Eastman Kodak Company (KODK) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Eastman Kodak Q4 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 be given at that time [Operator Instructions]. As a reminder, this call is being recorded. I would now like to turn the conference over to David Bullwinkle. Please go ahead.

Thank you. Good afternoon. My name is David Bullwinkle, Director, Global Financial Planning and Analysis and Investor Relations for Kodak. Welcome to the fourth quarter 2015 Kodak earnings call. At 4:15 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 2015. You may access the presentation and webcast for today’s call on our Investor Center at investor.kodak.com. During today’s call, we will 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 risks 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 Web site 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 full year financial performance, and 2016 guidance for the Company. Then John will take you through a cost reduction update, 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.

Thank you, Dave. Welcome, everyone and thank you for joining the Q4 investor call for Kodak. It’s been two years since I joined Kodak and I am pleased with the progress made during 2015 in the Kodak transformation. Today, in addition to our earnings review we are announcing strategic and product decisions with regard to our enterprise inkjet and silver metal mesh touch sensor businesses. The PROSPER business has significant potential for accelerated growth. To achieve its full economic potential, PROSPER will be best leveraged by a company with significantly larger sales and distribution footprint in their digital printing markets. Due to the success of the PROSPER business and significant progress achieved to date, we have received strategic interest in the PROSPER business from companies and their financial representatives. We are in discussion with prospective buyers to purchase the business from Kodak and we have hired Sagent advisors and DC Advisory which share Daiwa Securities as a common shareholder to manage the sales process for us. We will continue to execute this business and invest in the development of PROSPER and ULTRASTREAM the next generation inkjet rating systems during the sales process. ULTRASTREAM will greatly expand the market reach of this technology. It is an exceptional technology and the product set is highly valued by the printing industry. This decision represents a change in direction as up until making this decision we had expected PROSPER to continue to be growth driver of our business. Let me address this with providing some observation and conclusions which led us to this decision. In the digital printing industry there are companies of significantly more scale than Kodak. The success of PROSPER and the development of ULTRASTREAM require significant scaling and investment in the go-to-market resources. For example, at Kodak we have approximately 40 sales people dedicated to PROSPER. Potential buyers have hundreds and even thousands of additional sales business development and services headcount already deployed in geographies around the world which will be synergistic to a PROSPER combination. Number two, PROSPER presses sell for $2 million to $3 million each. Due to the competitive pressures in the inkjet market, PROSPER presses are often placed in loss on the basis that the annuity will yield a system profit overtime. Prospective acquirers of PROSPER are better positioned to make this magnitude of investment. Third, most of our competitors provide captive commercial financing to their customer which allows for more flexibility. In terms of third party financing, Kodak is limited in our ability to compete with significantly larger companies in financing. Since PROSPER is a relatively new product the residual value history required for third party commercial financing will not be available in the near future. After the sale of PROSPER is completed the impact to Kodak will be an improved balance sheet due to the purchase price proceeds as well as less CapEx in working capital investment which today supports the growth of PROSPER. We expect the proceeds will be used to reduce existing debt. In the medium and longer term post sale Kodak will grow slower and of less overall EBITDA in 2017 and beyond. However, given the strong prospects for Sonora, Flexo packaging, software and 3D printing Kodak will continue to have strong and diversified growth engines. In addition, we made the decision to focus on the development of touch sensors using copper metal mesh technology. Micro 3D printing is an important element of our portfolio and we have been developing offerings based on silver as well as copper technologies. After extensive discussions with industry participants it is clear our fully additive copper metal mesh technology is the winning approach in terms of overall cost, set up cost and the scalability of larger screens. We will continue to make silver halide sell available to touch screen sensor manufacturers. On the remainder of the call today, I’ll talk about the company results for the full year 2015 as well as our guidance for 2016. John McMullen will then follow with more details on the fourth quarter 2015 divisional performance, cost reduction update and the fourth quarter cash flow performance after which we’ll welcome your questions. Now moving onto our results. Starting on page five we delivered strong 2015 operating performance with $122 million of operational EBITDA which was higher than the guidance we provided for the year for operational EBITDA of $100 million to $120 million. We also delivered greater than the targeted cost structure savings which improved profit leverage going forward. In addition, within 2015 our quality of earnings has improved meaningfully. Operational EBITDA has improved year-over-year in all divisions with the exception of the consumer and film division due to the continued expected decline in consumer inkjet profit. As shown on slide six, growth businesses have expanded from 16% for the full year to 22% of Kodak revenues for the full year 2015. Overall, our growth engines grew 29% in 2015. Slide seven presents the company’s product portfolio to reflect the strategic decision for PROPSER. This is the way we view the company going forward. Growth engines include Sonora, Flex NX, software and solutions and Micro 3D printing. Strategic other businesses include plates, CTP and service and PSD NexPress, and related toner business in PSD, entertainment and commercial film in CFT, consumer products licensing CFT Eastern business product and IP licensing. Planned declining businesses, our products lines where you made the decisions to stop new product development and to manage an orderly expected decline in the installed product and annuity base. These product families include consumer inkjet and CFT, first to market EIFT and Digimaster and PSD. Non-recurring businesses include PROSPER and the $70 million of non-recurring ITO licenses that were recognized in 2014. From slide seven you can see that the majority of the Kodak product portfolio is stable to growing 83% of the company’s full year revenue in 2015 was basically flat on a constant currency basis. The expected decreases in the planned declining and non-recurring businesses results and the total company’s revenues declining for the full year. We are making progress and changing the trajectory for the full company into 2016 as the growth engines become a larger portion of the company’s revenues. As shown on slide eight in March of 2015 we guided the operational EBITDA of $100 million to $120 million assuming an unfavourable foreign exchange impact of $21 million. Our guidance represented a 50% to 80% year-over-year improvement on a comparable basis. For the full year 2015 the actual unfavourable impact of foreign exchange and operational EBTIDA was $26 million. Full year 2015 actual operational EBITDA was $122 million despite the greater than anticipated impact of foreign exchange and above the high end of the 2015 operational EBITDA guidance. Now I’ll talk about the business by division which is presented on slide nine for the full year 2015. Starting with the print systems division. Full year revenues were $1.1 billion a 12% decline compared to 2014. Operational EBITDA was $98 million, 5% better than the same period a year ago. On a constant currency basis PSD revenues declined 4% while operational EBITDA improved by 15%. These results were achieved despite tough challenges. The decline in year-over-year revenues is primarily due to foreign exchange, global economic volatility particularly in Brazil, Japan and China and competitive pricing pressures. In 2015, we achieved our goal of growing SONORA volume by 50% year-over-year. Our sales of SONORA placed within Japan, our most recently entered country are tracking as planned and we are actively ramping this part of the business. On the Q3, 2015 Investor call, we announced the release of two new products, Kodak Electromax and Libra. Today, we have about 50 customers using these two new plate offerings, so we are off to a good start. For the full year 2015 on the strength of SONORA, overall plate volume was flat compared to the prior year. Despite an overall decline in the industry and volatility seen in some of the larger economies around the world. While we were successful at maintaining stable plate volume, we are continuing to see low single digit plate price erosion. In addition, as a result of aluminum hedging program we did not realize the full benefit of decline prices in 2015. Continuing on the cost side, we have now converted the America’s