- Lexmark reports third-quarter revenue of $1.195 billion, GAAP EPS of
$0.48, including $0.12 for restructuring-related activities
- Company generates cash of $142 million during third quarter
- Restructuring plan expected to generate $40 million savings in 2008 and
$60 million annualized savings
LEXINGTON, Ky., Oct. 23 /PRNewswire-FirstCall/ -- Lexmark
International, Inc. (NYSE: LXK) today announced financial results for the
third quarter of 2007. Third-quarter revenue was $1.195 billion, down 3
percent compared to revenue of $1.235 billion last year. Third-quarter GAAP
earnings per share were $0.48. Earnings per share for the third quarter of
2007 would have been $0.60 excluding $0.12 per share for
restructuring-related activities. In the third quarter of 2007, the GAAP
provision for income taxes was a benefit of $18 million, reflecting tax
benefits due to the finalization of certain tax audits in the quarter and a
reduction in the expected full-year tax rate. Third-quarter 2006 GAAP
earnings per share were $0.85. Earnings per share for the third quarter of
2006 would have been $0.95 excluding $0.10 per share for
restructuring-related activities.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020819/LEXMARKLOGO )
Third-quarter 2007 business segment revenue of $728 million grew 5
percent year to year and consumer segment revenue of $468 million declined
13 percent compared to a year ago. Third-quarter 2007 gross profit margin
was 27.8 percent, the operating expense to revenue ratio was 26.1 percent,
the operating income margin was 1.7 percent, and net earnings were $45
million. Third-quarter 2007 operating income includes $15 million pretax
charges in connection with the company's restructuring-related actions.
Third-quarter 2006 gross profit margin was 32.6 percent, the operating
expense to revenue ratio was 23.3 percent, the operating income margin was
9.3 percent, and net earnings were $86 million. Third-quarter 2006 results
include $13 million restructuring-related pretax charges.
On a non-GAAP basis, excluding third-quarter restructuring-related
charges:
-- Third-quarter 2007 gross profit margin would have been 28.2 percent,
down 4.7 percentage points from 32.9 percent in the same period last
year, principally due to lower product margins partially offset by a
favorable product mix.
-- Third-quarter 2007 operating expense as a percentage of revenue would
have been 25.2 percent, up 2.7 percentage points from 22.5 percent in
the same quarter last year, driven by increased marketing and sales and
product development investments.
-- Third-quarter 2007 operating income margin would have been 2.9 percent,
down 7.5 percentage points from 10.4 percent last year, primarily
reflecting an operating loss in the consumer segment in the quarter.
-- Third-quarter 2007 net earnings would have been $57 million compared to
$95 million in the third quarter of 2006.
The company ended the quarter with $639 million in cash and marketable
securities. Third-quarter net cash provided by operating activities was
$142 million. Capital expenditures for the quarter were $39 million.
Depreciation and amortization in the quarter was $50 million. Lexmark did
not repurchase its stock during the third quarter. The company's remaining
share repurchase authorization was approximately $295 million at quarter
end.
"Although our business market segment continues to meet our
expectations and our third quarter earnings per share were better than
expected, EPS were significantly below a year ago, reflecting the
continuation of a very challenging situation in our consumer market
segment. We are taking steps to shift our consumer market segment focus to
higher-usage customers and to improve our cost and expense structure. At
the same time, we are committed to continuing our strategic investments in
new product development and branding to strengthen our position in growth
market segments," said Paul J. Curlander, Lexmark chairman and chief
executive officer.
The company announced a restructuring plan today, which includes:
-- Closure of one of the company's inkjet supplies manufacturing
facilities in Mexico, and additional optimization measures at the
remaining inkjet facilities in Mexico.
-- Reduction of business support cost and expense structure by further
consolidating activity globally and expanding the use of shared service
centers in lower-cost regions. The areas impacted are supply chain,
service delivery, general and administrative expense, as well as
marketing and sales support functions.
-- Focusing consumer segment marketing and sales efforts into countries or
geographic regions that have the highest supplies usage.
These actions are expected to impact approximately 1,650 positions by
the end of 2008. Most of the impacted positions are being moved to
lower-cost countries.
