Editor’s note: This is the fifth of a series of stories, each looking at key news events over the past 30 years in Rochester. The series accompanies the Rochester Business Journal marking its 30th anniversary.
Shortly after 1 a.m. on Jan. 19, 2012, Eastman Kodak Co. announced its filing for Chapter 11 bankruptcy protection.
Kodak along with its U.S. subsidiaries filed voluntary petitions for reorganization in the U.S. Bankruptcy Court for the Southern District of New York.
The move was at once shocking and unsurprising. Speculation had abounded for months about the onetime photo giant’s imminent bankruptcy, though company officials denied it was being considered.
More than five years later the bankruptcy—and the overall decline of Kodak—still reverberate through the Rochester community.
The bankruptcy was the culmination of decades of layoffs, legal and business setbacks, missteps and, most critically, the erosion of its core film business as digital imaging surged.
The filing aimed to bolster liquidity, monetize nonstrategic intellectual property, fairly resolve legacy liabilities and enable the company to focus on its most valuable business lines, Kodak said. The company obtained a $950 million debtor-in-possession credit facility with an 18-month maturity from Citigroup Inc. to enhance liquidity and working capital.
Kodak officials throughout the fall of 2011 had vowed it was not planning to file bankruptcy, even after it made moves that signaled severe cash flow issues. Shares of its stock had plummeted more than 60 percent on Sept. 30, 2011, following published reports the company was considering bankruptcy. Kodak had issued a statement saying it was not considering bankruptcy.
Some four months later, CEO Antonio Perez said the board and the senior management team unanimously believed bankruptcy was necessary for Kodak’s future. The company listed some $5.1 million in assets and $6.75 billion in debts.
Kodak’s Rochester area employment had peaked at 60,400 in 1982—more than the region’s current three largest local employers—the University of Rochester, Rochester Regional Health and Wegmans Food Markets Inc.—combined. Kodak’s global employment topped out at 145,300 in 1988.
Five leaders—three career Kodakers and two outsiders—steered the onetime photo giant during its 30-year decline. It had shrunk to 5,129 local workers by the end of 2011.
In late 2012, the company agreed to sell and license its digital imaging patents for some $525 million. The long-awaited move was key to its efforts to emerge from Chapter 11 bankruptcy in 2013. The series of agreements with a consortium, involving sales and licenses, successfully monetized its digital imaging patents, Kodak officials said.
The sale of the 1,100 patents initially was projected to fetch as much as $2.6 billion in a Bankruptcy Court auction. Kodak had begun the effort to sell the patents in 2011.
Kodak emerged from bankruptcy Sept. 3, 2013, 19 months after filing. Final steps in its restructuring included the spinoff of its Personalized Imaging and Document Imaging businesses to the U.K. Kodak Pension Plan. The company also successfully closed on its agreement for $695 million in term exit financing, paid off its debtor-in-possession lenders and second-lien noteholders in full, and completed its rights offerings, receiving some $406 million of new equity investments from participating unsecured creditors.
The shrinkage of Kodak’s local workforce and its revenues has not ended in the post-bankruptcy period. At the end of its bankruptcy in 2013, the company employed 2,300 employees in the Rochester area and 8,800 worldwide.
The company reported 1,640 local employees at year’s end 2016. Kodak said this month it would lay off more than 30 employees in November at Eastman Business Park and Kodak Research Labs.
Jeffrey Clarke began as CEO on March 11, 2014, with a big challenge ahead: taking the company that emerged from Chapter 11 bankruptcy and building it into a successful, profitable firm.
Kodak on March 7 this year reported its first annual profit since emerging from bankruptcy. Still its revenues continue to decline. Kodak expects 2017 revenues of $1.5 billion to $1.6 billion, down from $1.64 billion in 2016 and down from $6 billion in 2011.
George Conboy, chairman of Brighton Securities Corp., acknowledged the company’s success in turning a profit in 2017, but pointed to its continued difficulty in growing the top line.
“Unfortunately, clouds are gathering at the new Kodak,” he said, adding its stock is trading at a fraction of where it was after the bankruptcy. “Top line growth is still a problem. You can’t cut your way to growth.”
Kodak is competing in some promising markets, but is competing as a small company “scrapping for share” not as a dominant, monopoly firm.
The company that was the Rochester area’s largest employer for decades now ranks No. 16, according to the RBJ 75 list of the region’s largest employers. In addition, Kodak Alaris Inc., which was created from the businesses spun off to the U.K. Pension Plan as part of the bankruptcy, employs 656 and ranks as the region’s 50th largest employer.
Mike Dickinson is the former managing editor of the RBJ and covered Kodak for more than 20 years.
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What an absolute disaster and a striking example of late-stage American capitalism that only knows how to cut, thinks only short-term. I knew a father who’s life was turned upside down by this travesty.