at the beginning of the year was $5$4 million and ~~$31~~$35 million in 2020, respectively, and $5$4 million and ~~$30~~$34 million in 2019, respectively, and primarily represented revenue from prepaid service contracts and equipment revenue recognition. Contract liabilities as of ~~June~~September 30, 2020 included ~~$19~~$21 million and ~~$21~~$31 million of cash payments received during the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively. Contract liabilities as of ~~June~~September 30, 2019 included ~~$20~~$26 million and ~~$23~~$43 million of cash payments received during the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively.

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 ~~June~~September 30, 2020, there was approximately ~~$65~~$70 million of unrecognized revenue from unsatisfied performance obligations. Approximately ~~20%~~10% of the revenue from unsatisfied performance obligations is expected to be recognized in the rest of 2020, ~~25%~~30% in 2021, 20% in 2022 and ~~35%~~40% thereafter.

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

	Three Months Ended					Six Months Ended						Three Months Ended					Nine Months Ended
	June 30,					June 30,						September 30,					September 30,
(in millions)	2020		2019			2020			2019			2020		2019			2020			2019
Change in fair value of embedded conversion features derivative liability ⁽¹⁾	$	4	$	(3	)	$	(49	)	$	(2	)	$	431	$	4		$	382		$	3
Loss on foreign exchange transactions		3		1			5			1			1		3			6			4
Loss on early retirement of debt		—		1			—			1
Other		1		1			(1	)		1			—		(1	)		(1	)		—
Total	$	8	$	—		$	(45	)	$	1		$	432	$	6		$	387		$	7

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
(in millions)	2020			2019			2020			2019			2020			2019			2020			2019
(Loss) earnings from continuing operations before income taxes	$	(4	)	$	(4	)	$	50		$	(13	)
Loss from continuing operations before income taxes													$	(444	)	$	(3	)	$	(394	)	$	(16	)
Effective tax rate		(25.0	)%		(50.0	)%		332.0	%		(38.5	)%		(0.2	)%		(233.3	)%		(42.4	)%		(75.0	)%
Provision for income taxes		1			2			166			5			1			7			167			12
(Benefit) provision for income taxes at U.S. statutory tax rate		(1	)		(1	)		11			(3	)
(Benefit) for income taxes at U.S. statutory tax rate														(93	)		(1	)		(83	)		(3	)
Difference between tax at effective vs. statutory rate	$	2		$	3		$	155		$	8		$	94		$	8		$	250		$	15

For the three months ended ~~June~~September 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 (2) the results from operations in jurisdictions outside the ~~U.S and (3) a provision associated with foreign withholding taxes on undistributed earnings.~~U.S.

For the ~~six~~nine months ended ~~June~~September 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.~~U.S, (4) a provision associated with foreign withholding taxes on undistributed earnings and (5) changes in audit reserves.

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 iswas $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.

~~Additionally~~, onOn 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 ~~and six~~ months ended ~~June~~September 30, 2019, the difference between Kodak’s ~~recorded provision~~effective tax rate and ~~the benefit that would result from applying~~ 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 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.

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 ~~six~~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.

The activity in the accrued balances and the non-cash charges and credits incurred in relation to restructuring activities for the ~~six~~nine months ended ~~June~~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			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		$	11		$	1		$	—	$	12
Q1 charges		6			1			—		7			6			1			—		7
Q1 utilization/cash payments		(7	)		—			—		(7	)		(7	)		—			—		(7	)
Q1 other adjustments and reclasses ⁽²⁾		(1	)		(1	)		—		(2	)		(1	)		(1	)		—		(2	)
Balance as of March 31, 2020	$	9		$	1		$	—	$	10		$	9		$	1		$	—	$	10
Q2 charges	$	1		$	—		$	—	$	1		$	1		$	—		$	—	$	1
Q2 utilization/cash payments		(3	)		—			—		(3	)		(3	)		—			—		(3	)
Balance as of June 30, 2020	$	7		$	1		$	—	$	8		$	7		$	1		$	—	$	8
Q3 charges												$	1		$	—		$	—	$	1
Q3 utilization/cash payments													(3	)		—			—		(3	)
Balance as of September 30, 2020												$	5		$	1		$	—	$	6

The $1 million and $7$9 million of charges for the three and ~~six~~nine months ended ~~June~~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 ~~June 30, 2020 related to the elimination of 3 administrative positions outside of the U.S. The severance costs for the six months ended June~~September 30, 2020 related to the elimination of approximately 9040 positions including approximately 205 manufacturing/service positions and 7035 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 4075 in the U.S. and Canada and 5055 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.

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												Six Months Ended												Three Months Ended												Nine Months Ended
	June 30,												June 30,												September 30,												September 30,
	2020						2019						2020						2019						2020						2019						2020						2019
(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	$	3		$	1		$	2		$	1		$	6		$	2		$	5		$	2		$	2		$	1		$	3		$	—		$	8		$	3		$	8		$	2
Interest cost		22			2			31			3			43			4			61			6			21			2			30			3			64			6			91			9
Expected return on plan assets		(49	)		(4	)		(54	)		(5	)		(98	)		(9	)		(107	)		(11	)		(48	)		(5	)		(53	)		(6	)		(146	)		(14	)		(160	)		(17	)
Amortization of:
Prior service credit		(1	)		—			(1	)		—			(3	)		—			(3	)		—			(2	)		—			(2	)		—			(5	)		—			(5	)		—
Actuarial loss		3			1			—			1			7			3			—			2			4			2			—			2			11			5			—			4
Net pension income before special termination benefits		(22	)		—			(22	)		—			(45	)		—			(44	)		(1	)		(23	)		—			(22	)		(1	)		(68	)		—			(66	)		(2	)
Special termination benefits		—			—			1			—			1			—			2			—			1			—			—			—			2			—			2			—
Curtailment gain		—			—			(2	)		—			—			—			(2	)		—			—			—			—			—			—			—			(2	)		—
Net pension income from major plans		(22	)		—			(23	)		—			(44	)		—			(44	)		(1	)		(22	)		—			(22	)		(1	)		(66	)		—			(66	)		(2	)
Other plans		—			1			—			(3	)		—			1			—			(4	)		—			—			—			—			—			1			—			(4	)
Total net pension (income) expense	$	(22	)	$	1		$	(23	)	$	(3	)	$	(44	)	$	1		$	(44	)	$	(5	)	$	(22	)	$	—		$	(22	)	$	(1	)	$	(66	)	$	1		$	(66	)	$	(6	)

For the three and ~~six~~nine months ended ~~June~~September 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.

