Business Context and Reporting Period
Company: Eastman Kodak Company (KODK)
Filing Type: Form 8-K (Current Report)
Date of Report: September 12, 2019
Principal Executive Offices: Rochester, New York
This filing reports the adoption of a Tax Asset Protection Plan and related amendments to the Company's Certificate of Incorporation designed to protect Net Operating Loss (NOL) and foreign tax credit carryforwards.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. It focuses exclusively on corporate governance and securities structure.
Capital Structure Data Provided:
- Common Stock Issued (as of Sept 9, 2019): 43,741,805 shares
- Common Stock Outstanding: 43,078,185 shares
- Treasury Stock: 663,620 shares
- Shares Reserved: 49,210,627 shares (for employee benefit plans, Series A Preferred Stock, and convertible notes)
Material Changes
On September 12, 2019, the Company implemented the following material changes:
- Adoption of Tax Asset Protection Plan: A plan was adopted to discourage any person or group from becoming a 10% shareholder or from acquiring more than 1,000,000 additional shares if they are already a 10% shareholder. This threshold is higher than the standard 5% to account for the aggregation of Series A Preferred Stock and convertible notes for tax purposes.
- Dividend Declaration: A dividend of one "Right" per outstanding share of Common Stock was declared to holders of record as of September 12, 2019.
- Charter Amendments:
- NOL Charter Amendment: Restricts the transfer of Common Stock if it results in beneficial ownership of 10% or more, or an increase of over 1,000,000 shares for existing 10% shareholders.
- Series A Preferred Stock Amendment: Adjusts the Conversion Rate in the event of Rights exercise and restricts transfers of Series A Preferred Stock prior to the Plan's expiration.
Guidance, Outlook, and Risks
Purpose of Action: The measures are intended to minimize the risk of an "ownership change" under U.S. federal income tax laws, which would significantly limit the Company's ability to utilize Tax Benefits (NOLs and foreign tax credits).
Terms of the Rights:
- Exercise Price: $10.00 per Right (subject to adjustment).
- Underlying Security: One one-thousandth of a share of Participating Preferred Stock.
- Expiration: The earliest of the Exchange Time, Redemption Time, November 15, 2019, or when the Board determines Tax Benefits are no longer available.
- Flip-in Provision: If an "Acquiring Person" (10%+ owner) is identified, Rights (excluding those held by the Acquiring Person) may allow holders to purchase Common Stock with a market value equal to twice the Exercise Price.
- Redemption: The Board may redeem all Rights at $0.001 per Right at any time.
Risks and Contingencies:
- There is no guarantee that the Plan and Charter Amendments will prevent an ownership change.
- Until the "Separation Time," Rights are attached to Common Stock and transfer with it.
- Right holders have no voting or dividend rights solely by virtue of holding Rights.
Investor Verification Checklist
- Verify the specific definition of "Acquiring Person" in the full Tax Asset Protection Plan to understand the exact triggers for the poison pill mechanism.
- Confirm the current status of the Company's Net Operating Loss (NOL) carryforwards and the estimated tax value at risk.
- Review the terms of the 5.50% Series A Convertible Preferred Stock to understand how the conversion rate adjustments impact existing preferred shareholders.
- Monitor the expiration date of November 15, 2019, and any potential Board actions to redeem the Rights prior to this date.
- Check for any subsequent filings regarding the listing and registration of the Rights on the New York Stock Exchange.