Good day, ladies and gentlemen and welcome to the Eastman Kodak First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference may be recorded. I would like to introduce your host for today's conference, Mr. Bill Love. Sir, you may begin.

Thank you, Sabrina, and good afternoon, everyone. My name is Bill Love, and Eastman Kodak Company's Treasurer and Director of Investor Relations. Welcome to the first quarter 2017 Kodak earnings call and sorry for the delay in starting our call. There were some technical difficulties by the provider, which we believe now have been resolved. At 4:15 PM this afternoon, Kodak filed its annual report on Form 10-Q and issued its release on financial results for the first quarter of 2017. You may access the presentation and webcast for today's call on our Investors Center at investor.kodak.com. During today's call, we will be making certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. All forward-looking statements 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 results or events 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. 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 with the presentation on our Web site in our Investors Center at investor.kodak.com. Speakers on today's call will be Jeff Clarke, Chief Executive Officer of Kodak; and Dave Bullwinkle, Chief Financial Officer of Kodak. Jeff will provide some opening remarks, his perspectives on Kodak's financial performance, and guidance for 2017. Then Dave will summarize first quarter 2016 results, provide an update on cost reductions and review cash performance before we open it up to questions. I will now turn the call over to Kodak's CEO, Jeff Clarke.

Thank you, Bill. Welcome, everyone and thank you for joining the Q1 investor call for Kodak. On the call today, I'll talk about the company and divisional results for the first quarter of 2017. Our decision to retain PROSPER and the impact to our divisions, certain headwinds the company faces, our 2017 forecast and my thoughts on the future trajectory of Kodak. Dave will then follow with more details on net earnings, a cost reduction update and a detailed discussion of cash flow, after which we'll open your questions. Starting on Slide 5, Kodak delivered first quarter revenues of $357 million, down from $377 million in the prior year quarter or 4% on a constant currency basis. Operational EBITDA for the quarter was $8 million, consistent with our expectation, but down $11 million compared to the first quarter of 2016 or $9 million on a constant currency basis. Our cash use was $56 million, primarily due to an increased build of inventory and the year-to-year reduction in operational EBITDA. On Slide 6, in early April, the company announced the decision to retain the PROSPER Inkjet business. The decision was made following an in depth management review of business operation and multiple discussions with prospective wires. This was a pragmatic decision given the improvements in the business and the indications of interests received. Kodak is committed to multiple paths for maximizing shareholder value, including organic growth and inorganic transactions through mergers, acquisitions or divestitures. Last year we saw the opportunity to accelerate the monetization of our PROSPER business through a divestiture. It began with serious unsolicited indications of interest from significant industry participants. We hired an investment banker and featured the attributes of PROSPER and ULTRASTREAM at Drupa, a major printing industry trade show, which created additional interest in the business.…

Thanks, Jeff, and good afternoon. Today the company filed its Form 10-Q for the quarter ended March 31, 2017 with the Securities and Exchange Commission. As always I recommend you read this filing in its entirety. As we've noted our first quarter performance is consistent with our expectations and we are pleased with growth in key product areas. We've adjusted our full year 2017 guidance for revenues of $1.5 billion to $1.6 billion and operational EBITDA of $105 million to $120 million. This change in guidance corresponds to the reclassification of PROPER and ULTRASTREAM as well as related corporate support costs into operational EBITDA and the impact of higher than expected aluminum costs for the reminder of the year. Today, I'll share further details on the full company results and update on our cost structure and cash flow results and a full year cash flow outlook. First, a few important updates and notable items in the quarter in our Form 10-Q filed today with the SEC, which is summarized on Slide 16. On April 7, we announced Kodak will retain the PROSPER business. This business including our investments in ULTRASTREAM was previously reported as discontinued operations and is now included in continuing operations as part of the Enterprise Inkjet Systems division along with our legacy VERSAMARK business. Prior period results have been recast to reflect comparably year-over-year reporting. As part of this recast, $12 million of additional depreciation and amortization expense related to the PROSPER was recorded in other operating expense net. Please refer to note 10, other operating expense in our Form 10-Q. In addition, beginning with this quarterly report Micro 3D printing and the operations of the previous Intellectual Property Solutions division were combined into a new division called Advanced Materials and 3D Printing Technology division or AM3D.…

Thank you. [Operator Instructions] And our first question will come from the line of Shannon Cross with Cross Research. Your line is now open.