The company estimates that these actions will result in pretax costs of
approximately $20 million in 2007, and $70 million in 2008. Total savings
from the restructuring are expected to be about $40 million in 2008, and to
be approximately $60 million annually once these actions are completed.
Legal Partner and Wireless Inkjets Capitalize on Important Industry
Dynamics
During the quarter, Lexmark introduced the Lexmark Legal Partner, a
laser multifunction product that is customized specifically for the legal
industry. This product, along with the previously announced Education
Station and Clinical Assistant, allows Lexmark to capitalize on its
extensive research to identify unique document workflow management
requirements and trends associated with specific industry verticals in the
small and medium business space.
Additions to the new wireless line of inkjet products announced in the
third quarter include three full-featured all-in-one printers delivering
industry-leading value for small office/home office professionals and
combining the flexibility of wireless connectivity, the efficiency of
automatic two-sided printing and the convenience of easy installation.
Lexmark now offers a full line of the most affordable wireless printers in
the market.
Looking Forward
In the fourth quarter of 2007, the company expects revenue to be down
in the low- to mid-single digit percentage range year over year. It expects
fourth-quarter 2007 GAAP EPS to be in the range of $0.32 to $0.42 per
share. Restructuring-related costs and expenses are expected to be
approximately $0.18 per share in the fourth quarter of 2007. Excluding
these restructuring-related costs and expenses, non-GAAP EPS is expected to
be in the range of $0.50 to $0.60 per share. GAAP EPS in the fourth quarter
of 2006 were $0.91, or $1.05 excluding $0.14 per share
restructuring-related charges.
Conference Call Today
The company will be hosting a conference call with securities analysts
today at 8:30 a.m. (EDT). A live broadcast and a complete replay of this
call can be accessed from Lexmark's investor relations Web site at
http://investor.lexmark.com. If you are unable to connect to the Internet,
you can access the call via telephone at 888-693-3477 (outside the U.S. by
calling 973-582-2710) or the replay shortly afterward by calling
877-519-4471 (outside the U.S. by calling 973-341-3080) using access code
9323285. This telephone replay of the conference call will be available
until noon (EDT) on Tuesday, October 30, 2007.
Supplemental information slides, including reconciliations between GAAP
and non-GAAP financial measures, will be available on Lexmark's investor
relations Web site prior to the live broadcast.
About Lexmark
Lexmark International, Inc. (NYSE: LXK) provides businesses and
consumers in more than 150 countries with a broad range of printing and
imaging products, solutions and services that help them to be more
productive. In 2006, Lexmark reported $5.1 billion in revenue. Learn how
Lexmark can help you get more done at http://www.lexmark.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: Statements in this release which are not historical facts are
forward-looking and involve risks and uncertainties, including, but not
limited to, periodic variations affecting revenue and profitability, the
inability to meet customer product requirements on a cost competitive
basis, failure to execute planned cost reduction measures, aggressive
pricing from competitors and resellers, entrance into the market of
additional competitors focused on printing solutions, market acceptance of
new products and pricing programs, the financial failure or loss of
business with a key customer, reseller or supplier, increased investment to
support product development and marketing, weak economic conditions,
inability to perform under managed print services contracts, decreased
supplies consumption, increased competition in the aftermarket supplies
business, failure to successfully outsource the infrastructure support of
information technology systems, failure to manage inventory levels or
production capacity, unforeseen cost impacts as a result of new
legislation, fees on the company's products or litigation costs required to
protect the company's rights, inability to obtain and protect the company's
intellectual property and defend against claims of infringement and/or
anticompetitive conduct, reliance on international production facilities,
manufacturing partners and certain key suppliers, disruptions at important
points of exit and entry and distribution centers, changes in a country's
political or economic conditions, conflicts among sales channels, the
failure of information technology systems, changes in the company's tax
provisions or tax liabilities, business disruptions, currency fluctuations,
China's revaluation of its currency, terrorist acts, acts of war or other
political conflicts, or the outbreak of a communicable disease, and other
risks described in the company's Securities and Exchange Commission
filings. The company undertakes no obligation to update any forward-looking
statement.
