SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


       Date of report (Date of earliest event reported): October 31, 2006



                              Eastman Kodak Company
               (Exact name of registrant as specified in charter)



         New Jersey                    1-87                 16-0417150
- --------------------------------------------------------------------------------
 (State or Other Jurisdiction      (Commission            (IRS Employer
      of Incorporation)            File Number)         Identification No.)


                                343 State Street,
                            Rochester, New York 14650
                  (Address of Principal Executive Office) (Zip Code)


        Registrant's telephone number, including area code (585) 724-4000
                                                            -------------

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[ ]  Written communications pursuant to Rule 425 under the Securities Act (17
     CFR 230.425)

[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))



Item 2.02. Results of Operations and Financial Condition - --------------------------------------------------------- On October 31, 2006, Eastman Kodak Company issued a press release describing its financial results for its third fiscal quarter ended September 30, 2006. Copies of the press release and financial discussion document are attached as Exhibits 99.1 and 99.2, respectively, to this report. Within the Company's third quarter 2006 press release and financial discussion document, the Company makes reference to certain non-GAAP financial measures including "Digital revenue", "Traditional revenue", "New Technologies revenue", "Digital revenue growth", "Digital earnings", "Digital earnings from operations", "Digital earnings by segment", "Free cash flow", "Operating cash flow", "Investable cash flow", and "Earnings before interest, taxes, depreciation and amortization (EBITDA)", which have directly comparable GAAP financial measures. The Company believes that these measures represent important internal measures of performance. Accordingly, where these non-GAAP measures are provided, it is done so that investors have the same financial data that management uses with the belief that it will assist the investment community in properly assessing the underlying performance of the Company on a year-over-year basis. Whenever such information is presented, the Company has complied with the provisions of the rules under Regulation G and Item 2.02 of Form 8-K. The specific reasons, in addition to the reasons described above, why the Company's management believes that the presentation of the non-GAAP financial measures provides useful information to investors regarding Kodak's financial condition, results of operations and cash flows are as follows: Digital revenue / Traditional revenue / New Technologies revenue / Digital revenue growth / Digital earnings from operations / Digital earnings / Digital earnings by segment - The Company believes that the presentation of digital revenue, traditional revenue, new technologies revenue, digital revenue growth, digital earnings from operations, digital earnings, and digital earnings by segment information is useful to investors while its transformation from a traditional products and services company to a digital products and services company is ongoing, and management utilizes this information, to assess the Company's progress in supplementing declining revenues from traditional products with revenues from digital and other new technologies and in introducing a lower cost business model consistent with the realities of a digital business. The Company has tied both short-term and long-term incentive programs to certain of these measures.

Management views the Company's performance based on the following three key metrics: digital revenue growth, digital earnings growth and the generation of cash. These three key metrics are emphasized in the Company's attached earnings release for the third quarter of 2006. The digital measures form the basis of internal management performance expectations and certain incentive compensation. Net sales from continuing operations and earnings (loss) from continuing operations before interest, other income (charges), net and income taxes are measures used in making decisions about allocating resources and assessing the performance of each segment and are therefore the segment performance measures presented in the segment footnotes of the Company's financial statements. Digital revenue and digital earnings represent additional measures of performance used by management to assess the Company's performance against its objectives during the digital transformation period. These measures differ from those presented in the Company's Form 10-Q as the primary measures of segment performance. Free cash flow / Operating cash flow / Investable cash flow - The Company believes that the presentation of free cash flow, operating cash flow and investable cash flow is useful information to investors as it facilitates the comparison of cash flows between reporting periods. In addition, management utilizes these measures as tools to assess the Company's ability to repay debt and repurchase its own common stock, after it has satisfied its working capital needs (including restructuring-related payments), dividends, capital expenditures, acquisitions and investments. The free cash flow measure equals net cash provided by operating activities from continuing operations, as determined under Generally Accepted Accounting Principles in the U.S. (U.S. GAAP) minus capital expenditures. The operating cash flow measure equals free cash flow plus proceeds from the sale of assets, minus acquisitions, debt assumed in acquisitions, investments in unconsolidated affiliates, and dividends. The investable cash flow measure equals operating cash flow excluding the impact of acquisitions and debt assumed in acquisitions, and forms the basis of internal management performance expectations (it is one of the Company's three key metrics) and certain incentive compensation. Accordingly, the Company believes that the presentation of this information is useful to investors as it provides them with the same data as management uses to facilitate their assessment of the Company's cash position. EBITDA / Interest Expense - Under the Company's senior secured credit facilities, there are two financial debt covenants that the Company must be in compliance with on a quarterly basis: (1) debt to EBITDA and (2) EBITDA to interest expense. Accordingly, the Company believes the presentation of the debt to EBITDA and EBITDA to interest expense financial measures is useful information to investors, as it provides information as to how the Company actually performed against the financial covenant restrictions and requirements, and how much headroom the Company has within the covenants.

Item 9.01. Financial Statements and Exhibits - --------------------------------------------- (c) Exhibits -------- Exhibit 99.1 Press release issued October 31, Furnished with 2006 regarding financial results this document for the third quarter of 2006 Exhibit 99.2 Financial discussion document issued Furnished with October 31, 2006 regarding financial this document results for the third quarter of 2006

SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EASTMAN KODAK COMPANY By: /s/ Diane E. Wilfong ----------------------------- Name: Diane E. Wilfong Title: Controller Date: October 31, 2006 EXHIBIT INDEX ------------- Exhibit No. Description - ---------- ------------ 99.1 Press release issued October 31, 2006 regarding financial results for the third quarter of 2006 99.2 Financial discussion document issued October 31, 2006 regarding financial results for the third quarter of 2006

                                                                    Exhibit 99.1


    Kodak Reports 3rd-Quarter Sales of $3.204 Billion and Improved
                               Earnings

 Digital Earnings Grow by $98 million, Led by Graphic Communications
 and Consumer Portfolio; Company Ends Quarter with $1.102 Billion in
                  Cash; Reduces Debt by $192 Million

    Kodak on Track to Achieve 2006 Cash and Digital Earnings Goals

    ROCHESTER, N.Y.--(BUSINESS WIRE)--Oct. 31, 2006--Eastman Kodak
Company (NYSE:EK) today reported a GAAP earnings improvement of $877
million for the third quarter of 2006, on sales of $3.204 billion,
largely as the result of the recording of a tax valuation charge in
the year-ago quarter of $778 million. The company also delivered a $98
million increase in digital earnings, driven by wider gross profit
margins, from strong earnings performance in the Graphic
Communications and Consumer Digital businesses, and the result of the
company's global cost-reduction initiatives.

    Based on its third-quarter 2006 performance, the company is
confident of achieving its 2006 cash and digital earnings goals, and
expects digital revenue growth somewhat below its 10% target, as a
result of the company's focus on margin expansion. This corresponds to
a total revenue decline of approximately 6%.

    "Our business transformation is on track," said Antonio M. Perez,
Chairman and Chief Executive Officer, Eastman Kodak Company. "I am
encouraged by our third-quarter results, especially because they
reinforce our confidence in our full-year performance, which is the
basis on which I manage the company.

    "We measure our progress against three important metrics - cash
generation, digital earnings, and digital revenue. Our year-over-year
digital revenues were down slightly during the quarter, reflecting our
strong focus on margin expansion and willingness to pursue more
profitable sales, the universe of which expands as our cost structure
improves. Our digital earnings were vastly improved this quarter and
our cash balance continues to exceed $1 billion. While I am fully
aware of the challenges to largely complete our restructuring by the
end of next year, this performance represents clear progress toward
our goals and gives us good momentum to carry into the fourth quarter
and 2007."

    For the third quarter of 2006:

    --  Sales totaled $3.204 billion, a decrease of 10% from $3.553
        billion in the third quarter of 2005, largely attributable to
        a 19% decline in traditional sales. Third-quarter traditional
        revenue totaled $1.402 billion, compared to $1.725 billion in
        the year-ago quarter, while digital revenue totaled $1.793
        billion, as compared to $1.814 billion in the year-ago
        quarter.

    --  The company's earnings from continuing operations in the
        quarter, before interest, other income (charges), net, and
        income taxes, were $2 million, compared with a loss from
        operations of $123 million in the year-ago quarter.

    --  On the basis of generally accepted accounting principles in
        the U.S. (GAAP), the company reported a third-quarter net loss
        of $37 million, or $0.13 per share, which includes after-tax
        restructuring costs of $202 million, or $0.70 per share. By
        comparison, the third quarter 2005 GAAP net loss was $914
        million, or $3.18 per share. The difference is largely driven
        by the inclusion in last year's third quarter of a $778
        million, or $2.71 per share, non-cash charge to record a
        valuation allowance against the net deferred tax assets in the
        U.S.

    --  Digital earnings were $105 million, compared with $7 million
        in the year-ago quarter, marking the first time that the
        company's quarterly digital earnings growth exceeded the
        quarterly decline in traditional earnings. This performance
        was primarily due to operational improvements throughout the
        digital portfolio, the impact of a non-recurring licensing
        arrangement within the Consumer Digital Group, and strong
        results in the Graphic Communications Group.

    Other third-quarter 2006 details:

    --  For the quarter, net cash provided by operating activities on
        a GAAP basis was $329 million, compared with $370 million in
        the year-ago quarter. Investable cash flow for the quarter was
        $237 million, compared with $216 million in the year-ago
        quarter.

    --  Kodak held $1.102 billion in cash on its balance sheet as of
        September 30, 2006, compared with $610 million on September
        30, 2005. This is consistent with the company's stated desire
        to maintain approximately $1.0 billion of cash on hand.

    --  Debt decreased $192 million from the second-quarter level, to
        $3.339 billion as of September 30, 2006, and was down $244
        million from the December 31, 2005 level of $3.583 billion.
        The company intends to reduce debt by approximately $800
        million in 2006.

    --  Gross Profit was 27.3% in the current quarter, up from 25.9%
        in the prior year quarter, primarily because of reductions in
        manufacturing costs and the favorable impact of the previously
        noted licensing arrangement, offset by volume declines in
        traditional product sales.

    --  Selling, General and Administrative expenses declined by $105
        million in the third quarter, to $565 million, compared with
        $670 million for the prior-year quarter. As a percentage of
        sales, SG&A decreased from 18.9% in the prior-year quarter to
        17.6% in the third quarter of 2006.

    Third-quarter segment sales and results from continuing
operations, before interest, other income (charges), net, and income
taxes (earnings from operations), are as follows:

    --  Graphic Communications Group sales were $880 million, compared
        with $886 million in the year-ago quarter. Strong digital
        revenue growth from digital plates, commercial inkjet,
        NexPress color and document scanners during the quarter was
        offset by expected declines in the traditional product
        portfolio. Earnings from operations were $31 million, compared
        with $7 million in the year-ago quarter. This improvement was
        largely driven by contributions from the group's core digital
        businesses and cost reductions from business integration
        activities.

    --  Consumer Digital Group sales totaled $640 million, down 3%.
        Earnings from operations increased by $85 million, from a loss
        of $61 million in the year-ago period, to earnings of $24
        million in the current quarter. The earnings results reflect
        improvements across virtually the entire digital portfolio.