Thank you very much for taking my question. I wanted to know a little bit more about what's going on with PROSPER just in terms of end market demand positioning as you look to 2019. I just want to understand a little more about this company or that division I guess, since you have decided to retain it at this point. Thanks.

Sure, Sharon. Shannon I'm sorry. Yeah, as you can see we're coming up with very strong demand in Q4 and continued demand in Q1. So we're now - our recurring revenues were up 37%, our printing systems are now at a little over 1,300 and we got our installed presses of 64. And so there continues to be strong demand for PROSPER and notably PROPER this year after over $100 million of cumulative investment will move to breakeven as an entity. EFID, if you could to Slide 7, just to illustrate this. As you can see we've provided some additional information, 41 PROSPER and if you see VERSAMARK which is at the late stage of its life cycle is turning up nice profits. PROSPER as you see last year, delivered $21 million investment around 94 million. That will be close to zero this year, so we expect significant continued improvement on PROSPER as we now have grown the install base and we'll continue to invest in ULTRASTREAM. So the bottom line is that ULTRASTREAM - in talking to our customers and through the sale process, it became very clear that there is a significant interest in a product with the features of ULTRASTREAM for OEMs to build around. Also, we expect to have significant head sales in printing systems with ULTRASREAM. For PROSPER, we continue to see strong growth in printing sales, but we're not going to go out and invest the vast of a million or over a million to sell presses in the environment to build a base for non-high volume applications. So we'll continue to look at - to answer your questions on customers, we'll continue to look at existing customers that have already proven that PROPER works in their environment, we will continue to look for high volume newspaper accounts such as the Channel Islands where we can have significant cost savings for situations where they're flying newspapers in, so that works very well and in other high volume applications. So we expect strong continued growth and we expect as a division, after many years of losses we expect this division to breakeven and then be well positioned for significant growth going forward.

And just to be clear so, these are '16, so '17 understand breakeven for PROSPER, ULTRASTREAM saw some investment obviously. Is it '18 or is it '19 where we start to see significant improvement. I'm just trying to understand.

You're going to see cash, you're going to see profitability, or you're going to see positive EBITDA including all loaded cost and cash flow growth from '17 into '18 and then when ULTRASTREAM comes in you're going to see strong growth. So we're going to benefit from the trajectory of PROPER in '17 and '18 and then '19 you'll see continued growth in the PROSPER base, while you'll see the start of a new revenue stream of ultra - the new revenue streams from ULTRASTREAM. You'll also see less investment. As you can see on this chart, you make investments about every 10 years, you need to bring new technology market every 10 years. So the investment - once ULTRASTREAM is built and most of the future is happening by OEMs as opposed to Kodak, you're going to see a lot more profitability because we're not intending as you can see from the slide to build the very expensive digital pressing ULTRASTREAM that will be our partners who will be doing that.

Okay, thank you. And then in terms of FLEXCEL, can you talk a bit more about the end markets there as well given the growth opportunities and since you're now breaking it out as a separate division. In terms of, I know you've made some investment there I think for capacity, but how should we think about the next couple of years with this division?

Well, I mean the trajectory on the business is quite strong. So our FLEXCEL business is our highest performing business and it's our most differentiated business and has the highest mots around it of all our business versus the complication. So we believe the FLEXCEL market itself, the packaging market itself is growing about 4%. We've grown double digits, in 2016 we grew 16% and so four times the market and we continue to accelerate at that strength in the first quarter. So we're growing many times the market here. The reason is we have higher resolution of the print solution because of the proprietary term imaging wire, but also we save money for the printers because of less waste and much more efficient processes used like ink and other items. So this business continues to grow well. We expect - from a customer perspective it's both trade shops and packaging printers that are using it. Last year we delivered roughly $32 million before corporate cost and we expect continued economy upscale which will drive over 20% in EBITDA contribution both before corporate cost and below corporate cost. So very, very strong performance is expected to continue in the FLEXCEL packaging division.

Okay, great. And then maybe one question for Dave. In terms of corporate cost, what are your thoughts about sort of a continued optimization or are you basically at the level of a run rate that you need or how do we think about it relative to what your revenue is? Obviously your headcount is down substantially over the last three year, I'm just trying to understand what sort of a baseline would be?

