Good afternoon, ladies and gentlemen, and welcome to the Kodak's First Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. David Bullwinkle.

Good afternoon. My name is David Bullwinkle, Director, Global Financial Planning and Analysis and Investor Relations for Kodak. Welcome to the First Quarter Kodak Earnings Call. At 4 p.m. this afternoon, Kodak filed its quarterly report on Form 10-Q and issued its release on financial results for the first quarter 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 in the company's quarterly filings 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 contain certain measures that are deemed non-GAAP measures. Reconciliations to the most directly comparable GAAP measures has been provided with the release and 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 Becky Roof, Chief Financial Officer of Kodak. Jeff will provide some opening remarks and his perspectives on the business and the quarter. Then Becky will take you through our first quarter results before we open it up to questions. I will now turn this over to Kodak CEO, Jeff Clarke.

Thanks, David. Welcome, everyone. It's been 7 weeks since our last call on March 19 when we issued 2013 results. I will discuss 4 primary areas on which Kodak is focusing to manage our business and achieve our plans: first, invest in and enable growth in our strategic technology businesses; second, manage the expected decline and optimize cash flow in the mature businesses; third, reduce costs and streamline processes to improve operating leverage and efficiency; fourth, I will discuss the nonlinear profile of our plan this year. Area 1 is growth. Kodak is in a strong position to lead our customers through their shifts in production efficiency, simplicity, value and growth in printing and imaging. Our customers are embracing our technology as reflected in the rapid growth in our key product areas. In 2014, we expect to achieve year-end installed base of PROSPER Presses of more than 40. We have created opportunities with OEM partners like Bobst and Timsons to accelerate our growth. Utilizing our Stream Technology, our PROSPER Presses provide quality which approaches offset, unrivaled productivity and low total ownership costs. We expect to increase by about 1/3 the number of PROSPER S-Series imprinting systems in the field to more than 1,000. These systems offer speeds which match offset web presses as well as high-value customization capabilities. We expect achieve a 25%-plus increase in placements of FLEXCEL Systems for Packaging customers to more than 400 units. We expect to quadruple both our SONORA volume and the number of customers at year end. This technology platform is breakthrough because of its environmental and economic benefits. Printers also achieved the quality, productivity and print capability of mainstream processed plates. We expect to grow our Unified Workflow Solutions business, which includes our industry-leading PRINERGY Workflow Software by about 10%. These products are…

Good afternoon, and thank you, Jeff. Today, the company filed its Form 10-Q for the first quarter of 2014 with the SEC. I recommend that you read that filing in its entirety. I'm pleased to share my thoughts and comments on the quarterly results reported in that document and in our earnings release. First, I would like to review the improvement in our net loss quarter-over-quarter. As the slide demonstrates, we are comparing Q1 2014 to Q1 2013 on an apples-to-apples basis. The information is taken directly from the company's consolidated statement of operations in the 10-Q and adjust for large items in 2013 that provide an uneven comparison to 2014. As shown, the net loss for Q1 2014 was $36 million compared to net income in Q1 2013 of $283 million. However, 2013 included other operating income of $494 million, primarily from last year's gain of $535 million from the sale of the digital imaging patent portfolio. Our reorganization costs in Q1 last year were $120 million compared to $5 million in Q1 this year. And finally, last year, we had a loss on early extinguishment of debt in the amount of $6 million. Taking all this into consideration shows the comparable improvement of $54 million year-over-year. Turning to current quarter results. Consolidated company revenue declined 19% year-over-year, and gross profit decreased from $149 million in Q1 2013 to $86 million in Q1 2014. Offsetting these declines are improvements in operating costs in the current quarter versus the prior year. Q1 SG&A expenses decreased by $31 million year-over-year. In terms of a percentage of revenue, SG&A declined from 20% of revenue in 2013 to 18% of revenue in the current quarter. And we plan for this percentage to decline further as revenue grows in our succeeding quarters this year.…

Thank you, Becky. I'm very excited about the strategic technology businesses. They are the growth opportunities for Kodak. We will make significant investments in these businesses, including approximately $100 million of R&D, as well as $40 million of CapEx. These will be -- these investments will be in the next generation of our PROSPER Press and writing systems, OEM partnership agreements in Digital Printing and Functional Printing, Packaging product enhancements, including smart packaging solutions, continuing developments and capacity in our process free plates and workflow software. In addition, we've strengthened our management team. Just last week, we brought in a terrific talent in Eric Mahe to formulate strategy and coordinate efforts in software, OEM partnerships and channel marketing. He has an outstanding track record over his 25 years in the technology businesses, with such companies as Pitney Bowes, Sun Microsystems, PA and Xerox. We'll now be happy to take your questions.