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 ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 ~~follows (in millions):~~follows:

	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,						June 30,						September 30,						September 30,
(in millions)	2020			2019			2020			2019			2020			2019			2020			2019
Loss from continuing operations	$	(5	)	$	(6	)	$	(116	)	$	(18	)	$	(445	)	$	(10	)	$	(561	)	$	(28	)
Less: Series A convertible preferred stock cash dividend		(3	)		(3	)		(6	)		(6	)		(2	)		(2	)		(8	)		(8	)
Less: Series A convertible preferred stock deemed dividend		(2	)		(2	)		(4	)		(4	)		(3	)		(3	)		(7	)		(7	)
Loss from continuing operations available to common shareholders - basic and diluted	$	(10	)	$	(11	)	$	(126	)	$	(28	)	$	(450	)	$	(15	)	$	(576	)	$	(43	)

Net (loss) income	$	(5	)	$	201		$	(116	)	$	183		$	(445	)	$	(5	)	$	(561	)	$	178
Less: Series A convertible preferred stock cash dividend		(3	)		(3	)		(6	)		(6	)		(2	)		(2	)		(8	)		(8	)
Less: Series A convertible preferred stock deemed dividend		(2	)		(2	)		(4	)		(4	)		(3	)		(3	)		(7	)		(7	)
Net (loss) income available to common shareholders - basic and diluted	$	(10	)	$	196		$	(126	)	$	173		$	(450	)	$	(10	)	$	(576	)	$	163

(in millions of shares)
Weighted average shares — basic and diluted			43.7				43.0				43.7				43.0				64.8				43.0				50.8				43.0

As a result of the net loss from continuing operations available to common shareholders for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, Kodak calculated diluted earnings per share using weighted-average basic shares outstanding. If Kodak reported earnings from continuing operations available to common shareholders for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, the calculation of diluted earnings per share would have included the assumed conversion of 0.6 million and 0.5 million unvested restricted stock units for ~~both periods in~~the three and nine months ended September 30, 2020, respectively and ~~0.5 million and 0.4~~0.6 million unvested restricted stock units for the both periods in ~~2019, respectively.~~2019. The calculation of diluted earnings per share would have also included the assumed conversion of 1.2 million outstanding employee stock options.

The computation of diluted earnings per share for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 also excluded the impact of (1) the assumed conversion of 2.0 million shares of Series A Preferred Stock, ~~and~~ (2) the assumed conversion of outstanding employee stock options of ~~7.1~~3.1 million and 3.6 million for ~~both periods in~~three and nine months ended September 30, 2020, respectively and ~~7.2~~8.9 million and 9.0 million for ~~both periods in~~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 Notes because the effects would have been anti-dilutive.

Kodak’s stock incentive plan is the 2013 Omnibus Incentive Plan (the “2013 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 stock on the date 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 ~~computation~~2013 Plan, the maximum number of ~~diluted earnings per share~~shares available for the ~~three~~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.

Compensation expense is recognized on a straight-line basis over the service or performance period for each separately vesting tranche of the award and ~~six~~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 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 ~~June~~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:

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

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 value 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 ~~June~~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.

The Company recognized compensation expense 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.

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 ~~also excluded~~was $8.91 and $2.47, respectively. The total fair value of options that vested during the ~~assumed~~nine months ended September 30, 2020 and 2019 was $13 million and $7 million, respectively. Compensation cost related to stock options for the nine months ended September 30, 2020 and 2019 was $18 million and $4 million, respectively.

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:

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 ~~$100 million~~the Notes.

The following inputs were used in the lattice-based valuation of ~~Convertible Notes because~~ the ~~effect would have been anti-dilutive.~~July 27, 2020 option grants:

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. As of ~~June~~September 30, 2020 and December 31, 2019, there were ~~43.7~~77.3 million and 43.2 million shares of common stock outstanding, respectively, and 2.0 million shares of Series A Preferred Stock issued and outstanding. In 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. Treasury stock consisted of approximately 0.7 million shares as of both ~~June~~September 30, 2020 and December 31, 2019.

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

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

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 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 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 lines of business: Industrial Film and Chemicals, Motion Picture, Advanced Materials and Functional Printing Technology and Kodak Services for 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.

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019
Traditional Printing	$	119	$	181	$	273	$	347	$	146	$	187	$	419	$	534
Digital Printing		52		69		117		141		56		70		173		211
Advanced Materials and Chemicals		38		52		80		100		44		53		124		153
Brand		2		2		5		5		3		3		8		8
All Other		2		3		5		5		3		2		8		7
Consolidated total	$	213	$	307	$	480	$	598	$	252	$	315	$	732	$	913

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

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

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.

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 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 and other ~~(charges) income,~~charges, net.

Kodak’s segments are measured using Operational EBITDA both before and after allocation of corporate selling, general and administrative expenses (“SG&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.

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 ~~$207~~$212 million in the ~~quarter~~nine months ended ~~June~~September 30, 2019 and ~~$212 million in~~ 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.

