Eastman Kodak Company operates in Rochester, New York. Yet in its most recent second-quarter financial report—announced in the midst of this past Monday’s holiday—the publicly-traded company disclosed serious fiscal peril. The company, which has a storied history spanning 145 years, expressed “substantial doubt about (its) ability to continue as a going concern,” raising questions about its future operations.
Kodak’s financial collapse is so remarkable, in no small part, because of the company’s illustrious history as a pioneer and titan of photography. Of course, the company that created the first ever digital camera back in 1975 and boasts a lucrative library of 79,000 patents wouldn’t go down without a fight. The company never fully recovered from losing its once-dominant position when the world transitioned from film to digital photography. It ultimately overextended itself and filed for bankruptcy in 2012. Kodak did eventually come out of bankruptcy after an extensive reorganization, though it still struggles today trying to adapt to the industry’s new paradigm.
The accounting term “going concern” refers to a company’s capacity to continue to pay its debts. It further shows that the business will be able to stay in business beyond just the next year. Kodak’s recent admission of an inability to survive under current financial conditions indicates that the company is at a proverbial crossroads.
David Bullwinkle, Kodak’s Chief Financial Officer, emphasized the company’s commitment to managing its financial obligations.
“For the second half of the year, we will continue to focus on reducing costs today and converting our investments into long-term growth,” – David Bullwinkle.
Besides these cost-cutting measures, Kodak intends on funding its repayment obligations through cash inflows expected in the coming months.
“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,” – Eastman Kodak Company.
Kodak has since refocused on advanced materials and chemicals—particularly their use in pharmaceuticals—in an attempt to find a new revenue stream. How well the company can shift to these new sectors will determine if it can survive as a smaller company with many questions still remaining.
By the close of business on or about August 15th, Kodak hopes to have a better understanding of its financial position. The company continues to express faith that it will be able to meet all debts and obligations.
“We are confident we will be able to pay off a significant portion of our term loan well before it becomes due and amend, extend or refinance our remaining debt and/or preferred stock obligations,” – Eastman Kodak Company.
