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‘Blue-collar CEO’ Jim Continenza steers Eastman Kodak in new directions

Jim Continenza, CEO of Eastman Kodak. (Photo submitted)

One of the best days on the job for Jim Continenza took place about 18 months ago when he was talking with some workers on the shop floor at Eastman Kodak Co.

The employees – many of whom were close in age to the now 60-year-old Continenza – told him they would be retiring in the next few years and felt it was important they passed their industry knowledge – collected over the course of their careers – on to the next generation of workers there.

“It was the first time I heard people at Kodak talk like that; they saw a future,” Continenza says. “It was a breakthrough.”

Kodak dominated the photographic film market for most of the 20th century and served as a major employer in Rochester, as well as a leading customer for many other companies in the region.

However, new technologies – and the failure of company leaders to adapt to such changes – led to the start of the company’s downfall, which culminated in Kodak filing for Chapter 11 bankruptcy protection in 2012.

Continenza was named chair of Kodak’s board of directors in 2013, the year the business emerged from bankruptcy.

Known as a turnaround specialist with commercial printer roots, he was brought on board because of his experience guiding dozens of technology companies through transformations.

Continenza was named executive chairman in early 2019 and assumed the role of CEO in July 2020, succeeding Jeffrey Clark, who stepped down after nearly five years in the role.

Continenza — who is listed on the RBJ Power List for 2022 — was straightforward when talking recently about where things stood when he took the helm and what his role was to be moving forward.

“We had to change direction, or we weren’t going to make it,” he says, adding that the CEO appointment meant Continenza had an obligation to Kodak’s shareholders and investors. “It’s a responsibility I take very seriously.”

Despite the challenges, Continenza saw a path for Kodak and was determined not to give up.

“I have a lot of love and affection for this company,” he says.

Continenza grew up in Saint Paul, Minn. His father was an immigrant and blue-collar worker and the younger Continenza knew what it was like being part of a family living, at times, from paycheck to paycheck.

The large Italian family was tightknit and Continenza recalls spending a lot of time with his extended family growing up.

He studied business at the University of Wisconsin-River Falls and graduated in 1984. While there, he met his future wife, Sandi.

Over the course of his career, Continenza has held several leadership roles.

He has served as the chair and CEO of Vivial Inc., a privately held marketing technology and communications company. He has also held leadership roles at STi Prepaid LLC, a telecommunications company; Teligent Inc., a communications services company and Lucent Technologies Product Finance, a global leader in telecom equipment and AT&T.

When he took the top spot at Kodak, Continenza went right to work, fixing the balance sheet, focusing on the company’s core strengths and establishing a customer-first approach.

The work would be a tall order at any time but was especially challenging during a global pandemic and a period of inflationary challenges.

Continenza took it in stride.

“The worse things are, the better I act,” he says.

He also brought in new managers, noting roughly 80 percent of the leadership team has been changed since he came on board and many of whom have worked with Continenza during past turnarounds, knew the extensive work that needed to be done and were up for the challenge.

Continenza is confident in the leadership teams he has in place at Kodak locations to oversee day-to-day operations, noting he is focused on the future of the company.

“This company lost its courage along the way and took on a victim mentality,” he says. “Now we have to be warriors.”

Jim Continenza speaks with Kodak customers at a recent event. (Photo submitted)

Continenza is rarely in his corporate office and spends most of his time at Kodak’s numerous sites around the globe, as well as visiting customers and attending trade shows, working to gain market share.

“At the executive level you work around the clock” he says.

He describes himself as direct and transparent.

“I don’t hide anything; if it’s good or bad, I let people know,” he says.

One of the biggest issues he faced initially was that the company had tried to become a consumer-products company; but Kodak is ultimately a B2B company, focused on advanced materials and chemicals, Continenza explains.

“We need to get back to our roots; back to fundamentals,” he says.

Among his early goals was to bring the Eastman Business Park back to life.

There has been a rebirth of late at the 1,200-acre industrial park, where more than 6,000 people work at the 114 companies who now operate there. That includes Kodak, which is growing its presence.

The company has started construction at the site on a $20 million lab and manufacturing facility to produce reagents for health care applications.

It is one of several ways the manufacturing company is looking to use its long-standing technological expertise to develop new areas of the business.

Continenza announced at the end of 2021 four growth initiatives in Kodak’s advanced materials and chemicals segment.

All four initiatives are in their infancies and in various stages of development, he says, adding they would all have operations in the local business park.

Among them is the reagents lab and manufacturing facility at EBP.

Additional initiatives in the advanced materials and chemicals business focus on energy battery storage material manufacturing, light blocking technology and transparent antennas.

