Good day, ladies and gentlemen, and welcome to the Eastman Kodak Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session, and instructions will follow at that time. I’d now like to turn the call over to your host, David Bullwinkle. Please go ahead.

Good afternoon. My name is David Bullwinkle, Director, Global Financial Planning and Analysis, and Investor Relations for Kodak. Welcome to the Fourth Quarter 2014 Kodak Earnings Call. At 4:00 p.m. this afternoon, Kodak filed its Annual Report on Form 10-K and issued its release on financial results for the fourth quarter and full-year of 2014. You may access the presentation and webcast for today's call on our Investor Center at investor.kodak.com. During today's call, we'll be making certain forward-looking statements as defined by the United States Private Securities Act of 1995. These forward-looking statements are subject to a number of uncertainties or risk factors, which are clearly described in the company's 10-K, and which are qualified by the Safe Harbor provisions in our filings. We advise listeners to read these important cautionary statements in their entirety, as any forward-looking statement needs to be evaluated in light of these important risk factors or uncertainties. In addition, the release just issued and the presentation provided contains certain measures that are deemed non-GAAP measures. Reconciliations to the most directly comparable GAAP measures have been provided with the release and within the presentation on our website, in our Investor Center at investor.kodak.com. Speakers on today's call will be Jeff Clarke, Chief Executive Officer of Kodak; and John McMullen, Chief Financial Officer of Kodak. Jeff will provide some opening remarks, his perspectives on the business performance, and outlook for the company. Then John will take you through additional details of our fourth quarter results and cash flow results and outlook, before we open it up to questions. I will now turn this over to Kodak's CEO, Jeff Clarke.

Thanks, Dave. Welcome everyone and thank you for joining the Q4 investor call for Kodak. On the call today, we’ll talk about the progress made in 2014 in transforming Kodak toward a path of sustainable growth, and profitability. After 12 months here at Kodak, I am more excited than ever about the opportunities ahead. I also recognize our success is based on the acceptance and continued growth of several new technologies in the industries we serve. We’re establishing several new growth businesses based on our technology assets and the value of the Kodak brand, while at the same time managing the decline of our mature businesses. Enabled by our new divisional organization, we are reducing our cost structure to create an efficient and entrepreneurial set of operations appropriate for our scale and the portfolio of businesses we compete in within the marketplace. We continue to benefit from the pride and resilience of our dedicated and committed workforce, while at the same time evolving where needed the mix of skills required for the company going forward. Kodak is in the midst of a transformation. In November, we provided you with a summary of our portfolio which illustrated we’ve businesses in different stages of their life cycle. Several of them are predictable, stable, and have significant areas of growth while others are like start-ups and therefore less predictable. We also have businesses which are declining in line with their life cycle and due to the changes in their underlying technologies. We’re making progress towards achieving predictable financial performance. In November when we last spoke to you, we said we’d meet our guidance in 2014. I am pleased to say today that we met our commitment. In addition, we’ll continue to provide investors with greater transparency into the company. On the call today,…

Thanks, Jeff and good afternoon. Today the company filed its Form 10-K for the year ended December 31, 2014 with the SEC. I recommend that you read this filing in its entirety. I am pleased to share my thoughts and comments on the company's fourth-quarter, and full-year results. On slide 15, you’ll see a summary of our consolidated results for the quarter. Total company revenue of $529 million is down 13% year-over-year. Gross profit improved by $11 million year-over-year and gross profit margin for the fourth quarter improved to 21% versus 16% for the fourth quarter of 2013. We also continue to drive year-over-year improvements in operating costs. For the fourth quarter, the reduction in operational SG&A was $30 million. These improvements are the result of a number of actions including headcount reductions, reduced overhead costs, savings from global benefit changes, facilities consolidations, and renegotiations of vendor contracts. We'll continue to focus on opportunities to further reduce our cost structure going forward by driving a simpler, more efficient and more execution-oriented organization consistent with our new divisional structure. Overall the company's operational EBITDA for the fourth quarter was $35 million, a year-over-year improvement of $10 million or 40% versus 2013 when excluding non-recurring IP licensing revenue. The results of the fourth quarter represent improvement for the company in its operations. As we reported in our earnings release, net loss for the quarter was $41 million compared with a net loss of $57 million in Q4 of 2013. 2013 is difficult to compare due to the impacts of fresh-start accounting implemented in September of 2013. Looking at slide 14, on a full-year basis when comparing our results for 2014 to the results for 2013 on an apples-to-apples basis the comparable improvement was $411 million year-over-year. Applying the same approach to the…

