Antonio Perez - Chairman, Chief Executive Officer and Chairman of Executive Committee Antoinette McCorvey - Chief Financial Officer and Senior Vice President Sandra Rowland - Vice President of Corporate Finance Group and Director of Investor Relations

Arun Seshadri - Credit Suisse Richard Gardner - Citigroup Inc Ananda Baruah - Brean Murray, Carret & Co., LLC Ulysses Yannas - Buckman & Reid Mark Kaufman - Rafferty Capital Markets, LLC Shannon Cross - Weeden & Co., LP

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the First Quarter 2011 Sales and Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Thursday, April 28, 2011, and I'd now like to turn the call over to Ms. Sandy Rowland, Director of Investor Relations. Please go ahead, ma'am.

Good morning, and thank you for joining us today for Kodak's First Quarter 2011 Sales and Earnings Conference Call. Here with me today are Antonio M. Perez, Kodak's Chairman and CEO; as well as Ann McCorvey, Kodak's Chief Financial Officer. Antonio will begin this morning with his observations on the quarter, and then Ann will provide a review of the quarterly financial performance. Certain statements during this conference call and question-and-answer session, may be forward-looking in nature or forward-looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. For example, references to the company's expectations regarding the following are forward-looking statements: Economic conditions; revenue; revenue growth; cost of goods sold; savings and charges resulting from restructuring and rationalization actions; product pricing; gross margins; earnings; earnings growth; cash generation; demand for products, consumables and services in our core growth businesses, including Commercial Inkjet, Consumer Inkjet, Workflow Software and Services, and Packaging Solutions; new product introductions; commodity costs; liquidity; mitigation of the potential impacts of the Japan earthquake and tsunami; manufacturing productivity improvements; and potential cash proceeds from the sale of assets. These forward-looking statements are subject to a number of important risk factors and uncertainties, which are fully outlined in our 10-Q issued this morning. Listeners are advised to read these important cautionary statements in their entirety as any forward-looking statement needs to be evaluated in light of these important factors and uncertainties. And now, I will turn the conference call over to Antonio M. Perez.

