Kodak 2007 Annual Report Download - page 28

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Graphic Communications Group
For the Year Ended December 31
(dollars in millions)
2007
% of
Sales 2006
% of
Sales
Increase /
(Decrease)
% Change
Digital net sales $ 3,150 $ 2,950 $ 200 7%
Traditional net sales 440 527 (87) -17%
Total net sales 3,590 3,477 113 3%
Cost of goods sold 2,606 2,480 126 5%
Gross profit 984 27.4% 997 28.7% (13) -1%
Selling, general and administrative expenses 663 18% 697 20% (34) -5%
Research and development costs 205 6% 200 6% 5 3%
Earnings from continuing operations before interest, other
income (charges), net and income taxes
$ 116 3% $ 100 3% $ 16 16%
For the Year Ended December 31, Change vs. 2006
2007
Amount
Change vs.
2006 Volume Price/Mix
Foreign
Exchange
Manufacturing
and Other Costs
Total net sales $ 3,590 3.2% 0.7% -1.6% 4.1% 0.0%
Gross profit margin 27.4% -1.3pp 0.0pp -0.4pp 0.6pp -1.5pp
Worldwide Revenues
Digital revenue growth of 7% in 2007 contributed to total revenue growth of 3% for GCG, mainly driven by favorable foreign exchange and volume
increases within Digital Printing Solutions and Enterprise Solutions. Partially offsetting this growth was unfavorable price/mix across all SPGs.
Net worldwide sales of Prepress Solutions, including consumables, prepress equipment and related services, increased 3%, primarily driven by increased
sales of digital plates, partially offset by declines in sales of analog plates and prepress equipment sales. Unfavorable price/mix also negatively impacted
net worldwide sales.
Net worldwide sales of Document Imaging, which includes document scanners and services, media, and imaging services, were flat compared with prior
year. Unfavorable volume and price/mix were offset by favorable exchange.
Net worldwide sales of Digital Printing Solutions, including all continuous inkjet and electrophotographic equipment, consumables and service, increased
5%, primarily driven by favorable foreign exchange and volume growth in color electrophotographic solutions and inkjet printing solutions, partially offset
by volume and price/mix declines in black-and-white electrophotographic solutions.
Net worldwide sales of Enterprise Solutions, which includes workflow software and digital controller development, increased 10%, primarily driven by the
introduction of web-enabled solutions software and volume growth in the workflow software, partially offset by price/mix.
Gross Profit
The decrease in gross profit margin compared with the prior year was primarily driven by increased manufacturing costs in Prepress Solutions associated
with adverse aluminum costs, as well as unfavorable price/mix across all SPGs. Favorable foreign exchange partially offset these negative impacts.
Selling, General and Administrative Expenses
The decrease in SG&A expenses for GCG was largely attributable to concentrated efforts of the business to achieve targeted cost reductions.
All Other
Worldwide Revenues
Net worldwide sales for All Other were $112 million for the year ended December 31, 2007 as compared with $68 million for the year ended December
31, 2006, representing an increase of $44 million, or 65%. This increase is attributable to ongoing manufacturing supply and tolling arrangements with
Carestream Health, Inc.