The new initiatives are designed to grow over the next several years and beyond that, with the goal of taking the technologies to adjacent markets, he adds.

A renewed interest in film has also helped the business of late with Kodak adding workers, and shifts, to meet the demand.

“We might not get back to what we used to be, and we don’t have to,” Continenza says. “We will get to where we’re supposed to be and continue to grow.”

Under Continenza’s leadership, the business continues to invest in product innovation and back-end systems that allow Kodak to grow and scale more quickly.

There is also a focus on sustainability, especially in Kodak’s largest market: commercial print. The segment is comprised of prepress solutions, which includes Kodak’s digital offset plate offerings and computer-to-plate imaging solutions.

A third focus is on taking share from competitors by providing industry-leading solutions and service.

The efforts are helping create jobs. Kodak has added almost 330 new hires in Rochester this year and now has nearly 90 job openings. The company employs some 1,400 people locally.

Continenza says his role is to support the company’s employees and create value for the firm, which are not mutually exclusive.

“This company deserves to get its (good) reputation back,” Continenza says. “It has made so many contributions and to ignore those would be wrong.”

The balance sheet shows the model appears to be working.

In early November, Kodak released its third-quarter financial results, including its sixth consecutive quarter of revenue growth and a small profit.

George Conboy, chair of Brighton Securities, says the management team in place at Kodak is the best he has seen there in the past 40 years.

He points out that Kodak is a different company than it was in its heyday when the business had a near monopoly on the market and was so profitable it could afford to let some things slide.

Since the bankruptcy filing, the business has become lean and Continenza has done a lot of hard work righting the ship, or, as Conboy calls it: “fixing the motor before taking the car out on the road.”

“The car is nosing out of the garage and getting ready to go places,” Conboy adds.

Conboy notes that over the last few quarterly reports, Kodak management — led by Continenza — has arrested a decline in revenue, fixed the balance sheet and had modest and increasing profits.

“That is a testament to the hard work and competence this management team has brought to the company,” Conboy says.

Terry Taber, Kodak’s senior vice president and chief technology officer, has been at Kodak for more than four decades, beginning as a research scientist in 1980.

He says Continenza has brought to Kodak the focus required to make the company successful and sustainable.

“He has clearly defined Kodak as an industrial manufacturer and invested in our core strengths in advanced materials, coating and printing technologies,” Taber says. “And, more than any other leader I can remember, he takes time to visit our manufacturing teams and our customers to make the connection between what we do well and what our customers want and need.”

Continenza regularly hosts “Coffee with Jim” at Kodak sites.

The get togethers — done in-person and virtually — are with employees to whom Continenza looks for guidance on what’s working and what may need to be fixed.

He also wants employees to speak freely so managers are not allowed to sit in. These informal meetings have yielded results.

“We’ve fixed a lot of things we didn’t know about,” Continenza says, adding that workers are the heart of the business. “Those who run the machines know the machines. I can run the company, but I can’t make the products.”

Continenza believes in open communication.

“I don’t need yes people around me,” he says, adding that he gives, and expects in return, respect in public but also supports differing opinions and constructive criticism behind closed doors.

He is also comfortable being dubbed the “blue-collar CEO” by some on Wall Street, noting he may be seen as less polished than other business leaders.

“I’m fine in my life,” he says. “I don’t need to impress anyone.”

Continenza divides his time between Florida and Minnesota. He and his wife have three adult sons, ages 31, 29 and 25.

In his free time, Continenza enjoys a range of outdoor activities, including fishing, hunting and spending time on the water.

While Continenza has no immediate plans to retire, he believes in working to secure Kodak has a strong leadership in place as well as a succession plan so when he does get ready to step aside, the company is well positioned to continue growing without him.

“Never again will we lay silent as a victim” he says.

[email protected] / (585) 653-4021

 

Name: Jim Continenza, executive chairman and CEO, Eastman Kodak Co.

Age: 60

Residence: Florida and Minnesota

Family: Wife, Sandi, three adult sons

Education: Bachelor’s degree in business administration from the University of Wisconsin-River Falls, 1984

Hobbies: Fishing, hunting, being on the water

Quote: “This company lost its courage along the way and took on a victim mentality. Now we have to be warriors.”

Kodak reports year-over-year revenue growth in 3Q for sixth consecutive quarter  

Eastman Kodak Co. posted a third-quarter profit Tuesday despite what company leaders called a challenging business environment, with factors such as increased labor and materials costs and the impact of foreign exchange, affecting profitability. 

Kodak reported GAAP net income of $2 million for the quarter, compared to $8 million in the prior year’s quarter after markets closed Tuesday. Operational EBITDA was $7 million, compared to $6 million a year ago. 

