Feb 1, 2006

Kodak-Full Year Digital Sales Exceed Traditional Sales for the First Time

Press Release: ROCHESTER, N.Y., Jan. 30 — Eastman Kodak Company today reported that revenue rose 12% in the fourth quarter, led by a 45% increase in the sale of digital products and services. The performance includes strong demand for the market-leading offerings from the company’s consumer digital portfolio and the successful completion of the company’s acquisition program to support its Graphic Communications business. For all of 2005, digital sales represented 54% of total revenue, marking the first time in the company’s history that digital revenue exceeded traditional.

On the basis of generally accepted accounting principles in the U.S. (GAAP), the company reported a fourth-quarter loss of $52 million, or $0.18 per share. This largely stems from $283 million in after-tax restructuring charges, partially offset by the previously announced tax audit settlement between the company and the Internal Revenue Service that resulted in the reversal of certain tax accruals totaling $243 million.

For the fourth quarter of 2005:

* Sales totaled $4.197 billion, an increase of 12% from $3.759 billion in the fourth quarter of 2004. Digital revenue totaled $2.674 billion, a 45% increase from $1.850 billion. Traditional revenue totaled $1.514 billion, a 21% decline from $1.905 billion.

* The GAAP net loss was $52 million, or $0.18 per share, compared with a GAAP loss of $59 million, or $0.20 per share, in the year-ago period.

* The company’s fourth-quarter loss from continuing operations, before interest, other income, net, and income taxes was $162 million, compared with a loss of $236 million in the year-ago quarter.

* Digital earnings were $161 million, and were favorably impacted by a number of items, including a year-over-year increase in royalty income, which reflects the company’s continuing progress in the monetization of its intellectual property, as well as the favorable impact resulting from the company’s Graphic Communications Group acquisition program.

“Kodak is now a thriving digital company,” said Antonio M. Perez, Chairman and Chief Executive Officer, Eastman Kodak Company. “The fourth quarter marked the first time that we managed the company as it will be run in 2006, and the digital earnings performance was exceptional. And for all of 2005, we made tremendous progress on our digital transformation. We completed an aggressive acquisition program that established Kodak as a powerhouse in the graphic communications market, we strengthened our market position in consumer digital with several innovative new product introductions, and we made substantial progress on our goal of reducing our traditional manufacturing footprint, while benefiting from the strong cash flows available from that business. We enjoy a solid cash position, and we are determined to expand profit margins in the sizable digital businesses that we have assembled.”

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