Don Flick, Director, Investor Relations Antonio Perez, Chairman, Chief Executive Officer Bob Brust, Chief Financial Officer, Executive Vice President

Matt Troy, Citigroup Shannon Cross, Cross Research Jay Vleeschhouwer, Merrill Lynch Laura Starr, Equinox Capital Management Sam Doctor, JP Morgan Carol Sabbagha, Lehman Brothers Luke Williams, Bertco Advisors Joan Lappin, Gramercy Capital Hank Wines, Yankon Securities Ulysses Yannas, Buckman, Buckman & Reid Adam Camorra, Camorra Capital Don Flick, Director, Investor Relations: Good afternoon. I'm Don Flick, the Director of Investor Relations at Eastman Kodak. I'd like to welcome you all to our meeting here this afternoon and I would also like to extend a greeting to those who are joining us via our webcast and teleconference. And as per my custom I would take this moment to invite you all to take your cell phones and other electronic devices and either turn them off or set them on mute if you wouldn't mind. And then just a few housekeeping details to dispense with. Of course, we are making forward-looking statements in the course of today's meeting and these are subject to important risk factors. These are detailed on the Safe Harbor statement that's included in your handout package and of course in the webcast that's being put out today. And in the same sense we also use some non-GAAP metrics in the course of the conversation. Because these are important metrics by which management operates the business, but in each and every case the non-GAAP metric is reconciled to its closest GAAP equivalent and that's done both in the material attached at the end of the presentation deck today and on the website for those of you who are following via the webcast this morning. So now, I would like to introduce Antonio Perez, Kodak's Chairman and CEO. Antonio Perez, Chairman, Chief Executive Officer: Thank you, Don, and good morning. So I will introduce the meeting and give you my thoughts about 2005. I will get Bob Brust here and we will go through the results of the Q4 and the full year and then as well our forecast, our outlook for 2006. I'll come back and I'll give you my own perspective about next year and then we will go into Q&A. Now, if you look at the overall company in 2005, you look at the results and you look at the positioning of the Company, by any measure that I can find, 2005 was an extraordinary year for Kodak and in my view we make phenomenal progress in our transition. I'm especially pleased with the last four months of the year. The last four months of the year was crucial for several reasons. Among them represented 40% of our digital revenue and more than 100% of our digital earnings and the Company deliver on those. In going further than that, for me the Q4 was the most significant of the four quarters of the year because the Q4 is the first time that I have been able to have the structure in the company and the management team the way it is going to be run in 2006. We had GCG completed, we had the new restructure of the consumer groups into digital and traditional and we have recovered from some of the issues that we had in health at the beginning of the year. So that is the Company that we going to run in 2006 and the fourth quarter was an excellent quarter, a phenomenal quarter in any sense, and that is the Company that we going to run in 2006. And it was excellent both in digital revenue as well as in digital earnings. So in fact in the fourth quarter we grew ourselves in digital by 45% versus last year. Our digital earnings were $161 million. They compare on the same terms with 63 million the year before. A very significant increase. And we exceeded our cash goal. On top of that, we completed the acquisition of GCG and it was very well received by the market. I had a test of that by talking to customers. Obviously about as well, looking at the orders that we got in the fourth quarter. It was a difficult year for the health group and I will talk about this morning in a minute but the second part of the year was much better in the digital side of the business than the first half. In Q4, was another good recovery from the bad first and second quarter that we had in health. In fact, when you look at the digital earnings of the health group, the second half of the year was 22% higher than the first half of the year. Then I'll talk more about that in a minute. Now for the consumer groups we had for the digital part of our consumer business we had an incredible Christmas. And every single category where we are participating I will give you numbers later. In the consumer, traditional business is finally is running the managed per cash business to perfection. I'm very proud of that team. It's very hard to manage a business that's in decline. They doing a superb job dealing with the risk structuring and at the same time managing that valuable business for cash. Overall the whole company, if you look at this company today and you look at this company a year ago, the operational discipline of the Company has changed dramatically. When you look through the numbers, the basic operations of this company and you look at the way we managed inventory, we managed account receivables you will see that it is a phenomenal difference from last year and then obviously the cash performance was excellent and as you know that was the first goal, the most important goal we had for the year. So if that was the quarter, for the year for me 2005 was a pivotal year and actually a year that marks an inflection in our transition. Not only this is the first year in the history of the Company when you take the whole year that the digital revenue was larger than the traditional revenue, but we have positioned the Company for very strong success in 2006, and I will make my case for that during the next slides. Starting right now. We have a group of $3 billion in GCG that we didn't have a year ago and this group is going to return immediate and sustainable profit growth from now on. They already performed very well in the fourth quarter and you will see them performing very well during next year, starting in the first quarter slowly and getting later in the year with very high performance. We achieved a critical mass, a market power, a market position in the key categories of our consumer business. Let me give you numbers. The digital cameras grew 30% in a year where the industry was slowing down so we grew a lot of market share. We don't have the numbers but I'm sure we grew share. The home printers we grew 57% year-over-year. Within that 57%, the print docks actually grew 92 or 95%, I'm not sure about the number. I think it's 95%. Kiosk continue with a growth, 37% year-over-year and the Kodak Gallery grew 45% in revenue year-over-year. For me what this means is that installed base of the whole system grew very significantly this year and for me this means money. Money coming to us soon. Because the more Kodak digital cameras you have in the market, the more files that you have that will end up being printed in a larger number of printers in a larger number of Kiosks that we have all over the world. And the more cameras we have in the installed base, the more subscribers we are going to have to our Kodak gallery. The more cameras we have, the more CMOS sensors we are going to sell, so on and so forth. We look at this as a system and I think the system has reached a critical mass that is going to set us in a great position to be profitable for the first time this year. The consumer digital group which has been losing money in this company up until now will start 2006 as the first year where they are going to be making money and this is exponential. Now obviously I'm not happy with the results of the health group. So let me take you through that. First of all, our digital, our operational digital earnings in fact that would have achieved the goal that we had at the beginning of the year if it wasn't for the bad year we had in health, in the year it started badly in the first quarter, you probably remember we have some quality issues with CR. We've solved those issues in the second quarter and then we recover in the third and the fourth. But this is a very important P&L. We have very high margins with CR. And that very bad three, four, five months set us back for the year. DR, which we introduced in the fourth quarter had excellent results but in the fourth quarter and as you remember, too, probably, I did say that we were late for about three months introducing DR, and that as well did not help us. Then on top of that, HCIS, HCIS started out slowly. We had a very bad six months as you probably recall. We took action and we had actually a very strong second half of the year, but the combination of those three P&Ls not doing what we were hoping for them to do didn't allow us to compensate for the decline and the DryView laser printer business, which declined as expected and is part of our digital revenues and profits. Now when you look at end of the year you will see that actually digital capture which is a combination of CR and DR actually ended up doing relatively well for the year. They grew 15%, which is excellent but it wasn't as good as we had it planned for the year. And HCIS was a very strong performance in the latter part of the year, actually grew 39% as well they recovered somehow but it was not the plan that we had in mind when we started the year. Now the action that we took after the, in the middle of the second quarter was look at the root cause of what happened in the health group, we decided to reorganize the group and organize the group in verticals the way it has been working in the fourth quarter with the intention of giving more responsibility to the right people and as well increase the visibility of this issue so they can be dealt with earlier. One of the problems we had is that it took us too long to react to those things. Now moving to the direction of business, the managed for cash business model, as I said before, is starting to work beautifully well now. It took us a while to organize that, this was a company that was not managing like that for many years for obviously very good reasons and it took us time to organize the team and put the processes in place so worldwide we can take advantage of a very valuable business that is in decline, but if it is managed, the way it's been managed in the last six months of this year will still produce a lot of cash for us in the years to come which is the objective that we have. And in fact, halfway through the year we decided to spend $140 million more in restructuring, more than we had planned at the beginning of the year because we saw the possibilities that we had in cash generation for the year. We thought that we could cover