On a per-share basis, the company said it had net income of one cent. Earnings, adjusted for restructuring costs, came to three cents per share. 

Revenue was $289 million, up $2 million from last year’s quarter.  

Jim Continenza, Kodak’s executive chairman and CEO, said the company delivered year-over-year revenue growth for the sixth consecutive quarter.  

“This continuing growth reflects our management team’s experience with difficult business environments and our commitment to finding ways of putting our customers first despite ongoing inflationary and supply chain challenges,” Continenza said in a statement.   

He said the company continues to invest in digital print technologies and added that Kodak would continue to make significant investments in its Advanced Materials & Chemicals business. 

“Looking forward, we’ll continue to make strategic decisions focused on driving smart revenue for Kodak,” he said.  

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Demand for film driving need for workers at Kodak  

A resurgence in demand for photo and motion picture film has Eastman Kodak Co. in need of more workers.  

Kodak is running its film finishing factory around the clock and needs additional workers to cover the workload, a company spokesperson said. 

The increased demand stems from the fact that many amateur photographers have rediscovered film as part of the trend toward analog technology and many directors and cinematographers prefer the look of film for everything from music videos to feature movies, the company reported.  

Kodak has 75 open positions in Rochester, mostly for operators and skilled trades’ positions.  

Its Advanced Materials and Chemicals division – which includes film manufacturing – has hired more than 350 employees since 2021.  

Kodak has a 130-year legacy in film manufacturing. 

The American Chemical Society recently bestowed the company with The Birthplace of Consumer Photography landmark designation, recognizing Kodak’s legacy in chemistry and future in advanced materials and chemicals. 

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Kodak to be named a national historic chemical landmark by American Chemical Society 

The American Chemical Society will honor Eastman Kodak Co.’s chemical history at a ceremony at Kodak Center Monday. 

The national organization will bestow the company with The Birthplace of Consumer Photography landmark designation, recognizing Kodak’s legacy in chemistry and future in advanced materials and chemicals.  

Kodak has a 130-year legacy in film manufacturing and continues to focus on advanced material and chemicals.  

The company has recently announced growth initiatives which leverage the company’s coating and materials science capabilities including light-blocking fabric coatings, coated substrates for EV battery production, transparent antennas for auto applications and diagnostic test reagents. 

The American Chemical Society’s National Historic Chemical Landmark program recognizes seminal achievements in the history of the chemical sciences and provides a record of their contributions to chemistry and society in the United States.  

Since its inception in 1992, ACS has designated more than 90 landmarks across the country.  

The Kodak landmark will be the seventh NHCL in New York and the first to be located outside the New York City region. 

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Kodak improves bottom line in Q3

Eastman Kodak Co. Executive Chairman Jim Continenza

Eastman Kodak Co. after the bell on Tuesday reported an improved third-quarter bottom line.

Sales for the quarter ended Sept. 30 were $287 million, up from $252 million in the third quarter last year. Net income for the quarter rose to $8 million from a net loss of $445 million in the year-ago quarter.

“I’m pleased with our continued improvement in the third quarter despite challenges posed by supply chain issues, labor shortages and inflationary pressures,” said Kodak Executive Chairman and CEO Jim Continenza in a statement. “Our core print business has achieved increased market share in environmentally-friendly process-free plates and we are well-positioned to continue growing that important segment. Looking forward, we’ll continue to execute our go-to-market strategy focused on driving profitable revenue and growth.”

During an earnings call, Continenza said that the company is seeing a resurgence in its film business.

“More people are shooting still film, and the motion picture industry is choosing film as the ideal medium for their productions. As a result, we are increasing the capacity of our film factory,” he noted.

Kodak ended the third quarter with $380 million in cash and cash equivalents, an increase of $184 million from Dec. 31, 2020.

“During the third quarter we continued to see strong growth in our key product areas, including SONORA Process Free Plates volume and PROSPER annuities which were up 35 and 17 percent respectively compared to the prior-year quarter,” said Kodak CFO David Bullwinkle. “Kodak used $15 million in cash for the quarter, primarily driven by ongoing global cost increases which we are taking actions to address. We will continue to execute on our long-term plan — focusing on our core businesses and investing in future growth.”

Shares of Kodak stock (NYSE: KODK) closed Tuesday at $7.16 and was down more than 2 percent to $6.88 at the start of the day Wednesday.

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Kodak improves bottom line in first quarter

Eastman Kodak Co. this week reported a first-quarter drop in sales but a hefty improvement in its bottom line.

