Kodak Issues ‘Going Concern’ Warning

The company says its liquidity challenges "raise substantial doubt about Kodak’s ability to continue as a going concern.”
Matthew HellerNovember 12, 2018

Eastman Kodak has warned that its future as a going concern is in “substantial doubt” due to liquidity challenges that could affect its ability to pay off a $395 million loan.

The company has been in negotiations with lenders over a refinancing of the loan, which becomes due when it matures on Sept. 3, 2019 or in the event of a default, whichever comes earlier.

Those talks, however, face a Monday deadline and, according to Kodak, “there can be no assurance” that they will result in an agreement.

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“Based on forecasted cash flows, there are uncertainties regarding Kodak’s ability to meet commitments in the U.S. as they come due,” Kodak warned in its 10-Q quarterly report, noting that the possible sale of its flexographic packaging segment and/or refinancing of the loan “are not solely within Kodak’s control.”

“These conditions raise substantial doubt about Kodak’s ability to continue as a going concern,” the report said.

Kodak has not generated positive operating cash flows over the past four years and, as of Sept. 30, had approximately $238 million in cash, down $37 million from the June 30 cash balance. It expects to end the year with a balance of $260 million to $265 million.

“We have made significant progress reducing our cost structure and we will continue to strengthen our liquidity by completing actions to reduce operating costs and monetization activities,” CFO David Bullwinkle said in a news release.

For the third-quarter, it reported net income of $19 million on revenue of $366 million, compared to net income of $12 million on revenue of $379 million in the year-ago period. But revenue from the print systems division, Kodak’s largest, fell 6.5% to $217 million.

“Kodak’s stable and growth businesses may not grow or continue to generate the same or enough cash flow to offset businesses with declining cash flows,” the 10-Q said.

Kodak filed for bankruptcy protection in 2012, emerging as a much smaller company in 2013 after exiting legacy businesses and selling off its patents.