Kodak’s Corporate Doom: 1333 -year -old photo icon warns investors that he could cease operations with a debt problem of $ 500 million

In a quarterly file published Monday alongside its report on the second quarter results, Kodak management has raised serious concerns about its ability to continue to operate in the next year. The warning comes from around $ 500 million in maturation debts within 12 months and the lack of funding committed to cover these obligations. Without new funding or successful refinancing, the company could be lacking, they said.

The austere language of the note sent Kodak actions to tumble, sliding 21% to $ 5.43 Wednesday morning.

Deep strains in gains

For the second quarter finished on June 30, Kodak reserved $ 263 million in income, which was down 1% compared to the previous year. However, the real blow came from the bottom line: profitability took a blow compared to the last quarter, the gross profit jumping from $ 12% to $ 51 million, hugging Kodak from 22% to 19%. This was a profit of $ 26 million in the same period last year overturned 180 degrees to a loss of $ 26 million. Operational EBITDA has slipped to $ 9 million, compared to $ 12 million, as considerably reduced sales volumes and the rise in manufacturing costs have submerged relatively modest price increases.

Cash reserves have also decreased. Kodak ended the quarter with $ 155 million in hand, which is only $ 70 million in the United States, which represents $ 46 million less than in December, drained by cost increases and lower operating results.

The financial director, David Bullwinkle, said in the note that the company was counting on a somewhat random source of liquidity: ending its Kodak retirement income plan in the United States and using excess assets to repay the debt. Kodak said he expects clarity by mid-August on how he would set the obligations to plan participants and aims to finish the process by December.

Dave Zhang, an expert in the printing industry of the Whathethink analysts group, said that Kodak’s pain was not unique.

“Each major manufacturer of commercial printing equipment feels the same compression this year, in the United States and Europe,” said Zhang Fortune. “Customers retain large purchases unless they have absolutely.

Kodak’s long fall

Founded by George Eastman at the end of the 19th century, Kodak revolutionized photography by democratizing a film, making the cameras affordable for the masses. Its slogan – “You press the button, we do the rest” – is synonymous with practical sentimentality. At its peak in the 1970s, Kodak checked almost 90% of American film sales and 85% of the cameras market.

Then the digital revolution upset the industry and Kodak tripped. In a touch of irony, it was a Kodak engineer who created the first digital camera, but fearing that innovation can cannibalise its current product, the company sat on the invention. They bet on the film being a source of nostalgia, even if digital cameras have taken up the market with an even more convenience.

In 2012, Selé with billions of debts, Kodak filed a bankruptcy file in chapter 11. However, Zhang retraced the decomposition even earlier, in the mid -2000s, when the CEO of then Antonio Pérez “essentially decimated” the chemical and cinematographic manufacture of Kodak – “The roots of the company” – Destroy key installations.

“Don’t throw the baby with bath water,” said Zhang. “They exploded their future.”

When the current CEO Jim Convenza took over, his work consisted in withdrawing Kodak from bankruptcy and rebuilding his heart.

“It’s not just a question of nostalgia film,” said the analyst. “They had to rebuild a film line from zero – a crew that you cannot just order on Amazon – and now they are with full manufacturing capacity.”

Kodak’s production of films today includes industrial products such as films for car components, not just 35 mm rollers.

In addition, Kodak has gone from his company from consumer cameras to focus on commercial printing, packaging and specialized chemicals.

In recent years, he has requested growth in advanced materials, including cinema for the film industry and the components of pharmaceutical products. In fact, the pharmaceutical pivot was so successful that the day Kodak obtained a government loan to continue manufacturing, their stock has soared so quickly that he broke circuit breakers.

Kodak has also relied on nostalgia with hundreds of brick and mortar retail stores, which are particularly popular internationally. Despite the brand’s trend, Timothy Calkins, Marketing professor at Kellogg School of Management at the Northwestern University, said The New York Times He found the license of the trade mark “striking” and “sad”, suggesting a feeling of despair in the Kodak brand.

An uncertain path to follow

Kodak has a bright point of its second quarter income: its advanced division of materials and chemicals saw the income increase, and the company also recently obtained the registration of the FDA for a new pharmaceutical manufacturing installation, allowing it to produce regulated products.

CEO Jim Convevenza has supervised development as part of Kodak’s transformation into a manufacturer with diversified products.

“We continue to accelerate the growth of our advanced activities of materials and chemicals,” he said in the statement of gains, adding that the American manufacturing capacity could help protect Kodak from potential tariff shocks.

The question is whether this shield will be strong enough. The disclosure of continuous, towards the end of the report on the results, clearly indicates that the plans of Kodak to put the ship – reversion of the tension, restructuring of the debt and refinancing – are not entirely under its control. American accounting rules require such a warning when management cannot conclude that these steps are “likely”.

“They need time and money,” said Zhang. “Time is difficult to get, but if they can get money, they could simply rebuild this thing.”

For the moment, investors are wondering if the company can reinvent itself in an improbably for the second, the third or the fourth time, or if it is the long -awaited fondu of a company which has once defined the way in which the world has captured its memories.