For the quarter ended March 31, revenues declined by $2 million to $265 million, compared with the same period in 2020. Net income for the quarter was $6 million, up from a loss of $111 million in the year-ago quarter.

The prior-year quarter net loss includes an expense of $167 million related to the increase in deferred tax valuation allowances for locations outside the U.S. and income of $53 million related to the change in fair value of embedded derivatives in the Series A Preferred Stock and Convertible Notes.

Eastman Kodak Co. Executive Chairman Jim Continenza
Eastman Kodak Co. Executive Chairman Jim Continenza

“The steps we have taken in the last two years — strengthening our balance sheet, establishing a customer-first approach and continuing to invest in innovation — have created the foundation for growth,” said Kodak’s Executive Chairman and CEO Jim Continenza. “We will continue to execute on those strategies to create long-term value for our shareholders and our employees.”

Kodak ended the first quarter with a cash balance of $401 million, up from the Dec. 31 cash balance of $196 million.

“We continued to see improved cash performance during the first quarter, including an improvement in working capital and an increase in our cash balance through several financing transactions that closed during the quarter,” said David Bullwinkle, Kodak’s CFO. “During the first quarter, we returned to growth in our key product areas, including SONORA Process Free Plates volume and PROSPER annuities which were up 8 and 12 percent respectively compared with the first quarter of 2020. We will continue to evaluate strategies for investing the capital raised through financing activities to generate additional growth.”

Shares of company stock (NYSE: KODK) Thursday morning were trading up slightly at $6.83.

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Kodak acquires Massachusetts manufacturer

Eastman Kodak on Monday said it has acquired the assets of ECRM Inc.’s computer-to-plate (CTP) device business for the graphic arts and newspaper industries.

Based in Massachusetts, ECRM is a global leader in imaging technologies for the graphic communications industry, officials said. The transaction includes the equipment, contracts, inventory and intellectual property of the acquired business. Financial terms of the transaction were not disclosed.

“This acquisition reflects Kodak’s commitment to the printing industry and our focus on investing in growth,” said Kodak Executive Chairman and CEO Jim Continenza in a statement. “Acquiring these assets of an impressive company like ECRM makes us an even stronger player in the CTP category and we will continue to look for ways to better serve customers across the spectrum of traditional and digital print.”

The acquisition is expected to further strengthen Kodak’s position in the CTP segment of the commercial printing industry.

“In the wake of a challenging pandemic year, and on the anniversary of ECRM’s 50th year, we decided that this is a good time to rest on our past successes, yet protect and service our many long-term customers with an established company of appropriate size, CTP competence and resources. We are pleased today to place our company assets with Kodak,” said Rick Black, chairman and CEO of ECRM.

Shares of Kodak stock (NYSE: KODK) were trading down 19 cents at $7.23 midday Monday.

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Kodak reports full-year net loss

Eastman Kodak Co. after the bell on Tuesday reported full-year financial results that include a steep decline in revenues and a net loss of $196 million for the year.

For the full year ended Dec. 31, the Rochester company reported consolidated revenues of $1 billion, compared with $1.2 billion in 2019. Kodak reported a net loss of $541 million, compared with earnings of $116 million in the prior year.

Kodak reported a cash balance of $196 million at year-end.

On March 1, 2021, the company announced a series of financial transactions that provide access to new capital, address maturing obligations and strengthen the company’s ability to invest in strategic growth opportunities in its core businesses. Included in those transactions is a $100 million investment by Grand Oaks Capital, an investment firm started by Paychex founder Tom Golisano. Kodak officials said the additional liquidity provided by the financial transactions “eliminates the substantial doubt about Kodak’s ability to continue as a going concern.”

“Kodak successfully managed through 2020 despite the challenges of the pandemic,” said Kodak CEO and Executive Chairman Jim Continenza. “We mitigated the impact of COVID with cost-saving initiatives, launched several innovative print-business products and generated cash in the third and fourth quarters. More recently, we announced a series of financial transactions which significantly strengthened our balance sheet and set the stage for growth through investments in our core businesses in print and advanced materials and chemicals, and new initiatives.”

The company’s loss for the year included a charge of $416 million to reflect the increased value of the derivative liability embedded in the convertible notes immediately prior to conversion during the third quarter 2020, as well as expenses of $167 million related to the increase in deferred tax valuation allowances for locations outside the U.S. during the first quarter of 2020. Operational EBITDA was negative $1 million for the year, compared with $13 million in 2019.

“Kodak increased its cash balance in the third and fourth quarters by $16 million and ended the year at $196 million in cash,” said CFO David Bullwinkle. “During 2020 the company improved its financial health by removing legacy liabilities and reducing costs, and the recently announced transactions put Kodak in a strong financial position and provide incremental liquidity to drive growth.”

