Eastman Kodak Co. (EK), the 131-year-old camera maker, ended the third quarter with 9.9 percent less cash than three months earlier and said it would use more than anticipated this year as it works to build its digital printing- equipment business.
Cash and equivalents dropped to $862 million from $957 million in the second quarter, the Rochester, New York-based company said today in a filing. Kodak also said its cash balance at the end of the year would be $1.3 billion to $1.4 billion, down from an earlier projection of $1.6 billion to $1.7 billion.
Chief Executive Officer Antonio Perez is trying to sell an estimated $3 billion worth of patents to fund Kodak’s transformation into a profitable maker of inkjet printers. The consumer digital-imaging unit had a $90 million loss in the quarter, compared with profit of $67 million a year earlier, when it benefited from licensing revenue that won’t recur.
“We want to see those businesses become profitable so they can stand on their own in terms of cash generation,” Jody Lurie, a credit analyst at Janney Montgomery Scott LLC in Philadelphia, said today by telephone. “They’re spending to build up these businesses.”
The shares sank 6.7 percent to $1.12 at the close in New York and have tumbled 79 percent this year.
Selling patents and debt will help determine “the company’s ability to continue its operations” in the next 12 months, Kodak said in a filing. The company also said it is exploring supplementing or replacing first-lien financing to boost liquidity by as much as $500 million.
Kodak said it would pursue licensing opportunities for the digital-imaging patents if it’s unable to sell them at “an appropriate price.” The company said it’s “pleased with the progress and level of interest” in the patents.
Kodak said it may slow investments in its consumer and commercial inkjet units or sell some of its cash-generating businesses “if liquidity needs require.” It didn’t disclose which units may be sold.
“It appears they need to either raise debt or sell their patent portfolio in order to continue current business operations over the next year,” Shannon Cross, an analyst at Cross Research in Livingston, New Jersey, said today in an e- mail. She rates the shares “sell.”
Perez told analysts on a conference call that Kodak’s comments in the filing “shouldn’t be misunderstood in any way as dampening my optimism in our ability to complete the sale of our digital-imaging patent portfolio.” He declined to disclose an asking price or timeline for the sale.
Kodak plunged in September after drawing down $160 million from a line of credit to fund operations. The company has hired Lazard Ltd. (LAZ) to help it sell the patents and retained Jones Day among advisers helping on strategic options.
The company’s digital cameras and devices business is being squeezed by the popularity of smartphone cameras and may be a candidate for divestiture, said Mark Kaufman, an analyst at Rafferty Capital Markets LLC in New York.
Kaufman, who recommends buying the shares, had estimated Kodak ended the third quarter with cash of $890 million. Cross Research’s Cross and Deutsche Bank AG’s Chris Whitmore had estimated cash of $850 million, including the $160 million in borrowing from its credit line in September.
Kodak’s third-quarter net loss widened to $222 million, or 83 cents a share, from $43 million, or 16 cents, a year earlier. Revenue fell 17 percent to $1.46 billion. The average estimate of three analysts surveyed by Bloomberg was for sales of $1.65 billion.
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