	Three Months Ended					Six Months Ended					Three Months Ended					Nine Months Ended
	June 30,					June 30,					September 30,					September 30,
(in millions)	2020		2019			2020		2019			2020		2019			2020		2019
Revenues	$	—	$	5		$	—	$	44		$	—	$	—		$	—	$	44
Cost of revenues		—		2			—		28			—		—			—		28
Selling, general and administrative expenses		—		2			—		10			—		—			—		10
Research and development costs		—		—			—		2			—		—			—		2
Interest expense		—		—			—		7			—		—			—		7
Gain on divestiture		—		(210	)		—		(210	)		—		(4	)		—		(214	)
Income from discontinued operations before taxes		—		211			—		207			—		4			—		211
Provision for income taxes		—		4			—		6			—		(1	)		—		5
Income from discontinued operations	$	—	$	207		$	—	$	201		$	—	$	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.

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 (loss) earnings at the same time that the exposed assets and liabilities are remeasured through net (loss) earnings (both in Other (income) charges, net in the Consolidated Statement of Operations).

The notional amount of such contracts open at ~~June~~September 30, 2020 and December 31, 2019 was approximately ~~$329~~$350 million and $332 million, respectively. The majority of the contracts of this type held by Kodak as of ~~June~~September 30, 2020 and December 31, 2019 are denominated in euros, Japanese yen, Chinese renminbi and Swiss francs.

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

	Three Months Ended					Six Months Ended						Three Months Ended					Nine Months Ended
	June 30,					June 30,						September 30,					September 30,
(in millions)	2020			2019		2020			2019			2020			2019		2020			2019
Net (gain) loss from derivatives not designated as hedging instruments	$	(1	)	$	1	$	(2	)	$	(3	)	$	(4	)	$	1	$	(6	)	$	(2	)

Kodak had no derivatives designated as hedging instruments for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

In the event of a default under the ABL Credit Agreement, 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, “Debt and Finance Leases”, the Company concluded that the ~~Convertible~~ Notes ~~are~~were 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 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”) and the conversion in the event of a fundamental change or reorganization (“Fundamental Change or Reorganization Conversion”). 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 iswas in a liability position at ~~June 30, 2020 and~~ December 31, 2019 and iswas reported in Other long-term 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.

As discussed in Note 9, “Redeemable, Convertible, Series A Preferred Stock”, the Company concluded that the Series A Preferred Stock is 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 derivative was in ~~an asset position at June 30, 2020 and is reported in Other long-term assets in the Consolidated Statement of Financial Position. The derivative was in~~ a liability position at September 30, 2020 and December 31, 2019 and was reported in Other long-term liabilities in the Consolidated Statement of Financial Position. The derivative is 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 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 ~~both June~~September 30, 2020 and December 31, 2019 was $2 million and $1 ~~million.~~million, respectively. The gross fair value of foreign currency forward contracts in a liability position as of both ~~June~~September 30, 2020 and December 31, 2019 was $0 million.

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 ~~six~~nine months ended ~~June~~September 30, 2020.

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 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 ~~are~~at each conversion date:

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 associated with both the ~~Convertible~~ Notes and Series A Preferred Stock iswas calculated using a binomial lattice model. The value of the term extension option ~~reflects~~reflected the probability weighted average value of the ~~Convertible~~ 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:

	Valuation Date						Valuation Date
	June 30,			December 31,			December 31,
	2020			2019			2019
Total value of embedded derivative liability ($ millions)	$	9		$	51
Value of embedded derivative liability ($ million)							$	51
Kodak's closing stock price	$	2.23		$	4.65		$	4.65
Expected stock price volatility		98.82	%		104.61	%		104.61	%
Risk free rate		0.16	%		1.58	%		1.58	%
Yield on the convertible notes		11.15	%		11.52	%
Yield on the Notes								11.52	%

	Valuation Date						Valuation Date
	June 30,			December 31,			September 30,			December 31,
	2020			2019			2020			2019
Total value of embedded derivative (asset) liability ($ millions)	$	(6	)	$	1
Total value of embedded derivative liability ($ millions)							$	9		$	1
Kodak's closing stock price	$	2.23		$	4.65		$	8.82		$	4.65
Expected stock price volatility		98.82	%		104.61	%		146.96	%		104.61	%
Risk free rate		0.16	%		1.58	%		0.12	%		1.58	%
Yield on the preferred stock		15.51	%		16.27	%		13.13	%		16.27	%

The Fundamental Change and Reorganization Conversion values at issuance were calculated as the difference between the total value of the ~~Convertible~~ Notes or Series A 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 A Preferred Stock is redeemed on its fifth anniversary 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 Fundamental Change and Reorganization Conversion value for the Series A Preferred Stock exceeded the value of the Optional Conversion and Mandatory Conversion values at June 30, 2020 resulting in the Series A Preferred Stock derivative being reported as an asset.

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 ~~$119~~$17 million and $111 million at ~~June~~September 30, 2020 and December 31, 2019, 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 ~~June~~September 30, 2020 and December 31, 2019.

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 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 ~~report~~reports on Form 10-Q for the ~~quarter~~quarters ended March 31, 2020 and June 30, 2020, and in other filings the Company makes with the SEC from time to time, as well as the following:

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.

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 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.

Revenue decreased ~~$94~~$63 million and ~~$118~~$181 million when compared to the prior year quarter and year-to-date periods, respectively, ~~(31% and 20%, respectively)~~(20% in each period), including the ~~unfavorable~~favorable impact of currency ($~~3 million and $6~~4 million) in the current year quarter and ~~year-to-date periods, respectively.~~unfavorable impact of currency ($1 million) in the year- to-date period.

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

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

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, but at decreased volumes. Therefore, demand for the segment’s products declined. The Traditional Printing segment may also be impacted by supply chain disruptions and travel restrictions. With the decline in customer demand, manufacturing volumes were reduced. 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.

None of the Digital Printing segment’s manufacturing facilities were ordered to close by governmental authorities. Many of the segment’s customers around the globe continued to operate, but at decreased volumes. Therefore, demand for the segment’s products declined. The Digital Printing segment may also be impacted by supply chain disruptions and travel restrictions. With the decline in customer demand, manufacturing volumes were reduced. 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.