Lexmark and Lexmark with diamond design are trademarks of Lexmark
International, Inc., registered in the U.S. and/or other countries. All
other trademarks are the property of their respective owners.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
Revenue $1,195.4 $1,234.6 $3,664.2 $3,738.9
Cost of revenue (1) 862.8 832.2 2,538.6 2,515.0
Gross profit 332.6 402.4 1,125.6 1,223.9
Research and development 101.2 93.2 303.3 273.8
Selling, general and
administrative (1) 204.3 186.6 608.5 546.6
Restructuring and other, net (1)(2) 6.6 7.5 6.6 64.3
Operating expense 312.1 287.3 918.4 884.7
Operating income 20.5 115.1 207.2 339.2
Interest (income) expense, net (5.6) (5.2) (13.8) (17.0)
Other (income) expense, net (3) (0.8) 1.2 (7.0) 3.9
Earnings before income taxes 26.9 119.1 228.0 352.3
Provision for income taxes (18.3) 33.5 26.2 103.8
Net earnings $45.2 $85.6 $201.8 $248.5
Net earnings per share:
Basic $0.48 $0.86 $2.12 $2.38
Diluted $0.48 $0.85 $2.10 $2.37
Shares used in per share
calculation:
Basic 94.9 100.0 95.4 104.5
Diluted 95.2 100.6 96.0 105.0
(1) Amounts for the three months ended September 30, 2006, include the
impact of $13.3 million of restructuring-related charges and project
costs. Restructuring-related charges of $3.1 million relating to
accelerated depreciation on certain fixed assets were included in cost
of revenue. Restructuring-related charges of $7.5 million relating to
employee termination benefits were included in restructuring and
other, net. Project costs of $0.5 million and $2.2 million were
included in cost of revenue and selling, general and administrative
expenses, respectively.
Amounts for the nine months ended September 30, 2006, include the
impact of $116.3 million of restructuring-related charges and project
costs and a $9.9 million pension curtailment benefit. Restructuring-
related charges of $38.0 million relating to accelerated depreciation
on certain fixed assets were included in cost of revenue.
Restructuring-related charges of $74.2 million relating to employee
termination benefits and contract termination charges and the $9.9
million pension curtailment benefit were included in restructuring and
other, net. Project costs of $0.9 million and $3.2 million were
included in cost of revenue and selling, general and administrative
expenses, respectively.
(2) Amounts for the three and nine months ended September 30, 2007,
include the impact of $6.6 million of employee termination benefit
charges related to the Company's 2007 restructuring plan.
(3) Amounts for the nine months ended September 30, 2007, include an $8.1
million pre-tax foreign exchange gain realized upon the substantial
liquidation of the Company's Scotland entity.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions)
(Unaudited)
September 30 December 31
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $202.5 $144.6
Marketable securities 436.7 406.3
Trade receivables, net 574.3 584.3
Inventories 459.9 457.8
Prepaid expenses and other current
assets 231.9 237.0
Total current assets 1,905.3 1,830.0
Property, plant and equipment, net 864.3 846.8
Other assets 174.1 172.2
Total assets $2,943.7 $2,849.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt $4.2 $-
Current portion of long-term debt 149.9 -
Accounts payable 634.2 600.3
Accrued liabilities 672.4 723.7
Total current liabilities 1,460.7 1,324.0
Long-term debt - 149.8
Other liabilities 335.5 340.0
Total liabilities 1,796.2 1,813.8
Stockholders' equity:
Common stock and capital in excess of
par 878.4 828.4
Retained earnings 836.7 627.5
Treasury stock, net (454.7) (289.8)
Accumulated other comprehensive loss (112.9) (130.9)
Total stockholders' equity 1,147.5 1,035.2
Total liabilities and stockholders'
equity $2,943.7 $2,849.0
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
Earnings Per Share: 3Q07 3Q06
GAAP $0.48 $0.85
Restructuring-related charges & project costs 0.12 0.10
Non-GAAP $0.60 $0.95
Operating
Expense to Operating
3Q07: Gross Profit Revenue Income
Margin Ratio Margin
GAAP 27.8% 26.1% 1.7%
Restructuring-related charges & 0.4% (0.9%) 1.2%
project costs
Non-GAAP 28.2% 25.2% 2.9%