SONORA Plate manufacturing to our Columbus, Georgia facility from our leased operation in the U.K. The facility is running well and the transition of SONORA plate manufacturing from Europe to the Americas was seamless. We anticipated between $20 million to $25 million of annualized productivity gains of lease closures and we are now fully realizing the benefits of this action. We also plan to continue with cost reductions of productivity improvements as appropriate which will help overcome the headwinds we anticipate from continuing price erosion and weak global economies. We’ve been -- anticipate continuing cost reductions to offset the price erosion. Also within the PSD envision is our electrophotographic printing solutions or EPS business where we have our NexPress and Digimaster products. Year-over-year EPS performance improved, with NexPress driving the majority of the improvement while our legacy black and white Digimaster product declined as expected. In 2015, we increased Nexpress placements approximately 16% from 67 to 78 units. In 2016 we will continue to focus on our growing our Nexpress installed base while driving productivity and cost improvements across the entire EPS portfolio. Moving onto the Enterprise inkjet systems division which for 2015 includes our PROSPER and Legacy Versamark systems. For the full year 2015 PSD revenues were $173 million down $185 million in the same period last year. On a constant currency basis, revenues improved by $2 million. Operational EBITDA for the full year 2015 was a negative $26 million an $18 million improvement compared to the prior year. The improvement to operational EBITDA was $23 million on a constant currency basis. The improvement in operational EBITDA reflects the reduction in revenues and earnings contribution from the Versamark Legacy brand more than offset by growth and improvement in PROSPER contribution to higher consumables and cost reductions. PROSPER revenues for the full year 2015 grew by 35% or 40% on a constant currency basis. Total PROSPER annuity growth was 28% on a constant currency basis. For 2015 we grew PROSPER equipment placements by approximately 41%. 16 new PROSPER presses were sold and placed with it further six contracted for delivery or in a process of installation. We were short of our ambitious goal of installing 25 PROSPER systems primarily due to the timing of the orders received. This is a significant growth of the 2009 to 2014 cumulative five year installed base of 39 presses. We are not at an installed base of 55 units. We also increased our installed base of PROSPER S Series print edge by over 15% for the full year period. Moving on to the Micro 3D printing and packaging division which for 2015 include FLEXCEL NX system systems and plates as well as touch sensor film with the silver mesh and copper mesh technology. For the full year 2015, MPPD revenues were $128 million, flat compared to $130 million in the same period of last year, however, on a constant currency basis revenues improved by $12 million or 9%. Operational EBITDA improved from a negative $1 million to $9 million positive a year-over-year improvement of $10 million. Operational EBITDA improved $14 million on a constant currency basis. The improvement in this division represents strong growth in the FLEXCEL NX packaging business as well as less investment in Micro 3D printing as we shift from research to commercialization. This FLEXCEL NX packaging business has shown continued strong momentum. FLEXCEL NX revenue increased by 12% year-over-year or 24% on a constant currency basis and the installed base grew by 20% year-over-year ending at over 470 installed FLEXCEL NX CTPs. Plate volume increased 26% year-over-year for the full year. The significant advantages of our FLEXCEL NX systems are the improved efficiency in our management without sacrificing quality, reduced press downtime, faster writing speed and reduced waste and in consumption. FLEXCEL NX plates have enabled our customers to drive substantial efficiencies in the printing operations, greater than 20% in some cases while improving the consistency and quality of the packaging they deliver to the brand clients. Our packaging business is a significantly profitable business in our portfolio with double digit market share proving -- able to do in markets in relatively shorter quarter with our technology innovation. FLEXCEL NX was introduced in 2008 and continues to represent a significant growth area for Kodak. Micro 3D printing as I indicated earlier, we are exiting the silver mesh technology and are moving ahead with a focus on copper mesh touch sensors. At this year’s CE as our copper technology was well received by customers and we are pursuing a number of our cues [ph] particularly in the industrial segment. After investment in Micro 3D printing for the past several years we were very close to shifting to revenues which will result in reduced investment required in 2016. The Software and Solutions Division which includes PRINERGY workflow software had a strong year. For the full year 2015, SSD revenues were $112 million, up $108 million in the same period last year. On a constant currency basis revenues improved by $30 million or 12%. Operationally, EBITDA improved from $3 million to $9 million and year-over-year improvement is $6 million which corresponds to a $9 million improvement on a constant currency basis. The improvement in this division represents higher revenue from Kodak technology solutions. The improvement in operational EBITDA was due to cost improvements in unified workflow solutions and improved efficiencies. The Consumer and Film Division include consumer inkjet cartridges, motion picture, commercial film and synthetic chemicals as well as our consumer products group which includes licensing of the Kodak brand. For the full year revenues for CFD were $265 million, down from $25 million from $352 million driven by a 41% reduction in consumer inkjet revenue. Operational EBITDA declined from $66 million to $52 million, better than expected due to the improvement in our film business. For the fourth quarter in a row film reported profitable quarter on the basis of operational EBITDA before corporate cost which was our goal. We continue to develop new opportunities in film and consumer products businesses and have plans for growth in these categories in 2016. We anticipated in continued reduction in revenues and earnings from the consumer inkjet printer cartridge business in 2016. The Intellectual Property Solutions Division includes the company’s research lab as well as intellectual property licensing not directly related to other business divisions. For the full year we had modest revenue in the division. Operational EBITDA was a negative $22 million for the full year 2015 an improvement of $8 million from the negative $30 million in the full year 2014 when excluding non-recurring IP licensing. The improvement is a result of focussed reductions in research programs. As mentioned in our previous earnings call, we are pursuing partnerships in our up and other opportunities to commercialize Kodak’s inventions. On the Q3 2015 earnings call we announced the signing of a Memorandum of Understanding with Carbon 3D a promising Silicon Valley start up company which aims to shift 3D printing beyond prototyping to achieve 3D manufacturing. We are pleased to announce this MoU has expanded to a joint development agreement which we signed in February of this year. We are working on agreeing on the statements of work for further cooperation with Carbon 3D. Given our pipeline to monetize IP activities we expect to cover the majority of research cost within IPSD with single to double digit revenues. Based on actions already taken, we have reduced the 2016 run rate of R&D expenses by $6 million year-over-year. Coupled with a healthy pipeline of IP monetization activities we are positioned to deliver better year-over-year improvement than the run rate alone would suggest. Continuing through our final division, Eastman Business Park, full year 2015 revenues were $13 million down slightly from 2014 due to the timing of tenant transition. Operational EBITDA was $2 million up from $1 million in 2014. The overall operating efficiency of the Park is improving and we have a healthy pipeline of potential tenants. Currently Kodak operates approximately 55% of Eastman Business Park, external tenants occupy approximately 25% and there is approximately 20% available for lease. The site also includes 200 acres of prime industrial land available for development. Now to update you on our 2016 financial targets. On slide 10 of our 2016 guidance for revenues is $1.5 billion to $1.7 billion and operational EBITDA were $130 million to $150 million. We expect to see a year-over-year unfavourable impact to foreign exchange of approximately $30 million in revenue and $6 million in operational EBITDA based on the January rates. The operational EBITDA guidance represents a 12% to 29% improvement on a comparable basis versus 2015 adjusting for the year-over-year impact of foreign exchange. This guidance is on a continuing operations basis and excludes the PROSPER and silver metal mesh businesses includes the expected decline in consumer inkjet EBITDA from the anticipated reduction in replacement ink cartridge sales as well as the expense incurred for the company for the global print show Drupa which occurs once every three years in Germany. Despite these items will continue to see growth in our divisions through greater productivity improvements and a larger mix of growth engine revenues. I’ll turn it over to John to discuss Q4 performance, updates and cash on cost reductions and cash flow. John?