out that 140 more than the plan and still beat the number that we had for the year. Bob will take you through these numbers later. Which bring me to the liquidity question. We closed our debt agreements as you know and we build up a very strong cash position for the year. Stronger than we actually had in plan for the year. So for me overall this is an excellent year. I think it's an excellent year for the Company and especially because what we have done in the second half and in the fourth quarter which gives me a lot of confidence for 2006. So the results are there. First half soft, second half strong. The summary is we build a very strong digital company, large at this point of time. That has the size and the structure and the market position to be ready to exploit the digital business model including everything, including our instruments, including our services, including our consumables, to increase the operating margins starting this year, which is going to be the topic of the second part of my presentation after you listen to Bob. Bob? Bob Brust, Chief Financial Officer, Executive Vice President: Thank you, Antonio. And good to see everybody again and thanks for coming and we will try to run by, a little discussion on the metrics for this year, talk a little bit about the '05 results, a little more color on it and the '06 plan, and some key messages. Early this time last year we said we were going to go and concentrate on three metrics, digital revenue growth, digital earnings, and cash and we still think they are the right things to focus on as we go through maybe another four to six quarters with heavy restructuring going on in the Company and very hard to get clean results because of all of this restructuring and valuation allowances and all the stuff you heard about this year from us. We did have some good progress last year in '05. We will talk about that and we are off with good momentum in '06. In the middle of the year, we accelerated the transformation and the restructuring of the Company and we discontinued guidance and we said we were going to a GAAP only basis which we will only be reporting GAAP measures going forward. But in '05 we had some of both and our objectives were based on operationally and ended up on GAAP so I'm going to try to transit that for you as we go through '05 and then in '06 we will just be talking about GAAP. So last year we said we would, digital revenue growth the target was 36% growth. EFO on an operating basis was 275 to 325 and we were going to try to get investable cash flow of 4 to $600 million. Remember, this investable cash flow we, our cash flow, our earnings, and our restructuring cash outflow are not too far apart. We have to work a lot of ways to get cash flow into the Company. On a revenue basis, digital revenue, it grew 40% through the year. For the year the old DFIS business, which has since been split grew about 29% and that was driven by digital capture, home printing, and Kiosk. Our GCG business was up 131% and that obviously was driven by the acquisitions of Creo and the consolidation of KPG the first of April and Creo June 13. And our health business as Antonio said was, did not have a great year. Had a pretty sharp decline in digital output. Just barely offset by our IT business, digital capture, and services. The earnings goal for the year, we had a midpoint of 300 million in the 257 and 325. We ended up about 202 on that basis off about 100 million. Virtually all in health. As Antonio said, we reported a GAAP number of 118 and to get from the 202 to 118 are some one timer that normally wouldn't be in operating income. Purchase accounting for both Creo and KPG, the in-process R&D write-offs, we had some allocation changes as you brought those companies into the Company and the asset we shortened the asset useful lives to in the second two quarters of the year as you know. So on that same kind of basis we missed it by about $100 million and again, that was all in health. Cash we started out the year saying 4 to 600 million of investable cash. When we met you in September we knew we were going to spend 140, 150 million more in restructuring and we also knew there was a little bit of pressure on earnings and so we lowered that number from 4 to 600 million to 450. We said in there was a couple 2 or $300 million from sales of properties and IP and stuff, and all of that happened and the other thing was everything happened well. It's one of those, the old, for you older folks, the old A team, it's great to see a plan come together but virtually everything worked. And so our goal was to take inventories down 500 million, we took them down 510 million. Receivables, bringing all these companies in we beat that by $85 million. We constrained our restructuring by about 25 instead of 625 it was 600 and we didn't delay stuff, we just made it more efficient. We sold more real estate than we thought by $20 million as we restructure the traditional businesses. It's for sale. We don't need those assets, we will sell them as quickly as we can. We did accelerate our depreciation by shortening useful lives. We did spend a little more on CapEx than we thought. When we got comfortable with this there was a couple of projects that we put in that was mostly equipment for revenue this year. So we let that go and then we had about ten other things that was in the other category so we ended up with 728 million, which I thought was pretty good. Another way of looking at this, the Company covered restructuring, if you take the restructuring back out we really only would have generated about $1.3 billion of cash, pay 600 million for the restructuring and end up with 728. The Company my conclusion is good access to liquidity. It's important for a noninvestment grade company, we can't get commercial paper now and with the high seasonality of the Company, this is a very back end loaded company, being a digital company and we will talk about that a little bit more again, in the earning's. We needed good liquidity so we started this year with a cash balance of $1.7 billion on the books. We have a $1 billion undrawn line of credit that we negotiated in the fall. And we have a $500 million delayed draw option which expires June 15, which we're not going to use now because of the good cash balances, because we are planning to draw down debt this year and we have some small lines of credit around the world that are uncommitted. So we're in good shape liquidity-wise. I keep pushing these buttons the wrong way. If you look at the whole year, our revenue grew from $13.5 billion to $14.3 billion, which was 6%. In 20004 our digital businesses grew 39%. We had some acquisitions back then. Heidelberg, we had NexPress and we had Versamark. This year we grew 40%. Digital business is now 54% of the Company last year and will be much higher this year. Our traditional business declined 11% in '04, declined 18% in '05, and it continues to rapidly shrink, it is now 46% of the Company. Almost 40% of where revenue occurred in the last four months as Antonio said we have become very back end loaded and the revenues did grow about 6%. In the fourth quarter report you read this morning revenues were about $4.2 billion, up 12%. There is a big gap now as we go through this restructuring, a lot of the, all of the depreciation, accelerated depreciation and asset write-up, a lot of it ends up in COGS, in GAAP and gross profit. So we had a 2% drop in gross profit. Part of that is selling more digital equipment, which has lower margins than the film it's replacing but a lot of it is the accelerated depreciation and asset write-offs. The low EFO was worse, last year in '04 we booked the Sun settlement which was 92 million positive and that's most of the 105 that we dropped there and so EPS was about flat both years. The restructuring was a little less in the fourth quarter, that varies by quarter. For the year it was about $1.1 billion. The total year was up about 6%, we just went through that, $14.3 billion. Again, gross profit was off sharply. We booked 1.1 billion in restructuring and about 700 million shows here and the rest of it is up in there and that's why that's off so much. We had a big loss last year and we will talk about that in a minute of $4.76. And that all occurred in the third quarter. It was a $1 billion valuation write-off that you all saw us do in the third quarter. And it was evaluating the deferred taxes that's down, they're not gone, we just put a valuation allowance. So we ended up about $0.50 off the first two quarters, $0.20 negative here and it was a big thing from that valuation allowance. Probably, that won't reoccur this year we hope. But as we go through this restructuring that's part of the volatility of all this heavy restructuring. That is the restructuring totals. We spent 900 million in 2004. 1.1 billion in 2005. I know a lot of your models we said it would be about 3 billion for the period but it's going to be higher than that. I would expect 1.2, 1.3 billion this year of restructuring as we keep understanding more and more what we are doing as we move ahead in this. The cash payments last year was 460 million and was exactly 600 million in '05. I'm expecting around 650 this year for cash payments for restructuring. Last year at this time I remember leaning against the podium over there and talking about we were going to have to report two material weaknesses, I think we were one of the first major companies to report that and then during this summer we had an error anda restructuring over in the U.K. which was because of the very low materiality we now have because we are not earning much money, was another material weakness. We are in the process of remediating all of those. There is no indication right now that those remediation plans aren't on track. We won't know the final outcome until February, late in February and we will put the results of that in our 10-K but right now the plan seem to be on track. Going to 2006, the transformation is going to continue to progress. We have a lot of work to do this year. I would say there's four to six heavy quarters that are going on this thing. And we will show you a little bit about that in a few minutes. During, when we were here in September we told you we are changing the DFIS business and splitting between the consumer digital and the traditional and Antonio talked about that and we will show you that in a minute. We decided to discontinue accounting for LIFO. Some of you younger folks might not realize when that was put in years and years ago and the inflation thing and becoming more and more meaningless for Kodak. Many of our new businesses are not on LIFO and as we shrink the old manufacturing business, LIFO is not material so