Kodak Takes Action to Reduce Effect of Slowing Economy; Will Increase Cash Flow, Adopt Strict Spending Controls.

Business Editors

NEW YORK--(BUSINESS EDITORS)--Dec. 12, 2000

Eastman Kodak Company today said it will take aggressive action to increase cash flow, strengthen its balance sheet and impose strict spending controls in the face of a slowing economy that will have its primary effect on results in the second half of 2000 and the first half of 2001.

Kodak also said it expects to earn $0.65 to $0.75 per share in the fourth quarter of 2000, reflecting reduced consumer demand and inventory cutbacks by retailers; higher unit manufacturing costs as production declines; and a slower-than-expected recovery in Kodak Professional. For the full year, Kodak will earn $4.65 to $4.75 per share, a 6% to 8 % decline from 1999, caused mostly by an inability to offset the impact of a rising dollar.

"The slowing economy curtailed earnings growth in the second half of 2000 and will continue to do so in the first half of next year," said Kodak Chairman, President and CEO Daniel A. Carp. "The actions we're announcing today will help us manage the effects of the slowdown, which we expect will moderate in the second half of 2001. In no way do the economic conditions cause us to change our strategy of using digital technologies to create a bigger picture industry than exists today."

Kodak will take the following actions to increase cash flow and control spending:

- Cut capital spending by $200 million

- Reduce inventories by $200 million

- Significantly reduce SKUs

- Impose strict spending controls, including hiring limits

The outlook for slower growth, partly offset by aggressive spending controls, will result in per-share earnings next year in the range of $4.50 to $4.90. Per-share earnings in the first quarter of 2001 are expected to range from $0.50 to $0.60, with earnings for the balance of the year ranging from $4.00 to $4.30, based on an assumption of GDP growth of 2% to 2.5%.

Kodak said it expects sales and earnings to improve in the second half of 2001 as economic growth recovers. Sales in 2001 are expected to increase 4% to 6%, largely in the latter half of the year. Earnings also will benefit from easier comparisons against the second half of 2000, a reduced impact from exchange rates and spending controls.

As economic growth resumes, Kodak intends to build on its strategic successes in 2000, which include:

- Maintaining share in the U.S. and worldwide film markets

- Reaching profitability goals in China ahead of schedule, and

completing the manufacturing investment on schedule and on

budget

- Creating the Display business, with the intention of

commercializing the OLED technology in order to generate

profits beyond licensing

- Building up the consumer digital infrastructure, including

Internet photofinishing services through Print@Kodak , the

expansion of kodak.com, and the launch of Kodak Picture Center

Online at CVS.com

Kodak also plans to continue buying back shares at a pace of about $1 million a day during 2001, consistent with an effort to return the company's debt-to-capital ratio to about 39%, compared with about 49% at the end of this year. Kodak's board has authorized an additional $2 billion for stock repurchase over the next four years.

Certain statements in this press release 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 revenue growth and earnings expectations for fourth quarter 2000, first quarter 2001, and full year 2001 are forward-looking statements.

Actual results may differ from those expressed or implied in forward-looking statements. The forward-looking statements contained in this press release are subject to a number of risk factors, including: the realization of stronger U.S. economic growth in the second half of 2001; the ability of the Company to reduce inventories, improve receivables performance, and reduce capital expenditures; the inherent unpredictability of currency fluctuations and raw material costs; competitive actions, including pricing; the ability to reduce spending and realize operating efficiencies, including a significant reduction in SKU's; the ability to achieve planned improvements in Kodak Professional; the nature and pace of technology substitution; the ability of the Company to develop its business in emerging markets like China and India; general economic and business conditions; and other factors disclosed previously and from time to time in the Company's filings with the Securities and Exchange Commission.

Any forward-looking statements in this press release should be evaluated in light of these important risk factors.

Editor's Note: For additional information about Kodak, visit our web site on the Internet at: www.kodak.com/