Thank you, John. In summary, we continue to carefully manage an exciting portfolio of Kodak offerings, and opportunities while taking the actions necessary to ensure our successful performance and continued investment in those growth areas going forward. I'm pleased with the 60% to 90% improvement we’ll see in operational EBITDA for 2015 on a comparative basis. Although, we're not providing guidance today for 2016 and beyond, I’ll briefly discuss our thinking on some of the factors we are considering. We've indicated we expect positive cash flow for the second half of 2015, and we told you the linearity of the plan would result in 75% of our EBITDA or $75 million to $90 million in the second half of 2015. We also shared with you 90% of this EBITDA will come from our strategic and growing businesses in 2015. Based on these building blocks as well as the execution required to deliver on our 2015 guidance, we feel operational EBITDA of approximately a $175 million is a reasonable goal for 2016. We'll add more color on this on our first-quarter call, and we expect to host an Analyst Day in the next several months. We'll now be happy to take your questions. Dave?

Thanks, Jeff. Patrick, we’re now ready to open the Q&A session. Please remind callers of the instructions.

[Operator Instructions]. Our first question comes from Shannon Cross with Cross Research. Your line is open.

Thank you very much for taking my questions. I just had a few. But first, can you talk a little bit more about the Plate business? What you're seeing in terms of pricing, I am just curious you know traditional versus SONORA plates. Are there any differences there? And you know what the competitive landscape looks like?

So again, we thought we had a really good year in plates. It was effectively on our plan for the year. We had you know plate growth volume for the first time since 2011. And you know it's very good to grow in this business, but clearly we are taking market share. You know our primary competitors in this industry are Fuji and Agfa. There are several regional competitors, and there are also some commentators based in China. We believe we are gaining share against the majors and the regionals, and that's driven by a technology difference with SONORA. We continue to be able to charge a premium for the premium SONORA product. I shared with you the savings of chemicals, the savings of water, and the savings of electricity that make the value proposition so strong for SONORA. In terms of customers, I shared earlier that in the last five months we’ve created almost 40% of our overall customer base. So we’re very pleased that we continue to get converts to SONORA, and when you get that, you know when the process step is out, it is a system where with very high renewal rates, and very high consumption of our plates. So it's going well. One of the questions that I'm sure is out there is given the aluminum price differential, where aluminum costs are much higher than they were a year ago, you know are we able to pass any of this cost on to our customers. And the answer is no. This is a very competitive market. There is a lot of capacity in industry, and we are finding that our competitors since they do not have a technology-competitive product versus SONORA, they are tending to be very price sensitive and are eating the cost associated with the increased aluminum. We do feel overtime that aluminum will come back to a normal historic price point. But it is a volatile commodity, and it's a key input into our product. And so, all of our projections going forward are based on aluminum holding at this level for the rest of the year.

Okay great, and then you know you’ve restructured from a segment perspective. I'm curious when you look -- since you’ve done that, and I'm sure you know it's taken some investigation of the various business units in that, have you come up with any potential asset sales? Or are you pretty happy with the assets that you’ve right now?

