Kodak 2011 Annual Report Download - page 12

If we cannot fund the Company’s liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, product development
efforts, strategic acquisitions, and investments and alliances; selling additional assets; restructuring or refinancing the Company’s debt; or seeking
additional equity capital. These actions may be restricted as a result of the Company’
s chapter 11 filing and the DIP Credit Agreement. Such actions could
increase the Company’s debt, negatively impact customer confidence in the Company’s ability to provide products and services, reduce the Company’s
ability to raise additional capital, and delay sustained profitability. We cannot assure you that any of these remedies could, if necessary, be affected on
commercially reasonable terms, or at all, or that they would permit us to meet the Company’s scheduled debt service obligations. The Company’s DIP
financing agreement requires that we use certain proceeds from asset sales to make payments to secured lenders. In addition, if we incur additional debt,
the risks associated with the Company’s substantial leverage, including the risk that we will be unable to service the Company’s debt or generate enough
cash flow to fund the Company’s liquidity needs, could intensify.
The Company’s plans to raise cash proceeds from the sale of non-core assets and the potential sale of the Company’s digital imaging patent
portfolio may not be successful in raising sufficient cash, may be negatively impacted by factors beyond the Company’s control and may harm the
perception of us among customers, suppliers and service providers.
A number of factors could influence the Company’s ability to successfully raise cash through asset sales and the sale of the Company’s digital imaging
patent portfolio, including the approval of the Court and the Unsecured Creditors Committee under chapter 11, the process utilized to sell these assets, the
number of potential buyers for these assets, the purchase price such buyers are willing to offer for these assets and their capacity to fund the purchase, the
potential impact of an adverse judicial ruling in one of the Company’s litigation matters related to one or more of the patents in the digital imaging
portfolio, or the ability of potential buyers to conclude transactions and potential issues in the closing of transactions due to regulatory or governmental
review processes. One or more of these factors could negatively affect the timing of planned asset sales and the level of cash proceeds derived from the
sales which could adversely impact the Company’
s cash generation and liquidity. Further, there is no assurance that these plans will be successful in raising
sufficient cash proceeds or that the sale of certain of the Company’s assets, including the digital imaging patent portfolio, will not harm the Company’s
customers’, suppliers’ and service providers’ perception of us.
If we are unsuccessful with the Company’s strategic investment decisions, the Company’s financial performance could be adversely affected.
The Company has focused its investments on businesses in large growth markets that are positioned for technology and business model transformation,
specifically, consumer inkjet, commercial inkjet (including the Company’s Prosper line of products based upon the Company’s Stream
technology), packaging solutions, and workflow software and services. While we believe each of these businesses has significant growth potential,
consumer inkjet, commercial inkjet, and workflow software and services also require additional investment. The introduction of successful innovative
products and the achievement of scale are necessary for us to grow these businesses, improve margins and achieve the Company’s financial objectives. If
we are unsuccessful in growing the Company’s investment businesses as planned, the Company’s financial performance could be adversely affected.
The Company’s failure to implement plans to reduce the Company’s cost structure in anticipation of declining demand for certain products or
delays in implementing such plans could negatively affect the Company’s consolidated results of operations, financial position and liquidity.
We recognize the need to continually rationalize the Company’s workforce and streamline the Company’s operations to remain competitive in the face of
an ever-changing business and economic climate. If we fail to implement cost rationalization plans such as restructuring of manufacturing, supply chain,
marketing sales and administrative resources ahead of declining demand for certain of the Company’s products and services, the Company’s operations
results, financial position and liquidity could be negatively impacted. Additionally, if restructuring plans are not effectively managed, we may experience
lost customer sales, product delays and other unanticipated effects, causing harm to the Company’s business and customer relationships. The business plan
associated with the Company’s chapter 11 reorganization is subject to a number of assumptions, projections, and analysis. If these assumptions prove to be
incorrect, we may be unsuccessful in executing the Company’s plan, which could adversely impact our financial results and liquidity. Additionally, the
Company’s ability to execute restructuring within the entities filing for chapter 11 is subject to the approval by the Unsecured Creditors Committee and
Bankruptcy Court. Finally, the timing and implementation of these plans require compliance with numerous laws and regulations, including local labor
laws, and the failure to comply with such requirements may result in damages, fines and penalties which could adversely affect the Company’s business.
There can be no assurance that the Company will be able to meet the requirements under our Debtor-in-Possession Credit Agreement.
In addition to standard financing covenants and events of default, the Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) also provides
for (i) a periodic delivery by the Company of various financial statements set forth in the DIP Credit Agreement and (ii) specific milestones that the
Company must achieve by specific target dates. In addition, the Company and its subsidiaries are required not to
•
we will realize cost savings, earnings growth and operating improvements resulting from the execution of the Company’
s chapter 11 business and
restructuring plan; or
•
future sources of funding will be available to us in amounts sufficient to enable us to fund the Company’s liquidity needs.
11