Thank you, Sandy, and good morning, everyone. When we met with you at our investor conference in February, we identified 2 key financial metrics for 2011. First, we must scale our 4 digital growth initiatives: Consumer Inkjet, Commercial Inkjet, Workflow Software and Services, and Packaging Solutions. We're targeting 40% aggregate growth for these businesses in 2011. These businesses are all based on differentiated value, propositions and target large markets in need of transformation. They will be the foundation for the digital profitable and sustainable Kodak in 2012 and beyond. Second, we will continue our focus on cash and drive positive cash generation before restructuring payments. I would like to highlight a number of important elements of our first quarter results that we believe are key to achieving those full year goals. Our 4 digital growth businesses when compared to the prior year grew 23%, contributing to our overall 2% digital growth, excluding nonrecurring intellectual property licenses. We expect that this growth will accelerate during the year. Let me break it down for you. Consumer Inkjet and Packaging Solutions continued to gain momentum, each growing by over 50%. We continue to expand in our installed base and drive higher-margin annuities through these systems. In Consumer Inkjet, we, once again, significantly outpaced the market by growing more than 50% versus last year, including a 97% growth in printer units, while we maintained a price premium. We continue to win new accounts and expand our subspace in existing accounts. While the majority of our first quarter volume and growth came from our existing platform, we successfully launched our new low-cost consumer inkjet platform with the Kodak brand this quarter. You will recall that in the fourth quarter of 2010, we launched this new platform with the admin store brand for Dixons in the UK. So far, we have received very favorable feedback from the new platform from both our retail partners and end-users. In fact, PC Magazine gave one of our new models an Editor's Choice Award. Our ink sales are tracking in line with our plans as well. Ink revenue grew 85% compared to the prior year in the first quarter. This business is performing very well on its path to profitability in 2012. In Packaging Solutions, our leading-edge FLEXCEL NX System, which helps our clients to maximize shelf impact by combining high-resolution print quality packaging with significantly reduced production costs, continues to gain traction. We are on track to double our install base again in 2011. Our Commercial Inkjet and Workflow Software and Service businesses grew a combined 3% in the first quarter of 2011 compared to the prior year. We expect this growth to accelerate as we move along the year. Our Commercial Inkjet PROSPER presses, based on our breakthrough stream technology, deliver optic-class quality and feed [ph] media flexibility at low operating costs combined with the ability to perform variable data printing. The PROSPER press's combination of image quality and productivity is superior to any digital press in the market and our sales panel continues to be very strong. We are well-positioned for accelerated growth in the back half of the year. We saw traction with both our color and black-and-white PROSPER print heads. We doubled the placement of this series in printing systems. This growth was largely offset by lower annuities from our legacy presses. Finally, our Workflow Software and Services business had fully growth in the service part of the business. The growth was driven by strong demand for business process services in the emerging markets. We also expect stronger growth for Workflow Software in the second half of the year in line with our forecasted equipment installations. In summary, I'm very pleased with the performance of our Digital Growth businesses this quarter. It is in line with our forecast, and they represented approximately 15% of the total company revenue and 20% of our digital revenue. Now turning to cash in our cash generating business. As I said earlier, our plan for the year is to drive positive cash generation before restructuring. It is important to keep in mind that our business are highly seasonal, and we typically consume cash in the first half of the year and generate cash in the back half. In order to achieve this metric, we must effectively manage our largest cash generating business, especially the ones where we had pricing issues last year. This includes Prepress Solutions, Digital Capture and Devices and our Film Photofinishing and Entertainment Group. In addition, our 2011 cash plan includes generating between $300 million and $400 million in proceeds from the sales of certain nonstrategic assets and operations. Revenues in our Prepress Solutions business grew 3% compared to the first quarter of 2010, fueled by strong growth from both digital plates and computer-to-plate equipment in the emerging markets. 6% growth in digital plate volume, combined with a continued adoption of our newer premium products, including THERMAL DIRECT and Trillian, helped to mitigate the pricing pressures that we experienced in 2010. We expect to continue to expand the mix of our newer premium product, as they not only lowered the cost of ownership for the customer by eliminating processing, but I add also are environmentally advantaged. The combination of these factors resulted in year-over-year revenue growth for Prepress Solutions. On top of that, we announced in March that we will be raising prices for our digital plate worldwide, because of rising aluminum and raw material costs. The price increases will take effect in the second quarter. In 2010, approximately 5% of our total company revenues were generated in Japan, and Prepress Solutions is our largest business in Japan. Like other companies in our industry, we continue to analyze the impact of the earthquake and tsunami and their aftermath on our 2011 outlook. We continue to closely monitor supply, particularly for the second half of the year, as some of our high-end components for our digital equipment businesses are sourced from Japan. We're taking the necessary actions to mitigate any potential impacts. Now moving on to Digital Capture and Devices. As we outlined at our investor conference, the core of our Digital Capture and Device business, digital still camera, is in industry decline. Therefore, we're implementing a transformative strategy focused on earnings and cash generations rather than on top line. Revenues in our Digital Capture and Device business, excluding nonrecurring intellectual-property royalty revenue, went down 14% in the first quarter, as per our plan. Like every year, in the first quarter, we price competitively to clear 2010 models in preparation for the spring reset at retail. We also began to implement participation choices at the geographic product portfolio and account level. These choices, combined with the operational cost reductions that we have implemented will position the business for significantly improved profitability in the second half of the year, which is the meaningful part of the year for this business. Revenues in our Film Photofinishing and Entertainment Group declined 14% compared to the prior year, in line with our forecast as well. We continue to reduce costs in line with revenue decline. However, raw material costs, particularly silver, continue to skyrocket. Increase in silver prices, which began last August and moderated briefly earlier in the first quarter has accelerated. We have 3 mechanisms to minimize the effect of silver price increases. Number one, we have indexed most of our traditional photofinishing contracts to the price of silver. And in March, we announced price increases in Entertainment Imaging and our other FPEG product lines. Number two, we will continue our hedging program. And number three, we are aggressively transitioning our portfolio to be less dependent on silver. Now taking a look at asset sales. We made meaningful progress towards our cash generation targets as we sold our 3 most patent portfolio and our Microfilm business. This transaction generated approximately $70 million. We will continue to execute this strategy and monetize our underutilized assets and real estate when the time is appropriate and when we can get the right value. Overall, cash usage was $466 million in the first quarter of 2011, which represents a $27 million improvement compared to the prior year. If you exclude nonrecurring IP and asset sales from both periods, we lowered our cash usage by $52 million. I'm pleased with this performance. Now I will turn the call over to Ann, who will provide more details. Ann?