Advanced Materials and Chemicals has experienced adverse impacts from the COVID-19 pandemic, ~~in the second quarter of 2020,~~ most notably in Motion Picture where the industry has been heavily impacted and productions in affected regions have been suspended. None of the Advanced Materials and Chemicals segment’s manufacturing facilities were ordered to close by governmental authorities. However, each of the segment’s product lines was impacted by lowered demand and may also be impacted by supply chain disruptions and travel restrictions. The duration and extent of demand declines and then recovery is 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.

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.

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.

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. ~~In January 2019, Kodak received exemptions from U.S. tariffs on aluminum. The U.S. aluminum tariffs are still in place and Kodak’s exemptions continue.~~

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.

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

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.

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 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 ~~in 2019.~~for the nine months ending September 30, 2020 and the year ending December 31, 2019, respectively.

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 ~~LED lighting.~~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.

	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019
Traditional Printing	$	119	$	181	$	273	$	347	$	146	$	187	$	419	$	534
Digital Printing		52		69		117		141		56		70		173		211
Advanced Materials and Chemicals		38		52		80		100		44		53		124		153
Brand		2		2		5		5		3		3		8		8
All Other		2		3		5		5		3		2		8		7
Consolidated total	$	213	$	307	$	480	$	598	$	252	$	315	$	732	$	913

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

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

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.

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 ~~(loss)~~(expense) income, net (unless otherwise indicated); interest expense; loss on early extinguishment of debt and other ~~(charges) income,~~charges, 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.

	Three Months Ended June 30,															Six Months Ended June 30,															Three Months Ended September 30,															Nine Months Ended September 30,
(in millions)	2020			% of Sales			2019			% of Sales			$ Change			2020			% of Sales			2019			% of Sales			$ Change			2020			% of Sales			2019			% of Sales			$ Change			2020			% of Sales			2019			% of Sales			$ Change
Revenues	$	213					$	307					$	(94	)	$	480					$	598					$	(118	)	$	252					$	315					$	(63	)	$	732					$	913					$	(181	)
Cost of revenues		192						265						(73	)		423						516						(93	)		221						262						(41	)		644						778						(134	)
Gross profit		21			10	%		42			14	%		(21	)		57			12	%		82			14	%		(25	)		31			12	%		53			17	%		(22	)		88			12	%		135			15	%		(47	)
Selling, general and administrative expenses		34			16	%		54			18	%		(20	)		82			17	%		113			19	%		(31	)		56			22	%		48			15	%		8			138			19	%		161			18	%		(23	)
Research and development costs		8			4	%		11			4	%		(3	)		17			4	%		22			4	%		(5	)		8			3	%		11			3	%		(3	)		25			3	%		33			4	%		(8	)
Restructuring costs and other		1			0	%		2			1	%		(1	)		8			2	%		4			1	%		4			1			0	%		3			1	%		(2	)		9			1	%		7			1	%		2
Other operating income, net		(3	)		(1	)%		—			0	%		(3	)		(10	)		(2	)%		—			0	%		(10	)
Loss from continuing operations before interest expense, other (income) charges, net and income taxes		(19	)		(9	)%		(25	)		(8	)%		6			(40	)		(8	)%		(57	)		(10	)%		17
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
Interest expense		4			2	%		5			2	%		(1	)		8			2	%		8			1	%		—			3			1	%		4			1	%		(1	)		11			2	%		12			1	%		(1	)
Pension income excluding service cost component		(27	)		(13	)%		(26	)		(8	)%		(1	)		(53	)		(11	)%		(53	)		(9	)%		—			(26	)		(10	)%		(26	)		(8	)%		—			(79	)		(11	)%		(79	)		(9	)%		—
Other charges (income), net		8			4	%		0			0	%		8			(45	)		(9	)%		1			0	%		(46	)
(Loss) income from continuing operations before income taxes		(4	)		(2	)%		(4	)		(1	)%		—			50			10	%		(13	)		(2	)%		63
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	)
Provision for income taxes		1			0	%		2			1	%		(1	)		166			35	%		5			1	%		161			1			0	%		7			2	%		(6	)		167			23	%		12			1	%		155
Loss from continuing operations		(5	)		(2	)%		(6	)		(2	)%		1			(116	)		(24	)%		(18	)		(3	)%		(98	)		(445	)		(177	)%		(10	)		(3	)%		(435	)		(561	)		(77	)%		(28	)		(3	)%		(533	)
Income from discontinued operations, net of income taxes		—			0	%		207			67	%		(207	)		—			0	%		201			34	%		(201	)		—			0	%		5			2	%		(5	)		—			0	%		206			23	%		(206	)
Net (loss) income	$	(5	)		(2	)%	$	201			65	%	$	(206	)	$	(116	)		(24	)%	$	183			31	%	$	(299	)	$	(445	)		(177	)%	$	(5	)		(2	)%	$	(440	)	$	(561	)		(77	)%	$	178			19	%	$	(739	)

For the three months ended ~~June~~September 30, 2020 revenues declined ~~$94~~$63 million compared with the same period in 2019, driven by volume declines and unfavorable pricing within Traditional Printing ($5728 million and $3$4 million, respectively), and volume declines in Digital Printing and Advanced Materials and Chemicals ~~and Digital Printing~~ ($1916 million and ~~$18~~$11 million, respectively) ~~and unfavorable foreign currency ($2 million)~~. The revenue declines were offset by improved pricing and product mix in Advanced Materials and Chemicals ($43 million) and favorable ~~mix of products~~foreign currency ($4 million). The prior year period also included intellectual property licensing revenue ($13 million) associated with the HuaGuang relationship entered into in ~~Digital Printing ($2 million).~~September 2019. See segment discussions for additional details.

