Kodak 2008 Annual Report Download - page 10

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The results of the sales and operations for the Health Group and HPA are presented as discontinued operations in the Consolidated
Statement of Operations. All prior periods have been revised for comparison purposes. See Note 22, “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 23, “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 a contract to acquire
paper base from a certified photographic paper supplier 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. Sales of
digital products are typically 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. However, the economic downturn experienced in the
fourth quarter of 2008 resulted in a significant decline in consumer discretionary spending that negatively impacted the Company’s
digital camera and digital picture frame businesses in the CDG segment. CDG net sales in the fourth quarter declined from 42% of
CDG’s full-year revenue for 2007 to only 31% of full-year revenue for 2008. Sales are normally lowest in the first quarter due to the
absence of holidays and fewer picture-taking opportunities during that time.
Sales and earnings of the FPEG segment are linked to the timing of holidays, vacations and other leisure activities. Sales and
earnings of traditional film and photofinishing products are normally strongest in the second and third quarters as demand is high
due to heavy vacation activity and events such as weddings and graduations. Sales of entertainment imaging film are typically
strongest in the second quarter reflecting demand due to the summer motion picture season.
Sales and earnings of the GCG segment generally exhibit modestly higher levels in the fourth quarter. This is driven primarily by the
sales of commercial inkjet, electrophotographic printing, and document scanner products due to seasonal customer demand linked
to commercial year-end advertising processes. However, in the second half of 2008, tightening credit availability, combined with the
weak economy, resulted in a reduction of capital spending, negatively impacting equipment sales within GCG. The reduction of
global print demand during that timeframe had a negative impact on GCG consumables sales.
Research and Development
Through the years, the Company has engaged in extensive and productive efforts in research and development.
Research and development expenditures for the Company’s three reportable segments and All Other were as follows:
(in millions) For the Year Ended December 31,
2008
2007
2006
Consumer Digital Imaging Group $ 215
$ 250
$ 290
Film, Photofinishing and Entertainment Group 52
60
76
Graphic Communications Group 231
214
209
All Other 3
25
21
Total $ 501
$ 549
$ 596
Research and development is headquartered in Rochester, New York. Other U.S. groups are located in Boston, Massachusetts;
New Haven, Connecticut; Dayton, Ohio; and San Jose, Emeryville, and San Diego, California. Outside the U.S., groups are located
in Canada, England, Israel, Germany, Japan, China, and Singapore. These groups work in close cooperation with manufacturing
units and marketing organizations to develop new products and applications to serve both existing and new markets.