David Bullwinkle - Director, Global Financial Planning and Analysis and Investor Relations Jeff Clarke - Chief Executive Officer John McMullen - Chief Financial Officer.

Bill Grinstead - Cross Research Trent Porter - Guggenheim Partners Amer Tiwana - CRT Capital.

Good day, ladies and gentlemen and Welcome to Eastman Kodak’s Q2 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 conference call is being recorded.

I would now like to turn the call over to David Bullwinkle. Sir, you may begin..

Thank you. Good afternoon. My name is David Bullwinkle, Director of Global Financial Planning and Analysis and Investor Relations for Kodak. Welcome to the second quarter Kodak earnings call. At 4 PM this afternoon, Kodak filed its quarterly report on Form 10-Q and issued its release on financial results for the second quarter of 2014.

You may access the presentation and webcast for today’s call on our investor center at investor.kodak.com. During today’s call, we’ll be making certain forward-looking statements as defined by the United States Private Securities Act of 1995.

These forward-looking statements are subject to a number of uncertainties or risk factors which are clearly described in the company’s 10-K and in the company’s quarterly filings and which are qualified by the Safe Harbor provisions in our filings.

We advice listeners to read these important cautionary statements in their entirety, as any forward-looking statement needs to be evaluated in light of these important risk factors or uncertainties. In addition, the release just issued and the presentation provided contained certain measures that are deemed non-GAAP measures.

Reconciliations to the most directly comparable GAAP measures have been provided with the release and with the presentation on our website in our investor center at investor.kodak.com. Speakers on today’s call will be Jeff Clarke, Chief Executive Officer of Kodak, and John McMullen, Chief Financial Officer of Kodak.

Jeff will provide some opening remarks and his perspectives on the business and quarter. Then John will take you through our second quarter results before we open it up for questions. I will now turn this over to Kodak’s CEO, Jeff Clarke..

Thank you, David. Welcome everyone and thanks for joining the investor call for Kodak’s second quarter. I’d like to begin by introducing you to our new Chief Financial Officer, John McMullen. John is an accomplished financial executive, and brings to Kodak strategic expertise and deep knowledge in technology and commercial imaging and printing.

I will discuss and provide an update to you on four primary areas and which Kodak is focusing to manage our business and achieve our plans we discussed in our last earnings call in May. First, growth of our strategic technology businesses. Second, manage the expected decline and optimize cash flow in the mature businesses.

Third, reduce costs and streamline processes to improve operating leverage and efficiency. Fourth, I will discuss the keys to achieving our plan for the year. Area number one is growth. For the full year, we expect growth in our strategic technology businesses to essentially offset the declines in our mature businesses.

The second half of this year is an important crossover point for the company. While we were flat in our strategic technology businesses in the second quarter in revenue, we expect double-digit percentage year-over-year revenue growth for the second half of 2014 from our strategic technology businesses.

As a result, a return to single-digit percentage year-over-year revenue growth for the company in total in the second half of 2014. In other words, for the first time in a long time for the second half of 2014, Kodak expects to grow as a company.

Looking at a performance in the second quarter, we achieved solid growth in several of the strategic technology businesses and also continue to experience substantial declines in the mature businesses. Let me take you through the highlights.

In our PROSPER product line, we grew revenue for the quarter by 10% year-on-year including annuity growth of 12%. Page volume is also increased dramatically as a result of increased installed base as well as improved customer volumes. In the quarter, we launched the Kodak PROSPER 6000 Presses.

These solutions have been designed to extend the total number of pages a customer can print by expanding the range of commercial and publishing applications to newspapers, catalogs, and direct mail, and significantly improving production efficiency.

PROSPER 6000 Presses printed speeds exceeding industry standards, up to 1,000 feet per minute on matted and uncoated papers, 2.5 times faster than the Kodak PROSPER 5000 XLI press. Kodak 2000 presses produce salable prints at a low cost per page, approaching $0.005 per A4 page in color consumable costs.

PROSPER 6000 Presses contained an enhanced drying capability which allows heavyweight glossy and silk stock to be printed on the PROSPER 6000C Press at 650 feet per minute. In 2014, we expect to achieve year-end installed base of PROSPER presses of more than 40.

Year-to-date, PROSPER page volume, both color and black-and-white, has increased 47% over prior year, and this bodes well for second half annuity revenue growth. We expect to increase by about one-third the number of PROSPER S series and printing systems in the field to more than a 1,000.

