Kodak Warning + Later Clarification

[Prest_400]

Made my day in a not so good way. Didn't expect at all to see that headline. Long story short and after reading some other web opinions is that Kodak itself has more or less a good operation sans the obligations. Also agree it looks like a combination to rise capital plus debt restructuration.

The business area in which film is under seems to have a rather positive outlook, and then they had also invested heavily recently.

We continue to accelerate the growth of our Advanced Materials & Chemicals ("AM&C") business.

During the second quarter, Kodak continued its focus on improving the efficiency of our operations and investing in growth initiatives in our AM&C group," said David Bullwinkle, Kodak’s CFO. "Revenue for the quarter was roughly flat year over year, which was in line with expectations, and we continued to see revenue growth in our AM&C business.

Kodak Reports Second-Quarter 2025 Financial Results:

Kodak Reports Second-Quarter 2025 Financial Results

Eastman Kodak Company (NYSE: KODK) today reported financial results for the second quarter 2025.

www.kodak.com

​

In the very worst scenario, we'd need an operation that keeps the value of film but also encompassing the AM&C business. Question there is if film alone could sustain Rochester's facilities.
Who bears Color film is Kodak, nobody else can make it nor they would approach the level of refinement that Kodak does. Fuji could, but their market stance in the Motion Picture and still film is not what it was.

 

[DREW WILEY]

They'd probably have done just fine if the film division had been spun off to private independent ownership years ago. Being married to Wall Street can be an endlessly nagging ball and chain. Or maybe Fuji could absorb them for sake of their own interest. There are plenty of Gazoolionaires out there who could buy Kodak outright with pocket change. After all, they don't make just photographic film, but base materials necessary to various aspects of the Tech Industry itself.

 

[chuckroast]

I agree with what you said about Kodak's digital transition. Unimaginative wasn't the problem.

I fully agree that their R&D was innovative, but their corporate execution and strategy was wholly not so. It's one thing to have smart ideas. It's an entirely different thing to actually commercialize them.

I've been on both sides of this - both doing early stage R&D, and later in my career, working to deliver products to the market. One requires the imagination to be able to apply Calculus. The other requires the imagination to understand the market, where it is going, and how to be part of it. Kodak did the first brilliantly as always. They did a very poor job of the second. The proof is that other companies - like the aforementioned Nikon and Canon, did both well. For that matter, so did Leica, but it took a PE step to get there.

There is no way a company like Kodak could have lost the first mover advantage of 100+ years of experience, great customer satisfaction, and a reputation for outstanding quality without having to point to uninspired leadership. The scientists and engineers were- and are among the best in the business. This was just a plain leadership miss.

In fairness, the Board should have caught it long before it became a death march, but all too often, very large companies employ Boards that contribute to status quo sclerosis.

They are hardly alone, just the most relevant example for this forum.

 

[chuckroast]

They'd probably have done just fine if the film division had been spun off to private independent ownership years ago. Being married to Wall Street can be an endlessly nagging ball and chain. Or maybe Fuji could absorb them for sake of their own interest. There are plenty of Gazoolionaires out there who could buy Kodak outright with pocket change. After all, they don't make just photographic film, but base materials necessary to various aspects of the Tech Industry itself.

All true, but VC and PE bring their own version of "nagging ball and chain". When you take the man's money, you take his rules too.

 

[Lachlan Young]

It sounds like this pension plan clawback has been in progress for a little while, and Kodak is making this disclosure due primarily to regulatory reasons regarding the deadline for paying back this debt and the fact that they don’t control the pension plan thing entirely and thus can’t count it on their books until it’s done.

That's the sane and probably correct reading. Penultimate paragraph syndrome once again causing all sorts of silliness.

