Kodak 2000 Annual Report Download - page 36

1999 Compared with 1998
C o n s o l i d a t e d Worldwide sales for 1999 increased 5% over the
prior year. The impact of portfolio actions on the year- t o - y e a r
comparison was essentially neutral. Currency changes against
the dollar negatively affected sales by $12 million. Sales gro w t h
in 1999 was achieved across numerous businesses, including
Health Imaging film (analog film as well as laser imaging pro d u c t s
of the acquired Imation medical imaging business), consumer and
p rofessional digital cameras, Consumer Imaging color paper and
film (especially Advantix film and one-time-use cameras), C D
media, and inkjet media.
Sales in emerging markets increased 6% , and accounted
for approximately 16% of the Company’s 1999 worldwide sales.
The emerging markets portfolio showed growth across a wide
geographical range, with China up 30%, Korea up 36% and India
up 19% . Strong growth in Mexico of 16% was offset by a 16%
decline in Brazil, resulting in a 2% decline in the Latin American
Region. Sales in Russia were weak, reflecting a 33% sales
decline from 1998.
Overall gros s profit margins decreased 2.3 perc e n t a g e
points from 45.6% in 1998 to 43.3% in 1999. Excluding special
c h a rges in both years, gross profit margins decreased .4 per-
centage points from 46.1% in 1998 to 45.7% in 1999. Gro s s
p rofit margins were pre s s u red by lower prices, increased levels
of goodwill amortization, startup costs in the China manufactur-
ing project, and the acquired Imation medical imaging business,
which had gross profit rates lower than the Company average.
These pre s s u res were offset, almost entire l y, by gains in manu-
facturing pro d u c t i v i t y, improvements in digital businesses, and the
beneficial effects of portfolio actions taken, including the divesti-
t u re of Office Imaging and a significant portion of Consumer
I m a g i n g ’s retail business.
SG&A expenses for the Company were essentially level,
but decreased from 24.6% of sales in 1998 to 23.4% in 1999.
Excluding re s t ructuring charges, SG&A expenses decreased 2%
f rom the prior year and declined as a percentage of sales fro m
24.1% in 1998 to 22.5% in 1999. SG&A excluding advert i s i n g
expenses also decreased, from 18.5% to 17.4% of sales. The
d e c rease in rates, excluding re s t ructuring charges, is due to
higher sales and cost reduction activities as well as reductions in
a d v e rtising expense.
Excluding the Imation charge in 1998, R&D decreased 7%,
f rom 6.6% of sales in 1998 to 5.8% in 1999, as a result of a num-
ber of factors, including improvement in the R&D cost stru c t u re ,
a more tightly focused portfolio, and more joint development, with
m o re work shared with part n e r s .
E a rnings from operations increased 5% to $1,990 million.
Excluding special charges in both years, earnings from opera-
tions increased $389 million or 19% , as the benefits of higher unit
sales volumes across many of the Company’s key products, man-
ufacturing pro d u c t i v i t y, and cost reductions more than off s e t
lower effective selling prices and the unfavorable effects of cur-
rency rate changes.
I n t e rest expense increased 29% in 1999 to $142 million, pri-
marily due to higher average borrowings. Other income (charg e s )
d e c reased $67 million from the prior year. Excluding special
c h a rges and credits from 1999 and 1998, other income (charg e s )
d e c reased $70 million, resulting primarily from reduced invest-
ment income, lower gains on asset sales and R&D investments in
the NexPress joint venture. The effective tax rates were 34% in
both 1999 and 1998.
Consumer Imaging Consumer Imaging segment sales incre a s e d
3% in 1999. Excluding the impact of the divestiture of the Fox
Photo operating unit in September 1998, sales increased 6% ,
as higher volumes more than offset lower effective selling prices
and the negative effects of exchange. Sales inside the U.S.
i n c reas ed 7% , as higher volumes were partly offset by lower
e ffective selling prices and the impact of portfolio changes. Sales
outside the U.S. increased 1%, as higher volumes more than
o ffset lower effective selling prices and the negative effects of
e x c h a n g e .
Worldwide film sales increased 4% over 1998, as volume
i n c reases of 10% more than offset lower effective selling prices.
Sales inside the U.S. increased 2% , as higher unit volumes more
than offset lower effective selling prices. Sales outside the U.S.
i n c reased 5%, as higher volumes more than offset lower eff e c-
tive selling prices and the unfavorable effects of currency rate
c h a n g e s .
Worldwide color paper sales increased 6% over 1998, as
volume increases of 9% more than offset lower effective selling
prices. Sales inside the U.S. were particularly strong, incre a s i n g
12% , due to higher unit volumes and slightly higher effective
selling prices. Sales outs ide the U.S. increased 2%, as higher
volumes more than offset lower effective selling prices and the
unfavorable effects of currency rate changes.
SG&A expenses for the segment decreased 5% in dollar
t e rms, and from 27.4% of sales in 1998 to 25.2% in 1999,
reflecting the benefits of Consumer Imaging’s sales growth and
cost reduction activities. Excluding advertising expenses, SG&A
expenses decreased 4% , from 18.9% of sales in 1998 to 17.5%
in 1999. R&D expenses decreased 5% , from 5.1% of sales in
1998 to 4.7% in 1999.