    --  Film and Photofinishing System sales were $1.074 billion, down
        from $1.353 billion in the year-ago quarter. Earnings from
        operations were $139 million, compared with $174 million in
        the year-ago quarter. This decrease was primarily driven by an
        expected decline in revenue and higher silver prices. During
        the third quarter of 2006, the group achieved a 12.9%
        operating margin, maintaining the performance from the
        year-ago quarter.

    --  Health Group sales were $597 million, down 6%. Earnings from
        operations for the segment were $68 million, compared with $96
        million a year ago. This is primarily due to higher silver
        prices, and costs associated with the company's exploration of
        strategic alternatives for its Health Group. Despite these
        challenges, the Health Group maintained operating margins of
        11.4%.

    --  All Other sales were $13 million, compared with $20 million in
        the year-ago quarter. For the third quarter, the loss from
        operations was $48 million, compared with a loss of $61
        million in the year-ago quarter. The All Other category
        includes the Display & Components operation and other
        miscellaneous businesses.

    2006 Goals

    Kodak continues to expect net cash provided by operating
activities this year of $800 million to $1.0 billion, which
corresponds with investable cash flow of $400 million to $600 million.
Accordingly, the company expects a GAAP loss from continuing
operations before interest, other income (charges), net, and income
taxes for the full year of $400 million to $600 million, which
includes approximately $1.0 billion in pre-tax restructuring charges.
This corresponds to digital earnings from operations this year in a
range of $350 million to $450 million. The company forecasts 2006
digital revenue growth somewhat below 10%, reflecting the company's
focus on targeted participation in the consumer digital market. Total
2006 revenue is expected to be down approximately 6%.

    Conference Call Information

    Antonio Perez and Kodak Chief Financial Officer Robert Brust will
host a conference call with investors at 11:00 a.m. eastern time
today. To access the call, please use the direct dial-in number:
913-981-5542, access code 9443954. There is no need to pre-register.

    For those wishing to participate via an Internet Broadcast, please
access our Kodak Investor Relations web page at:
http://www.kodak.com/go/invest.

    The call will be recorded and available for playback by 2:00 p.m.
eastern time today by dialing 719-457-0820, access code 9443954. The
playback number will be active until Tuesday, November 7th at 5:00
p.m. eastern time.

    CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

    Certain statements in this report may be forward-looking in
nature, or "forward-looking statements" as defined in the United
States Private Securities Litigation Reform Act of 1995. For example,
references to expectations for the Company's digital earnings,
revenue, digital revenue growth, losses, cash, cash flow,
restructuring charges, and debt reduction plans are forward-looking
statements.

    Actual results may differ from those expressed or implied in
forward-looking statements. In addition, any forward-looking
statements represent the Company's estimates only as of the date they
are made, and should not be relied upon as representing the Company's
estimates as of any subsequent date. While the Company may elect to
update forward-looking statements at some point in the future, the
Company specifically disclaims any obligation to do so, even if its
estimates change. The forward-looking statements contained in this
report are subject to a number of factors and uncertainties, including
the successful:

    --  execution of the digital growth and profitability strategies,
        business model and cash plan;

    --  implementation of a changed segment structure;

    --  implementation of the cost reduction program, including asset
        rationalization and monetization, reduction in selling,
        general and administrative costs and personnel reductions;

    --  transition of certain financial processes and administrative
        functions to a global shared services model and the
        outsourcing of certain functions to third parties;

    --  implementation of, and performance under, the debt management
        program, including compliance with the Company's debt
        covenants;

    --  implementation of product strategies (including category
        expansion and digital products) and go-to-market strategies;

    --  protection, enforcement and defense of the Company's
        intellectual property, including defense of our products
        against the intellectual property challenges of others;

    --  implementation of intellectual property licensing and other
        strategies;

    --  development and implementation of e-commerce strategies,
        including on line services;

    --  completion of information systems upgrades, including SAP, the
        Company's enterprise system software;

    --  completion of various portfolio actions;

    --  reduction of inventories;

    --  integration of acquired businesses; improvement in
        manufacturing productivity and techniques;

    --  improvement in receivables performance; improvement in supply
        chain efficiency and management of third-party sourcing
        relationships; and

    --  implementation of the strategies designed to address the
        decline in the Company's traditional businesses.

    The forward-looking statements contained in this report are
subject to the following additional risk factors:

    --  inherent unpredictability of currency fluctuations, commodity
        prices and raw material costs;

    --  competitive actions, including pricing;

    --  changes in the Company's debt credit ratings and its ability
        to access capital markets;

    --  the nature and pace of technology evolution, including the
        traditional-to-digital transformation;

    --  continuing customer consolidation and buying power;

    --  current and future proposed changes to accounting rules and to
        tax laws, as well as other factors which could adversely
        impact the Company's reported financial position, effective
        tax rate;

    --  general economic, business, geo-political and regulatory
        conditions;

    --  market growth predictions;

    --  continued effectiveness of internal controls; and

    --  other factors and uncertainties disclosed from time to time in
        the Company's filings with the Securities and Exchange
        Commission.

    Any forward-looking statements in this report should be evaluated
in light of these important factors and uncertainties.



Eastman Kodak Company
Third Quarter 2006 Results
Non-GAAP Reconciliations


    Within the Company's third quarter 2006 press release, the Company
makes reference to certain non-GAAP financial measures including
"digital earnings increase", "digital revenue", "traditional revenue",
"investable cash flow", "expected investable cash flow", "expected
digital earnings from operations", "digital revenue growth", "digital
earnings goals". Whenever such information is presented, the Company
has complied with the provisions of the rules under Regulation G and
Item 2.02 of Form 8-K. The specific reasons why the Company's
management believes that the presentation of each of these non-GAAP
financial measures provides useful information to investors regarding
Kodak's financial condition, results of operations and cash flows has
been provided in the Form 8-K filed in connection with this press
release.

    The following table reconciles digital earnings to the most
directly comparable GAAP measure of net loss (dollar amounts in
millions):



                                                            Increase/
                                       Q3 2006    Q3 2005   (Decrease)
                                      ---------- ---------- ----------

Digital earnings, as presented        $     105  $       7  $      98
Traditional and new technologies
 earnings                                   109        148        (39)
Restructuring costs and other
 decrease                                  (212)      (278)       (66)
                                      ---------- ---------- ----------
Earnings (loss) from continuing
 operations before interest, other
 income (charges), net and income
 taxes (GAAP basis), as presented             2       (123)       125
Interest expense                            (74)       (57)        17
Other income (charges), net                  54         (9)        63
Provision for income taxes                   19        726       (707)
                                      ---------- ---------- ----------
Net loss (GAAP basis), as presented   $     (37) $    (914) $    (877)
                                      ========== ========== ==========


    The following table reconciles digital revenue, traditional
revenue, and new technologies revenue amounts to the most directly
comparable GAAP measure of consolidated revenue (dollar amounts in
millions):



                             Q3 2006   Q3 2005  Change from prior year
                            --------- --------- ----------------------

Digital revenue, as
 presented                  $  1,793  $  1,814                    - 1%
Traditional revenue, as
 presented                     1,402     1,725                    -19%
New technologies revenue           9        14                    -36%
                            --------- --------- ----------------------
Consolidated revenue (GAAP
 basis), as presented       $  3,204  $  3,553                    -10%
                            ========= ========= ======================


    The following table reconciles the net cash provided by continuing
operations relating to operating activities under US GAAP, to Kodak's
definition of (1) free cash flow, (2) operating cash flow, and (3)
investable cash flow:



                             3rd Quarter
- ----------------------------------------------------------------------
($ amounts in millions)                            2006       2005
                                                 ---------- ----------
Net cash provided by continuing operations
 relating to operating activities, as presented  $     329  $     370
Additions to properties                                (98)      (122)
                                                 ---------- ----------
Free Cash Flow (continuing operations)                 231        248
Net proceeds from sales of businesses/assets            79         40
Investments in unconsolidated affiliates                (1)         -
Acquisitions, net of cash acquired                      (3)         -
Dividends                                              (72)       (72)
                                                 ---------- ----------
Operating Cash Flow (continuing operations)            234        216
Acquisitions, net of cash acquired                       3          -
                                                 ---------- ----------
Investable Cash Flow (continuing operations), as
 presented                                       $     237  $     216
- ------------------------------------------------ ---------- ----------


    The following table reconciles projected full year 2006 expected
investable cash flow to the most directly comparable GAAP measure of
expected full year 2006 net cash provided by operating activities from
continued operations (dollar amounts in millions):



                                                        2006 Plan
                                                    ------------------

Expected investable cash flow, as presented         $        400-$600

Additions to properties, net proceeds from sales of
 assets, distributions from/ (investments in)
 unconsolidated affiliates and dividends                          400
                                                    ------------------

Net cash provided by operating activities from
 continued operations (GAAP basis), as presented    $      800-$1,000
                                                    ==================


    The following table reconciles expected digital earnings from
operations goals to the most comparable GAAP measure of expected loss
from continuing operations before interest, other income (charges),
net and income taxes (dollar amounts in millions):



                                                        2006 Plan
                                                    ------------------

Expected digital earnings from operations goals, as
 presented                                          $        350-$450

Traditional earnings goals, new technologies
 earnings goals, restructuring costs and other
 discrete items goals                                      (950)-(850)
                                                    ------------------

Expected loss from continuing operations before
 interest, other income (charges), net and income
 taxes (GAAP basis), as presented                   $     (600)-$(400)
                                                    ==================

The following table reconciles projected full year 2006 digital
 revenue growth to the most comparable GAAP measure of total company
 revenue (decline) growth:
                                                         Forecast
                                                    ------------------

Digital revenue growth (including New
 Technologies), as presented                             Less than 10%
Traditional revenue decline                         Greater than (22)%
                                                    ------------------
Total Company revenue (decline) (GAAP basis), as
 presented                                                        (6)%


    As previously announced, the Company will only report its results
on a GAAP basis, which will be accompanied by a description of
non-operational items affecting its GAAP quarterly results by line
item in the statement of operations. The Company defines
non-operational items as restructuring and related charges, legal
settlements, in-process research and development charges related to
acquisitions, significant gains and losses on sales of assets, asset
impairments, the related tax effects of those items and certain other
significant items not related to the Company's core operations.
Non-operational items, as defined, are specific to the Company and
other companies may define the term differently. The following table
presents a description of the non-operational items affecting the
Company's quarterly results by line item in the statement of
operations for the third quarter of 2006 and 2005, respectively.