Sure, so as I shared in my remarks, we're at a run rate of 6% right now of revenue. We expect for '17 to be at 5% and we also expect to continue to get simplification benefits using shared services and those sorts of things standardizing our approaches across not only corporate cost, but the entire company to drive that 5% on what we expect to be at least stable revenue going forward and focusing on our investments to increase revenue. So at 5% hopefully starts to trend downward. We will continue to do things to utilize the shared services environment, which we –as you can turn the slide, we've done very well so far. We've got more opportunity in all parts of the organization which I mentioned in the slide.

Right and I know you discussed a little bit, but in terms of working capital just can you be little bit more specific about opportunities there? Obviously like during the year, but I'm just curious in terms of absolute optimization or focus on cash. You guys have been focusing on cash for year.

Yeah, so we've done a good job in improving our DSO and DSI. What we're challenged with now of course is the trajectory and revenue with respect to working capital. We did build inventory in the first quarter by $40 million. That is typical for us seasonally, although it's a little bit more pronounced this quarter and that's where the largest source of cash or the change will come from for the remainder of the year. As Jeff mentioned good growth in packaging is what we're seeing with PSD Plates and the CTP business of course is where we built that inventory. So the largest opportunity for us is inventory and we've shown good performance there. Really all across working capital, we've shown improvement in days, in DSI, DPO and DPO, all around three days on a year-over-year basis. If you're doing like a four quarter average, so we've got good trajectory and goo acceleration there and we now need to deliver on the revenue growth to start to - to see the working capital perform.

Yeah, I just want to comment on this. I'm really pleased with the performance of the company. The cash conversion cycle over the last four quarters is 93 days versus 103 in the prior four quarters, so it's about 10% improvement in cash conversion cycle driven by the improved DSO, DSI and payables, the biggest performance being an inventory. And that is fighting [indiscernible] around mix because our consumer inkjet business has very low inventory requirements, very high turns whereas our packaging business has - at least today because we have to have the inventory shifted, shift from Japan. In the future we'll be making that in Weatherford as well and has very long cycle. So our fastest growing business has a difficult cash conversion cycle, our declining business has a good one, yet we're still improving, overcoming that mix by 10%. So I'm pleased with our ability to manage working capital and as you saw in one of Dave's slide, it's an important part of our projection this quarter in order to drive the cash flow growth.

Great, thank you very much.

Yeah, thank you Shannon. Next caller please. Next questions please.

Thank you. [Operator Instructions] And the next question will come from the line of Gary Ribe with MACRO Consulting Group. Your line is now open.

Hi Jeff, hi Dave.

Hi, Gary, how are you?

Hi Gary.

Good, good. I just had one quick one. Not one quick one but I really want to ask a couple, but the cash on the year, the use of ten is zero, you guys I think used 50 million, may be a little bit more, I don't have it right in front of me in the quarter. So is that you guys are going to make somewhere between $40 million and $50 million of cash in the remainder of the year?

So you cut out a little bit, but I think your question we used 56. I'll give you the actual number, $56 million in the first quarter and yeah, we do expect to increase cash over the remainder of the year by 46 million to get to that low end of range and of course at a breakeven perspective 56. Most of that is going to come from our working capital. We used roughly $30 million in - I'm sorry, $30 million increase in cash used from working capital on a year-over-year basis. The rough use was about 40 to 50 in Q1 of 2017 and primarily again in inventory, which we have the most control over in terms of the PSD business, which is where we see the concentration.

Got it. Thank you for that. I guess this other one is a little bit higher level. Howa re you guys thinking about ROI on this R&D spend stuff. You spend 8 million this quarter, it seems like there might be some stuff on the horizon, but like how do you think about that going forward?

Excellent question Gary and it's something that we spend an enormous amount of time on. One of the challenges of Kodak is for the last 10 years the company's revenue has declined. So we need to make some focused investments in the printing industry. So we're a printing company and today our portfolio is very much focused on offset printing, which is a business that has provided significant profits for us, but it is an industry in decline, it's a segment in the industry declined. The other faster growing parts of the industry are in packaging printing and there we have a product that is frankly spot on and delivering and executing very well with strong growth at the top and bottom line. The only investments we need to make in that business is really around adding capacity and so the ROI on one of our largest investments this year which is building the factory for packaging growth, just for packaging growth is quite good. Because of the growth of the business you got a ROI with a payback in a couple of years, which isn't bad for a bricks in water factory. In terms of the next fastest growth, so from a scale of what's growing fast in the printing industry, the slowest part is where we're currently concentrating is the offset part. The next fastest growing is packaging and the next fastest growing is - growing faster than packaging is in digital printing, this is where PROSPER the largest investments over the last decade have been made by Kodak in primarily around PROSPER and now around ULTRASTREAM. PROSPER from ROI I think is pretty clear was a very long ROI, it took over 10 years of investment and we're just now getting to breakeven on it. The good news going forward is there is minimal investment required. We have an installed base and it will grow well. And the next generation after PROSPER, ULTRASTREAM as we mentioned will be a fraction of the investment of PROSPER because it's - we're using a more derivative of existing technology's strategy than trying to create something brand new like PROSPER was. So we're building on that in an incremental basis. So from that perspective -