For the ~~six~~nine months ended ~~June~~September 30, 2020 revenues declined ~~$118~~$181 million compared with the same period in 2019, driven by volume declines and unfavorable pricing and product mix within Traditional Printing ($6290 million and $8$11 million, respectively), volume declines in Digital Printing and Advanced Materials and Chemicals ~~and Digital Printing~~ ($2943 million and ~~$28~~$40 million, respectively) and unfavorable foreign currency ($51 million). The revenue declines were offset by improved pricing and product mix in Advanced Materials and Chemicals ($811 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 for the three months ended ~~June~~September 30, 2020 declined approximately ~~$21~~$22 million compared with the same period in 2019 reflecting volume declines, unfavorable pricing and product mix in Traditional Printing (each $4 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.

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 ($711 million, $4$13 million and $5$8 million, respectively), volume declines and increased costs in Advanced Materials and Chemicals ~~(each $5 million)~~($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 ($4 million) partially offset by favorable pricing and product mix in Advanced Materials and Chemicals ($~~4 million) and lower depreciation and amortization expenses ($4 million). See segment discussions for additional details.~~

Gross profit for the six months ended June 30, 2020 declined approximately $25 million compared with the same period in 2019 reflecting volume declines, unfavorable pricing and product mix as well as increased costs in Traditional Printing ($7 million, $10 million and $7 million, respectively), volume declines and increased costs Advanced Materials and Chemicals ($8 million and $7 million, respectively) and volume declines and unfavorable costs in Digital Printing ($4 million and $5 million, respectively) partially offset by favorable pricing and product mix in Advanced Materials and Chemicals ($911 million), favorable mix of products in Digital Printing ($3 million) and lower depreciation and amortization expenses ($914 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.

Consolidated SG&A ~~decreased $20~~increased $8 million and ~~$31~~decreased $23 million for the ~~three and six month~~three-and nine-month periods ended ~~June~~September 30, 2020, ~~respectively, primarily due~~respectively. The increase in Consolidated SG&A for the three months ended September 30, 2020 was driven by increased stock compensation expense ($17 million) as discussed in Note 20, Stock-Based Compensation, an increase of $4 million in consulting and project costs with the internal and external investigations that started in the quarter as well as the $2 million impact to SG&A of the increase in workers’ compensation reserves. These increases were partially offset by lower investment in segment selling and marketing activities driven by cost reduction efforts ($1812 million for the quarter and ~~$22~~$34 million year-to-date)~~, and lower consulting and project costs ($2 million for the quarter and $4 million for the year)~~. The temporary furloughs and pay cuts in the current quarter provided approximately $3$7 million of the ~~$18~~$17 million savings in the three months ending ~~June~~September 30, 2020 and $18 million of the $34 million in the nine months ending September 30, 2020. The ~~six-month~~nine-month period ended ~~June~~September 30, 2019 also included $2 million of compensation related to the former CEO separation agreement while the ~~six-month~~nine-month period ending ~~June~~September 30, 2020 included increased bad debt expense ~~due~~primarily attributed to increased collection risk related to the COVID-19 pandemic ($3 million).

Consolidated R&D expenses decreased $3 million and $5$8 million for the quarter and year-to-date periods ended ~~June~~September 30, 2020, respectively, primarily due to cost reduction efforts.

The change in Other charges, ~~(income)~~net was primarily driven by the embedded conversion features derivative liability associated with the ~~Convertible~~ Notes. Refer to Note 15, “Other Charges, ~~(Income),~~ Net” and Note ~~24,~~25, “Financial Instruments”.

The Provision for income taxes in the year-to-date period was primarily driven by the $167 million provision associated with the establishment of a valuation allowance on deferred tax assets outside the U.S. Refer to Note 16, “Income Taxes”.

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 ~~23,~~24, “Discontinued Operations”.

	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended September 30,									Nine Months Ended September 30,
(in millions)	2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change
Revenues	$	119		$	181		$	(62	)	$	273		$	347		$	(74	)	$	146		$	187		$	(41	)	$	419		$	534		$	(115	)

Operational EBITDA	$	1		$	9		$	(8	)	$	2		$	15		$	(13	)	$	5		$	21		$	(16	)	$	7		$	36		$	(29	)
Operational EBITDA as a % of revenues		1	%		5	%					1	%		4	%					3	%		11	%					2	%		7	%

The decrease in Traditional Printing revenues for the three months ended ~~June~~September 30, 2020 of approximately ~~$62~~$41 million reflected volume and pricing declines ($5022 million and $4 million, respectively) in Prepress Solutions consumables and volume declines in Prepress Solutions service ($32 million) and Prepress equipment ($34 million) ~~and unfavorable~~, partially offset by favorable foreign currency ($23 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.

The decrease in Traditional Printing revenues for the ~~six~~nine months ended ~~June~~September 30, 2020 of approximately ~~$74~~$115 million primarily reflected volume and pricing declines ($5476 million and $9$14 million, respectively) in Prepress Solutions consumables and volume declines in Prepress Solutions service ($35 million) and Prepress equipment ($~~5 million) and unfavorable foreign currency ($4~~9 million) offset by favorable pricing and product mix ($23 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.

Traditional Printing Operational EBITDA for the three months ended ~~June~~September 30, 2020 declined $8$16 million reflecting volume and pricing declines ($62 million and $4 million, respectively) in Prepress Solutions consumables, volume declines in Prepress service ($1 million), and higher manufacturing costs ($73 million) driven by unfavorable cost absorption from the volume declines partially offset by lower SG&A expenses ($86 million) and lower aluminum costs 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

Traditional Printing Operational EBITDA for the ~~six~~nine months ended ~~June~~September 30, 2020 declined ~~$13~~$29 million primarily due to volume and pricing declines ($68 million and $9$14 million, respectively) in Prepress Solutions consumables, volume declines in Prepress service ($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 ($21 million) partially offset by lower SG&A expenses ($1217 million) and lower aluminum costs in the current year ($46 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.

