Kodak 2001 Annual Report Download - page 35

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were $820 million for 2001 as compared with $715 million for 2000,
representing an increase of $105 million, or 15%. Net sales outside the
U.S. were $639 million for 2001 as compared with $702 million for 2000,
representing a decrease of $63 million, or 9% as reported, or 4%
excluding the negative impact of exchange.
Net worldwide sales of document imaging equipment, products and
services increased 8% in 2001 as compared with 2000. The increase in
sales was primarily attributable to an increase in service revenue due to
the acquisition of the Bell & Howell Imaging business in the first quarter
of 2001. With the acquisition of the Bell & Howell Imaging business, the
Company continues to secure new exclusive third-party maintenance
agreements. The increase in revenue was also due to strong demand for
the Company’s iNnovation series scanners, specifically the new i800
series high-volume document scanner.
Net worldwide sales of the Company’s commercial and government
products and services increased 16% in 2001 as compared with 2000.
The increase in sales was principally due to an increase in revenues from
government products and services under its government contracts.
Net worldwide sales for wide-format inkjet products were a
contributor to the net increase in Commercial Imaging sales as these
revenues increased 9% in 2001 as compared with 2000, reflecting year-
over-year sales increases throughout 2001. The Company continues to
focus on initiatives to grow this business as reflected in the worldwide
launch of the 5260 wide-format inkjet printer in the fourth quarter of
2001 and the acquisition of ENCAD, Inc. in January of 2002. Given
ENCAD’s strong distribution position in this industry, the acquisition of
ENCAD is expected to provide the Company with a strong channel to the
wide-format inkjet printer market, which Kodak had not previously served.
Net worldwide sales of graphic arts products to Kodak Polychrome
Graphics (KPG), an unconsolidated joint venture affiliate in which the
Company has a 50% ownership interest, decreased 15% in 2001 as
compared with 2000. The largest contributor to this decline in sales was
graphics film, which experienced a 20% decrease, reflecting a 19%
decrease in volume and small declines attributable to price/mix and
foreign exchange. The decrease in sales to KPG is attributable to
continued technology substitution and economic weakness. During 2001,
KPG continued to implement the operational improvements it began in
2000, which returned the joint venture to profitability in the first quarter
and throughout 2001. In the fourth quarter of 2001, KPG completed its
acquisition of Imation’s color proofing and software business. The
Company believes that Imation’s portfolio of products will complement
and expand KPG’s offerings in the marketplace, which should drive sell-
through of Kodak’s graphics products. The Company is the exclusive
provider of graphic arts products to KPG.
Net worldwide sales of products to NexPress, an unconsolidated joint
venture affiliate in which the Company has a 50% ownership interest,
decreased in 2001 as compared with 2000, reflecting a 15% decrease in
volume and declines in price/mix. In September 2001, the joint venture
achieved its key milestone in launching the NexPress 2100 printer
product at the Print ’01 trade show. There is strong customer demand for
the new printer, which the Company believes should drive increased sell-
through of Kodak’s products through the joint venture.
The gross profit margin for the Commercial Imaging segment was
30.7% in 2001 as compared with 33.4% in 2000. The 2.7 percentage
point decrease in gross margin is primarily attributable to lower selling
prices in a number of product groups within the segment.
SG&A expenses increased 19% in 2001 as compared with 2000. As
a percentage of sales, SG&A increased from 12.4% in 2000 to 14.4% in
2001. R&D expenses decreased 5%. As a percentage of sales, R&D
decreased from 4.3% in 2000 to 4.0% in 2001.
Earnings from operations decreased $68 million, or 29%, from $233
million in 2000 to $165 million in 2001, which is attributable to the
decrease in the gross profit percentage and an increase in SG&A
expenses in 2001 as compared with 2000, as described above. Net
earnings decreased $10 million, or 11%, from $90 million in 2000 to $80
million in 2001. Net earnings include positive earnings from the
Company’s equity in the income of KPG.
All Other Net worldwide sales of businesses comprising All Other
were $110 million for 2001 as compared with $126 million for 2000,
representing a decrease of $16 million, or 13% as reported, with no
impact from exchange. Net sales in the U.S. were flat at $68 million for
both 2001 and 2000, while net sales outside the U.S. were $42 million
for 2001 as compared with $58 million for 2000, representing a
decrease of $16 million, or 28% as reported, or 30% excluding the
impact of exchange.
The decrease in worldwide net sales was primarily attributable to a
decrease in optics revenues of 39% and a decrease in revenues due to
the divestment of the Eastman Software business in 2000. These
decreases were partially offset by a 10% increase in the sale of sensors.
In December 2001, the Company and SANYO announced the
formation of a business venture, SK Display Corporation, to manufacture
and sell active matrix organic light emitting diode (OLED) displays for
consumer devices. Kodak will have a 34% ownership interest in this
venture. For 2001, there were no sales relating to this business. In the
future, the Company will derive revenue through royalty income and sales
of raw materials and finished displays.
Earnings from operations decreased $49 million from a loss of $11
million in 2000 to a loss of $60 million in 2001. The increase in the loss is
attributable to increased costs incurred for the continued development of
the OLED technology, the establishment of the SK Display business venture
and costs incurred to grow the existing optics and sensor businesses.