Kodak Alaris Update: A Positive Move for Film Photography

As you may have heard, the UK Pension Protection Fund (PPF) sold Kodak Alaris (KA) to Kingswood Capital Management LP (KCM) on August 5th. As a film photographer and former corporate finance executive, I follow industry news closely and with great interest.

As background KA consists of 2 business units: Kodak Alaris & Kodak Moments. While both businesses were purchased, I’ll focus on the film business (Moments) versus the document management business (Alaris). The 2 units are very different IMO so they will likely be managed differently by KCM and may end up going different routes.

While information on the purchase is limited, and PPF was never very transparent about its business operations, I believe this is a beneficial move for both KA and the film photography community.

Why is this a good move? Let me explain:

1. PPF’s Focus: PPF was not a film photography-oriented company. Their primary goal was to maximize cash flow to meet Kodak UK’s pension obligations. Moments is essentially a distributor and product management business. Therefore they needed to excel in supply chain, marketing, price management, social media, and industry promotion. However, their financials did not reflect significant success in these areas.

2. KCM’s Expertise: KCM is a Los Angeles-based venture capital firm that acquires companies to help them reach their full potential. They do this by providing capital, enhancing operations, and identifying growth opportunities. Their business model is standard for venture capital, aiming to provide value to their investors through cash flow or profitable sales of acquired companies.

3. KA Different Businesses: The 2 units operated in different markets and had unique supply chains and management needs. The film business is essentially distribution and supply chain. The document management business is customer development & management, operational management, software & significantly more competitive. Therefore, these businesses can be managed differently within KCM.

Benefits for KA under KCM’s ownership:

1. Experienced Management: KCM brings a management team experienced in analyzing and managing mid-sized companies. I am of the opinion to maximize value from KA they will manage them based on experience with other companies in their portfolio.
2. Profitability and Value: They will work with KA to enhance profitability and overall long term value.
3. Access to Capital: KCM has the necessary capital to grow the business.
4. Strategic Discussions: It’s likely they had prior discussions with Kodak or ensured the Kodak contract is fully assignable.
5. Maximizing Value: They may maximize the value of the Moments business (film) and potentially sell it to another film or photography-oriented company, possibly even back to Kodak or to a company like CineStill (both KCM & CineStill are LA based).

In conclusion, I believe this acquisition is a positive development for film photography.

I’ve reviewed the year end 2023 financials for Kodak. Why? Really no reason except 1) financial analysis was one of the things I did during my corporate life & 2) curiosity as a film photographer. The important facts about financial analysis are to avoid the corporate PR & scripted talking points and simply focus on the facts and numbers. The numbers tell all.

After examining Kodak's year-end financials for 2023, Kodak’s consumer and motion picture film business, housed within its Advanced Materials & Chemicals unit (AMC), comprise 2 of 4 segments: Industrial Film & Chemicals (IFC) and Motion Picture film.

Kodak manufactures and directly markets Motion Picture film (Vision3), whereas consumer 35mm and 120 photographic films are NOT SOLD by Kodak but by Kodak Alaris, a separate entity owned by the UK Kodak Pension Plan. Kodak Alaris holds the exclusive contract for selling all consumer film. Kodak Alaris is listed as a CUSTOMER within Kodak’s AMC unit.

In terms of financial performance, Kodak's total revenue for the 2023 was $1.17 billion, reflecting a 7% decline from the previous year. The AMC unit totaled $255 million of Kodak’s total sales. Earnings from operations are a modest $4 million, with a reported net income of $75 million, largely attributed to non-business related activities. The IFC unit totaled $201 million. On a positive note, Kodak maintains a healthy cash balance, crucial for business operations.

Within the AMC unit, IFC contributes $201.1 million, with sales to Kodak Alaris totaling $86.7 million, representing a small fraction (7.8%) of Kodak's total sales. Additionally, Vision3 sales, part of the AMC but outside of IFC, likely amount to less than $20 million.

Despite Kodak's acknowledgment of the importance of consumer and motion picture film, challenges such as equipment condition, staffing levels, and supply chain constraints have hindered capacity, necessitating additional future capital for improvement.

In conclusion, while Kodak remains a very important player in the film industry, producing film both for consumers (sold to you through Kodak Alaris) and motion pictures, the business's financial returns are not substantial. However, as long as demand persists, Kodak will continue to support the business. The next step will be to review the financial condition of Kodak Alaris. 

Stay tuned!