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Kodak nearing new start

Rochester Business Journal
March 15, 2013

Eastman Kodak Co. appears to be just months away from exiting Chapter 11 bankruptcy-an achievement some company watchers doubted would ever occur.
Still, the remaking of Kodak into a chiefly commercial imaging firm has not come without costs, in terms of cash, its top line and workers' jobs.
Indeed, Kodak spent nearly $1.1 billion on reorganization and restructuring costs in 2012. The company cut its global workforce by some 4,000 to 13,094 and reduced its Rochester-area employment by 31 percent, or nearly 1,600.
Kodak heads into 2013 with 3,542 employees here, down from 5,129 a year ago.
The restructuring moves in 2012 were aimed at reducing Kodak's cost structure to produce sustainable profitability, the company said. Those actions included winding down sales of consumer inkjet printers, exiting the digital capture and devices business, reducing traditional product manufacturing capacity and eliminating jobs with winding down of the Kodak Gallery.
The company has not yet hit its target of profitability, however, even excluding the restructuring charges.
Kodak saw an improvement in Commercial Imaging, which includes its Digital Printing and Enterprise and Graphics, Entertainment and Commercial Films segments, with the operating loss improving to $244 million in 2012. The segments combined lost $522 million in 2011.
Revenues from the Commercial Imaging segment totaled $2.7 billion, down from $3.35 billion in 2011.
The Graphics, Entertainment and Commercial Films businesses had $1.74 billion in revenues in 2012, down from $2.25 billion in 2011 and $2.41 billion in 2010. Nearly 75 percent of sales last year came from outside the United States.
The Digital Printing and Enterprise segment generated $940 million in revenues, down from $1.1 billion in 2011 and $950 million in 2010. Roughly 54 percent of sales in the segment came from outside the United States.
George Conboy, president of Brighton Securities, said he is concerned with the 2012 loss in the Digital Printing and Enterprise segment, which totaled $211 million, or some 22 percent of the segment's sales. The loss was from continuing operations before interest expense, other income or charges, and income taxes.
"That's what is going to be the future of the company, and they are losing 22 percent," he said. "That concerns us."
The other piece of Commercial Imaging, the Graphics, Entertainment and Commercial Films business, lost $33 million on the same basis, or 2 percent of sales, he said. That includes the entertainment film business, which is going to produce cash but is not seen as having a long-term future.
Kodak's overall revenues from continuing operations declined roughly 20 percent in 2012 to $4.11 billion, but that includes $1.4 billion from the Personalized and Document Imaging business, which is on the block.
The company said the revenue decline reflects decisions to focus on profitable businesses and accounts, along with soft industry demand as a result of the broader economic downturn in some businesses and regions, lower sales of traditional products and unfavorable foreign exchange impact.
Conboy said he expects additional decline in revenues as the company emerges from bankruptcy and with the sale of the Personalized and Document Imaging business. He anticipates Kodak coming out of bankruptcy around June with annual revenues of $2 billion.
"Post-bankruptcy, they face considerable headwinds," he said. "It will be a very different company. It will not be a behemoth that owns the market."
Kodak reported a consolidated net loss of $1.38 billion in 2012. Excluding the reorganization and restructuring costs totaling $1.07 billion, the loss for the year would have been $308 million, the company said. Its loss per share for the year was $4.79 for continuing operations, compared with $2.84 a year ago.
"Our momentum continues as we work to file our plan of reorganization and then complete the final actions that will enable us to emerge from Chapter 11 in mid-2013," Chairman and CEO Antonio Perez said in a statement. "Thanks to the talent and dedication of our employees, our 2012 performance was on track or ahead of our adjusted EBITDA and cash projections, and we have remained in compliance with the covenants of our debtor-in-possession facility, laying the foundation for emergence as a profitable, sustainable company."
Kodak filed for bankruptcy protection in January 2012. Its worldwide cash balance was $1.14 billion at the end of 2012.
The company pointed to a $226 million reduction in its selling, general and administrative costs as evidence of its continued focus on cost cutting. With other profit-improvement initiatives implemented for 2013, Kodak believes it is on a path to emerge from Chapter 11 reorganization in mid-year.
Kodak released its employment totals this week along with its 2012 10-K filing with the Securities and Exchange Commission.
The 31 percent drop puts the region's longtime top employer at No. 9, according to the Rochester Business Journal's most recent list of private-sector employers. The University of Rochester ranks No. 1 on that list.
Kodak's local employment peaked at 60,400 in 1982. It lost its status as the region's top private-sector employer in the middle of the last decade.

3/15/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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