Shares of company stock (NYSE: KODK) closed Tuesday at $8.75 and were down more than 5 percent midday Wednesday to $8.24.

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Golisano firm invests $100 million in Kodak

Grand Oaks Capital, an investment firm founded by Paychex founder Tom Golisano, has committed to invest a total of $100 million in Eastman Kodak Co.

The firm purchased $75 million of Kodak’s 5 percent Series C Convertible Preferred Stock and has agreed to purchase an additional $25 million of this series of preferred stock subject to HSR Act clearance. As part of the agreement, Grand Oaks Capital will have the right — for three years or until they hold less than 50% of the initial amount of the preferred shares or common stock into which it is converted — to nominate one person to be elected to Kodak’s board of directors.

Tom Golisano
Tom Golisano

“Grand Oaks Capital is excited about the long-term future of Kodak,” Golisano said in a statement. “We are very confident in the company’s leadership, vision and new growth opportunities and are proud to be investing in a global company headquartered in Rochester, N.Y.”

Additionally, Kennedy Lewis Investment Management LLC has provided Kodak with an initial $225 million term loan and a commitment to provide delayed-draw term loans of up to an additional $50 million, which may be drawn on or before February 26, 2023. The term loans have a five-year maturity and are non-amortizing.

Kennedy Lewis also has purchased 1 million shares of the company’s common stock at a purchase price of $10 per share, as well as $25 million of the company’s newly issued 5 percent unsecured convertible promissory notes due May 28, 2026. As part of the agreement, Kennedy Lewis will have the right for three years to nominate one person to be elected to Kodak’s board of directors.

“Kodak has made tremendous strides over the last few years under Jim Continenza’s leadership. We are pleased to support the company in its continued efforts to fortify its balance sheet and provide the capital assistance needed to enable Kodak to pivot forward to pursue its strategic growth initiatives. We feel strongly that the company is well positioned for the future,” said Darren Richman, co-founder of Kennedy Lewis.

With the proceeds from the transactions, Kodak repurchased 1 million shares of the company’s 5.5 percent Series A Convertible Preferred Stock due to mature on Nov. 15, 2021, from funds managed by Southeastern Asset Management for $100 million plus accrued and unpaid dividends. In addition, Kodak has issued the Southeastern-managed funds one million shares of Series B Preferred Stock in exchange for the remaining Series A Preferred Stock held by the funds, plus payment of accrued and unpaid dividends.

“Since Jim Continenza and his team took over at Kodak, there have been dramatic improvements in operating costs and the balance sheet, as well as new product introductions. Jim’s team has also opened up the possibility of new business lines which would build on legacy assets and institutional strengths,” said Staley Cates, vice-chairman of Southeastern Asset Management.

Kodak has entered into a cash collateralized Letter of Credit Facility Agreement for up to $50 million and amended its ABL Credit Agreement to extend the maturity date to Feb. 26, 2024, and decrease the aggregate commitments from $110 million to $90 million.

The transactions provide the company with up to $310 million of incremental cash to invest in growth opportunities in Kodak’s core businesses of print and advanced materials and chemicals, officials said Wednesday.

The transactions address the mandatory redemption of the Series A Preferred Stock that was required in November 2021, extend the maturity date of the company’s ABL and limit the amount of cash needed to service capital.

Jim Continenza
Jim Continenza

“Over the past two years, we have taken a number of significant steps to strengthen our financial position,” said Continenza, Kodak’s executive chairman and CEO. “Financing secured through Kennedy Lewis and investments made by Grand Oaks Capital and funds managed by Southeastern Asset Management represent the next step in our strategy for returning the company to growth and help position us to invest in expanding our core businesses in print and advanced materials and chemicals.”

Shares of company stock (NYSE: KODK) closed Tuesday at $8.62 and were moving upward Wednesday afternoon. Shares were up 8 percent to $9.31 at 3:30 p.m.

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Former Kodak CEO dies

Colby Chandler
Colby Chandler

Former Eastman Kodak Co. leader Colby Chandler died March 4. He was 95.

Mr. Chandler joined Kodak in the 1950s and served as chairman and CEO from 1983 to 1990. He presided over the company when Kodak employed more than 60,000 people in Rochester.

Mr. Chandler was a graduate of the University of Maine and received his MBA from the Sloan Fellows program of the MIT Sloan School of Management.

Throughout his life, Mr. Chandler served on a number of boards and in advisory roles. He was chairman of President Ronald Reagan’s Export Council. He was a director of Rochester companies Pictometry International Corp. and VirtualScopics Inc. He was chairman of the Industrial Management Council, which later merged with the Greater Rochester Metro Chamber of Commerce Inc. to become the Rochester Business Alliance Inc., now the Greater Rochester Chamber of Commerce Inc.

