Kodak 2001 Annual Report Download - page 32

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2001 Compared with 2000
Consolidated Net worldwide sales were $13,234 million for 2001 as
compared with $13,994 million for 2000, representing a decrease of
$760 million, or 5% as reported, or 3% excluding the negative impact of
exchange. Net sales in the U.S. were $6,459 million for 2001 as
compared with $6,810 million for 2000, representing a decrease of $351
million, or 5%. Net sales outside the U.S. were $6,775 million for 2001
as compared with $7,184 million for 2000, representing a decrease of
$409 million, or 6% as reported, or 2% excluding the negative impact of
exchange. The U.S. economic condition throughout the year and the
events of September 11th adversely impacted the Company’s sales,
particularly in the consumer film product groups within the Photography
segment. The total decrease in net worldwide sales of $760 million, or
5%, was comprised of declines in Photography sales of $828 million, or
8%, and All Other sales of $16 million, or 13%, partially offset by
increases in Health Imaging sales of $42 million, or 2%, and Commercial
Imaging of $42 million or 3%. The decrease in Photography sales was
driven by declines in consumer, entertainment origination and
professional film products, consumer and professional color paper,
photofinishing revenues and consumer and professional digital cameras.
Sales in emerging markets decreased 4% from 2000 to 2001. The
net decrease in emerging market sales was comprised of decreases in
Latin America, Asia, Greater China and the European, African and Middle
Eastern Region (EAMER) Emerging Markets of 5%, 4%, 7% and 7%,
respectively, partially offset by an increase in sales in the Greater Russia
market of 17%.
Gross profit declined 19% with margins declining 5.7 percentage
points from 40.2% in 2000 to 34.5% in 2001. Excluding special charges
to cost of goods sold in 2001 and 2000 of $156 million and $50 million,
respectively, gross profit margins decreased 4.8 percentage points from
40.5% in 2000 to 35.7% in 2001. The decline in margin was driven
primarily by lower prices across many of the Company’s traditional and
digital product groups within the Photography segment, a significant
decline in the margin in the Health Imaging segment, which was caused
by declining prices and mix, and the negative impact of exchange.
Selling, general and administrative expenses (SG&A) increased $113
million, or 4%, in 2001 as compared to 2000. The increase in SG&A
expenses is primarily attributable to charges of $73 million that the
Company recorded in 2001 relating to Kmart’s bankruptcy, environmental
issues and the write-off of certain strategic investments that were
impaired.
Research and development (R&D) expenses remained flat,
decreasing $5 million from $784 million in 2000 to $779 million in 2001.
Earnings from operations decreased $1,869 million from $2,214
million in 2000 to $345 million in 2001. The decrease in earnings from
operations is partially attributable to charges taken in 2001 totaling
$891 million primarily relating to restructuring and asset impairments,
significant customer bankruptcies and environmental issues. The
remaining decrease in earnings from operations is attributable to the
decrease in sales and gross profit margin percentage for the reasons
described above.
Net earnings decreased $1,331 million from $1,407 million in 2000
to $76 million in 2001. The decrease in net earnings is attributable to
lower earnings from operations, as described above, the increase in
interest expense due to higher average borrowings during 2001, and
the decrease in other income (charges) due to lower gains on the sale
of investments.
The actual tax rates for the years ended December 31, 2001 and
December 31, 2000 were 30% and 34%, respectively. The decline in the
Company’s 2001 actual tax rate as compared with the 2000 actual tax
rate is primarily attributable to an increase in creditable foreign taxes
and an $11 million tax benefit related to favorable tax settlements
reached in the third quarter, which were partially offset by restructuring
costs recorded in the second, third and fourth quarters, which provided
reduced tax benefits to the Company.
Photography Net worldwide sales for the Photography segment were
$9,403 million for 2001 as compared with $10,231 million for 2000,
representing a decrease of $828 million, or 8% as reported, or 6%
excluding the negative impact of exchange. Photography net sales in the
U.S. were $4,482 million for 2001 as compared with $4,960 million for
2000, representing a decrease of $478 million, or 10%. Photography net
sales outside the U.S. were $4,921 million for 2001 as compared with
$5,271 million for 2000, representing a decrease of $350 million, or 7%
as reported, or 3% excluding the negative impact of exchange.
Net worldwide sales of consumer film products, which include
traditional 35mm film, Advantix film and one-time-use cameras in both
the traditional and APS formats, decreased 7% in 2001 relative to 2000,
reflecting a 3% decline in volume and a 2% decline in both exchange
and price/mix. The composition of consumer film products in 2001 as
compared with 2000 reflects a 2% decrease in volumes for Advantix film,
a 7% increase in volume of one-time-use cameras and a 4% decline in
volume of traditional film product lines. Sales of the Company’s
consumer film products within the U.S. decreased, reflecting a 5%
decline in volume in 2001 as compared with 2000. Sales of consumer
film products outside the U.S. decreased 9% in 2001 as compared with
2000, reflecting a 2% decrease in volume, 3% decline in price/mix and
4% decline due to foreign exchange. During 2001, the Company
continued the efforts it began in 1998 to shift consumers to the
differentiated, higher value Max and Advantix film product lines. For
2001, sales of the Max and Advantix product lines as a percentage of
total consumer roll film revenue increased from a level of 62% in the
fourth quarter of 2000 to 68% by the fourth quarter of 2001. The U.S.