 

[DREW WILEY]

Chuck - in my own field of commerce, I watched one 75 or yr old mfg corp after another fall like flies in a single decade due to takeovers, or going public, or some radical shift in strategy, esp outsourcing. You know the saying, "If it ain't broke, don't try to fix it" - then some bright eyed and bushy tailed CEO or MBA comes along who has an untested idea, and so it goes. Nothing is risk free. Some mistakes are predictable, like bringing in top mgt with no background in the specific field itself. Kodak is a textbook case of that. They were also just too big, an octopus with so many arms that they lost track of some along the way. Then another classic error - taking a massive surplus of cash and using it to buy back their own stock options, instead of saving it for a rainy day, or facility upgrading. All kinds of things could be cited, and have been. Water under the bridge at this point. The next question is, will the bridge itself hold? At this point in time, many forces are at work to allegedly encourage domestic mfg, but which in a real world context, are actually making it a lot more difficult. Time will tell.

 

[4season]

Pension plans can have a really long tail, and even if EK ceased offering the things a half-century ago (speculation, but in the USA, Individual Retirement Accounts were introduced in the mid-1970s) it's super likely that there are still former employees or their beneficiaries receiving payments.

IRAs are very different from traditional pensions, in the sense that the risk, but also the potential rewards, have been shifted to the employee, rather than the employer.

 

[chuckroast]

Chuck - in my own field of commerce, I watched one 75 or yr old mfg corp after another fall like flies in a single decade due to takeovers, or going public, or some radical shift in strategy, esp outsourcing. You know the saying, "If it ain't broke, don't try to fix it" - then some bright eyed and bushy tailed CEO or MBA comes along who has an untested idea, and so it goes. Nothing is risk free. Some mistakes are predictable, like bringing in top mgt with no background in the specific field itself. Kodak is a textbook case of that. They were also just too big, an octopus with so many arms that they lost track of some along the way. Then another classic error - taking a massive surplus of cash and using it to buy back their own stock options, instead of saving it for a rainy day, or facility upgrading. All kinds of things could be cited, and have been. Water under the bridge at this point. The next question is, will the bridge itself hold? At this point in time, many forces are at work to allegedly encourage domestic mfg, but which in a real world context, are actually making it a lot more difficult. Time will tell.

Sure, there is a balance to be struck between responding to every new shiny object that comes along and staying so welded to the old ways of doing things that you miss the market entirely.

Certainly, I too have seen the bright eyed bushy tailed bean counters come in and see the business entirely through the prism of financials without thinking about the value of market reputation, customer experience, employee retention and any number of other "soft" indicators that are very important.

As an aside, this started when the business schools started preaching the nonsense gospel that you didn't have to be an expert in product, customers, or industry to manage things, you just had to be a an expert manager. That meant all they taught was the one thing common to all businesses: Financials

Historically, the crown jewels of at least American business were run by people who had a passion for their business areas: Henry Ford, George Eastman, Andrew Carnegie, Thomas Watson, and more recently Bill Gates, Steve Jobs, and Elon Musk are all examples. The we're-smarter-than-everyone bunch in the universities decided that these people were all robber barons by various names, utterly ignored their tremendous contributions to US success. They proceeded to create a class of professional managers who couldn't pour piss out of a boot if the instructions were written on the heel.

Fortunately, this is starting to change. When businesses have to change at the speed of information, you have to be a domain expert to lead them. I think the pointy headed bunch in the schools are starting to get this.

Full disclosure, I have a Masters in a STEM field and the course work for a Ph.D. in a theoretical STEM area completed. So, I've seen the Academy up close for plenty of years. I thoroughly enjoyed graduate school and learned a bunch. But the folks in the business schools, law schools, and worse still, the fuzzy studies (things ending in "ology" or something "studies") never seemed to me to be learning all that much or demonstrating a lot of passion for the field. Hopefully, this too is changing.

P.S. If it were up to me, every single Bachelor's degree would have the usual 4 year requirement PLUS another 2 years of internship in the field of interest before the degree was granted. Apprenticing has a long and rewarding history in the trades and this should be carried into the university setting.

 

[chuckroast]

IRAs are very different from traditional pensions, in the sense that the risk, but also the potential rewards, have been shifted to the employee, rather than the employer.