                                             3rd Quarter
                               ---------------------------------------
                                      2006                2005
(in millions, except per share
 data)
                                   $        EPS        $        EPS
                               --------- --------- --------- ---------

Loss from continuing operations
 - GAAP                         $   (37)  $ (0.13)  $  (915)  $ (3.19)
                                                             ---------

COGS

- - Charges for accelerated
 depreciation in connection
 with the focused cost
 reduction actions                   73                 105

- - Charges for inventory
 writedowns in connection with
 focused cost reduction actions       2                  10
                               --------- --------- --------- ---------
                       Subtotal      75      0.26       115      0.40
                               --------- --------- --------- ---------

R&D

- - Adjustment for in-process
 research and development for
 the Creo acquisition in 2005         -         -       (12)
                               --------- --------- --------- ---------
                       Subtotal       -         -       (12)    (0.04)
                               --------- --------- --------- ---------

Restructuring

- - Charges for focused cost
 reduction actions                  137                 163
                               --------- --------- --------- ---------
                       Subtotal     137      0.48       163      0.57
                               --------- --------- --------- ---------

Other Income/(Charges)

- - Gain on the sale of property
 related to focused cost
 reduction actions                  (43)                (21)

- - Adjustment of asset
 impairment in 2006 and charge
 for asset impairment in 2005        (2)                 21
                               --------- --------- --------- ---------
                       Subtotal     (45)    (0.16)        -         -
                               --------- --------- --------- ---------

Taxes

- - Net tax impacts of the above-
 mentioned items                      -                  79
                               --------- --------- --------- ---------
                       Subtotal       -         -        79   $  0.28
                               --------- --------- --------- ---------

Impact of Contingent
 Convertible Debt on EPS                    (0.01)



    CONTACT: Eastman Kodak Company
             Media:
             David Lanzillo, 585-781-5481
             david.lanzillo@kodak.com
             or
             Barbara Pierce, 585-724-5036
             barbara.pierce@kodak.com
             or
             Investor Relations:
             Don Flick, 585-724-4352
             donald.flick@kodak.com
             or
             Patty Yahn-Urlaub, 585-724-4683
             patty.yahn-urlaub@kodak.com
                                                                    Exhibit 99.2



                    FINANCIAL DISCUSSION DOCUMENT

    THIRD QUARTER 2006 COMPARED WITH THIRD QUARTER 2005

    CONSOLIDATED

    Worldwide Revenues

    Net worldwide sales were $3,204 million for the third quarter of
2006 as compared with $3,553 million for the third quarter of 2005,
representing a decrease of $349 million or 10%. The decrease in net
sales was primarily due to declines in volumes and unfavorable
price/mix, which decreased third quarter sales by approximately 8.0
and 2.5 percentage points, respectively. The decrease in volumes was
primarily driven by declines in the consumer film capture Strategic
Product Group (SPG), photofinishing services SPG, and consumer output
SPG within the FPG segment; the consumer digital capture SPG within
the CDG segment; the traditional consumables SPG within the GCG
segment; and the radiography film and digital output SPGs within the
KHG segment. The unfavorable price/mix was primarily driven by the
consumer film capture SPG and the consumer output SPG within the FPG
segment; and the workflow and prepress SPG and digital prepress
consumables SPG within the GCG segment. These declines were partially
offset by the favorable impact of foreign exchange of approximately
0.8 percentage points.

    Net sales in the U.S. were $1,288 million for the third quarter of
2006 as compared with $1,446 million for the prior year quarter,
representing a decrease of $158 million, or 11%. Net sales outside the
U.S. were $1,916 million for the current quarter as compared with
$2,107 million for the third quarter of 2005, representing a decrease
of $191 million, or 9%, which includes the positive impact of foreign
currency fluctuations of $25 million, or 1%.

    Digital Strategic Product Groups' Revenues

    The Company's digital product sales, including new technologies
product sales, were $1,802 million for the third quarter of 2006 as
compared with $1,828 million for the prior year quarter, representing
a decrease of $26 million, or 1%, primarily driven by the digital
capture SPG within the CDG segment and the digital output SPG within
the Health Group segment. Product sales from new technologies, which
are included in digital product sales, were $9 million for the third
quarter of 2006 and $14 million for the third quarter of 2005.

    Traditional Strategic Product Groups' Revenues

    Net sales of the Company's traditional products were $1,402
million for the third quarter of 2006 as compared with $1,725 million
for the prior year quarter, representing a decrease of $323 million,
or 19%, primarily driven by declines in the consumer film capture SPG,
the photofinishing services SPG and the consumer and professional
output SPGs in the FPG segment.

    Foreign Revenues

    The Company's operations outside the U.S. are reported in three
regions: (1) the Europe, Africa and Middle East region (EAMER), (2)
the Asia Pacific region and (3) the Canada and Latin America region.
Net sales in the EAMER region were $1,007 million for the third
quarter of 2006 as compared with $1,084 million for the prior year
quarter, representing a decrease of $77 million, or 7%. This decrease
in net sales for the period included the favorable impact of foreign
currency fluctuations of 2%. Net sales in the Asia Pacific region were
$589 million for the current quarter as compared with $670 million for
the prior year quarter, representing a decrease of $81 million, or
12%. The impact of foreign currency fluctuations for the period was
insignificant. Net sales in the Canada and Latin America region were
$320 million in the current quarter as compared with $353 million for
the third quarter of 2005, representing a decrease of $33 million, or
9%. The decrease in net sales for the period included the favorable
impact of foreign currency fluctuations of 2%.

    Gross Profit

    Gross profit was $874 million for the third quarter of 2006 as
compared with $922 million for the third quarter of 2005, representing
a decrease of $48 million, or 5%. The gross profit margin was 27.3% in
the current quarter as compared with 25.9% in the prior year quarter.
The 1.4 percentage point increase was primarily attributable to: (1)
reductions in manufacturing costs, which increased gross profit
margins by approximately 1.2 percentage points, (2) positive
price/mix, primarily attributable to the year-over-year increase in
royalty income related to digital capture, which increased gross
profit margins by approximately 0.5 percentage points, and (3) foreign
exchange, which positively impacted gross profit margins by
approximately 0.3 percentage points. These increases were partially
offset by volume declines, driven primarily by the consumer film
capture SPG within the FPG segment and traditional prepress
consumables SPG within the GCG segment, which reduced gross profit
margins by approximately 0.6 percentage points.

    Selling, General and Administrative Expenses

    Selling, general and administrative expenses (SG&A) were $565
million for the third quarter of 2006 as compared with $670 million
for the prior year quarter, representing a decrease of $105 million,
or 16%. SG&A as a percentage of sales decreased from 19% for the third
quarter of 2005 to 18% for the current year quarter. The absolute
dollar decrease in SG&A is primarily attributable to declines in
advertising spending, a reduction in selling expenses, and lower
employee benefit costs resulting from ongoing Company-wide cost
reduction initiatives.

    Research and Development Costs

    Research and development costs (R&D) were $170 million for the
third quarter of 2006 as compared with $212 million for the third
quarter of 2005, representing a decrease of $42 million, or 20%. R&D
as a percentage of sales was 5% for the third quarter of 2006 as
compared with the prior year quarter of 6%. This decrease was
primarily driven by significant spending reductions in the current
quarter related to traditional products and services, and was also
impacted by reductions in R&D spending related to the display
business.

    Restructuring Costs and Other

    Restructuring costs and other were $137 million for the third
quarter of 2006 as compared with $163 million for the third quarter of
2005, representing a decrease of $26 million or 16%. These costs, as
well as the restructuring costs reported in cost of goods sold, are
discussed in further detail under "RESTRUCTURING COSTS AND OTHER"
below.

    Earnings (Loss) From Continuing Operations Before Interest, Other
Income (Charges), Net and Income Taxes

    Earnings from continuing operations before interest, other income
(charges), net and income taxes for the third quarter of 2006 were $2
million as compared with a loss of $123 million for the third quarter
of 2005, representing an increase in earnings of $125 million. This
change is attributable to the reasons described above.

    Interest Expense

    Interest expense for the third quarter of 2006 was $74 million as
compared with $57 million for the prior year quarter, representing an
increase of $17 million, or 30%. Higher interest expense is a result
of a non-recurring charge related to a non-U.S. export tax claim, and
higher interest rates under the Company's October 2005 $2.7 billion
Senior Secured Credit Facilities.

    Other Income (Charges), Net

    The other income (charges), net component includes principally
investment income, income and losses from equity investments, gains
and losses on the sales of assets and investments, and foreign
exchange gains and losses. Other income for the current quarter was
$54 million as compared with other charges of $9 million for the third
quarter of 2005. The increase of $63 million is primarily attributable
to: (1) $43 million of gains on property and asset sales related to
focused cost reduction actions, (2) fluctuations in gains/losses on
foreign exchange, which resulted in a year-over-year increase in other
income of $12 million, and (3) a year-over-year increase in interest
income of $9 million.

    Loss From Continuing Operations Before Income Taxes

    The loss from continuing operations before income taxes for the
third quarter of 2006 was $18 million as compared with a loss of $189
million for the third quarter of 2005, representing an increase in
earnings of $171 million. This change is attributable to the reasons
described above.

    Income Tax Provision

    For the three months ended September 30, 2006, the Company
recorded a provision of $19 million on a pre-tax loss of $18 million,
representing an effective rate of (105.6)%. The difference of $25
million between the recorded provision of $19 million and the benefit
of $6 million that would result from applying the U.S. statutory rate
of 35.0% is outlined below.

    For the three months ended September 30, 2005, the Company
recorded a provision of $726 million on a pre-tax loss of $189
million, representing an effective rate of (384.1)%. The difference of
$792 million between the recorded provision of $726 million and the
benefit of $66 million that would result from applying the U.S.
statutory rate of 35.0% is outlined below.



 (dollars in millions)                   3 Months Ended 3 Months Ended
                                          September 30,  September 30,
                                              2006           2005

- -- The ongoing impact of not providing
 any tax benefit on the losses incurred
 in the U.S., partially offset by the
 impact of the pre-tax earnings outside
 the U.S. being generated in
 jurisdictions with a net effective tax
 rate that is lower than the U.S.
 statutory rate. The Company was
 recording the write-down of its net
 deferred assets in the U.S. resulting
 from the Company's assessment of the
 realizability of the net deferred
 assets as of and for the three months
 ended September 30, 2005.                       $ (14)         $ (88)

- -- The Company recorded discrete pre-tax
 charges for restructuring, asset sale
 gains, asset impairments, and a legal
 settlement charge totaling $168 million
 in the three months ended September 30,
 2006, relating to which the Company
 recorded a tax benefit of $1 million.
 This benefit differs from the benefit
 that would have resulted using the U.S.
 statutory rate of $59 million due to
 the fact that the restructuring charges
 recorded in the U.S. have not been
 benefited, combined with the fact that
 the charges recorded outside the U.S.
 have been incurred in jurisdictions
 that have a net tax rate that is lower
 than the U.S. statutory rate.                      58             --

- -- The Company recorded discrete pre-tax
 charges for restructuring, property
 sales due to focused cost reductions,
 asset impairments and in-process R&D
 charges totaling $258 million in the
 three months ended September 30, 2005,
 relating to which the Company recorded
 a tax provision of $88 million. This
 provision differs from the benefit that
 would have resulted using the U.S.
 statutory rate of $90 million due to
 the fact that the restructuring charges
 recorded in the U.S. have not been
 benefited, combined with the fact that
 the charges recorded outside the U.S.
 have been incurred in jurisdictions
 that have a net tax rate that is lower
 than the U.S. statutory rate.                      --            178

- -- The Company recorded discrete tax
 charges in the three months ended
 September 30, 2006 relating primarily
 to tax rate changes and impacts from
 the ongoing tax audits with respect to
 open tax years totaling $19 million.              (19)            --

- -- The Company recorded discrete tax
 charges in the three months ended
 September 30, 2005 relating primarily
 to the establishment of a valuation
 allowance against net deferred tax
 assets in the U.S. and other foreign
 jurisdictions, the planned remittance
 of earnings from subsidiary companies
 outside the U.S. and other tax
 adjustments.                                       --            702
                                         -------------- --------------

Total tax provision difference resulting
 from the Company's effective tax rate
 vs. the U.S. statutory rate                       $25           $792
                                         ============== ==============


    On October 3, 2006, the Company filed a claim for a federal tax
refund of approximately $650 million related to a 1994 loss recognized
on the sale of a subsidiary stock that was disallowed at that time
under Internal Revenue Service (IRS) regulations. Since that time, the
IRS has issued new regulations that serve as the basis for this refund
claim. Due to the uncertainty of the claim, the Company, in accordance
with its accounting policies, has not recorded a tax benefit related
to this refund claim.