We deliver continued growth in our packaging business as well this quarter. As a reminder, for the full year we expect to achieve 25 plus percent increase in the installed base of FLEXCEL systems for packaging customers to more than 400 units.

For the quarter, unit placements of our FLEXCEL NX systems grew 67% and the annuities generated grew by 26% in volume for the quarter. In June we launched the new Kodak FLEXCEL NXY 5080 system and a new range of Kodak FLEXCEL NX placed to significantly improve our portfolio offering to the corrugated printing packaging sector.

Developed in response to customer demand in the post-print and pre-print configured markets, the solution drives significant print volume improvements while taking advantage of increased print stability and press-room efficiencies.

The solution is based on continued innovation and investment in technology, such as Kodak’s SQUAREspot imaging technology and Kodak’s Digicap NX patterning. This is a large market for Kodak. Corrugated print is 38% of the market in revenue dollars, and the total FLEXCEL plate market is estimated at $700 million.

In our last call, I discussed our expectation for SONORA growth. For the year, we expect to quadruple both our SONORA volume and the number of customers. For the SONORA product in the quarter, plate volume was up approximately 4X in line with our full-year projections.

As recently announced, we’ve reached a new milestone in this area with our 1,000 customer adoption of SONORA Process Free Plates. We’re making good progress in our program to increase SONORA plant capacity and bring manufacturing closer to the customer. Earlier today in Xiamen, we inaugurated our first SONORA line in China.

This will continue to support momentum we’ve seen this year for SONORA. Also within our graphics business for the quarter, we saw CTP unit growth of 6%. Last week, we announced the installation of our 20,000th SQUAREspot thermal imaging head, the industry’s gold standard in imaging technology.

As the developers of thermal computer-to-plate technology, Kodak makes the only CTP system which utilized Kodak’s SQUAREspot imaging technology, giving customers the competitive advantage needed to reach higher level of stability, accuracy, and reliability within their operation.

Revenue in our unified Workforce Solutions business, which includes our industry-leading PRINERGY Workflow software, grew almost 10% year-on-year in the second quarter, consistent with our full-year expectations. The emerging technologies on which we’re focusing are developing an increasing scale.

In parallel, our legacy products in this category are experiencing declines primarily in digital printing, which represents a strong annuity contributor with a large installed base.

Our legacy inkjet business, Versamark uses older continuous inkjet technology, which was a precursor to the PROSPER stream technology, and continues to decline in line with the market and in line with our expectations. Our electro-photographic products, Nexpress and Digimaster, are competing in flat market.

Here we’re seeing modest decline as older units retire from the base, which reduces our annuity revenue. Another area of growth opportunity is our startup functional printing business. Within this business, we’re focused on n developing two technologies with our partners, UniPixel and Kingsbury.

I’d like to provide with an update on both of these technologies, beginning with UniPixel. Over the last several months we’ve largely transitioned from lab scale to pilot and production processes.

Our technical focus has been on finding robust product and process configurations for each individual production step, in an understanding the interaction effects with upstream and downstream processes.

We now have printing, plating, testing, and finishing processes running in Rochester and we’re at the early stages of end-to-end integration with full production scale operations. Our earlier development activities on fundamental technical elements provide a solid base to address process issues, which will rise at production scale.

For printing, catalytic ink formulation, and substrate details are now locked for initial production. Regarding yield, we’re now focused on customer performance criteria including electrical continuity and optical performance.

On a week-to-week basis, we have been seeing improving yield performance on key criteria and are now working to establish regular repeatable performance to the full roll-to-roll process for all criteria. Regarding Kingsbury, the Rochester Kingsbury factory is 90% complete and running production trials.

Product performance continues to meet requirements and is now in final reliability testing with the customer as part of display integration process for a completed touch screen product. In summary, we are delayed in our implementation of the touch screen sensor solutions.

However, we remain incredibly excited about the growth opportunity touch screen sensors and functional printing provide to Kodak. Overall, operational EBITDA for the strategic technology businesses improved by $21 million year-over-year, excluding non-recurring licensing revenue operational EBITDA improved by $12 million.

To enhance our focus on growth for identifying opportunities to establish new capabilities. Since the close of the quarter, as an example, we created a new group, Kodak Technology Solutions to insure we’re getting the maximum benefit from our world-class innovation.

Kodak Technology Solutions act as an accelerator to the inventive work coming out of Kodak Research Labs by developing the best route to market for our emerging technologies.