Only in theory is the risk shifted materially. In reality, IRAs can be created that follow the exact some risk horizon a pension fund manager would. Moreover, for even a very slight increase in risk, the returns would be far higher than pension funds. A young person should be taking a lot of risk in their early years to grow their wealth for later in life when they have to derisk. You can't do that with most employer sponsored 401Ks. You can do that with a self-managed IRA.

The really dangerous risk is that pension funds are so conservatively managed that they return well below market returns over the nearly 50 working years for an individual thereby depriving them of something so much better. And, of course, there is the not inconsiderable risk of the pension funds being raided by the employer, the unions, or just plain being underfunded and losing full liquidity. With an IRA, the money is yours and no one can legally touch it.

 

[albireo]

professional managers who couldn't pour piss out of a boot if the instructions were written on the heel.

Thank you! I have noted this expression down and I WILL use this line at some point in my life!

 

[chuckroast]

Thank you! I have noted this expression down and I WILL use this line at some point in my life!

It's not original I believe it was first used in the military, but I'm not certain.

 

[mshchem]

Tariffs on aluminum used in offset printing is a huge factor going forward.

 

[ags2mikon]

"couldn't pour piss out of a boot if the instructions were written on the heel."
That was one of my fathers expressions he would use when he met someone that he thought was really stooped. He also spent 4 years in the U.S. Navy.

 

[warden]

I won’t be panic buying TMax just yet. Sounds like they are required to report the worst case scenario while working to avoid it. I hope they work it out. The news has certainly hit all the major networks.

 

[Trail Images]

"scale of users for these films appear to me to be far smaller than for monochrome." Is this true? Yes, colour slides are a very niche area, but I thought colour negatives were big ... that was part of the motivation for the Harman activity. Any one got any numbers?

I started doing photography while in the military back in the late 1960's. I have only used slide and / or transparency film since that date. Was a big user of Kodak early on in various types and speeds. Shifted to Fuji Velvia 50 for what seemed like forever until it became too much of a headache to buy in MF & LF consistently.
In the end Ektachrome E-100 has been my go to for several years now in both MF & LF and works extremely well for my landscape needs. I'm in the field once a week in my retirement years now.

 

[Scott J.]

Maybe I’m the odd man out here, but I think Kodak could be in a pretty good position by the end of the year if they can finalize purchase of the annuity contracts and transfer the pension plan to whichever outside company (presumably an insurance company) they’re currently negotiating with.

The pension plan is massively overfunded (reportedly $1.2 billion in surplus funds), which Kodak would like to access so it can pay down other debts (their current, non-pension debt obligations are estimated at $500 million). If they can successfully finalize the annuity purchase by the end of the year — and they’re saying they believe they will — responsibility for the pension plan will officially transfer (forever) to the insurer and Kodak will get a huge cash infusion ($1.2 billion, minus premiums and other charges). The estimate I saw suggested they’d end up with about $500 million in cash after all is said and done, which would be just enough for them to completely pay off all remaining debts, thereby rendering the company effectively debt-free.

Kodak still generates around $1 billion in revenue per year, so putting its debt behind it could really open up a lot of possibilities for expansion, R&D, etc. Gotta stay positive.

 

[mshchem]

I think that the headlines are intended to cause retirees to drop dead of a heart attack

Diabolical!!!

 

[chuckroast]

I think that the headlines are intended to cause retirees to drop dead of a heart attack

Diabolical!!!

That's one way to reduce pension obligations.

 

[Alan Edward Klein]

When Kingswood Capital Management, a Los Angeles-based American private equity firm, bought the British Kodak Alaris two years ago, I said then that it made sense for them to buy Eastman Kodak to assure the survival of the film they need for distribution sales. Maybe something is going on behind the scenes along these lines..

