The misplaced concern about Kodak

Mark Twain once famously quipped that reports of his death were exaggerated. A clear echo could be heard recently coming from Kodak Tower.

When Eastman Kodak reported its second-quarter results on Aug. 11, news reports did not focus on its revenues (basically unchanged from a year earlier), the growth in its Advanced Materials & Chemicals business, or its significantly improved use of cash. Instead, with headlines like “Kodak says it might have to cease operations” and “Kodak’s struggle for survival: The possible end of an icon,” the stories zeroed in on a disclosure noting “substantial doubt” about Kodak’s ability to continue as a going concern.

Two days later, Kodak issued a statement in response to “misleading media reports,” saying that the company “has no plans to cease operations, go out of business, or file for bankruptcy protection.” It stated that the “going concern disclosure’ was a technical report that is required by accounting rules, but doesn’t reflect management’s plans for the company.

Kodak’s explanatory statement received far less media attention. And no one at the time reported another development revealed in the company’s Q2 release: that the Series C preferred stock held by GO EK Ventures IV LLC, a fund of Tom Golisano’s investment firm, Grand Oaks Capital, on Aug. 8 was exchanged for shares of Kodak common stock, long before the mandatory redemption date next May.

If Kodak faced serious risk of shutting down, why would the Paychex founder and billionaire philanthropist want to convert preferred shares, which have less downside risk than common shares in the event of a bankruptcy?

Debt strategy

The going concern disclosure included in Kodak’s second-quarter regulatory filing was required by U.S. GAAP, the framework for financial reporting in this country, because the company has debt coming due within 12 months and at this time doesn’t have committed financing or available liquidity to meet those obligations.

But Kodak does have a clear plan regarding its debt. And if that plan is executed as expected over the next several months, the company says, it will have “a stronger balance sheet than we have had in years.”

The outlines of the strategy have been evident since last fall, when Kodak revealed its intention to terminate the overfunded Kodak Retirement Investment Plan and reap the proceeds after meeting its obligations to all participants in the pension plan. The company expects to receive roughly $500 million in assets.

Kodak currently has about $470 million of term debt and $100 million of preferred stock outstanding. Its credit agreements require the company to use $300 million in cash it will receive—probably in December—for term debt repayment. Kodak can then decide how it wants to address the remaining preferred stock and term debt obligations—say, by refinancing or extending the agreements.

If executed as planned, this strategy will not only meet Kodak’s obligations; it will reduce the company’s interest costs and give it substantial funds—possibly in the range of $215 million and $270 million, it has said—to invest in growth opportunities. Kodak’s strategy does not include using cash from the pension plan transaction to fund its operations.

Given this clearly stated strategy by Kodak, does the conversion of preferred stock—acquired in February 2021—to common shares represent a vote of confidence from Tom Golisano? Grand Oaks Capital’s Matthew Ray declined to comment for this article. But Brighton Securities chairman George Conboy, who has followed Kodak for decades, sees it that way.

“Totally agree,” Conboy says. “Tom Golisano is probably the most public-spirited philanthropist in the Rochester area since George Eastman. (But) he’s unlikely to make even a public-spirited investment if he thinks it’s throwing money down a rathole.”

Kodak chief financial officer David Bullwinkle says Golisano keeps in touch with Kodak’s leadership team and also has a representative, David Bovenzi, on the company’s board.

“Both the Series C and term loan lenders have representatives on our board of directors, so they see the details of our long-term plan,” he told me last week.

Bullwinkle echoed Conboy, saying Golisano was not someone who likes to “throw his money away.” Asked why Golisano opted to convert the shares now, he did not answer directly but noted that the exchange price of $8.25 per common share was lower than the price would be if he waited for the mandatory redemption, thus giving him more shares. Indeed, Golisano received roughly 15.7 percent of the outstanding shares of Kodak common stock worth roughly $125 million—making him its largest shareholder.

Then and now

Even before its filing for Chapter 11 bankruptcy protection in January 2012, Kodak’s days as an American business titan were in the distant past. The company’s local employment in the Rochester area peaked in 1982 at more than 60,000; today, it employs 1,200 people here, 1,800 total in the U.S., and 4,000 worldwide.

Yet the company’s leadership team, headed by Executive Chairman and CEO Jim Continenza, is upbeat about opportunities to grow its revenues and employment.

“We’re going up, not down, that’s for sure,” Bullwinkle says. “You can see the ‘hiring’ signs on the side of the building.”

Kodak has not released any projections publicly, but “Rochester is the nucleus of our AM&C businesses and we’re expecting growth for the company to come from those (businesses), so we expect employment to be increasing in Rochester.”

The company does business in several segments, with its Print operations by far the largest. In the first half of this year, Print accounted for 67 percent of revenues; AM&C generated 29 percent. Going forward, however, the latter is expected to be the growth engine.

