Kodak: Melting Ice Cube With No Growth And Hidden Liabilities Offers Substantial Downside
Summary
- Kodak’s core business segments continue to shrink due to unattractive technologies in secular decline.
- Kodak is mischaracterized as a “growth company” or “technology company” despite its obsolete product line, continued decreasing sales and earnings, and unrealistic EBITDA guidance.
- The optimistic view on “hidden assets” may actually be described as potential hidden liabilities.
- Management is overly promotional, presents financial reports in a deceptive manner and exhibits other red flags.
- Valuation is rich, and fair value is likely 25% to 50% lower than current levels.
Kodak (NYSE:NYSE:KODK) - Common Stock Short
Date: 12/28/15
Price: $13.00
Timing: 6-12 months
Catalyst: Increased investor scrutiny; earnings guidance reduction
In this report, we will illustrate that Kodak's operating segments are unattractive, the earnings guidance and anticipated growth are unrealistic, hidden assets are of little value and may actually be hidden liabilities, management is excessively promotional and the valuation is unattractive.
Kodak's core business segments continue to shrink due to unattractive technologies in secular decline
Company Background, In-Court Bankruptcy Restructuring and Post-Reorganization Overview
Eastman Kodak was once a blue-chip stock that memorialized the phrase "Kodak moment" as a leader in photography and film technology. Founded by George Eastman in 1892 in Rochester, New York, Kodak dominated the film industry for most of the 20th Century, until the digital age revolutionized technology and left traditional film-based photography obsolete. While Kodak was actually responsible for the development of the first digital camera in 1975, the company's cultural of bureaucracy and complacency caused Kodak to not actively pursue the research or development of the product, and starting in the 1990s, the company began to suffer significant strategic and financial challenges as the digital camera industry took off.
As a result of the continued threats posed by the evolving technological landscape, and despite several unsuccessful attempts to cut costs and turn around the business, Kodak filed for bankruptcy in the United States Bankruptcy Court in New York in January 2012.
The company began its reorganization process by engaging investment bankers to execute what it thought, or perhaps hoped, would be a quick and relatively painless restructuring process whereby it would sell its valuable digital imaging IP assets, right-size its capital structure, and emerge as a leaner, more financially sound business. The "EmergeCo" business was expected by management to be focused on its core printing and scanning operations going forward. However, the auction for Kodak's imaging patents garnered substantially less interest than expected, and the company ultimately sold the portfolio for approximately $500 million, much lower than the $2.6 billion purchase price that it initially anticipated.
As a result, Kodak was forced to sell additional segments of its business in order to satisfy its creditors' claims and emerge from bankruptcy. Specifically, Kodak had to hand over the keys to its core personalized imaging "PI" (photo paper, kiosks, disposable cameras) and digital imaging "DI" (scanners and software) businesses to the UK Kodak Pension Plan (KPP) in satisfaction of large pre-petition liabilities that had blocked the path to Ch. 11 emergence.
In September 2013, Kodak emerged from bankruptcy as a much smaller, low-growth and capital intensive commercial printing business, with a dying consumer film business and a hodgepodge of other assets. Despite this relatively unattractive collection of businesses, the new company debuted in the public markets at the height of the 2013 bull market, with an equity market capitalization north of $1 billion and analysts touted the stock as a "turnaround story" with "high growth segments" and "hidden assets." However, as discussed in greater detail below, Eastman Kodak today is nothing more than a shadow of its past: a smaller, unattractive pool of low or no growth assets whose intrinsic value will continue to decline with emerging competition.
Current Business & Segments
Kodak today is currently comprised of seven different reportable segments. While the business is discussed in more depth below, it's important to clarify that Kodak is not the "growth" story or "turnaround opportunity" that is often referred to as by analysts and the management team. The segments can more accurately broken down into 1) mature businesses that are profitable but in secular decline (some more rapidly than others) and 2) "growth" businesses with some sales growth but either insignificant or negative earnings contribution. Given this profile, Kodak is likely to continue to disappoint analysts and investors.