(Eric Mahe), who is experienced on sales strategies and execution, will lead this new group and build a network of technology and business partners to accelerate deployment of new solutions. In regard to our mature businesses, which include Entertainment and Commercial Films as well as Consumer Inkjet? Revenue decreased 33% year-over-year.

Operational EBITDA for these businesses was $15 million for the quarter. Film currently accounts for about 6% of the company’s revenue. In the current year, we have experienced declines beyond our expectations, which challenged profitability for this business. . This accelerated decline required us to explore alternatives for this business.

After extensive discussions with our customers of film, which include filmmakers and leading studios as well as industrial customers for printed circuit boards and aerial film, we’ve established support for the products going forward, and therefore we intend to continue production who work with industry leaders to finalize agreements.

This decision allows us to continue to absorb the fixed costs associated with our film manufacturing, and also provides an opportunity to continue production into the future in support of new products like functional printing.

Our Consumer Inkjet business is declining as well as the installed base continues to contract, but at a slower rate than expected. Therefore, relative to the guidance we provided for the mature businesses, this profitable consumables business is offsetting the accelerated decline in the film business.

The third area of focus is to reduce costs and streamline processes. For the first half of 2014, we’ve reduced our operational SG&A by $20 million and expect about a $50 million reduction in operational SG&A for the full year.

These reductions will come from many areas, and include headcount reductions, movement of certain functions to lower cost geographies, and a rigorous review and renegotiation of third-party expenditures as we continue to verbalize our cost structure.

Just last week, we announced actions which will make company more competitive and in line with the market. Kodak is moving from the current pension plan formulas and 401K match for U.S. employees to revise benefit formula effective January 1, 2015. With this change, our retirement benefit will be competitive with companies in our industry.

As a result of this change, we expect a reduction in the company’s projected benefit obligation related to the U.S. pension plan of approximately $55 million and annual expense reduction of $12 million. Kodak is implementing a vacation policy change which will reduce U.S. vacation carryover from four to two weeks as well.

We’ll continue to evaluate our market competitiveness and compensation of benefits globally to insure we maintain the ability to attract and retain talent. We’re also addressing the cost of our manufacturing footprint in graphics and satisfying the growing SONORA demand by implementing a regional manufacturing strategy.

We’re consolidating our plate manufacturing from five to four sites worldwide while increasing our capability to manufacture Process Free Plates globally. We formulated this plan to drive local sourcing while continuously improving manufacturing quality, production efficiencies, and customer service across our entire digital plate portfolio.

As a result, we realized $4 million in operational savings in 2014. And upon completion in the third quarter of 2015, we expect to deliver $25 million in annual operational savings. Overall, this will increase our plates factory productivity by 14%.

The company is also reviewing additional structure and and better cost reductions and will continue to implement them. The fourth and final area I’d like to discuss is the non-linear profile of our plan, which I also addressed during the Q1 earnings conference call.

For the full year 2014, we expect to deliver revenue between $2.1 billion and $2.3 billion and operational EBITDA of $145 million to $165 million with growth in our strategic technology businesses effectively offsetting the decline in mature businesses in both revenue and operational EBITDA.

At the full company level, the year-to-date operational EBITDA was $30 million. As we’ve discussed, this is clearly not a linear run rate to deliver $145 million to $165 million in operational EBITDA for the year. Let me update additional detail in the second half skew in our plan.

Our full year projection incorporates a significant portion of our operational EBITDA in the second half of the year. The skew in our plan results from four factors.

First, as experienced in prior years, sales in both graphics and digital printing businesses are seasonally waited to later quarters; second, lumpy non-recurring items such as licensing and legal settlements; third, increasing annuity revenue for our PROSPER and FLEXCEL pipelines driven by new equipment placement; fourth, benefits from ongoing cost improvements which will grew as we gain efficiencies across administrative and manufacturing functions.

I’ll now turn the call over to John who will review the financial results of the quarter..

Thanks, Jeff, and good afternoon. It’s a pleasure to have joined Kodak. It’s been seven weeks since I started, and I am very excited to be a part of company at this time. Kodak is an iconic company and brand with a tremendous opportunity for profitable growth moving forward. Later in my remarks, I will share some initial observations in more detail.

Today, the company filed its Form 10-Q for the second quarter of 2014 with the SEC. I recommend that you read that filing in its entirety. I’m pleased to share my thoughts and comments on quarter results reported in that document and in our earnings release.

