Kodak shareholders meeting

Photo Engineer · Feb 8, 2007

Kodak held a meeting of shareholders today in NYC. Although they are to report it tomorrow in the paper, the local TV news tonight ended with a short segment on the meeting.

Of main interest was this. Perez said that Kodak would let traditional (analog) photography play out to the end as it made $300 M this last year (Offhand IDK if that was sales or income). Interestingly enough, I remember when color paper alone made $500 M (that was income) in one year. This should give you an idea of how much sales have dropped.

The announcer added that Kodak has kept the lead in motion picture film and it appears that with the slow growth of digital there this news should make Steven Spielberg happy. That was Rich Funke in NYC for the meeting on channel 10 news in Rochester at 6:25 PM, Rochester.

More news after I read the paper tomorrow morning.

PE

Tom Kershaw · Feb 8, 2007

I'd have thought that RA-4 paper (Kodak & Fuji) would still be popular as it's used by all the photo labs and on-line printing services.

eddym · Feb 8, 2007

Tom Kershaw said:
I'd have thought that RA-4 paper (Kodak & Fuji) would still be popular as it's used by all the photo labs and on-line printing services.

Yeah, me too. Or does this reflect the phenomenon that people are not printing their digital images any more, but rather just showing off their photos of their grandchildren by scrolling through them on the lcd screen on the back of their camera? Or for that matter... cell phone?
Gagging....

PHOTOTONE · Feb 8, 2007

People are printing their digisnaps. Most certainly. Unfortunately for Kodak, Fuji has a tremendous share of the mini-lab business.

HerrBremerhaven · Feb 8, 2007

Last I saw on PMAI reports, the kiosks were doing well, though not as much as earlier anticipated. Many of the self serve kiosks use RA-4 technology. One thing that might have hurt Kodak a little in photofinishing was Fujifilm picking up many contracts at Target Stores.

The $300M figure I believe I saw as profits in the consumer imaging division of Kodak, on their last quarterly SEC filing. However, reporting of profits combines consumer digital camera and printer sales with film sales and one-time-use camera sales. If you read the press releases carefully, Kodak indicate that consumer digital just finally managed a 3% profit level in the last few quarters. As far as I know, Nikon is the only other company to report profits directly from digital camera sales.

While a little tougher to decipher, indications at Fuji with their financial reports show traditional films still in the 12% to 18% profit range. This is over the financial statements from 2005 and 2006, mostly based upon quarterly reports. It might be interesting to wonder whether Kodak are more or less profitable from their film production; this might be a factor of their manufacturing efficiency.

Ciao!

Gordon Moat
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PHOTOTONE · Feb 8, 2007

Photo Engineer said:
The announcer added that Kodak has kept the lead in motion picture film and it appears that with the slow growth of digital there this news should make Steven Spielberg happy.
PE

But, with Agfa out of the picture, who else even competes in cine camera raw stock, and release print stocks? Fuji?

HerrBremerhaven · Feb 8, 2007

http://www.agfa.com/en/sp/solutions/cine/index.jsp

AGFA still make motion picture films. They never had much of a catalogue of choices, so questionable how much market share they enjoyed. This division, and aerial films, were never a part of the failed AGFAPhoto.

Fuji is indeed still involved in motion picture films. I have no idea on market share with this area, though they have a good selection of films. I have read in a few places that India was a large market for cine films, so perhaps Fuji do well in that region.

Ciao!

Gordon Moat
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Photo Engineer · Feb 8, 2007

Kodak has about 80% of the worlds motion picture market.

As for printing on RA paper, the announcer added that Kodak's motto once used to be "you press the button and we do the rest" but with digital it is "you press the button and then you do the rest".

Sounds like he is on our team.

PE

PHOTOTONE · Feb 8, 2007

HerrBremerhaven said:
http://www.agfa.com/en/sp/solutions/cine/index.jsp

AGFA still make motion picture films. They never had much of a catalogue of choices, so questionable how much market share they enjoyed. This division, and aerial films, were never a part of the failed AGFAPhoto.

Gordon Moat
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Wow, Agfa in Belgium still has quite a product line, and also offers custom coating solutions. But..they do not offer movie camera film, only color release print stock, and soundtrack stocks.

