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Kodak expects to post positive cash flow in '13

Rochester Business Journal
August 17, 2012

Eastman Kodak Co.'s survival depends on generating cash-from its ongoing digital patent sale in the short term and from operations in the long term.

In financial projections disclosed this week, Kodak said it expects to have negative operating cash flow of $84 million this year. That would be an improvement from the $394 million in cash it burned in 2011. But the plan shows Kodak using $130 million in the second half of 2012 after generating positive cash flow of $45 million in the first half.
 
The company's cash balance on June 30 was nearly $1.3 billion, down from $1.4 billion at the end of the first quarter but up from $957 million on June 30, 2011.
 
It projects generating operating cash flow of $146 million in 2013, $350 million in 2014 and $440 million in 2015. The six-year projection peaks at $714 million in 2017.
Kodak said it agreed to disclose the preliminary financial projections this week in conjunction with discussions with its creditors.
 
The company projects revenues of $4.4 billion in 2012, down from $6 million last year, reflecting in part the company's exited businesses, such as digital capture and Kodak Gallery. The financial projections put 2013 revenue at $4.5 billion, growing to $5.8 billion in 2017.
 
Kodak projects a loss of $135 million in 2012, calculated on the basis of earnings before interest, taxes, depreciation and amortization, after corporate costs. That is an improvement from a loss of $197 million in 2011. The company projects a swing to positive earnings in 2013 and beyond.
 
On a segment basis, Kodak expects revenues in its consumer segment to fall to $1.46 billion in 2012, down from $1.67 billion in 2011, and then to rise to $1.52 billion in 2013. It expects EBIDTA, before corporate allocation, of $116 million in 2012, up from a loss of $99 million in 2011. It projects earnings of $143 million in 2013.
 
The digital printing and enterprise segment posted a loss on that basis in 2011 of $31 million. Kodak expects the segment to swing to positive with earnings of $45 million in 2012 and then jump by triple-digit percentages in both 2013 and 2014. Revenues for the segment are projected to reach $1.1 billion in 2012, down slightly, and then edge upward to $1.5 billion in 2014.
 
The graphics and commercial films segment posted earnings of $288 million on an EBIDTA basis, before corporate allocation, in 2011. That is projected to dip to $186 million in 2012 and then grow by more than 10 percent annually in the next two years. Revenues for the segment are projected to dip to $1.8 billion this year from $2.3 billion in 2011 and then continue to decline in 2013 and 2014.
 
Kodak projects that it will cut operating expenses from more than $1.4 billion in 2011 to more than $800 million in 2014. The company cut more than 2,300 positions through June 30 this year.
 
Its plan to emerge from Chapter 11 bankruptcy projects sharp reductions in Kodak's corporate costs from $536 million in 2011 to a projected $448 million in 2012, down 16 percent; $367 million in 2013, down 18 percent; and $328 million in 2014, down 11 percent.
 
The projections do not state how much Kodak is anticipating from the pending sale of its digital imaging patents. The answer to that was expected this week, but Kodak and its creditors agreed to extend the deadline for announcing the outcome of the auction, which had been 5 p.m. Monday. A final sale hearing has been slated for Aug. 20, but it was unclear at midweek how the auction extension would affect that schedule.
 
The extension was made because of continuing discussions with bidders, Kodak said. It did not provide a timeline for the extension.
 
Kodak has been hoping to raise more than $2 billion through the sales of some 1,100 patents. The auction began last week, and published reports indicated the initials bids were far short of that amount. 
 
The company, which filed for Chapter 11 protection on Jan. 19, is counting on the sale of its digital capture and Kodak imaging systems and services patent portfolios to provide cash needed for its post-bankruptcy turnaround. Kodak began the effort to sell its digital patents last year in hope of finding a buyer in 2011.
 
The digital capture portfolio includes more than 700 patents covering aspects of image capture, processing and transmission technologies related to the design and operation of digital cameras and multifunction devices, including camera-enabled smartphones and tablets, Kodak said.
 
The Kodak imaging systems and services, or KISS, portfolio includes more than 400 patents that cover technologies including image analysis, manipulation and tagging, and network-based services, including image storage, access and fulfillment, the company said.
 
8/17/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.
 

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