Kodak 2010 Annual Report Download - page 34

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expiration of a significant customer contract in 2009. Cost improvements, primarily within Digital Capture and Devices (+4 pp) and
Consumer Inkjet Systems (+2 pp), positively impacted gross profit margin as a percent of sales and were largely the result of
supplier cost reductions and improved product life cycle management.
The increase in gross profit margin as a percentage of sales from 2008 to 2009 for CDG was primarily attributable to significantly
lower product costs, particularly within Consumer Inkjet Systems (+7 pp) as a result of new product platforms, and Digital Capture
and Devices (+5 pp), resulting from supplier cost reductions and improved product life cycle management. Partially offsetting these
improvements were unfavorable price/mix (-7 pp), largely attributable to the pricing pressures within Digital Capture and Devices as
mentioned above, and unfavorable foreign exchange (-1 pp).
Included in gross profit were non-recurring intellectual property licensing agreements within Digital Capture and Devices. These
licensing agreements contributed $838 million, $435 million and $227 million to gross profit in 2010, 2009 and 2008, respectively.
Selling, General and Administrative Expenses
The increase in SG&A expenses from 2009 to 2010 of 10% for CDG was primarily driven by increased advertising expense.
The decrease in SG&A expenses from 2008 to 2009 of 15% was primarily driven by focused cost reduction actions (-5%)
implemented in 2009 to respond to the current economic conditions.
Research and Development Costs
The increase in R&D costs from 2009 to 2010 of 1% for CDG was not significant.
The decrease in R&D costs from 2008 to 2009 of 29% was primarily attributable to lower spending related to Consumer Inkjet
Systems (-10%), resulting from the movement of product offerings from the development phase into the market introduction and
growth phases, as well as portfolio rationalization within Digital Capture and Devices (-15%).
Graphic Communications Group
(dollars in millions)
For the Year Ended
December 31,
2010
% of
Sales
%
Change
2009
% of
Sales
%
Change
2008
% of
Sales
Total net sales
$ 2,681
-2%
$ 2,726
-18%
$ 3,334
Cost of sales
2,012
-3%
2,073
-15%
2,445
Gross profit
669
25.0%
2%
653
24.0%
-27%
889
26.7%
Selling, general and administrative
expenses
543
20%
4%
524
19%
-18%
637
19%
Research and development costs
152
6%
-11%
171
6%
-23%
221
7%
(Loss) earnings from continuing operations
before interest expense, other income
(charges), net and income taxes
$ (26)
-1%
38%
$ (42)
-2%
-235%
$ 31
1%
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
$ 2,681
-1.7%
3.2%
-4.7%
-0.2%
n/a
Gross profit margin
25.0%
1.0pp
n/a
-2.7pp
0.1pp
3.6pp
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
$ 2,726
-18.2%
-14.5%
-1.7%
-2.0%
n/a
Gross profit margin
24.0%
-2.7pp
n/a
-1.1pp
-0.8pp
-0.8pp