(Source of all images: Analyst Day presentation)
PSD - Printing Segment Division
Kodak's Printing Segment is its largest division, contributing 60% to the company's sales and 80% to its operational EBITDA on a trailing twelve-month basis.
In this segment, Kodak manufactures and sells equipment that transcribes images and text onto aluminum plates, which are subsequently used to transfer these images onto papers, signs and packages.
Customers of these plates and related equipment include large graphics and commercial printing companies, as well as smaller "mom-and-pop" printing businesses. To understand Kodak at a high level, this is its core business, and it continues to suffer declines in sales growth for a variety of reasons. As a result of competitive industry pricing, for example, there has been significant pricing erosion on plate contracts, with an estimated annual pricing deterioration of at least 4%-5% annually.
Additionally, due to a reduction in Kodak's EPS (Electrophotographic Printing Solutions) business, driven largely by the fact that this is an older technology with decreasing industry demand, the PSD segment has suffered from continued top line declines.
Despite continued attempts to turn this segment around, continued flattish volume numbers coupled with the pricing deterioration have caused continued underperformance. Yet, Kodak still boasts of the segment's "strong performance" in its earnings releases. For example, in the most recent quarter's press release, the company highlighted its SONORA Process Free Plates and noted the product's volume growth of 41%, despite the fact that SONORA was less than 10% of plate volume for 2014 and continues to be a small piece of the segment.
CFD - Consumer and Film
The Consumer and Film segment is largely composed of Kodak's legacy consumer inkjet business which provides ink and cartridges for printers that it no longer sells*. This very mature segment is operating in runoff mode due to the decreasing installed base of its core printers and exacerbated product obsolescence. Over the past year, this segment's sales have decreased at a rate of 20%-30% each quarter, but management expects this growth rate to approach negative 40% year over year. This is particularly disheartening when one realizes that out of Kodak's LTM operational EBITDA of $110 million, $55 million or exactly half comes from this segment. However, please note that there are segments at Kodak that contribute negative EBITDA amounts, so it is important to refer to the contribution of each segment to understand the CFD contribution.
*"The company made a decision years ago to stop selling printers, so there's only so many cartridges that we continue to sell, and that declines about 40 percent or more a year." 2015 Analyst Day.
Note: Q3 2014 CFD EBITDA 53% of total when excluding one-time IP sale.
The Consumer and Film segment also houses Kodak's entertainment film business, where it manufactures and sells analog movie film to studios in the entertainment industry. While the company also sells film to customers in the military, electronics and graphics industries, this is a breakeven business at best that offers no potential contribution to Kodak's earnings or EBITDA in the short or long term.
Lastly, this segment contains a brand licensing business whereby it allows others to use the Kodak name on certain consumer electronics products. However, similar to the entertainment film business, there will be little meaningful earnings contribution from here either. How many people would pay a significant sum of money to buy the brand of The Sharper Image, Radio Shack or Polaroid?
MPPD - Micro 3D Printing and Packaging
Unlike Kodak's PSD or CFD segments discussed above, its Micro 3D Printing and Packaging segment is one of its "growth" segments, comprised of a Flexographic Packaging business and 3D printing operations.
Flexographic packaging offers printing solutions to customers who print items such as snack bags, cartons and consumable packaging using Kodak's FLEXCEL systems. This segment's sales have experienced some growth, as the company continues to install FLEXCEL systems, thus driving higher plate volume sales.
However, the second portion of the MPPD segment is Kodak's early stage and unproven 3D printing business. The nascent 3D printing industry has been a large disappointment for innovative leaders such as 3D Systems (NYSE:DDD), Stratasys (NASDAQ:SSYS) and others. Kodak is positioned far worse than those peers, yet the company presents its 3D segment as a growth opportunity.
While Kodak thinks its 3D business can deliver positive EBITDA contribution by 2017, it is still unsure whether or not it has a product that can successfully go to market. In other words, the company thinks there could be an opportunity to sell this product, yet it has stretched that into EBITDA guidance as it talks about its ability to develop and sell these new technologies. Time will tell as to whether this can turn into a profitable business opportunity, but it isn't something anyone should count on.
