Kodak Warning + Later Clarification

[Aidan Sciortino]

They could buy just the film portion from Eastman.

I think the coater in building 38 handles coating stuff other than film too, which would make this challenging.

If there are any former Kodak folk on the thread, correct me if I’m wrong.

 

[F4U]

I have always maintained this is the era of the digital apocalypse. A photographic dystopia. Considering the severity of the hit that the film photography took in gut, it's a wonder every day that anybody makes film at all. But it won't last forever. I think we've all known that.

 

[MattKing]

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.

That is like saying that Eastman Kodak has an x% markup on all the triacetate, polyester, silver, chemicals, etc, etc.
The cost of the film from Eastman Kodak is only a portion - and a fairly small portion at that - of getting film from a small manufacturer in Rochester, New York to wholesalers and other market participants around the world.

 

[MattKing]

I think the coater in building 38 handles coating stuff other than film too, which would make this challenging.

If there are any former Kodak folk on the thread, correct me if I’m wrong.

Eastman Kodak has a steadily growing business incorporating its coating technology in non-photographic products.
In addition, of course, that building 38 production facility is what makes the various products that serve the motion picture film industry - an industry that Kodak Alaris has no capacity to service.

 

[F4U]

I know practically zilch about the demise of Eastman Kodak Co as I always knew it. All I really knew is that the computer and digital came along and everything went to hades practically overnight with Y2K, 9/11, and all the rest of the tumult in those few short years. Apparently from what I know, a company called Alaris, which is nothing but a a private equity firm of bean counting Robert McNamara's came along and cherry picked a building still producing something they could harness for an entry for a shareholder's quarterly bulletin. It's not evil or greedy. It's just business. I get it. Then the 2008 crash was like a stake in the heart. There will come a time, sooner than later, I'm afraid, that this Alaris firm will hire a new young bright McNamara and Kodak film will join the dinosaurs overnight. These people play hardball. Every day we live may be our last, and that's a fact.

 

[koraks]

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.

 

[Agulliver]

Concerning, even though we have been here before more than once. The stone cold fact is that Eastman-Kodak make the only truly high quality colour negative film in the world right now. Everyone else is either out of the game or some years away from getting there...and getting there won't ever be a simple case of buying bits of Kodak knowledge or even buying the contents of Building 38.

Looking at several news stories, some run with the same 'Kodak not confident it can continue' while others, within the last 12 hours, quote Kodak as saying they are confident they can meet debt obligations.

All a bit confused and unclear right now...which is hardly what investors want to see....

 

[albireo]

View attachment 405185

Cohen Brothers at their best. Shot on film, too!

 

[skahde]

But patents don't produce film. People and physical infrastructure do.

In addition: A patent is published knowledge and the rights to exploit it end after 20 years. What's more important is the unplished knowledge and the inherent "knowledge" of people running a process on a production line, which in a large part isn't even considered as such let alone documented. If you shut down and send the people home, that's it.

 

[gary mulder]

When someone says something like this, I always have to picture a gigantic excavator that picks up the Kodak film coating line including the bedrock several dozens of feet down below floor level and cart it over to another continent.

A gigantic excavator dos’n seem a good idea. Sorry I like pictures.

 

[koraks]

Image courtesy of....Liebherr. Surprise surprise. Taken from https://im-mining.com/2022/10/24/li...drogen-engine-potential-upscaling-for-mining/

But maybe your image is an apt illustration as well. Not what I had in mind, but interestingly appropriate.

 

[gary mulder]

My picture is from the largest excavator in the world.

 

[pentaxuser]

From a strictly practical aspect can I ask is there a date to be gleaned from the Kodak announcement that amounts to "deadline day" when we will know if Kodak is done or at least know if it is on a downward path to its end or that the crisis is over and we can breath again?

pentaxuser

 

[BMbikerider]

Noooooooooo!

I have a foot in both camps but prefer film. It still gives me a challenge which I enjoy. I can get bored if things become too easy. On the other hand should they go as predicted/suggested, that opens the field for the likes of Ilford/Harman, Foma and possibly a resurgence of Fuji.

 

[Alan Edward Klein]

I think the coater in building 38 handles coating stuff other than film too, which would make this challenging.

If there are any former Kodak folk on the thread, correct me if I’m wrong.

DIdn't Eastman expand their film facilities recently and hire a bunch of people?

 

[Alan Edward Klein]

That is like saying that Eastman Kodak has an x% markup on all the triacetate, polyester, silver, chemicals, etc, etc.
The cost of the film from Eastman Kodak is only a portion - and a fairly small portion at that - of getting film from a small manufacturer in Rochester, New York to wholesalers and other market participants around the world.

That's true. Alaris does have other costs. So it's nbot a 100% markup. But I think that the higher cost for Kodak film overall happens because there are makups at manufacturing (Eastman), then Alaris for distribution, then other distributors in some localities, and finally at the retail level. Other film manufacturers handle distribution, and I feel they operate at lower markups overall. It would be nice to see the internal figures of the various companies.

 

[BrianShaw]

In addition: A patent is published knowledge and the rights to exploit it end after 20 years. What's more important is the unplished knowledge and the inherent "knowledge" of people running a process on a production line, which in a large part isn't even considered as such let alone documented. If you shut down and send the people home, that's it.

Yes and no. Patents and personnel experience are exactly as has been described. Engineered products and processes rely more on SPECIFICATIONS, of many types. These are generally proprietary. The specs are perhaps more of the “secret sauce” than the patent.

 

[Alan Edward Klein]

I know practically zilch about the demise of Eastman Kodak Co as I always knew it. All I really knew is that the computer and digital came along and everything went to hades practically overnight with Y2K, 9/11, and all the rest of the tumult in those few short years. Apparently from what I know, a company called Alaris, which is nothing but a a private equity firm of bean counting Robert McNamara's came along and cherry picked a building still producing something they could harness for an entry for a shareholder's quarterly bulletin. It's not evil or greedy. It's just business. I get it. Then the 2008 crash was like a stake in the heart. There will come a time, sooner than later, I'm afraid, that this Alaris firm will hire a new young bright McNamara and Kodak film will join the dinosaurs overnight. These people play hardball. Every day we live may be our last, and that's a fact.

Alaris was bought out by an aggressive American private equity firm, Kingswood Capital Management in Los Angeles, a couple of years ago. I wonder if they have contacts with Hollywood producers in LA who buy a lot of Kodak film.

Kingswood Capital Management, L.P.

Kingswood is a firm that focuses on “win-win” partnerships with strong underlying businesses where we can help drive significant improvement.

www.kingswood-capital.com

 

[BrianShaw]

Aggressive, or successful?

 

[warden]

DIdn't Eastman expand their film facilities recently and hire a bunch of people?

Yes, I don’t know about facilities but they hired several hundred employees in 2021-2023 to increase production.

 

[Lachlan Young]

Looking at several news stories, some run with the same 'Kodak not confident it can continue' while others, within the last 12 hours, quote Kodak as saying they are confident they can meet debt obligations.

It's the age-old publish-and-be-damned attitude, accelerated by AI.

 

[pentaxuser]

It's the age-old publish-and-be-damned attitude, accelerated by AI.

Yes it might be the newer version of song in the film of the mid 50s " High Society" that went "Have you heard, it's in the stars, next July we collide with Mars. Well did you ever .....

pentaxuser

 

[George Mann]

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.

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

Kodak needs to find a way to dump Alaris.

 

[retina_restoration]

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.

 

[koraks]

However, the KRIP reversion is not solely within Kodak’s control and therefore is not deemed ‘probable’ under U.S. GAAP accounting rules

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"? IDK.