Kodak 2007 Annual Report Download - page 8

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Graphic Communications Group (GCG) Segment
Sales from continuing operations of the Graphic Communications Group segment for 2007, 2006 and 2005 were (in millions) $3,590, $3,477, and $2,825,
respectively.
The Graphic Communications Group segment serves a variety of customers in the creative, in-plant, data center, commercial printing, packaging, newspa-
per, and digital service bureau market segments with a range of software, media, and hardware products that provide customers with a variety of solutions
for prepress equipment, workflow software, digital and traditional printing, document scanning, and multi-vendor IT services. Products include digital and
traditional prepress equipment and consumables, including plates, chemistry, and media; workflow software and digital controller development; color and
black and white electrophotographic equipment and consumables; high-speed, high-volume continuous inkjet printing systems; wide-format inkjet inks
and media; high-speed production and workgroup document scanners; and micrographic peripherals and media (including micrographic films). GCG also
provides maintenance and professional services for Kodak and other manufacturers’ products, as well as providing imaging services to customers.
Marketing and Competition: Throughout the world, graphic communications products are sold through a variety of direct and indirect channels. The
end users of these products include businesses in the commercial printing, data center, in-plant and digital service provider market segments. While
there is price competition, the Company has generally been able to maintain price by adding more attractive features to its products through technologi-
cal advances. The Company has developed a wide-ranging portfolio of digital products — workflow, equipment, media, and services to meet the needs
of customers who are interested in converting from analog to digital technology. Maintenance and professional services for the Company’s products are
sold either through product distribution channels or directly to the end users. In addition, a range of inkjet products for digital printing and proofing are sold
through direct and indirect means. Document scanners are sold primarily through a two-tiered distribution channel to a number of different industries.
The growth in digital solutions has negatively affected revenues from traditional graphic arts films, analog plates and other traditional products. As a result,
the Company has become more active in digital printing products, software and services in order to participate in these growth segments. The Company
remains competitive by focusing on developing digital solutions based on inkjet, thermal and electrophotographic technologies including comprehensive
workflow, training, and service systems.
All Other
Sales from continuing operations comprising All Other for 2007, 2006 and 2005 were (in millions) $112, $68, and $83, respectively.
All Other is composed of the Company’s display business and other small, miscellaneous businesses.
Discontinued Operations – Health Group
On April 30, 2007 the Company closed on the sale of its Health Group to Onex Healthcare Holdings, Inc., a subsidiary of Onex Corporation. Approximately
8,100 employees of the Company associated with the Health Group transitioned to Carestream Health Inc. as part of the transaction. Also included in the
sale were manufacturing operations focused on the production of health imaging products, as well as an office building in Rochester, NY. The results of
the sale and operations for the Health Group are presented as discontinued operations in the Consolidated Statement of Operations. All prior periods have
been revised for comparison purposes. See Note 23, “Discontinued Operations” in the Notes to Financial Statements for further discussion.
Financial Information by Geographic Area
Financial information by geographic area for the past three years is shown in Note 24, “Segment Information.”
Raw Materials
The raw materials used by the Company are many and varied, and are generally readily available. Lithographic aluminum is the primary material used in
the manufacture of offset printing plates. The Company procures raw aluminum coils from several suppliers on a spot basis or under contracts generally in
place over the next one to three years. Silver is one of the essential materials used in the manufacture of films and papers. The Company purchases silver
from numerous suppliers under annual agreements or on a spot basis. Paper base is an essential material in the manufacture of photographic papers. The
Company has contracts to acquire paper base from certified photographic paper suppliers over the next several years.
Seasonality of Business
Sales and earnings of the CDG segment are linked to the timing of holidays, vacations and other leisure or gifting seasons. In 2007, sales of digital prod-
ucts were highest in the last four months of the year. Digital capture and consumer inkjet printing products have experienced peak sales in this period as a
result of the December holidays. Sales are normally lowest in the first quarter due to the absence of holidays and fewer picture-taking opportunities during
that time. These trends are expected to continue as the Company continues to experience growth in sales of digital products.
Sales and earnings of the FPG segment are linked to the timing of holidays, vacations and other leisure activities. Sales and earnings are normally stron-
gest in the second and third quarters as demand is high due to heavy vacation activity, events such as weddings and graduations, and the summer motion
picture season.
Sales and earnings of the GCG segment exhibit modestly higher levels in the fourth quarter. This is driven primarily by the sales of continuous inkjet,
electrophotographic printing, and document scanner products due to seasonal customer demand linked to commercial year-end advertising processes.