Kodak done?

[chuckroast]

It seems that people have latched on to the headlines and paid zero attention to what a Kodak spokesperson was actually quoted as saying:

“The ‘going concern’ language in Kodak’s 10-Q is essentially required disclosure because Kodak’s debt comes due within 12 months of the filing. Kodak is confident it will be able to pay off a significant portion of its term loan well before it becomes due, and amend, extend or refinance our remaining debt and/or preferred stock obligations,” the spokesperson says.

“To fund the repayment, we plan to draw on the approximately $300 million in cash we expect to receive from the reversion and settlement of our U.S. pension fund (the Kodak Retirement Income Plan, or ‘KRIP’) in December. However, the KRIP reversion is not solely within Kodak’s control and therefore is not deemed ‘probable’ under U.S. GAAP accounting rules, which is what triggered the ‘going concern.’ Once the KRIP reversion is completed Kodak will be virtually net debt free and will have a stronger balance sheet than we have had in years.”

So much needless hand-wringing.

Thanks for that clarification. I have to go now and wash all the egg off my face for reacting without reading the details.

 

[Milpool]

It seems that people have latched on to the headlines and paid zero attention to what a Kodak spokesperson was actually quoted as saying:

“The ‘going concern’ language in Kodak’s 10-Q is essentially required disclosure because Kodak’s debt comes due within 12 months of the filing. Kodak is confident it will be able to pay off a significant portion of its term loan well before it becomes due, and amend, extend or refinance our remaining debt and/or preferred stock obligations,” the spokesperson says.

“To fund the repayment, we plan to draw on the approximately $300 million in cash we expect to receive from the reversion and settlement of our U.S. pension fund (the Kodak Retirement Income Plan, or ‘KRIP’) in December. However, the KRIP reversion is not solely within Kodak’s control and therefore is not deemed ‘probable’ under U.S. GAAP accounting rules, which is what triggered the ‘going concern.’ Once the KRIP reversion is completed Kodak will be virtually net debt free and will have a stronger balance sheet than we have had in years.”

So much needless hand-wringing.

Self awareness

 

[Cholentpot]

And exactly why we don't want Alaris to buy out the film division.

Kodak needs to find a way to dump Alaris.

Been saying this for a while. Even to the point of dumping them and going to court. Litigate the whole mess but be free of them. Alaris is holding back Kodak from riding this current film wave.

 

[Scott J.]

The thing is, there might be a reason the GAAP accounting rules are strict in this sense. The question is how big the risk is that EK won't be able to use the anticipated $300m in cash. It's apparently not zero. Does that mean it's "significant", "big", or "not meaningful"?

My reading of it is that GAAP interprets any calling of debt in the near future to qualify as a “going concern,” even if the company’s management has a plan in place to meet its debt obligations. The “going concern” is, in essence, a public disclosure that there are obligations that need to be met soon and needn’t necessarily be interpreted as conveying severity one way or the other.

After having done a little additional reading on Kodak’s situation, the pension plan thing is basically a done deal — i.e., Kodak is paying a premium to transfer responsibility for managing and administering the plan to a third party. After that is finalized at the end of this year, the pension plan will be off Kodak’s books forever. The only remaining issue is the pensioner election to determine who wants a lump sum payout and who wants an annuity, and Kodak expects that to be completed soon (in the next week, if I’m reading this correctly).

All this talk of them “going under” is a gross misunderstanding of the situation.

 

[Alan Edward Klein]

It's still not clear to me what legal relationships between Alaris and Eastman still exist? And if and when they end?

 

[BHuij]

ProImage 100, Gold 200, Ultramax 400... I'd be sad to see those go.

But Ektachrome, that would be a devastating loss. My silly uneducated hope is that Ilford/Harman ends up with the rights to product Ektachrome when this mess is sorted out.

 

[Aidan Sciortino]

i

It's still not clear to me what legal relationships between Alaris and Eastman still exist? And if and when they end?

Ive got the same question; I had a heated conversation once with someone who insisted that whatever terms emerged in the bankruptcy were still extant, and that EK cannot under any circumstances sell or own a subsidiary that sells still film to the general public while Alaris exists.

This seems unlikely to me, but what do I know.

 

[brbo]

So you think Alaris waived that $2bln goodbye in exchange for EK CEO’s phone number?

 

[BrianShaw]

From Aug 2023.

“Continenza added that Eastman Kodak recently renewed its supply agreement for film with its long-term customer, Kodak Alaris, in a deal which will run through 2028. “We are committed to manufacturing film as long as there is demand from the filmmakers and photographers worldwide,” said Continenza.”

Mixed picture for Eastman Kodak in its latest quarter

Kodak saw a boost in profits but a drop in revenues in its latest quarter, compared to the same period a year ago.

www.wxxinews.org

And a quick skim of this seems to clearly indicate that the Alaris license is “in perpetuity “.