we are discontinuing that as of '06. And we, the new subsidiaries we purchased last year, Creo and KPG we now put those into the parent company and so they are picking up more of the corporate allocation and that will lower the digital earnings as reported as we do a pro forma going forward. The new segment structure, FPG is our film and photo finishing group and that has all those old traditional consumer businesses in it, entertainment imaging, aerial imaging, consumer output, pro output, and film, and photo processing. PDG is the new consumer digital business. Digital capture, home printing, HS systems, sensor solutions, the gallery, and our Kiosk businesses is all in that business. The health business hasn't changed. That's kind of virtually unchanged from where we used to report it and GCG now is all, that's the conglomeration of the acquisitions now as Antonio said in the fourth quarter this whole business is up and operating. This is how we are going to report operations starting in April as we move through and we will report digital earnings on these segments beginning with the first quarter. Again, we have to go through the pro forma accounting. The 118 of digital earnings that we ended the year with, we add a little bit for the structural changes. LIFO goes away which is recast through operations for several years and that takes 12 million out. And then our digital earnings will be hurt by 27 million because we will pick up more of the Corporates assesses so that just increases traditional earnings, no change for the Company. So as we look at the 2006 plan. This our key measurement, we expect revenue to increase by 16 to 22% over this year and we will show you that by little segments in a minute. Digital earnings 350 to 450. Consider that thing as several things going on in here. In the 86 we talked about we absorbed a lot of things that won't recur this year. A lot of the things in consolidating GCG. In GCG they are working on 70 or $80 million of integration savings this year, which helped that. We will talk about the growth in the different segments in a minute. In investable cash flow. Again, a target of 4 to $600 million. This year looks very much like last year did. Our earnings will be by and large taken up by the restructuring cash outflows. So we will be working hard on the, much the same things we did this year and we think we can get 4 to 600 million in investable cash flow. This should be the last year of that. Next year the restructuring should be beyond the decline and the earnings should be going up. Again, we have a small change with our structural changes in digital revenue. We recorded 7.7 on a pro forma basis it would go back to 7.4. So as we look at the segments '05 to '06, our consumer digital business we're forecasting a growth of 16 to 17% and our health group 9 to 11% as the IT work and the digital, and the DR start to offset some of the decline and DO and GCG still getting helped by the acquisition, a very strong 28 to 30% growth this year. One of the things that is becoming apparent as we put this digital company together is it's very seasonal. It's very back end loaded. And last year as you look at our earnings, our digital earnings on a GAAP basis were 118, 161 of that was earned in the fourth quarter. So we are back loaded. And it's heavily the consumer digital business, the last four months of the year, September to December, is where a lot of that output goes, it's Christmas oriented, holiday oriented and that probably won't change much. Our health business is more or less distributed a little bit back end loaded but more or less flattish during the year first half, second half. And our graphic communications business, which is rapidly becoming a big part of the Company is also back end loaded. Things like scanners and stuff like that tend to go out at the end of the year, plus they're doing all of their integration this year now that they have those businesses all together and there is $80 million of integration savings we think are going to occur this year and they will grow as the year goes on. So we are going to have another, I think year not quite as back end loaded as last year because the acquisitions are here, but it's going to be heavily back end loaded. So you should look for that same kind of thing, a very slow start and a very strong finish as we move through this year. This is the consumer digital, the consumer digital imaging group. The EFO this year on a pro forma basis still had a loss in it. Pretty good loss and we expect it to become profitable on a full year basis on GAAP, we think there is going to be very strong leveraging of the cost structure, the platforms, we're going to continue to go after royalties and the infrastructure as we find the go to market models and that business now has the scale and the size to start getting some real cost reduction out of platforms and infrastructure. We had a lot of, we should get much more of the media, paper and stuff like that because the output was strong. Sold a lot kiosks and printers and stuff this year. So this growth is about half of our EF growth, not quite, but about half of the EF growth. From '05 to '06. The health group, Antonio talked about that. We had a large decline in our digital output business. HCIS got very strong near the end of the year. It was much later than we envisioned. We thought it would be much more helpful last year but it looks like it's going to be in much better shape this year and our digital capture margins are improving. That's a very, very modest improvement. The downturn should be arrested and we are expecting a very modest improvement here. Most of the rest of the improvement is GCG. The integration is going well. Everything we see that's a very big success. If you were here in September you remember Jeff Jacobson got up and talked about the integration he is in charge of that, the 70 to 80 million. That looks like that's in very good shape. So we expect a strong performance from this group during this year and about half of that earnings growth comes out of GCG. Little bit on cost, we have been doing a lot of this manufacturing downsizing in the traditional business. It's going to be a big year this year, but most of that should be done in '07. We are working that down. In September I told you about a 3 or $4 billion business we think that will be kind of stable for a few years. In that stable business would be entertainment imaging, x-ray films for health imaging, and color paper. And some films, regular films that are left over. But we were pulling that infrastructure down under $1 billion asset value and that's where we are heading toward, to be able to approve this kind of a product which we think will be stable for a few years and when it goes away we will continue to downsize that. But that's where we were aiming. Each of the businesses now is doing a segment go to market models. We had this big huge go to market model for the old traditional business and now we are customizing that for consumer digital, for GCG, and all of these other businesses and that's going to be complete by the end of this year and we will take out SG&A costs as we get that finished and you will see the full impact of that next year. We continue to work on our corporate cost. We have been pulling those down. We are going to wrap that corporate service part around it, whatever those four businesses end up on their segment. And that should be completed by the middle of next year. So when we look at our SG&A costs, they were 18.6% last year. We think they will go down by 1 to 2 points the next few years as we move toward our ultimate digital model that we showed you before. I would say about a percentage will come out this year and that will accelerate as we go forward and continue to do those things which I talked about up there. Investable cash. Again, I think coming into this year feels much like coming into last year. Got a lot of work to do. We do have the opportunity in working capital still. We took $500 million out of inventory last year and it's got to be at least 2 or 300 million more or maybe more than that we can get this year. Our receivable. We brought in some components that are not as efficient at receivable collections as we are, have higher past dues. We got some of that in the last part of last year, we should be able to get some pretty good work out of the receivables. We will be monetizing assets. As soon as we restructure something it becomes available and is ready to sell, we will sell it. Any assets we do not need will be monetized. Those end up being pluses and minuses on the income statement but it's cash we are after. So even if it's going to take a loss to sell it, we will sell it to get the cash. We will just book the lost. Restructuring this year around $615 million on the cash. About a 1.2 billion or 1.3 billion in total and the rest being non-cash items. We watch that very carefully. We look at that every week and we make sure that we are not spending $1 inefficiently on that large number. We are going to start pulling debt down this year. Our plan is, I will show you a debt schedule in a minute. To reduce debt by about $800 million and become a, draw that back down as our financial health continues to improve. We have no significant acquisitions are planned obviously and there's no change in our dividend policy. This is our debt repayment schedule. We have $819 million of debt due this year. It's our intention to pay that. And then after we get through this year the debt certainly is not a burden and we may accelerate repaying that depending on our future financial condition. But in '07, there is virtually nothing, $7 million and then there is a little bit in '08. And so we just get through this year, our debt is in good shape and again, we may try to pull some of that forward. We started this year with a 1.7 billion in cash. It's actually 1.665 billion. We are going to try to generate investable cash of about 500 million this year. We are going to repay debt of about 800 million and so I would have guessed the cash balance at the end of this year somewhere between 1.3 billion and 1.5 billion. Our goal is to keep that cash balance above $1 billion. Well, we don't have access to commercial paper to go through the seasonality of the business. As you know, when we negotiated the new lines of credit and new debt in October, we were put under covenants for the first time because we are not investment grade and a lot of people were worried about how we were doing in those covenants at the end of the year. One covenant is debt to EBITDA and we had to have, it had to be less than 475 and it ended up 280. So way below the covenant there and the other covenant is EBITDA to