Bill Love - Treasurer and Director of IR Jeff Clarke - CEO Dave Bullwinkle - CFO

Good day ladies and gentlemen and welcome to the Eastman Kodak Third Quarter 2018 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, today's conference may be recorded. I would now like to turn the call over to Bill Love. Sir, you may begin.

Good afternoon, everyone. I am Bill Love, Eastman Kodak Company's Treasurer and Director of Investor Relations. Welcome to Kodak's third quarter 2018 earnings call. At 4:15 p.m. this afternoon, Kodak filed its quarterly report on Form 10-Q and issued its release on financial results for the third quarter of 2018. 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 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 events or results 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. Kodak undertakes no obligation to update or revise forward-looking statements to reflect events or circumstance that arise after the date made or to reflect the current of unanticipated events. 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 have been provided with the release and within the presentation on our website in our Investor Center at investor.kodak.com. Speakers on today's call are Jeff Clarke, Chief Executive Officer of Kodak and Dave Bullwinkle, Chief Financial Officer of Kodak. Jeff will provide some opening remarks, a review of Kodak's third quarter financial results, and divisional performance. Then Dave will summarize net earnings for the third quarter, provide update on operational EBITDA, 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 Q3 investor conference for Kodak. On the call today, I'll talk about the company and division results for the third quarter of 2018. Additionally, I'll provide an update on the initiatives we are taking to strengthen our capital structure presented last quarter. Dave will then follow with more details on net earnings, a cost reduction update, a discussion of cash flow, and our 2018 outlook after which we will welcome your questions. The company is in advanced negotiations on an exclusive basis to sell its Flexographic Packaging Division and expects to be in a position to sign a definitive and binding sale agreement in the fourth quarter and to close in the transaction in the first half of 2019. I’ll now discuss the company's performance for the third quarter. Turning to slide 5, Kotak delivered third quarter revenues of $366 million, down from $379 million in the prior year quarter. When adjusted for the unfavorable impact of foreign exchange of $5 million, revenue decreased by $8 million or 2% when compared to the prior year quarter. Operational EBITDA for the quarter was $20 million, up $7 million compared to the third quarter of 2017. When adjusted for the unfavorable impact of foreign exchange of $3 million, higher aluminum cost of $6 million, and the impact of a reduction in our workers' compensation reserves of $6 million, Kodak's operational EBITDA increased by $10 million or 77% when compared to the prior quarter. When we further adjust $1 million for the expected decline in our legacy consumer inkjet business, year on year adjusted operational EBITDA improvement is $11 million or double from the prior year quarter. This increase in adjusted operational EBITDA reflects the impact of Kodak's cost cutting efforts, operational…

Thanks Jeff and good afternoon. Today, the company filed its Form 10-Q for the quarter ended September 30, 2018, with the Securities and Exchange Commission. As always, I recommend you read this filing in its entirety. As Jeff described we are in advanced negotiations on an exclusive basis to sell the Flexographic Packaging business. The net proceeds from the completion of a sale transaction will be used to reduce the outstanding balance of the company's term debt. In addition, the company has entered into a non-binding work letter with an existing lender and another potential financing source to negotiate a binding commitment letter. The non-binding work letter replaces the non-binding letter of intent entered into during the third quarter. The proceeds from the new facility if consummated would be used to refinance the loans under the first-lien term credit agreement in full. Exclusive negotiations between Kodak and the potential financing sources expire on November 12, 2018, in accordance with the terms of the non-bidding work letter. I will now share further details on the company's -- on the full company results and update on our cost structure and cost actions for 2018. I will also discuss the cash flow and our full-year outlook for revenue, operational EBITDA, and cash. Now for the GAAP financial results for the third quarter. On slide 11 as we reported in our earnings release, the net income for the third quarter of 2018 on a GAAP basis was $19 million, an increase of $65 million compared with the third quarter of 2017. For the nine months ending September 30, 2018, the reported net lost is $2 million compared with a net loss of $35 million for the nine months ended September 30, 2017. Excluding the impacts of changes in the value for the derivative embedded…

[Operator Instructions] : :

So, I want to thank everyone for joining the call. And as noted, we had some good momentum this year on SONORA, FLEXCEL NX and PROSPER, and we're looking forward to talking to you in the new year after our fourth quarter results. Thank you very much.

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