U.K. Kodak Pension Plan Revitalizes Kodak’s U.S. Imaging Businesses

In the 1880s, when George Eastman was developing his fledgling film company, he wanted a name that was short, easy to pronounce and unique. Kodak, the brand that would become synonymous with photography, was born from Eastman playing anagram games with his mother and his insistence that the name...

www.institutionalinvestor.com

 

[koraks]

qualify as a “going concern,”

This is a technicality, but a 'going concern' is just tech-speak for "normally functioning business". https://www.investopedia.com/terms/g/goingconcern.asp So it's not a 'concern' as we'd use the word in normal parlance. But, as said, it's a technicality and a detail; I otherwise agree with your interpretation, although I'm insufficiently aware of the details to be able to estimate whether it's a complete non-issue, or just an issue that's being blown out of proportion.

 

[BrianShaw]

“In its earnings report Monday, the company warned that it doesn’t have “committed financing or available liquidity” to pay its roughly $500 million in upcoming debt obligations. “These conditions raise substantial doubt about the company’s ability to continue as a going concern,” Kodak said in a filing.”

 

[Scott J.]

“In its earnings report Monday, the company warned that it doesn’t have “committed financing or available liquidity” to pay its roughly $500 million in upcoming debt obligations. “These conditions raise substantial doubt about the company’s ability to continue as a going concern,” Kodak said in a filing.”

That they don't have the available liquidity is technically true, in the sense that they only have $155 million in cash-on-hand to pay off the $477 million in term loans that are due in May 2026. However, they plan to use some of the surplus money ($1.2 billion) in the pension plan to pay off those loans (i.e., a pension reversion). Because the surplus funds in the pension plan can't be accessed until after the reversion is finalized (expected in December of this year), they are required by law to say: "We don't, as of this exact minute, have the liquid assets to pay back the loans, and if we don't pay the loans back, it would be a problem for us." It sounds more dire than it really is because the preciseness of the law prevents them from being able to invoke future liquidity to address present debts.

 

[MattKing]

Kodak Alaris is a lot bigger than the still film manufacturing part of Eastman Kodak, and if Eastman Kodak had to take on the responsibilities that Kodak Alaris fulfills, they would have to expand their hiring and international outreach tremendously.
They are two entirely different corporations, who are mostly in two entirely different businesses, with completely different business infrastructures, and with one being rooted physically and metaphorically in one small city in New York, and the other having operations all around the world.
Suggesting they be combined is like suggesting Walmart start manufacturing all their inventory themselves.

 

[BrianShaw]

That they don't have the available liquidity is technically true, in the sense that they only have $155 million in cash-on-hand to pay off the $477 million in term loans that are due in May 2026. However, they plan to use some of the surplus money ($1.2 billion) in the pension plan to pay off those loans (i.e., a pension reversion). Because the surplus funds in the pension plan can't be accessed until after the reversion is finalized (expected in December of this year), they are required by law to say: "We don't, as of this exact minute, have the liquid assets to pay back the loans, and if we don't pay the loans back, it would be a problem for us." It sounds more dire than it really is because the preciseness of the law prevents them from being able to invoke future liquidity to address present debts.

I agree with you. I also find it interesting that those were the words they, themselves, published. The Going Concern ASSESSMENT is normal and required. It is not necessarily a harbinger of doom.

They also said this, apparently: "In a statement to CNN Tuesday, a Kodak spokesperson said that it’s “confident it will be able to pay off a significant portion of its term loan well before it becomes due, and amend, extend or refinance our remaining debt and/or preferred stock obligations.”"

 

[Scott J.]

I also find it interesting that those were the words they, themselves, published.

I was initially taken aback by that too. But the comment about "substantial doubt" is not actually Kodak's own wording -- it's a specific classification scheme under GAAP. GAAP requires an initial assessment of "substantial doubt" without considering any mitigating plans the company may have in place to address a problem (e.g., debt). There's a flow chart here that shows how the assessment is done.

 

[Europan]

Kodak could easily double sales of motion-picture film, if they would lower prices while at the same time start pushing the stocks to dealers, onto the sales desks, paralleled by decent publicity efforts. The present-day Ektachrome is beautiful, no-one else has anything like it. The black-and-white films are way too expensive and too sensitive. 25 ISO should be brought back. Panatomic-X reversal on colorless TAC.

Kodak does not fight for film projection. They have given up cinema being a photochemistry enterprise. Kodak could revive slides projection. Big fun.

 

[mshchem]

Been saying this for a while. Even to the point of dumping them and going to court. Litigate the whole mess but be free of them. Alaris is holding back Kodak from riding this current film wave.

Alaris is critical to Kodak. As critical as can be. Global distribution!!!

 

[koraks]

Kodak could easily double sales of motion-picture film, if they would lower prices while at the same time start pushing the stocks to dealers, onto the sales desks, paralleled by decent publicity efforts.

And which movie productions are going to purchase all that film? If this is the old story of "we can use it for stills", then keep in mind that it'll just eat into the market share of existing still film products (Kodak & others).