Those all seem like rational areas to be allocating capital, I guess my question was more focused on this advanced materials division kind of - the expansion of FLEXCEL is great, investment in ULTRASTRAM makes total sense, but this other division, it's more -

I was going to get to that, so thank you Gary. So relative to the prior investments, obviously these are more modest. These investments are taking technologies that have been build, have been commercialized in some areas in the case of advanced materials, the number one thing that we've built off the advanced materials have been the inks and toners that support our existing printing businesses and our FLEXCEL business. But let's dive into specifics on them and that's why we've showed some more information. We look at these ROIs very closely and let's go through each one. So let's start off with Micro 3D printing. That is a derivative of using the same thermal imaging layer that has been so successful at packaging and moving up the value chain into printing logic, printing touch screen sensors, batteries and areas like that. This is an area where the company has been at this for about four or five years. We've refocused the investment to be focused on copper mesh as opposed to silver and copper mesh and the first time as you heard in my remarks we now have signed contracts and people delivering product on that. So there's not a lot of future investment required in this area and we now have revenue streams associated with it because the product has been designed and we're focused now on the industrial applications. So yes, there is some investment now in Q1 and a little bit more throughout the rest of the year, but the revenues will come in and start to cover that. On the light-blocking materials, the investment on this was significant in terms of single millions of dollars over the past couple of quarters and we saw significant opportunities with fastest growing part of printing which is starting…

Got it and so these contracts, are they in the guidance for this year?

They are, that's why - we saw these coming. We've signed them. Some of them were signed when guidance were given, some of them have evolved during the year as per our plan. The pipeline is very strong to commercialize these products and these are with significant players. If you're going to be kind of the in talent side of the printing industry where we're going to be providing materials to major players that they count on in building their products. You want to align up with the big players and we've mentioned some of them, some of the other ones we can only refer to today as a major textile manufacturer that you would certainly know if I said the name, but we want to keep this confidential at this point. But we have real contracts with real companies and you'll see improvement in this division every quarter going forward.

Got it, okay and then I guess just kind of one more big picture question. You've got kind of like an interesting collection business and assets there and like at what point you guys - you mentioned strategic stuff M&A and probably comfort given kind of the balance sheet, but also divestiture. Can you just kind of speak high levels, if whether or not this collection of businesses together kind of make sense in what you guys are thinking on that level and as you look at kind of places you can find cash and places you can invest cash and that sort of thing?

Yeah, so Gary I think we've proven that we'll be quite pragmatic as we evaluate different dispositions and/or acquisitions. So PROSPER is a fast growing - as I stated across the scheme of printing, PROSPER, the Enterprise, Inkjet part of the printing industry is a very significant growth area, but yeah, we were willing to accelerate monetization if we could do it. We did get the price we wanted and as such we're going to keep going because from a shareholder value, we're pragmatic both ways. We were very happy to keep things if we think they're going to take our ROIs and are willing to sell them if we think that is a faster monetization for shareholders. So I would think that all areas - we're quite broad across the portfolio of technologies and products that you can sell into the printing business, so we have a lot of latitude here in terms of being able to attack the industry with different technologies. There are some synergies across, most notably the software business with all of the printing areas. Bu each of the areas I think we can be pragmatic with if a combination made sense that could get us a value ahead of the value we would be able to achieve on our own.

Okay, got it. I think that's if for me. Thanks guys.

Thank you very much Gary. Operator, are there any more questions?

There are no further questions at this time.

So thank you very much for joining the Q1 earnings call for Kodak. As Dave and I talked about, we are seeing strong execution across the SONORA area, the FLEXCEL NX area and the PROSPER area. This is driving strong year-over-year improvements on a comparable basis. We do have headwinds on aluminum prices and on currency, but as you can see we believe that we can overcome them and hit the guidance that we're giving you now. So I appreciate your time very much and thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.