Eastman Kodak Company (KODK) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Eastman Kodak Company. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to Jim Continenza, Chief Executive Officer of Eastman Kodak Company. Mr. Continenza, the floor is yours. Hello, and welcome to the Annual Meeting of Shareholders of Eastman Kodak Company. Please -- no, go ahead, sir.

Okay. Sorry, everyone. Welcome. The meeting is now called to order. It is my pleasure to welcome you to Kodak's 2021 Annual Meeting of Shareholders, which is the company's 118th Annual Meeting. We are pleased to be able to facilitate safe participation in this annual meeting by hosting it virtually again this year in light of the ongoing COVID situation. This format also allows more convenient participation by more shareholders. I would like to recognize our Director nominees, along with myself, standing for reelection today. Those Director nominees are Philippe Katz, Jason New, Darren Richman. During the past year, our directors demonstrated their continued strong commitment to our company, to our shareholders by playing a very active role in a number of decisions and activities. I'd like to thank each and every one of them for their valuable contribution, and helping us guide this business has been a team effort. Three of our existing directors, Jeffrey Engelberg, George Karfunkel, William Parrett will not -- excuse me, were not nominated for reelection. At this time, I'd like to thank Jeff, one of the smartest, hardest, most supportive directors I've ever worked with; George Karfunkel, one of the smartest businessmen and a mentor to me, humble and kind and really helped drive this business; and then Bill Parrett, and I don't know what I can say. Those are the longest standing members, helped the company emerge. They're my partners since I've been here, Head of Chair of the Audit Committee, helped guide the company to where we are today. And I can sincerely say without Bill's participation and support, I don't think we'd be where we are today. So thank you, Bill, for your long-term service and staying with the company. With that being said, I'd like to also now recognize our new Director nominees standing for election for the first time. Those Director nominees are Thomas Golisano, Kathleen Lynch and Michael Sileck, Jr. I look forward to working with these talented individuals as we continue to strengthen and grow Kodak. Their skill set is what's needed for the new journey we're about to take to turn Kodak into a growth company. Next, I would like to introduce Roger Byrd, General Counsel, Secretary and Senior Vice President of the company. I have delegated to Roger the authority to conduct the remainder of the meeting -- excuse me, to -- the remainder of the business portion of the meeting. Roger?