These EBITDA guidance revisions are reflected in the slide to the right from Kodak's most recent analyst day in October. The company was forced to revise its 2016 expectations downward for a variety of reasons, but one of the most impactful drivers was its overly optimistic growth projections for the MPPD segment - specifically the 3D printing business. Banking unsuccessfully on this segment for large growth, the company had to retract its unrealistic expectations and reset to a lower and less promising EBITDA target for 2016.
EBPD - Eastman Business Park
Eastman Business Park very simply is a low-value asset that houses small businesses on Kodak's legacy campus in upstate New York. Kodak's promotional management team likes to boast about the size and value of the property by overlaying it on the picture of Manhattan to the right, as they did in their recent analyst day. However, real estate values in Rochester have nothing to do with those of Central Park in Manhattan, and this illustrates management's promotional nature.
Furthermore, for the entire year of 2014, this segment generated $1 million in operational EBITDA, and year-to-date through the third quarter of 2015, it has done the same. When management attempted to run a sale process for this segment, none of the offers were acceptable given that potential bidders would only have been interested in sale-leaseback type transactions where Kodak guaranteed a significant portion of the rent. Unfortunately, the geographic limitations of Rochester simply cause this asset to have very little value and certain liabilities associated with the property may actually turn it into a liability. As a result, this "great" opportunity to own real estate the size of Central Park is far from the attractive asset that the company describes.
Eastman Business Park's Insignificant Sales & EBITDA Contribution:
EISD - Enterprise Inkjet Systems
Kodak's Enterprise Inkjet Systems division is composed of a portfolio of commercial printing systems. It includes its PROSPER 1000 press system as well as additional black-and-white and color systems and components. Similar to other Kodak products which also have commercial applications, these systems serve the graphic communications, packaging and decorative markets. Also similar to other Kodak businesses, this segment loses money. In the most recent quarter, this segment reported operational EBITDA of negative $4 million. This has been this segment's trend for the past several years and is expected to continue given the faster-than-expected decline of its legacy Versamark product, as well as the expected continued investment in next generation PROSPER systems.
SSD - Software and Solutions
The bulk of Kodak's Software and Solutions segment is comprised of its United Workflow Solutions product, a print workflow management system that accounts for nearly 70% of the segment's revenues.
This software, however, is levered to the outdated and secularly declining computer to plates ("CTP") print system industry. As sales of these printing systems continue to deteriorate, it is expected that the accompanying software will as well. Additionally, the bulk of the segment's growth over the past year has come from increased government contracts that may not continue over the longer term. And lastly, this segment is relatively insignificant with 6% operational EBITDA margins and contributing only 7% of LTM operational EBITDA to Kodak.
IPSD - Intellectual Property Solutions
The last segment is Kodak's intellectual property "treasure trove," which appears to be running on fumes. While the company's patent portfolio generated a one-time sale in 2014 of $70 million in sales and $45 million in operational EBITDA, this nonrecurring transaction seems to have left the patent portfolio on its last legs.
In fact, most of Kodak's IP value left its patent portfolio after the digital imaging sale for $500 million during its bankruptcy. Former CEO Antonio Perez did everything he could to monetize the company's once valuable IP, leaving very little value leftover. Litigation, licensing deals and then a formal patent sale left little room for continued payouts or settlements. A Wall Street Journal article written as Kodak was heading into bankruptcy states, "Mr. Perez said Kodak will…no longer be able to litigate [the patents]-a strategy that Kodak has used to fund its expensive turnaround efforts." Further, Kodak's "licensing strategy brought in $1.9 billion from 2008 to 2010, but the flow of settlements dried up this year."
The majority of Kodak's remaining IP is related to its current printing technologies which are less attractive and in secular decline. While the company does still retain intellectual property in the toner space including electrophotographic patents, most of the remaining IP is primarily aligned with Kodak's current weak businesses. As a result, while analysts enjoy ascribing large and arbitrary values to the remaining IP portfolio, it appears that little value remains.
As illustrated above, the company's core business segments are weak and likely to face further decline.