3Q06:
GAAP 32.6% 23.3% 9.3%
Restructuring-related charges &
project costs 0.3% (0.8%) 1.1%
Non-GAAP 32.9% 22.5% 10.4%
Net Earnings (In Millions) 3Q07 3Q06
GAAP $45 $86
Restructuring-related charges &
project costs 12 9
Non-GAAP $57 $95
Earnings Per Share
Guidance: 4Q07 4Q06
GAAP $0.32 - $0.42 $0.91
Restructuring-related charges &
project costs $0.18 0.14
Non-GAAP $0.50 - $0.60 $1.05
Note: Management believes that presenting these measures is useful
because they enhance shareholders' understanding of how management
assesses the performance of the Company's businesses. Management
reviews the performance of the Company's operating segments based
on GAAP and non-GAAP measures which reflect income and expense
items which are recurring in nature, and do not include the impact
of actions that management believes are not reflective of the
ongoing operation of the Company. These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
Totals may not foot due to rounding.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
Nine Months Ended September 30
Earnings Per Share: 2007 2006
GAAP $2.10 $2.37
Restructuring-related charges &
project costs 0.19 0.77
Accumulated translation gain upon
Scotland liquidation (0.07) -
Pension curtailment gain - (0.07)
Non-GAAP $2.22 $3.07
Operating
Expense to Operating
2007: Gross Profit Revenue Income
Margin Ratio Margin
GAAP 30.7% 25.1% 5.7%
Restructuring-related charges &
project costs 0.3% (0.4%) 0.6%
Non-GAAP 31.0% 24.7% 6.3%
2006:
GAAP 32.7% 23.6% 9.1%
Restructuring-related charges &
project costs 1.1% (2.1%) 3.1%
Pension curtailment gain 0.0% 0.3% (0.3%)
Non-GAAP 33.8% 21.9% 11.9%
Net Earnings (In Millions) 2007 2006
GAAP $202 $249
Restructuring-related charges &
project costs 18 81
Accumulated translation gain upon
Scotland liquidation (7) -
Pension curtailment gain - (7)
Non-GAAP $213 $322
Note: Management believes that presenting these measures is useful
because they enhance shareholders' understanding of how management
assesses the performance of the Company's businesses. Management
reviews the performance of the Company's operating segments based
on GAAP and non-GAAP measures which reflect income and expense
items which are recurring in nature, and do not include the impact
of actions that management believes are not reflective of the
ongoing operation of the Company. These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
Totals may not foot due to rounding.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In Millions)
(Unaudited)
Segment Operating Income
Restructuring-
Related
Charges and
Project
Three Months Ended September 30 GAAP Costs (1) Non-GAAP
2007
Business $143 $1 $144
Consumer (22) 7 (16)
Other (100) 7 (94)
Total $20 $15 $35
2006
Business $147 $6 $153
Consumer 62 5 67
Other (94) 3 (91)
Total $115 $13 $128
2007 vs. 2006 Comparison of Segment
Operating Income:
Business (3%) (6%)
Consumer n/a n/a
Other (6%) (3%)
Total (82%) (73%)
(1) 2007 amounts include $8 million of project costs.
Note: Management believes that presenting these measures is useful
because they enhance shareholders' understanding of how management
assesses the performance of the Company's businesses. Management
reviews the performance of the Company's operating segments based
on GAAP and non-GAAP measures which reflect income and expense
items which are recurring in nature, and do not include the impact
of actions that management believes are not reflective of the
ongoing operation of the Company. These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
Totals may not foot due to rounding.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In Millions)
(Unaudited)
Segment Operating Income
Restructuring-
Related
Charges and
Project
Nine Months Ended September 30 GAAP Costs (1) Non-GAAP
2007
Business $446 $2 $448
Consumer 56 3 59
Other (295) 17 (278)
Total $207 $22 $229
2006
Business $443 $28 $471
Consumer 196 55 250
Other (2) (299) 23 (276)
Total $339 $106 $445
2007 vs. 2006 Comparison of Segment
Operating Income:
Business 1% (5%)
Consumer (71%) (76%)
Other 2% (1%)
Total (39%) (49%)
(1) 2007 amounts include $15 million of project costs.