“Even after 14 years of retirement, if somebody said to me, ‘Would you like to go back to work doing what you did before?’ I would jump at the chance,” Chandler told the RBJ in a 2004 interview.

Mr. Chandler was a proponent of the manufacturing sector and eschewed a shift to service industries.

″Watching the swing toward a service-intensive society and listening to some parties say that’s good is scary,″ he told the Associated Press in a 1988 interview.

In his spare time, Mr. Chandler was a tennis player and avid reader. He told the RBJ that when he retired he had some 1,000 books and nearly all were non-fiction. That changed when his tennis group became a book club.

“(With the club) I would say two out of the three books are fiction. And I love it. I love the discussions,” he told the RBJ.

Funeral services are being provided by Anthony Funeral Home. No memorial events are currently scheduled.

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Kodak shares surge on news of DFC loan investigation

Eastman Kodak Co. shares surged on Monday on news that regulators had found no wrongdoing in a loan process that would have had the company manufacturing chemicals for COVID-19 and generic drugs.

Following a report from the Wall Street Journal indicating that government officials had done nothing wrong in the days and weeks leading up to the announcement of a $765 million loan Kodak was expected to be awarded, shares of Kodak stock (NYSE: KODK) rallied more than 80 percent on Monday, closing the day up 60 percent at $12.04.

The Wall Street Journal on Sunday reported that the inspector general of the U.S. International Development Finance Corp., the agency that in July signed a letter of interest with Kodak to provide the loan, found no wrongdoing in the process that created the loan. That follows an internal investigation on behalf of Kodak that cleared the company in September.

In the DFC report, Inspector General Anthony Zakel said he found no evidence that employees of the agency had any conflicts of interest in the plans, according to the Wall Street Journal story. Zakel also said he did not find “any evidence of misconduct on the part of DFC officials.”

The DFC assessment also stated that it was reasonable for the agency to consider Kodak for the loan, noting other companies’ pivots to COVID-19 supply-chain manufacturing and Kodak’s experience providing materials to the pharmaceutical industry.

The Securities & Exchange Commission and Congress also launched investigations into the deal, neither of which have been concluded.

When Kodak and the DFC on July 28 announced details of the loan, which had not been finalized, Kodak shares soared from a July 27 close at $2.62 to more than $16. Within two days, shares had reached $43.45, and at one point the stock reached $60 per share.

A week later, the SEC and Congress said they would look into the possibility of misconduct on behalf of Kodak leaders. Kodak Executive Chairman James Continenza was issued 1.75 million stock options by the board the day before the loan announcement, triggering an outcry by investors and the public.

SEC filings showed that Continenza purchased 46,700 additional shares of Kodak stock, while board member Philippe Katz purchased 5,000 shares on the same day. In an interview with CNBC following the announcement, Continenza said Kodak had been working on the loan deal for a “few months” prior to the July 28 announcement.

The potential windfall from the $765 million loan would have allowed Kodak to reinvent itself with a new division, Kodak Pharmaceuticals, that would manufacture components of generic drugs and enable the U.S. to rely less on China for its pharmaceuticals. It is unclear whether the DFC loan is still on the table, but Kodak officials have repeatedly said the company will move ahead in making the drug ingredients, regardless of whether it receives government assistance.

While Kodak’s internal investigation by an independent law firm found that company executives and officers did not participate in insider trading, the report has no legal bearing on the SEC investigation, said an analyst with ASB Capital in a November Seeking Alpha article. Moreover, this week’s DFC report doesn’t specifically clear Kodak of wrongdoing either.

Shares of company stock midday Tuesday were trading down from Monday’s surge at $11.27.

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Kodak reports Q3 loss

After the bell on Tuesday, Eastman Kodak Co. reported a third-quarter decline in sales of $63 million and a net loss for the quarter of $445 million. Shares of company stock (NYSE: KODK) were down roughly 2 percent to $6.55 in light trading Wednesday at midday.

For the quarter ended Sept. 30, the one-time photo giant reported revenue of $249 million, down from $313 million in the year-ago quarter. The quarterly loss of $445 million compares to a $5 million net loss in the third quarter last year.

Eastman Kodak Co. Executive Chairman Jim Continenza
Eastman Kodak Co. Executive Chairman Jim Continenza

“As the pandemic continued during the third quarter, Kodak stayed focused on keeping our employees safe and serving customers while carefully managing our costs and cash,” said Kodak Executive Chairman and CEO Jim Continenza. “We continue to invest in leading-edge digital print technology, and winning eight awards recently in three prestigious print industry competitions provides external validation of that commitment. Looking forward, we’ll continue to build on our strengths in print and advanced materials and chemicals, including our existing business in manufacturing pharmaceutical ingredients.”