First, I would like to review the improvement in our net loss for the quarter on a year-over-year basis. As we reported in our earnings release, the net loss for the quarter improved from a loss of $224 million in Q2 of 2013 to a loss of $62 million in Q2 of 2014.

The improvement of $162 million is primarily due to reduction in reorganization costs related to Chapter 11 in 2013 of $67 million, the reduction in interest expense of $31 million and a reduction in the provision for income taxes of $43 million.

Looking at slide 10, on a year-to-date basis, we are comparing the first half of 2014 to the first half of 2013 on an apples-to-apples basis. The information is taken directly from the company’s consolidated statement of operations in the 10-Q and adjust for large items in 2013 that provided uneven comparison to 2014.

As shown, the net loss for the first half of 2014 was $98 million compared to net income in the first half of 2013 to $59 million. However, 2013 included other operating income of $495 million primarily from last year’s gain of $535 million from the sale of digital imaging patent portfolio.

Our reorganization costs in last year were $192 million compared to $10 million in this year. And finally, last year we had a loss of early retirement of debt in the amount of $6 million. Taking all this into consideration shows the comparable improvement of $150 million year-over-year.

On Slide 11 continuing with our results for the quarter, consolidated company revenue of $525 million declined 10% year-over-year and gross profit decreased $31 million from a $133 million in Q2 of 2013 to a $102 million in Q2 of 2014.

Year-to-date, consolidated revenue is down 14% year-over-year and gross profit decreased from $282 million in 2013 to $191 million in 2014. Revenue declines in our Entertainment and Commercial Films business, as well as our Consumer Inkjet business, are the primary drivers of these decreases and are collectively consistent with our expectations.

Partially offsetting these declines for the quarter are improvements in operating cost versus the prior year. Q2 SG&A expenses decreased by $30 million year-over-year. On a year-to-date basis, SG&A expenses are down $61 million.

In terms of a percentage of revenue, Q2 SG&A declined from 20% of revenue in 2013 just 16% of revenue in the current quarter and down from 18% of revenue on a sequential basis versus Q1. We planned for further percentage declines as revenue grows in succeeding quarters.

These reductions are resulting from a number of actions including headcount reductions, the elimination of overhead costs with the completion of our document imaging and a personalized imaging sale to the Kodak Pension Plan in U.K.

decreases in pension expense, facilities consolidations and re-negotiations of vendor contracts during the Chapter 11 process. Overall, the company’s operational EBITDA was basically flat at $24 million in Q2 2014 versus $25 million in Q2 2013. On a year-to-date basis, operational EBITDA is down from $74 million in 2013 to $30 million in 2014.

The year-to-date decline is driven by the reduction in our Film and Consumer Inkjet businesses as Jeff indicated earlier. As Jeff also noted, we are seeing growth in our strategic technology businesses partially offsetting these declines. Turning to the year-over-year results in our operating segments.

Our Graphics, Entertainment and Commercial Film segment or GECF revenue declined by $14 million or 4% for the quarter resulting from volume declines in Entertainment and Commercial Films as the motion picture industry continues its transition from traditional film to digital distribution, and pricing and mix impacts within graphics.

GECF gross profit decreased a $11 million year-over-year from 16% of revenue in Q2 of 2013 to 14% of revenue in Q2 2014.

The declines in gross profit will primarily due to the impact of depreciation, amortization, and other expenses resulting from the application of fresh start accounting, as well as the result of revenue reduction described and unfavorable manufacturing cost with an Entertainment and Commercial Films.

Partially offsetting this decline was a three percentage point improvement to margin within graphics due to lower material cost and productivity improvements.

SG&A expense for GECF improved on a year-over-year basis by $10 million leading to an overall year-over-year decline in segment earnings for GECF $2 million and a year-over-year improvement in operational EBITDA of $12 million. Let’s move on to our Digital Printing and Enterprise segment, or DP&E.

DP&E revenue in the second quarter decreased $30 million year-over-year or 15% with roughly two-thirds of this decline attributable to Consumer Inkjet sales with a remainder in overall digital printing revenues and a small decline in enterprise services.

Our packaging in PROSPER businesses which include equipment and annuities partially offset these decreases as we continue to grow this important strategic businesses.

Gross profit for DP&E in the second quarter decreased by $19 million year-over-year from 29% of revenue in Q2 of 2013 to 23% of revenue in Q2 of 2014, primarily due to the decline and resulting mixed impact from our Consumer Inkjet business as well as the depreciation and amortization impact from the application of fresh start accounting, similar to those described for our GECF segment.