	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended September 30,									Nine Months Ended September 30,
(in millions)	2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change
Revenues	$	52		$	69		$	(17	)	$	117		$	141		$	(24	)	$	56		$	70		$	(14	)	$	173		$	211		$	(38	)

Operational EBITDA	$	(3	)	$	(4	)	$	1		$	(5	)	$	(6	)	$	1		$	(3	)	$	(3	)	$	—		$	(8	)	$	(9	)	$	1
Operational EBITDA as a % of revenues		(6	)%		(6	)%					(4	)%		(4	)%					(5	)%		(4	)%					(5	)%		(4	)%

The decline in Digital Printing revenues for the three months ended ~~June~~September 30, 2020 of approximately ~~$17~~$14 million primarily reflected volume declines in Electrophotographic Printing Solutions consumables and service ($117 million), and Electrophotographic Printing Solutions equipment ~~($2 million) and PROSPER consumables and service~~ ($4 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 ($2 million) due to both declines in the installed base of VERSAMARK systems and the COVID 19 pandemic.

The decline in Digital Printing revenues for the nine months ended September 30, 2020 of approximately $38 million primarily reflected volume declines in Electrophotographic Printing Solutions consumables and service ($22 million), Electrophotographic Printing Solutions equipment ($8 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 ($8 million) due to both declines in the installed base of VERSAMARK systems and the COVID 19 pandemic. The impact of the volume declines was partially offset by improved volume in PROSPER components ($~~4 million).~~

The decline in Digital Printing revenues for the six months ended June 30, 2020 of approximately $24 million primarily reflected volume declines in Electrophotographic Printing Solutions consumables and service ($15 million), Electrophotographic Printing Solutions equipment ($4 million), PROSPER consumables and service ($4 million) and PROSPER systems ($1 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 ($6 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 ($57 million) and improved pricing in PROSPER components and PROSPER systems ~~(each~~($2 million and $1 ~~million)~~million, respectively).

Digital Printing Operational EBITDA for the three months ended ~~June~~September 30, 2020 ~~improved $1 million driven by~~was flat reflecting higher manufacturing costs in Electrophotographic Printing Solutions ($32 million), volume declines in Electrophotographic Printing Solutions consumables and service ($21 million), ~~PROSPER consumables and service ($2 million) and~~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 ($21 million), inventory write-downs driven by pricing declines in PROSPER systems in the prior year quarter ($21 million) and lower SG&A costs ($53 million).

Digital Printing Operational EBITDA for the ~~six~~nine months ended ~~June~~September 30, 2020 improved $1 million driven by improved volume in PROSPER components ($4 million), volume changes 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 ($69 million), volume declines in Electrophotographic Printing Solutions consumables and service ($34 million), PROSPER consumables and service ($2 million) ~~and~~, VERSAMARK service and consumables ($23 million) ~~offset by improved volume~~and an increase in ~~PROSPER components ($3 million), volume improvements in Electrophotographic Printing Solutions equipment ($1 million), improved pricing in PROSPER systems~~workers’ compensation reserves ($2 million) ~~and PROSPER components ($1 million) and lower SG&A costs ($6 million)~~.

	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended September 30,									Nine Months Ended September 30,
(in millions)	2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change			2020			2019			$ Change
Revenues	$	38		$	52		$	(14	)	$	80		$	100		$	(20	)	$	44		$	53		$	(9	)	$	124		$	153		$	(29	)

Operational EBITDA	$	(7	)	$	(8	)	$	1		$	(16	)	$	(18	)	$	2		$	(6	)	$	(6	)	$	—		$	(22	)	$	(24	)	$	2
Operational EBITDA as a % of revenues		(18	)%		(15	)%					(20	)%		(18	)%					(14	)%		(11	)%					(18	)%		(16	)%

Advanced Materials and Chemicals revenues for the three months ended ~~June~~September 30, 2020 declined ~~$14~~$9 million primarily from volume declines in Motion Picture ($105 million) driven by productions halted as a result of the COVID 19 pandemic, Industrial Film and Chemicals ($53 million) primarily due to the COVID-19 pandemic’s impacts on its customers and Consumer Inkjet Solutions ($2 million) driven by lower sales of ink to the existing installed base of printers.

Additionally, current year revenues for Kodak Services for Business declined ($21 million) primarily due to operations in Asia being impacted by the COVID-19 pandemic, and the prior year period included revenues from Kodakit ($1 million) which ceased operating in January 2020. Partially offsetting these impacts was improved pricing in Industrial Film and Chemicals ($43 million) driven by higher pricing for ~~solvents and~~ professional and consumer still photographic film.

Advanced Materials and Chemicals revenues for the ~~six~~nine months ended ~~June~~September 30, 2020 declined ~~$20~~$29 million primarily from volume declines in Motion Picture ($1217 million) driven by productions halted as a result of the pandemic, Industrial Film and Chemicals ($69 million) primarily due to COVID-19 pandemic’s impacts on its customers, and Consumer Inkjet Solutions ($46 million) driven by lower sales of ink to the existing installed base of printers. Additionally, current year revenues for Kodak Services for Business declined ($45 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 ($811 million) driven by higher pricing and favorable product mix in professional and consumer still photographic film and higher pricing for solvents.

Advanced Materials and Chemicals Operational EBITDA ~~improved $1 million~~remained flat for the three months ended ~~June~~September 30, 2020 ~~primarily due to favorable pricing ($4 million) in Industrial Film and Chemicals.~~

~~Also contributing were~~as lower selling and administrative expenses ($4 million), favorable pricing ($3 million) in Industrial Film and Chemicals, and lower R&D costs ($21 million)~~. Partially offsetting were~~ offset volume declines in Motion Picture ($~~3 million),~~2 million) and Consumer Inkjet Solutions ($1 million) ~~and Industrial Film and Chemicals ($1 million)~~, ~~as well as~~ unfavorable cost impacts in ~~Industrial Film and Chemicals~~Motion Picture ($31 million) and ~~Motion Picture~~an increase in workers’ compensation reserves ($2 million)~~driven by unfavorable cost absorption.~~ .