Well we set up these into divisions and five groupings of products in these divisions. And we are pleased with the portfolio. I mean by definition, we're always going to evaluate you know what parts of the portfolio are growing, what parts are particularly important. But a part of the divisional structure was to provide optionality. You know, I believe at one point many of these businesses were viewed as highly synergetic, and there is some synergy across divisions. But not as much as they are independently-driven you know approaches to the industry. So you know we’re going to be pragmatic, but we continue to invest in these businesses and we are seeing as you can see strong growth. For example if you look at, and if you just take some of our most recent technologies within these divisions, and you look at PROSPER, the SONORA part of our plates business, FLEXCEL NX software solutions we expect to grow over 40% year-on-year. And so you know when you're growing at that rate, and we’ll be approaching half a billion dollars of our revenue coming from those categories along with software and services. So these businesses are doing well, they are just a relatively small part of the couple of billion dollars sized company. So one of the goals of the divisional structure is that we can operate more entrepreneurly, and that we can understand the segments. The other one is so we can give you as investors more visibility into some of the things going really well at Kodak. Thank you, Shannon.

Okay great, and then just a couple of questions for John quickly. Can you talk a little bit about your foreign exchange rates that you're using going forward given FX was you know a pretty big hit. So what is your guidance predicated on for the euro for instance? And then, can you give us a little idea on your hedging program?

Yeah, so we are taking basically March rates and running those forward, Shannon. So we are not making predictions relative to foreign exchange rates. We don't have a full economic hedging program within Kodak. So we’ve some natural hedges in place from a cost structure point of view, but we don't have a full-fledged hedging program that would smooth some of this out.

Okay, and then the last question was just, can you clarify the EBITDA guidance? Is there any non-recurring IP licensing in that? I wasn’t sure, and if there is not then obviously, there is some opportunity for upside?

Yeah, there is a very small element, but essentially you know we took out on a year-over-year basis everything that reflected getting us to a more comparable basis.

Our next question comes from Jen Ganzi with NewMark Capital. Your line is open.

Just a follow-up on Shannon’s last question about the IP licensing. I mean is it that you feel that, there’s you know no opportunities, and nothing on the horizon you know to generate EBITDA from that, you know portion of the business? Or is it just that, because you’ve no visibility you’d rather just be conservative and assume it’s zero?

So we're working as you would expect on multiple avenues to monetize the intellectual property of the company. There is nothing in the pipeline of the scale that we appreciate, that we saw with the Asia Optical IP transactions last year, as well as from the legal settlements. So we believe that it is prudent to put in plans, things that you can count on. And we want to make sure that when we forecast our performance going forward, these are things that we can execute to. And there is too much variability and too much distance between some of the areas that we’re targeting for license, and areas that we have visibility into within this 12-month period. So I wouldn't call it conservative. I wouldn't call it aggressive. I would just say, you know right now we’re exercising lots of areas, but there’s nothing, there’s no big lumpy piece that we’ve visibility to. That doesn't mean that there isn’t great opportunity here. We’ve an entire division structure to do just this. So we’re working it hard, but we’re not going to put in things that may or may not come in within the focus of this guidance.

So then I'm assuming then, when you gave the $175 million sort of goal estimate for 2016, that also does not include any sort of you know non-recurring IP licensing you know numbers in there?

First let me please clarify. It was not an estimate. It was not guidance. It was a discussion to give you a sense of some of the things that we are thinking about, and the direction that we are seeing. But to answer your question specifically, there is no lumpy piece of that. That $175 million relates to the $75 million to $90 million of operational EBITDA we’ll see in the second half of this year, which does not have IP component in it. That we believe is sustainable going forward, now that 90% of our business comes from that profit pool.

And then I guess just in terms of you know sort of your and it sounds like you said that your Packaging business you know has been profitable. I mean, can you give us a sense of what margins are looking like on that at this point in time? And you know kind of how you expect those to you know kind of on a go-forward basis, like how you expect those to like increase or you know even flatten out?

Sure Jen. I mean Jen, first of all the Packaging business has been terrific. I mean this is a business that has gone from start-up in five years to a business you know that at the end of this past year you know was close to $130 million in total, both the FLEXCEL NX and some of the legacy pieces. We are seeing very good margins, but equally important we're seeing margin expansion for multiple reasons. One is the product is as they call it closed system. So when we sell one of our 400 CTPs, they churn for a significant period of time. But typically these CTPs have a 9-year life cycle, and we’re very young in this entire life cycle. Second of all, we have expanded into a wider format, and this is very important because we are getting much higher levels of plate burn. I mentioned we’re in the 30% plate burn. The plates have very high margins, and you know over 30% EBITDA margins in these plates. And as the factory continues to fill, our margins go up. We’ve also hit record manufacturing metrics in the Packaging business. We’re hitting record levels of quality, and record levels of performance capacity. So Jen, we’re really pleased we’re in the Packaging business and we see strong margins today and expansion going forward.

