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For the year ended December 31, 2013, consolidated gross profit increased 3% while gross profit as a percentage of revenue increased
2 percentage points compared to the same period in 2012. Gross profit margin versus the same period in 2012 was impacted by a 3
percentage point YTY increase due to a favorable mix shift reflecting relatively less inkjet hardware and more software and laser
supplies. Gross profit margin was also impacted by a 1 percentage point increase due to lower YTY costs of restructuring activities,
acquisition-related adjustments, and a net pension and other post-retirement benefit plan net gain compared with a loss in the prior
year. This was partially offset by a 1 percentage point decrease YTY due to negative product margins. Gross profit for the year ended
December 31, 2013 included $52.4 million of pre-tax acquisition-related adjustments, $21.5 million of pre-tax restructuring charges
and project costs and a pension and other postretirement benefit plan net gain of $17.4 million.
Gross profit for the year ended December 31, 2012 included $47.8 million of pre-tax restructuring charges and project costs, $32.7
million of pre-tax acquisition-related adjustments and a pension and other postretirement benefit plan net loss of $4.3 million.
See “Restructuring Charges and Project Costs” and “Acquisition-related Adjustments” sections that follow for further discussion.
Operating Expense
The following table presents information regarding the Company’s operating expenses during the periods indicated:
2014 2013 2012
(Dollars in millions) Dollars % of Rev Dollars % of Rev Dollars % of Rev
Research and development $ 354.5 10 % $ 287.2 8 % $ 369.1 10 %
Selling, general and administrative 888.2 24 % 810.1 22 % 805.1 21 %
Gain on sale of inkjet-related technology and assets – – % (73.5) (2) % – – %
Restructuring and related charges (reversals) 17.9 – % 10.9 – % 36.1 1 %
Total operating expense $ 1,260.6 34 % $ 1,034.7 28 % $ 1,210.3 32 %
For the year ended December 31, 2014, total operating expense increased 22% compared to the same period in 2013, primarily due to
the Gain on sale of inkjet-related technology and assets recognized in the 2013 period, a pension and other postretirement benefit plan
net loss in 2014 compared with a net gain in 2013 and higher acquisition-related adjustments.
Research and development expenses for the year ended December 31, 2014 increased compared with the same period in 2013
primarily due to a pension and other postretirement benefit plan net loss compared with a net gain in 2013. Research and development
expenses for the 2014 period also reflected increased investment in Perceptive Software both organically and due to the Company’s
acquisitions, particularly ReadSoft in the third quarter of 2014. Selling, general and administrative expenses for the year ended
December 31, 2014 increased compared with the same period in 2013 primarily due to a pension and other postretirement benefit plan
net loss compared with a net gain in 2013, higher acquisition and divestiture-related adjustments and investment in Perceptive
Software, partially offset by expense reductions in All other due to the Company’s 2012 restructuring actions and overall expense
management.
For the year ended December 31, 2013, total operating expense decreased 15% compared to the same period in 2012. The decrease
was primarily due to the net benefit of the sale of inkjet technology and related development resources as well as lower pre-tax
restructuring and related charges and related project costs and favorable impact of the pension and other postretirement benefit plan
net gain in 2013.
Research and development expenses decreased in 2013 compared to 2012, primarily due to the exit of inkjet technology and
development in 2012. Selling, general and administrative expenses increased due to employee variable compensation expenses and the
impact of acquisitions completed in Perceptive Software, partially offset by expense reductions from the restructuring announced in
August 2012. Both research and development and selling, general and administrative expenses in 2013 reflected the pension and other
postretirement benefit plan net gain compared with a net loss in 2012.
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