Eastman Kodak (KODK)

William G. Love Treasurer and Director, IR
Jeffrey J. Clarke CEO
David Bullwinkle SVP and CFO
Craig Carlozzi BulwarkBay Investment Group
Amer Tiwana Cowen & Company
Call transcript
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Good day, ladies and gentlemen, and welcome to the Eastman Kodak Q1 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 follow at that time. [Operator Instructions]. And I would now like to introduce your host for today's conference, Mr. Love. Bill begin. may you Sir,

William G. Love

At you, tomorrow. first Sandra Love, Investor I Bill its on financial earnings afternoon, Welcome issued report afternoon, its quarterly release XXXX and Kodak Company's and good on call. XXXX Eastman quarter of for Kodak's everyone. p.m. Treasurer this to Kodak the am results first Thank XX-Q X:XX quarter and Relations. file Form Director will

at call You may and presentation our investor.kodak.com. access Center webcast for on Investor today's the

we or as this could of in call, Kodak on to certain referenced Kodak's apply these presentation. this cause the materially factors events based to these statements in U.S. forward-looking today's various differ forward-looking statements may Commission or time that filings the making During and risks, will Securities may forward-looking results date in results forward-looking actual detail and All results the differ from or the statements anticipated more forward-looking are that are as be differ statements. Private assumptions. Exchange their presentation materially or from the cautionary among may in in Litigation expressly other statements acting or Future upon uncertainties expectations by expressed only others, There defined forward-looking attributable other XXXX. behalf entirety by of Kodak's include, described its Reform and the events Act statements. persons factors of to from All the factors to be Important qualified Kodak's Securities from statements actual time. and included cause with

presentation first Kodak deemed provide Chief some of measures summarize cash measures. operational within call the just an results, Chief the are Clarke, Kodak. provide and questions. directly Investor Reconciliations I non-GAAP review that certain in Jeff quarter, GAAP presentation investor.kodak.com. Jeff with release Officer measures our Jeff and contains now quarter divisional we and Officer CEO, on Center the and Bullwinkle, Kodak's provided performance Executive addition, will net reductions comparable website to Kodak's Then to Speakers Financial will release our the open before opening on of a issued Clarke. performance. at today's provided it cost turn to most and been the have earnings the Dave In first first for update on will review quarter and EBITDA call financial of up the remarks, over Dave are

Jeffrey J. Clarke

thank for you QX Kodak. call Bill. Welcome joining for everyone investor and Thanks

talk On first divisional full XXXX and our the the today year welcome after XXXX details more a update, XXXX will and and of on your questions. reduction cost Dave net cash earnings, call I'll flow, with discussion about then outlook which company results quarter will the we forecast. follow cash our for of

First, progress execution year-over-year. which I'd We're growth demand like of in strong SONORA Plates we're making on the pleased grew with to highlight continuing the key Free XX% our the Process strategies. our

volume growth our to FLEXCEL Plates. division which in growth see flexible a XX% We continue packaging NX in strong includes

Additionally and ULTRASTREAM, annuities the technologies quarter as our provide they XXXX in Advanced grew technology continue in Kodak of growth will will X% first In advanced future. invest revenue we PROSPER in including to the Materials for strong XXXX.

to in NX invest customers. Additionally meet our FLEXCEL our demand expansion to the plant continue will we of from strong Weatherford, Oklahoma

$X for the a $X quarter million $XX legacy EBITDA of impacts in further range increased When million. foreign year year constant of Kodak's deliver exchange, on full adjust We the costs million we million prior On in million. or plan cost Inkjet adjusted operational consumer on This is of $X the was of while revenues flat by and When EBITDA year-on-year quarter decline quarter. improvement first operational negative our and $X slide quarter EBITDA million aluminum million. of product million impact XXXX Kodak strengthening guidance operational compared $XXX million operational reflects million operational the our EBITDA performance efforts, first of million $X.X the currency are in $X $X to higher cutting X, adjusted the for the down $XX of to revenues comparing increase basis. $X.X for Operational to delivered expected EBIT Kodak's improvements, portfolio. business, the expected to with of

quarter. XXXX year Our compared for discuss to our the in QX quarter when million the key Dave declined less million $XX drivers flow later. cash $XX will balance the of by was prior which cash

revenues impact prior $X When higher in the the was by quarter. quarter Plate decline. and decline X% plate was volume was X% the the volume declining in excluding on Division would shown with $XXX impact a constant price were improved of bottom I volume. as presented like by division lower million. offset or slide and erosion PSD million Print manufacturing plate $XX decrease the overall expenses Division, aluminum the the discussed basis market to is XXXX. The Systems overall in line quarter $X performance Print million also the the compared slide of for year-over-year Starting actions, be X% price slide million X. Plate a currency million, which when Operational business first $X of to All improvements, comparisons to first section price plate The for plate by Now with on talk XXXX. operating on year-over-year. down of cost declined X. compared comments X Systems to the of quarter and the cost erosion EBITDA supporting about of first the

