The penetration rate for the number of rolls scanned at Qualex wholesale laboratories averaged 4.1% for the full year, equivalent to approximately 260 million scanned images. By the end of 2000, the number of placements of Kodak Picture Maker kiosks was over 29,000, an increase of 6,000 from year-end 1999.

SG&A expenses for the segment decreased 6%, from 25.2% of sales in 1999 to 23.7% in 2000, reflecting the benefits of the Company’s cost reduction efforts. SG&A excluding advertising decreased 6%, from 17.5% of sales in 1999 to 16.4% in 2000. R&D expenses decreased 9%, from 4.7% of sales in 1999 to 4.3% in 2000.

Earnings from operations decreased 9%, reflecting reduced profit margins driven primarily by lower effective selling prices, unfavorable product mix and adverse exchange movements. Lower gross profit was partially offset by reduced SG&A and R&D spending. Net earnings were $860 million, which reflects a 4% decrease from the prior year, due primarily to lower earnings from operations.

Kodak Professional  Sales in the Kodak Professional segment decreased 11% from 1999, 8% excluding adverse currency movements. Adjusting the year-over-year comparison for the impact of the formation of the KPG joint venture in Japan, sales declined 9%. U.S. revenues decreased 7% and revenues outside the U.S. decreased 13%, or 8% excluding the unfavorable impact of exchange.

Total commercial products revenue declined 14% primarily due to lower sensitized film and paper sales, as well as declines in professional digital camera sales, all of which suffered from volume declines and pricing pressure. The graphics business also experienced revenue declines of approximately 26%, due to reduced sales to the Company’s KPG joint venture. The segment’s Portrait/Social business increased 2% reflecting increased sales of digitization services and 35mm film, which increased both on a dollar and unit basis.

SG&A expenses for the segment were in line with 1999 in dollar terms but increased as a percentage of sales, from 18.1% to 20.3%. Excluding advertising expenses, SG&A expenses increased 1%, from 15.9% of sales to 18.0%. R&D spending decreased 10% in dollar terms, but remained level on a percentage of sales basis at 7.4%. The decrease is primarily due to the reclassification of NexPress R&D costs to below earnings from operations upon the formation of the NexPress joint venture in 1999. Excluding this reclassification, R&D decreased 2%.

Earnings from operations decreased 30%, while net earnings declined 58%. Included in 1999 earnings from operations is a $20 million pre-tax charge related to the write-off of the Company’s investment in CalComp Corporation. Excluding this charge, other income (charges) decreased $141 million from a positive $48 million in 1999 to a negative $93 million in 2000, primarily reflecting a reduction in joint venture income from KPG and the reclassification of NexPress R&D.