R&D expense is also increased by $4 million year-over-year for DP&E due to fresh start depreciation and an increase in expense as new products like functional printing near commercialization. The DP&E segment loss for the quarter increased by $16 million year-over-year and operational EBITDA decreased by $13 million due to the reason described.

Based on the results we achieved in Q1 and Q2, second half revenue expectations, licensing and non-recurring items as well as the ongoing impact of cost structure improvements, we expect that our 2014 revenue will fall within a range of $2.1 billion and $2.3 billion and our operational EBITDA will fall within the range of $145 million to $165 million.

These are the same ranges discussed on our last call. Recently announced changes regarding the U.S.

pension plan would likely result in a re-measurement process between now and the end of the year which will impact our GAAP financial statements, all other assumptions around the range of GAAP earnings from continuing operations at this time are effectively unchanged.

Focusing on our current cash flow and balance sheet, we are pleased with the progress we are making and the continued strength of our balance sheet. As of June 30, 2014, we reported cash of $768 million. The current cash balance is a reduction of $76 million compared to December 31, 2013.

To the first six months of the year, the company has used cash primarily for working capital, restructuring, interest expense payments, capital expenditures, and miscellaneous and smaller liability payments.

Use of cash for inventory increases throughout the first half of the year is $58 million and includes approximately $20 million of aluminum purchases based on favorable pricing and our expectations around consumption during the second half.

Ending cash for Q2 is within our expectations for the quarter and we expect to generate positive cash from operating activities during the remainder of the year. As I mentioned at the beginning in my remarks, I would like to share my initial observations on Kodak with you based on my first seven weeks for the company.

First and foremost, I’m excited to be a part of the company’s next chapter. Kodak has been and remains an incredibly strong technology leader, and like Jeff, I’m very excited about the potential of our strategic offerings moving forward and the opportunity for profitable growth. I’m also very impressed by the employees and leadership team at Kodak.

And as a finance executive, I’m very pleased with the post-emergence financial strength of the company. I will now turn this back to Jeff for closing comments..

Thank you, John. Great to have you on board. I’m very excited about the Strategic Technology businesses. They’re the growth opportunities for Kodak. In addition to these businesses, we’re taking actions to accelerate the improvement and profitability by reducing cost and making our operations more efficient.

We’re also developing new capabilities in areas with the new growth opportunities, like Kodak Technology Solutions. We’ll make significant investments in our strategic technology businesses in putting approximately a $100 million of restructuring development as well as $40 million in capital expenditures.

This will be focused primarily on the next generation of our PROSPER press and rating system improvements, OEM partnerships in digital printing and functional printing, packaging product enhancements including smart packaging solutions, and continuing developments in capacity in our Process Free Plates and workflow software.

For the full year, we expect growth in our strategic technology businesses to essentially offset the declines in our mature businesses. The second half of this year is an important crossover point for the company. We expect double-digit percentage year-over-year growth.

Revenue growth in our strategic technology business in the second half of 2014, and as a result returned to single-digit percentage year-over-year revenue growth for the company in total for the second half of 2014. We’d now be very happy to take your questions.

Dave?.

Thank you, Jeff. Stephanie, we are now ready to open the Q&A session. Please remind callers of the instructions for asking questions..

Sure. (Operator Instructions) Our first question comes from Shannon Cross of Cross Research. Your line is open..

Hi, thank you. This is actually Bill Grinstead in for Shannon Cross. Thanks for taking my questions.

First question around your agreement that you signed with the Hollywood filmmakers, can you talk a little bit about the certainty that may provide you as far as stepping down expenses or planning going forward?.

Yes, of course. So, we’re still in negotiations, but the initial discussion gave us confident that we had a broad collision of all of the major studios and all of the independent studies that we reached out too as well as broad deep list of filmmakers who care deeply about film.

It’s great to have customers who care a lot about the product you made and that’s what we have.

So, when we look at the overall economics of our business, we went and check with the non-entertainment film business as well our large business in making film for printed circuits boards and also the business that we make with our formal partner – with our partner and former part of our company, Kodak Alaris.

We found that it made sense to continue to manufacture based on these projections. And we expect and intend to keep the factory open for the foreseeable future. We have a lot of fixed costs in this business.

The film factory was designed for much larger volumes and strategically it’s important that we are able to manufacture films for our functional printing business going forward.

So, this is – it’s a nice way of solidifying the demand, the support for product, bridging a period where our volumes going to be relatively low until we go into the growth we expect in the functional printing of touch screen sensors..