Free growth for environmentally We our year-over-year. in to SONORA which -- now see solid see grew in plate growth our solid volume. of accounts will Plates we advantaged continue Process continue to Kodak XX% SONORA total our XX%

NEXFINITY, X outlook XXX a includes presses new in printing across challenging large offset SONORA color as over SONORA applications XXXX many achieved printers using in substrates. tested XX and countries [ph] of over We've environment different in and such press. types and of XXX inks Our electro of links the on continued photographic X ultraviolet. SONORA variety X particularly growth run SONORA different and long a introduction print

Our of resolution can in to and switch performs performance. is any handling productivity significant test our unbathed well cash Plate now applications a which contributes proved consistently as generation. Process terms without plate. Free and PSD to printer revenues foundational Process an Kodak capabilities compromises in Free process Most business the

to slide seven impact year million. Exchange seven price headwind last $XX will of to included, a be at high. have Metal in We a the prices excuse years. trade over XXXX a presenting The aluminum the LME metal Europe continues London me, historical appendix year-over-year The

materials other prior end and to the As a increases second result be to in we the plan quarter. of used Further cost of manufacturing, additional plate in of continued the to plate announced price take aluminum raw details actions.

Moving EISD to was Inkjet the and Systems in Operational prior was compared and breakeven, million operational equipment a on EBITDA XXXX EBITDA decline to for decline the legacy the quarter. of by first The Enterprise $X quarter were in decline placements. million quarter. first of consumables revenues to expected change prior $X revenue quarter driven compared Division. our the a $XX the of million,

and annuities quarter our expectation. by increased the declined annuities X% is with by approximately XX% PROSPER For VERSAMARK consistent which

to the first in continued quarter. in invest we Additionally ULTRASTREAM

PROSPER investment VERSAMARK review we ULTRASTREAM, decline a commercial in production XXXX. industry speed quarter the printing prior expect in annuities, water continued availability our and Kodak's in UTECO in Inkjet based to offer Technology growth discussed in I at utilizes on speeds. UTECO EISD announced This PROSPER Stream in and variable substrates of economical the which digital environmentally press the market. As inks the and production first friendly new packaging is our a flexible in SapphireEVO with

volume For of was by quarter were $XX improvements increase revenues a flexible base over The due was rapid volume improvements to $X NX primarily by compared larger offset deliver sales the volume product investment by a FLEXCEL consumables prior our driven substantial and in which quarter ETP the prior the growth customers. million revenue increased marketing, proposition of year EBITDA value XX% NX quarter. operations flat Operational to in and $X packaging million, the to the a quarter. of plate in FLEXCEL result strong NX XX% to revenues provides NX FLEXCEL driven FLEXCEL NX development, the million printing installed volume grew increase FLEXCEL in increased revenue and NX continues Systems. FLEXCEL efficiencies consumables the prior activities. division compared to

Weatherford development and infrastructure invest will our of expansion continue We factory. new in product to

primarily due prior in The reflect agreements the results For was dollars compared million the $XX XXXX of and improvements were similar decline timing the EBITDA the XXXX quarter. operational revenues to SSD million the year down of quarter. first quarter was of SG&A. Operational revenue to in in $X year breakeven prior license first to quarter EBITDA

digital to cloud and continue make in will We focused services. packaging software and investments analytics

revenues quarter quarter our First in licensing were an consumables Inkjet could CIG and compared $X film prior $XX by primarily higher lower ink sales division motion installed volume million offset and base volume industrial This for year lower film million and driven picture printers expected in brand films volume when decline the to revenues. of down into by higher smaller and a of in chemicals. consumer is

approximately consumer which $X the was increased in prior quarter to annualized when revenue down million For for licensing driven revenues picture rate expected million decline quarter the the volume for EBITDA $X of the with this compared was safety $XX for million. equates business. for a Operational quarter the run XX% Brand film motion quarter. million Inkjet $X.X negative by

results blocking picture one to focus investments. $X print to and licensing and industrial varies The to advanced prior Continuing In improved in operational to which the year on our AMXD materials. expect and the our million largely the We quarter. actions of Eastman business will focus our brand taken CFD improvement electronics, sharpen film orders, this AMD EBITDA due variability business motion the of compared timing see timing final Business division, materials, continued light the year scalability to to Partner. was on due due licensees. productions, new off

