Q4 2019 Earnings Call

For the speakers presentation, there will be a question and answer sorry.

Last question during the session you'll need a press star one on your telephone.

Be advised to today's conference maybe recorded.

If you acquire any further assistance please press star zero.

I'd now like to hand, the conference over your speaker today Mr. Paul do Thank you. Please go ahead Sir.

Thank you and good afternoon, everyone.

Paul deals Eastman Kodak companies to tax officer, Sam Director of Investor Relations Welcome to codecs fourth quarter 2019 earnings call.

For 15.

This afternoon correct filed its annual report on form 10-K, and issue gets released financial results for 2019.

You may access this presentation and the webcast for today's call minority Investor Center that investors Dot Kodak Dot com.

[noise] during today's call deals and making certain forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

Okay. We're looking statements are based upon codecs expectations and various assumptions.

Sure events or results may differ from those anticipated everything's expressed in forward looking statements.

Important factors that could cause actual events or results could differ materially.

These forward looking statements include among others the risks uncertainties and other factors described in more detail in codecs filings.

You asked Securities Exchange Commission from time to time.

There may be other factors that may cause critics actual results could differ materially.

Forward looking statements all forward looking statements attributable to Kodak and persons acting on his behalf.

Only apply as of the date of this presentation.

And our expressly qualified and their entirety by the cautionary statements included losses in this presentation.

Kodak undertakes no obligation to update or revise forward looking statements to reflect events or circumstances that arise after the date made or to reflect that.

The yeah courage had anticipated events.

In addition, this release just issued and the crew 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 then the presentation on their website in our Investor Center at the Investor that Kodak backdrop.

Speakers for today's call her Kim Crawford, and Kodak's Executive Chairman and David Bullwinkle, Chief Financial Officer, Cortech, I will now turn the call over to Jim.

Thank you Paul welcome everyone and thank you for joining the fourth quarter investor call through some colder.

Turning to slide four.

2019 to break into your from Kotak.

We ended the year 2019 was $233 million with cash cash equivalents.

When comparing 2018, the first time in several years, we haven't burn $90 million to $100 million.

Oh, we're expecting to burn close to 140.

Thank you once you actually and we really taken down took on a full cost shut all divisions that were not profitable got focused on what we do Boston once you're not DNA.

Part of that settlement was we completed the film a flexible graphic packaging division.

The issuance in jail multimillion dollars.

Aggregate principal amount over 5% unsecured convertible note do 2021.

We paid in full 395 million excuse me.

For a moment.

Establishing strategic relationship with the people Republican China.

And lucky how warm graphics.

[noise] you were going to call those broken profitable revenue or smart revenue, you're referring keen sometimes in the future.

Oh volumes from Kodak Sonora process free plates grew by 22%.

Again clinic wants continued be great stewards of the environment also.

An annuity revenues for Kodak Prosper grew by 5%.

All this stuff.

Stuff so he's trying to align the new organization that we've been talking about before we could get into the new organization, we have to stabilize the balance sheet. The foundation of the business and focus on what we do.

The new organization structure of 20 to 2020 will leverage our technology import print.

That's materials and chemicals.

That is one quarter does so when I asked what is called I do one more time print advanced materials and chemicals.

Effective January 2020.

Cool that will report results based on the phone structure print business, which comprises all traditional print segment.

And digital print.

And software.

Advanced materials.

And chemicals.

Ran segment.

In three areas annual report.

Turning to slide trucks.

A new simplified structure.

Well better aligned with our customers need by providing a one kodak we've been saying for a while we've now got there.

Customer first experience.

And better allow us to continue to focus on generating free cash flow.

Yeah on reducing operating expense, well certainly get customer needs better.

Once the customer first it does not mean our employees are important.

Equally as important.

Well, we're going to make sure that everything we do it is around the customer and product development.

Service to help them become more profitable we want to be a key strategic partner for them.

Thank you is committed to the film business, the chemical business and the printing industry.

Annual revenue.

Annual R&D spend.

25 million for our print business, continuing our commitment to build on our heritage that'll be equipment, how technologies substrates. Thanks.