Thanks, Jeff and good afternoon. Today, the company filed its Form 10-K for the year ended December 31, 2015 with the SEC. I recommend that you read this filing in its entirety. As Jeff noted in his opening remarks, we are pleased with both our fourth quarter and full year performance. I will now provide a little more detail on the fourth quarter and full year. As we reported in our earnings release, the net loss for 2015 on a GAAP basis was a $75 million compared to a net loss of $118 million in 2014, an improvement of $43 million. This information is taken directly from the company’s consolidated statement of operations in the 10-K. We are pleased with the year-over-year improvement. Moving onto slide 12, for the total company we ended the fourth quarter with revenues of $467 million and operational EBITDA of $48 million. At the divisional level, starting with PSD, revenues for Q4 were $292 million and a 11% decline compared to Q4 in 2014. Operational EBITDA for the quarter was $37 million, 23% better than the same period a year ago. On a constant currency basis, PSD revenues declined 5% while operational EBITDA improved by 30%. In Q4, we continue to add new customers for our SONORA Process Free Plates and SONORA plate volumes increased by 27% year-over-year for the quarter. Our EISD business ended the quarter with revenues of $50 million up from $47 million in the same period last year On a constant currency basis revenues improved by $5 million. Operational EBITDA was a negative $4 million compared with a negative $8 million in the fourth quarter of 2014 for an improvement of $4 million. On a constant currency basis operational EBITDA improved by $5 million. Within the EISD business, EBITDA before corporate costs for our PROSPER business in Q4 was negative $2 million close to breakeven as expected and well positioned for 2016 as we execute our process to find a new owner to drive accelerated growth and market scale for this business moving forward. MPP revenues for Q4 were $31 million down $5 million compared to the same period a year ago. On a constant currency basis, revenues declined by $2 million or 6% in Q4 of 2014. On a constant currency basis, operational EBITDA improved by $2 million driven by the continued success of the Kodak FLEXCEL NX system. Q4 SSE revenues were $27 million or $29 million on a constant currency basis, essentially flat compared to the same period last year. Operational EBITDA improved from $3 million to $4 million on a year-over-year basis. Q4 revenues for CFD were $63 million down from $87 million in Q4 of 2014. Operational EBITDA declined from $17 million to $14 million. Q4 revenues included $5 million from the amendment of a brand licensing arrangement. These results were consistent with our expectations as our Legacy consumer inkjet cartridge business continues to decline year-over-year. Finally, for our IPSD and EBT divisions, we met our expectations for both revenues and operational EBITDA during the quarter. Now, let me provide an update on our cost reduction programs. As we shared with you over the course of the year, we expect greater than $100 million in operational SG&A and R&D cost reductions for the full year of 2015. As you can see on slide 13, we exceeded our goal by $7 million. Key drivers of these difficult by necessary cost improvements were company headcounts down approximately 12% year-over-year and benefit reductions effective at the beginning of 2015 which provide approximately $20 million in annual operating expense savings. We continue to see opportunities for further efficiencies within our cost structure both at the divisional level and the cross global functions. We will continue to take actions as appropriate based on the business model needs for our divisions and corporate cost benchmarks consistent with the total company portfolio and financial objectives going forward. Now, let’s focus on cash. As shown on Slide 14, the Company ended the year with $547 million in cash. This reflects a cash generation of $26 million during Q4 2015. During the quarter, the Company used cash primarily for interest expenses and debt repayments, capital expenditures, employee severance payments, workers compensation payments, funding of planned cash tax payments and consistent with prior quarters the continued negative impact of foreign exchange. These cash expenditures were more than offset by positive operational EBITDA for the quarter as well as cash generations from working capital of $63 million. It is important to note within our full year cash results we face difficult unplanned headwind from foreign exchange impacts. Year-to-date, our cash position has been reduced by $18 million as a result of negative foreign exchange impact on our bank balances. In addition, we saw unplanned impacts on our working capital balances as a result of currency translation effects and headwind and velocity of our working capital versus our goals for 2015 with current economic softening and volatility, primarily outside of the U.S. Even with these headwinds we remain comfortable with Kodak’s year end liquidity position and supporting the operating and investment needs of the Company going forward. Looking forward to 2016 we are currently projecting full year growth in cash of approximately $10 million to $30 million by year end, excluding any material foreign exchange impacts and excluding the purchase price proceeds of a completed PROSPER transaction. Cash growth during 2016 will be driven by continued progress and year-over-year operating results. Cash generation from working capital is similar to what we achieved for the full year 2015, reduced investment and company restructuring, strong capital expense management and the likely monetization of assets and/or technology partnerships throughout the course of the year. In summary for both the fourth quarter and full year 2015 results, we are pleased with the Company’s continued progress. We are executing well across our divisional structure while continuing to exceed aggressive cost growth for the company to provide the investment capacity needed for growth, sustained profitability and cash generation going forward. And I’ll turn it back to Jeff for closing remarks before we open the call to your questions.