Kodak ended the quarter with a cash balance of $193 million.

“Kodak delivered improved revenue compared with the second quarter of the year while improving its financial position,” said Kodak CFO David Bullwinkle. “During the third quarter, the company reduced its debt by $100 million due to the conversion of the convertible notes and its cash balance increased by $13 million.”

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Eastman Museum installs Colorama for new visitor center opening

As the George Eastman Museum continues its renovations, a reproduction of a Colorama image is being installed adjacent to the museum’s new Thomas Tischer Visitor Center, scheduled to open to the public Oct. 10.

The structure to display the Colorama has been built at the north end of the museum’s parking lot near the new main entrance at the ESL Federal Credit Union Pavilion. The new Colorama is 48 feet wide and more than 14 feet tall and is an 80 percent scale reproduction of the original Colorama that was installed in Grand Central Terminal in New York City.

The first installation is Colorama 531, a photo of Taj Mahal, India by Steve Kelly. (provided)
The first installation is Colorama 531, a photo of Taj Mahal, India by Steve Kelly. (provided)

The Colorama was one of Eastman Kodak Co.’s longest-running advertising campaigns that was first conceived in 1949. The massive backlit transparencies were designed to demonstrate the brilliance of color photography and advertise Kodak color film products to a mass market.

Until 1990, a new Colorama was installed every few weeks, resulting in a total of 565 transparencies. The advertising campaign ended in 1990 as Grand Central Terminal prepared for renovations and each giant transparency was destroyed.

But in 2010, Kodak donated the original photographic negatives, transparencies and guide prints used to create them to the George Eastman Museum, which preserved the objects.

The first installation is Colorama No. 531, a photograph of Taj Mahal, India, by photographer Steve Kelly. The original was installed in Grand Central Terminal in 1986.

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After investigation, legal experts conclude Kodak, executives did not violate any laws

An independent legal review of Eastman Kodak Co.’s actions during and ahead of a July announcement that the Rochester manufacturer was in line to receive a massive loan to produce pharmaceuticals has concluded that the company and its executives broke no laws.

As a result, Kodak shares (NYSE: KODK) were up more than 40 percent midday Wednesday at $8.80.

The review, conducted by Akin Gump Strauss Hauer & Feld LLP and released on Tuesday, concluded that Kodak and its officers, directors and senior management “did not violate the securities regulations or other relevant laws, engage in a breach of fiduciary duty or violate any of Kodak’s internal policies and procedures.”

Akin Gump was retained by a special committee formed by Kodak’s board of directors to look into allegations of impropriety surrounding the July 28 signing of a letter of interest between the U.S. International Development Finance Corp. and Kodak that would result in a $765 million loan.

The potential windfall would allow Kodak to reinvent itself with a new division, Kodak Pharmaceuticals, that would manufacture components of generic drugs and enabling the U.S. to rely less on China for its pharmaceuticals.

The July 28 letter of interest noted that it was not a done deal and that the loan could be any dollar amount up to $765 million. Both Kodak and the DFC said at the time that they could continue due diligence.

Eastman Kodak Co. Executive Chairman Jim Continenza
Eastman Kodak Co. Executive Chairman Jim Continenza

But within days of the announcement, the U.S. Securities and Exchange Commission said it would investigate the transaction. Kodak Chairman and CEO Jim Continenza had been issued 1.75 million stock options by the board the day before the loan announcement, triggering an outcry from analysts and investors. SEC filings also showed that Continenza purchased 46,700 additional shares of Kodak stock, while board member Philippe Katz purchased 5,000 shares on the same day. Additionally, board member George Karfunkel the day after the July 28 announcement had gifted a large number of shares to a charity.

Each of those actions raised eyebrows and suspicion.

On Aug. 7, the DFC suspended the loan until an investigation could be completed. Kodak share price has ranged from $2.62 on the day before the official announcement to a one-time high of $60, with a July 29 closing price of $33.20. But in recent weeks, shares had languished at around $6 while the public awaited results from several investigations.

