Eastman Kodak Company (KODK) on Q1 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Eastman Kodak Q1 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. And apologies, there will be no question-and-answer session for this call. I would now like to hand the conference over to your speaker today, Paul Dils. Please go ahead. Paul Dils: Thank you, and good afternoon everyone. I am Paul Dils, Eastman Kodak Company's Chief Tax Officer and Director of Investor Relations. Welcome to Kodak's first quarter 2021 earnings call. At 4:15 p.m. this afternoon, Kodak issued its press release and financial results for the first quarter 2021. You may access the presentation and the webcast for today's call on our investor center at investor.kodak.com. Jim Continenza: Welcome everyone, and thank you for joining the first quarter earnings call for Kodak. I'd like to start by saying I'm pleased with the progress we've made during the past two years. Actions we have taken to strengthen our balance sheet, focus on core customers, develop sustainable solutions, and continue investing in innovations have created a foundation for growth and long-term value creation. An example of some of our recent achievements are we exceeded our revenue forecast and ended the first quarter 2021 with $401 million of cash and cash equivalents, resulting from our strategic initiatives, which we began more than two years ago as part of our long-term strategy, including the financing transactions announced on March 1. David Bullwinkle: Thanks Jim and good afternoon. Before we get into the details for the quarter, I would like to make a few general comments. The company's performance is beginning to turn the corner as a result of the many strategic efforts we have taken based on the implementation of our long-term strategy more than two years ago. We continue to recognize improvements in volumes, our cost structure and gross profit margins. We expect to see this continue going forward. We are very pleased with the improved business performance and the strength of the balance sheet. Turning to slide 6 as discussed on our last call, on March 1st, we 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 our core businesses. First, Kodak entered into financing agreements with Kennedy Lewis Investment Management. Kennedy Lewis 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 mature in five years and their interest comprised of 8.5% payable in cash quarterly and 4% PIK interest. The company has also issued Kennedy Lewis $25 million of 5% unsecured convertible promissory notes due May 28 2026. The convertible notes bear 5% PIK interest with a conversion price of $10 per share and have a mandatory conversion option by the company if the share price equals or exceeds $14.50 for 45 of 60 trading days. Additionally, Kennedy Lewis has purchased one million shares of the company's common stock at a purchase price of $10 per share. As part of the agreement, Kennedy Lewis holds the right subject to certain conditions for three years or until they hold less than 50% of the initial principal amount of the term loans to nominate one person to be elected to the company's Board of Directors. With the proceeds from these transactions, Kodak repurchased 1 million shares of the company's 5.5% Series A convertible preferred stock due to mature on November 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 1 million shares of Series B convertible preferred stock in exchange for the remaining Series A preferred stock for a total of $100 million. The Series B preferred stock has a 4% quarterly dividend payable in cash, with a mandatory redemption in five years and 91 days. The conversion price is $10.5 per share, with a mandatory conversion option by the company, if the price equals or exceeds $14.50 for 45 of 60 trading days. Jim Continenza: Thank you, Dave. In summary, the steps we have taken in the last few years strengthening our balance sheet, establishing a customer-first approach and continuing to invest in innovation have created the foundation for growth. We continue to execute on those strategies to create long-term value for our shareholders and our employees. Thank you for attending the call and your continued interest in Kodak. End of Q&A: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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