2001 Business / Market Highlights

Photography Group U.S. industry film sales declined steadily through the first three quarters, but at a slower rate in the fourth. Our U.S. consumer film share for the full year held steady for the fourth consecutive year and worldwide share increased slightly. We saw good growth in many of our newer online and other digital services and we introduced several exciting new products in traditional photography.

Consumer use of our Kodak picture maker kiosks grew at double-digit rates. Our focus now is on creating new channels and increasing usage to an even higher level to drive output media.

In U.S. wholesale photofinishing, Qualex scanning rates have shown steady growth despite the economic downturn. More consumers are enjoying the advantages of receiving film images in digital form. The principal drivers are Kodak picture CD and our retail online partners. The average penetration rate for the number of rolls of film scanned grew from 4.1% in the first quarter to 6.7% in just the second half of the year. The number of images scanned showed a fourth-quarter, year-over-year increase of 49%. Our acquisition of wholesale photofinishing operations in Europe will allow us to expand this capability outside the U.S. photo market, which is the most digitally advanced. In addition, Ofoto is off and running, with our customer base growing by 12% a month.

In emerging markets, we continued to expand the number of outlets for Kodak consumer products. There are now more than 14,000 Kodak Express photo stores in Greater Asia, including China. In addition, we completed launching a new concept called “Photoshops” in India. More than 4,300 retail “Photoshops” were in place in key cities by year-end 2001, expanding the availability and distribution of Kodak consumer products.

Turning to our consumer digital imaging product offerings, our new line of EasyShare digital cameras has drawn a great response from consumers. The cameras continue to receive rave reviews and our docking station has truly brought “You Press the Button, We Do the Rest” simplicity to the art of digital photography.

In digital output, Kodak inkjet photo papers continue to attract consumers and maintain a high market share. In addition to continued growth in digital printing services through Ofoto, we see the launch of services from our Phogenix joint venture helping to drive even greater popularity for printing digital photo files.