[Operator Instructions] And our first question comes from the line of Trent Porter of Guggenheim Partners.

Yes, I have a long 2-part question. So when I think about the -- your nonlinear ramp in the strategic technology businesses, it seems to me that some of this ramp you probably have a tremendous amount of visibility into. For example, the JTOUCH agreement in Functional Printing. And you -- I'm guessing you have a fair amount of visibility into your forecasts for growth in installed base. Maybe you got orders or something. So I was wondering if you could help us, if possible, give a little bit more flesh on the bones in terms of visibility first by maybe apportioning this ramp between how much is coming from growth in the annuity from the PROSPER Presses and the FLEXCEL NX, and then how much is coming from Functional. And anything else you can tell us about the visibility that you've got.

Okay, so excellent question, Trent. So the -- we do have a lot of color on this. I don't want to go into all of the color, but I'll try to answer your questions as best I can. First, at the highest level, realize that Kodak has a lot of fixed costs. And so in a quarter like Q1 where we have materially less revenue than in the following 3 quarters, that fixed cost make -- drives our margin down because we don't cover that with the top line. And so I mentioned, for example, our largest business, Graphics, the plates business. This business, for the first time in many, many quarters, grew in April. Its decline of the 4% in this past quarter is one of the smallest declines we've seen in some period of time. So the fact that these businesses have seasonality, and then they -- as they -- I mean, they absorb additional factory capacity, and they cover the fixed costs that we're working our way to try and reduce. So the first part is that -- and just think of -- I'd like to consider that as well. In terms of visibility into the things, yes, we have a pretty good visibility. The fact is most of our PROSPER Systems are long sale cycles. These are not systems that are sold over a 2-month period, so we have a good visibility into our backlog. Obviously, like any company, when you're sitting in May, we've got 7 months to close some of these products. And these products have high revenue, in the case of the systems, and high revenue and high margin, in the case of the components. In terms of the annuities, we have good -- excellent visibility into the annuities because we know the…

Okay, understood. And so the -- on the Eastman Kodak industrial park, is it possible to -- I think the answer is no. But if you could give us any way to ballpark or guesstimate how material potential proceeds from a sale, if it does happen, could be, do you think?

It's a complex -- it's a very complex industrial park. And I'm not going to tip our buyers to negotiate -- pre [ph] with our buyers. But we expect a good price from it as any good real estate salesperson would say in any transaction.

And our next question comes from the line of Amer Tiwana from CRT Capital.

My first question is regarding the Consumer Inkjet business, if you could give us some sense of what EBITDA contribution was in the quarter.

We don't disclose specifics on that. However, it was -- we do share with you -- if you go to Page 6 of the slides, you'll see that there was $8 million of overall EBITDA in the quarter from both our Commercial Films and Consumer Inkjet business. And you should realize that a larger portion of that is in the Inkjet than the Consumer -- Commercial Films business.

Sure. Secondly, I wanted to ask you about the strategic businesses. And you had given a range of about $100 million of target EBITDA. Given your performance in this quarter, I know you're reiterating your guidance for 2014. Are we still expecting about $100 million from the strategic businesses?

So the answer is we are not changing the original guidance. I just want to fully understand what's your basis. We're looking at a -- in the strategic businesses, what we gave -- just so everyone on the call has the same numbers, we gave a operational EBITDA projection for the strategic businesses of $100 million to $115 million, up from $9 million in 2013. So yes, the $100 million is still what we're projecting. And on the top line, we're projecting anywhere from $1.825 billion to $1.975 billion at the high end, about an 8% growth. And so yes, obviously, as you make a plan during the year, you have lots of puts and takes between areas. But we're still projecting that those are in the ranges that we -- that we're looking for.

Sure. And my last question is regarding your working capital. Any sense of what we should expect for the full year. And to that end, I assume your cash -- you had given year-end cash guidance which remains the same as well.

This is Becky. Let me address that. Our cash used in operations in the first quarter was a very positive trend. Due to the seasonal nature of our business, we traditionally consume cash in the first quarter. During Q1 2014, $44 million of cash was used in operating activities, which is an improvement of $215 million compared to the $259 million of cash we used in operating activities during first quarter of 2013. With regards to the full year, we expect our cash balance to remain even, year end-to-year end. There, of course, will be puts and takes during the year as we generate cash from working capital in some quarters and use cash from working capital in other quarters. But generally, we expect to stay even year end-over-year end.