Well in software.

We will continue to do business.

Well over 200, it's over half, although <unk> 400 printers in the U.S.

Big statements on the top 400 printers were doing business with over half of them.

Clinic is focused on customer needs by providing simplicity.

We said, we make the complicated easy.

Making technologies accessible is our DNA.

Roma How's it going back anchor who you Scott somewhere they've been involved.

And digital print or Trent optics graphics, Inc.

In this technology is too we are.

The key asset isn't you probably had.

Three to 4000 people, who are well boost in this industry.

It's really what we do best.

Well that's technologies.

Is your views.

This is productivity and reduces need in training.

Productivity, many printers are being squeezed margins.

And they need to me every minute every dollar outside their traditional business.

Kodak can help streamline workflow increased productivity and profitability.

I'm gonna grow overall the industry is shrinking we're gonna grow overall, because the shrinking people are focusing on packaging short run valuable variable data.

Said differently now the opportunity were digital and analog and plates and crossed there are more won't be done.

And our short term runs on plates.

In the short term loans on did you all are easier to switch convert over now becoming cost effective so smaller runs become more than standard endpoint and printing organization digital becomes more of the player.

The future is digital at Kodak is doubling down.

18 volume and margins you can you should know print threatens an easy bio many printers, there's got to become more efficient more flexible faster and leader.

Increasing demand for short runs faster turning around increasing.

The opportunity variable data in direct mail newspaper packaging, which is critical.

In other applications.

Also the packaging segment, there's an opportunity it represents your digital.

When I say that we currently you're gonna get more detail on this all launch the first digital packing container.

From previous today codec solutions and the smart investment no. One else offers will pull that brings to the table.

Deep industry expertise decades of experience.

A complete portfolio.

Superior products.

But help increase productivity and drive growth and innovation.

Introductions of new products and capabilities, you'll see over the next six to 12 months watching several new products in the digital line and also in a similar lines have been enhancement.

Including the previously announced you technology.

Sapphire evil fresh machine.

Which is a game changer and it's a co branded machine between you technical and Kodak.

Its a great example hall Kodak is helping to lower cost and drive efficiency and providing innovation.

The first flexible packaging for US uses continues inkjet technology.

They'll be another machine also coming out.

Each of your wide format. So we're using both stream and ULTRASTREAM heads.

Fundamentally friendly.

Utilization.

Mystery compliant water based pigment.

Thanks.

Alone excellent print for various qualities are substrates.

You mean, the door wide open for applications, such as food beverage and personal care.

Again this is groundbreaking when you look at how long it take between the back either three complaints and different Ron.

Literally a PDF file.

In the qualities unbelievable and speeds are getting better and better.

We're excited about the breakthrough we put a lot of money into it and sometimes you tackle them in a great partner.

And we placed a few of the machines and they've done very well.

Sure.

We're well aware of.

<unk>.

The Corona virus and the business impacts we are taking everything into fall best practices and safety for our employees at least Globers on these calls has been leading the charge for the company. If you have any questions later.

But we are addressing yet and we're on top of it we have called daily we're up to the minute.

Notifications and any changes as you guys know and what we're doing everything we can do to keep our employees safe and our customers and our partners.

With that let me turn over to Dave can discuss in 2019 financial results. Thanks.

Thanks, Jim and good afternoon.

Today the company filed its form 10-K for the year ended December 31st 2019, with the Securities Exchange Commission as always I recommend you read this filing in its entirety.

The company generated positive cash flow in the fourth quarter between 19 at breakeven cash flow for the full year 2019, which reflects benefits from working capital improvement.

Individual transactions, which occurred during the year.

The company will remain focused on cash generation and 2020.

I will now share further details on that full company results operational EBITDA and cash flow for 2019.

Please note the results of Flexographic packaging Division has been reported as discontinued operations in 2019 in the comparable 2018 period.

The sales are they in April of 2019.

Additionally, certain amounts have been reclassified for the current and prior year period due to assets held for sale reporting requirement.

Related to that hogland transaction.

On slide seven as we reported in our earnings release net income for 2019 in the U.S. GAAP basis.