They even offer several bw photo papers, glossy and matte RC.

aldevo · Feb 8, 2007

PHOTOTONE said:
Wow, Agfa in Belgium still has quite a product line, and also offers custom coating solutions. But..they do not offer movie camera film, only color release print stock, and soundtrack stocks.

They even offer several bw photo papers, glossy and matte RC.

At the risk of getting off-topic...where did you see the bw photo papers? I searched here but didn't find any...

http://www.agfa.com/en/sp/products_services/prod_cat/index.jsp

Agfa still manufactures a document film (Copex) which can be made to act (more or less) as a continuous-tone pictorial film with special developers, but I think that's the extent of their involvement in still photography.

PHOTOTONE · Feb 8, 2007

aldevo said:
At the risk of getting off-topic...where did you see the bw photo papers? I searched here but didn't find any...

http://www.agfa.com/en/sp/products_services/prod_cat/index.jsp

Agfa still manufactures a document film (Copex) which can be made to act (more or less) as a continuous-tone pictorial film with special developers, but I think that's the extent of their involvement in still photography.

It's all right there under the Aerial products at the link you gave. They make several color negative emulsions for aerial photography, a color transparency film, b/w films and Rapidtone papers. These would currently be long roll products for aerial imaging applications, but of course they could be custom cut.

A better link, with more clearcut product descriptions would be:

Black and White products: http://www.agfa.com/en/sp/solutions/aerialphotography/black_white/index.jsp

Color products: http://www.agfa.com/en/sp/solutions/aerialphotography/color/index.jsp

It is obvious to me that certain NEW consumer films from a company in Germany are based on emulsions outlined in the above two links.

aldevo · Feb 8, 2007

Ahh, now I see. Yes, I think you may be on to something

Photo Engineer · Feb 8, 2007

Here is the 11:00 news update.

Perez said that film is very profitable and Kodak plans to retain this business and stay in the market as long as it stays that way.

PE

Curt · Feb 8, 2007

http://kevxml2a.verizon.net/_1_2JCS...2&qcat=finance&ran=2095&passqi=&feed=ap&top=1

david b · Feb 8, 2007

http://news.yahoo.com/s/ap/20070209/ap_on_bi_ge/kodak_investors_19

HerrBremerhaven · Feb 9, 2007

"Film and Photofinishing Group earnings from operations were $77 million, compared with $51 million a year ago, on sales of $1.013 billion, which were down 16% from the prior-year quarter. During the fourth quarter of 2006, the group achieved an 8% operating margin, double the rate of the year-ago quarter and in line with company expectations."

from http://www.kodak.com/eknec/PageQuerier.jhtml?pq-path=2709&pq-locale=en_US&gpcid=0900688a80669169

This is just the Fourth Quarter, and an easier to understand breakdown than some journalists summary interpretation. With traditional products earnings going from $51M to $77M, seems to me that despite decreasing revenues, the numbers got better. Also higher up in that linked Pres Release from Kodak:

"Traditional revenue totaled $1.357 billion, a 15% decline from $1.592 billion in the fourth quarter of 2005."

With that being one fourth (1/4) of their fiscal year, that still means around $4 billion in traditional revenues. Some of that is photofinishing and paper, but that stills sounds like a hell of a lot of film.

Please note: I still think it is better to read through several years of SEC reports, especially the Annual Reports, but those who do not have the time should at least read through the official releases from Kodak. SEC regulations require honesty in reporting, and would heavily fine EK for any false or misleading statements.

Ciao!

Gordon Moat
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gr82bart · Feb 9, 2007

Antonio Perez said:
"Film is going to follow its own destiny," he said. "Right now, entertainment (motion-picture) imaging is very stable, is very good for the company. ... If that goes digital, which eventually I believe it will, then we'll do something else. We will do what's better for the shareholders."

While I love Kodak, I think their CEO is an idiot.

Regards, Art.

copake_ham · Feb 9, 2007

Originally Posted by Antonio Perez, CEO of Kodak
"Film is going to follow its own destiny," he said. "Right now, entertainment (motion-picture) imaging is very stable, is very good for the company. ... If that goes digital, which eventually I believe it will, then we'll do something else. We will do what's better for the shareholders."

gr82bart said:
While I love Kodak, I think their CEO is an idiot.

Regards, Art.

