Kodak 2002 Annual Report Download - page 16

Financials
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a decrease of $110 million, or 4%. The decrease was primarily
attributable to sales declines in Argentina, Brazil, China, and
Taiwan of 13%, 12%, 4%, and 12%, respectively, which were
primarily a result of economic weakness being experienced by
these countries. These sales declines were partially offset by an
increase in sales in Russia of 22%, which was primarily a result
of the success in camera seeding programs. The emerging market
portfolio accounted for approximately 18% and 35% of the
Company’s worldwide and non-U.S. sales, respectively, in both
2001 and 2000.
Gross profit was $4,568 million in 2001 as compared with
$5,619 million in 2000, representing a decrease of $1,051
million, or 19%. The gross profit margin declined 5.7 percentage
points from 40.2% in 2000 to 34.5% 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. The decrease in
margin was also attributable to an increase in restructuring costs
incurred in 2001 as compared with 2000, which negatively
impacted gross profit margins by approximately 0.9 percentage
point.
SG&A expenses increased $111 million, or 4%, from $2,514
million in 2000 to $2,625 million in 2001. SG&A expenses
increased as a percentage of sales from 18.0% in 2000 to 19.8%
in 2001. 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,
which amounted to $12 million.
R&D expenses remained flat, decreasing $5 million from
$784 million in 2000 to $779 million in 2001. R&D expenses
increased slightly as a percentage of sales from 5.6% in 2000 to
5.9% in 2001.
Earnings from continuing operations before interest, other
(charges) income, and income taxes decreased $1,862 million, or
84%, from $2,214 million in 2000 to $352 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.
Interest expense for 2001 was $219 million as compared
with $178 million for 2000, representing an increase of $41
million, or 23%. The increase in interest expense is primarily
attributable to higher average borrowings in 2001 as compared
with 2000. Other charges for the current year were $18 million
as compared with other income of $96 million for the prior year.
The decrease in other (charges) income is primarily attributable
to increased losses from the Company’s NexPress and Phogenix
joint ventures in 2001 as compared with 2000 as these business
ventures are in the early stages of bringing their offerings to
market, and lower gains recognized from the sale of stock
investments in 2001 as compared with 2000.
The Company’s effective tax rate decreased from 34% for the
year ended December 31, 2000 to 30% for the year ended
December 31, 2001. The decline in the Company’s 2001 effective
tax rate as compared with the 2000 effective 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 of 2001, which were partially offset by
restructuring costs recorded in the second, third and fourth
quarters of 2001, which provided reduced tax benefits to the
Company.
Net earnings from continuing operations for 2001 were $81
million, or $.28 per basic and diluted share, as compared with
net earnings from continuing operations for 2000 of $1,407
million, or $4.62 per basic share and $4.59 per diluted share,
representing a decrease of $1,326 million, or 94%. The decrease
in net earnings from continuing operations is primarily
attributable to the reasons outlined above.
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 5% excluding the negative net impact of exchange.
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.
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 2% excluding the negative impact of exchange.
Net worldwide sales of consumer film products, which
include 35mm film, Advantix film and one-time-use cameras,
decreased 7% in 2001 relative to 2000, reflecting a 3% decline
in both volume and exchange, and a 1% decline in 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, a