Thanks, Antonio, and good morning, everyone. Our first quarter performance demonstrates that our focus on our 2 fundamental imperatives is delivering positive results. In aggregate, our 4 digital growth initiatives made progress, and we improved our cash generation before restructuring payments year-over-year. Before I discuss the details of the first quarter financial results, I want to remind you of the non-GAAP measure related to our operating earnings that we introduced at our February Investor Meeting. This measure excludes the effect of certain nonservice-related corporate components of pension and other postretirement benefit costs from our segment earnings. During the first quarter, we also changed our GAAP segment measures to exclude those corporate cost components as well. These components are driven primarily by changes in market performance. As we expected, our benefit costs shifted from income through expense in the first quarter. The combined impact of this year-over-year, noncash, unfavorable change on gross profit SGA and R&D were $34 million. Now for the first quarter. Consolidated revenues were $1.3 billion, a 31% decrease versus the prior year. This year-over-year decrease is primarily due to the onetime benefit of a nonrecurring IP transaction recognized in the first quarter of 2010 and the continued industry-related volume decline in our traditional businesses. This decline was partially offset by increased volumes to consumer inkjet printers and ink, digital plates and our production scanners. Our first quarter segment gross profit margin was 10.5% versus 41.2% in the year ago quarter. This decline is largely due to a nonrecurring intellectual-property licensing transaction in the first quarter of 2010. In addition, gross profit margins were negatively impacted, as we continued to invest in growing our install base of consumer inkjet printers, where unit sales increased 97%. However, Consumer Inkjet margins improved year-over-year driven by increased ink profits. Other factors which factors negatively impacting our gross profit margins are: the year-over-year increase from silver and aluminum commodity of $28 million, the start-up costs associated with Commercial Inkjet PROSPER platform, an unfavorable price mix across most product categories, including digital cameras, digital plates and our traditional business. Our segment SG&A and R&D expense decreased by $14 million, as we continue to reduce our infrastructure costs. These cost reduction actions were partially offset by increased advertising spend for our consumer inkjet printers. We expect to see increasing benefits from our restructuring actions as we move through the year. Our pretax restructuring charges totaled $35 million for the quarter, and restructuring related payments from corporate cash were $17 million for the first quarter. As we said at our February investor meeting, we expect our full year restructuring charges to be in the range of $150 million to $170 million, and restructuring cash payments to be approximately $80 million. For the first quarter, the GAAP loss from continuing operation was $249 million as compared to GAAP earnings from continuing operations of $119 million in the prior year quarter. The decrease in earnings was primarily driven by factors previously described, partially offset by the decreased tax provision, primarily due to withholding taxes associated with the IP transaction and the one-time, non-cash charge associated with an early extinguishment of debt from a financing transaction in the first quarter of 2010, along with the gain on asset sales during the first quarter of 2011. Now let's take a look at the results by segment, starting with the Digital Businesses. For the quarter, Consumer Digital Imaging Group's revenue was $330 million compared to $884 million in the prior year quarter. CDG's segment earnings from operations decreased by $569 million as compared to the last year's first quarter segment earnings from operation. This decline in revenue and earnings is primarily due to the one-time benefit of a $550 million nonrecurring IP transaction for the first quarter 2010 and negative price mix for digital cameras, as we cleared the legacy inventory from the fourth quarter of 2010. As Antonio indicated, we have begun making participation choices that will result in a smaller top line. However, it is important to note that these choices will drive significant improvement in earnings. The revenue decline was partially offset by higher volumes for consumer inkjet printers and ink. Moving to the Graphics Communications Group. GCG's first quarter revenue was $625 million, an increase of 4% versus the prior year quarter. The revenue improvement for the quarter was primarily driven by increased volumes for digital plates, higher sales for production scanners, increased demand for business process services and a 2% favorable foreign exchange impact. The pricing environment in the commercial printing industry continues to be competitive. However, the actions we've taken to mitigate the pricing pressures are showing positive results. For the first quarter of 2011, GCG's revenue included a 2% unfavorable price mix, down from the 5 percentage point decline we experienced for the full year of 2010. We're experiencing solid traction with our new digital plate products. And going forward, we expect to see benefits from the announced price increase. Our GCG business also continues to show strong performance in emerging markets, growing 11% in the first quarter. GCG's first quarter segment loss from operations was $71 million compared to a loss of $40 million in the prior year quarter. This decline in earnings is largely attributable to start-up costs associated with our Commercial Inkjet business. We've increased our service cost to ensure that the earliest adopters of our PROSPER press are able to successfully achieve all the benefits of this breakthrough technology. Additionally, by getting new technology, our early production presses have the highest unit cost. However, we will continue to drive productivity improvements as we scale the manufacturing operations. On to our traditional business, Photofinishing and Entertainment Imaging Group. FPEG's revenue declined 14% to $367 million and posted a loss from operation of $15 million for the first quarter. FPEG's revenues and earnings for the quarter were impacted by the industry-related volume declines across each of the businesses as well as significantly higher silver and petroleum-based raw material costs. Operating margins were down 9 percentage points when compared to the prior year. This decline was primarily the result of increased commodity costs, particularly silver. To mitigate the rapid rise in silver price, we've implemented an index pricing model for most of our color negative paper products. Also in March, the business announced a price increase for many of FPEG's products, including motion picture film. And we will continue to consider pricing modifications in line with silver price changes. Also, we will continue our ongoing hedging program to reduce the volatility within the year. With respect to cash and liquidity, I am pleased that over the past few months we have been able to take advantage of the improvements in the credit market to increase our financial flexibility as we continue to invest in our 4 digital growth initiatives and complete our transformation to a sustainable, profitable, digital company. First, in March, we successfully raised $250 million in senior secured notes due in 2019, and repurchased $50 million of 7.25% senior notes due in 2013. Second, earlier this week, we completed the amendment of our credit agreement and did so at terms that are more favorable, including lower borrowing costs and more flexible covenants. This new 5-year agreement provides us up to $400 million in lending capacity. Now I'll take you through our cash flow statement. Cash generated from financing activities was approximately $200 million higher than prior year quarter, due to the recent volume transactions just discussed. Cash generated from investing activity was $38 million higher than the prior year quarter. This increase in cash generation was primarily due to the sale of a nonstrategic asset, partially offset by the acquisition of the TOK [Tokyo Ohka Kogyo] business in Japan for our Packaging business. Cash used from operating activity was $54 million more than the prior year quarter. Excluding the $94 million in cash received from a nonrecurring IP transaction in the prior year quarter, cash from operating activities improved by $40 million. This improvement in cash was driven by reduced settlement of other operational liabilities in the current year quarter and lower cash restructuring payments. As a company, we define cash generation as cash flows from continuing operations from operating activity, less capital expenditures, plus proceeds from asset sales. And for the quarter, this represented a cash use of $466 million, $27 million better than the prior year quarter. Cash generation before restructuring payments represented a use of cash of $7 million lower than the prior year quarter and is in line with our seasonal trends. As a result, our cash balance at the end of the first quarter was $1.3 billion. Overall, we are committed to achieving the financial goals we outlined in our February investor meeting. We're focused on scaling our core growth initiatives, improving the profitability in our digital cash-generating businesses and aligning our cost structure with our top line reality. Thank you very much. And now, Antonio and I will take your questions.