As we shared with you on the call today, the company’s results for 2015 represents solid performance from operational improvements which are sustainable. The Company has also made some important strategic decisions surrounding our portfolio of businesses. I will now take your questions and discuss these items with you. Questions please?

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

Hi, Shannon

Thank you very much. Hi, couple of questions. I guess the first is, strategically getting rid of PROSPER, obviously gives you some cash. I'm curious at how you think that the potential purchasers are looking at the Company from a valuation perspective? I know you don't want to totally tip your hand, but if you can give us some idea of their breaking EBITDA out for the two businesses, looking at Versamark on its own, and then given the revenue multiples of the other business, or just how they're looking at it? And then there are some other assets, the software business, some of the other things that might be considered I don't want to say non-core, but could be monetized. I mean is this something where you're looking at monetizing other parts, or are you happy with just moving away from PROSPER and Versamark?

So PROSPER is a unique situation. You know PROSPER has been a business that we’ve spend a lot of money over the last half decade building. We now have built it to the point where it is very attractive. So, we’re offering this PROSPER for sale from a position of strength. And we didn’t put out a sale sign, companies came to us, they are excited about the technology. They are excited about the ULTRASTREAM technology which brings it into broader market. And on top of that there are companies that I mentioned in my remarks that will have significant synergies beyond what we would have as a standalone. So as we step back and went through a continuation of our core strategy, we realize that it will be much more valuable in a company that already has the sales force beyond the 40 people we have and a broader distribution market as well as you know perhaps some synergies on engineering side or another inkjet technologies. The -- well PROSPER the ability to put it for sale really is based on the installed base that now is large enough that there isn’t significant additional investments required to build the technology out and that with a larger sales force you can get to cash flow positive sooner. We were targeting as you know, we targeted in the fourth quarter the combined EISD business to be roughly break even. That would have happened in 2016 but PROSPER would have still required significant investment. And it would have required significant investment in 2017 as well and we would have started to see cash flow generation in 2018. And that’s a long time to wait when another company can add it to existing resources achieve synergies get a broader footprint and get to a cash flow positive much faster. It is an incredible technology. It is a technology that is unique in the industry, has a rich set of customers and partners. We will continue to support those customers, continue to add the installed base and continue to invest in the technology. We’ll showcase this at Drupa, and we believe this will be a very attractive technology and business for potential acquirers. Versamark isn't for sale we are very comfortable with Versamark, it is one of the businesses we think we can manage very well down. It is very separable from the PROSPER business and the rest of our business is aren’t for sale. PROSPER was in for sale, we got compelling interest from outside parties and that is what brought us to this strategic decision. Of course we are pragmatic and we have to listen to opportunities but we believe with the PROSPER sale the portfolio will be a good balance of growth of and where matures products sets as well.

And should we assume since you are working with Daiwa that these are most likely international buyers?

Well Sagent has a partnership with Daiwa and so that it -- really will cover the whole global footprint. Sagent has a very strong footprint in the U.S. and Europe. Daiwa has a strong footprint more in Asia. So we felt this was the right bank. If you go back in history you will see that this combination has had over a dozen meeting for sales in recent periods of technologies within the printing industry.

