Kodak 2004 Annual Report Download - page 19
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Please find page 19 of the 2004 Kodak annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Financials
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2 0 0 4 S U M M A R Y A N N U A L R E P O R T
increaseinsalesfromtheaerialandindustrialmaterialsSPGandtheimag-
ingservicesSPG,offsetbydeclinesintheequipmentandmediaSPG.
GrossProfitGrossprofitfortheCommercialImagingsegmentfor2004
increased$4million,or1%,from$267millionfor2003to$271million
for2004.Thegrossprofitmarginwas33.7%for2004ascomparedwith
33.8%for2003.Thedecreaseinthegrossprofitmarginof0.1percent-
agepointswasattributabletoanincreaseinmanufacturingcost,which
negativelyimpactedgrossprofitmarginsbyapproximately0.2percent-
agepoints,andunfavorableprice/mixof0.5percentagepoints,partially
offsetbyexchange,whichfavorablyimpactedgrossprofitmarginsby0.8
percentagepoints.
Selling,GeneralandAdministrativeExpensesSG&Aexpensesfor
theCommercialImagingsegmentdecreased$5million,or4%,from$135
millionfor2003to$130millionfor2004.Asapercentageofsales,SG&A
expensesdecreasedfrom17%for2003to16%for2004.Thedecrease
inSG&Aexpensesisprimarilyduetocostsavingsrealizedfromongoing
focusedcostreductionprogramsandreducedadvertisingcosts,partially
offsetbytheunfavorableimpactofexchange.
ResearchandDevelopmentCostsR&DcostsfortheCommercialIm-
agingsegmentdecreased$10million,or43%,from$23millionfor2003
to$13millionfor2004.Asapercentageofsales,R&Dcostsdecreased
from3%in2003to2%in2004.
Earnings(Losses)FromContinuingOperationsBeforeInterest,
OtherIncome(Charges),NetandIncomeTaxesEarningsfromcon-
tinuingoperationsbeforeinterest,otherincome(charges),netandincome
taxesfortheCommercialImagingsegmentincreased$18million,or17%,
from$109millionin2003to$127millionin2004.Theincreaseinearnings
fromoperationsisprimarilyattributabletothereasonsoutlinedabove.
GraphicCommunications
OnMay1,2004,KodakcompletedtheacquisitionoftheNexPress-related
entities,whichincludedthefollowing:
•Heidelberg’s50%interestinNexPressSolutionsLLC(Kodakand
HeidelbergformedtheNexPress50/50JVin1997todevelophigh
quality,on-demand,digitalcolorprintingsystems)
•100%ofthestockofHeidelbergDigitalLLC(Hdi),amanufacturer
ofdigitalblack&whiteprintingsystems
•100%ofthestockofNexPressGMBH—aR&Dcenterlocatedin
Kiel,Germany
•Certainsalesandserviceemployees,inventoryandrelatedas-
setsandliabilitiesofHeidelberg’ssalesandserviceunitslocated
throughouttheworld
TherewasnoconsiderationpaidtoHeidelbergatclosing.Undertheterms
oftheacquisition,KodakandHeidelbergagreedtouseaperformance-
basedearn-outformulawherebyKodakwillmakeperiodicpaymentsto
Heidelbergoveratwo-yearperiod,ifcertainsalesgoalsaremet.Ifallsales
goalsaremetduringthetwocalendaryearsendingDecember31,2005,
theCompanywillpayamaximumof$150millionincash.Duringthefirst
calendaryear,noamountswerepaid.Additionalpaymentsmayalsobe
maderelatingtotheincrementalsalesofcertainproductsinexcessofa
statedminimumnumberofunitssoldduringafive-yearperiodfollowing
theclosingofthetransaction.Theacquisitionisexpectedtobecomeaccre-
tiveby2007.Duringtheeightmonthssinceclosing,theNexPress-related
entitiescontributed$177millioninsalestotheGraphicCommunications
segment.
OnJanuary5,2004,Kodakannouncedthecompletionofitsacquisi-
tionofScitexDigitalPrinting,theworldleaderinhigh-speed,variabledata
inkjetprintingsystems.Kodakacquiredthebusinessfor$239millionin
netcash.Thisacquisitionwasexpectedtocontributeapproximately$200
milliontoGraphicCommunicationssegmentsalesin2004.ScitexDigital
PrintingnowoperatesunderthenameKodakVersamark,Inc.(KodakVersamark).
During2004,KodakVersamarkcontributed$198millioninsalestothe
GraphicCommunicationssegment.
WorldwideRevenuesNetworldwidesalesfortheGraphicCommunica-
tionssegmentwere$724millionfor2004ascomparedwith$346million
for2003,representinganincreaseof$378million,or109%asreported,
or108%excludingthefavorableimpactfromexchange.Theincreasein
netsaleswasprimarilyattributabletotheacquisitionsofKodakVersamark
andtheNexPress-relatedentities,whichcontributedapproximately$375
millioninnetsalestotheGraphicCommunicationssegment.
NetsalesintheU.S.were$350millionfor2004ascomparedwith
$156millionfor2003,representinganincreaseof$194million,or124%.
NetsalesoutsidetheU.S.were$374millioninthecurrentyearascom-
paredwith$190millionintheprioryear,representinganincreaseof$184
million,or97%,or95%excludingthefavorableimpactfromexchange.
DigitalStrategicProductGroups’RevenuesGraphicCommunications
segmentdigitalproductsales,whicharecomprisedofKodakVersamark,
theNexPress-relatedentities,andEncad,Inc.productsandservices,were
$456millionforthecurrentyearascomparedwith$75millionfortheprior
year,representinganincreaseof$381million,or508%.Theincrease
isprimarilyattributabletotheacquisitionsofKodakVersamarkandthe
NexPress-relatedentities.
KodakVersamarkexperiencedstrongsalesperformancedrivenby
increasedplacementsofcolorprintingunitsinthetransactionalprinting
marketcoupledwithagrowingconsumablesbusiness.
TraditionalStrategicProductGroups’RevenuesSegmenttraditional
productsalesarelimitedtothesalesoftraditionalgraphicsproductstothe
KPGjointventure.NetworldwidesalesofgraphicartsproductstoKPG,
anunconsolidatedjointventureaffiliateinwhichtheCompanyhasa50%
ownershipinterest,of$268millionwereconsistentforthecurrentyearas
comparedwith2003netsalesof$271million.Increasingvolumeswere
offsetbynegativeprice/mixprimarilyattributabletographicartsproducts.
GrossProfitGrossprofitfortheGraphicCommunicationssegmentfor
2004increased$82million,or167%,from$49millionfor2003to$131
millionfor2004.Thegrossprofitmarginwas18.1%for2004ascom-
paredwith14.2%for2003.Theincreaseinthegrossprofitmarginof3.9
percentagepointswasprimarilyattributabletotheacquisitionsofKodak
VersamarkandtheNexPress-relatedentities,whichcontributed13.2
percentagepointstogrossprofitmarginforthecurrentyearperiod.Thisis
despitethefactthatKodakVersamark’smarginswerenegativelyaffected