And our next question comes from the line of Donald Madigan from Garden State Securities.

Yes. I just have a simple question. I've been wondering, you mentioned UniPixel. Your earnings estimate, are they included in this quarter report? Or is it -- when do you expect to generate future revenue from either UniPixel or Kingsbury?

What we've said in the past, which I'm reiterating that -- today, is that we expect revenue and earnings contribution from our Functional Printing business, which includes both UniPixel and Kingsbury in the second half of the year. We are incurring costs in that business now, so costs are falling through -- we're obviously losing businesses book [ph] as we're pre-revenue in those important OEM relationships. Yet we do expect to deliver both revenue and positive EBITDA in the second half of the year.

And our next question comes from the line of Jen Ganzi [ph] from Newmark Capital.

I was just wondering, did you just mention that the sort of the Commercial Inkjet printing is also down this quarter?

So we didn't break out specifics within our strategic technology businesses or within our Digital Printing and -- Digital Printing business, but did you do...

We talked -- I believe what I said was that our Digital Printing and Packaging results have revenue increases of 2%.

Okay. Between the 2 of them?

I did not break that out.

Okay. So I was just curious. I guess [indiscernible] talked about sort of that inkjet printing solutions. Is that one of the businesses that are going to -- that are sort of back-half loaded then?

Yes. I mentioned earlier that the largest swing in top line, first half to second half, is in the inkjet printing systems. And this is our -- again, our PROSPER Presses, our PROSPER components. That's what is driving the largest half-on-half growth. And that business, again, has a lot of investment costs, as I've mentioned, in it. And so as we build the annuity stream and continue to sell high-revenue and high-margin components, as well as high-revenue and modest-margin systems, that will improve both revenue and our profitability in that business. And it will be a second half improvement in EBITDA versus the first half.

Okay, got you. So these are all contracted situations and such. And then just to understand a little bit about sort of the runoff businesses, I know you're not breaking it out. But seeing sort of your Graphics, Entertainment & Commercial Films business kind of swing to -- swing really negative on the EBITDA side, is -- can we sort of kind of guess that there could potentially be some sort of negative margin on those runoff businesses at this point? Or is that not the right assumption?

So here's what has happened. And if you go to Page 6, you'll see that this is a -- these businesses, both Consumer Inkjet and Entertainment and Commercial Films, are declining rapidly, I think 43% year-over-year. And the operational EBITDA went from $44 million down to $8 million. I did not disclose that either of them are profitable or negative. But I did say, if you remember, in my earlier remarks that the Inkjet business is more profitable than the Commercial Films and -- Entertainment and Commercial Films business. Our objective in managing these businesses is to manage it from an optimal cash flow perspective. We have certain inventories in place. We have a series of assets in place in these businesses, and we're trying to manage it for optimal cash. And that's what we are going to do. Is there a possibility that it makes [indiscernible] in the negative EBITDA at one point in one of the businesses? Of course, that's possible. But we try and optimize cash flow and try and mitigate that with other cost actions.

And our next question comes from the line of Shannon Cross from Cross Research.

Jeff, I think you've now been at Kodak about 2 months. I think that's right in terms of timing. I'm just curious as to if you could give us -- you take a step back, and sort of give us your impressions of what you've found in the business, what surprised you, what -- then either on the positive or negative side, sort of how you're thinking about the business now that you've had a few weeks to sort of absorb things.

Yes. And I think, Shannon, you can kind of tell the tone through my remarks. This is a business where we have fantastic market-changing assets. I'm very, very excited about our Inkjet businesses, our PROSPER Systems. I'm very exciting -- excited about our SONORA plates that add both environmental and efficiency attributes to our customer. I'm very excited about our flexible plates business, which is growing very rapidly in the packaging market. So we've got a series of assets that each can be very large businesses for Kodak. However, each of these businesses is still in an early stage in their development. And none of these businesses has yet built the annuity streams that you need in a business like this when you're managing with the very rapid declines of your Entertainment and Commercial Films and Consumer Inkjet businesses, as well as some of the more flat and the more secular declines with your EPS business, and you're not in your traditional non-process free plates. So what you've got here is a very mixed portfolio, all great products. But we're clearly going to emphasize the growth of these products and the strategic products I've outlined. And that's going to be the key toward the real leverage of the cost structure in Kodak and the growth of the company. So this is a year of transition. And what I found is we've got a great ability to scale these businesses. We're seeing some nice trajectory on some of these businesses. But at the same time, we've got some real mature product sets that are going to decline. So given that, what do you do? You prioritize rigorously around where you're going to invest and you manage for cash flow the other businesses. And at the same time, you try and streamline your processes and run the company in a much more efficient way. I mean, we all know that Kodak is a company that at one point was much, much larger than it is today. And there's still some reengineering of processes and streamlining that we need to do to get the overhead structures in line with the current size of the business. So it's been an exciting 2 months. I've had the opportunity to meet several of our customers. I've done reviews of almost all of our global businesses, spent last week in Europe, going to fly out tomorrow to get back to Europe for another 10 days to meet with more customers and look at more opportunities. So I'm pleased with where we are, but we have a lot of work to do.