    Loss From Continuing Operations

    The loss from continuing operations for the third quarter of 2006
was $37 million, or $.13 per basic and diluted share, as compared with
a loss from continuing operations for the third quarter of 2005 of
$915 million, or $3.19 per basic and diluted share, representing an
increase in earnings of $878 million. This decrease in loss from
continuing operations is attributable to the reasons described above.

    CONSUMER DIGITAL IMAGING GROUP

    Worldwide Revenues

    Net worldwide sales for the Consumer Digital Imaging Group (CDG)
segment were $640 million for the third quarter of 2006 as compared
with $659 million for the third quarter of 2005, representing a
decrease of $19 million, or 3%. The decrease in net sales was
comprised of: (1) declines related to unfavorable price/mix, driven
primarily by the kiosk SPG and the home printing solutions SPG, which
reduced net sales by approximately 3.0 percentage points, and (2)
lower volumes, which decreased third quarter sales by approximately
0.7 percentage points, driven primarily by declines in the consumer
digital capture SPG. These decreases were partially offset by
favorable exchange, which increased net sales by approximately 0.9
percentage points.

    CDG segment net sales in the U.S. were $401 million for the
current quarter as compared with $400 million for the third quarter of
2005, representing an increase of $1 million, or less than 1%. CDG
segment net sales outside the U.S. were $239 million for the third
quarter of 2006 as compared with $259 million for the prior year
quarter, representing a decrease of $20 million, or 8%.

    Net worldwide sales of consumer digital capture products, which
include consumer digital cameras, accessories, memory products,
imaging sensors, and intellectual property royalties, decreased 7% in
the third quarter of 2006 as compared with the prior year quarter,
primarily reflecting volume decreases, partially offset by positive
price/mix, which was primarily driven by the impact of a non-recurring
extension and amendment to an existing license arrangement executed
during the current quarter. On a year to date basis through August,
the Company remains in the top three market position, in both the U.S.
and worldwide, for consumer digital cameras.

    Net worldwide sales of picture maker kiosks/media (the kiosk SPG)
increased 11% in the third quarter of 2006 as compared with the third
quarter of 2005, as a result of volume increases and favorable
exchange, partially offset by negative price/mix. Sales continue to be
driven by strong consumable sales at retail locations with 4x6 media
volumes increasing 45% versus last year.

    Net worldwide sales of the home printing solutions SPG, which
includes inkjet photo paper and printer docks/media, decreased 7% in
the current quarter as compared with the third quarter of 2005 driven
by volume declines and negative price/mix, partially offset by
favorable exchange. On a year to date basis through August, the
Company's printer dock product continues to maintain a leading market
share position in the U.S.

    Gross Profit

    Gross profit for the CDG segment was $179 million for the third
quarter of 2006 as compared with $125 million for the prior year
quarter, representing an increase of $54 million or 43%. The gross
profit margin was 28.0% in the current quarter as compared with 19.0%
in the prior year quarter. The 9.0 percentage point increase was
primarily attributable to a reduction in manufacturing costs,
improvements in price/mix, and the favorable impact of foreign
exchange. The reduction in manufacturing costs increased gross profit
margins by approximately 2.7 percentage points. Improvements in
price/mix impacted gross profit margins by approximately 6.0
percentage points, largely due to a non-recurring extension and
amendment to an existing license arrangement during the current
quarter, which positively impacted gross profit margins by
approximately 7 percentage points, offset by unfavorable price/mix,
which negatively impacted gross profit margins by approximately l
percentage point. Foreign exchange increased gross profit margins by
approximately 0.4 percentage points.

    Selling, General and Administrative Expenses

    SG&A expenses for the CDG segment decreased $25 million, or 18%,
from $142 million in the third quarter of 2005 to $117 million in the
current quarter, and decreased as a percentage of sales from 22% for
the third quarter of 2005 to 18% for the current quarter. This
decrease was primarily driven by an $18 million decline in advertising
spending.

    Research and Development Costs

    R&D costs for the CDG segment decreased $7 million, or 16%, from
$45 million in the third quarter of 2005 to $38 million in the current
quarter and decreased as a percentage of sales from 7% in the prior
year quarter to 6% in the current year quarter.

    Earnings (Loss) From Continuing Operations Before Interest, Other
Income (Charges), Net and Income Taxes

    Earnings from continuing operations before interest, other income
(charges), net and income taxes for the CDG segment were $24 million
in the third quarter of 2006 compared with a loss of $61 million in
the third quarter of 2005, representing an increase in earnings of $85
million or 139%, as a result of the factors described above.

    FILM AND PHOTOFINISHING SYSTEMS GROUP

    Worldwide Revenues

    Net worldwide sales for the Film and Photofinishing Systems Group
(FPG) segment were $1,074 million for the third quarter of 2006 as
compared with $1,353 million for the third quarter of 2005,
representing a decrease of $279 million, or 21%. The decrease in net
sales was comprised of lower volumes driven primarily by declines in
the consumer film capture SPG, the consumer output SPG, and the
photofinishing services SPG, which decreased third quarter sales by
approximately 19.5 percentage points, and declines related to negative
price/mix, driven primarily by the consumer film capture SPG and
consumer output SPG, which reduced net sales by approximately 2.6
percentage points. These declines were partially offset by favorable
foreign exchange, which increased net sales by approximately 1.2
percentage points.

    FPG segment net sales in the U.S. were $350 million for the
current quarter as compared with $445 million for the third quarter of
2005, representing a decrease of $95 million, or 21%. FPG segment net
sales outside the U.S. were $724 million for the third quarter of 2006
as compared with $908 million for the prior year quarter, representing
a decrease of $184 million, or 20%.

    Net worldwide sales of the consumer film capture SPG, including
consumer roll film (35mm and APS film), one-time-use cameras (OTUC),
professional films, reloadable traditional film cameras and
batteries/videotape, decreased 25% in the third quarter of 2006 as
compared with the third quarter of 2005, primarily reflecting industry
volume declines.

    Net worldwide sales for the consumer and professional output SPGs,
which include color negative paper and photochemicals, decreased 22%
in the third quarter of 2006 as compared with the third quarter of
2005, primarily reflecting volume declines and unfavorable price/mix,
partially offset by favorable exchange. The volume declines are
largely driven by the substantial reduction of direct sales of minilab
equipment, which began in the third quarter of 2005, as the Company
has shifted its focus to providing minilab services.

    Net worldwide sales for the photofinishing services SPG, which
includes equipment and photofinishing services at retail on-site and
Qualex in the U.S. and CIS (Consumer Imaging Services) outside the
U.S., decreased 43% in the third quarter of 2006 as compared with the
third quarter of 2005, reflecting continuing volume declines in the
development and processing of consumer films.

    Net worldwide sales for the entertainment imaging SPGs, including
origination and print films for the entertainment industry, increased
3%, primarily reflecting volume increases in color print films, and
favorable exchange.

    Gross Profit

    Gross profit for the FPG segment was $307 million for the third
quarter of 2006 as compared with $432 million for the prior year
quarter, representing a decrease of $125 million or 29%. The gross
profit margin was 28.6% in the current quarter as compared with 31.9%
in the prior year quarter. The 3.3 percentage point decrease was
primarily attributable to increased manufacturing costs, which reduced
gross profit margins by approximately 2.2 percentage points and were
largely driven by increased silver costs. Volume declines reduced
gross profit margins by approximately 0.8 percentage points, while
negative price/mix unfavorably impacted gross profit margins by
approximately 0.7 percentage points. These declines were partially
offset by favorable exchange, which increased gross profit margins by
approximately 0.4 percentage points.

    Selling, General and Administrative Expenses

    SG&A expenses for the FPG segment decreased $80 million, or 34%,
from $238 million in the third quarter of 2005 to $158 million in the
current quarter, and decreased as a percentage of sales from 18% in
the prior year quarter to 15% in the current year quarter. The decline
in SG&A was attributable to ongoing Company-wide cost reduction
initiatives.

    Research and Development Costs

    R&D costs for the FPG segment decreased $10 million, or 53%, from
$19 million in the third quarter of 2005 to $9 million in the current
quarter and remained constant as a percentage of sales at 1%. The
decrease in R&D was primarily attributable to reductions in spending
related to traditional products and services.

    Earnings From Continuing Operations Before Interest, Other Income
(Charges), Net and Income Taxes

    Earnings from continuing operations before interest, other income
(charges), net and income taxes for the FPG segment were $139 million
in the third quarter of 2006 compared with earnings of $174 million in
the third quarter of 2005, representing a decrease of $35 million or
20%, primarily as a result of increased silver costs and other factors
described above.

    GRAPHIC COMMUNICATIONS GROUP

    The Graphic Communications Group (GCG) segment serves a variety of
customers in the in-plant, data center, commercial printing,
packaging, newspaper and digital service bureau markets with a range
of software, consumables, and hardware products that provide customers
with a range of solutions for prepress, traditional and digital
printing, and document scanning and multi-vendor IT services.

    During the second quarter of 2006, the Company indicated that, as
a result of ongoing integration of acquisitions within the Graphic
Communications Group, it had become increasingly difficult to report
results by the discrete businesses that were acquired. Therefore,
beginning with the current quarter, results for the GCG segment are
reported using the following SPG structure:

    --  Digital Prepress Consumables - digital plates, chemistry,
        media and services

    --  NexPress Color - equipment, consumables and services for
        NexPress color products, and direct image press equipment

    --  Commercial Inkjet Printing Solutions - Versamark equipment,
        consumables and service

    --  Workflow and Prepress - workflow software, output devices,
        proofing equipment, and services

    --  Other Digital - electrophotographic black and white equipment
        and consumables, document scanners and services, wide format
        inkjet, imaging services

    --  Traditional - analog plates, graphics and other films, paper,
        media equipment, archival products

    Worldwide Revenues

    Net worldwide sales for the Graphic Communications Group segment
were $880 million for the third quarter of 2006 as compared with $886
million for the prior year quarter, representing a decrease of $6
million, or 1%. The decrease in net sales was primarily due to
unfavorable price/mix, primarily driven by the workflow and prepress
SPG and digital prepress consumables SPG, which decreased third
quarter sales by approximately 3.5 percentage points. These negative
impacts of price/mix were partially offset by overall volume
increases, which increased sales by approximately 2.8 percentage
points. Volume declines for traditional products, as defined above,
reduced total sales by approximately 3.8 percentage points. These
declines in volume were more than offset by volume increases in other
SPGs, primarily driven by the digital prepress consumables SPG and
commercial inkjet solutions SPG, which in total resulted in sales
increases of approximately 6.6 percentage points from the prior year
quarter.