Thank you, Jim. I would like to acknowledge Dave Bullwinkle, the company's Chief Financial Officer and Senior Vice President, who is also in attendance today. Denisse Goldbarg, interim Chief Marketing Officer of the company, is also participating and will be processing any questions received. In addition, I'd like to introduce you to Sean Lynch, coordinating partner at Ernst & Young LLP, the independent accountants of the company. As noted in the proxy statement, a representative of Ernst & Young is in attendance today to respond to appropriate questions. Janet Moor of Computershare, who will be acting as our inspector of election for this meeting, is also in attendance. She will certify the voting results and has already executed her oath of office. Jim and I are proxies named by the company for this meeting. We will vote the shares of those shareholders who have authorized us to do so in the manner they have stipulated. The proxy statement relating to this meeting was distributed in accordance with U.S. Securities and Exchange Commission and New York Stock Exchange rules with a copy of the company's annual report. If you need a copy of the annual report or the proxy statement, you can access them by clicking on the Annual Meeting Materials link on the left side of the meeting center screen. As noted in the notice and proxy statement, the record date for voting at this meeting was the close of business on March 29, 2021. A list of the shareholders on the record date is available to our shareholders by following the link towards the bottom of this page. I have received an affidavit of mailing showing that notice of this meeting was given. A copy of both the notice and the affidavit will be incorporated into the minutes of this meeting. There are 78,503,476 shares of our common stock and 750,000 shares of our Series C convertible preferred stock eligible to vote at this meeting. Because each share of the Series C preferred stock is convertible into 10 shares of common stock, and holders of preferred stock are entitled to the number of votes equal to the number of full shares of common stock into which such shares could be converted, a total of 86,003,476 votes are entitled to be cast at this meeting. Janet Moor of Computershare, our inspector of election, has reported to me that shares corresponding to 56,758,373 votes are represented in person or by proxy, constituting 66% of the votes entitled to be cast. Therefore, we have a quorum present and we will proceed with the meeting. I direct your attention to the rules of conduct set forth for this meeting. These are made available to each shareholder in the Files section in the lower left of your screen. We ask that, in fairness to all shareholders attending this meeting, you honor these rules. As noted by the operator, persons participating as shareholders may submit questions or comments at any time by clicking on the message icon located in the upper right side of the meeting center screen. Persons participating as guests do not have this functionality. Now here's the agenda for today's meeting. First, we will consider and act upon items of official business as outlined in our proxy statement. The proposals to be voted on are: the election of directors; an advisory vote to approve the compensation of our named executive officers; the approval of the first amendment to the company's amended and restated 2013 Omnibus Incentive Plan; and the ratification of the Audit and Finance Committee's selection of Ernst & Young LLP as our independent registered public accounting firm. The company has not received notice from any of its shareholders as required under its bylaws of any other matter to be considered at today's meeting. Therefore, no other proposals may be properly introduced by shareholders. After we have acted on the official business matters, I will report the preliminary results of our voting as tabulated and verified by our inspector of election. I will then adjourn the formal business portion of the meeting. Following that, Jim Continenza will provide a state of the business summary. I will now provide a description of the matters to be voted on at today's meeting. The first proposal is the election of Directors. The Board of Directors recommends that the following persons be elected to serve as Directors until the 2022 Annual Meeting of Shareholders or until their successors are duly elected and qualified: James V. Continenza, B. Thomas Golisano, Philippe D. Katz, Kathleen B. Lynch, Jason New, Darren L. Richman; and Michael E. Sileck, Jr. The qualifications of the candidates are described in detail in our proxy statement The second proposal is the advisory vote to approve the compensation of our named executive officers. An advisory vote is not binding on the company. However, the Board will duly consider the results of the advisory vote. The third proposal is for the approval of the first amendment to the amended and restated 2013 Omnibus Incentive Plan. The terms of the amendment are described in our proxy statement. The final proposal is the ratification of the Audit and Finance Committee's selection of Ernst & Young LLP as our independent registered public accounting firm. Those are the matters on which we will be acting at the meeting. Denisse, have we received any questions from shareholders concerning the matters to be voted on?

No, we have not received any questions.

Thank you. It's now 1:10 and the polls are now open. If you have not voted or wish to change your vote, you may do so now by clicking on the link provided online. Any shareholder who has already voted and does not want to change their vote does not need to take any further action. We'll wait for just a moment to allow people to cast votes. [Voting]

The online voting will now be closed. The proxies are in the possession of the inspector of election, who will count the votes. The preliminary report of the inspector shows that the Director nominees named in the proxy statement have been elected. Additionally, the preliminary report of the inspector shows that a majority of the votes cast were cast in favor of the advisory vote to approve the compensation of our named executive officers in favor of approving the first amendment to the amended and restated 2013 Omnibus Incentive Plan and in favor of the ratification of the Audit and Finance Committee's selection of Ernst & Young LLP as our independent registered public accounting firm. This concludes the business portion of the meeting. I am aware of no other business that should be brought before this meeting and, accordingly, hereby adjourn the meeting. I would like to note that the flexibility to conduct this meeting virtually is based on temporary relief from New Jersey's in-person meeting requirements that would apply but for the current state of emergency declared by the Governor of New Jersey. This flexibility may not be available in future years unless New Jersey further amends its laws. The company intends to hold virtual annual meetings whenever permitted. The proxy statement for next year's annual meeting will describe how that annual meeting will be conducted. Next, we will move to a brief summary of the state of the business. Before I turn the meeting over to Jim, we want to advise you that during today's presentation, we'll be making certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. All forward-looking statements, such as when describing what Kodak believes, expects or anticipates and similar expressions, are based upon Kodak's expectations and various assumptions. Future events or results may differ from those anticipated or expressed in the forward-looking statements. Important factors that could cause actual events or results to differ materially from these forward-looking statements include, among others, the risks, uncertainties and other factors described in more detail in Kodak's filings with the U.S. Securities and Exchange Commission from time to time. There may be other factors that may cause Kodak's actual results to differ materially from the forward-looking statements. All forward-looking statements attributable to Kodak or persons acting on its behalf apply only as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements included or referenced in this presentation. Kodak undertakes no obligation to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. I'll now turn the meeting back over to Jim Continenza to provide the overview of the state of the business.