interest which had to be greater than 3 and it ends up being 640. So we will watch this closely. We will watch this every month. We will make absolutely sure we aren't getting close to violating those covenants. But as you can see there is adequate headroom under those and we don't look at that as any big danger and we'll continue to report to you how we are doing on that. Some other things on looking ahead below EFO, interest costs will go up this year. We have higher debt. If we repay it down because of our noninvestment grade we have little bit higher interest rate so interest costs will go up. As we monetize and sell the assets, it's hard to determine when this is going to happen. Because they have a for sale sign on them and two, whether we're going to get a gain or a loss. Again, we are only after the cash there, below EFO, we are going to record whether it's a gain or a loss and we will just tell you what that is every quarter. Tax rate. With everything that's going on in the Company with all of this restructuring, tax rate is almost impossible to calculate. With the valuation allowance last year. Our GAAP effective tax rate was minus 92% last year. So we are going to have something like that this year and it's, we will keep telling you every quarter as we go through what it is but it is not meaningful to forecast it because we can't get all this restructuring exactly lined up how it's going to happen. So kind of the key messages from me is much of the transition will be complete this year. We will really be close to the end, maybe a quarter or two more. And we will have this thing pretty well stabilized. The EFO growth from digital is accelerating and at 400 million is starting to become a sizable number. As you go into '07 and restructuring starts to fall away we can now generate cash the old fashioned way by those earnings. Our cash position should be stable. It is stable. I don't see a changing much between now and the end of the year. Even if paying off $800 million of debt and the debt reduction will begin now and we hope to be long term debt repayers than incurring any more debt. So that's all I had to say on this thing. I'm going to turn it back over to Antonio. Antonio Perez, Chairman, Chief Executive Officer: Thank you, Bob. So I'm assuming that we have some credibility as far as cash generation and probably significant credibility, I hope in digital revenue growth. So I'm going to spend most of the time in this part of the presentation talking about digital earnings and why we put that number on that chart of 350 to 450. First of all, the focus is moving for very good reasons and I will take you through that through our logic, and through our rationale. From share of market to share of profit, when we say that we want to be number one and number two in any particular market, we want to be number one or number two of the share of profit that we can extract from that segment. Not necessarily only share of market in units. This is the purpose. Now, of course, you cannot get to a share of profit without a decent share of market as far as units is concerned. And because of that, during the first two years of this four year transformation, the goals were set in that particular order. Number one was cash. Most important theme for this transition as you can imagine with all of these payments, all these expenses that we have to go through, through the transformation. Number two was to building, build a digital business of enough size. And we did have to sacrifice in many cases the earnings in order to get the size and the market share that we needed to get. Now we have built a very significant business now in the digital business. I took you through the growth during last year and the year before. Now what's going to happen in the second two years is first are going to grow out the cash the same way. Cash continues to be the number one, it's the most important thing during this transition. Probably ever anyway, but certainly in this transition we will continue to do that and we know how to do that. The second we are going to subordinate digital revenue growth to digital earnings growth. Don't get me wrong. We are still going to go for a growth of 16 to 22% in revenue growth and this is the opportunity to go for earnings growth. Let me take you through the case. The size of the digital business influences tremendously your ability to generate earnings with that business. Let me give you example. The size of DCG helps to drive not only revenue but it helps to lower the cost of the business. The R&D investment which is large. This leverage is across a lot of businesses. And that larger cost per dollar of sales. Your influence with your customers is a lot better, your influence with your suppliers is a lot better. You can get better deals with your suppliers, you can get better deals with your customers, with your distributors, with your partners. A good example, I talked to you about the revenue growth successes that we had both in some cases in health, digital capture and HCIS as well as the consumer digital group. Let me give you some examples on GCG. NexPress grew this year 82% in revenue. Better than we thought. I can assure you the sum of that was because of the synergy created and the influence that we have obtained by building this big organization called GCG. In fact, because of that growth, 82% we expect a lot of consumables coming from that business next year and because of that last number of consumables that was more than we expected in the past we are actually planning to end up the year with a round rate of breaking even, or of positive for the business which is earlier than we ever thought when we bought the Company. A lot of that has happened because of the influence of a larger, more powerful, more compelling, organization called GCG. Same thing in the consumer business except that even bigger. I took you before through some of the effects in our P&L of having a large number of cameras out there. And I get this question from you very often. Why are you in the digital camera business? That's not a good business. Nobody makes money on that business. I get that question often. First of all we are not in the digital camera business. We are in the digital capture business. The way we define that business is that includes our CMOS sensors. This an initiative we started two years ago. We came with the first two sensors a few months ago. We are right at the beginning of that business. Includes CMOS sensors, includes image science. Includes royalties from our IP deals and includes digital cameras and all the devices that will become digital capture devices. You have to put all those things together to look at the, at our ability to make money with the digital capture business. By the way, the investment in R&D that we've done in the last 50 years affects each one of those elements. You can't really separate those. The same IP that goes into image science is supplied to the CMOS sensors, is supplied to the IP royalties, is applied to the digital cameras, et cetera, et cetera. And again, I am going to go back to the same notion that I told you before. The number of cameras in the market share of cameras and the shelf space that we have helps with a lot of things. First, with the number of CMOS sensors that we are going to sell into our own cameras. And that we are planning to sell to any of the cameras that are interested in buying good CMOS sensors that we are going to produce. Of course, because we produce digital sensors to our own cameras which is a large number of cameras is going to allow us to create a low cost image sensor that then we can sell into many other devices such as the cell phones and that is why we are in interrupting the deal with Motorola which we are going to try to supply to them for ten years to come with a lot of CMOS sensors. You have to link all those things together. Royalties. Because we have a large number of cameras out there a ability to negotiate IP deals is much stronger than it would be if we wouldn't have any camera in the market. So on and so forth. So when you look at all, then something else. When you have a large business in cameras, which we didn't have few years ago, three or four years ago, at that time we used to design product. That's all you can do. You only going to sell so few so you have to design product. Last year we had been working and I talked to you about this two years ago. We've been starting to design platforms. If you look into our cameras today you will find that some of the key elements of the camera, long lived components, the expensive components they becoming similar in a large number of cameras. That allows us to get a better price for those components, to lower the risk of that inventory, to lower the risk of distribution. And by the way, because they are designed in platforms allows you to come with products a lot faster with hardly any cost. With very little cost. All of that comes from the fact that we have been able to create a large digital business. In many ways time to volume here is time to money. You have to get to that point to be able to exploit the business case. To the point when you combine all of these elements, both in GCG and in the consumer business, they are going to give us two things. One, a great improvement in earnings GCG from year to year which is very obvious. We didn't have the $3 billion business last year and this way it would allow us to go positive in earnings for the first time for the Company in the consumer business next year. Another way to look at it, is where are you going to get those earnings from? What part of the P&L is going to show improvement? Actually it is going to be about 1 point or a little more than 1 point on each one of the three lines. First the gross profit. We are going to move from 28 to 29. Somewhere around 29. Why? This is a mix issue. We have more revenue coming from commercial products that have higher gross margins. They are going to help us with that move. At the same time we have created a lot of consumable business by selling a lot of printers, a lot of presses. More consumables means higher margins, too. The combination of those two things and a little selectivity in how much you go for growth in consumer digital is going to move us at least that 1 point to a 1.5 point there after. The R&D, we know the chance of the number in R&D will be around the $900 million. But because the revenue has grown so fast, obviously as a percentage of revenue will be going down. In the SEMA, we have now some upward pressure because we have included in the Company companies such as KPG and Creo that come with higher SG&A percentage but we are working in those synergy. Bob mentioned some of those and