    Net sales in the U.S. were $314 million for the current quarter as
compared with $331 million for the prior year quarter, representing a
decrease of $17 million, or 5%. Net sales outside the U.S. were $566
million in the third quarter of 2006 as compared with $555 million for
the prior year quarter, representing an increase of $11 million, or
2%.

    Digital Strategic Product Groups' Revenues

    The Graphic Communications Group segment digital product sales are
comprised of the digital prepress consumables SPG; NexPress color SPG;
commercial inkjet printing solutions SPG; workflow and prepress
systems SPG; and other digital SPG.

    Digital product sales for the Graphic Communications Group segment
were $754 million for the third quarter of 2006 as compared with $746
million for the prior year quarter, representing an increase of $8
million, or 1%. The increase in digital product sales was primarily
attributable to increases in the digital prepress consumables SPG,
commercial inkjet printing solutions SPG, and the NexPress color SPG,
largely offset by declines in the workflow and prepress SPG and other
digital products and services.

    Net worldwide sales of digital prepress consumables increased 15%
in the current quarter as compared with the prior year quarter,
primarily driven by strong volume increases as the Company continues
to benefit from digital industry growth.

    Net worldwide sales for the workflow and prepress SPG decreased
15% in the current quarter as compared with the prior year quarter.
Sales declines were partially offset by growth in workflow software.

    Net worldwide sales for the NexPress color SPG increased 9%
primarily driven by a 25% revenue increase in NexPress color equipment
and consumables, partially offset by direct image press equipment
sales, which declined 73%. The installed base of digital production
color presses continues to grow, with average monthly page volumes
increasing 75% in the current quarter versus the prior year quarter,
leading to an increase in consumables sales of 78%.

    Net worldwide sales of commercial inkjet printing solutions
increased 22% in the current quarter as compared with the third
quarter of 2005. Overall sales increases were driven by higher
equipment placements and a growing annuity business in the
transactional print market.

    Net worldwide sales of other digital products and services
decreased 9% in the current quarter as compared with the prior year
quarter, driven primarily by volume declines for electrophotographic
black and white equipment and consumables, and wide format inkjet.
These decreases were partially offset by sales increases for document
scanners.

    Traditional Strategic Product Groups' Revenues

    Segment traditional product sales are primarily comprised of sales
of traditional graphics products and other films, paper, media,
equipment, archival products, and analog plates. These sales were $126
million for the current quarter compared with $140 million for the
prior year quarter, representing a decrease of $14 million, or 10%.
The decrease in sales was primarily attributable to declines in analog
plates and graphic films as the industry continues to transition to
digital.

    Gross Profit

    Gross profit for the Graphic Communications Group segment was $246
million for the third quarter of 2006 as compared with $230 million in
the prior year quarter, representing an increase of $16 million, or
7%. The gross profit margin was 28.0% in the current quarter as
compared with 26.0% in the prior year quarter. The increase in the
gross profit margin of 2.0 percentage points was primarily
attributable to reductions in manufacturing and other costs, which
more than offset the impact of increased silver and aluminum commodity
costs and which increased gross profit margins by approximately 2.1
percentage points. The impacts from foreign exchange, volume, and
price/mix on gross profit margins were not significant.

    Selling, General and Administrative Expenses

    SG&A expenses for the Graphic Communications Group segment were
$165 million for the third quarter of 2006 as compared with $164
million in the prior year quarter, representing an increase of $1
million, or 1%, and remained constant as a percentage of sales at 19%.
Realized cost integration savings were offset by redistribution of
corporate costs associated with bringing acquired businesses into the
Kodak portfolio.

    Research and Development Costs

    Third quarter R&D costs for the Graphic Communications Group
segment decreased $10 million, or 17%, from $59 million for the third
quarter of 2005 to $49 million for the current quarter, and decreased
as a percentage of sales from 7% for the third quarter of 2005 to 6%
for the current quarter. The year-over-year decrease was primarily
driven by savings realized from integration activities, partially
offset by the impact of a $12 million purchase accounting credit in
the prior year quarter for purchased in-process R&D associated with
acquisitions.

    Earnings From Continuing Operations Before Interest, Other Income
(Charges), Net and Income Taxes

    Earnings from continuing operations before interest, other income
(charges), net and income taxes for the Graphic Communications Group
segment were $31 million in the third quarter of 2006 compared with
earnings of $7 million in the third quarter of 2005. This increase in
earnings is attributable to the reasons outlined above.

    HEALTH GROUP

    Worldwide Revenues

    Net worldwide sales for the Health Group segment were $597 million
for the third quarter of 2006 as compared with $635 million for the
prior year quarter, representing a decrease of $38 million, or 6%. The
decrease in sales was attributable to volume declines of approximately
6.1 percentage points, primarily driven by the radiology film and
digital output SPGs, partially offset by the growth in the digital
capture SPG, digital dental SPG, and healthcare information solutions
SPG. Unfavorable price/mix reduced third quarter sales by
approximately 0.9 percentage points, primarily driven by the digital
output SPG. These declines were partially offset by favorable
exchange, which increased net sales by approximately 1.0 percentage
points.

    Net sales in the U.S. were $215 million for the current quarter as
compared with $260 million for the third quarter of 2005, representing
a decrease of $45 million, or 17%. Net sales outside the U.S. were
$382 million for the third quarter of 2006 as compared with $375
million for the prior year quarter, representing an increase of $7
million, or 2%.

    Digital Strategic Product Groups' Revenues

    Health Group segment digital sales, which include digital output
(DryView laser imagers/media and wet laser printers/media), digital
capture systems (computed radiography and digital radiography
equipment), digital dental systems (practice management software and
digital and computed radiography capture equipment), healthcare
information solutions (Picture Archiving and Communications Systems
(PACS)), Radiology Information Systems (RIS) and Information
Management Solutions (IMS), and associated services were $399 million
for the current quarter as compared with $409 million for the third
quarter of 2005, representing a decrease of $10 million, or 2%. This
sales decline was driven by declines in the digital output SPG,
partially offset by growth in the digital capture SPG, the digital
dental SPG, and the healthcare information solutions SPG.

    Traditional Strategic Product Groups' Revenues

    Segment traditional product sales, including analog and dental
film, equipment, service, and chemistry, were $198 million for the
current quarter as compared with $226 million for the third quarter of
2005, representing a decrease of $28 million, or 12%. Sales declines
were primarily driven by volume decreases in traditional radiology
film products.

    Gross Profit

    Gross profit for the Health Group segment was $218 million for the
third quarter of 2006 as compared with $252 million in the prior year
quarter, representing a decrease of $34 million, or 13%. The gross
profit margin was 36.5% in the current quarter as compared with 39.7%
in the third quarter of 2005. The decrease in the gross profit margin
of 3.2 percentage points was principally attributable to increases in
manufacturing costs, which decreased gross profit margins by
approximately 2.1 percentage points, largely resulting from increased
silver costs. Also contributing to this decrease in gross profit
margins was unfavorable price/mix, which negatively impacted gross
profit margins by approximately 1.0 percentage points primarily driven
by the digital output SPG and the digital capture SPG. The impacts
from foreign exchange and volume on gross profit margins were not
significant.

    Selling, General and Administrative Expenses

    SG&A expenses for the Health Group segment increased $3 million,
or 3%, from $115 million in the third quarter of 2005 to $118 million
for the current quarter, and increased as a percentage of sales from
18% in the prior year quarter to 20% in the current year quarter. The
increase in SG&A expenses is primarily attributable to $9 million of
spending related to the Company's exploration of strategic
alternatives for the Health Group, which was announced on May 4, 2006,
partially offset by cost reduction activities.

    Research and Development Costs

    Third quarter R&D costs decreased $7 million, or 18%, from $40
million in the third quarter of 2005 to $33 million, and remained
constant as a percentage of sales at 6%. This decline is primarily
attributable to planned reductions in R&D spending for the Health
Group, specifically in the digital output SPG and the digital capture
SPG.

    Earnings From Continuing Operations Before Interest, Other Income
(Charges), Net and Income Taxes

    Earnings from continuing operations before interest, other income
(charges), net and income taxes for the Health segment decreased $28
million, or 29%, from $96 million for the prior year quarter to $68
million for the third quarter of 2006 due to the reasons described
above.

    ALL OTHER

    Worldwide Revenues

    Net worldwide sales for All Other were $13 million for the third
quarter of 2006 as compared with $20 million for the third quarter of
2005, representing a decrease of $7 million, or 35%. Net sales in the
U.S. were $8 million for the third quarter of 2006 as compared with
$10 million for the prior year quarter, representing a decrease of $2
million, or 20%. Net sales outside the U.S. were $5 million in the
third quarter of 2006 as compared with $10 million in the prior year
quarter, representing a decrease of $5 million, or 50%.

    Loss From Continuing Operations Before Interest, Other Income
(Charges), Net and Income Taxes

    The loss from continuing operations before interest, other income
(charges), net and income taxes for All Other was $48 million in the
current quarter as compared with a loss of $61 million in the third
quarter of 2005, primarily driven by reductions in R&D spending for
the display business.

    NET LOSS

    The consolidated net loss for the third quarter of 2006 was $37
million, or a loss of $.13 per basic and diluted share, as compared
with a net loss for the third quarter of 2005 of $914 million, or a
loss of $3.18 per basic and diluted share, representing an increase in
earnings of $877 million or 96%. This increase is attributable to the
reasons outlined above.

    RESTRUCTURING COSTS AND OTHER

    The Company is currently undergoing the transformation from a
traditional products and services company to a digital products and
services company. In connection with this transformation, the Company
announced a cost reduction program in January 2004 that would extend
through 2006 to achieve the appropriate business model and to
significantly reduce its worldwide facilities footprint. In July 2005,
the Company announced an extension to this program into 2007 to
accelerate its digital transformation, which included further cost
reductions that will result in a business model consistent with what
is necessary to compete profitably in digital markets.

    In connection with its announcement relating to the extended
"2004-2007 Restructuring Program," the Company has provided estimates
with respect to (1) the number of positions to be eliminated, (2) the
facility square footage reduction, (3) the reduction in its
traditional manufacturing infrastructure, (4) the total restructuring
charges to be incurred, (5) incremental annual savings, and (6)
incremental cash charges associated with these actions.

    The actual charges for initiatives under this program are recorded
in the period in which the Company commits to formalized restructuring
plans or executes the specific actions contemplated by the program and
all criteria for restructuring charge recognition under the applicable
accounting guidance have been met.