Kodak is mischaracterized as a "growth company" or "technology company" despite its obsolete product line, continued decreasing sales and earnings, and unrealistic EBITDA guidance
When you put the whole picture together, Kodak is nothing more than a melting ice cube. The chart below shows the consolidated sales growth (or lack thereof) across the company's business segments over the last several quarters. As you can see, and as especially highlighted in its core segments such as Printing and Consumer & Film, the company has been struggling to generate top-line growth for quite some time.
Its key Printing Segment Division has been slowing down for a variety of reasons as discussed above, and Kodak's only other significant EBITDA segment contributor, Consumer & Film, is declining even more rapidly:
While there is some modest growth in the much smaller MPPD (Micro 3D Printing) and SSD (Software & Solutions) segments, given the size and relative contribution of these segments to overall Kodak, it will not be meaningful enough to turn the company around.
You can see this limited EBITDA contribution by the only growing segments below:
The chart above shows that in addition to the challenges facing Kodak's sales growth, its operational EBITDA performance has been very weak as well. As discussed below, given the company's lofty guidance which should continue to be revised downward, it appears unlikely that Kodak will be able to achieve its EBITDA estimates going forward.
Lastly, Kodak has struggled and will likely continue to miss its guidance. In the third quarter of 2015, it was forced to revise downward its expectations for 2016 EBITDA. However, rather than resetting to more conservative assumptions, management simply pushed their aggressive targets out one year to 2017.
Given the inherent issues with the company's business model - including lack of growth secular headwinds and weak competitive position - it appears that Kodak will continue to miss and revise downward its guidance, even using robust assumptions for growth and profitability:
The optimistic view on "hidden assets" may actually be described as potential hidden liabilities
While Kodak's core business is suffering from a variety of challenges related to growth and profitability, the bull case points to its "asset monetization" plans. It is more likely, however, that these "hidden assets" turn into hidden liabilities.
The most recent and largest "hidden asset" is Kodak's earnout potential from its 2007 sale of Carestream Health to Onex. Kodak sold this business in 2007 to Onex, and in connection (see p. 115) with this deal is entitled to 25% of the excess return over a 25% IRR that Onex realizes on this investment, with a cap at $200 million. While bulls were pleasantly surprised by this apparent windfall, there are two caveats: 1) Onex has not yet received its 25% IRR and 2) a liquidity event (which is unlikely) would need to occur for Kodak to receive a meaningful windfall.
In order for Kodak to realize value, Onex would either need to conduct another dividend recapitalization or sell the business. Given that Carestream is already carrying a net debt to EBITDA load of 5x, coupled with the fact that it already did a dividend recapitalization just two years ago, this option seems unlikely. Additionally, Onex ran an unsuccessful auction process for the business in 2013 where all potential bidders dropped out. Given that this business's underlying performance is also poor (its most recent quarter sales growth was -9%), it appears unlikely that there would be interest from a potential buyer, especially given the more difficult recent conditions in the high yield credit markets and regulatory restrictions on Wall Street banks providing LBO leverage above 6x debt/EBITDA.
Below is an analysis of Onex's potential IRR and the Kodak earn-out from an optimistic hypothetical 2016 sale valuing Carestream at $2.5 billion. For comparison, Carestream was asking for as much as $3.5 billion in its failed 2013 sale process, and EBITDA has declined by 7% since then and has not grown in the 9 years that Onex has owned the company.
Source: Onex public filings.
For these reasons, we think the Carestream earn-out is unlikely to be as valuable as management claims.
Brazil Industrial Park Property
Another potential "hidden asset" that Kodak talks about is its Brazilian Industrial Park property. While the company included a slide in its recent analyst day presentation about this property as a potential monetization opportunity, it failed to also discuss the sizable potential tax and litigation liabilities associated with this property.
According to public disclosures, the park has "received or been the subject of numerous governmental assessments related to indirect and other taxes in various stages of litigation, as well as civil litigation and disputes associated with former employees and contract labor."
Furthermore, Kodak has disclosed that its current unreserved portion of these potential liabilities is more than $40 million:
As of September 30, 2015, the unreserved portion of these contingencies, inclusive of any related interest and penalties, for which there was at least a reasonable possibility that a loss may be incurred, amounted to approximately $43 million."