Okay.

And then kind of broader, switching kind of more to the headcount, when you think more about kind of your declining businesses and the general step down in expenses that you expect to roll through there, how do you view your expense structure? Do you see any incremental pockets of expense you could pull out outside of kind of the declining businesses? What are your overall thoughts?.

Yes, okay. So, I think there are many different ways that the company is going to try and become more productive. The company is much smaller than it was a few years ago. And as such, we will continually to work around different areas to improve our productivity as a company.

We also are going to a very substantial shift and that the products that we build and bring to the marketplace. So to give you an example, the film business we just discussed is really down about 300 employees – between 300 and 400 employees. So, there is not a lot of reduction left there.

These are accounted employees and our team to create and innovate in the film area, and will be the basis for not only continuing the existing business, but the investments going forward for films, for functional printing.

In the Consumer Inkjet business, our other mature business that’s a very small sales team working with distributor and so that’s – that is also relatively small team. And so the mature businesses I don’t see a significant amount of further reduction.

We do have still a lot of vertical integration in the company that supported a series of more complex products in the past and there is some opportunities there. But overall, we are we are looking to grow quite significantly.

So from a headcount perspective while we will always look to be more efficient, we’re also looking to higher talent in the software area for our for our workflow software business, and in the areas of around our inkjet business, which is growing quite well as our functional printing businesses and packaging businesses.

So you heard the overall cost implications. We expected, what, $50 million down, primarily driven by headcount on year-over-year. After that, cost structure will be generally about at a right place..

Okay, all right. Thank you..

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

Hi, guys. Just a quick one, you said that you are currently behind your expectations in the functional printing business, and yet you’re able to reiterate your guidance range. And I think you provided an answer embedded in some of your comments earlier, but I was hoping you could summarize how you’re able to do that.

What improved elsewhere? Is it the agreement with the studios or are there other things contributing?.

Yes, so, lots of puts and takes in our reiteration of the guidance and I think we go through some of that. We’re doing – while we are behind in film, we’re ahead of our expectations in Consumer Inkjet, and those overall balances out in the mature areas. And in the strategic sector, we expect to provide this roughly $100 million year-over-year.

So while there – some businesses are a little bit behind there and some businesses are a little bit ahead. Overall, we’re on track on the strategic businesses where we want to be. So, within the mature business, I think that the main story is that while we are behind on the film, we’re making that up with the – making that up with the consumer inkjet.

On the functional printing miss, we’re doing better in packaging and we’re doing better in some of the brand licensing and intellectual property area..

Okay. And then on intellectual property, I think you described something I think back of the envelope I came up with $14 million of what you described is non-recurring IP.

But should we think about this as a headwind or do you have sort of an outlook or expectation for continued IP settlements and licensing going forward, that would make it less of a headwind and more of sort of an ongoing kind of a thing?.

Well first of all everything in this area around brand licensing intellectual property is a tailwind..

Right, okay..

It’s all good news. The question is I described this business is a bit – this business being a bit lumpy because there are some quarters you get licensing. If you look at last year as an example, some quarters, 2013 we had some quarters we had some modest numbers and then you had a couple of ones of larger amount.

And that’s the nature of intellectual property and licensing business. There is a treasure trove of 7,000 somewhat patents that this company has. There is great intellectual property in this company and while a lot particularly the digital imaging portfolio, which was sold during the bankruptcy is behind us as an opportunity.

There is still a significant number of additional intellectual property and brand licensing upgrades. The Kodak brand is very strong. And we today in our – in the brand licensing are in the 10s of millions of dollars of profit.

I believe that can be quite significant growth going forward as well as having these lumpy more intellectual property licensing opportunities..

Okay. That’s good news.

So rather than thinking of this as $14 million is not going to happen again in 2015, it’s – it sounds like there is more opportunity going forward and that the licensing component could increase, am I characterizing that right?.

Yes. I think again look I mean be real clear. The brand licensing and intellectual property business is not a business that gets depleted over time. That’s a business that is a growing business and opportunity for future licensing, future intellectual property, joint ventures and or sales and or annuity licenses.

So, there is a rich treasure trove and a great brand that has yet to be fully monetized.

We see for the next several years being able to take steps to monetize both of those, both the licensing, joint ventures around our technologies, new technologies that are being invented on our labs that we can later license and or work in the joint ventures or bring to market ourselves.

