Kodak 2006 Annual Report Download - page 15

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Health Group Segment (KHG) Segment
Sales from continuing operations of the Health Group segment for 2006, 2005 and 2004 were (in millions) $2,497, $2,655 and $2,686, respectively.
Products and services of the Health Group segment enable healthcare customers (e.g., hospitals, imaging centers, etc.) to capture, process, integrate,
archive and display images and information in a variety of forms. These products and services provide intelligent decision support through the entire
patient pathway from research to detection to diagnosis to treatment. The Health Group segment also provides products and services that help custom-
ers improve workflow in their facilities, which in turn helps them enhance the quality and productivity of healthcare delivery.
The Health Group segment provides digital medical imaging and information products, and systems and solutions, which are key components of sales
and earnings growth. These include laser imagers, digital print films, computed and digital radiography systems, dental radiographic imaging systems,
dental practice management software, advanced picture-archiving and communications systems (PACS), and healthcare information systems (HCIS).
Products of the Health Group segment also include traditional analog medical films, chemicals, and processing equipment. The Company’s history in
traditional analog imaging has made it a leader in this area and has served as the foundation for building its important digital imaging business. The
Health Group segment serves the general radiology market and specialty health markets, including dental, mammography, orthopedics and oncology.
The segment also provides molecular imaging for the biotechnology research market.
The Company announced on January 10, 2007 that it has reached an agreement to sell the Health Group to Onex Corporation for as much as $2.55
billion. The transaction is expected to close in the first half of 2007. As a result, KHG will be reported as a discontinued operation beginning in the first
quarter of 2007.
Marketing and Competition: In the U.S., Canada and Latin America, health imaging consumables and analog equipment are sold through distribu-
tors. A significant portion of digital equipment and solutions is sold direct to end users, with the balance sold through distributors and OEMs. In the
U.S., individual hospitals or groups of hospitals represented by, as buying agents, group purchasing organizations (GPOs), account for a significant
portion of consumables and equipment sales industry-wide. The Health Group segment has secured long-term contracts with many of the major GPOs
and, thus, has positioned itself well against competitors. In Europe, consumables and analog equipment are sold through distributors and value added
service providers (VASPs) as well as direct to end users. Hospitals in Europe, which are a mix of private and government-funded types, employ a highly
regimented tender process in acquiring medical imaging products. In addition to creating a competitive pricing environment, this process can result
in a delay of up to 6 to 18 months between the time the tender is delivered to the hospital and the time the hospital makes a decision on the vendor.
Additionally, the government-funded hospitals’ budgets tend to be limited and restricted. Government reimbursement policies often drive the use of
particular types of equipment and influence the transition from analog to digital imaging. These policies vary widely among European countries. In Asia
and Japan, sales of all products are split between distributors and end users. In Europe, Asia and Japan, consumables and analog equipment are often
sold as part of a media/equipment bundle. Digital equipment and solutions are sold direct to end-users and through OEMs in these three geographic
areas.
Worldwide, the medical imaging market is crowded with a range of strong competitors. To compete aggressively, the Company’s Health Group segment
has developed a full portfolio of value-adding products and services. Some competitors offer digital solutions similar to those of Kodak, and other
competitors offer similar analog solutions or a mix of analog and digital. The Health Group segment has a wide range of solutions from analog to digital
as well as solutions combining both analog and digital technologies. Moreover, the segment’s portfolio is expanding into new areas, thus enabling the
segment to offer solutions that combine medical images and information, such as patient reports, into one unified package for medical practitioners.
The Company will continue to innovate products and services to meet the changing needs and preferences of the marketplace.
All Other
Sales from continuing operations comprising All Other for 2006, 2005 and 2004 were (in millions) $69, $83 and $70, respectively.
All Other is composed of the Company’s display business, business development and other small, miscellaneous businesses. The development initia-
tives in consumer inkjet technologies continue to be reported in All Other through the end of 2006.