“I think Q4, Q1, was 10-15 percent revenue growth, Q2 a little bit more muted,” Bullwinkle says. “But we’re expecting that low-double-digit, high-single-digit growth moving forward in that business, based on the strength of existing business and the (original equipment manufacturer) volumes we’ve seen there primarily in various types of films and well as commercialization of the cGMP facility as well as some of the other growth areas we have highlighted like energy storage materials and printed electronics.”

The FDA-registered cGMP (current good manufacturing practice) facility to produce regulated pharmaceutical products at Eastman Business Park has begun production. “We are making product. Not large volumes, but we are making and selling products,” he says.

Tariff question

When Kodak released its second-quarter results, Continenza said the company “continued to make progress against our long-term plan despite the challenges of an uncertain business environment.” He added: “While tariffs did not have a material impact on our business in Q2, we are assessing the potential impact of new tariffs going forward.”

Bullwinkle explains that the largest piece of the Print business is printing plates, sometimes referred to as digital plates. Produced in the U.S., the process involves converting coils of aluminum into plates of various thicknesses and sizes.

“We cannot purchase the aluminum in the U.S.,” he says. “Nobody in the U.S. makes that type of aluminum. Nobody in North America makes that type of aluminum. So, the only potential sources of supply are in Europe and potentially in China, but the quality of aluminum out of China doesn’t really meet our specifications.”

Kodak is closely watching the level of tariffs placed on aluminum.

“The last group of tariffs we saw were the Section 232 tariffs and we were able to qualify for an exemption for those,” Bullwinkle notes. “That exemption expires later this year, I think in Q4, and so the question is, are there going to be new exemptions?”

The concern is that tariffs could put Kodak at a competitive disadvantage.

“Is the tariff going to basically tax that raw material at a higher rate than it would a finished product imported by our competitors? That’s where we are continuing to analyze it,” he says. “We think based on state of play today that we’ll be able to compete and it’s basically a level playing field, but that bounces around a lot given whatever actions and decisions are made by the administration on almost a daily basis.”

Putting Kodak ‘back where it belongs’

In the first half of 2025, Kodak reported a net loss of $33 million, compared with net income of $58 million in the same period a year ago and a $102 million profit for the full year. But GAAP reporting, which can be impacted by onetime gains and charges, is not always that clearest way to track a company’s performance. The key metrics Kodak uses to measure its performance, Bullwinkle says, are use of cash and operational EBITDA, or earnings before interest, taxes, depreciation and amortization, a non-GAAP financial measure.

“In the second quarter versus the first quarter, (we used) much less cash—it was $3 million versus close to $40 million,” he notes. “So, that gives us confidence heading into the second half of the year that we’re poised to start to generate cash now.

“We’re expecting real improvements in EBITDA and the cash generation of our business,” he continues. “And that’s again why we made the statement that our business is self-sustainable now, given the actions we’ve taken, the improvements we’ve made. This isn’t just an overnight story; we’ve been working on this for five, six years, to streamline our operations, to make our back office more efficient, to improve our pricing and profitability with all of our customers.”

Conboy says “the old Kodak is long gone; there’s no resemblance, no vestiges there.” But that doesn’t mean Kodak has no future.

“I’ve been an unrestrained critic of Kodak on and off over the years when I felt they deserved criticism,” he says. “But to be honest with you, this management team has done a good job with what has been since the bankruptcy somewhat of a weak hand. They’ve got competent management, smart people.”

He thinks the KRIP termination and reversion process is a good move both for Kodak retirees and the company, which offers a chance for Kodak to reinvest in its future.

Those growth opportunities, particularly in the AM&C businesses, have transformed the mood inside Kodak, Bullwinkle says.

“It feels way better … now than at any other point in my 21-year career here,” he says. “There’s a lot of excitement around Rochester, around those businesses.

“Our mission is to provide continuous employment for the next generation. When Jim and I talked about what our strategy was six years ago, that’s how we described it. We’re putting Kodak back to the place where it belongs, which is an iconic company that is providing employment for families. … So, I am super-excited about that opportunity.”

The new Kodak has much work to do before it can be called a success story. As Bullwinkle acknowledges, “we have to perform to regain credibility.” But the odds that it will cease operations in the next 12 months seem vanishingly small.

“Whenever I’ve seen over 40-odd years (a) ‘going concern’ note in financials, I perk up and I’m thinking, holy crap, what’s going on with this company,” Conboy says. “But with Kodak, I’ve got to tell you, it’s the first time that I can recall where I’ve looked at a ‘going concern’ note and said, ‘Yeah, it’s nothing.’ It really is nothing. Usually, a ‘going concern’ (note) is a red flag for investors. In this case, it is absolutely not.

“Yes, in theory the pension deal might not close,” he adds. “Yes, in theory they might not get that money. (But) I’m telling you right now, I’ll pull a $100 bill to bet against anybody’s $50 bill that the pension deal goes through largely as described. Nobody will take the other side of my bet.”

Paul Ericson is Rochester Beacon executive editor.

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