$X income quarter the absorb helps EBP the other units. First XXXX rental flat business with million prior quarter. fixed year of were cost revenues

of of Print solid slide X, Brad thank we PSD. Division. of succeeded joined to in would his our XXXX of Kodak through positions future. service, the managed Print years XXXX System Brad John and and Turning Systems Consumer President Print retirement and John was to company. regional Division many various the the of his for Sales opportunities of in Systems John served the held placing managing to In development the as throughout Division. in John has PSD position Brad has Film recently for regional I as appointed on like market the basis. Kruchten, Most O'Grady and a and for Division for sales, a recently for Worldwide contributions service operations business President including announced strategic President Manager marketing General go worldwide the

John's for John's transition. customers both announce confident will near PSD experience future. I'm with a will help with CFD strong in the ensure relations We PSD smooth successor and our and employees extensive

X, slide for year solutions, when an to portfolio. the from prior a The is businesses which turn year the software provide X% PROSPER, NX I revenues four the point brand now include account grew licensing, to total engines prior SONORA, These and improvement Now compared quarter. and will on XX% quarter. growth of FLEXCEL which update overall technologies advanced

XX% Park, other IP related Toner other packaging include CTP plates, our Licensing Service, and Nexpress and represent Business film, Our products which Business, total now revenues. strategic Eastman of businesses

total have flow include account these and The past for Digimaster As planned now and for the declining consistent we cash Inkjet, revenues strong revenues. in which company. provide consumer of VERSAMARK, businesses businesses X% stated the

the base. in these summarize and flow. the decision we improvements As an and in are achieved QX new cash annuity to product product the to made expected past orderly installed lines year-on-year decline comparable Kodak stated was development in our have where stop EBITDA manage product operational in To

bringing ULTRASTREAM in XXXX. with SONORA, market Continued growth product and NX, in expectation the in investment continued of strong technology FLEXCEL to engines, execution the PROSPER

over aluminum. I which Continued plate now strategies high turn pricing of to will Dave. productivity mitigate will costs improvement,

David Bullwinkle

issued for release earnings Thanks Today good Jeff the quarter. company its and afternoon. the

Exchange mentioned Commission XX-Q for Bill company its March May As the XX, will XXXX XXth. quarter-ended the with Securities and file tomorrow Form the

As recommend read this in entirety. filing you always its I

results I noted pleased and areas. further we consistent cost our operational results company -- Jeff is growth our company expectations key first full year the flow EBITDA, with quarter and and product our details As performance with details and outlook. in more share cash on on are on structure, will our update full

quarter reporting. in important update first the notable First an and item

was period. no measure same changed the services During the of costs exclude first company's due to to are the adoption the amortization other during credits ASU compensation service line the XXXX-XX longer reported XXXX prior as and of quarter costs from in segment of rendered arriving which

to division. on presentation the provides to year basis. appendix We revised this a on a have XXXX recast basis prior by for present information results consistent our quarterly The

GAAP slide On basis XXXX, the quarter to in net million financial for XX results GAAP of was Now the as $XX the the our earnings of the first on a $XX compared reported for first XXXX loss quarter. we $X quarter million in for first million. net earnings release, decline of a of

up million the preferred of of onetime impact PROSPER The expense $XX million of include the stock. value results quarter XXXX amortization the embedded $XX full preferred for revaluation by the prior associated quarter expense in fair our these depreciation in catch derivative related million earnings. Series million EBITDA. BRIDGE million The year first offset items the the reduction $XX EBIT XXXX Series changes year-over-year quarter operational included slide A for $XX the the $XX favorable to for year from presenting results of and year-over-year a partially A and guidance with On embedded for net we an million to for are a Adjusting first is operational change stock. derivative $X the XX, for

we presented foreign $X related impacts million increased As exchange million related unfavorable of impacts XXXX. $XX aluminum in to and costs expect to