as well we will have our own problems with the rest of the Company. By the way, year to year without acquisitions our SG&A went down by 8% year to year. We will keep working in AGA reductions and more productivity from our people and reducing the cost of our corporate center that Bob mentioned. A combination of those three will get us going from 1, 1.5 to 4 to 5 EFO as a percentage of revenue. Another way to look at this is where are you going to get the money from? We are going to have, we used to have not very long ago only one business that was making money in digital with digital revenue. That was the health group. This year for the first time we are going to have three businesses that are going to contribute to digital earnings. Let's go through each one of them once more. Graphic communications is a $3 billion business. We can argue how much we are going to make out of this and it is going to be different, the beginning of the year to the end of the year. But we should aim at having at least a 4% year for us, a percentage of revenue for the business. Lower at the beginning, then getting percentages and the volumes higher at the end of the year. It very much will then actually lower than the industry we should be able to get that. And in order to get that, don't forget that we have 70 to $85 million in integration savings that will help to get that number. I'm not saying that the integration is already done. I know that we have work to do with our integration still. You don't put six companies together in six months. We understand that. We have work to do with systems and people and processes. But things are going very well. And the least we can expect from this business is to go around those numbers. So that will be one of the key components of this 350 to 450. Don't forget either that the NexPress installed base has grown significantly last year. That means a lot more consumables, that is going to help with that. In this case, the prepress consumables are moving rapidly from monologue to digital. Guess what, in this case the margins in prepress consumables in digitals are higher. I am going to say it again. Are higher than the margins in the old analog business so that is helping this business, too. And then Versamark continues to grow, they grew 18%. They are going to have more media and more ink that we will be selling this year. The combination of those three things, those four things allow us to put this forecast with a significant year-over-year digital earnings growth. Obviously, it will be very significant because we didn't have the business last year. But nonetheless it will be a key part of that 350 to $400 million to $450 million that Bob put on the chart. Now the health group. We are going to forecast essentially flat year-over-year earnings. Slightly vary digital earnings but flat overall, about flat. Why? Because we need to continue to invest in digital. We made, I told you before that the second half of the year went well for us in digital. We recovered somehow most of the losses, if not all that we had in the first half. We have a better plan, better people, better prospects both for digital capture, CR, especially for DR which has been very successful and a much better success with the implementation of installation of HCIS. But as well, we are going to work and the cost of digital and dental we have a great business there. We haven't been paying enough attention to the cost. We are going to work on cost. The combination of all those things will give us a good compensating effect for the fact that x-ray will continue to go down very much as planned. And DO the DryView place of business will continue with, to go down as planned. So overall, year-over-year similar. Slightly better in digital earnings from year to year which should not be that difficult given the bad beginning of the year that we had in 2005. Then finally the consumer digital imaging group. I don't want to repeat myself here very much but we were planning a substantial year-over-year earning. This is one of those business that it is exponential. That there is a point in which your COGS start to reduce significantly because of the volumes and the platforms and the deals that you are making. The number of consumer, the revenue that comes from consumables increases enough to compensate for the lower margin of your hard work. And then together with that, your cost in inventory goes down, your distribution goes down. The whole system gets much more effective and this is the plan that we have for the year. Together with that, we are going to see the beginning of the CMOS business. The CMOS, we have a lot of faith in that business. Phenomenal technology, phenomenal IP, and as you know a ten year deal and hopefully many others that will come and that business basically is time to volume. So semiconductor business is bank to volume. When you think about digital sensors, don't think about just the semiconductor. Our plan obviously is to include a very valuable technology that we have in image science that will be obviously embedded in those semiconductors. Not only the value in the IP and the know how of the software but as well our brand will be very valuable to sell that. So strong focus in expanding our earnings. Our operating earnings based on all these ratios that I gave you, we think this is the right time. This is the right size of the Company, the right moment to do that. We have the basis to be able to do this. We will continue to restructure the Company as fast as we can. We are going to finish with this by 2007. And we are going to continue to manage for cash the traditional business as we have been doing in the last year and a half. And we will continue to do extreme effort in reducing the cost of the Company to get to the target model that we want and that will be working in SG&A and working in the Corporate center costs. In my summary, as we've come a very long way in a very short time and a very difficult transformation. We have proven the ability to succeed in digital markets. And I will say that market share shows that, digital earning improvements as showed by Bob, show that. Our customer satisfaction rating shows that. JD Power's awards. Innovation awards. CES awards. And our brand and our IP finally have been recognized in this industry. Significantly and has allowed us to make very significant partnerships. IBM, Motorola, and more to come. Those partnerships are fundamental for us. And the digital business model do have to partner to give the total solution. You can't do that by yourself like we used to do in the past in our old business. It's fundamental that we establish those relationships. They are coming along and they are coming along very powerfully and they are not a one shot deal. Those are long time relationships with a lot of very good implications for us in the bottom line and in the top line. And finally the strong momentum that we had in Q4. As I described to you the last four months, specifically the last quarter when I felt that I had the Company just the way it was going to be run in 2006 gives me a lot of confidence for the 2006. Thank you very much. We are going to go now to questions. Questions & Answers: Don Flick, Director, Investor Relations: If we could bring the house lights up as far high as we can. Okay, and as for the normal course, as I recognize you and you get the microphone, if you'd please take and state your name and the name of your business that would be great. We'll start with Matt Troy. Q - Matt Troy: Thanks, Don. Antonio, wanted to drill down to one of the bright spots of the quarter, the graphics communications groups results certainly ahead of my expectations. As I understood it, fourth quarter you were going to ramp up in terms of product rationalization also in terms of sales force integration. As we look forward to 2006, what are the one or two key metrics you are looking at to monitor progress in that business and integration, what should we be looking for in terms of roadmap? And a follow-up. A - Antonio Perez: I guess three things, although you probably few more, but I will be looking first of all to get the 70 to 85, hopefully $100 million in cost synergies. Those synergies, we have to get them early or you don't get them. There is a way which the organization, they kind of settle. So it's critical that we get there, we get them this year. We did a good job in the first four months of the year. We got more than we thought we were going to get. I expect, my desire will be to do the same and overperform that number, that's number one. I think the second is look for the synergies in revenue, too. We haven't talked much about synergies in revenue. We had mentioned a few things now. I've seen some of that. I didn't expect to grow NexPress by 82% year-over-year. I mean, this is magnificent. It's really phenomenal. And it's the fact that it's going to get, that's going to give us a lot of consumables next year. So now my goal will be to be break even or better soon during the year with NexPress which will be a great help. And then finally we have very ambitious plans for new technologies that we had in Kodak and they have to go through GCG. I will be looking at Jim Langley and ask him to expedite the transition of that technology from the labs into the products. Q - Matt Troy: The follow-up then is on the consumer side and I hate to focus on one product in such a large company with so many moving parts and pieces but it does come up in terms of investor conversations and interest and that's the ink jet strategy. I was wondering, on the consumer side could you just give us an update. You had originally talked about back to school special, finish line and then also with HP soon to put their skin in the game in terms of an ink jet strategy at retail, is there an opportunity potentially for Kodak to use that technology and put it into that distribution channel? Thanks. A - Antonio Perez: We have a great ink jet strategy. We do have, we understand who we are going to be competing with. We haven't changed any plans of what we have said before. We are trying to disclose what we are going to do as late as possible, simply because we think it's better for us. We have several options on how we are going to go about it. We still have several options that we can do and we will pick the one that we think is better for us at the right time. We understand the business very well and we think it's a great opportunity and I'm sorry to be dancing around the topic but it doesn't help me if you knew more than you should. Don Flick, Director, Investor Relations: We will go to Shannon Cross immediately ahead of you. Q - Shannon Cross: Hi, Shannon Cross. Curious on the royalty payments and your strategies