Eastman Kodak Co. warned Thursday that its survival over the next year hinges on its ability to sell its potentially lucrative digital-imaging patents or raise extra funds by selling debt.
Its cautionary statement in a securities filing came as the embattled photography pioneer posted a wider $222 million loss for the third quarter. Its cash reserves fell almost 10 percent in the quarter.
Revenue tumbled 17 percent in the July-September period, with surging sales of inkjet printers more than offset by slumping digital camera and film revenue.
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.
Its shares fell 10 cents, or 8.8 percent, to $1.10 in midday trading after sinking as low as $1.07 earlier in the day. It traded as low as 54 cents a share on Sept. 30.
In a filing with the Securities and Exchange Commission, Kodak 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 continue operations within the next 12 months "is dependent upon the ability to monetize its digital imaging patent portfolio through a sale or licensing" or by issuing additional debt.
Shrinking cash reserves, which fell to $862 million in the quarter from $957 million in June, have intensified investor fears of a looming bankruptcy. The company set a 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.
"The reports of Kodak's death, where everybody was expecting Kodak to go bankrupt, are premature," Ulysses Yannas, a broker with Buckman, Buckman & Reid in New York, had said before the regulatory filing. "They continue to lose a lot of money but they have the wherewithal to become profitable again."
"You've got a challenge here," countered Shannon Cross of Cross Research in Livingston, N.J. "Kodak's at a point where one of two things have to happen -- either they have to raise more money or they have to complete the sale (of digital-imaging patents). Otherwise, they're not going to be able to continue."
Kodak typically generates the bulk of its cash during the run-up to the holiday season. But worries that it's burning through cash 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 -- its 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.
The company said it posted modest patent royalties in the quarter but didn't specify how much. 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 current quarter.
The four businesses remain a bright spot in the 131-year-old company's long and painful drive to recast itself into a reliably profitable player in the turbulent digital-imaging arena. Kodak is hoping they will 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. Since July, Kodak has been hawking a portfolio of 1,100 digital-imaging patents that many analysts think could fetch $2 billion to $3 billion.
A sale represents a sharp tactical shift. Kodak picked up just $27 million in patent-licensing fees in the first half of 2011 after amassing nearly $2 billion in the previous three years.
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 workforce has plunged to 18,800 from 70,000 in 2002.
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