Changes an in as projected declines and well impact as $XX product FLEXCEL favorable investment and to This in year. an in Our to our impact full will pricing areas. NX, XXXX. expected to result growth on mix transitions consumer year VERSAMARK in $XX the million continued revenue unfavorable Inkjet SONORA, our full million have PROSPER are in includes

the full of improvements provide of the most million XX% headcount Finally these a result XXXX. Approximately to fully and favorable implemented. are of will which reductions implemented cost impact $XX manufacturing been reductions year improvements have

waste and costs, savings and and productivity material manufacturing in services include Additional purchasing. improvements yield, logistics

are Now on XX. $XX related million In $XX update shown manufacturing XXXX slide of to related eliminations this to $XX for position savings to be expected improvements represents an cost improvements. on productivity as million. This million and year-over-year

automation for cost activities. identified related being are opportunities Additional and actions to simplification

As This of XXX been XX, current the X,XXX represents a have X,XXX XXXX reduction of for April was excluding year-over-year. down from positions positions from company. notified headcount which exit

with on the company million with Moving on earnings to cash the XX. quarter XXXX. million our I were restricted million provided sheet equivalents, in and slide cash, $XXX ended consistent XX, the million from cash cash our down March. a which $XXX presented performance within $XX of expectations at on The equivalents reported balance cash, first on company the and in information XXXX call million last and $XXX decrease XX, December $XX from Cash December was

first CAPEX in used million to year use A from of build higher period by use was used $X activities $X preferred trade in offset of to a the occurred the Cash Cash in primarily quarter of primarily an net in comparable higher from first the sheet million period. the and as $XX million cash asset decreased cash related payment investments of increase in of During payables million. $X investing million million in $XX in decrease in the activities in on compared and by of our of was year flow lower to seasonal in dividend million payments the proceeds $XX Capital $XX trade by quarter in prior XXXX balance excluding related Weatherford financing million $XX $XX XXXX accounts prior $X quarter to the cash as of of decline million inventory the activities related $X partially receivables. the A use driven earnings a operating lower of the operating from cash sales million lower $XX and flow compared by quarter Cash in million million and was million $X stock. of then payable from primarily liabilities for presented. to and XXXX. plant reflecting changes Series period XXXX were activities compared

to million for million a of million in basis. a on use is Moving to cash breakeven and $XX XXXX cash our on $XX a outlook XX, slide $XX unlevered an generation to levered of basis range

at sales Our $XX to EBITDA million, million year-end million prior cash several $X cash of The $XX balance of and generation million XXXX sources asset working to requirement reduction projected $X other from proceeds cash $XX be repayments debt small ABL from of $XXX million, million, $XXX $XX million. cash of of operational of collateral will to million, items. approximately capital are

to cash of million pension, million $XX $XX in as to compensation presented EBITDA an operational Therefore of related items payments, order related which million projected items the disability. included long-term expense $XX of used these the been of sale the through adjustment cash legacy includes expect is for in EBITDA. and flow. reconcile workers incremental consideration We foreign to business, to contingent amount has

XXXX cash $XX of and million, restructuring dividend of capital net $XX million, in million, payments of to payments related and $XX usage of outside U.S. $XX of the Additional interest cash million. expenditures income will be taxes

credit with by first covenants secure NX. areas execution million. in continued SONORA, agreements. product was calculated satisfy company's under our the we To performance $XX to compliance leverage EBITDA key reflects ratio EBITDA the Finally covenant lien and summarize, necessary our good FLEXCEL quarter particular PROSPER, company's XXXX we what is including remain ratio the agreement expected in under and first the used exceeded In term credit loan the in our

earnings and for For full XXXX growth continued growth of the Kodak's revenues balance we engines. in year expect

for focused will on return on our also profitable be investments delivering growth. We

year of and to expect we revenue, operational stronger skew EBITDA, performance cash. to As the second seasonality the in in XXXX half

the please your instructions the of now ask call questions. to open We questions. to remind will Sandra, participants


[Operator Instructions]. this I'm no at showing time. And questions

Jeffrey J. Clarke

thank listening you I Well everyone very appreciate much. on.

questions have question Investor sorry Love I'm call available. to XXXX. thank a Relations has Director our is you for if always you I the got As Operator. I QX in. want that Bill waved again for been And coming joining