So, I think the way to look at this is, this is a great business within our strategic businesses. However, when you are trying to – if you are trying to model kind of standard straight line linear year-over-year growth, you are not going to find that in this particular business..

Okay, okay. That makes sense.

And then finally you touched on this, but I was wondered if you could make any – is there anything else you can say about any progress you made in terms of the pipeline of other potential OEM partners beyond Bobst and Timsons and also when we might expect to see monetization of the Bobst agreement? And then finally potential other partners in functional printing and then I am done?.

Alright. Great, Porter. Very, very good question. So, we are all quite excited about. First of all, the OEM relationships that we have to-date around let’s go through the different pieces, so, in the digital printing area, where Bobst in packaging is our most significant currently announced partnership. We are very excited about that.

We have a pipeline of systems that are being built, we have customers of Bobst and Kodak has customers in place and a strong pipeline. The monetization of that will occur beginning this year..

Okay..

In terms of Timson, which is a book press that we’re working, that is also making reasonably good progress and we expect monetization this year and next year and in future years.

We are in discussions with other partners for our Prosper Technologies, I am not going to announce them on this call, but when those things firm up into formal joint ventures and agreements, we will be pleased to announce them. But I am comfortable with the pipeline that we have going forward.

In terms of functional printing opportunities beyond our very strong relationships that UniPixel and Kingsbury, we also see additional opportunities around the touch screen sensor with further partners particularly on the silver halide solution area. That today is what we are partnered with Kingsbury.

And so both Kingsbury and Kodak are working together to try to expand the market for this product that is already act as I said 90% production level to-date and already in customer, working with customers for final acceptance to test. So, very excited about that.

And then just to add to this, I mentioned that we started a new group Kodak Technology Solutions and this is based on the very deep level of technologies around secure packaging, around digital print, around micro-fluids and many other areas within our labs. And the strategy of this group is to monetize these faster than has been the historic track.

Historically most of these products that went into a business unit and eventually became part of in overall revenue stream.

Going forward that maybe a primary way of going, but there will also be alternatives of joint ventures, sales of technology, licensing of technology, coming out of the rich portfolio of historic and forward opportunities we have from our research lab..

Great, great, great. Thank you so much. I am done. Thank you..

Thank you, Trent. Next question please..

Thank you. Our next question comes from (Jen Ganzi) of NewMark Capital. Your line is open..

Hi, thanks so much for taking the question. Just a couple. I was just wondering, and maybe this was in the Q. I haven’t had a chance to review it fully yet, but can you give us your U.S.

cash number?.

John..

Yes. So, we have roughly in the U.S. I believe at the end of the quarter $190 million..

Okay, great. That’s helpful. Thanks. And then you mentioned and maybe you mentioned this earlier, I might have missed this, but you mentioned that your plates graphics business like outside of the Films business, experienced growth for the first time in a while.

Did you give us like the percentage rate of that growth?.

I am sorry, you are breaking up. But let me try and answer, I think I hear which is that we experienced that we mentioned that we experienced volume growth and our overall global plates business. And I think in our last call we mentioned that the month of April was the first month that we had achieved that in some period of time.

And I will confirm that for this quarter we did end up with achieving year-over-year growth and that has continued in the current month, first month of this quarter.

So, very pleased with the market share we’re gaining and the volume growth in our digital plates business, this is driven by SONORA Process Free Plate and the execution of both manufacturing and sales across the world in this business have been quite strong this year..

Okay.

So, you see – kind of give us a sort of number around sort of the revenue growth there?.

Well I mean that revenue growth on process, on overall plates?.

Yes, just on plates overall?.

The answer is we have volume increases of single digit levels and roughly flat revenue overall. Within that number is a rapid increase in the Process Free sector and a single digit decline as we impinge on our own customer base with the other plates business.

In doing so, while it’s relatively flat on the top line it’s as John mentioned in his remarks around gross margin for the business, our gross margins are stronger than that, there is good growth in the gross margin coming from our plates business because of both manufacturing efficiencies, but also the premium that we’re able to charge for process free plate versus the traditional plate..

Okay, great. So, it sounds like at some point you expect the Process Free’s growth to sort of offset the kind of declines on sort of the older line plates.

Is that the right way to think about it?.

Yes. Over time including now, we expect – the growth in Process Free Plates to offset the decline of other plates and lead to modest growth in this mature business..

Okay, that’s helpful. Thanks so much.