Specifically, Akin Gump was retained to investigate:

• Whether Katz or Continenza engaged in insider trading, violated Kodak’s internal policies and procedures or otherwise acted improperly in purchasing Kodak shares in June 2020.
• Whether Kodak’s award of stock options to Continenza and other members of Kodak’s senior management team on July 27, 2020, the day prior to the DFC announcement, violated Kodak’s internal policies and procedures or the federal securities laws or constituted a breach of fiduciary duty under applicable state law.
• Whether board member Karfunkel violated the federal securities laws or Kodak’s internal policies and procedures by donating 3 million Kodak shares to an affiliated charity the day after the DFC announcement, while Kodak’s trading window remained closed.
• Whether Moses Marx, the father-in-law of board member Katz, or Southeastern Asset
Management, a large Kodak investor that had nominated two of Kodak’s board members, sold shares of Kodak after the DFC Announcement while in possession of material nonpublic information obtained from any of Kodak’s officers, directors or employees.
• Whether Kodak was responsible for the early release of information related to the LOI on July 27, 2020, the day before the DFC Announcement, and, if so, whether that release violated Regulation Fair Disclosure, promulgated by the SEC.

The Akin Gump investigation revealed that both Katz and Continenza sought and obtained preclearance to trade from Kodak’s general counsel, in compliance with the company’s insider trading policies.

Additionally, the July 27, 2020 options grants complied with the terms of Kodak’s
Executive Compensation Plan and were approved by a group of “disinterested” directors acting in their capacity as members of Kodak’s Compensation, Nominating and Governance Committee. The grants — and in particular the grant to Continenza — had been discussed with the board well in advance of the start of the DFC loan application process and were awarded for legitimate business purposes unrelated to the DFC announcement, according to the investigation.

The investigation also found that Karfunkel’s gift the day after the announcement was a bona fide gift and therefore did not constitute a sale of securities for insider trading purposes.

As a result of Akin Gump’s findings, Kodak’s Special Committee has recommended that the company adopt corporate governance and procedural changes with respect to its executive compensation practices, insider trading policies and procedures regarding the disclosure of information about the company to the public.

“The board and I are grateful for the diligence and care that was taken by the Special Committee and by its counsel to perform such a thorough independent review. Kodak is committed to the highest levels of governance and transparency, and it is clear from the review’s findings that we need to take action to strengthen our practices, policies and procedures,” Continenza said in a statement late Tuesday. “Expeditiously implementing these recommended measures will be critical as we continue to execute on our long-term strategy and transform our business for the future.”

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Kodak shares slide as investigation continues

Eastman Kodak Co. shares (NYSE: KODK) in two days last month skyrocketed more than 1,100 percent, and plummeted 50 percent a few days later. Share price continues to fall following a blunder by Kodak leaders and an investigation by the U.S. Securities and Exchange Commission.

On Monday, shares were down again to $7.76 following White House trade adviser Peter Navarro criticizing Kodak management for their “stupidity” on CNBC.

Peter Navarro
Peter Navarro

“Based on what I’m seeing, what happened at Kodak was probably the dumbest decisions made by executives in corporate history,” Navarro said. “You can’t fix stupid. You can’t even anticipate that degree of stupidity.”

A spokeswoman for Kodak said “no comment” in response to Navarro’s criticism.

The criticism and SEC investigation stem from a possible leak of the loan announcement and the timing of stock awards to Kodak leaders, including Executive Chairman James Continenza. Continenza was issued 1.75 million stock options by the board the day before a $765 million loan announcement, triggering an outcry from analysts and investors.

On July 28, the U.S. International Development Finance Corp. (DFC) and Kodak had signed a letter of intent that would allow the photo giant to shift gears and begin producing generic drugs here. But the DFC within days put a hold on its loan in light of the SEC investigation.

On Aug. 10, White House Press Secretary Kayleigh McEnany said President Trump had used the Defense Production Act “more than 30 times” to increase production and is aware of the “Kodak allegations.”

“Would he pull the plug on this deal? I’ll leave that to the president, but he takes these (allegations) very seriously,” McEnany said. “We won’t speculate as to what this investigation finds.”

Share price has ranged from $2.62 on the day before the official announcement to a one-time high of $60, with a July 29 closing price of $33.20. The stock has continued to fall throughout August as Kodak performs its own internal investigation into the matter.

Last week the company reported a lackluster second-quarter. For the quarter ended June 30, Kodak reported a $94 million sales decline to $213 million and a net loss of $5 million. Kodak ended the quarter with a cash balance of $180 million, down from the March 31 balance of $209 million.

Eastman Kodak Co. Executive Chairman Jim Continenza
Eastman Kodak Co. Executive Chairman Jim Continenza

“Kodak continued to navigate the challenges posed by the pandemic during the second quarter,” Continenza said. “Although the print industry slowdown impacted our performance, we continued to serve our customers and furthered our long history of innovation through the launch of six new print products.”

The company did not offer full-year guidance nor address the DFC loan.

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