                    Restructuring Programs Summary


    The activity in the accrued restructuring balances and the
non-cash charges incurred in relation to all of the restructuring
programs described below were as follows for the third quarter of
2006:




                                 Balance
(in millions)                    June 30,  Costs               Cash
                                  2006    Incurred Reversals Payments
                                 -------- -------- --------- ---------
2004-2007 Restructuring Program:

Severance reserve                $   280  $    97  $      -  $   (90)
Exit costs reserve                    29       14         -      (21)
                                 -------- -------- --------- ---------
  Total reserve                  $   309  $   111  $      -  $  (111)
                                 ======== ======== ========= =========

Long-lived asset impairments and
 inventory write-downs           $     -  $    28  $      -  $     -
                                 ======== ======== ========= =========


Accelerated depreciation         $     -  $    73  $      -  $     -
                                 ======== ======== ========= =========

Pre-2004 Restructuring Programs:

Severance reserve                $     -  $     -  $      -  $     -
Exit costs reserve                    12        -         -       (1)
                                 -------- -------- --------- ---------
  Total reserve                  $    12  $     -  $      -  $    (1)
                                 ======== ======== ========= =========

Total of all restructuring
 programs                        $   321  $   212  $      -  $  (112)
                                 ======== ======== ========= =========


                                                   Other
                                                Adjustments   Balance
(in millions)                       Non-cash        and      Sept. 30,
                                   Settlements Reclasses (1)   2006
                                   ----------- ------------- ---------
2004-2007 Restructuring Program:

Severance reserve                  $        -  $         13  $    300
Exit costs reserve                          -             2        24
                                   ----------- ------------- ---------
  Total reserve                    $        -  $         15  $    324
                                   =========== ============= =========

Long-lived asset impairments and
 inventory write-downs             $      (28) $          -  $      -
                                   =========== ============= =========


Accelerated depreciation           $      (73) $          -  $      -
                                   =========== ============= =========

Pre-2004 Restructuring Programs:

Severance reserve                  $        -  $          -  $      -
Exit costs reserve                          -             -        11
                                   ----------- ------------- ---------
  Total reserve                    $        -  $          -  $     11
                                   =========== ============= =========

Total of all restructuring
 programs                          $     (101) $         15  $    335
                                   =========== ============= =========






(1) The total restructuring charges of $212 million include:
    (1) pension and other postretirement charges and credits for
    curtailments, settlements and special termination benefits, and
    (2) environmental remediation charges that resulted from the
    Company's ongoing restructuring actions. However, because the
    impact of these charges and credits relate to the accounting for
    pensions, other postretirement benefits, and environmental
    remediation costs, the related impacts on the Consolidated
    Statement of Financial Position are reflected in their respective
    components as opposed to within the accrued restructuring balances
    at September 30, 2006. Accordingly, the Other Adjustments and
    Reclasses column of the table above includes: (1)
    reclassifications to Other long-term assets and Pension and other
    postretirement liabilities for the position elimination-related
    impacts on the Company's pension and other postretirement employee
    benefit plan arrangements, including net curtailment gains,
    settlement losses, and special termination benefits of $11
    million, and (2) reclassifications to Other long-term liabilities
    for the restructuring-related impacts on the Company's
    environmental remediation liabilities of $2 million. Additionally,
    the Other Adjustments and Reclasses column of the table above
    includes foreign currency translation adjustments of $2 million,
    which are reflected in Accumulated other comprehensive loss in the
    Consolidated Statement of Financial Position.


    The costs incurred, which total $212 million for the three months
ended September 30, 2006, include $73 million and $2 million of
charges related to accelerated depreciation and inventory write-downs,
respectively, that were reported in cost of goods sold in the
accompanying Consolidated Statement of Operations for the three months
ended September 30, 2006. The remaining costs incurred of $137 million
were reported as restructuring costs and other in the accompanying
Consolidated Statement of Operations for the three months ended
September 30, 2006. The severance costs and exit costs require the
outlay of cash, while long-lived asset impairments, accelerated
depreciation and inventory write-downs represent non-cash items.



                    2004-2007 Restructuring Program


    The Company announced on January 22, 2004 that it planned to
develop and execute a comprehensive cost reduction program throughout
the 2004 to 2006 timeframe. The objective of these actions is to
achieve a business model appropriate for the Company's traditional
businesses, and to sharpen the Company's competitiveness in digital
markets.

    The Program was expected to result in total charges of $1.3
billion to $1.7 billion over the three-year period, of which $700
million to $900 million are related to severance, with the remainder
relating to the disposal of buildings and equipment. Overall, the
Company's worldwide facility square footage was expected to be reduced
by approximately one-third. Approximately 12,000 to 15,000 positions
worldwide were expected to be eliminated through these actions
primarily in global manufacturing, selected traditional businesses and
corporate administration.

    On July 20, 2005, the Company announced that it would extend the
restructuring activity, originally announced in January 2004, as part
of its efforts to accelerate its digital transformation and to respond
to a faster-than-expected decline in consumer film sales. As a result
of this announcement, the overall restructuring program was renamed
the "2004-2007 Restructuring Program." Under the 2004-2007
Restructuring Program, the Company expected to increase the total
employment reduction to a range of 22,500 to 25,000 positions, and to
reduce its traditional manufacturing infrastructure to approximately
$1 billion, compared with $2.9 billion as of December 31, 2004. These
changes were expected to increase the total charges under the Program
to a range of $2.7 billion to $3.0 billion. Based on the actual
actions taken through the end of the third quarter of 2006 under this
Program and an understanding of the estimated remaining actions to be
taken, the Company expects that the employment reductions and total
charges under this Program will be within the ranges of 25,000 to
27,000 positions and $3.0 billion to $3.4 billion, respectively, as
indicated in the second quarter 2006 Form 10-Q. When essentially
completed in 2007, the activities under this Program will result in a
business model consistent with what is necessary to compete profitably
in digital markets.

    The Company implemented certain actions under the Program during
the third quarter of 2006. As a result of these actions, the Company
recorded charges of $139 million in the third quarter of 2006, which
were composed of severance, long-lived asset impairments, exit costs
and inventory write-downs of $97 million, $26 million, $14 million and
$2 million, respectively. The severance costs related to the
elimination of approximately 1,650 positions, including approximately
800 manufacturing, 600 administrative, and 250 research and
development positions. The geographic composition of the positions to
be eliminated includes approximately 1,050 in the United States and
Canada and 600 throughout the rest of the world. The reduction of the
1,650 positions and the $111 million charges for severance and exit
costs are reflected in the 2004-2007 Restructuring Program table
below. The $26 million charge in the third quarter and the $72 million
year-to-date charge for long-lived asset impairments were included in
restructuring costs and other in the accompanying Consolidated
Statement of Operations for the three and nine months ended September
30, 2006, respectively. The charges taken for inventory write-downs of
$2 million and $8 million were reported in cost of goods sold in the
accompanying Consolidated Statement of Operations for the three and
nine months ended September 30, 2006, respectively.

    As a result of initiatives implemented under the 2004-2007
Restructuring Program, the Company recorded $73 million and $227
million of accelerated depreciation on long-lived assets in cost of
goods sold in the accompanying Consolidated Statement of Operations
for the three and nine months ended September 30, 2006, respectively.
The accelerated depreciation relates to long-lived assets accounted
for under the held and used model of SFAS No. 144. The third quarter
amount of $73 million relates to $70 million of manufacturing
facilities and equipment, $2 million of photofinishing facilities and
equipment, and $1 million of administrative facilities and equipment
that will be used until their abandonment. The year-to-date amount of
$227 million relates to $6 million of photofinishing facilities and
equipment, $219 million of manufacturing facilities and equipment, and
$2 million of administrative facilities and equipment that will be
used until their abandonment. The Company will incur approximately $59
million of accelerated depreciation for the remainder of 2006 as a
result of the initiatives already implemented under the 2004-2007
Restructuring Program.

    Under this Program, on a life-to-date basis as of September 30,
2006, the Company has recorded charges of $2,647 million, which was
composed of severance, long-lived asset impairments, exit costs,
inventory write-downs, and accelerated depreciation of $1,243 million,
$334 million, $236 million, $64 million, and $770 million,
respectively. The severance costs related to the elimination of
approximately 22,200 positions, including approximately 6,025
photofinishing, 10,300 manufacturing, 1,325 research and development
and 4,550 administrative positions.

    The following table summarizes the activity with respect to the
charges recorded in connection with the focused cost reduction actions
that the Company has committed to under the 2004-2007 Restructuring
Program and the remaining balances in the related reserves at
September 30, 2006:




(dollars in millions)


                                                             Exit
                                 Number of    Severance      Costs
                                 Employees     Reserve      Reserve
                                ------------ ------------ ------------
2004 charges                          9,625  $       418  $       99
2004 reversals                            -           (6)         (1)
2004 utilization                     (5,175)        (169)        (47)
2004 other adj. & reclasses               -           24         (15)
                                ------------ ------------ ------------
Balance at 12/31/04                   4,450          267          36
2005 charges                          8,125          497          84
2005 reversals                            -           (3)         (6)
2005 utilization                    (10,225)        (377)        (95)
2005 other adj. & reclasses               -         (113)          4
                                ------------ ------------ ------------
Balance at 12/31/05                   2,350          271          23
Q1, 2006 charges                      1,175           90          19
Q1, 2006 reversals                        -           (1)          -
Q1, 2006 utilization                 (1,425)         (97)        (14)
Q1, 2006 other adj. & reclasses           -            6           1
                                ------------ ------------ ------------
Balance at 03/31/06                   2,100          269          29
Q2, 2006 charges                      1,625          141          20
Q2, 2006 reversals                        -            -          (1)
Q2, 2006 utilization                 (1,300)        (118)        (15)
Q2, 2006 other adj. & reclasses           -          (12)         (4)
                                ------------ ------------ ------------
Balance at 06/30/06                   2,425          280          29
Q3, 2006 charges                      1,650           97          14
Q3, 2006 utilization                 (1,075)         (90)        (21)
Q3, 2006 other adj. & reclasses           -           13           2
                                ------------ ------------ ------------
Balance at 09/30/06                   3,000  $       300  $       24
                                ============ ============ ============


(dollars in millions)

                                         Long-lived Asset
                                           Impairments
                                          and Inventory   Accelerated
                                  Total    Write-downs    Depreciation
                                 ------- ---------------- ------------
2004 charges                     $  517  $           157  $       152
2004 reversals                       (7)               -            -
2004 utilization                   (216)            (157)        (152)
2004 other adj. & reclasses           9                -            -
                                 ------- ---------------- ------------
Balance at 12/31/04                 303                -            -
2005 charges                        581              161          391
2005 reversals                       (9)               -            -
2005 utilization                   (472)            (161)        (391)
2005 other adj. & reclasses        (109)               -            -
                                 ------- ---------------- ------------
Balance at 12/31/05                 294                -            -
Q1, 2006 charges                    109               38           82
Q1, 2006 reversals                   (1)               -            -
Q1, 2006 utilization               (111)             (38)         (82)
Q1, 2006 other adj. & reclasses       7                -            -
                                 ------- ---------------- ------------
Balance at 03/31/06                 298                -            -
Q2, 2006 charges                    161               14           72
Q2, 2006 reversals                   (1)               -            -
Q2, 2006 utilization               (133)             (14)         (72)
Q2, 2006 other adj. & reclasses     (16)               -            -
                                 ------- ---------------- ------------
Balance at 06/30/06                 309                -            -
Q3, 2006 charges                    111               28           73
Q3, 2006 utilization               (111)             (28)         (73)
Q3, 2006 other adj. & reclasses      15                -            -
                                 ------- ---------------- ------------
Balance at 09/30/06              $  324  $             -  $         -
                                 ======= ================ ============


    As a result of the initiatives already implemented under the
2004-2007 Restructuring Program, severance payments will be paid
during periods through 2008 since, in many instances, the employees
whose positions were eliminated can elect or are required to receive
their payments over an extended period of time. Most exit costs have
been paid or will be paid during 2006. However, certain costs, such as
long-term lease payments, will be paid over periods after 2006.