Advanced Materials and Chemicals Operational EBITDA improved $2 million for the ~~six~~nine months ended ~~June~~September 30, 2020 primarily due to favorable pricing ~~and improved product mix~~ ($811 million) in Industrial Film and Chemicals. Also contributing to the improvement were lower selling and administrative expenses ($711 million) and lower R&D costs ($23 million). Partially offsetting were volumes declines in Motion Picture ($46 million), Industrial Film and Chemicals ($2 million) and Consumer Inkjet Solutions ($23 million) as well as unfavorable cost impacts in Industrial Film and Chemicals ($5 million) and Motion Picture ($12 million) driven by unfavorable cost ~~absorption.~~absorption and an increase in workers’ compensation reserves ($2 million).

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

Operational EBITDA	$	2		$	2		$	—	$	4		$	3		$	1	$	3		$	2		$	1	$	7		$	5		$	2
Operational EBITDA as a % of revenues		100	%		100	%				80	%		60	%				100	%		67	%				88	%		63	%

Brand revenues ~~and EBITDA~~ for the three and ~~six~~nine months ended ~~June~~September 30, 2020 remained ~~relatively~~ flat 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.

Kodak recorded $1 million and $8$9 million of charges for the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, in Restructuring costs and other in the Consolidated Statement of Operations.

Kodak made cash payments related to restructuring of approximately $3 million and ~~$10~~$13 million during the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively.

The restructuring actions implemented in the first ~~six~~nine months of 2020 are expected to generate future annual cash savings of approximately $9$13 million. These savings are expected to reduce future annual Cost of revenues and SG&A expenses by $1$2 million and $8$11 million, respectively. Kodak began realizing a portion of these savings in the first ~~six~~nine months of 2020 and expects the majority of the annual savings to be in effect by the end of the year as actions are completed.

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.

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.

Kodak is facing liquidity challenges due to operating losses and low or negative cash flow from operations and collateral needs. Kodak has ~~$80~~$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. 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 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 U.S. Current global economic conditions are highly volatile due to the COVID-19 ~~pandemic, resulting in market size contractions in many countries due to economic slowdowns and government restrictions on movement.~~pandemic. The conversion of accounts receivable to cash is taking longer and collection risk has increased since before the pandemic. The economic uncertainty surrounding the COVID-19 pandemic is an additional complexity in 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 ~~scaling~~adjusting manufacturing volumes ~~due~~ to ~~reduced volumes.~~meet changing expectations around production requirements. The Company is also seeking to take advantage of any available government incentives around the world in response to the COVID-19 pandemic such as 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. 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.

Net cash used in operating activities increased ~~$51~~$44 million for the ~~six~~nine months ended ~~June~~September 30, 2020 as compared with the corresponding period in 2019 primarily due to increased cash use for accounts payable and other liabilities, including the payment of $6 million of interest upon the conversion of the Notes, partially offset by higher reductions of accounts receivable in ~~2020,~~2020. Additionally, cash used 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 ~~in 2019~~ of a $15 million prepayment for transition services, products, and other services as a part of the divestiture of FPD.

Net cash provided by investing activities decreased ~~$302~~$324 million for the ~~six~~nine months ended ~~June~~September 30, 2020 as compared with the corresponding period in 2019 due to the proceeds from the sale of FPD in the prior year.

Net cash ~~used in~~provided by financing activities in the ~~six~~nine months ended ~~June~~September 30, 2020 ~~compares $288~~improved $305 million favorably to the corresponding period in 2019 driven by the current year proceeds 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 ~~Convertible~~ Notes and the proceeds from the RED – Rochester borrowing and the current year payment of preferred stock dividends.

Available liquidity includes cash balances and the unused portion of the ABL Credit Agreement. The amount of available liquidity is subject to fluctuations and includes cash balances held by various entities worldwide. At ~~June~~September 30, 2020 and December 31, 2019 approximately ~~$95~~$108 million and $72 million, respectively, of cash and cash equivalents were held within the U.S. and approximately $85 million and $161 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 ~~June~~September 30, 2020 and December 31, 2019, outstanding inter-company loans to the U.S. were ~~$429~~$436 million and $408 million, respectively, which includes short-term inter-company loans from Kodak’s international finance center of ~~$130~~$138 million and $110 million, respectively. In China, where approximately ~~$23~~$22 million and $89 million of cash and cash equivalents was held as of ~~June~~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 ~~anticipation of~~ an inter-company transaction. Under the terms of the ABL Credit Agreement, the Company is permitted to invest up to $100 million in subsidiaries and joint ventures that are not party to the ABL Credit Agreement.

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 of up to $120 million to $110 million, subject to 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.

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 Cash by $13 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 million as of March 31, 2020. The Equipment Availability was $14.75 million for ~~June~~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.

The Company had issued approximately $87 million and $80 million of letters of credit under the ABL Credit Agreement as of ~~both June~~September 30, 2020 and December 31, ~~2019.~~2019, respectively. Under the ABL Credit Agreement the Company is required to maintain Excess Availability above 12.5% of lender commitments ($13.75 million at ~~June~~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. ~~On July 20, 2020 the Company funded $5 million to the Eligible Cash account. Including the July 20, 2020 Eligible Cash funding in the June 30, 2020 compliance calculation the~~The Company had approximately ~~$17~~$20 million of Excess Availability under the ABL Credit Agreement for the ~~June~~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 ($13.75 million and $18.75 million as of ~~June~~September 30, 2020 and December 31, 2019, respectively), ~~incremental to the $5 million funding of the Eligible Cash account on July 20, 2020,~~ Kodak funded $9$21 million and $22 million to the Eligible Cash account held with the ABL Credit Agreement Administrative Agent as of ~~June~~September 30, 2020 and December 31, 2019, respectively, which is classified as Restricted Cash in the Consolidated Statement of Financial Position.