Sorry Art, but if I was a shareholder this is exactly what I would want him to say at the shareholder's meeting!

An idiot would have told the owners to "bug off". And such an idiot would soon be out of a job.

Perez's (and any CEO's) loyalty and fiduciary responsibility is first and foremost to the owners of the Company! What would make you think it would or should be anything else? :confused:

Photo Engineer · Feb 9, 2007

In the morning paper, it was added that Perez commented on not having any plans to sell the film portion of the business. The writer of the article added that the analysts said "who would buy it".

This does not imply that the film unit is bad or the products are bad, but rather that the market, from their perspective is in bad shape.

PE

Steve Smith · Feb 9, 2007

Photo Engineer said:
In the morning paper, it was added that Perez commented on not having any plans to sell the film portion of the business. The writer of the article added that the analysts said "who would buy it".

This does not imply that the film unit is bad or the products are bad, but rather that the market, from their perspective is in bad shape.

PE

What it also means is that Kodak can still run it at a profit because they own it outright. If anyone else were to buy it they would probably need to borrow the purchase money which would then need to be repaid from the profit.

Steve.

copake_ham · Feb 9, 2007

Photo Engineer said:
In the morning paper, it was added that Perez commented on not having any plans to sell the film portion of the business. The writer of the article added that the analysts said "who would buy it".

This does not imply that the film unit is bad or the products are bad, but rather that the market, from their perspective is in bad shape.

PE

PE,

As I have said on several threads "The Street" wants Kodak out of the film business and will keep pushing for it to happen. The analysts covering the Company are young, tech-savvy, Blackberry toting financial professionals. They consider film to be a dead technology and they have enormous influence on Kodak's share price.

Until and unless the film division is sold (whether to outside investors or via a MBO) it will be viewed as an albatross around Kodak's neck by the financial community. The analysts are only interested in financial performance and have no "sentimental interest" in the Company preserving what is perceived to be a dead business line.

The only equation anyone analyzing the Company cares about is whether the discounted present value of the remaining cash flow of the film business is greater than a likely sale price. Perez is arguing that this is still the case and so the film division should be kept in order to finance the Company's switch to digital.

When the time comes that the PV of the DCF is only about equal to a sale price (actually will still have to be somewhat higher to make it attractive) will the film division be spun off.

aldevo · Feb 9, 2007

I'm not so sure.

The analysts also pay attention to cash flow. Right now, Kodak's traditional operations do wonders for its cash flow picture - if for no other reason than these traditional operations result in a great deal of depreciation which is added on to the cash flow.

Cash flow is the main determinant in the cost of acquiring and servicing debt. When you restructure (which Kodak has been doing non-stop for years) - you tend to acquire lots of debt.

Kodak just let a big piece of recurring cash flow go in the form of their Health operation - and much of that is being used to reduce their debt. However, they will probably want to be reasonably sure that they will not need access to low-cost debt in the short-term if they surrender their film operations. Because this will have a pretty negative impact on cash flow and raise their borrowing costs.

On the other hand, you balance all that against what you are likely to fetch for the film operations. Right now, the only estimates I've seen peg its value 0.5 X its annual revenue given that the film market is moribund (at best) but profitable. So we are talking about $1.5 - 2.0 billion (thereabouts) and that number will only go down with time.

So the decision, I think, is pretty complicated. If Kodak's inkjets prove to be runaway hits and digital margins start to look much better - then maybe there's no need to acquire new debt and film's margins will start to look like a drag.

But that's all speculative on my part.

copake_ham · Feb 9, 2007

aldevo said:
I'm not so sure.

The analysts also pay attention to cash flow. Right now, Kodak's traditional operations do wonders for its cash flow picture - if for no other reason than these traditional operations result in a great deal of depreciation which is added on to the cash flow.

Cash flow is the main determinant in the cost of acquiring and servicing debt. When you restructure (which Kodak has been doing non-stop for years) - you tend to acquire lots of debt.

Kodak just let a big piece of recurring cash flow go in the form of their Health operation - and much of that is being used to reduce their debt. However, they will probably want to be reasonably sure that they will not need access to low-cost debt in the short-term if they surrender their film operations. Because this will have a pretty negative impact on cash flow and raise their borrowing costs.

