Kodak 2008 Annual Report Download - page 41

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Worldwide Revenues
Net sales for CDG increased 8% due to increases in intellectual property royalties, new digital picture frames, and the introductory
launch of inkjet printers, partially offset by snapshot printing within Digital Capture and Devices. The unfavorable price/mix was
primarily driven by digital camera product portfolio shifts within Digital Capture and Devices and by price declines in Retail Systems
Solutions.
Net worldwide sales of Digital Capture and Devices, which includes consumer digital cameras, digital picture frames, accessories,
memory products, snapshot printers and related media, and intellectual property royalties, increased 7% in the year ended
December 31, 2007 as compared with the prior year, primarily reflecting higher digital camera volumes, increased intellectual
property royalties, sales of new digital picture frames, and favorable foreign exchange, partially offset by unfavorable price/mix and
lower snapshot printing volumes.
Net worldwide sales of Retail Systems Solutions, which includes kiosks and related media, increased modestly in the year ended
December 31, 2007 as compared with the prior year, reflecting volume growth and favorable foreign exchange, partially offset by
unfavorable price/mix.
The first quarter 2007 launch of Consumer Inkjet Systems contributed to volume improvements in CDG.
Gross Profit
The increase in gross profit dollars and margin for CDG was primarily attributable to reductions in cost, increases in intellectual
property royalties, and favorable foreign exchange. The reductions in manufacturing and other costs were primarily driven by
strategic manufacturing and supply chain initiatives to improve margins in Digital Capture and Devices. In addition, cost reductions
were driven by the benefits of previous restructuring activities and lower depreciation expense, partially offset by costs associated
with the scaling of manufacturing and new product introduction activities in the Consumer Inkjet Systems business. The gross profit
margin improvement was partially offset by unfavorable price/mix in Digital Capture and Devices products.
Included in gross profit was the impact of a non-recurring extension and amendment of an existing license arrangement and new
non-recurring license arrangements during the current year. The impact of these licensing arrangements contributed approximately
7.3% of revenue to segment gross profit dollars in 2007, as compared with 6.0% of revenue to segment gross profit dollars for
similar arrangements in 2006. These types of arrangements provide the Company with a return on portions of historical R&D
investments and similar opportunities are expected to have a continuing impact on the results of operations.
Selling, General and Administrative Expenses
The increase in SG&A expenses for CDG was primarily driven by increased advertising expenses associated with Consumer Inkjet
Systems, partially offset by ongoing efforts to achieve target cost models and improved go-to-market structure.
Research and Development Costs
The decrease in R&D costs for CDG was largely attributable to spending incurred in 2006 related to the development of Consumer
Inkjet Systems, which were introduced in the first quarter of 2007. The decrease was also impacted by cost reduction actions.
Film, Photofinishing And Entertainment Group
(dollars in millions) For the Year Ended
December 31,
2007
%of
Sales
2006
%of
Sales
Increase /
(Decrease)
%
Change
Total net sales $ 3,632
$ 4,254
$ (622) -15%
Cost of goods sold 2,771
3,203
(432) -13%
Gross profit 861 23.7%
1,051
24.7% (190) -18%
Selling, general and administrative expenses 520 14%
656
15% (136) -21%
Research and development costs 60 2%
76
2% (16) -21%
Earnings from continuing operations before
interest expense, other income (charges),
net and income taxes $ 281 8%
$ 319
7% $ (38) -12%