[Operator Instructions] Our first question comes from the line of Ananda Baruah with Brean Murray Investment. Ananda Baruah - Brean Murray, Carret & Co., LLC: Just a couple of things, if I could. Antonio, just given the rise, the ongoing rise in silver prices in the acknowledged comments around the impact to the cost structure, could you give us any sense of how this changes or what the impact of the headwinds here to your full year guidance might be? And then, is there any change to the metrics that you provided on an ongoing basis about kind of changes in the price equal to change in profitability?

At this time, we're not going to make any change. We have found mechanisms to contain what has happened. Obviously, there's a big change in price. But nonetheless, we have internal mechanisms to deal with those changes. If this were to continue and at the same pace, it will be a different story. But up until now, when we started the year, we put in place contingencies to deal with a significant increase of silver price because the tendency was pretty obvious when we're doing the planning for the year. And so far, while the business, obviously, will continue to be cash-generating this year, it will be slightly less than what we had in our original plan, but it's a small number that doesn't make a change for the overall company. So for now, there's no change, and we put in place these 3 mechanisms that I just described to you today. With silver price, we are raising prices, we are indexing. There are contracts we are hedging, and we are moving as fast as we can with the part of the portfolio that is not silver-dependent. You put all those things together, and so far, we don't have to make a change for -- to the forecast for the year. Ananda Baruah - Brean Murray, Carret & Co., LLC: Okay, and I guess just a follow-up to that, and then maybe this is one for Ann. Can you give us some sense of what -- so I appreciate you're not changing the guidance here. But can you give us some sense, given the added pressure, what the increased impact to profitability is for every dollar change in silver like you typically have done?

