Kodak 2004 Annual Report Download - page 23
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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
of$572million,or75%.Thedecreaseinnetearningsfromcontinuing
operationsisprimarilyattributabletothereasonsoutlinedabove.
Digital&FilmImagingSystems
WorldwideRevenuesNetworldwidesalesfortheD&FISsegmentwere
$9,248millionfor2003ascomparedwith$9,002millionfor2002,rep-
resentinganincreaseof$246million,or3%asreported,oradecreaseof
3%excludingthefavorableimpactofexchange.Approximately1.9percent-
agepointsoftheincreaseinnetsaleswasattributabletoincreasesrelated
tovolume,drivenprimarilybyconsumerdigitalcameras,printerdock
products,inkjetmediaandentertainmentprintfilms,partiallyoffsetbyvol-
umedeclinesfortraditionalconsumerfilmproducts,andapproximately5.9
percentagepointsoftheincreasewasattributabletofavorableexchange.
Theseincreaseswerepartiallyoffsetbyprice/mixdeclines,primarilydriven
byconsumerdigitalcamerasandtraditionalproductsandservices,which
reducednetsalesbyapproximately4.8percentagepoints.
D&FISsegmentnetsalesintheU.S.were$3,828millionfor2003as
comparedwith$4,034millionfor2002,representingadecreaseof$206
million,or5%.D&FISsegmentnetsalesoutsidetheU.S.were$5,420
millionfor2003ascomparedwith$4,968millionfor2002,representingan
increaseof$452million,or9%asreported,oradecreaseof1%excluding
thefavorableimpactofexchange.
DigitalStrategicProductGroups’RevenuesD&FISsegmentdigital
productsaleswere$1,802millionfor2003ascomparedwith$1,199mil-
lionfor2002,representinganincreaseof$603million,or50%,primarily
drivenbytheconsumerdigitalcaptureSPGandthehomeprintingSPG.
Networldwidesalesofconsumerdigitalcamerasincreased79%in
2003ascomparedwith2002,drivenalmostentirelybystrongincreasesin
volume,whichwerepartiallyoffsetbydeclinesinprice/mix.Salescontinue
tobedrivenbystrongconsumeracceptanceoftheEasySharedigital
camerasystem,asreflectedinincreasedmarketshareinarapidlygrowing
market.
AlthoughsomeofKodak’slargestchannelsdonotreportsharedata,
KodakcontinuedtoholdoneofthetopU.S.digitalcameramarketshare
positionsinchannelsreportingsharedata,attainingthenumberthree
sharepositionforthefullyear,afterattainingthetopspotforthefourth
quarteralone.OutsideoftheU.S.,Kodakplacedinthetopfourmarket
sharepositionsin6outof9keymarketsinthefourthquarter,andinthe
topfourin5outof9keymarketsforthefullyear.Consumerdigitalcam-
eraswereprofitableonafullyallocatedbasisforthesecondhalfof2003.
Kodak’snewprinterdockproducts,initiallylaunchedinthespring
of2003,experiencedstrongsalesgrowthinthefourthquarterof2003,
strengtheningtheirnumbertwosharepositionintheU.S.snapshotprinter
marketandputtingthemontracktobea$100millionbusinessinthefirst
fullyearofsales.
NetworldwidesalesfromtheCompany’sconsumerdigitalprod-
uctsandservices,whichincludepicturemakerkiosks/mediaandretail
consumerdigitalservicesrevenueprimarilyfromPictureCDandRetail.
com,increased6%in2003ascomparedwith2002,drivenprimarilybyan
increaseinsalesofkiosksandconsumerdigitalservices.
Networldwidesalesofinkjetphotopaperincreased32%in2003as
comparedwith2002,primarilyduetohighervolumes.Kodakcontinued
tomaintainitssharedleadermarketsharepositionintheU.S.in2003.
Thedouble-digitrevenuegrowthandthemaintenanceofmarketshareare
primarilyattributabletostrongunderlyingmarketgrowthandthecontinued
growthandacceptanceofanewlineofsmallformatinkjetpapers.
TraditionalStrategicProductGroups’RevenuesD&FISsegment
traditionalproductsaleswere$7,446millionfor2003ascomparedwith
$7,803millionfor2002,representingadecreaseof$357million,or5%,
primarilydrivenbydeclinesinthefilmcaptureSPGandtheconsumerout-
putSPG.NetworldwidesalesofthefilmcaptureSPG,includingconsumer
rollfilm(35mmandAPS),one-time-usecameras(OTUC),decreased9%in
2003ascomparedwith2002,reflectingdeclinesduetolowervolumesof
12%andprice/mixdeclinesof3%,partiallyoffsetbyfavorableexchange
of6%.SalesoftheCompany’sconsumerfilmproductswithintheU.S.
decreased18%in2003ascomparedwith2002,reflectingdeclines
duetolowervolumesof17%andprice/mixdeclinesof1%.Salesofthe
Company’sconsumerfilmproductsoutsidetheU.S.decreased2%in2003
comparedwith2002,reflectingdeclinesinvolumeof9%andprice/mixde-
clinesof2%,partiallyoffsetbyfavorableexchangeof9%.Thelowerfilm
productsalesareattributabletoadecliningindustrydemanddrivenprimar-
ilybytheimpactofdigitalsubstitutionandretailerinventoryreductions.
TheU.S.filmindustrysell-throughvolumesdecreasedapproximately
8%in2003ascomparedwith2002primarilyduetotheimpactofdigital
substitution.TheCompanymaintainedapproximatelyflatyear-over-year
blendedU.S.consumerfilmshareasithasdoneforthepastseveral
consecutiveyears.
Networldwidesalesforphotofinishingservices(excludingequip-
ment),includingQualexintheU.S.andConsumerImagingServices(CIS)
outsidetheU.S.,decreased15%in2003ascomparedwith2002,reflect-
inglowervolumesanddeclinesinprice/mix,partiallyoffsetbyfavorable
exchange.IntheU.S.,Qualex’ssalesforphotofinishingservicesdecreased
19%in2003ascomparedwith2002,andoutsideoftheU.S.,CISsales
decreased8%.
Networldwidesalesoforiginationandprintfilmtotheentertainment
industryincreased11%in2003ascomparedwith2002,primarilyreflect-
inghigherprintfilmvolumesandfavorableexchange,partiallyoffsetby
negativeprice/mix.
Networldwidesalesofprofessionalfilmcaptureproducts,including
colornegative,colorreversalandcommercialblackandwhitefilms,de-
creased13%in2003ascomparedwith2002,primarilyreflectingdeclines
involumeandnegativeprice/mix,partiallyoffsetbyfavorableexchange.
Salesdeclinesofprofessionalfilmcaptureproductsresultedprimarily
fromtheongoingimpactofdigitalsubstitution.Networldwidesalesof
professionalsensitizedoutput,includingcolornegativepaperanddisplay
materials,increased2%in2003ascomparedwith2002,primarilyreflect-
inganincreaserelatedtofavorableexchange,partiallyoffsetbydeclinesin
volumeandnegativeprice/mix.
GrossProfitGrossprofitfortheD&FISsegmentwas$2,864millionfor
2003ascomparedwith$3,219millionfor2002,representingadecrease
of$355millionor11%.Thegrossprofitmarginwas31.0%inthecurrent
yearascomparedwith35.8%intheprioryear.The4.8percentagepoint
decreasewasprimarilyattributabletodecreasesinprice/mixthatimpacted
grossprofitmarginsbyapproximately6.3percentagepoints,partially
offsetbymanufacturingcostimprovementsandfavorableexchange,which