Kodak has even posted a $5 million security deposit and has liens on these Brazilian assets due to this tax litigation. As a result, this "hidden asset" may actually be a hidden liability.
Rochester Industrial Park
When the company solicited interest in a potential sale of this property, no offers above $50 million were received, and all potential bids would have required guaranteed rent from Kodak under proposed sale-leaseback transactions. Kodak has tried to lease the space out and the firms that were interested included "blue-chip" companies such as Uni-Pixel (see "Uni-Pixel: Possible Securities Regulation Violations And A 109-Page Lawsuit Are Questioning Management's Credibility And UniBoss" and "Uni-Pixel: Bright Future Promised By Clouding The Gruesome Reality For The Less Informed").
There may be hidden liabilities at the Eastman Business Park in Rochester as well. In May 2014, the company came to an environmental settlement agreement with the New York State Department of Environmental Conservation and the New York State Urban Development Corporation*. Under the terms of this agreement an environmental remediation trust was established whereby Kodak would be liable for the first $49 million of any environmental liabilities, New York State would be responsible for the next $50 million and then Kodak would be responsible for 50% of any liabilities exceeding $99 million. Given the limited interest in the Business Park in a sale scenario, coupled with these potential environmental liabilities, this "hidden asset" may not carry the value that management often ascribes it.
* "The Company, the New York State Department of Environmental Conservation and the New York State Urban Development Corporation have entered into a settlement agreement concerning certain of the Company's historical environmental liabilities at Eastman Business Park through the establishment of a $49 million environmental remediation trust. Should historical liabilities exceed $49 million, New York State is responsible for payments of cost up to an additional $50 million. In the event the historical liabilities exceed $99 million, the Company will become liable for 50% of the portion above $99 million, which could have a material adverse effect on our financial condition."
Working Capital and Pension Underfunding
Two additional hidden assets that Kodak touts are its working capital potential and (ironically) its pension liability. While management talks about working capital as a positive source of free cash flow because of normalized payment terms post-bankruptcy, it is inappropriate to ascribe value to these non-recurring short term positive working capital inflows. Unlike a business with recurring negative working capital, Kodak requires working capital and any temporary cash inflows should not be capitalized in valuing the company's long-term free cash flow using a multiple.
Likewise, management tries to spin their pension status as a positive, highlighting that the discount rate used is lower than what some companies (such as Hewlett Packard) use. This point is largely irrelevant and does not address the fact that the company carries an underfunded pension and other post-retirement liability on its most recent balance sheet of $556 million. In addition, Kodak has had significant cash pension costs and management expects an annual pension cash outlay of $20 to $25 million going forward for several years.
Additionally, it is highly unlikely that another company would acquire Kodak and subsequently change its pension discount rate to reduce the liability. One can only imagine the reaction of Hewlett Packard shareholders to an acquisition based on changing pension accounting assumptions after HP's disastrous acquisition of Autonomy in 2011. Further, given the recent structural challenges in the printing industry, coupled with recurring earnings misses and changing priorities (e.g. Hewlett-Packard recently split into two entities and is unlikely to engage in M&A, Lexmark has put themselves up for sale), Kodak's pension is unlikely to be valued at a lower discount rate and therefore does not create additional hidden value.
Management is overly promotional, presents financial reports in a deceptive manner, along with exhibiting additional red flags
In addition to the struggling business segments and limited hidden assets, Kodak also comes with an overly promotional management team. The company held an analyst day for its current and prospective investors on October 23rd of this year, and in his opening remarks, CEO Jeff Clarke described Kodak as a technology company with differentiated science:
"So, Kodak is a technology company. Many of us think of it as a brand company …but today we are a technology company that differentiates with science. We're very different than many technology companies that you see today. We have deep underlying…patent history, science that makes our products significantly differentiated."
He then went on to discuss the printing segment and how the printing market is growing, stating, "so, you've got a half a trillion dollar market growing to $650 billion." Additionally, as evidenced in companies third-quarter earnings release Clarke continues to describe the company as a growth opportunity. From Kodak's most recent earnings release, he stated, "Q3 marked significant progress in Kodak's transformation…I'm pleased with the strong growth of our strategic product lines17." Later in the release the company states that, "Revenues in the third quarter of 2015 were $446 million, a decline of 21% from the third quarter of 2014" (emphasis added).