Ananda, at this time, we're not changing it. Because on a cost basis, the impact remains about the same, the $10 million to $12 million. And as we talked about it in February, we're clearly doing things that we believe that by the time we get to 2012, we will have reduced it. But in this short period of time, on a cost basis, that's the same kind of sensitivity. So the actions we're taking around pricing and indexing our pricing and, of course, continuing to hedge are the things we're doing to keep the net profits in line. Ananda Baruah - Brean Murray, Carret & Co., LLC: And then just last one for me here. Just following on your comments around actions taken in the Digital Camera business. It sounds like, I guess, the comments on the call were increased profitability in the second half of the year. Are you suggesting that, I guess do you think that there can be -- with the actions you've taken, do you think they can be profitable for the full year? On a full year basis? And could you just, I guess, maybe give us a more specific sense of some of the things that you're going to be doing?

No, it won't be profitable for the full year, but it will be a very significant improvement in performance versus last year. It's very significant. Now come 2012, you can ask me that question again, and the answer will be different. Ananda Baruah - Brean Murray, Carret & Co., LLC: Any more specifics on the actions that you guys are going to be taking?

In cameras, what we've done is we have selected the geographies, the models, the channels, and it has been working very well, actually. We -- in certain cases, we're not in the stores, but we are in the online stores. In other cases, we haven't used -- we took away the models that we're losing, they had negative margins. I mean, there's a combination of things. It's been a very aggressive program. It's been run effectively, and we are optimistic for the second half. Of course, let me finish, at the cost of top line. There is a top line that we're leaving behind, and that's what we tried to tell you in February. There was a significant top line that we were going to leave behind, if we were going to improve our bottom line.

And our next question comes from the line of Shannon Cross with Cross Research.

My first question is a sort of follow-on, if it's not profitable and it's going to be challenging, and I would assume that you're going to face pricing pressures next year, maybe even get your cost in order, I don't know, but why actually stay in the Digital Camera business at this point? And are there geographies that are actually profitable, so you're shifting there or segments? Or is this something where you need to actually just sort of reduce the overall cost structure, since I know you've already outsourced a lot of your manufacturing?

Yes, but there's a variety of things. Many of the things that you said are true. There are geographies where, yes, they are profitable. Then there are as well parts of the portfolio that are profitable, such as the video cameras as well. There is an important element of our presence in Digital Cameras that is very important for our IP strategy, And then as well it's an important part for some of our retailers although less and less. But it was a very important part for our -- it make us more important in front of the retailers when we're introducing our consumer inkjet. Today, the fact is consumer ink jet stands by itself, and we don't need the support of the presence of our digital cameras to have a strong presence with printers. But during all these years, the digital cameras was the entry car for us to have presence in retail. But first, the industry is in decline. So we're going to select the areas, the geographies and the products where we can make money and abandon the rest. If that's what you're saying, yes, that's what we're doing. And at the same time, the rest of the portfolio now can stand by itself, because it has the size and the presence to fight for shelf space without any problem.

And you'd mention that it's important for your IP strategy. I think a lot of the IP licenses you've signed are actually for prior patents. Are there sort of ongoing relationships that require you to continue to invest R&D in the digital camera space? Or is it more sort of historical?

No, there's nothing to do with historical, Shannon. This has to do that view it's a lot easier to claim damage when are in the business than when you're not.

That's fair. And with regard to the pricing increases, I clearly understand why you're doing it, given what's going on with commodity side. So what percent of your portfolio is exposed? Are there any long-term contracts that will take time for them, for the pricing to actually run through? What do you think your competitors are doing? What are you hearing out there? I know in the Entertainment Imaging side, you don't have a ton of competition, but what are you hearing from some of the others?

Well, I won't comment about competitors. As you can imagine, they can do whatever they want. But the price -- the cost of commodities has getting to a point that we don't -- our customers don't even fight it. So this is a very logical step and both in digital plates and in film products, and we're just starting to apply it and we will continue. I mean, this is just a way of doing business. There's nothing else to say. Shannon Cross - Weeden & Co., LP: Anyway, I understand. It's just that when you do face competition, if your competitors don't take their prices up, there's an opportunity for potentially losing market share. My last question is, you typically disclose some growth rates within your press release and your Qs, and I was curious, with Entertainment Film growth rates, digital camera growth rates, I'm sorry if I missed them, but do you think you could provide a little bit more color on sort of the segments in what you saw growing and what you saw under pressure?