Okay great, and then just on the -- I guess the Graphics business. You know it sounds like you're expecting real strong growth next year from SONORA. Do you feel like you will be at the point where you know sort of the growth in SONORA offsets to declines from sort of the legacy products in that division?

That's right, that's what we saw this year, and that's what we're planning for next year. And so we added about 7 million m² of plates last year. We expect to do a similar amount this year. So coming from different basis, well still and growing over 50% in 2015, and that will drive us to plate growth in aggregate, and obviously significant market share shifts.

Okay and finally on the Commercial Inkjet Solutions. I mean it looks like that's also you know obviously strong growth for the next year. Do you expect profitability in that business next year? Or is that further out?

No, we do expect that we'll move to breakeven and perhaps a little beyond. You know as we said, you know when you are shipping -- when you’ve 39 presses in your install base and you are adding 25 during a year, that's a big change. These are such sophisticated machines, particularly in the OEM space. That it’s going to take a while for them to burn. As I mentioned, we did just last year over 5 billion A4 page equivalents, which was up over 50%. So we are burning on the existing install base, and we see a significant opportunity going forward. But because these are such sophisticated systems, it does take a while to get them ramped up and going, you know when they get to the customer side. You know, you’ve to tune them specifically for the applications and so forth. So we would be at a higher profitability, but when we put these presses in, there’s a lot of service costs, and many of these presses go in that breakeven or even a loss for the later profitability. So, but we are deferring some profitability in this business because we’re willing to go for the longer-term plate burn, excuse me ink burn in this case. And you know, effectively we’d have higher profitability if we sold a few more systems, a fewer systems this year. But we would rather get those systems in place, so we’ve a much better second half and a much better 2016 and beyond.

Got it, so a lot of you know, I guess sort of Delta between you know we’re you seeing you know 2016 versus 2015. I guess a lot of that is due to sort of you know kind of the cash flow ramp, you know in that business.

Yeah, I mean, I want to give you some perspective. I mean you are keeping kind of, as a rule of thumb think that we lost, you know about $40 million last year, you know before corporate costs on the inkjet business. And this year, when I say we’re going to be breakeven, you know that's quite a significant shift for us, and a very important business that is at really a pivot point to go from heavy investment into starting to monetize going forward. And then obviously when you get more sets of systems in, that looks quite good for the future.

Okay, great and then just, so this is more of a request than you know a question. But I mean it would be possible to sort of you know give us back a couple of years, you know instead of pro forma numbers. So that you know the seven sectors that you're going to be going forward breaking out your business lines, and so that would be like super helpful for us. And that's it from me, thanks.

Our next question comes from Alex Yaggy with Cortina. Your line is open.

I have a quick question on the cash expectations. You laid out a lot of nice detail for 2015, but can you just give us a little bit of an indication going into 2016, how many of these are going to go away? And maybe what you think might happen with working capital going forward? If it’s going to become a cash drain as you continue to grow?

Yeah sure. So I think, it's a great question. I think, let me talk about some of the things that I think are either going away or more in variable in nature to start. So I talked about legacy and reorganization payments in 2015 of approximately $30 million. That number will be materially gone, okay by the time we get into 2016. There maybe some very low legacy type things, but the reorganization type payments will be gone. So you can count on that. Restructuring, you know will be a function of where we’re, and how we view the cost structure as we enter 2016, and that's a variable number. And we'll see when we get there, but I would expect that number to be in decline certainly as we get into 2016. Capital expenditures are going to be a function of both direct capital, but also in terms of how we’re doing, and how we’re choosing to go to market with businesses like the press business. I mean we see good opportunities in the marketplace, and we want to use our commercial capital as a way to penetrate that market place and we certainly will. From a working capital point of view, I think sure the growth in the business will have its impact. But I see a lot of opportunity for us over time to improve from a working capital point of view, our cash conversion cycle. And I am confident in our ability to make pretty significant improvements over time there. So as I made comments in my opening, in my prepared remarks, you know we expect to exit the year, second half cash flow positive, and we expect to continue to be cash flow positive going forward throughout 2016 on an annual basis, and start being in a position to rebuild and grow cash going forward.