(Revenues declined 14% year-over-year even excluding the one-time IP revenues from the prior year.)
As you can see, there is a large inconsistency between the language that the company uses for its business performance and its actual reported numbers.
Questionable/Misleading Disclosure
In addition to the overly promotional nature of Kodak's management team, the company has also exhibited deceptive reporting standards. Earlier this year, Uni-Pixel exercised its right to terminate its supply agreement with Kodak for a variety of reasons, which separately may also be a reflection of the poor potential opportunities for Kodak's touch sensor 3D printing product that it will be attempting to go to market with over the next year. In connection with the Uni-Pixel termination, Kodak recognized a gain in third quarter of 2015 of $3 million:
"In the third quarter of 2015 a $3 million gain was recognized related to assets that were acquired for no monetary consideration as a part of the termination of the relationship with Unipixel. The gain was reported in Other operating income (expense), net in the Consolidated Statement of Operations. Other operating income (expense), net is typically excluded from the segment measure. However, this particular gain was included in the Micro 3D Printing and Packaging segment's earnings for the third quarter of 2015"
While GAAP reporting standards requires this one-time gain to be classified below the operating income line, Kodak deceptively moved this gain into its operational EBITDA figure for its 3D printing segment, giving the MPDD operational EBITDA a 50% boost from $6 million to $9 million. You can see this below in the reconciliation from non-GAAP MPPD EBITDA to GAAP earnings, which requires a $3 million add-back:
Furthermore, on Kodak's third-quarter 2015 earnings call, it inaccurately attributed the growth in the MPPD segment to FLEXCEL performance:
"Moving on to the Micro 3D printing and packaging division, which includes the FLEXCEL NX systems and plates as well as touch sensor film with the silver mesh and copper mesh technology. Revenues for division for Q3 were $32 million, flat with the same period a year ago. However, on a constant currency basis, revenues increased by $4 million or 13% from Q3 2014. On a constant currency basis, operational EBITDA improved by $5 million driven by the success of the Kodak's FLEXCEL NX system. FLEXCEL NX packaging business has strong momentum."
While Kodak repeatedly talks about "the improvement in the quality of [its] earnings" and how "the quality of [its] earnings is materially different than six quarters ago," it just attributed FLEXCEL systems for the $5 million in growth, when 60% of the EBITDA increase came from a one-time non-GAAP gain. On the Q3 call, the company also stated that, "when adjusted for the non-recurring intellectual property revenues realized in the third quarter of 2014 and foreign exchange impact year-over-year, total company Operational EBITDA improved by $9 million." However, and as we now know, 33% of the EBITDA improvement came from a one-time Uni-Pixel gain on sale. Will it remove the $3 million gain next year to show an illusion of growth, like it did with its one-time IP gain last year?
Augusta Columbia Capital
In addition to the overly promotional language and deceptive financial reporting, Kodak's management team has other red flags. Current Kodak CEO Jeff Clarke's previous employer was a private equity firm named Augusta Columbia. According to Kodak's website, "Prior to joining Kodak, Clarke was a Managing Partner of Augusta Columbia Capital ((ACC), a private investment firm he co-founded in 2012." Augusta Columbia was acquired earlier this year by One Equity Partners, J.P. Morgan's former middle-market private equity division, and its revised website has been essentially shut down, archived screen shots of the old Augusta Columbia website reveal some interesting details:
Mr. Clarke had remained on Augusta's website under the investment team page while serving as a public company CEO at Kodak as recently as August of this year. Sources have discussed that Mr. Clarke was an active participant in fundraising meetings for Augusta Columbia's most recent private equity fund. It is unclear how much time CEO Clarke spends at Augusta Columbia but this is just another red flag displayed by management that should make any potential Kodak investor think twice.