Digital Camera's growth rate, I think Antonio actually disclosed it in the script. I think it was down 15%...

14%.

14%. And when you think about the Entertainment Imaging decline, it's in line with FPEG kind of decline. It's sort of a...

14%. It happens to be 14% too. I think we disclosed those. If you have any other questions, you can call us, but we disclosed those. Shannon Cross - Weeden & Co., LP: Just my last question is on the Commercial Inkjet business. You're spending a little bit more there. Is that because you're seeing increased demand? Can you be a little bit more specific? I know you said a little bit more in terms of services, but how should we think about the increased expenditures sort of rolling off as we go through the year?

Did you say Commercial Inkjet or Consumer Inkjet? Shannon Cross - Weeden & Co., LP: Yes, Commercial Inkjet, yes.

I think Ann went through the explanation. There are 2 factors that we expected that will be there, and they are. One is that the first installations we are building -- doing anything we can to make those installations to be incredibly successful So they will be the showcases that we can use for the future. And now, we have a bunch of them, a number of them, and there are some costs associated with that. And then, we still are making very few and, they are making, basically, they're made by hand. So there is a moment in time in which we will soon reach that point in which all of the sub-assemblies would be automized (sic) [automated], and then the prices go down dramatically, but you don't do that until you set the expectations and get everything right. This is a very typical, very common process with any new product, especially of this complexity. Those are the 2 elements. We'll not worry about it, which is we know that we have to go through this phase.

And our next question comes from the line of Richard Gardner with Citigroup. Richard Gardner - Citigroup Inc: A couple of questions. First of all, thank you for clarifying the growth rate in Consumer Inkjet, but I was hoping you could also talk about the pricing environment in Consumer Inkjet, especially given that Lexmark cited a much more promotional market in Consumer Inkjet on its call 2 days ago.

I did specify the 97% because of revenue report, Richard, for you. The pricing number, we're getting a lot of demand for our Consumer Inkjet Printers. And we expected that, that was going to happen because the business model is better known. We have a lot of customers that are very satisfy, and they tell to their friends. So this is building up, it's building up. So we're very pleased, and we were expecting significant growth, maybe, not, 97%. Honestly, maybe a little less than that, but we're obviously very happy with that. The pricing environment is very tough. It's very tough because the market is basically flat, so the incumbent obviously, they're acting very aggressively and the average selling price of the printers has gone down. With that, what we have to do is go down, too, but maintaining our price premium. This is what we did last year. This is what we will continue to do. At the end of the day, what matters to us is to keep business in this install base, and then get this Ink revenue that keeps growing beautifully year-over-year. And this is so very much in track for the 2012 positive EFO. But yes, the environment pricing is tough. It's competitive. Richard Gardner - Citigroup Inc: And then, well actually, just to stay on that point, could you talk about whether it's become materially tougher here during the past, say, 3 months, even than it was before?

I wouldn't say -- it's been hard from the beginning. Since we came with this new business model that was so dramatically different from the industry, the industry, as you would expect, reacted aggressively. This was a threat for the rest of the industry, and the industry reacted aggressively, more than anything else with a lot of prices and promotions and everything else. This has been our life since the very beginning, and I wouldn't say that it's harder than it was 2 years ago. Richard Gardner - Citigroup Inc: Okay, great. And then, I guess a question for Ann. Ann, you mentioned that you're not changing your $1 per troy ounce equals $10 million to $15 million in profit sensitivity for silver pricing. But just to be clear, if you do the simple math on the recent increases we've had in silver prices, it does suggest that FPEG'S profits would have been much worse this quarter than they were. So it does appear that the actions you're taking, the indexing, the price increases and so forth are materially changing that sensitivity. And I just wanted you to clarify that and, hopefully, get a little bit more detail on how to model that sensitivity going forward, given that it is so important for the portfolio.

I understand. As you can imagine, the silver price is changing rapidly. We just -- we've been announcing price increases. We've been working with our customers to get the indexing in place. And even as we were doing that, silver was continuing to change. And so, with one quarter behind us and a lot of quarters in front of us and not knowing exactly where silver price is going, it's probably not appropriate yet to change that sensitivity. But it does give you a feel for what it does to our cost structure, which is set. It continues to be the case, and you can see what we're trying to do with pricing to keep the profitability under control or mitigate the loss. Richard Gardner - Citigroup Inc: Okay and then, Ann, could you also just address very quickly, what is the change in your interest expense expectation this year based on the recent debt restructuring actions, refinancings that you've taken? You had said I think back in February $150 million net in interest expense for the year, how should we model that now, please?