    The charges of $212 million recorded in the third quarter of 2006
included $36 million applicable to the Film and Photofinishing Systems
Group segment, $16 million applicable to the Consumer Digital Imaging
Group segment, $6 million applicable to the Graphic Communications
Group segment, and $3 million applicable to the Health Group segment.
The balance of $151 million was applicable to manufacturing, research
and development, and administrative functions, which are shared across
all segments.

    The restructuring actions implemented during the third quarter of
2006 under the 2004-2007 Restructuring Program are expected to
generate future annual cost savings of approximately $122 million, of
which approximately $120 million represents future annual cash
savings. These cost savings began to be realized by the Company
beginning in the third quarter of 2006, and are expected to be fully
realized by the end of 2007 as most of the actions and severance
payouts are completed. These total cost savings are expected to reduce
future cost of goods sold, SG&A, and R&D expenses by approximately $52
million, $46 million, and $24 million, respectively.

    Based on all of the actions taken to date under the 2004-2007
Restructuring Program, the program is expected to generate annual cost
savings of approximately $1,312 million, including annual cash savings
of $1,260 million, as compared with pre-program levels. The Company
began realizing these savings in the second quarter of 2004, and
expects the savings to be fully realized by the end of 2007 as most of
the actions and severance payouts are completed. These total cost
savings are expected to reduce cost of goods sold, SG&A, and R&D
expenses by approximately $855 million, $326 million, and $131
million, respectively.

    The above savings estimates are based primarily on objective data
related to the Company's severance actions. Savings resulting from
facility closures and other non-severance actions that are more
difficult to quantify are not included. The Company is updating its
estimate of total annual cost savings under the extended 2004-2007
Restructuring Program of $1.6 billion to $1.8 billion, as announced in
July 2005, based on the additional charges expected to be incurred, as
discussed above.



                    Pre-2004 Restructuring Programs


    At September 30, 2006, the Company had remaining exit costs
reserves of $11 million relating to restructuring plans committed to
or executed prior to 2004. Most of these remaining exit costs reserves
represent long-term lease payments, which will continue to be paid
over periods throughout and after 2006.



                          CASH FLOW ACTIVITY


    The Company's cash and cash equivalents decreased $563 million
from $1,665 million at December 31, 2005 to $1,102 million at
September 30, 2006. The decrease resulted primarily from $72 million
of net cash used in operating activities, $182 million of net cash
used in investing activities, and $319 million of net cash used in
financing activities.

    The net cash used in operating activities of $72 million was
primarily attributable to a decrease in liabilities excluding
borrowings of $494 million, which included $408 million of payments
for restructuring-related severance benefits and exit costs, as well
as timing of payments of customer rebates and trade payables. These
uses of cash were partially offset by decreases in receivables of $261
million. The decrease in receivables is a result of lower sales in the
three month period ended September 30, 2006 compared with fourth
quarter 2005 sales. In addition, the company's net loss of $617
million which, when adjusted for equity in earnings from
unconsolidated affiliates, depreciation and amortization, the gain on
sales of businesses/assets, restructuring costs, asset impairments and
other non-cash charges, and benefit for deferred taxes, provided $316
million of operating cash.

    The net cash used in investing activities of $182 million was
utilized primarily for capital expenditures of $282 million, partially
offset by net proceeds from the sale of assets of $112 million. The
net cash used in financing activities of $319 million was the result
of a net decrease in borrowings of $247 million and dividend payments
of $72 million.

    The Company's primary uses of cash include restructuring payments,
debt payments, capital additions, dividend payments, employee benefit
plan payments/contributions, and working capital needs.

    Capital additions were $282 million in the nine months ended
September 30, 2006, with the majority of the spending supporting new
products, manufacturing productivity and quality improvements,
infrastructure improvements, equipment placements with customers, and
ongoing environmental and safety initiatives. For the year ending
December 31, 2006, the Company expects capital additions of less than
$500 million.

    During the nine months ended September 30, 2006, the Company
expended $408 million against restructuring reserves and pension and
other postretirement liabilities, primarily for the payment of
severance benefits. Certain employees whose positions were eliminated
could elect to receive severance payments for up to two years
following their date of termination.

    The Company has a dividend policy whereby it makes semi-annual
payments which, when declared, will be paid on the Company's 10th
business day each July and December to shareholders of record on the
close of the first business day of the preceding month. On May 10,
2006, the Board of Directors declared a semi-annual cash dividend of
$.25 per share payable to shareholders of record at the close of
business on June 1, 2006. This dividend was paid on July 18, 2006. On
October 17, 2006 the Board of Directors declared a semi-annual cash
dividend of $.25 per share payable to shareholders of record at the
close of business on November 1, 2006 and payable on December 14,
2006.

    The Secured Credit Agreement contains various affirmative and
negative covenants customary in a facility of this type, including two
quarterly financial covenants: (1) a consolidated debt for borrowed
money to consolidated earnings before interest, taxes, depreciation
and amortization (EBITDA) (subject to adjustments to exclude any
extraordinary income or losses, as defined by the Secured Credit
Agreement, interest income and certain non-cash items of income and
expense) ratio of not greater than: 4.00 to 1 as of September 30,
2006; and 3.50 to 1 as of December 31, 2006 and thereafter, and (2) a
consolidated EBITDA to consolidated interest expense (subject to
adjustments to exclude interest expense not related to borrowed money)
ratio, on a rolling four-quarter basis, of no less than 3 to 1.

    As of September 30, 2006, the Company's consolidated debt to
EBITDA ratio was 2.64 and the consolidated EBITDA to consolidated
interest ratio was 5.13. Consolidated EBITDA and consolidated interest
expense, as adjusted, are non-GAAP financial measures. The Company
believes that the presentation of the consolidated debt to EBITDA and
EBITDA to consolidated interest expense financial measures is useful
information to investors, as it provides information as to how the
Company actually performed against the financial requirements under
the Secured Credit Facilities, and how much headroom the Company has
within these covenants.

    The following table reconciles EBITDA, as included in the
computation of the consolidated debt to EBITDA ratio under the Secured
Credit Agreement covenants, to the most directly comparable GAAP
measure of loss from continuing operations before interest, other
income (charges), net and income taxes:



                                      Third   Second   First   Fourth
(in millions)          Rolling Four  Quarter  Quarter Quarter Quarter
                       Quarter Total  2006     2006    2006    2005



Net loss               $       (663) $   (37) $ (282) $ (298) $   (46)

Plus:
Interest expense                269       74      66      62       67
Provision (benefit)
 for income taxes                27       19      51       3      (46)
Depreciation and
 amortization                 1,481      300     345     371      465
Non-cash restructuring
 charges and asset
 write-
 downs/impairments              280       38      77      56      109
Loss from cumulative
 effect of accounting
 change, net of income
 taxes (extraordinary
 loss)                           57        -       -       -       57
Non-cash stock
 compensation expense            20        3       8       6        3
Non-cash equity in
 (earnings) loss from
 unconsolidated
 affiliates                      (9)      (1)     (7)      -       (1)
Impact of change in
 accounting from LIFO
 to average cost                  4        -       -       -        4
                       ------------- -------- ------- ------- --------
      Total additions
       to calculate
       EBITDA                 2,129      433     540     498      658

Less:
Earnings from
 discontinued
 operations, net of
 income taxes
 (extraordinary
 income)                       (148)       -       -       -     (148)
Investment income               (51)     (14)    (13)    (17)      (7)
                       ------------- -------- ------- ------- --------
      Total
       subtractions to
       calculate
       EBITDA                  (199)     (14)    (13)    (17)    (155)
                       ------------- -------- ------- ------- --------

EBITDA, as included in
 the debt to EBITDA
 ratio as presented    $      1,267  $   382  $  245  $  183  $   457
                       ============= ======== ======= ======= ========


                                      Third   Second   First   Fourth
(in millions)          Rolling Four  Quarter  Quarter Quarter Quarter
                       Quarter Total  2006     2006    2006    2005


(Following is a reconciliation to the most directly comparable GAAP
 measure)

EBITDA, as included in
 the debt to EBITDA
 ratio as presented    $      1,267  $   382  $  245  $  183  $   457
Depreciation and
 amortization                (1,481)    (300)   (345)   (371)    (465)
Non-cash restructuring
 charges and asset
 write-
 downs/impairments             (280)     (38)    (77)    (56)    (109)
Other adjustments, net         (101)     (42)     10     (15)     (54)
                       ------------- -------- ------- ------- --------

(Loss) earnings from
 continuing operations
 before interest,
 other income
 (charges), net and
 income taxes          $       (595) $     2  $ (167) $ (259) $  (171)
                       ============= ======== ======= ======= ========


    The following table reconciles interest expense, as adjusted, as
included in the computation of the EBITDA to interest expense ratio
under the Secured Credit Agreement covenants, to the most directly
comparable GAAP measure of interest expense:



                                      Third   Second   First   Fourth
(in millions)          Rolling Four  Quarter  Quarter Quarter Quarter
                       Quarter Total  2006     2006    2006    2005

Interest expense, as
 included in the
 EBITDA to interest
 expense ratio         $        246  $    62  $   62  $   59  $    63

Adjustments to
 interest expense for
 purposes of the
 covenant calculation            23       12       4       3        4
                       ------------- -------- ------- ------- --------
Interest expense       $        269  $    74  $   66  $   62  $    67
                       ============= ======== ======= ======= ========


    Adjustments to interest expense relate to items that are not debt
for borrowed money, including interest relating to capital leases and
interest relating to tax matters.

    CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

    Certain statements in this report may be forward-looking in
nature, or "forward-looking statements" as defined in the United
States Private Securities Litigation Reform Act of 1995. For example,
references to expectations for the Company's digital earnings,
revenue, digital revenue growth, losses, cash, business transformation
and debt reduction plans are forward-looking statements.

    Actual results may differ from those expressed or implied in
forward-looking statements. In addition, any forward-looking
statements represent the Company's estimates only as of the date they
are made, and should not be relied upon as representing the Company's
estimates as of any subsequent date. While the Company may elect to
update forward-looking statements at some point in the future, the
Company specifically disclaims any obligation to do so, even if its
estimates change. The forward-looking statements contained in this
report are subject to a number of factors and uncertainties, including
the successful:

    --  execution of the digital growth and profitability strategies,
        business model and cash plan;

    --  implementation of a changed segment structure;

    --  implementation of the cost reduction program, including asset
        rationalization and monetization, reduction in selling,
        general and administrative costs and personnel reductions;

    --  transition of certain financial processes and administrative
        functions to a global shared services model and the
        outsourcing of certain functions to third parties;

    --  implementation of, and performance under, the debt management
        program, including compliance with the Company's debt
        covenants;

    --  implementation of product strategies (including category
        expansion and digital products) and go-to-market strategies;

    --  protection, enforcement and defense of the Company's
        intellectual property, including defense of our products
        against the intellectual property challenges of others;

    --  implementation of intellectual property licensing and other
        strategies;

    --  development and implementation of e-commerce strategies,
        including on-line services;

    --  completion of information systems upgrades, including SAP, the
        Company's enterprise system software;

    --  completion of various portfolio actions;

    --  reduction of inventories;

    --  integration of acquired businesses;

    --  improvement in manufacturing productivity and techniques;

    --  improvement in receivables performance;

    --  improvement in supply chain efficiency and management of
        third-party sourcing relationships; and

    --  implementation of the strategies designed to address the
        decline in the Company's traditional businesses.