Besides, even if they doubled the motion picture business, the impact on the total revenue would at most be something like +15% or so. That's revenue impact, not EBITDA.

 

[Scott J.]

With the obvious caveat that film manufacturing comprises only a small fraction of Kodak's revenue stream, I do think they would benefit from putting out more film products with higher regularity. Most companies benefit from periodically producing new products, as it maintains customer interest, but Kodak has been pretty quiet on that front (for probably understandable reasons, of course, but still).

My sense is that the "film photography revival," of which I'm a big fan, is starting to wane a bit, and my intuition is that much of the waning is due to a lack of new products, as well as a lack of product availability overall (e.g., Fuji E6 film). My hope is that Kodak getting past this hurdle in 2026 will allow them to press "reset" and start offering some new products.

At the top of my list would be: 1) the Kodak-branded E6 chemistry that they claimed was going to be released in 2024; and 2) another color E6 film to fill the void left by Velvia 50's near-unavailability (a reformulated E100VS would be great). Bringing these two out together (or something along those lines) would be a nice and much-needed shot in the arm for the analog community.

 

[retina_restoration]

All this talk of them “going under” is a gross misunderstanding of the situation.

Exactly!!
But the Internet thrives on drama and doom, so there are many people who would far rather interpret the report as suggesting Kodak is in a state of imminent failure, than actually read what was said and think about what it means.
So go folks — rush out and buy up however much Kodak film you think you're going to need for the next decade — Kodak won't mind one bit.

From a previous post: “Continenza added that Eastman Kodak recently renewed its supply agreement for film with its long-term customer, Kodak Alaris, in a deal which will run through 2028. “We are committed to manufacturing film as long as there is demand from the filmmakers and photographers worldwide,” said Continenza.” (emphasis mine)

We, the photographers, need not trouble ourselves with the legalese of the report — the above quote is all we need to know.

 

[retina_restoration]

Thanks for that clarification. I have to go now and wash all the egg off my face for reacting without reading the details.

If its not too late, make yourself a nice Eggs Benedict!

 

[koraks]

I do think they would benefit from putting out more film products with higher regularity

This requires R&D (if the products would have to be meaningfully different from the present ones) as well as launching costs, as well as the incurred costs of a broader product portfolio as there would be resistance if they also axed existing products. Those combined costs would have to be recouped from the added sales of these new products, taking into account cannibalization of existing product lines. Long story short - there's very little room for frequent product launches for EK in the still film arena.

Besides, what they really need to find an alternative revenue stream for is the offset plates. That is the pressing problem for them.

 

[chuckroast]

If its not too late, make yourself a nice Eggs Benedict!

I can just stay here on Photrio and someone will roast me

 

[DREW WILEY]

Every new product would involve a serious risk of overextending themselves. Yeah, they have the ability to make sample coatings; but mass manufacture for sake of the market is something else. And what they are currently coating (not all at once) are home run products, some of the finest films ever.

E100VS was a bellyflop. Fuji's Velvia offerings had a good run, but with today's custom of people super-saturating their shots post in PS anyway, will there still be the same demand? How many people are still doing actual slide shows, or even scanning Velvia for printing purposes? - it's an infamously difficult film to reproduce well due to its very high contrast (although I loved it for its ability to boost misty low contrast scenes - but that was all in relation to sheet film,
which has since gotten terribly expensive).

 

[dkirby]

Kodak could easily double sales of motion-picture film, if they would lower prices while at the same time start pushing the stocks to dealers, onto the sales desks, paralleled by decent publicity efforts. The present-day Ektachrome is beautiful, no-one else has anything like it. The black-and-white films are way too expensive and too sensitive. 25 ISO should be brought back. Panatomic-X reversal on colorless TAC.

Kodak does not fight for film projection. They have given up cinema being a photochemistry enterprise. Kodak could revive slides projection. Big fun.

I think you underestimate how much digital projection outstrips film in terms of practicality, cost, and durability through the course of a theatrical run. "Real" projection is tons of fun - and I'm happy I get to experience it a few times a year with movies like Sinners, but in terms of widespread use the standardization to DCP was inevitable. Frankly, the current situation where some films are projected analogue, and some archival prints are otherwise struck, but most films are projected digitally, is/was the best possible scenario for Kodak as far as distribution is concerned. There is no viable "fight" for them to make here.

Film origination for cinema is an entirely different beast, although I think it is still inaccurate to say that "they have given up cinema being a photochemistry enterprise." They do a fair amount of work to promote cinema film products ie Kodak film awards, student grants, the establishment of Kodak film labs, their presence at major film festivals, and the aforementioned deals with movie studios, although there are various threats to the future of film in cinema - most notably the spreading phase-out of analogue classes at film schools.

Their greatest marketing, of course, is that film severely over-indexes among movies of higher quality, and is the preference of most of the great current filmmakers. This is not a coincidence, and drives more up-and-coming filmmakers to shoot film.