And I am just curious in terms of looking at your sort of packaging versus PROSPER printing solutions, do you have any overlap in terms of your clients there, where possibly guys that you didn’t sell to both on the corrugated boxes side as well as if they do sort of for packaging as well?.

Excellent question. There are many different ways to try and label a piece of corrugated. And the conditional way is a rubber FLEXCEL plate.

And that market is one that we entered a few years ago and have done extraordinarily well in growing in that business, growing much faster than the overall market and moving from zero percent share up to high single-digit share in that market.

This past quarter, I think we mentioned that we had 66% some odd growth in our – in the FLEXCEL plate setter and strong 20%ish growth in the plates themselves. So, we are very pleased with the FLEXCEL solution. Obviously, you can also print on corrugated with inkjet.

To print successfully on corrugated with inkjet, you need a very, very sophisticated head and that’s what our PROSPER systems do.

In the partnership with Bobst, clearly we will have an impact on the FLEXCEL market, because it will displace many FLEXCEL customer – many FLEXCEL solutions around printing with a cheaper, more effective digital process around printing on corrugated.

And so we are very excited with that, but different packaging customers are going to choose different solutions. Some will choose inkjet solutions and some will choose FLEXCEL, we are very pleased to be in the forefront around technology in both sectors of this rapidly growing business.

When you think of visual print, packaging is perhaps the most exciting market that we operate now..

Okay, great. So, it sounds like you guys probably go out to different customers with sort of a proposal of using sort of a bunch – a number of different products, whether it’s PROSPER or FLEXCEL and the customer gets to kind of basically choose one or both of them depending on sort of their individual needs.

Is that the right way to think about it?.

Yes. I think for different applications, you will use either tool. Kodak is pleased to provide customer choice to run around both technologies to the industry..

Great. That’s all from me. Thanks so much..

Thank you..

Thank you. And our last question comes from Amer Tiwana of CRT Capital. Your line is open..

Hi, guys. I was just looking through the press release and wanted to see if you guys have any updates on the S systems? I think last time you gave some quantitative measures and this time I haven’t seen anything.

So, if you could just update us on that?.

It’s a question on the PROSPER heads, S series heads, what is the volumes on that?.

Yes..

So, we had – first of all the answer is we gave the overall equipment number of roughly 10% growth for PROSPER equipment and 12% growth in the annuities. We had a very good first quarter shifting over 60 heads. On a sequential basis, we are down a bit this year, but we are on track for the numbers that we talked about.

And overall, what we said it’s – we want to get to a 1,000 for the year..

Okay.

And then moving on some of the seasonality in the business that you mentioned, I am just wondering if you could help us out with respect to 3Q and 4Q as to how we should think about growth? Is it going to be linear meaning 4Q better than 3Q or if you would just help us out there?.

Yes. So we are not going to give any guidance on that. The answer is as you can tell if you back into right now, the – if you back into what the revenue is for the first half versus the second half, you are going to see high single-digit, mid to high single-digit growth in overall company revenue for the second half.

To give you context, where we are still checking the numbers, because it’s been a while, but we believe the last time that Kodak grew on a year-over-year basis in revenue was 1999. So, we are very excited that second half of this year will have year-over-year growth in single – low to mid single-digit growth.

In terms of how it comes in third and fourth quarter, we have a lot – a lot of our growth is in complex sales and the sales of long sales cycle.

So, we see a good pipeline, but I am not necessarily managing this company on whether it’s in September or October, but we want to get the business in as soon as we can to try and drive the annuity growth in the installed base, but at this point getting back to growth is a great accomplishment for the company. We are very pleased about that..

Sure. And the last question I have is with respect to functional print, just in terms of thinking about the revenues from the UniPixel and the Kingsbury relationship I know you mentioned that the process is sort of delayed a little bit.

Can we expect some revenues by the end of this year or is it now a next year story?.

No. We do expect revenue this year around the functional printing level. And that revenue will be very pleased with that. We actually had a modest amount of revenue in the second quarter, but the revenue will be in the tens of millions for the year..

Thank you very much..

Okay. That’s all the questions we have time for. I’d like to hand the call back over to Jeff..

Thank you very much, David. So, again, I am very pleased with the progress we are making in our strategic businesses. As I said when I joined the company, we will make progress in this company.

It won’t necessarily be a straight line, but I am very pleased with the trajectory of some of our businesses and the decisions that we are able to make and the implementations that we are able to make around transforming some of our both mature businesses and getting some of the acceleration of growth in our strategic businesses.

So, I appreciate your time today and thanks very much for joining the call..

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..