Under the ABL Credit Agreement, if Excess ~~Availability)~~Availability falls below 12.5% of lender commitments), Kodak would be required 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 ~~June~~September 30, 2020 month-end compliance reporting date, Kodak is not required to have a minimum Fixed Charge Coverage Ratio of 1.0 to 1.0. As of ~~June~~September 30, 2020 Fixed Charges exceeded EBITDA (as defined in the ABL Credit Agreement) by approximately ~~$27~~$39 million, therefore, the Fixed Charge Coverage Ratio was less than 1.0 to 1.0.

As a result of the Company’s current credit ratings, induring the second quarter of 2020 two surety bond holders notified the Company they ~~will require~~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 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.

On July 28, 2020 the U.S. International Development Finance Corporation signed a non-binding letter of interest to provide up to a $765 million loan to Kodak Pharmaceuticals, Inc. (“KPI”), which ~~is expected to~~would be a wholly owned subsidiary of the Company that ~~will~~would produce pharmaceutical ingredients. The 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 be no assurances that the DFC Loan will be approved or made.

Due to exercises of stock options primarily by ex-employees, the Company ~~has~~ received approximately $29 million, net of tax payments, ~~starting~~ in July ~~through the date of this filing.~~and August 2020.

Kodak made net contributions (funded plans) or paid benefits (unfunded plans) totaling approximately $6$9 million to its defined benefit pension and postretirement benefit plans in the first ~~six~~nine months of 2020. For the balance of 2020, the forecasted contribution (funded plans) and benefit payment (unfunded plans) requirements for its pension and postretirement plans are approximately ~~$10~~$8 million.

Cash flow from investing activities included $9$13 million of capital expenditures for the ~~six~~nine months ended ~~June~~September 30, 2020. Kodak expects approximately $15 million of total capital expenditures for 2020.

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. Kodak’s Executive Chairman~~10-Q and ~~Chief Financial Officer~~ 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 ~~effective.~~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.

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.

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 of the potential DFC Loan and Pharmaceutical Initiative discussed under Item 1A. Risk Factors below (the “Pharmaceutical Announcement”). The Company intends to vigorously defend itself against the Securities Class Actions.

In addition to the Securities Class Actions, the Company has received two 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 Announcement and alleged proxy disclosure deficiencies. The Company is in the process of responding to these requests, and its response may serve as the basis for the requestors to bring shareholder derivative lawsuits which the Company intends to vigorously defend.

The Pharmaceutical Announcement has also given rise to 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 ~~June~~September 30, 2020, Kodak’s Brazilian Operations maintained accruals of approximately $3$2 million for claims aggregating approximately ~~$110~~$107 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.

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. 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.

Reference is made to the Risk Factors set forth in Part I, Item 1A. of the 2019 Form 10-K. The Risk Factors remain applicable from the 2019 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”).

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.~~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.~~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 ~~internal review being performed by a special committee of the Company’s Board of Directors.~~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”,~~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”). ~~While the Conversion Shares have not been registered for resale, the Conversion Shares were issued without restrictive legends or transfer restrictions based~~Based on ~~the Company’s receipt of an opinion of counsel for the Converting Holders that the resale of up to all of the Conversion Shares~~filings made by the Converting Holders ~~could be made in accordance~~ with ~~Rule 144 at any time in~~ the ~~three (3) month period commencing on August 3, 2020. The Company does not know if any of the Conversion Shares are still held by~~SEC, the Converting Holders ~~or if any~~have sold into the market all of the 29,922,956 Conversion Shares ~~have been sold. If~~as well as an additional 4,000,000 shares of common stock previously registered for resale by one of the Converting ~~Holders continue to hold the Conversion Shares, future sales of the Conversion Shares by the Converting Holders could exert downward pressure on the Company’s stock price.~~Holders.

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.

NEW JERSEY		16-0417150
(State or other jurisdiction of ~~incorporation)~~incorporation or organization)		(IRS Employer Identification No.)

343 STATE STREET, ROCHESTER, NEW YORK		14650
(Address of principal executive offices)		(Zip Code)

		Page
Part I.—Financial Information

Item 1.	Financial Statements	3
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive (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	3237
	Liquidity and Capital Resources	4550
Item 4.	Controls and Procedures	4753

Part II. —Other Information

Item 1.	Legal Proceedings	4854
Item 1A.	Risk Factors	4854
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4955
Item 6.	Exhibits	4956

	Index to Exhibits	5056
	Signatures	5158

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

(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

	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

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

	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	%

(3.1)	Second Amended and Restated Certificate of Incorporation of Eastman Kodak Company (Incorporated by reference to Exhibit (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 (Incorporated by reference to Exhibit (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)	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)	James V. Continenza Nonqualified Stock Option Award Agreement, dated July 27, 2020, filed herewith.

(10.2)	Eastman Kodak Company 2013 Omnibus Incentive Plan ~~(As Amended and Restated effective May 20, 2020)~~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 Award Agreement (multiple tranches), filed herewith.

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

(101.CAL)	XBRL Taxonomy Extension Calculation Linkbase.

(101.INS)	XBRL Instance Document.

(101.LAB)	XBRL Taxonomy Extension Label Linkbase.

(101.PRE)	XBRL Taxonomy Extension Presentation Linkbase.

(101.SCH)	XBRL Taxonomy Extension Schema Linkbase.

(101.DEF)	XBRL Taxonomy Extension Definition Linkbase

~~Date August 11,~~Date: November 10, 2020		/s/ Eric Samuels
		Eric Samuels
		Chief Accounting Officer and Corporate Controller
		(Chief Accounting Officer and Authorized Signatory)