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Kodak to Use $6 Billion in Free Cash Flow to Fund Acquisitions, Growth

Press release from the issuing company

NEW YORK CITY, May 2 -- Eastman Kodak Company today reported on the progress made in pursuit of its digital products and services strategy and said it will build on that success with internal and external investments and acquisitions funded by at least $6 billion in free cash flow between 2001 and 2005. Driven by infoimaging the convergence of images and information technology Kodak sees ample room for growth in both its commercial and consumer businesses, especially as the economy rebounds. The opportunities created by the infoimaging industry will help the company capitalize on its strategy of expanding the market for digital products and services. The company also said it expects average annual revenue growth of 5 percent to 7 percent, as well as average annual earnings per-share growth of 5 percent to 7 percent, once the current economic downturn ends. The company's free cash flow will be used to strengthen those Kodak businesses with the strongest growth prospects and to fund growth-oriented acquisitions. Kodak also reiterated that it expects to earn $1.00 to $1.30 per share in the second quarter of 2001, reflecting lower consumer demand caused by the economic slowdown. "Kodak intends to take advantage of the economic slowdown to strengthen its market position and reduce its cost structure so that we are positioned for maximum benefit once the economy's growth accelerates," said Kodak Chairman and CEO Daniel A. Carp. "The completion of our manufacturing project in China, the less capital-intensive nature of digital products, and improved inventory management will provide Kodak the free cash flow to fund growth and make acquisitions. Kodak's planned acquisition of Ofoto is just one example of how the company is pursuing the new opportunities created by infoimaging." The planned purchase of Ofoto, which Kodak announced on Monday, is part of a broader effort to expand the mass market for consumer digital devices and services. Consistent with that plan, Kodak will narrow its focus in the consumer digital camera market to devices priced at less than $500, which is the segment where Kodak's brand is strongest. The plan will be supported by Kodak's new EasyShare digital camera system, which makes it easier than ever for consumers to upload pictures to computers for printing and sharing. Kodak's effort to license its intellectual property for both digital cameras and consumer online photo sharing also will help create the standards that will lead to the expansion of the market for digital products and services. In commercial markets, Kodak will pursue those opportunities that promise the highest potential for profitable growth. The company's commercial units currently account for about half of total sales and earnings and have made a successful transition to the digital age. "While the economic slowdown is crimping consumer spending, in no way does it deter Kodak from pursuing our strategy of using digital technologies to create a bigger picture business than exists today," Carp said. "The convergence of imaging and information technology will mean more opportunities for Kodak. "Our strategy is designed to generate growth more consistently and to ensure that Kodak makes good on the promises made to investors, customers and employees," Carp said. "With consistency comes value, and we intend to deliver both." 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 expectations for earnings and gross profit for second quarter 2001 and expectations for revenue growth, earnings per share growth and cash flow over the period 2001 to 2005, are forward-looking statements.