on that going forward. It looks like there is 60 millionish based on what Motorola said in the quarter. Curious if there were other cell phone providers? Where you stand with Nokia? How we should think about timing on that? And then also, with the success of the royalty in this quarter, what your thoughts with regard to maybe just licensing your inkjet IP as opposed to actually manufacturing it yourselves. A - Antonio Perez: Second part of the questions wouldn't work. A lots of the companies that work in inkjet, they have cross license across them and the cross license do not allow you to pass technology around. So that, I don't see that working. I can imagine a consultant with my work in certain areas but I don't think it will be a large and stable business. The first time we invested for more than 15 years a lot of money in R&D. We kept building a lot of IP portfolio and know how and then we come in with products, but IP royalties and IP relationships have been part of the program from the very beginning. They are not a one-shot deal. We aren't trying to just get a bunch of money and get out of here. We are trying to build relationships that will continue to bring revenue and profits to the Company with time to come. Because we need to build these partnerships. We can't succeed in this market if we don't have these partners. They control business channels, they control products and other technologies that we need too. So we will continue to make relationships that are valuable for both companies. And the plan with those partnerships is to disclose as much as we can from both, we want to disclose as much as we can until the point in where we are starting to hurt our competitiveness. Both from IBM and us, Motorola and us, or whoever we have a partnership with. So we will continue to try to use our brand and our IP portfolio to build partnerships, partnerships that are revenue generating and profit generating and they have a longer term with much more interest in that than in short of cash tomorrow and we aren't looking for that. We can deal with our cash. We are in good shape with cash. More cash would always be better, but we are in fine shape. We are looking for building a sustainable business. Q - Shannon Cross: Okay. And a follow-up. Bob, looking at the traditional business, I think you said something, it seemed to calculate out to about the $300 million EFO this year for 2006. Is that sort of in the ballpark when you look at the fact that you had the 900 to a $1 billion worth of GAAP losses and then you've got 1.2 billion in charges. Is that the best way to think about it in terms of profitability and traditional? A - Bob Brust: Yes, Shannon we're not, we've decided not to disclose traditional. That's where we book all the restructuring charges and some of the restructuring charges are GAAP, some are non-GAAP, some are useful life and everything so I mean the traditional business is still valuable. We always said it would run in the, we said before it would run in the 10% range before the useful life. So it's probably somewhere around where you said. A - Antonio Perez: It's not wrong. It's just the accounting is so complex that not going to forecast. The analysis, about that, maybe a little more. A - Bob Brust: 98% of the restructuring is against the traditional business. You can figure it out. Don Flick, Director, Investor Relations: Okay, can we go to Jay Vleeschhouwer in the center of the room. Right there in the center. Q - Jay Vleeschhouwer: Two questions, both related to your consumer business. What do you see Antonio as the major risk to that growth forecast overall for the consumer business, particularly in light of the maturation of the consumer digital camera market? Secondly, just to delve into the EFO forecast a little bit more, if you take the midpoint of your '06, EFO number that's, let's say 400 million which is well over $0.250 billion more than what you did in 2005, half of that increment is in your consumer business, or let's call it 125, 150 million incremental profitability this year in consumer which seems to be a pretty high proportion of your incremental revenue assumption for the year for consumers. So I know you think about this as an exponentially leverageable business, but maybe give us the components of where you really see that magnitude of incremental dollars coming from, particularly going back to the first part of the question as to any market risks with respect to consumer revenue. And a follow-on. A - Antonio Perez: Well, we are aiming at, it is exponential. That's all I can say. The risk will be that people will stop printing. People will stop printing and then I have a problem. If people continue to print then they are going to deliver numbers that we have there. And we, obviously we took a plus or minus for all those things, so some people print more and some people will print less. The other risk, we didn't, we are not, we are looking at very low growth in digital cameras for next year. Within the markets. And we are moving up in digital cameras. You probably noticed that we just introduced the first ever dual sensor digital camera in the whole world. Since you asked me I am going to brag a little bit. If you allow me to just for a few seconds. Actually, we got comments that it was really cool that the ultimate film company in the world, Kodak, will be the one that actually tells the world that the analog workload that is used right now with the personal digital camera is no longer going to be valid for the future and they are coming with the first one to break that model. We have a lot of innovation and you will see it coming. And you will see our cameras going steadily up in the price range. You will see CMOS getting to our cameras. The question is when they are going to come into the camera. That is a risk. When. When they are coming will make a difference. Could we sell immediately to other camera manufacturers or not? Or to other devices sooner or later? That could be another risk. The growth that we had around 16 to, what is the growth in CDG as well. 16%?. A - Bob Brust: Next year? 16 to 18. A - Antonio Perez: 16 to 18? A - Bob Brust: '06, summer of '05. A - Antonio Perez: 16 to 18 is, we will soon have a very good growth in kiosk in front of us. We will still have a very good growth of home printers. We have consumables growth. Very low growth we've put in those numbers for the cameras. Those are the risks associated with the business. But we have been very aggressive gaining share as you can imagine. And I explained why. You may or may not disagree with that theory. But that, we executed what we thought was what we needed to do. And now we are going to execute on this strategy, that is subordinate the digital growth. You can always buy share in this market if you really want to. So those are the risks. Q - Jay Vleeschhouwer: Just a follow-up on GCG. In response to an early question, you highlighted revenue synergies, which you and Jim have talked about earlier in prior presentations. You saw some of that at print '05 in terms of your booking commensurate to the show. Is that the preponderant part of your growth assumption for '06 and beyond? Is this really the heart of the strategy? A - Antonio Perez: I think Jim is a sandbagger. No, I think we just took the market the way, hope he's not listening. Don Flick, Director, Investor Relations: He is. But he is a well-known sandbagger. A - Antonio Perez: No, we took, this is our first year with GCG. We want to have a good year. His main concentration has kept the business running. It's give the consumables capacity. We don't have enough capacity for consumables at this point of time. We are running at the edge. We have to ramp fast and get capacity. Integrate those systems, get the natural revenue synergies they are going to come by having all these products with you. Get the cost. That's the biggest thing for the year. Don Flick, Director, Investor Relations: We will go with Laura Starr, Joe, right next to you. Q - Laura Starr: I have two separate questions. The first one is on China, can you give us update on China, you had some problems there last year. Could you just tell us what's going on now? And then the second was on the gallery. Do you have any data that you can give us on how many customers you had at the end of the year? And then also a lot of your revenues at the gallery come from people who aren't buying 4 by 6 prints. It's the coasters and the aprons and the T-shirts and all that. Can you sort of break down the growth rates of those two buckets and where those buckets are starting or whatever this year? A - Antonio Perez: Yes. China is moving to digital fast. I guess that's the best answer that I can give you. We did underestimated that at the beginning of last year. We learned. We learned our lesson. We are dealing with the fact that that's the way it is. So we are moving field more and more into the second tier and third tier cities and we are going for market share in, in cameras and printers. What we are doing as well is we are taking the phenomenal distribution system that we have, which is the Kodak Express stores. We have more than 9000 Kodak Express stores with independent owners. But the work with us and stores are called Kodak Express and we are helping them to move to digital. Yes, some of them, they have kiosks. Some of them they have kiosks. Q - Laura Starr: Even in the second and third tier markets, some of them have……… A - Antonio Perez: No. Second and third tier they don't have the, they don't have enough money to pay for that, no. But we are, so we are building first in the coastal cities, it's very large. There is a lot of cities, a lot of people, a lot of stores. So still a lot of work to do and one of those cities is like a country in Europe. So it's a big, we have a lot to do yet in the coastal cities. So that's what we are doing in China. I don't know if we will disclose the rest for the color gallery. A - Bob Brust: We have never put a big splitting apart or parsing apart of all those details. The only thing we've talked about directionally, of course is to acknowledge that we've had a lot of growth in photo books and the other higher value added. A - Antonio Perez: It's a competitive issue we have three or four guys and another 15 coming into that market and we don't want to tell them what sells and what doesn't sell much. But we are selling all those things. Q - Laura Starr: How many customers did you have at the end of the year? Did you announce that? A - Bob Brust: The last number I heard….. A - Antonio Perez: More than last year. I can't tell you the number. A - Bob Brust: Last number I heard was about 22 million. But I can double-check that and get back to you. Q - Laura