Okay. And should we assume like use of proceeds sets strength in the balance sheet will that go to near term debt repayment or how do we think about this and does this have anything to do with the covenant?

This is a strategic decision that we are making based on our view of where the business is for us and our ability to generate meaningful sustainable cash going forward versus the synergies in other party would place. So I would characterize this as a strategic decision that we would make with or without our current capital structure. It will improve the capital structure.

Okay. And then it’s a couple of other questions. On Micro 3D printing on the copper side, how do we guage success, what milestones should we look for you know obviously there were some that we were looking for on the server side, but what would you recommend at watching and when do you think you will sort of get to where a meaningful contributor of the business?

As I stated that at on each of the last several calls and at the Analyst meeting last fall, the company has a history of overpromising on this technology and I don’t intend to continue. And so, I think that the best milestone you can have we’ll see is when there is revenue and positive EBITDA coming off it. And all the rest of that we’re going to go, go keep inside. I will note that there isn’t a lot of additional research that’s required on copper. And it’s really is at the stage of commercialisation now. And the second piece relative to silver, in order to respond to RFPs and to build protos and others it is a very different process. It was a much larger investment for each bid on the silver side then the copper side which we can prep easier with the Flexographic press. And so, I think copper lends itself to some of the ambiguities of a start up market better than silver did.

Okay. That’s helpful. And I assume no revenue was included. I just want to confirm and -- that in 2015 from copper?

Let’s put it this way. We have a very conservative estimate of where we’ll be for the Micro 3D printing in 2016.

Okay. And then one last question, just on Flexo, how should we think about you know growth expansion investment in that business given it’s going to be one of the more important growth drivers I think going forward with PROSPER exiting. And you know any more color you can give us on what you are seeing in that market, and then I’ll conclude the…

Well again, I remind -- I do realize that you know maybe if you can just -- everyone if you could go back to slide six and the thing, I remind people that while PROSPER is very important to us and if it comprised $24 million of the $97 million of constant currency growth we got part of our growth engines last year. So clearly SANORA, FLEXCEL our software solutions business and overtime Micro 3D printing will need to replace the growth that we had planned for PROSPER. And yes, FLEXCEL to your point becomes really important. And it is a business that as I mentioned with the statistics I read on the script, that’s doing quite well. You know we are upto 470 placements now, we have wider formats, you will see the product features quite significantly and some of the roadmap additions at Drupa and it’s a business with high margins, consumables that we like very well. So, yes it will be the packaging industry will is very central to our strategy and with the divestment of the PROSPER business it becomes more core. We are very comfortable with the progress we are making in that business. In terms of new investment, we will and this is one of those good problems. In the next couple of years we are going to need to build the new factory to keep up with the demand for the product and so that is the only material new investment beyond the investments that fit in the business model as it grows in terms of adding sales people and different features to CTPs etcetera.

Great. Well thank you very much. We look forward to seeing you at Drupa if not before.

All right, Shannon thank you. Next question please.

Thank you. And our next question comes from the line of Jen Ganzi of NewMark Capital. Your line is now open.

Hey guys, thanks so much for taking the question. Can you hear me okay?

Hear you perfect, Gan.

Great, perfect. So just one housekeeping item just to start off with. I don't know if you gave this out, I mean, I may have missed it, but did you give the standalone like FLEXCEL packaging EBITDA ex-Micro 3D for 2015, whether you broke it out in your presentation at the investor day, so I was wondering if you could let us know what that number is?

We did not. The number is I believe 22, is that right.

That was the number year-to-date through March to September rather than -- provide. So the number was 30.

Okay, so 30 for the full year.

Yes.

Okay, great. And then in terms of just housekeeping on the proceeds from the sale of the PROSPER business; it looks like from the credit agreement that it's got to be used to pay down debt and specifically first lien debt? Is that correct?

I don’t want to go in all the things. There is some ability to make additional investments but our intent at this time is to pay down debt.

Right. And will that be at par or will there -- is there the mechanism to do sort of a discounted purchase within the credit agreement? I'm just kind of curious how you're thinking about that?

Yes, I think we’ll wait and see where we are at the time to do the transaction around that. There is the ability to -- there is the ability to go down and pay, pay down on the first lien and there is different approaches for us to be able to do that.

Okay, got you. And then just in terms of understanding the value, I'm just wondering how much you had invested in PROSPER so far like you know as of I guess you know inception, like can you kind of give us a number around that?

Yes, I mean I don’t want to go back too far, but you know we did share some numbers with you at the analyst call over the last couple of years of how much EBITDA we’ve invested there. Dave, do you want to just read those numbers off since they are public from the thing.

[Indiscernible]

Dave is going to give you the specific numbers, but it’s been several hundred million dollars that have been invested since the interception and we’ll give you the specific number that we shared with you over the last couple of years.

So we have combined the investment starting in 2014, 2015 and 2016 it was a negative 75 which combined Micro 3D and PROSPER. That was for 2014. For 2015 it was a negative 45 in total in both of those technologies.

And a majority of those numbers are related to PROSPER in those three years.

And I’m referring to slide 126 of the Analyst day.

And so I think one of the key things is as we’ve grown the annuity base and as we’ve added more S series print edge we are as you saw from our marks [ph] a significant improvement year-over-year, a reduction in the use of cash required. And in 2016 it will be a manageable number. Obviously we’ll be running this business in 2016 until the sale is consummated. And it is the number that -- it is a manageable number for us and then in 2017 we would as I mentioned earlier we would go positive EBITDA but require growth in CapEx and cash and working capital. That’s why this deal makes so much sense for a company that’s either a little bit or quite a bit larger than Kodak particularly if they have a sales force in place and other inkjet investments.