Thank you, Roger. We're going to start out with Kodak at a glance. 2020 revenues of $1 billion, approximately 4,300 employees with global operations. Next slide. We are committed to One Kodak. When we came in 2 years ago, we were bifurcated, confusing our customers, hard to do business with. We put a customer-first model in place and we moved to One Kodak. Next slide. We showed our commitment to the print industry. We focused on profitable solutions, print that pays and environmental sustainability. We want to be the industry leader, and we take that seriously. Next slide. We are focused on creating long-term value. Our existing strategy -- next slide, sorry. Our existing strategy over the last 2 years, we are on track with our 5-year plan. The accomplishments to date materially fixed our balance sheet and financial foundation with a series of financial transactions that provided access to new capital, address maturing obligations and strengthen the company's ability to invest in strategic growth opportunities. As I said, we created one organization all under One Kodak. This structure is a customer-first model. And yes, we put our employees equally as important but we all know we're here to service our customers. We established clear focus on the core business: print, advanced materials and chemicals. We reduced nonessential spending, again, all spending around our core competencies. We completed acquisitions of a small couple of print foundations to help continue to build out our print area, one in the plates and in the CTP area. We're going to continue to look for those opportunities. Next slide. Executing on our strategy. The next phase of our plan, we will continue to focus on our customers, putting them first, driving products that they need, taking their feedback, listening to the analysts in the industry that we have a council put together and a council with our largest customers. We're going to invest in growing our core business. We're going to launch new initiatives, again, working off of our core competencies, skill set and assets. We're going to invest back in our infrastructure to make Kodak more efficient and easy to do business with. We've invested in the front end with our CRM products. Now we're investing in the back end. We're going to build a world-class service organization. We are going to bring AI and other initiatives to our customers to make them more efficient, more profitable and new technologies to better serve the equipment. We are further going to refine the sales organization, which has been ongoing the last 2 years, to better serve our customers and generate profitable revenues. We're going to focus on hiring and making acquisitions in key areas to support growth. And something I haven't said in a long time, we currently have over 50 openings in Eastman Business Park alone. I'm excited about the opportunity to continue to grow this business. We're going to continue to increase our environmental sustainability in the print industry. And overall, we are going to lead that initiative, whether it be through water-based inks, process-free plates. Even internally inside of the park on how we develop and build our products, we want to be the leader in this area. It's something we take very seriously. And if COVID has taught us anything, we are one planet. And whatever happens anywhere else happens here. We are interconnected. So Kodak is going to lead that initiative. Next slide. Recent key accomplishments. Our number of priority -- our #1 priority was to maintain the safety of our employees and our customers and continue to contribute to the country during this pandemic. Every Monday, we start our meetings with the safety of our employees. We want to mitigate some of the impact of the pandemic through cost savings. We included furloughs and pay reductions. I want to thank our employee base for graciously accepting this and helping us make it through this tough time. We ended the year with a cash balance of $196 million, generated cash in the third and fourth quarter of 2020, materially reduced net debt, continued to invest in our core business. And it starts with chemicals, and we work backwards from there. We won 7 prestigious innovation awards in our printing and digital packaging businesses, 7. It's a great accomplishment for the team and things that we put out in the market. Next slide. Q1 2021 financial highlights. Revenues for Q1 2021 of $265 million, a slight decrease of $2 million compared to Q1 2020. This is during the pandemic. Cash performance. Ended quarter 1 with a cash balance of $401 million, up from December 31, 2020 cash balance of $196 million, again, building the infrastructure and having the right debt structure and financial structure to run our business. Performance in key product areas. Our volume for KODAK SONORA Process-Free Plates grew by 8%. Annuity revenues for KODAK PROSPER inks platform grew by 12% year-over-year for the quarter. That's just the beginning of where we need to go, but we're going to continue to focus on our core business and our core assets. With that, I want to thank everyone for attending the meeting. Now I'd like to turn it back to Roger Byrd.

Thanks, Jim, and thanks, ladies and gentlemen, for participating today. This concludes the meeting. Thank you for your interest in Eastman Kodak Company.

Ladies and gentlemen, this concludes today's meeting. You may now disconnect. Everyone, have a wonderful day.