So you should probably add approximately an additional $20 million on a full year basis. Obviously, this is 3/4 of it.

Our next question comes from the line of Mark Kaufman with Rafferty Capital Markets. Mark Kaufman - Rafferty Capital Markets, LLC: I've got 2 questions. My first is, you're at the beginning now of the Commercial Inkjet process, and I was wondering what the time is between getting the printer into a print shop and set up, educating the printshop workforce, et cetera, and so that it's to a point where you can actually report it in revenues? And where you think or where you might like that process to go on a timeline basis? As you said before, you're making sure, you're bringing out all the guns, basically, to make sure that everything is done perfectly. So that these are examples for the rest of the industry. And if you could give me an idea of that timeline and how you might see it shrinking as you commented before in the actual manufacture of those printers. And my other question was, I missed it, what was the growth of Consumer Inkjet Ink sales in the quarter?

The Consumer Inkjet was 85% growth. Mark Kaufman - Rafferty Capital Markets, LLC: That's what I thought I heard.

The Ink, 85%. When we install a Commercial Inkjet System now, from the beginning we start to sell consumables. So consumables they come immediately. As soon as the press is working, we get consumables immediately. Now the process of installation is complicated now, because you have to train people, too. This is a very different technology. It's complicated. It takes -- sometimes it replaces 3 or 4 or 5 or 6 of the other machines they have there. It's a process. So it will take -- it could take now even up to 4 months, to do this right. What would be ideal? I think with time this should be 1 to 2 months, and no more than that.

And we have a question from the line of Ulysses Yannas with Buckman Reed. Ulysses Yannas - Buckman & Reid: Based on the numbers that you gave us on your press release, it seems that sales of your inkjet increased from $25 million to $38 million, while your gross profit loss declined from $63 million to $43 million. This in terms leaves us with a decline in sales of various forms of business from $309 million to $292 million and an increase -- a decrease in gross profit from $75 million to $34 million. Can you give me some idea as to what extent the decline in profitability of the rest of the business was due to your decline in -- or your attempt to liquidate your camera inventory? And what happened to sales of the other components of the business, which is essentially kiosks and the Gallery?

Okay, so let me, Ulysses, I want to make sure I understand, you're talking about the year-over-year decline in gross profits within CDG? Ulysses Yannas - Buckman & Reid: Yes.

And so, you've made some statements about what you thought was the revenue for Consumer Inkjet, because we're not providing that level of detail. So I won't try and confirm or -- those numbers. But if you look at the gross profits for CDG, obviously, the biggest decline there was associated with the nonrecurring IP from last year. Ulysses Yannas - Buckman & Reid: That, I'm excluding.

Once you exclude that, then the next thing is, as we talk about kiosks, Consumer Inkjet became a bigger percentage of the overall revenue. And while their gross profit margins certainly improved because a bigger piece of their revenue and profits were coming from ink, as a particular product within that portfolio, the gross profit margins in Consumer Inkjet is lower than the rest of the portfolio. The other thing attacking the gross profits for CDG is, as Antonio talked about, is the fact that we had pricing pressures on digital cameras, in particular, as we were moving out the fourth quarter inventories. And we've talked about the fact that we're really driving that business toward maybe a smaller top line, but driving it towards profitability and some of the actions that we will be taking there that you will be seeing more of the results in the back half of the year. The other products in there, as Retail Systems Solutions and the Gallery, and they were kind of flat. There certainly was still some issues [indiscernible] as it relates to pricing pressures as we hit the last year of last quarter of the impact of Wal-Mart U.S. change. Does that help? Ulysses Yannas - Buckman & Reid: Yes, it does help. The other question, of course, is since your inventory for the quarter was up, despite a sharp decline in sales. Is this inventory concentrated in your Consumer Digital Group?

No, I wouldn't say the inventory is concentrated in Consumer Digital. As you know, we have an outsourced supply chain for Consumer Digital. And so, it's not the bigger piece of the inventory there. Ulysses Yannas - Buckman & Reid: So what part of the inventory is the one that really increased by that much?