 

[MattKing]

When Kingswood Capital Management, a Los Angeles-based American private equity firm, bought the British Kodak Alaris two years ago, I said then that it made sense for them to buy Eastman Kodak to assure the survival of the film they need for distribution sales. Maybe something is going on behind the scenes along these lines..

In 2023 Kodak Alaris had revenues of approximately 500 Million Dollars.
For the same year, Eastman Kodak had revenues that were about twice as much, of which considerably more than 3/4 had nothing to do with film.
Why would Kingswood be interested in something that has relatively so little to do with its other investment?

 

[Steven Lee]

Note that far smaller companies like the aforementioned Harmon, Foma, Adox etc. seem to plod along just fine. They are smaller and thus more agile to change. Kodak could have done that, but a hundred years of institutional inerta and complacent leadership thinking prevented that.

I am not suggesting that Kodak management of that era was "incompetent". I am saying they were unimaginative and inflexible.

Harmon, Foma and Adox combined reprensent a microscopic fraction of Eastman Chemical, just one of four Kodak descendants. I am not following your logic. Fomapan's yearly revenue is around $10M, that's about as much as a single Chick-fil-A location makes. Meanwhile we're talking about preserving a trillion dollar empire. Why are you using a restaurant-scale business as an example? This tells me you aren't serious.

Again, if you combine the total enterprise value of all surviving Kodak divisions, that's still a formiddable and successful business measured in billions. They have diversified into chemicals, pharma, even defense contracting, and -- yes -- coating, while still continuing to make film. That counts as pretty flexible in my book.

BTW, I know exactly where this myth of "inflexible" Kodak management came from. There was a publication by Harward Business School which was, unfortunately, written by a moron. Subsequently it was quoted numerous times in the press simply because Kodak is such a well-known brand. But the paper never, not once, mentioned that this wasn't just about one technology replacing/disrupting another. The entire industry shrank in size in dramatic proportions. Talk about not seeing an elephant in the room.

 

[Steven Lee]

If Kodak were to go down, along with its near monopoly of realistic color neg film production and now the future of chrome film too, that would be the end of any incentive for Fuji to produce RA4 printing paper, or for anyone to make processing chemicals (which still happens to have high demand). You can't just start that kind of thing back up by selling off patents or by relocating complicated experienced production.

Meanwhile, Ilford's black and white presence is being artificially crippled by dramatically rising prices to US consumers - what do you want, a death spiral to the whole industry? And don't imagine digital printing supplies won't follow suit in an inflationary spiral if they're the only remaining option. What are even hand-coaters going to do if all kinds of subsidiary ingredients disappear due to lack of broader demand? Back to cave painting - but it had higher esthetic standards than most of today's photographic output.

Time to take a deep breath, before a bunch or unsubstantiated rumors gain traction.

The linked article is talking about EK's difficulties servicing their debts. That is not a threat, as long as the unit economics is solid. Nobody is going to shut down a profitable business just because it can't pay off debt. They will get recapitalized, existing investors will get wiped out, and debt will be restructured in a way which is attractive to new investors.

It would have been far far worse if their EBITDA was negative (or small), but it's reasonable at almost $200M in 2024 with 18% margin.

 

[Model71]

Wow! Not the news I want to hear (read).

 

[Alan Edward Klein]

In 2023 Kodak Alaris had revenues of approximately 500 Million Dollars.
For the same year, Eastman Kodak had revenues that were about twice as much, of which considerably more than 3/4 had nothing to do with film.
Why would Kingswood be interested in something that has relatively so little to do with its other investment?

They could buy just the film portion from Eastman.

 

[Alan Edward Klein]

In 2023 Kodak Alaris had revenues of approximately 500 Million Dollars.
For the same year, Eastman Kodak had revenues that were about twice as much, of which considerably more than 3/4 had nothing to do with film.
Why would Kingswood be interested in something that has relatively so little to do with its other investment?

That means that Alaris has a 100% markup or 50% margin on cost of film from Kodak. That's an awful nice profit and explains why Kingswood bought Alaris. It also explains why Kodak film is so expensive at retail.