    The forward-looking statements contained in this report are
subject to the following additional risk factors:

    --  inherent unpredictability of currency fluctuations, commodity
        prices and raw material costs;

    --  competitive actions, including pricing;

    --  changes in the Company's debt credit ratings and its ability
        to access capital markets;

    --  the nature and pace of technology evolution, including the
        traditional-to-digital transformation;

    --  continuing customer consolidation and buying power;

    --  current and future proposed changes to accounting rules and to
        tax laws, as well as other factors which could adversely
        impact the Company's reported financial position or effective
        tax rate in the future;

    --  general economic, business, geo-political and regulatory
        conditions;

    --  market growth predictions;

    --  continued effectiveness of internal controls; and

    --  other factors and uncertainties disclosed from time to time in
        the Company's filings with the Securities and Exchange
        Commission.

    Any forward-looking statements in this report should be evaluated
in light of these important factors and uncertainties.



EASTMAN KODAK COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
(in millions, except per share data)

                                  Three Months Ended Nine Months Ended
                                     September 30      September 30
                                  ------------------ -----------------
                                    2006     2005     2006     2005

Net sales                         $  3,204  $ 3,553  $ 9,453  $10,071
Cost of goods sold                   2,330    2,631    7,092    7,420
                                  --------- -------- -------- --------
   Gross profit                        874      922    2,361    2,651

Selling, general and
 administrative expenses               565      670    1,794    1,901
Research and development costs         170      212      540      680
Restructuring costs and other          137      163      451      531
                                  --------- -------- -------- --------
Earnings (loss) from continuing
 operations before interest, other
 income (charges), net and income
 taxes                                   2     (123)    (424)    (461)

Interest expense                        74       57      202      144
Other income (charges), net             54       (9)      82      (11)
                                  --------- -------- -------- --------
Loss from continuing operations
 before income taxes                   (18)    (189)    (544)    (616)
Provision for income taxes              19      726       73      601
                                  --------- -------- -------- --------
Loss from continuing operations   $    (37) $  (915) $  (617) $(1,217)
                                  ========= ======== ======== ========


Earnings from discontinued
 operations, net of income taxes  $      -  $     1  $     -  $     2
                                  ========= ======== ======== ========


NET LOSS                          $    (37) $  (914) $  (617) $(1,215)
                                  ========= ======== ======== ========

Basic and diluted net loss per
 share:
  Continuing operations           $   (.13) $ (3.19) $ (2.15) $ (4.23)
  Discontinued operations                -      .01        -      .01
                                  --------- -------- -------- --------
  Total                           $   (.13) $ (3.18) $ (2.15) $ (4.22)
                                  ========= ======== ======== ========


Number of common shares used in
 basic net loss per share            287.2    287.2    287.2    288.1

Incremental shares from assumed
 conversion of options                   -        -        -        -
                                  --------- -------- -------- --------

Number of common shares used in
 diluted net loss per share          287.2    287.2    287.2    288.1
                                  ========= ======== ======== ========




EASTMAN KODAK COMPANY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - UNAUDITED
(in millions)
                                            September 30, December 31,
                                                2006         2005

ASSETS

CURRENT ASSETS
Cash and cash equivalents                   $      1,102  $     1,665
Receivables, net                                   2,541        2,760
Inventories, net                                   1,478        1,455
Deferred income taxes                                114          100
Other current assets                                 133          116
                                            ------------- ------------
  Total current assets                             5,368        6,096
                                            ------------- ------------
Property, plant and equipment, net                 3,018        3,778
Goodwill                                           2,187        2,141
Other long-term assets                             3,487        3,221
                                            ------------- ------------
  TOTAL ASSETS                              $     14,060  $    15,236
                                            ============= ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and other current
 liabilities                                $      3,740  $     4,187
Short-term borrowings                                 92          819
Accrued income taxes                                 669          483
                                            ------------- ------------
 Total current liabilities                         4,501        5,489

OTHER LIABILITIES
Long-term debt, net of current portion             3,247        2,764
Pension and other postretirement
 liabilities                                       3,291        3,476
Other long-term liabilities                        1,207        1,225
                                            ------------- ------------
 Total liabilities                                12,246       12,954

SHAREHOLDERS' EQUITY
Common stock at par                                  978          978
Additional paid in capital                           884          873
Retained earnings                                  6,022        6,717
Accumulated other comprehensive loss                (260)        (467)
Unvested stock                                        (3)          (6)
                                            ------------- ------------
                                                   7,621        8,095
Less: Treasury stock at cost                       5,807        5,813
                                            ------------- ------------
 Total shareholders' equity                        1,814        2,282
                                            ------------- ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $     14,060  $    15,236
                                            ============= ============




EASTMAN KODAK COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
(in millions)
                                                  Nine Months Ended
                                                     September 30
                                                ----------------------
                                                   2006       2005

Cash flows relating to operating activities:
Net loss                                        $     (617) $  (1,215)
Adjustments to reconcile to net cash used in
 operating activities:
  Earnings from discontinued operations                  -         (2)
  Equity in earnings from unconsolidated
   affiliates                                            -        (11)
  Depreciation and amortization                      1,016        937
  Purchased research and development                     -         54
  Gain on sales of businesses/assets                   (49)       (42)
  Restructuring costs, asset impairments and
   other non-cash charges                              118        170
  (Benefit) provision for deferred taxes              (152)       792
  Decrease in receivables                              261        199
  Increase in inventories                              (16)      (207)
  Decrease in liabilities excluding borrowings        (494)      (728)
  Other items, net                                    (139)        (7)
                                                ----------- ----------
    Total adjustments                                  545      1,155
                                                ----------- ----------
    Net cash used in operating activities              (72)       (60)
                                                ----------- ----------
Cash flows relating to investing activities:
  Additions to properties                             (282)      (332)
  Net proceeds from sales of assets                    112         62
  Acquisitions, net of cash acquired                    (3)      (987)
  (Investments in) distributions from
   unconsolidated affiliates                           (10)        63
  Marketable securities - purchases                    (88)       (79)
  Marketable securities - sales                         89         70
                                                ----------- ----------
    Net cash used in investing activities             (182)    (1,203)
                                                ----------- ----------
Cash flows relating to financing activities:
  Net decrease in borrowings with original
   maturity of 90 days or less                          (8)       (65)
  Proceeds from other borrowings                       580      1,241
  Repayment of other borrowings                       (819)      (477)
  Dividend payments                                    (72)       (72)
  Exercise of employee stock options                     -         12
                                                ----------- ----------

    Net cash (used in) provided by financing
     activities                                       (319)       639
                                                ----------- ----------
Effect of exchange rate changes on cash                 10        (21)
                                                ----------- ----------

Net decrease in cash and cash equivalents             (563)      (645)
Cash and cash equivalents, beginning of year         1,665      1,255
                                                ----------- ----------
Cash and cash equivalents, end of quarter       $    1,102  $     610
                                                =========== ==========




Net Sales from Continuing Operations by Reportable Segment and All
 Other - Unaudited
(in millions)

                          Three Months Ended      Nine Months Ended
                             September 30           September 30
                        ---------------------- -----------------------
                         2006    2005   Change  2006    2005    Change

Consumer Digital
 Imaging Group
  Inside the U.S.       $  401  $  400    + 0% $1,054  $ 1,095    - 4%
  Outside the U.S.         239     259    - 8     712      788   - 10
                        ------- ------- ------ ------- -------- ------
Total Consumer
 Digital Imaging
 Group                     640     659    - 3   1,766    1,883    - 6
                        ------- ------- ------ ------- -------- ------

Film and
 Photofinishing
 Systems Group
  Inside the U.S.          350     445    -21   1,025    1,359   - 25
  Outside the U.S.         724     908    -20   2,118    2,765   - 23
                        ------- ------- ------ ------- -------- ------
Total Film and
 Photofinishing
 Systems Group           1,074   1,353    -21   3,143    4,124   - 24
                        ------- ------- ------ ------- -------- ------

Graphic
 Communications Group
  Inside the U.S.          314     331    - 5     941      738   + 28
  Outside the U.S.         566     555    + 2   1,717    1,310   + 31
                        ------- ------- ------ ------- -------- ------
Total Graphic
 Communications Group      880     886    - 1   2,658    2,048   + 30
                        ------- ------- ------ ------- -------- ------

Health Group
  Inside the U.S.          215     260    -17     692      778   - 11
  Outside the U.S.         382     375    + 2   1,145    1,177    - 3
                        ------- ------- ------ ------- -------- ------
Total Health Group         597     635    - 6   1,837    1,955    - 6
                        ------- ------- ------ ------- -------- ------

All Other
  Inside the U.S.            8      10    -20      38       33    +15
  Outside the U.S.           5      10    -50      11       28    -61
                        ------- ------- ------ ------- -------- ------
Total All Other             13      20    -35      49       61   - 20
                        ------- ------- ------ ------- -------- ------
    Consolidated
     total              $3,204  $3,553    -10% $9,453  $10,071    - 6%
                        ======= ======= ====== ======= ======== ======




(Loss) Earnings from Continuing Operations Before Interest, Other
 Income (Charges), Net and Income Taxes by Reportable Segment and All
 Other - Unaudited
(in millions)

                         Three Months Ended       Nine Months Ended
                            September 30            September 30
                      ------------------------ -----------------------
                         2006    2005  Change    2006    2005  Change

Consumer Digital
 Imaging Group        $    24  $  (61)   +139% $ (149) $ (171) +13%
   Percent of Sales         4%    (9)%            (8)%    (9)%

Film and
 Photofinishing
 Systems Group        $   139  $  174     -20% $  281  $  489  -43%
   Percent of Sales        13%     13%              9%     12%

Graphic
 Communications Group $    31  $    7    +343% $   84  $  (69) +222%
   Percent of Sales         4%      1%              3%    (3)%

Health Group          $    68  $   96    - 29% $  192  $  283  - 32%
   Percent of Sales        11%     15%             10%     14%

All Other             $   (48) $  (61)   + 21% $ (142) $ (170) + 16%
   Percent of Sales     (369)%  (305)%          (290)%  (279)%
                      -------- ------- ------- ------- ------- -------
Total of segments     $   214  $  155    + 38% $  266  $  362  - 27%
   Percent of Sales         7%      4%              3%      4%

Restructuring costs
 and other               (212)   (278)           (686)   (823)
Legal settlement            -       -              (4)      -
Interest expense          (74)    (57)           (202)   (144)
Other income
 (charges), net            54     ( 9)             82     (11)
                      -------- ------- ------- ------- ------- -------
   Consolidated loss
    from continuing
    operations before
    income taxes      $   (18) $ (189)   + 90% $ (544) $ (616) + 12%
                      ======== ======= ======= ======= ======= =======