$116 million compared to a net loss of $16 million in 2018.

2019 results included in net gain on sale of PD business, a $214 million non Kashi isn't workers compensation legal reserve adjustments of $3 million.

Expense of $4 million related to Tradename impairment.

And the related changes in the fair value for the derivatives embedded in the series a preferred stock.

Convertible notes a $42 million.

The 2018 results include $11 million associated with non cash changes in workers' compensation and legal reserves in a benefit of $16 million related to the Korean withholding tax refund.

The 2018 results also include expense of $13 million or lead to a tradename impairment driven by the sale of SPD.

Excluding the impact.

His current and prior year item.

Between 19, adjusted net loss was $49 million compared to one.

$30 million in the prior year.

Turning to slide eight.

2019, we reported revenues of $1.242 billion compared to $1.320 billion in the prior year for a decline of $78 million.

Adjusting for the unfavorable impact of foreign exchange of $27 million.

The license revenue received from the high one transaction $13 million revenue declined by $64 million compared to the prior year.

Operational EBITDA for 2019 was $12 million compared to $1 million in 2018.

Excluding the favorable impact of foreign exchange and aluminum costs.

License revenue received in the high one transaction and adjusting for the increase in workers compensation reserve.

Operational EBITDA decreased $8 million from the prior year.

We delivered strong full year performance in our key growth engine.

On a year over year basis volumes for Sonora process free plates grew by 22%.

The annuity revenue for prosper grew by 5%.

We also continue to invest in future growth there is ULTRASTREAM advanced material.

Moving onto the company cash performance presented on slide nine.

Cash cash equivalents unrestricted cash for 2019 increased by $23 million compared to a decrease of $102 million in prior year.

Restricted cash and cash included in assets held for sale increased by $23 million, who has compared to a decrease of $7 million in the prior year.

The current year includes $14 million for the settlement of an escrow in China to secure various ongoing obligation.

Under the agreement.

Strategic relationship.

With hogwash $19 million funding related to the <unk>, primarily due to the sale of PD.

Remaining cash prepayment of $3 million received in the U.S. for services and products provided by the company to the buyer that P D.

Which was secured corresponding restrict cash deposits in China.

Offset by a decrease of $15 million of cash including assets held for sale.

The prior year end.

There was no change in cash and cash equivalence between 19 compared to a net decrease.

$95 million.

[music].

We continue to evaluate opportunities to eliminate release restricted cash and 2020 and could benefit from a cash positions around the world.

As of the year end 2019 restricted cash globally is $57 million.

During 2019 cash provided by operating activities was $12 million driven primarily by cash used from net earnings of $42 million.

Offset by cash generated from balance sheet changes $54 million, including a change in working capital of $57 million and a decrease in other liabilities of $10 million.

Accounts payable increased by $25 million inventory decrease.

$11 million and accounts receivable decreased by 21 million.

Cash provided by our by investing activities for $311 million during 2019 as compared to a use of $22 million in the prior year.

The current year included proceeds from the sale.

Pee Dee Ann Hogland transaction.

Cash used in financing activities was $298 million between 19 compared to the use of $11 million in the prior year.

The current year included $395 million of cash used for the full repayment.

Senior secured first lien term credit agreement.

Actually offset.

Issuance has secured convertible note.

$100 million.

Finally, as disclosed in our form 10-K.

We remain in compliance with the covenants under our credit agreement.

We'll now open the call to your question.

Operator, please remind participants of the instructions to ask questions.

As a reminder, asked the question you will need to press star one on your telephone.

Withdraw your question first the pound key please stand by all the compiled it you in a roster.

Once again, ladies and gentlemen, if he would like to ask a question at this time. Please press Star then one.

[noise] I'm not showing any questions at this time.

Right well, that's the thinking we want the dollar yen generally lumbar that's here going a long time.

And it's starting to foundation of the new Kodak and what sold about we're going so thanks again for Dominion Wifi in it.

Hi, Thanks.

Right.

Ladies and gentlemen, this concludes todays conference call. Thank you for participation you may now disconnect.

[noise].