Thanks, and can you update us on any plans you’ve for the Eastman Business Park? As I recall, I think there was some effort to sell that, but I haven't heard anything in a while on that?

Sure, so the Eastman Business Park, and one of the things we are going to do is break this out for you after our Q1 call in about six weeks. Yeah, it’s a lot of assets. You know it is one of the largest industrial parks in North America. It’s one that operates at significant underutilization, but it’s one that is -- we’re making steady progress on. There is not a -- we’ve yet to find despite significant effort to find a buyer who is willing to purchase the park in a manner that's favorable to Eastman Kodak. There’s lot of offers that have come in, but they are quite adverse to Eastman Kodak. So our job is to do a better job managing this park, and then eventually find partners whether that would be government partners, whether that would be commercial partners, but do a better job managing the park. One of the key elements of the park, the largest tenant in the park is film. As many of you’ve probably heard, we’re recommitted to film. We see this as a business that can make money over time, and should be breaking even this year for us. And we can see profitability going forward in that business, as it kind of hits a sustainable level, and perhaps even gets a little bit of a bump as we readdress some of the opportunities of it much like vinyl has. And if you look at film, film covers a lot of the cost of the park. And closing the film business would have been very difficult for the park if that had, had happened. We have more tenants in the park than Kodak employees now. And so we’ve made some progress, and we’ve got a good pipeline of new tenants. But a large part of this will be working business development with local community, government officials, and others to try and get higher utilization out of the park. We'll go through these numbers in detail with you at the end of our first quarter, but you know like many parts of Kodak you know the park has been there a long time. We need to manage it better, and we’re putting a lot of focus on it. It's no longer in a kind of a shutdown, and hope someone will buy it in that phase. It’s now in a place, we are going to manage this thing and we’re going to run this thing efficiently, and get the right partners to go do that.

[Operator Instructions]. Our next question comes from Amer Tiwana with CRT Capital. Your line is open.

I wanted to sort of go over the guidance for 2015. And you know just going through the numbers, there’s about $63 million as you mentioned is the base level for 2014. How do you build up to the 2015 guidance broken between growth and the strategic business as well as what the cost reduction you're getting from SG&A and R&D. Can you help me there?

Yeah, let's go back to page 11 on the webcast if we could, which outlines the drivers of the performance. You know obviously a huge driver of the performance, you know we’re talking about as we said an improvement. Let me just go over it. Wait for one second, and I’ll get the exact numbers for you. We’re talking about an improvement really from $63 million to a $100 million to $120 million, so a 60% to 90% improvement. If you take the midpoint of that, you're really talking about a $53 million improvement. And the first bullet here says that a 100% of that, more than $100 million of that $63 million is based on cost savings. So taking 25% of cost out is a very formidable task. We’re well on our way to doing it. I am highly confident we'll achieve that. As we mentioned, you know there is things moving both ways. While we take COGS out, we improve our COGS. We take out costs, and we see growth. You know I mentioned earlier in the call that we’ve 40% growth across some of our -- roughly $400 million on its way to $500 million of revenue in key strategic areas, and that is going to have a big impact most notably in PROSPER and in Packaging. The reality is that we also are facing a lot of other headwinds within this, and we mentioned those. You know we didn't mention, you know when we talk about the apples-to-apples performance, we talked about not having the $70 million non-recurring IP and $21 million of foreign exchange. But we are also facing the aluminum hit that we talked about and pricing pressure in some of our legacy businesses. You know while we're doing well in PROSPER, we’ve other legacy businesses that are still in decline. So this is a balance between growth in PROSPER, where as I mentioned that's going to be you know tens of millions of dollars of improvement year-on-year. A strong growth in our FLEXCEL business, you know SONORA helping us hold you know our profitability in our overall plates building, as flat as we can on a constant currency basis, with you know marginal growth and strong cost actions. And then the wild card for us, and as I mentioned earlier we are circumspect and conservative in this. Micro 3D printing, you know if that comes in a little earlier, that's very good news for us. If that comes in a little later, it's not as much bad news as it was in 2014 because we are not betting on new technologies, that we can’t demonstrate yet. And so what you're seeing here is a more cost-driven approach on balance because we’ve much more control over that. And that said, we’ve ambitious but achievable goals in our PROSPER and FLEXCEL NX business, as well as the SONORA part of our plates business.

