The pension obligations were NOT mainly from the film era. They are quite equally distributed IMHO based on how many people from film divisions moved over from to digital that were not laid off. Retirees from digital divisions now almost equal those from film divisions when we gather for lunches of the retirees group. Now I grant you, the film retirees are older!
But, there are less of them due to attrition. Also, a lot of the income from film has been plowed back into digital. In addition, many things are contracted out nowdays giving a low burden in terms of pensions and benefits.
As for the figures, Digital sales went up as noted, and film went down, but Digital started with a much smaller base and film started with a much larger base. This still gives film a larger income and a larger profit. Give the numbers, not the percentages!
PE
From their Q3 SEC submittal:
"Revenue and profitability for the nine months ended September 30, 2011 declined primarily due to non-recurring intellectual property licensing arrangements in the prior year period, and were also negatively impacted by industry-related volume declines and increased commodity costs, particularly silver, in the Film, Photofinishing, and Entertainment Group (FPEG) segment. The Company has been utilizing price increases and silver-indexed pricing models, as well as continuing its silver hedging program to mitigate the impact of historically high 31 silver prices on FPEG. Given the time necessary to implement these actions, results were affected more positively in the third quarter from the pricing actions than in the first half of 2011."
The part about revenue and profitability declining is a giveaway.
The income (revenues) from film have to be ploughed back into their print operations because the revenues for print are stabilizing (commercial and consumer services) and the film revenues are on a steady clip downwards.
And film does not have a larger revenue stream. Consumer Digital as of Q3 2011 was $1,142, Graphic Communications was $1,975, and Film and Entertainment $1,152.
If you look at the non-group losses from restructuring and rationalization, most of which is attributable to the FPEG, the measly $2 million "profit" the film side shows is completely wiped away by the $39 million attributable to their share of the costs for R&R. If you split the pension obligations as well this makes the film side unable to finance itself nor support a larger corporate structure.
The critical issue is revenues. Film revenues are in free fall at over 10% per. What you notice in the statements is that the Net sales for FPEG decline, but guess what? The Cost of sales is staying constant. This means that the FPEG group cannot sell down any more assets (close factories, sell land, lay off people) and break even. It has to draw on the other group revenues to stay solvent. This is not a case of film miraculously being profitable when the customer base is declining; this is a case of the cost to manufacture and distribute film products and services hits a floor. Film has no marketing because they cannot afford it and no one would listen.
This cannot continue. The decline of film revenues is breaking Kodak's back.
I am not saying that the digital push on at Kodak is a success, certainly not the consumer division. I have grave doubts about that. But digital is not dragging down the film side or capturing needed resources that could revive film. The staggering loss of film consumption has destroyed the company's equity and goodwill positions and it is pretty clear the Kodak management cannot see a way to stabilize the losses. It's pretty certain an outside group will have to take the film side over, find the bottom with the risk of private capital, and create an ecosystem of sales and production based on a whole new model and market space for traditional film emulsion. If this happens, look to some deep pockets in the motion picture industry to find the money.