And we have a follow-up from the line of Trent Porter of Guggenheim Partners.

Yes. So I was wondering, the -- first of all, the mature businesses that the -- you did $8 million, and the decline seems -- and we expected a steep decline, but it was steeper than I expected in the first quarter. Is there a nonlinearity that you're expecting there and seasonality? And then if I have time, I had a second question on the SONORA. Assuming that the volume quadruples, what would that make the SONORA Plates in terms of percentage of total plate revenue? What would it do to your blended margin? And are you gaining share in the plates market as a result of your SONORA Plates?

All right. Let me see if I get all those. First, I think if I can paraphrase what you said, it -- are the mature businesses declining a little more -- a little faster than we had expected? And second, is there a second half linearity on a favorable basis in those businesses? And the answer is the Inkjet business is declining both slower than we had expected, and the Film business is declining a little bit faster than we had expected. In terms of second half linearity, yes. While both these businesses are declining, the second half -- first half, second half is relatively better. That doesn't mean that they're growing first half and second half. It's just that the decline is at a lower rate. And so that will give you a sense of where we are in the mature businesses. Your second question was what I'm very excited about -- is SONORA. Yes, we believe we are gaining share with SONORA because it is a unique product. One of the things I mentioned in my remarks is that we are not only going to increase the rate of -- the number of placements of SONORA Plates, but we're going to materially also increase the customer base. Many of these are new customers choosing to take the -- all the efficiencies of a process free plate -- of moving the process free out of their system. And there's lots of economics. I urge you to go to our white paper, which we have published on this, which we use with the customers, that shows that there's not only material environmental savings by reducing the chemistry, there is material water savings as a result. And there are significant labor savings as you take out an entire step in offset process. In terms of the total percentages, we're not disclosing the total percentages. But you -- but I would expect that the total non-process piece of the business will continue to exceed 20%, and SONORA is a large part of that process. And it would not surprise me that if we continue to see this growth, that SONORA will become an increasingly large part of the Graphics business over the next couple of years. In terms of margins, the main thing we're doing in terms of improving margin is lowering our manufacturing costs by moving from 5 plate factories to 4. What we're also doing is adding SONORA lines. I was in Germany last week, did an operational review of our manufacturing process and reviewed the new SONORA line we have in Germany. Very excited about it. As you probably heard, we're also adding a SONORA line to our Georgia factory. So this additional regional capacity is going to allow us to get these -- more of these plates out there, where there's substantial customer demand. Thanks for the question, Trent. I think -- are there any other more questions, operator?

We have one final question from the line of Christopher Hillary from Independence Capital.

I wanted to ask on the outlook you gave. What are some of the things that are driving the range on the high and the low end? Is it the pace of decline in the mature businesses? Is it some of your growth businesses and getting those placements out in the second half of the year? Can you just give us a little more context? And does the first quarter kind of non- [ph] -- if it does -- does the first quarter have a big impact to the seasonality on that?

No, the range -- we left a lot of range. When we started the year and gave this guidance, we wanted to have a relatively broad range. And the reason is that unlike most companies, we've got multiple moving parts. At the same time, were taking out costs and reengineering our factories and a lot of our processes. We have businesses that are materially growing and businesses that are materially declining. Trying to get that just right in terms of predictability as well as operations is quite a challenge. And so we've put a broader range than we would typically do because there's a lot of variables. Now that we've got 4 months of actuals, and I've just finished our fifth month, obviously, we're seeing more -- we're seeing a closer sense of where we're getting. That said, we're going to hold with these ranges because frankly, there's a lot, as you can tell, to go in the second half of this year as well as the rest of this quarter. So we think it's prudent to hold a little bit broader range simply because our business had multiple transformations across it. Thank you very much. I thank everyone for joining us on the call today. We look forward to reporting out again at the end of the second quarter. And we're pleased, as I said, with some of the growth in our key areas. And we do realize we have a lot of work to still do. So I thank you, all, and wish you all the -- I'm sorry, a good rest of your day. Bye-bye. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may, all, disconnect.