Aggressive advertising and promotion across the range of Kodak consumer offerings supported increased sales of one-time-use cameras and digital services such as picture CD. We are especially pleased with the positive response to our marketing initiatives to boost sales of one-time-use cameras and black and white films among the critical 18 – 34 age demographic. Test marketing of black and white amateur film was so successful that we launched a national campaign targeted to young adults who want to experience the fun and unique benefits of black and white photography.

Photofinishing volumes in the U.S. were lower due to lower industry film sales. However, wholesale photofinisher acquisitions in Western Europe helped boost Kodak sales in that region. Consolidation of these operations will strengthen our print and processing services in that part of the world.

The rollout of Kodak Perfect Touch processing began in the fourth quarter and will continue into the second quarter of 2003. This high-volume, premium digital processing service scans film negatives and applies special software to automatically provide more vibrant color, richer detail and fewer dark shadows in pictures. In U.S. test markets for Perfect Touch processing, research showed that 74% of consumers surveyed noticed a dramatic difference in their pictures. Better yet, six of ten consumers indicated they would switch retailers in order to use Kodak Perfect Touch processing. After the service was launched throughout the Midwest, overnight premium photofinishing volumes increased more than 20%. A similar reception by European consumers greeted the rollout of the service —called Kodak Photo Perfect —in Austria, where 64% of those surveyed said they would be repeat users of the service.

Results on the professional photography front were mixed. While sales declined in professional markets for film and paper as the market evolves to digital formats, Kodak generated excitement and demand in the digital arena. The Kodak Professional DCS 14n digital camera provides a cost-effective way to capture ultra-high resolution pictures. Kodak also moved aggressively to implement the professional products and services workflow productivity solutions for professional laboratories and photographers.

Worldwide sales of origination and print film to the entertainment industry were flat. Origination film volume decreases were due primarily to economic factors impacting commercials and independent feature films, and were partially offset by an increase in print volumes. Even in the slow economy, motion pictures continue to be a major source of fun and entertainment for millions of people. U.S. moviegoers spent a record $9.3 billion on theater tickets in 2002. We're proud to note that 100% of the motion pictures nominated for major 2002 Academy Awards were shot on Kodak film stock. Introduction of second-generation, Kodak Vision2 motion picture film takes traditional film performance to a new level, and is receiving enthusiastic reception among cinematographers.