KODAK MOVES AWAY FROM FILM

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Date: Monday July 25, 2005 10:38:00 am
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    Kodak Moves With Market – Away from Film

    Kodak Accelerates Digital Transformation Strategy: Digital Revenue Up 43%, Traditional Sources Drop 15%. Layoff Predictions Jump to 25,000.

    ROCHESTER, NY, July , 2005 – Eastman Kodak Company announced today an acceleration of its digital transformation, consistent with the company’s expressed goal of building a business model to achieve long-term success in digital markets.

    Expects $275-$325 Million Earnings from Digital
    The company also recommitted to the goals presented to investors In January: digital revenue growth in 2005 of approximately 36%, anddigital earnings from operations this year in a range of $275 million to $325 million. Kodak continues to expect net cash provided byoperating activities this year of $1.0 billion to $1.2 billion, whichcorresponds with investable cash flow of $400 million to $600 million.

    Layoffs Could Hit 25,000
    As part of the effort to accelerate its digital transformation and to respond to a faster-than-expected decline in consumer film sales, Kodak will extend the restructuring activity originally announced in January 2004, in which the company set plans to reduce employment worldwide by as many as 15,000 positions. The company now plans to increase the total employment reduction to a range of 22,500 to 25,000 positions, and to reduce its traditional manufacturing infrastructure to approximately $1 billion, compared with $2.9 billion in January 2004. When largely completed by the middle of 2007, these activities will result in a business model consistent with what is necessary to compete profitably in digital markets.

    Split Company
    “Kodak is a company with product portfolios that are proceeding ontwo very different tracks,” said Antonio M. Perez, Chief ExecutiveOfficer and President, Eastman Kodak Company. “As sales of ourtraditional consumer products and services decline faster than anticipated, we are moving more aggressively to reduce cost. At the
    same time, we continue to make significant progress growing the sales and earnings of our digital portfolio. Second-quarter digital sales, for example, increased 43%, and we made significant progress in improving our digital earnings.
    “In 24 months, as a result of the actions announced today,we will bring to an effective end the significant restructuring charges associated with the transformation and essentially complete the transition to our digital business model,” Perez said. “In that time,we intend to improve upon the success we are enjoying in digital markets. In June, for example, our digital revenue exceeded our traditional revenue on a monthly basis for the first time ever, paving the way for us to achieve the full-year goal of having digital revenue surpass traditional revenue. Kodak is a different company that’s becoming a stronger digital player each day.”

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