Kodak survival depends on patent sale or new debt
By Liana B. Baker
The company said it may incur more debt, which could add an additional $500 million in financing. This additional debt could be used to "support its ongoing operational needs," the company said.
"The company's ability to continue its operations... within the next twelve months is dependent upon the ability to monetize its digital imaging patent portfolio through a sale or licensing" or "the issuance of additional debt," the company said in a filing with the U.S. Securities and Exchange Commission.
The warning, coupled with dismal quarterly results released on Thursday, are the latest blow to the century-old American corporate icon, which is grappling with the specter of default, though Kodak denied it is making bankruptcy plans.
A Moody's analyst Richard Lane told Reuters earlier this week that the company's credit rating as well as the trading of its debt instruments "indicate a heightened probability of default."
The company said in September it hired Jones Day, a law firm that specializes in restructuring. FTI Consulting, another restructuring firm, also touted Kodak as its latest client during its quarterly earnings call on Wednesday. FTI also counts bankrupt MF Global as a client.
Kodak reported its cash holdings fell 10 percent in the third quarter from the second quarter and it projected deeper losses this year as the photography company failed to gain traction with its new printers and digital cameras.
As of September 30, the company said it held $862 million in cash, down from $957 million on June 30.
The company lowered its annual cash outlook on Thursday. It expects to end the year with $1.3 billion to $1.4 billion in cash, down from a previous forecast of $1.6 billion to $1.7 billion.
It widened its projected losses from continuing operations to the range of $400 million to $600 million, compared with a previous forecast of a loss of $200 million to $400 million.
Analysts will be listening for any details regarding the company's sales of its intellectual property during the conference call later on Thursday. The company hired a financial adviser in July to help it shop around more than 1,100 patents related to digital imaging.
Kodak said in a statement on Thursday that the "company is pleased with the progress and level of interest in the portfolios."
"When the sale of these portfolios does occur, the company anticipates the proceeds will materially increase its cash balance," the company said.
Kodak did not provide any concrete projections for the proceeds. Analysts have estimated that the patents Kodak is shopping could be worth as much as $2 billion to $3 billion.
In the third quarter, Kodak's loss from continuing operations widened to $222 million, or 83 cents per share, from $43 million, or 16 cents per share, a year earlier. A year ago, it announced a $210 million licensing deal.
Analysts on average were expecting a loss of 44 cents per share, according to Thomson-Reuters I/B/E/S.
Revenue fell 17 percent to $1.46 billion, falling short of the $1.65 billion analysts were expecting.
The company's consumer digital imaging group, which includes consumer inkjet printing, commercial printing and digital cameras posted a net loss was $90 million, compared with a loss of $67 million a year earlier.
The company's traditional film business sales fell 10 percent to $389 million, as silver costs continued to hurt the segment.
Kodak's shares fell about 3 percent to $1.11 per share in premarket trading on Thursday after falling by as much as 8 percent earlier. Its shares have fallen roughly 80 percent so far this year.
(Reporting by Liana B. Baker; Editing by Lisa Von Ahn and Derek Caney)