Eastman Kodak Company will highlight its restructuring accomplishments to date in a motion it plans to submit today to the Bankruptcy Court to extend until February 28, 2013, its exclusive right to file a plan of reorganization. The extension will assist the company as it continues its progress toward successful emergence in the first half of 2013.
In its motion, Kodak describes the substantial progress it has made toward reorganization goals since filing for Chapter 11 on January 19, 2012. Kodak’s case is large and complex, involving some $5 billion in assets, global operations, thousands of contracts and leases, thousands of potential creditors, and ongoing asset sales. Kodak’s progress includes the successful stabilization of its business, the development of its emergence plan, significant operating improvements, the expansion of customer and vendor relationships, and substantial cost reductions.
Kodak previously announced its intention to emerge as a company focused on commercial, packaging & functional printing solutions and enterprise services, as well as processes to sell its Personalized Imaging and Document Imaging businesses. Consistent with that emergence strategy, Kodak has continued to manage its Consumer Inkjet business for profitability, and the company announced today that, starting in 2013, it will focus that business on the sale of ink to its installed base, and wind down sales of consumer inkjet printers. Kodak expects that this decision will significantly improve cash flow in the U.S. beginning in the first half of 2013.
“Kodak is making good progress toward emergence from Chapter 11, taking significant actions to reorganize our core ongoing businesses, reduce costs, sell assets, and streamline our organizational structure,” said Antonio M. Perez, Kodak Chairman and Chief Executive Officer. “Steps such as the sale of Personalized Imaging and Document Imaging, and the Consumer Inkjet decision, will substantially advance the transformation of our business to focus on commercial, packaging & functional printing solutions and enterprise services. As we complete the other key objectives of our restructuring in the weeks ahead, we will be well positioned to emerge successfully in 2013.”
Kodak remains committed to its significant installed base of consumer inkjet printer customers, who recognize the value proposition of affordable ink, high-quality output because of Kodak’s unique pigment-based inks, and advanced features including cloud printing. The company will provide its customers and retail partners the same level of service and support they have come to expect from Kodak.
In its motion to the Court, Kodak described specific accomplishments thus far, including:
- The formulation of a business strategy focused on commercial, packaging & functional printing solutions and enterprise services that will be the cornerstone of a plan of reorganization;
- The stabilization of its global business resulting in the maintenance of key customer and supplier relationships around the world;
- An extensive operational restructuring that has streamlined businesses and reduced corporate costs. This restructuring includes the reduction of Kodak’s global workforce by more than 2,700 positions so far in 2012, with the current expectation of a further reduction of at least 1,200 employees (up 200 from the 1,000 previously announced). This 23% headcount reduction will result in a savings of more than $340 million per year and a smaller workforce of approximately 13,100 employees;
- Negotiations with respect to a fair, equitable and permanent resolution of Kodak’s U.S. retiree benefit (OPEB) liability, which amounts to approximately $1.2 billion;
- Use of the applicable provisions of the Bankruptcy Code to renegotiate existing supply contracts or to enforce prepetition contracts to achieve substantial cost savings;
- Actions to exit or sell unprofitable and declining businesses, such as the digital camera and on-line photo services businesses;
- Commencement of a process to sell the market-leading Personalized Imaging and Document Imaging businesses, which are not core to Kodak’s future. Kodak noted that, while the sale process is still in its early stages, there has already been significant interest among potential buyers for these businesses;
- Continued negotiations with respect to the sale of its intellectual property assets and the development of alternatives in the event a transaction on acceptable terms is not reached, and
- Continuation of normal global operations while aggressively conserving cash, with worldwide cash balances consistently in excess of $1 billion and with Days Payable Outstanding remaining stable.
The company anticipates that in the near term, it will begin realizing savings from its new, more strategically focused business, workforce reductions and other cost-reduction initiatives. Kodak continues its analysis of further operational and workforce reductions in an effort to streamline operations and generate profits.
“The actions we are taking are significant steps toward our successful emergence,” said Perez. “We are committed to take the remaining steps required for our emergence in 2013 as a profitable, sustainable company.”
An Omnibus Hearing to consider the motion and other matters is scheduled for October 17, 2012.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This document includes "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning the Company's plans, objectives, goals, strategies, future events, future revenue or performance, capital expenditures, financing needs, plans or business trends, and other information that is not historical information. When used in this document, the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," or future or conditional verbs, such as "will," "should," "could," or "may," and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, management's examination of historical operating trends and data are based upon the Company's expectations and various assumptions. Future events or results may differ from those anticipated or expressed in these forward-looking statements. Important factors that could cause actual events or results to differ materially from these forward-looking statements include, among others, the risks and uncertainties described under the heading "Risk Factors" in the Company's most recent annual report on Form 10-K under Item 1A of Part 1, in the Company's most recent quarterly report on Form 10-Q under Item 1A of Part II and those described in filings made by the Company with the U.S. Bankruptcy Court for the Southern District of New York and in other filings the Company makes with the SEC from time to time, as well as the following: the ability of the Company to continue as a going concern, the Company's ability to obtain Bankruptcy Court approval with respect to motions in the chapter 11 cases, the ability of the Company and its subsidiaries to prosecute, develop and consummate one or more plans of reorganization with respect to the chapter 11 cases, Bankruptcy Court rulings in the chapter 11 cases and the outcome of the cases in general, the length of time the Company will operate under the chapter 11 cases, risks associated with third party motions in the chapter 11 cases, which may interfere with the Company's ability to develop and consummate one or more plans of reorganization once such plans are developed, the potential adverse effects of the chapter 11 proceedings on the Company's liquidity, results of operations, brand or business prospects, the ability to execute the Company's business and restructuring plan, increased legal costs related to the Bankruptcy Filing and other litigation, our ability to raise sufficient proceeds from the sale of non-core assets and the monetization of our digital imaging patent portfolios within our plan, the Company's ability to generate or raise cash and maintain a cash balance sufficient to fund continued investments, capital needs, restructuring payments and service its debt; the Company's ability to manage contracts that are critical to its operation, to obtain and maintain appropriate terms with customers, suppliers and service providers, to maintain product reliability and quality, to effectively anticipate technology trends and develop and market new products, solutions and technologies, to retain key executives, managers and employees, our ability to successfully license and enforce our intellectual property rights and the ability of the Company's non-U.S. subsidiaries to continue to operate their businesses in the normal course and without court supervision. There may be other factors that may cause the Company's actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to the Company or persons acting on its behalf apply only as of the date of this document and are expressly qualified in their entirety by the cautionary statements included in this report. The Company undertakes no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.