Understood and maybe I can just follow up on that issue, how much functional print in terms of your guidance is you know coming from functional print in terms of EBITDA range? Is it a small number, a big number? I know you said, it's relatively hard to give guidance on that, but if you could just give us some range?

It's a very small number, and so that doesn't mean that we don't believe that the business is very important. This is a business that could be one of the largest producers of our profit in 2016, 2017 and 2018, and so we are committed to this business. There is not a lot of additional expenditure that we are doing. Most of the technology has been done, now we’re tuning the manufacturing processes, scaling the road of all processes. But in terms of revenue contribution in these businesses, we're going to be circumspect. You know, this is an area where perhaps I'm a little conservative, but I don't want to bet on the start-up businesses in our guidance.

Understood. And the last question I’ve is regarding your CapEx spending. You know you mentioned $70 million, how much of that is maintenance and you know, how much is related to the commercial capital?

Yeah it's about, a little over half of that is maintenance, and then the balance would be in commercial capital. We are going to manage that very tightly throughout the course of the year as well.

Yeah, we’ll we’re finding two things. Well first of all there, we are seeing such growth in our Packaging business that we’re going to start some of the investment that's required in the second half of this year to build a second factory. And that total factory cost will be about $50 million over a couple of years. But, I mean that's good news. I mean this shows great demand for our product sets. As we mentioned, we are putting in a new SONORA line in Columbus, Georgia. So that's going to have a [tail] of some capital. So we are putting capital in you know where it really makes sense in some highly profitable businesses. I think the difference from prior years, Kodak was significantly constrained particularly against you know deep-pocketed players like Hewlett-Packard and others around getting systems out there with commercial capital. And you know, the payback on this is quite strong. And so we will be careful how we do it, because we watch our cash balances. We watch our return. You know John has done a fantastic job adding a lot of discipline around returns, before we utilize capital. But we are seeing opportunities and a greater number of opportunities because of the growth of PROSPER. And you know there are certain industries particularly in the OEM space, where we can get machines out there faster if we’re willing to deploy some commercial capital. The returns are pretty quick.

Sure, I appreciate that. Actually can I just make one last question. And on the debt side, you know pretty heavy on interest payments at this point in time. Any plans on you know looking at the balance sheet and trying to either [re-fi] it or some other opportunities to perhaps bring down that you know cash outflow?

Sure, sure. I mean you know clearly that's an opportunity for us going forward, and I think like we’ve mentioned on the past one or two calls is you know we're opportunistically looking at what our market opportunities are in terms of our capital structure going forward. So you can be sure if there is an opportunity for us to do something different going forward, we’ll be all over that. So it's a good opportunity for us going forward and the health of our business and the great things we're accomplishing certainly will help us along the way that.

Thank you very much. We really appreciate it. And so I thank everyone for joining the call. As you can tell, John and I are pretty excited about you know the ability to drive real apples-to-apples improvement this year of a 60% to 90%. We’re very excited about some of the unlocked value we’re seeing by the divisional structure in terms of driving more cost out, and getting better entrepreneurial performance. We’re excited about many of the things we’re seeing in our pipeline, and so we look forward to talking to you in six weeks after. So we'll talk again about a little more about the divisional structure, our Q1 results and talk to you again soon. Well, thank you again.

Thank you.

Ladies and gentlemen, thanks for participating in today's program. This concludes the program. You may all disconnect.