Okay. And then in terms of I guess, so if you assume a little over $100 million you've invested over the last couple of years, I mean can we think about how do you think about what percent of that investment you think you'll recoup on the sale of the business?

I hope you don’t expect that given that I mean the sales process that I’m going to start talking price with other to public. So obviously we think this is a very attractive technology. We believe it would fit with several different partners out there, several there has been external funds solicited interest into Kodak about the business. We have a banker to run the process, so I don’t think its’ going to help anyone in the process, certainly not Kodak to speculate on the value.

All right, fair enough. Just in terms of, it sounds like on your investor day you gave out some sort of EBITDA and cash flow estimates for 2017. Sounds like for 2016, the sale of this business will basically be a positive even ex the proceeds, because you won't have to invest in it, or I guess, it will be positive to neutral rather. But then for 2017, I'm just curious, you have a range of $180 million to $210 million of EBITDA, how much of that we potentially lose from the sale of PROSPER? It sounds like there will be an offset from a cash flow perspective, but how should we think about that projection viz-a-viz losing the PROSPER business having being sold?

Yes. So we shared with you that impact today, why don’t you just readopt the charge.

So again on the same spot at the analyst day we had showed positive EBITDA from a combination of Micro 3D printing and PROSPER about $25 million in 2017. So that would of course be reduced to some extent. I’ll let Jeff…

Yes, there is going to be -- it wouldn’t be apples-to-apples because as first of all as we shift PROSPER onto another party that allows us to put more focus on our current businesses and to reduce some of the overheads as well. So it won’t be an apple-to-apple and that was both pieces. I would say you know we would be closer to a $10 million than a $25 million headwind that we would face going into 2017 which is still nine months away though it even starts and so we’ll work our way towards that. We are not going to give you 2017 guidance now it will as in my marks it will impact you know 2017 but at the end of the day we have a lot of opportunity now and then to make up some of that gap. So let’s just put it that way that it will be a headwind but one that we are going to take on forward full speed.

All right, got it. Again, just trying to understand how to think about it just for modeling purposes. And then, just a broader strategy question, obviously, now you're selling the EISD business, so it's basically, you've got your graphical printing, and with the SONORA plates and you've got the FLEXCEL business. I guess you think you have the full spectrum of printing products now you're just going to have basically two of the three. How do you think of that in terms of your strategic direction for the Company over the next couple of years? I know it's a broad question, but maybe just talk a little bit about does that affect how you view the business, not having the commercial inkjet, and how that affects where you're going with the business?

Yes. We still have one of the richest portfolios and the classic free press graphic cards business. I will remind you that no one has the full range that we have there with CTP manufacturing plates development of the broadest ranges of plates including leadership and SONORA plates as well as other categories and in the work flow across that element. So we still have you know real leadership in the graphics art industry. We will still have diverse -- lot of set which is well installed out there and we will be very as flair remarks very focussed in the packaging business. The FLEXCEL business is a rich business growing fast and one of the fastest growing elements. The electrophotographic business which we showed 16% unit growth is also a business that we see the opportunity in to grow. It is today more than 2.5 times the size of PROSPER, so that’s a business for us that PROSPER would have taken a couple of years to even get to the scale of that existing business. And we see additional opportunities with NexPress business. So we’ll still be a very broad provider across graphics arts, electrophotographic, and software. And what I would also like to remind is that with 3D printing which is perhaps the most interesting fast growth we have a couple of plays there. We have a play as a material supplier, with Carbon 3D, and we also have the micro 3D opportunity. So for a company for our size, 1.8-ish billion revenue having this broad portfolio is still quite extensive and quite diversified and that comes into play with our ability to make a strategic decision around PROSPER.

Okay, great. And then just lastly in terms of I guess sort of your lowered revenue guidance, so that’s based I guess selling the PROSPER business, I’m guessing and then, it sounds like you’re not I guess over the long run expecting a big difference from dropping the silver versus the copper on the 3D, is that the right way to think about those things?

I think I would – in terms of what I think your question is kind of what’s your growth trajectory going forward. If you go back to the slide 7 which is I think is up, you see that last year in 2015 83% of our business was relatively flat adjusted for currency. PROSPER is roughly – last year it was about 5% of our total business and so we will quickly replace that it stay in the 80s of businesses that we’ll grow. And then I expect that that subset of growth engine, strategic other businesses which will be 80% of our business will not be flat, but it will be single digit growth next year and as you can see with the growth engine, growth part start growing more. So, we believe that the ability to grow this business is really based on portfolio mix shift and growth engines are clearly growing faster and you see that on this slide and that will continue to accelerate as our businesses that we expect to decline to and as our non-recurring businesses go away. So, there is a portfolio that will allow growth. It won’t show up in 2016 because of these decisions and the relative sizes of the 2B [ph].

Okay. That’s helpful. Thanks so much, guys.

Thank you. Next question please.

Thank you. Our next question comes from the line of Trent Porter of Guggenheim Securities. Your line is now open.

Hi, guys. I think you took care of almost all of mine. Just one housekeeping, I think I miss this but did you talk about what volume in 2015 for the traditional plates away from SONORA was and then maybe an update on what percentage SONORA now represents of print systems or maybe total plates. And have you – do you have any visibility into kind of how near term an event might be or growth SONORA might eclipse the continued price pressure on the traditional plates? And then I have one follow-up.

