Eastman Kodak Co. warned Thursday that its survival over the next year hinges on an ability to sell its potentially lucrative digital-imaging patents or raise extra funds by selling debt.
The cautionary statement in a securities filing came as the embattled photography pioneer posted a wider $222 million loss for the third quarter and said its cash reserves fell almost 10 percent.
CEO Antonio Perez remains bullish about Kodak's prospects of reinventing itself by 2012 as a profitable player in digital imaging and printing.
"These required statements shouldn't be misunderstood in any way as a dampening of my optimism in our ability to complete the sale of our digital-imaging patent portfolio, which is very high," Perez said in a conference call with analysts.
Revenue tumbled 17 percent in the July-September period, with surging sales of inkjet printers and ink more than offset by slumping revenue from film and digital cameras.
Kodak trimmed its full-year outlook, warning that revenue could be 1.5 percent to 4 percent lower than expected and losses might drop to the low end of its previous forecast.
Shares fell 8 cents, or 6.7 percent, to close at $1.12. The stock hit an all-time low of 54 cents on Sept. 30.
In a filing with the Securities and Exchange Commission, the 131-year-old corporate icon said it is seeking to raise an additional $500 million in financing that could be used to support "ongoing operational needs."
Kodak said its ability to sustain operations over the next 12 months now depends on how well it succeeds in monetizing its 1,100 digital-imaging patents through an outright sale and licensing deals or by issuing additional debt.
Since July, Kodak has been hawking patents for capturing, storing, organizing and sharing digital images that many analysts think could fetch $2 billion to $3 billion.
Its shrinking cash reserves, which fell to $862 million in the quarter from $957 million in June, have intensified investor fears of a looming bankruptcy. Kodak set a new year-end cash target of $1.3 billion to $1.4 billion that excludes any intellectual-property licensing deals, down from a previous forecast of $1.6 billion to $1.7 billion.
"Kodak's at a point where one of two things have to happen," said Shannon Cross of Cross Research in Livingston, N.J. "They have to raise more money or they have to complete the (patent) sale. Otherwise, they're not going to be able to continue."
"The reports of Kodak's death, where everybody was expecting Kodak to go bankrupt, are premature," countered Ulysses Yannas, a Buckman, Buckman & Reid broker in New York. "They continue to lose a lot of money but they have the wherewithal to become profitable again."
Kodak typically generates the bulk of its cash during the run-up to the holiday season. Worries about its rapid cash burn escalated in late September when it drew $160 million from a revolving credit line and enlisted the help of restructuring firms. Kodak insisted it had no intention of filing for bankruptcy protection.
Its third quarterly loss in a row _ the ninth such loss in the last three years _ amounted to 83 cents per share in the quarter. That compares with a loss of $43 million, or 16 cents per share, a year earlier.
Analysts surveyed by FactSet expected a smaller loss of 42 cents a share for the latest quarter.
Revenue dipped to $1.46 billion from $1.76 billion a year ago, with shrinking film group sales falling 10 percent to $389 million. Consumer digital-imaging sales tumbled 38 percent to $408 million as Kodak shifts to pricier camera models to try to offset intense competition from smartphones and video cameras.
Its year-ago results were lifted by a $210 million licensing deal with an undisclosed digital-camera competitor.
Since 2005, Kodak has poured hundreds of millions of dollars into new lines of inkjet printers that are finally on the verge of turning a profit. Home photo printers, high-speed commercial inkjet presses, workflow software and packaging are viewed as Kodak's new core.
Revenue from those businesses rose by a combined 13 percent in the quarter, fueled by 89 percent growth in packaging solutions and 44 percent growth in home printers and ink. Kodak said it expects the consumer printer to become profitable in the October-December quarter.
The four businesses remain a bright spot in Kodak's stumbling drive to recast itself in the turbulent digital arena. Kodak is hoping they'll more than double in size by 2013, accounting for 25 percent _ or nearly $2 billion _ of all sales.
In the meantime, mining its inventions for revenue has become indispensable _ and the hoped-for sale of its digital inventions represents a sharp tactical shift.
Kodak picked up just $27 million in patent-licensing fees in the first half of 2011 after amassing $1.9 billion in the previous three years. It expects to generate more than $340 million in the current quarter from at least two patent-licensing deals and the sale of non-strategic assets, Perez revealed Thursday.
"I want to emphasize again that our 2012 cash performance through our digital business will be significantly better than this year, that 2011 was the peak of our cash usage," Perez added. "By the end of 2012, we're going to get to (be) this self-standing digital company."
Based in Rochester, N.Y., Kodak turned picture-taking into a hobby for the masses over a century ago. It developed the world's first digital camera in 1975 but failed to capitalize quickly on its new-wave know-how in digital photography.
Its payroll has plunged to 18,800 from 70,000 in 2002. It has posted only one annual profit since 2004.
Kodak now expects segment losses in 2011 to be closer to $300 million, which is within its previous forecast range of $100 million to $300 million in losses. It expects revenue to be $6.3 billion to $6.4 billion, down from a previous forecast of $6.4 billion to $6.7 billion.