No question about it: 2001 was an extraordinary and difficult year for the nation, for the world and for nearly every business, including Kodak. The continuing worldwide economic slump, coupled with the tragic events of September 11, severely impacted industries important to our business, including travel, theme parks, lodging, advertising and entertainment.

Through these challenging times, we focused on strengthening Kodak’s value as an investment, maintaining our market share in key segments of our business and laying the groundwork for future growth. In the broad category of infoimaging—our strategic framework going forward—we’re driving the convergence of images and information beyond traditional boundaries, and into new image applications and business opportunities for Kodak.

While our revenues and earnings were down for the year, our successful drive to generate cash—including continuing, aggressive cost-reduction programs—produced a strong balance sheet and healthy dividend payouts. We maintained our full-year market share in the U.S. consumer film business and increased it slightly worldwide. We drove Kodak digital imaging to record revenues, with consumer-friendly products and services—including online and retail photo printing and the highly successful Kodak EasyShare camera launch—that are in the forefront of this burgeoning business.

We gained market share in our Health Imaging business, but pricing pressures and some operating issues led to margin declines. We moved quickly to put in place corrective measures that are returning that segment to its promising, profitable path.

Cash Management
Consistent with current economic reality, we have reduced our cost base and increased our focus on cash generation. On the cost front, we took a number of steps to reduce worldwide employment by about 9% and expect to see much of the resulting savings in our full-year 2002 results. We drove inventories down by 34 percent, or $581 million. We reduced receivables and continued our tight restraint on capital expenditures, with the latter decreasing 21% year-over-year.

All these actions contributed to a greatly strengthened cash position compared to a year earlier. Cash flow for 2001 was $373 million after paying dividends. Excluding a December 2001 accelerated dividend payment, cash flow was $504 million.