Kodak 2010 Annual Report Download - page 33

31
Consumer Digital Imaging Group
For the Year Ended
December 31,
(dollars in millions)
2010
% of
Sales
%
Change
2009
% of
Sales
%
Change
2008
% of
Sales
Total net sales
$ 2,739
5%
$ 2,619
-15%
$ 3,088
Cost of sales
1,729
-12%
1,955
-22%
2,495
Gross profit
1,010
36.9%
52%
664
25.4%
12%
593
19.2%
Selling, general and administrative
expenses
531
19%
10%
483
18%
-15%
565
18%
Research and development costs
148
5%
1%
146
6%
-29%
205
7%
Earnings (loss) from continuing operations
before interest expense, other income
(charges), net and income taxes
$ 331
12%
846%
$ 35
1%
120%
$ (177)
-6%
For the Year Ended
December 31,
Change vs. 2009
2010
Amount
Change
vs. 2009
Volume
Price/Mix
Foreign
Exchange
Manufacturing
and Other Costs
Total net sales
$ 2,739
4.6%
-1.0%
6.3%
-0.7%
n/a
Gross profit margin
36.9%
11.5pp
n/a
5.9pp
-0.1pp
5.7pp
For the Year Ended
December 31,
Change vs. 2008
2009
Amount
Change
vs. 2008
Volume
Price/Mix
Foreign
Exchange
Manufacturing
and Other Costs
Total net sales
$ 2,619
-15.2%
-10.6%
-2.9%
-1.7%
n/a
Gross profit margin
25.4%
6.2pp
n/a
-7.3pp
-1.4pp
14.9pp
Revenues
CDG’s 2010 revenue increase as compared with the same period in 2009 was primarily due to an increase in revenues from non-
recurring intellectual property licensing agreements (+15%) as noted in more detail below, partially offset by unfavorable price/mix in
the other components of Digital Capture and Devices due to pricing pressures in the industry (-7%). Volume improvements in
Consumer Inkjet Systems (+3%) also contributed to the revenue increase which management believes is reflective of how the
Company’s value proposition continues to resonate with customers. Partially offsetting these increases were volume declines in
Retail Systems Solutions (-4%), primarily due to the expiration of a significant customer contract in 2009.
CDG’s 2009 revenue declines as compared with 2008 reflect the global economic downturn which began in the fourth quarter of
2008. The decrease in revenue was primarily driven by volume declines within Digital Capture and Devices (-11%) as a result of
weak consumer discretionary spending. Unfavorable price/mix within Digital Capture and Devices (-3%) also contributed to the CDG
revenue decline, resulting from pricing pressures related to the overall economic conditions as noted above. Partially offsetting these
declines was an increase in volumes for Consumer Inkjet Systems (+2%), which management believes is reflective of favorable
consumer response to the Company’s unique value proposition. Unfavorable foreign exchange (-2%) also contributed to the decline.
Included in revenues were non-recurring intellectual property licensing agreements within Digital Capture and Devices. These
licensing agreements contributed $838 million, $435 million and $227 million to revenues in 2010, 2009 and 2008, respectively.
Gross Profit
The increase in gross profit margin as a percentage of sales from 2009 to 2010 for CDG was primarily attributable to the increase in
non-recurring intellectual property licensing revenues (+10 pp) included in price/mix within Digital Capture and Devices, as noted in
more detail below. This was partially offset by unfavorable price/mix in the other components of Digital Capture and Devices (-2 pp),
largely related to competitive pricing pressures, and by price/mix declines within Retail Systems Solutions (-1 pp) primarily due to the