(2) $10 million pension curtailment gain included in 2006 GAAP and
Restructuring-related columns on "Other" line.
Note: Management believes that presenting these measures is useful
because they enhance shareholders' understanding of how management
assesses the performance of the Company's businesses. Management
reviews the performance of the Company's operating segments based
on GAAP and non-GAAP measures which reflect income and expense
items which are recurring in nature, and do not include the impact
of actions that management believes are not reflective of the
ongoing operation of the Company. These measures may not be
comparable to similar measures of other companies as not all
companies calculate these measures in the same manner.
Totals may not foot due to rounding.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In Millions)
(Unaudited)
Three Months Ended September 30 2007 2006
Gross Profit:
GAAP $333 $402
Restructuring-related charges & project costs 4 4
Non-GAAP $337 $406
Operating Expense:
GAAP $312 $287
Restructuring-related charges & project costs (10) (9)
Non-GAAP $302 $278
Operating Income:
GAAP $20 $115
Restructuring-related charges & project costs 15 13
Non-GAAP $35 $128
Net Earnings:
GAAP $45 $86
Restructuring-related charges & project costs 12 9
Non-GAAP $57 $95
Net Earnings: (As a Percentage of Revenue)
GAAP 3.8% 6.9%
Restructuring-related charges & project costs 1.0% 0.8%
Non-GAAP 4.8% 7.7%
Note: Management believes that presenting these measures is useful because
they enhance shareholders' understanding of how management assesses
the performance of the Company's businesses. Management reviews the
performance of the Company's operating segments based on GAAP and
non-GAAP measures which reflect income and expense items which are
recurring in nature, and do not include the impact of actions that
management believes are not reflective of the ongoing operation of
the Company. These measures may not be comparable to similar
measures of other companies as not all companies calculate these
measures in the same manner.
Totals may not foot due to rounding.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In Millions)
(Unaudited)
Nine Months Ended September 30 2007 2006
Gross Profit:
GAAP $1,126 $1,224
Restructuring-related charges & project costs 10 39
Non-GAAP $1,136 $1,263
Operating Expense:
GAAP $918 $885
Restructuring-related charges & project costs (12) (77)
Pension curtailment gain - 10
Non-GAAP $907 $817
Operating Income:
GAAP $207 $339
Restructuring-related charges & project costs 22 116
Pension curtailment gain - (10)
Non-GAAP $229 $446
Net Earnings:
GAAP $202 $249
Restructuring-related charges & project costs 18 81
Accumulated translation gain upon (7) -
Scotland liquidation
Pension curtailment gain - (7)
Non-GAAP $213 $322
Note: Management believes that presenting these measures is useful because
they enhance shareholders' understanding of how management assesses
the performance of the Company's businesses. Management reviews the
performance of the Company's operating segments based on GAAP and
non-GAAP measures which reflect income and expense items which are
recurring in nature, and do not include the impact of actions that
management believes are not reflective of the ongoing operation of
the Company. These measures may not be comparable to similar
measures of other companies as not all companies calculate these
measures in the same manner.
Totals may not foot due to rounding.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
Nine Months Ended September 30 2007 2006
Net Earnings: (As a Percentage of Revenue)
GAAP 5.5% 6.6%
Restructuring-related charges & project costs 0.6% 2.2%
Accumulated translation gain upon
Scotland liquidation (0.2%) -
Pension curtailment gain - (0.2%)
Non-GAAP 5.8% 8.6%
Note: Management believes that presenting these measures is useful because
they enhance shareholders' understanding of how management assesses
the performance of the Company's businesses. Management reviews the
performance of the Company's operating segments based on GAAP and
non-GAAP measures which reflect income and expense items which are
recurring in nature, and do not include the impact of actions that
management believes are not reflective of the ongoing operation of
the Company. These measures may not be comparable to similar
measures of other companies as not all companies calculate these
measures in the same manner.
Totals may not foot due to rounding.
SOURCE Lexmark International, Inc.
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Related links:
http://www.lexmark.com
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20020819/LEXMARKLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Investors, John Morgan, +1-859-232-5568,
jmorgan@lexmark.com; or Media, Tim Fitzpatrick, +1-859-232-7527,
tfitzpat@lexmark.com
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