Starr: And then just finally, you talked at one time or another over the last couple of years about starting to charge for different levels of service or storage at the gallery. Is there anything new on that? A - Antonio Perez: When is the last time you've been into that website? Because we have been charging for awhile. If you choose……….. Q - Laura Starr: Probably……… A - Antonio Perez: You can choose now premium services. Why don't you go into the website and you will have your answer there, right there. And please sign up. Don Flick, Director, Investor Relations: Okay, we will go next to Sam Doctor. Q - Sam Doctor: Thank you. JP Morgan. I have a couple of questions for you. First, is one, based on the cost structure that we had in the fourth quarter ignoring any changes in lease structuring from now, what is the time to market between the print and photo finishing group and the consumer digital group? How long will it take to get to market and what is the product mix that needs to change to get there in terms of devices with the consumables. A - Bob Brust: If I understand your question right, Sam, the film growth, the parity in margins close to never. I mean, that was a very high margin product. As long as it has reasonable sales and we can continue those facilities, we are down to a couple players left in the world and we, and it's going towards good margins. If we can pull that down fast enough which we are doing, if you just read the restructuring, like you said, if we could pull it down fast enough it will be in a high margin product for a long time and it depends on what part of the digital products you are talking about. If you are talking about cameras, I don't think they'll ever hit. But if you are talking about the consumables and you are talking about papers and stuff like that, maybe, but it's been awhile. A - Antonio Perez: Let's say the metric would be return on capital. You can't look at the film and look at the gross margins, forgetting that we invested billions and billions of dollars per year to create that. I don't know if that is, it wouldn't help me to know, obviously the margins and the gross margin and the consumer digital group, it will never be higher than, I don't know, 30%. If we will do really well, 32, if we have a great year. If the CMOS sensors are a lot bigger number than the rest, we will go higher. But it will never compare to 65 or 70% margin. But, of the metrics because it's a completely different business. A - Bob Brust: It's going from a chemical business to a mechanical business. And it's a, the investment intensity is not even comparable. CRIC gets close to them but not the actual margins. Q - Sam Doctor: Can you give us a sense of the Corporate expense of advertising and other corporate overhead, how is that allocated currently between consumer digital and the other segments? A - Antonio Perez: One of the things that I agree with your report, maybe one of the few, no I agree with more. We have too expensive corporate center and I think we have to work in our advertising expense. So good point. We are working on it. Don Flick, Director, Investor Relations: We will go back to Carol Sabbagha. Q - Carol Sabbagha: Thanks. Just two questions. The first one sticking with consumer digital. It looks like you are looking for that business to earn 150 million in EBIT next year. Is that mostly going to come from output or if you were going to look at that break down of 150 million what are the big sources behind that? A - Antonio Perez: The system. It's the system. We, first we are not going go down into splitting that. Second we never said the 150. That's yours and that was the second time that appeared. You two apparently said it the same number. But it's a combination of getting, doing a lot better with cameras, doing something with CMOS, doing better with printers, doing better with Kiosk, doing more consumables, and a combination of those. And that's as much as I will go. Q - Carol Sabbagha: That's not one big thing then? A - Antonio Perez: No. Which is better, by the way. We know, we are not looking for a miracle will happen. Something that will, we're looking for something that will happen naturally. This is not, we are not mavericks and we aren't expecting a miracle. This has been done through innovation and a lot of hard work, that's why I think it is going to happen. Q - Carol Sabbagha: And then looking at cash flow for next year, two questions around that. Is it going to be as seasonal as this year with pretty much all of it coming in the fourth quarter? Is it going to be more even? Then if you look at the 4 to 600 million next year versus the 720 something this year, what are, it looks like earnings and the restructuring are going to be similar in '06 versus '05. What are going to be the other big variables that might not come in as big this year in '06 or might come in, whether it's asset sales or so on? A - Bob Brust: Yes, I think seasonality I hope it's not as late. That was finger biter, but we had a lot of our asset sales currently in the year. We started that process much earlier now and we are deeper into the restructuring so the assets available for sale have been identified. Last year they were being identified during the year and we went out and saw them. Now we have identified them and we're working on them. So some of that will come earlier. We have a much more sophisticated supply chain in digital now. Last year we weren't as efficient during the year at accumulating equipment as we will be this year now because we have got a better way of bringing those to market and more close to the point of sale rather than building a lot of digital equipment up. We built it up and pulled it down. This year I hope we don't, so that will pull the cash a little forward. The earnings, and a lot of that depends on the timing of the restructuring cash outflows which is generally people. So it will be a little more seasonally front. It's a little lower, you are right. The earnings and the cash outflow from restructuring aren't that far part so most of this has to be done by working capital improvements, selling assets, all that stuff we talked about. So if everything works, it will be higher. So I'm trying to give a number that we can run the Company on which is around 500 million. A - Antonio Perez: The same things seasonality though is going to be, it should be seeing a little better this year but similar to this year. We can't change that this year. Next year we will be, we are getting increasingly better. But first quarter should be low. That's the way. And we don't like it like that either. In fact, we have been being considering, we haven't decided this, but we have been considering would it be better for our investor, for our fiscal year will be different. We'll have a better handle of the year rather than have such a big chunk of things to have to happen in the last four months of the year and so much at stake. We haven't made any decision there. But it would get better with time. But slowly. Don Flick, Director, Investor Relations: We will go to this gentleman down front, first. I'm sorry I'm not sure I know your name. Q - Luke Williams: Thank you. Luke Williams, Bertco Advisors. Could you give us the, a discussion of the competitive landscape and the commercial graphics group and what type of profit margins do your key competitors have, please? A - Antonio Perez: I don't know what they report, but that industry is an industry that should be able to produce anything from 8 to 12% EFO. Some companies they are more dedicated to digital printers and presses. Others have more software so it's hard to make comparisons. But our goal is to end up with something like that in that business. Q - Luke Williams: Could you though, tell us the main companies with whom you compete and your market share versus theirs? How you plan to change it? A - Antonio Perez: We aren't going to change them. They are going to keep competing with us. But depending on what area and we have a unique value proposition that we have announced that we thought that the, talking to many customers for many years we figured out that the most valuable thing for the presence of customers is how can we help them to move from the analog world to the digital world and make money while they are doing this. And we looked at the key elements that will contribute to make the addition a reality and that's why we created the Company that we have created including KPG and Creo and NexPress and Versamark that we have. The industry really is not organized like that today. We spend a lot more money and a lot more effort and workflow than many of the companies that we compete with. We have production printers vary at which most of the other people don't have. So it's hard for me to compare. I mean, you have to go company by company and look at the difference. We are slightly different than the majority of the industry competitors. Don Flick, Director, Investor Relations: We will go with Joan Lappin immediately behind you. Q - Joan Lappin: Joan Lappin, Gramercy Capital. I have two questions. One is the impact of this tax, the tax court decision that added considerably to your fourth quarter earnings had on all of these reported results. I'm sorry, I don't have the notes here to look and see what you did with that and if it affected any of these groups. And my other question is on the health group. You're forecasting flat year on year earnings and the question is that's a group, that's a business you have been in for 100 years. And yet you're competing there with GE, with huge companies that are also offering doctors and clinics and whatever of these document systems and whatever and they are going around saying why do you want to buy Kodak for? They may not be there to support it. You are saying you've made some changes to address some issues. I don't know if those are the issues you are addressing or what. But I would appreciate more as we say on Wall Street these days, color. A - Antonio Perez: Did you hear any one of our competitors saying that because I want to sue them. Q - Joan Lappin: No, but I have a son-in-law who happens to run a very large radiology group here in New York and they just opened a new clinic, your folks came in, he decided not go with you and that was the line he was given and he fell for it. And he is a very smart guy. So I just figured he's, and he frankly was at GE for many years. He knows, well, he was selling against you and so, you know. A - Antonio Perez: I really don't know what to tell you about your friend. I haven't heard from, I see a lot of these customers myself. Nobody has said that we are going to, that we are going to disappear. This is the first time that I hear this. They did say that GE