I would say the inventory in GCG would be the largest piece of that increase. Ulysses Yannas - Buckman & Reid: Okay, then maybe I can ask another question. When do you expect inkjet sales to equal printer dollar sales?

You mean Inkjets Ink? Ulysses Yannas - Buckman & Reid: Ink will equal Printer in dollars.

We're getting very close to that point. What has happened this quarter is that our Printer growth grew extraordinarily, which is a great thing for the future. So we're not complaining about that. We... Ulysses Yannas - Buckman & Reid: It must have grown extraordinarily in units, but not in dollars, because, otherwise, how did the whole thing was up only 54% against inkjet sales of 85%.

As I said before, the average selling price of the inkjet printers have gone down over the years, and that was the competitive nature of this business, and we're still maintaining our price premium, but the base is lower. Nonetheless, the profitability of the business doesn't change because the profitability comes from the Ink, and the Ink is associated with the number of printers they serve in the process. Ulysses Yannas - Buckman & Reid: Finally, you were given a present by Mr. [John] Chambers of Cisco by eliminating Flip. You had mentioned years ago in an interview in the New York Times, if my memory serves me right, that you thought that the low end of the camera market would really be more or less move to cellphones. Do you think the same thing might happen to video cameras?

It's not the same. A lot of these video cameras are used for applications in sporty situation and environments that where they have to be very robust, and it's not the same. It's not the same. And by different people, it's not the same. Although some of the videos, obviously, will be done by the -- but now within this, this has a longer life and it has better margins and still is at the very beginning of the development of this category. Ulysses Yannas - Buckman & Reid: Presumably, you had a decent increase in sales in the first quarter of video cameras.

Yes, we grew. I don't have a number, but we've been growing share since we started with this program. So I don't have the numbers here. Ulysses Yannas - Buckman & Reid: So in essence, what we are saying, the second half of the year, when Flip inventories disappear, you should then have a significant increase in sales there, don't you?

I don't know what to say. I will -- I don't know what Cisco is going to do. I read what you read, but I'm not in a position to comment. But we've been gaining share over everybody, including them, again and again and again, and our plan is to continue to do that.

And we have a question from the line of Arun Seshadri with Crédit Suisse. Arun Seshadri - Credit Suisse: I just wanted to basically start with asking you about the purpose of your recent debt raise in the high-yield market. I just wanted to understand, you've given guidance that your cash flow, your overall cash, you expect it to remain flattish after restructuring. So what was the purpose for your recent raise of capital?

So yes. We did that capital raise. The credit markets were significantly improving, and we thought it was a good time to take advantage of that improvement and to raise some additional capital that would give us some flexibility as we continue to invest in the growth initiatives and drive the company to the sustainable digital profitable company we'd like to become. So it gives us some flexibility as we move through this major transformation, to have that little additional liquidity available to us.

I think as well we used that as a leverage for the negotiation for the revolver, which has worked very well for us. Arun Seshadri - Credit Suisse: Okay. So as far as the revolver is concerned, are you allowed to draw on that revolver to retire 2013 unsecured bonds?

Yes. Arun Seshadri - Credit Suisse: Is there anything inside your second-lien bonds covenants that will now not allow you to do that, meaning, can you, at this point, really draw on the revolver to pay off 2013?

Yes. Arun Seshadri - Credit Suisse: Yes?

Yes. Arun Seshadri - Credit Suisse: Okay. So the last thing I wanted to understand is then why don't you retire these 2013s early because that will lift a lot of people's concern regarding your near-term maturities. Is -- I mean how do you think about retiring those 2013s? are you not focused on it? Is it something for a future date?

I think for a future date. I think we may or may not. It's something that we will decide on, on the way. There is still a long time to go. We have time to think about it and find the best methodology to do it, if we decide to do it.

And ladies and gentlemen, this concludes the question-and-answer session. Mr. Perez, please continue.

Well, first of all, thank you all for joining the call. Again, I'm pleased with the traction that we have with the digital growth business. We have strong momentum going into the second quarter, and we expect to finish the year with a 40% aggregate growth for this business. As far as cash, we'll continue with the focus in cash, and we expect to finish the year with positive cash generation before restructuring. And again, thank you for attending the call.

Ladies and gentlemen, this concludes the First Quarter 2011 Sales and Earnings Conference Call. If you'd like to listen to a replay of today's conference, please dial 1 (800) 406-7325 and enter the access code of 4430195. Thank you for your participation. You may now disconnect.