Great question. And so, the answer is that we were flat in overall volumes which we believe was a meant a gain in global market share and that includes particular issues we’re having around duties and so forth in Brazil. So we overcame that and still had what we believe this market share growth and flat overall volume. As we mentioned we had single digit price pressures, which we overcame because we’re 5 million up as you know overall adjusted for currency last year in the overall PST business. And so we have been able to with cost reduction offset some of the price actions that we’ve had. In terms of the mix of SONORA which was your second question, we grew SONORA 44% in constant currency, 50% in unit volume, so from 91 million up to 120 million, our total plates business is about 800-ish million. And so if you look at that, SONORA is rapidly becoming a larger percentage of the total plates. However, we are introducing other new products beside SONORA, SONORA is a uniquely differentiated product, but we’re introducing other products as well. And so we don’t feel that SONORA is the only answer we have to pricing pressure or to other dynamics in PST, so we believe PST is critically important part of our company. It’s a large part of our company, cash flow positive, SONORA is a key product in it and helping us maintain the growth and profitability, but its not SONORA only story.

Okay. And then, maybe this is a combination of two follow-up questions, but I think I heard you say, you missed so many times on the micro 3D that you wanted to kind of keep that in-house which I understand, but I wonder within micro 3D there were opportunities outside of touchscreen sensors for smartphones and tablets in such, is that something that you had already begun or and if not does the decision to sell the PROSPER press, does it free up, its obviously going to delever the heck out here, but does it free up potential funding to invest elsewhere and with that where would be – is there among your various growth drivers of which you’ve got a lot, are there any of the standout as potential growth drivers that would benefit significantly given added investment, I guess that I’ve to say but..?

I think I know where you’re going. So, the answer is that today we are differentially investing in SONORA in our packaging FLEXCEL business and in our software business, that’s where we’re differentially investing. Around micro 3D we are shifting from deep research into commercialization and most of the investment is behind us on that. There are some additional categories of that – in the future we can lot at, printing batteries, printing others parts of logic, we are not making significant investment in that and we don’t intent to until we make sure that we have been discipline in our process, so we’re driving a profitable micro 3D business on touch sensors. Once we get there and we’re driving profitable EBITDA and solid growth, then we can look at some category expansion, but we’ll be very discipline because we believe that we have the right amount of growth within SONORA packaging in PROSPER, excuse me, and software that with divestment of PROSPER we can focus on those and we won’t need to put more CapEx or more R&D into adjacencies.

Okay. And then, something you all talked about for a while, price of ITO had come down a lot, I think those suppliers saw the alternatives on the horizon which made it maybe more difficult to get the design wins, but since the last time we’ve talked whether it six, nine months or whatever. Has the cost benefit of your copper mesh solution remain relatively stable or relative the legacy ITO products or has it narrow down you further or has it expanded?

Yes. I think the answer is we are able to have a material cost advantage with our copper technology again ITO. And the way we do that is because of setup times, flexibility, the ability to use it in larger formats, and the raw cost of copper relative to silver or indium. And so we’re very comfortable that this well-positioned and the ability for us to make a decision to cease the investment in silver, which was pretty much a sunk investment really comes from our belief that copper is the solution going forward. We want to put more of our energy behind that. And it can be very clear as we continue to work with customers in a fast changing market that this copper solution has a lot of opportunity that silver for us no longer has because of some of the ITO changes but also because of the some of the dynamics I mentioned in my remarks earlier around faster setup time et cetera.

Okay, great. Thank you so much for taking the questions.

Thank you, Trent. Next question please.

Thank you. And our next question comes from the line of Peter Rabover of Artko Capital. Your line is now open.

Good afternoon, Peter.

Hey, guys. Hey, good afternoon. Hey, thanks for the announcements, so I got a bunch of questions, the first one you guys gave guidance of 1.80 to 2.10 for 2017 and how does the sale PROSPER like that?

We kind of answer that a little bit before. The answer is we as the time we gave guidance we put $25 million, I’m sorry, guidance is the wrong word, as we haven’t given guidance, but by the time when we gave the direction at the Analyst Meeting of 1.80 to 2.10, we had penciled in clearly in that $25 million for micro 3D printing in PROSPER. In my earlier Q&A I reference that PROSPER would probably impacted, so the headwind is about 10, but I’m not necessarily willing to conceive that yet, and so we’ll see how the sell process goes, we’ll see how some of our other business do this and then well give an update to that guidance, but the answer overall is its not a giant shift from that.

Great. Maybe would you be able to tell me how much of the copper business is reflected in your pension, I guess deficit I guess how much of that would go with the PROSPER business?

A tiny amount, and insignificant amount.

A very relatively small amount.

Okay. So, also on the Analyst Day, you guys have called out a bunch of strategic non-core monetization from Onex to the Brazilian Park to the IP portfolio monetization, so maybe if you could give us some update on that that would be great?

Yes. So there were no material monetizations of that scale or that type in the fourth quarter. We continue -- these are opportunistic things that we don’t forecast. Those are all still items that we continue to look at and talk about some Onex, on the Onex Carestream piece we have no control over that, so that one is one that if we are derivative beneficiary of, when it occurs on Brazil it is unlikely that this will happen in immediate term, although we continue to look at that. An IP is probably the most promising area and I don’t have anything to announce, but I will tell you that there is a lot of activity going on in that area.

Okay, great. And then the last question, could you repeat what your capacity was at the business park that you guys operate?

Yes. And so, there is we have about – first of all, this is a quite a large park, and this is a space that’s available to rent. There is lot of space that’s not available to rent including 100s of acres that could be develop and there are other buildings that could be reset into multiple uses, but of the available space 55% is occupied by Kodak, 25% by tenants and about 20% is available for lease and we have a rich pipeline of companies we’re talking to in terms of coming in.

Right. Did I see somebody was going to invest $200 million in the park like a bio company, is that correct?

Please send me that purchase order then I will prosecute it very quickly. No. There is nothing of that scale. I think we may be thinking about is there have been several federal and New York State awards that have been given to Rochester and Finger Lakes region, of which a key participant in all of the documentation and proposals was the Eastman business park and this includes photonics institute as well as a series of other economic development areas. It is the unique park and we believe that it will benefit significantly, from this I urge you to watch the news tomorrow and there’s going to be some stuff coming out on that that from the state and so forth. So, we’re very bullish about the redevelopment of Eastman Business Park. It will done, almost all with third party investment and economic development from government and other parties.