is larger. Which has some good things, some very bad things, too. That's what they say. So we have our specialties that GE doesn't have, by the way, we have a great relationship with GE. We sell them a lot of our, all of the laser printers that they sell or most of them they come from us. We are happy that GE is very successful in that business, because every time they sell one of those systems, they sell one of ours. Q - Joan Lappin: But you're saying here, flat year on year earnings so something isn't quite right in an area that you have been functioning in for decades and yet you are still not able to grow there. I'm really asking why? A - Antonio Perez: I think, I tried to explain it before. What I tried to do is that we needed to invest more in digital. Our digital business had a bad beginning of the year last year. We needed more investment and we needed to do a few other things such as reorganize ourselves. We did that. That's why we are taking this year, we said though, I said that we have grown ACIS more than 30%, 39% for the year. Digital capture devices that include CR. They are growing very fast, too. We had a bad year in health, yes we had a bad year in health, so we trying to recover this year by putting more investment in health. We compete very well with those people, by the way. In our own specialty they are very strong in other areas where we are not participating. The health market is enormous and GE and all the others participate in many other things that we are not participating on. So when you look into the areas in which we are participating like the x-ray, x-ray department, and the radiology we are actually extremely strong in those departments when it comes to x-ray. We are the only company that has the full proposition for x-rays out there. And the strongest proposition. So we aren't trying to be a GE. We don't need to be a GE. We aren't trying to be like them. God bless them. They are a very good company. We are our own and we are going to keep our footprint. Don Flick, Director, Investor Relations: Bob, did you want to take the tax issue and discontinued ops? A - Bob Brust: Yes. I think the tax issue you are referring to is the settlement of a 1994 thing which was the sale of the Sterling drug company and we settled with the IRS on that. Just one of those long time things that go on. The proceeds of the settlement were booked against discontinued operations and the interest that they owed us on the, it went against interest income. That's where you would ordinarily expect that kind of stuff to go, so it's discontinued ops. Don Flick, Director, Investor Relations: We will go with the gentlemen ahead of you on your left. Q - Hank Wines: Thank you. Hank Wines. Yankon Securities. I have two questions. The first, I would like to get to know what your feel is with the relationship you have with the Lexar Corporations and the sale of digital film. Secondly, I would like to know your reaction to the Minolta and Konica decision to exit the photography business and Nikon's decision to exit the film photography business? A - Antonio Perez: I'll start with the second. Minolta, we were expecting that to happen in the business that is going down the ways we're going down now unless you have very large critical mass like we do or Fuji does, it's very hard to sustain. These are very large installations and very expensive machinery. If you have that machinery idle for a few hours, you can't make any money any more. So I wasn't surprised. I was surprised by how long it took them to do this. The same with Acfa I didn't quite understand why they kept going at it. So what's going to happen with that decision to us? I don't know exactly but I'm sure it's not going to hurt. I think it's going to, I know it's going to be positive and I don't know how positive yet. We have to watch and see what happens. I feel the same about Nokia. And I think it was an expected thing in the industry. I think as well is no, not going to hurt us. In any case, if anything, it might help us. Lexar we have, we put our brand and they do the product and they do the distribution. We don't cover any inventory, that's what we do. We are making some money. I want to make more, but making some money. Don Flick, Director, Investor Relations: Okay, we will go with Ulysses Yannas. Q - Ulysses Yannas: Ulysses Yannas, Buckman, Buckman & Reid. How long do you expect yourselves to continue making single use in 35-millimeter cameras? Or when are you going to decide to outsource them. A - Antonio Perez: We already outsource them. We use a company in India, a company in China, I cannot remember any more. They buy the film, they make the cameras by themselves, we sell them with our name and with our film. Q - Ulysses Yannas: That's the single use, or one time use cameras as well? A - Antonio Perez: Oh, no. Single use, we still do it. It's a pretty complex process for the single use camera. We have the very highly developed. The lowest cost in the industry for single use cameras. So as long as the volumes remain and going down, but as long as we have enough of a volume to run those operations, we are concentrating in the operations though. We used to have three factories, we have…… Q - Ulysses Yannas: So you have everything moving to China? A - Antonio Perez: Actually, not. Actually not. Because you are going to end up with the fact that most of the uses for single use cameras are not in China, are in the U.S. So whatever you see from manufacturing there you are going to lose that and more bringing it here so we can't do that. Q - Ulysses Yannas: Another question, if I may, you were asked before about the gallery, and the programs you started last September with premium service. Can you give us some idea what percentage of the people in the gallery have been signing on? A - Antonio Perez: Did you sign, Ulysses? Q - Ulysses Yannas: I was the first to sign. A - Antonio Perez: Very good. Very good. You got me. Small number. We won't say, but this is a small number. This location process is going to take time. For anybody. I mean, you have seen, our competitors are trying to do something similar with videos and things. This is a location process. By and large, consumers out there think that whatever's on the web should be free. That's why people keep going to the web. Q - Ulysses Yannas: I noticed that with Yahoo! and some of the guys now starting to offer and getting paid for some of the services. A - Antonio Perez: We are all trying the same thing. Or similar things, I mean the same idea behind different services it's a small number. But we knew it was going to be small. But it's moving but it's small. Q - Ulysses Yannas: And then can you also give us some ideas to what percentage of the gain in kiosks related volume was media? A - Antonio Perez: I think last time I disclosed this and I think I said something like 2.5 times so close to 3 times of the revenue comes from media. So it's big time. Don Flick, Director, Investor Relations: Okay, we have time for one last question and we will go to the back there to the gentleman on your right as you go up. A - Antonio Perez: I want to give you the right number, Ulysses. Could you check that Don? We will get that number. But it's about that. Q - Adam Camorra: Thanks. Adam Camorra and Chess Capital. What's your current outlook for the theatrical film business. Does this business segment generate approximately 300 million or so of EBITDA. A - Antonio Perez: It's a good business. It's a great business. It has grown this year. I know that everybody says that it's going to go away. They tell me all the time wherever I go, they tell me the business, actually it has been going away for the last two or three years and we see them growing year after year. I don't know what to say any more. I don't want to get into a technology discussion. I know very well, as well as anybody else in the world how easy it will be to do that with digital projection. I understand it perfectly well. I could lecture. I could lecture on it. The problem is the business model doesn't work very well. And that is helping to keep the business the way it is. The businesses still grew this year. Do we expect it to grow, do we expect that business to grow in the future? No, we always think it is going to be kind of flattish. Maybe going down a little bit for next year. But we haven't seen significant signs to make us believe they are in decline. I mean, actually we've seen the contrary signs. And we don't disclose what the individual numbers of that business make. For a good reason. First, competitively will be an issue that there are not many suppliers in that business so we don't want to disclose that. Second, because the same machinery that we use, we have four big related assets in the world and one of them is dedicated to this business, but some other the things to and if you were to disclose individually the number that you ask me, you will have to do all sorts of, activation allocations of these very large assets is not very valuable for us. So that's why we are putting within the natural business of which it is. We, the processes business, the best single rolls that they go independent on the cameras we use the same machines or we use as well to do aim films and other films, so we put it all together. That's the best way to do the accounting. Q - Adam Camorra: But in terms of your long-term forecast, it sounds like you are anticipating that this business stays flat as you look out one years, three years, five years? Or can we eventually, is there a time frame where you think something might change in this business? A - Antonio Perez: I think it is going to last, I think it's going to last for a significant amount of time. But I said as well publicly that as far as the need from this company to use the cash generated from the business to survive which is sometimes why they ask me this question. They ask me this question and then if I say, well, I feel for the next two years is not very significant changes I keep saying. I don't want to get into the forecasting business how long it's going to be. I think it's going to be a lot more than two years for many reasons. Many technical reasons and many business model reasons. But what I have been saying is that as long as we last, we need that business at a good level for the next two years because we still have a lot of restructuring to do. After that I said that we love the business, but it won't be a necessary business for us to have to be able to deal with the, for the transformation. But I believe it is going to last a lot more than two years. Don Flick, Director, Investor Relations: Okay, thank you very much. We are out of time. I would like to thank you all for coming and have a very good day.