Thank you.

line Our of first question comes Craig of from Bulwark. Carlozzi the

Your open. now line is

Craig Carlozzi

guys. a the to question. opportunity hi, I ask Yeah, thanks appreciate

the can of there -- you that Regarding some the you discussed that are the is in those strategic any there update for past provide callers? initiatives

Jeffrey J. Clarke

those of can't on and opportunities give would overall can say build delever. divest I M&A at and different Kodak but Craig portfolio to expect, I both All the specifics look to as we to any continue assets to you scale

Craig Carlozzi

Compared to to say process? any as timeline expect either truncated with XX reason be days ago would there the extended the or

Jeffrey J. Clarke

I sorry them. can't formally get just Yeah, I have say on we specifics general something until to can into announce.

Craig Carlozzi

is it Okay, ongoing?

Jeffrey J. Clarke

our ongoing very a of review on portfolio The basis. is thorough

Craig Carlozzi

Great, very thank much. you


our Thank the Cowen Amer Tiwana and question you. line comes And next from of with Company.

Your now open. line is

Amer Tiwana

showed Hi your anything us give just cash potential proceeds you XXXX guys, particular? million $XX can my what question guys sense outlook, first some of in in is you they from asset is there or are updated sales, of

David Bullwinkle

multiple the asset adjusted so any XX to we point. specifics last slightly values were provide we There that have this or spoke Last at we we presenting have non-strategic don't monetizations. we quarter other are. But time are given where than real

Jeffrey J. Clarke

an be example An example estate underutilized would for building. real

Amer Tiwana

sort of out attached to page try on to sort and X the is? down your these presentation break Understood. fee what segments, And to is figure there for three of us businesses buckets profitability way a of your you

Jeffrey J. Clarke

perspective. some give you just general Yeah, why don't I

is our most in flagship differentiated product SONORA our plate So business.

that of plates chemicals fewer other X% been SONORA lower of We labor an gives between average historically less able premium have have use the benefits do the chemical on plates. of XX% that XX%, than a around you plate because And is the can to anywhere chemicals, other electricity, not to using that being and and not in free. capabilities using terms price

PROSPER business business that is the most stage. within and is Enterprise is product arts a annuity profitable So Inkjet would which be know that primarily plates business. you our at graphic our business based this as

of number base. significant installed a presses unit our selling not in are XX We

you systems. printing the They're heads of are profitable So are use the is when of terms ink terms then are in in of profitability there the sell expect hybrid fashion. there; ink high. profitable sales as one are on they head. heads two they're the And we they of into off These that elements profitability in are and profitable PROSPER quite obviously refurbishment the

business of look portfolio a NX legacy is our that by is whole NX that The you can the as business less then What which the of and margin third percentage businesses see than FLEXCEL profitability revenue that value higher the some of determine can at that unit even looking and element of our business is has and portion you FLEXCEL our the you FLEXCEL at NX. of understand that have margin. even highest

as investments has overall quarter stage a over that that this some run the break the rate business. small is but and that losing stage licensing XX% cost solutions particularly Brand Technologies high Software which there. a center being portfolio maintenance mentioned We an and the quite are the margins And that profitable is area last licensing at $XX that should new There and think solutions that manages very royalties but making this has is million stage. is the of portion at it's high. seeks a solutions, Brand an software business. we you this royalty licensees and that business. are is based this group very and on the business yield on money is profitable and transforming is of Advanced the Kodak low even investment very incremental brand one at

So for once than more overall to the the they profitable Kodak. get are portfolio products probability

Amer Tiwana

Understood, and just is on. maybe too bit to I early this know a comment

declining the of business. now businesses Looking at a relatively portfolio component overall are small overall like your seems

and of up free move XXXX be you well. obviously XXXX becomes the coming where in refi in cash be will question can is positive guys can XXXX going flow to then we you note the into as term As your EBITDA and loan

profitable the than that more XXXX? be So business going is to can we directionally assume

Jeffrey J. Clarke

be to and capital be profitable expect expect in to more we XXXX. positive business in we Yes, XXXX the

Amer Tiwana

very you much. Thank

Jeffrey J. Clarke

Thank much. you very


no showing questions. I'm now and you further Thank

Jeffrey J. Clarke

Well, again and all the thank time. for your you appreciate call I joining


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