Great. So, if I was to think about Eastman Business Park is a standalone I guess asset where you would pay a rent, is $30 million of revenues for the year for 25% of the park , would that be okay to extrapolate your 55% of what you would pay?

Yes, absolutely. The different they’re obviously like everything, there’s different class space. We have clean rooms that rent for a lot more than unadorned space that you still have to remove some of the asbestos in. So there's very different categories of space. What you have is a very strong input structure that supports manufacturing and research and development.

Okay, great. I will hop off the call now. Thank you very much for answering my questions.

Thank you very much Peter. Appreciate it. Are there any other questions?

Our next question comes from the line of Amer Tiwana of CRT Capital. Your line is now open.

Hi, guys. I have a couple of questions. The first one I have is just with respect to the timing with respect to PROSPER sale, are we thinking more like 2Q?

Yes. I’m not going to comment on the sale process at all. So, this is obviously a private sale process one that we’ve an investment bank there working on as of, I don’t want to sharing any of that public competitive process.

Sure. Okay. Another question I have is with respect to cash flow for 2016, has anything change materially with respect to your working capital assumptions for 2016 or some of the other items like CapEx, I know you give guidance of $45 million CapEx and about $35 million of positive working capital for this year. Can you still bank on that?

Yes. I think the profile that we highlighted back in the fall and then the projections that I talked about in my prepared remarks growth of $10 million to $30 million range are still pretty consistent and the components that I shared in terms of what the drivers of cash were about in the fall, the CapEx number and what we’re planning for this years is roughly the same, but similar number in working capital, so you could assume that the way we’ve laid that in the fall is relatively consistent with us having a projection today of growing cash year-over-year by $10 million to $30 million by year end 2016.

And then excludes the PROSPER purchase proceeds?

Right. And it also exclude project this what any impacts or material impacts of foreign exchange would be.

Right. And I assume if you pay down some debt that would be some interest component as well?

If we’re able to do that there could be some interest component, yes.

Okay. And then correct me if I’m wrong, your prior revenue guidance for 2016 was $1.8 billion to $2 billion?

I’m sorry, one more time.

Your prior revenue guidance for 2016 was $1.8 billion to $2 billion?

That is correct. And just to give you a sense of PROSPER 2015 revenue was about $89 million.

Right. So, looking at your new guidance there is about $200 million sort of gap, can you sort of bridge that for us?

Yes. We obviously that we expected PROSPER to grow quite a bit and we would like to add some conservatism into the guidance.

Understood, but can you give us some sense of where – of which particular segments that conservatism be in?

All of them.

Okay. And lastly –last question and then I’ll let you guys go. On the cost reduction side you’ve made obviously significant progress both on the SG&A and R&D front, are there any more things we can do over there or for the time being, is that where we will be?

Yes. I think we’re obviously we will continue to take advantage of any efficiencies we see across the divisions anywhere in the company. We’ll continue to be focus on it 2016. We are – we will continue to reduce cost in global functions on the PROSPER company in 2016 and you will see further cost reductions throughout the course of the year, but they base on the way we plan the year there won’t be the order of magnitude certainly that you saw in 2015 and we’ll update you on that as we have this past year on a quarterly basis.

And also that’s a very much covers the OpEx piece but there’s no question that in the PST business we see significant manufacturing productivity opportunities coming in and even though we have move the factory we get a full year benefit of that this year and the efficiency of the factory with PROSPER continues to impress me. And so, we’re going to do a nice job on the cost of goods sold side as well.

Understood. Thank you very much.

Thank you, Amer.

And we have time for one more set of question.

Thank you. And our final question comes from the line of Robby Tennenbaum of Alta Fundamental. Your line is now open.

Hey, guys. Thanks for taking the question, two quick questions. One is can you give a little more color what the driver is of the projected cash generation from working capital. Is that – is there a lot of room for improvement in days sales, what’s -- is it inventory reduction, what gives you confident that you’re going to be able to generate another $35 million, $40 million from working capital this year?

Sure. It’s a bit of a mix. I think that my belief is the primary opportunities in the way we are planning through 2016 will be really around velocity and our diversion cycle. I think there’s opportunities to do more certainly from DSO point of view. I think that the business is towards the end of the year in particular we did an excellent job in terms of the inventory management. I think that we still have further opportunities there. So I would think about it primarily in the inventory space from a working capital point of view.

Got it. Okay. Thank you. And then last question is just, can you help us understand a little bit more your thinking on kind of the company’s need for cash in various jurisdictions and your ability to pull cash out of both Europe and China, just China understand exactly how much cash is available to be brought back to the U.S. to pay down debt and for other purposes.

Sure. So I think we did very good job throughout the course of 2015 in terms of cash positioning. So, I’ll give you, I don’t if you had an opportunity to read our filing yet, so we ended the year with $302 million of cash in the U.S. and $245 million of cash outside of the U.S. and with more than half of that $245 million in China. And then the balance really distributed across European and Latin American countries. So I think that we are very, very focused in terms of cash positioning U.S cash is important for us in a number of different ways and I think we’ve done a good job. So, my expectation as we move throughout the course of 2016, as we have convey to you our projection that to have a cash growth on a year to year basis, we will continue to be able to manage our cash from the location point of view in a way that its helpful and effective for the company.

Thank you.

Thank you. So just to wrap up, the 2015 was a solid year for us. We made some significant comparable improvements in our operations. We made some important strategic decisions today. And I want to thank you all for you time and your support for Kodak. Have a good day.

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.