Summary
In sum, Kodak faces a variety of challenges that will continue to impact its business segments and the company's stock price. Its core businesses are deteriorating - some very rapidly - and over time sales and EBITDA will continue to wane. This opportunity exists because the market has bought into the false story that Kodak is a "technology company" and "turnaround story" with several hidden assets. Additionally, the market seems to be giving Kodak's management team credit for unrealistic guidance numbers - specifically the 2017 figure - which seems unlikely to attain.
Lastly, we have seen that Kodak's management team is excessively promotional and very liberal with its reporting standards. If one examines the true earnings power of this business and takes a view on its unattractive growth outlook across each segments going forward, it seems clear that this company is and will continue to remain challenged over the short, medium and long term.
Valuation is rich and fair value is likely 25% to 50% lower than current levels
Valuation
Kodak trades in line with peers despite far worse growth, margins and long-term outlook:
FCF Conversion
Kodak's EBITDA overstates the true free cash flow generation capabilities of the company:
Sum-of-the-parts analyses are necessarily imprecise and subject to significant subjectivity, especially for a company with many unprofitable segments that can be given arbitrary "option" value. Nonetheless, a fair estimate of the assets and liabilities of Kodak suggests that the company's value is significantly below the current share price. A more straightforward analysis of the long-term earnings power suggests an even lower price.
Onex/Carestream Health Figures
Initial Purchase
Onex Corporation (TSX:OCX) announced today that it has completed the $2.6 billion (US$2.35 billion) acquisition of Eastman Kodak Company's Health Group, renamed Carestream Health, Inc.
The equity investment of approximately $521 million (US$471 million) to complete the acquisition will be made by Onex Partners, Onex' large cap Private Equity Fund. The investment by Onex Corporation, as a limited partner in that fund, is approximately $206 million (US$186 million).
Special Distribution Press Release
6/10/13
Toronto, June 10, 2013 - Onex Corporation ("Onex") (TSX: OCX) and its affiliates (the "Onex Group") announced today that Carestream Health, Inc. ("Carestream") raised approximately $2.4 billion of debt to fund a $725 million distribution to shareholders, refinance existing debt facilities and pay fees and expenses associated with this recapitalization.
The Onex Group will receive a distribution of approximately $673 million, of which Onex' share will be approximately $295 million, including carried interest of $48 million. Combined with prior distributions, the Onex group will have received approximately $1.2 billion, representing a 2.6x gross multiple of invested capital and a 22% cash-on-cash rate of return, and will continue to own approximately 91% of Carestream.
Latest Quarterly Report - Q1 2015
Distribution History
2008
P4 - $72m distribution in 2008
2009
P5 - $72m distribution in 2009
2010
P. 115 - 231m in cumulative distributions
2011
P. 3 - $434m in cumulative distributions
2012
P.3 - $561m in cumulative distributions
2013
P. 4 - $1.311 billion in cumulative distributions
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Disclaimer: Use of the research is at your own risk. You should assume the author of this report and his affiliates hold positions in the securities mentioned and may transact in the securities after publication. The author of this report makes no representations, express or implied, as to the accuracy, timeliness or completeness of any such information or with regard to the results to be obtained from its use. All expressions of opinion are subject to change without notice, and the author does not undertake to update or supplement this report or any of the information contained herein. Nothing contained herein should be construed as an offer or solicitation to buy or sell any investment or security mentioned in this report.
Analyst’s Disclosure: I am/we are short KODK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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Comments (19)
CCC
For a company only out of C11 for about 2 years its a steep hill to climb and not everyone wants them to make it to the top!
My experience is that for every bad article (and lets face it we can all write those) there is usually a good one that balances out the arguments.
a collection and likes of, blown by corporate management that IMO behave
like a clown bus of monkeys with sticks pointing at things. Kodak has had management brain cancer for decades and now the brain's remaining stored memory is being erased and destroyed. The people they have managing Kodak from top down have no concept of the technology they have. They that have promoted people within maintaining the cancer cells of the bankrupt Kodak, fired the wrong people and now the ice cube melts in the desert.Just like Kodak could not sell its patents, it shows what management they have cannot sell the technology properly. Good lick bond holders, the technology window is passing Kodak and what do you have to show for what you hold ?Blackrock what will you end up with here?