Kodak 2011 Annual Report Download - page 37

Revenues
For the year ended December 31, 2011, net sales decreased approximately 16% compared with the same period in 2010 due to a decline in the CDG
segment primarily driven by lower revenue from non-recurring intellectual property licensing agreements (-11%), as discussed below. Also contributing
to the decrease in net sales were industry-related volume declines within the FPEG segment (-4%), and volume declines in the CDG segment (-2%).
For the year ended December 31, 2010, net sales decreased approximately 6% compared with the same period in 2009 primarily due to volume declines
in the FPEG segment (-6%). Favorable price/mix in the CDG segment (+2%) was largely offset by unfavorable price/mix in the GCG segment (-2%).
Included in revenues were non-recurring intellectual property licensing agreements. These licensing agreements contributed $82 million, $838 million,
and $435 million to revenues in 2011, 2010, and 2009, respectively. In July 2011, the Company announced that it is exploring strategic alternatives,
including a potential sale, related to its digital imaging patent portfolios. As this process proceeds, the Company will continue to pursue its patent
licensing program as well as all litigation related to its digital imaging patents.
Gross Profit
The decrease in gross profit margin from 2010 to 2011 was driven by unfavorable price/mix within the CDG segment (-10pp), largely due to the
decrease in revenue from the non-recurring intellectual property agreements as discussed below. Also contributing to the decline in gross profit margin
were higher commodity-related costs, primarily within the FPEG segment related to silver (-3pp). Higher cost of sales in the GCG segment (-2pp),
attributable to continuing start-up costs associated with the stabilization of the PROSPER printing systems, also contributed to the decline. Partially
offsetting these declines were cost improvements in the CDG segment (+1pp), due to improved quality and component cost reductions.
The increase in gross profit margin from 2009 to 2010 was primarily driven by manufacturing and other cost reductions within the CDG (+2pp) and
GCG (+1pp) segments. Also contributing to the increase in gross profit margin was favorable price/mix in the CDG segment (+2pp), partially offset by
unfavorable price/mix in the GCG segment (-1pp).
Included in gross profit were non-recurring intellectual property licensing agreements. These licensing agreements contributed $82 million, $838
million, and $435 million to gross profit for non-recurring agreements in 2011, 2010, and 2009, respectively.
Selling, General and Administrative Expenses
The decreases in consolidated selling, general and administrative (SG&A) expenses from 2010 to 2011 were primarily attributable to reduced
advertising expense in the CDG and GCG segments.
The decrease in consolidated SG&A expenses from 2009 to 2010 was attributable to decreases in SG&A in the FPEG segment (-7%) primarily driven
by cost reduction actions, partially offset by increases in SG&A in the CDG and GCG segments (5%), primarily due to increased advertising costs.
Research and Development Costs
The decreases in consolidated research and development (R&D) costs were primarily due to the rationalization of investments.
Restructuring Costs, Rationalization and Other
These costs, as well as the restructuring and rationalization-related costs reported in cost of sales, are discussed under the "RESTRUCTURING COSTS,
RATIONALIZATION AND OTHER" section.
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