Kodak 2001 Annual Report Download - page 34

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average digital penetration rate for the number of rolls processed
increased each quarter during 2001 up to a rate of 6.7% in the fourth
quarter, reflecting a 49% increase over the fourth quarter of 2000. In
certain major retail accounts, the digital penetration reached levels of up
to 15%.
During the second quarter of 2001, the Company purchased Ofoto,
Inc. The Company believes that Ofoto will solidify the Company’s leading
position in online imaging products and services. Since the acquisition,
Ofoto has demonstrated strong order growth, with the average order size
increasing by 31% over the 2000 level. In addition, the Ofoto customer
base reflected growth of approximately 12% per month throughout 2001.
The gross profit margin for the Photography segment was 36.2% in
2001 as compared with 40.1% in 2000. The 3.9 percentage point
decrease in gross margin for the Photography segment was primarily
attributable to continued lower effective selling prices across virtually all
product groups, including the Company’s core products of traditional
film, paper, and digital cameras, unfavorable exchange and flat
distribution costs on a lower sales base.
SG&A expenses remained flat, decreasing 1% in 2001 as compared
with 2000. As a percentage of sales, SG&A increased from 19.3% in
2000 to 20.9% in 2001. SG&A, excluding advertising, increased 4%,
representing 14.6% of sales in 2001 and 12.9% of sales in 2000. R&D
expenses decreased 6% in 2001 as compared with 2000. As a
percentage of sales, R&D increased slightly from 5.6% in 2000 to 5.8%
in 2001.
Earnings from operations decreased $643 million, or 45%, from
$1,430 million in 2000 to $787 million in 2001, reflecting the lower sales
and gross profit levels described above. Net earnings decreased $499
million, or 48%, from $1,034 million in 2000 to $535 million in 2001 due
primarily to lower earnings from operations.
Health Imaging Net worldwide sales for the Health Imaging segment
were $2,262 million for 2001 as compared with $2,220 million for 2000,
representing an increase of $42 million, or 2% as reported, or a 4%
increase excluding the negative impact of exchange. Net sales in the U.S.
were $1,089 million for 2001 as compared with $1,067 million for 2000,
representing an increase of $22 million or 2%, while net sales outside
the U.S. were $1,173 million for 2001 as compared with $1,153 million
for 2000, representing an increase of $20 million, or 2% as reported, or
6% excluding the negative impact of exchange. Sales in emerging
markets increased slightly, up 4% from 2000 to 2001.
Net sales of digital products, which include laser imagers (DryView
imagers and wet laser printers), digital media (DryView and wet laser
media), digital capture equipment (computed radiography capture
equipment and direct radiography equipment) and picture archiving and
communications systems (PACS), increased 11% in 2001 as compared
with 2000. The increase in digital sales was principally the result of a
184% increase in digital capture revenues resulting from a 201%
increase in volume, partially offset by declines attributable to price and
foreign exchange. Laser imaging equipment, services and film also
contributed to the increase in digital sales, as sales in these combined
categories increased 3% in 2001 as compared with 2000. The 3%
increase in these product groups was the result of increases in DryView
laser imagers and media of 8% and 33%, respectively, which were
partially offset by the expected decreases in wet laser printers and media
of 8% and 29%, respectively, in 2001 as compared with 2000. Sales of
PACS increased 9% in 2001 as compared with 2000, reflecting a 16%
increase in volume, partially offset by declines attributable to price and
foreign exchange of 4% and 3%, respectively.
Sales of traditional medical products, which include analog film,
equipment, chemistry and services, decreased 7% in 2001 as compared
with 2000. This decline was primarily attributable to a 12% decrease in
non-specialty medical sales. The decrease in these sales was partially
offset by an increase in specialty Mammography and Oncology sales,
which increased 4%, reflecting a 12% increase in volume, offset by
declines attributable to price/mix and foreign exchange of 6% and 2%,
respectively. Additionally, Dental sales increased 3% in 2001 as
compared with 2000, reflecting a 5% increase in volume, which was
partially offset by declines of 1% attributable to both price/mix and
foreign exchange.
The gross profit margin for the Health Imaging segment was 38.4%
in 2001 as compared with 46.6% in 2000. The 8.2 percentage point
decrease in gross margin is primarily attributable to selling price
declines in 2001, driven by the continued conversion of customers to
lower pricing levels under the Company’s Novation Group Purchasing
Organization contracts and a larger product mix shift from higher margin
traditional analog film toward lower margin digital capture and printing
equipment. Additionally, in 2001 as compared with 2000, the Company
incurred higher service costs due to an increase in volume of new digital
capture equipment and systems placements, compounded by short-term
start-up reliability issues with the new equipment.
SG&A expenses increased 4% in 2001 as compared with 2000. As a
percentage of sales, SG&A increased from 15.8% in 2000 to 16.2% in
2001. R&D expenses increased 10% in 2001 as compared with 2000. As a
percentage of sales, R&D increased from 6.2% in 2000 to 6.7% in 2001.
Earnings from operations decreased $195 million, or 38%, from
$518 million in 2000 to $323 million in 2001, which is attributable to
the decrease in the gross profit percentage in 2001 as compared with
2000, as described above. Net earnings decreased $135 million, or 38%,
from $356 million in 2000 to $221 million in 2001 due to lower earnings
from operations as described above.
Commercial Imaging Net worldwide sales for the Commercial Imaging
segment were $1,459 million for 2001 as compared with $1,417 million
for 2000, representing an increase of $42 million, or 3% as reported, or
5% excluding the negative impact of exchange. Net sales in the U.S.