On the other hand, you balance all that against what you are likely to fetch for the film operations. Right now, the only estimates I've seen peg its value 0.5 X its annual revenue given that the film market is moribund (at best) but profitable. So we are talking about $1.5 - 2.0 billion (thereabouts) and that number will only go down with time.

So the decision, I think, is pretty complicated. If Kodak's inkjets prove to be runaway hits and digital margins start to look much better - then maybe there's no need to acquire new debt and film's margins will start to look like a drag.

But that's all speculative on my part.

I have no speculation to offer. If you drill down into this article from today's NY Times biz section:

http://www.nytimes.com/2007/02/09/business/09kodak.html?_r=1&ref=business&oref=slogin

You will find that five of the eight Street analysts who cover Kodak have a "Sell" recommendation. The other three are at a "Hold" position. None have a "Buy" recommendation.

What this means is that large institutional portfolio managers will be very wary of adding Kodak shares to their holdings. While it is true that you make big money on the Street by going against the herd - few lose their jobs while running with it.

HerrBremerhaven · Feb 9, 2007

I think it is tough to put much value behind the words of financial writers. Obviously, for someone to sell shares in EK, there has to be buyers for those shares. It should not be surprising that analysts don't make it to CEO positions at major corporations.

Kodak was one of the major sponsors of the Print Week trade show I attended this week. This is were the current emphasis and in-depth analysis are currently focuing, Kodak's Graphic Communications Group. This division is also resposible for a great deals of charges and expenses, since Kodak purchased many smaller companies to now become the giant in this industry. This is also the division primarily responsible for the digital company comments, though this division also sells film:

http://graphics.kodak.com/us/consumables/default.htm

Consumer products, especially a new inkjet business idea based upon price, are unproven. It would be rare for any financial analyst nor reporters to consider this a good idea. Maybe it will work out for Kodak, but it could be the failure that kills profits. Risk taking is something more common to NASDAQ listed technology stocks, not NYSE listed companies.

Overall revenues are important, profits are important, and earnings per share are important. Investors pay more attention to companies that show growth potential, than those that show stability, which affects share prices. However, this still goes back to perception, something that Kodak is working hard to change.

Ciao!

Gordon Moat
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copake_ham · Feb 9, 2007

HerrBremerhaven said:
I think it is tough to put much value behind the words of financial writers. Obviously, for someone to sell shares in EK, there has to be buyers for those shares. It should not be surprising that analysts don't make it to CEO positions at major corporations.

Kodak was one of the major sponsors of the Print Week trade show I attended this week. This is were the current emphasis and in-depth analysis are currently focuing, Kodak's Graphic Communications Group. This division is also resposible for a great deals of charges and expenses, since Kodak purchased many smaller companies to now become the giant in this industry. This is also the division primarily responsible for the digital company comments, though this division also sells film:

http://graphics.kodak.com/us/consumables/default.htm

Consumer products, especially a new inkjet business idea based upon price, are unproven. It would be rare for any financial analyst nor reporters to consider this a good idea. Maybe it will work out for Kodak, but it could be the failure that kills profits. Risk taking is something more common to NASDAQ listed technology stocks, not NYSE listed companies.

Overall revenues are important, profits are important, and earnings per share are important. Investors pay more attention to companies that show growth potential, than those that show stability, which affects share prices. However, this still goes back to perception, something that Kodak is working hard to change.

Ciao!

Gordon Moat
Dead Link Removed

Gordon,

I am not talking about financial writers - I am talking about the analysts at Wall Street firms that cover Kodak. Perhaps you are unfamiliar with the analyst's role in the stockmarket? These are industry specialists working at the major underwriting and trading firms. Their analyses and resulting Buy/Sell/Hold recommendations are key advisories to their firm's own tradiing positions as well as to those firms institutional clients.

If you think these people are just pundits you are very mistaken. They move huge sums of money in the market - and you can bet the farm that public companies are very responsive to their questions and analyses.

BTW: Top level Street analysts often command eight figure incomes; well above the salaries of many of the CEOs of the companies they cover. These are not low-level, green eyeshade number crunchers.

And yes, because many of them advise "specialist" firms which are "buyers of last resort" in making a market in certain stocks in the NYSE - they are very tuned-in to the performance of the companies they cover.

Kodak shareholders meeting

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