Lexmark Newsroom

LEXINGTON, Ky., Oct. 23, 2012 /PRNewswire/ -- Lexmark International, Inc. (NYSE: LXK) today announced financial results for the third quarter of 2012.

Third Quarter Results

GAAP revenue of $919 million includes $2.0 million of acquisition-related adjustments. Non-GAAP¹ revenue of $921 million declined 11 percent compared with last year.

GAAP earnings per share for the third quarter of 2012 were $0.00, compared with GAAP earnings of $0.86 per share in the third quarter of 2011. Non-GAAP earnings were $0.94 per share, about flat compared with non-GAAP earnings of $0.95 per share in the third quarter of 2011.

"Our third quarter financial results were highlighted by solid free cash flow generation and ongoing growth in Perceptive Software and managed print services revenue," said Paul Rooke, Lexmark chairman and chief executive officer. "Even with the ongoing economic weakness we are seeing, particularly in Europe, revenue for the quarter was in line with the guidance we provided in July, and non-GAAP EPS were about flat year to year and exceeded that guidance.

"Last week we announced a broad array of solutions-enabled laser products that further strengthen our smart multifunction product and managed print services leadership," added Rooke. "We continue to leverage our investment in the Perceptive Software portfolio in combination with our smart multifunction products to reduce the complexities of manual processes and improve productivity for our customers.

"We remain committed to delivering a long-term operating income margin of 11 to 13 percent and continue to maintain capital allocation discipline to deliver shareholder value," Rooke added. "In the past 15 months, we have returned more than $500 million to shareholders through dividends and share repurchases."

Imaging Solutions and Services (ISS) revenue of $879 million declined 13 percent compared to the same period last year. Within ISS, Managed Print Services (MPS) revenue² grew 2 percent, Non-MPS revenue³ declined 12 percent and Inkjet Exit revenue⁴ declined 29 percent year to year. Inkjet Exit revenue represented 16 percent of total revenue and is expected to decline with the company's decision to exit its remaining inkjet hardware for improved profitability.

Perceptive Software revenue was $41 million. Perceptive Software revenue, excluding acquisition-related adjustments of $2.0 million, was $43 million and grew 88 percent compared to the same period in 2011.

Lexmark's focus continues to be on growing workgroup laser hardware and supplies, MPS, and software revenue as inkjet continues to become a less significant portion of the company's revenue mix.

Hardware revenue and Supplies revenue declined 24 percent and 10 percent, respectively. 

Software and Other revenue grew 25 percent, or 28 percent excluding acquisition-related adjustments.

Third Quarter 2012 GAAP results:

• Revenue was $919 million compared to $1.035 billion last year.
• Gross profit margin was 35.7 percent versus 36.9 percent in 2011.
• Operating expense was $316 million compared to $283 million last year. 
• Operating income margin was 1.3 percent compared to 9.6 percent in 2011.
• Net earnings were $0 million compared to 2011 net earnings of $67 million.

Third Quarter 2012 Non-GAAP results:

• Revenue was $921 million compared to $1.035 billion last year.
• Gross profit margin was 39.9 percent versus 37.3 percent in 2011.
• Operating expense was $269 million compared to $279 million last year.
• Operating income margin was 10.7 percent compared to 10.4 percent last year.
• Net earnings were $65 million compared to $74 million in 2011.

Maintaining Capital Allocation Discipline to Deliver Shareholder Value

Lexmark is continuing to execute on its previously announced capital allocation framework of returning more than 50 percent of free cash flow⁵ to shareholders, on average, through quarterly dividends and share repurchases while building and growing its solutions and software business through expansion and acquisitions. Lexmark has returned more than $500 million to shareholders through dividends and share repurchases since July 2011.

In the third quarter of 2012, Lexmark paid a dividend of $0.30 per share totaling $21 million. The company also repurchased 5.8 million of the company's shares for $120 million. An additional $15 million was paid during the third quarter to repurchase shares, with the final settlement of these shares expected to occur in the fourth quarter. The company's remaining share repurchase authorization is currently $251 million.

The company ended the quarter with $859 million in cash and current marketable securities. Net cash provided by operating activities was $133 million. Free cash flow was $95 million. Capital expenditures were $38 million. Depreciation and amortization was $81 million.  

Lexmark Extends Smart MFP Leadership with New Solutions-Enabled Laser Products

Last week, Lexmark announced a wide breadth of new laser printers and multifunction products (MFPs) built on an enhanced technology platform that delivers productivity-enhancing solutions.

Lexmark's smart MFPs include an intuitive touch screen that provides access to many powerful applications that reduce the complexities of manual processes and improve productivity. This seamless integration of Lexmark's smart MFPs with the Perceptive Software portfolio helps improve infrastructure efficiency and team performance to propel growth.

Some of the newest additions to Lexmark's printer and MFP product families include:

• CX510 color laser MFP – Designed for mid-size workgroups, the Lexmark CX510 offers time-saving productivity solutions that are typically present on larger devices. This device produces professional-quality color worthy of branded marketing collateral thanks to Lexmark's calibration technology for the PANTONE^® color system and Lexmark Named Color Replacement true color matching.
• MX812 monochrome laser MFP – This high-performance MFP features exceptionally fast processor, print, copy and scan speeds. As the first A4 monochrome laser MFP to print and copy up to 70 pages per minute⁶, as well as to deliver the first page in as quickly as four seconds⁶, this is the ideal device for large enterprise workgroups who need a workhorse in the office. It provides professional finishing and comes with pre-loaded business solutions that are quickly accessible through an intuitive 10.2-inch color touch screen. An extra high-yield 45,000-page Unison toner cartridge, the largest in its class⁶, ensures fewer user interventions to replace toner.
• MX611 monochrome laser MFP – The Lexmark MX611 features a vibrant 7-inch color touch screen, providing access to pre-installed workflow solutions that enhance business productivity by automating tasks. It's a workhorse equipped to print up to 50 pages per minute and prints or copies a first page in as quickly as seven seconds. The Lexmark MX611 is the only MFP in its class⁷ that offers an automatic inline stapler finishing option.
• MX410 monochrome laser MFP – The Lexmark MX410 introduces solutions capabilities on an MFP below the affordable $600 price point. The device saves time with fast processor, print, copy and scan speeds, and with powerful productivity solutions via the 4.3-inch color touch screen. It prints up to 10,000 pages per month, up to 40 pages per minute, and prints or copies a first page in as quickly as seven seconds.
• MS610 monochrome laser printer – Starting at $699, the Lexmark MS610 is impressive in its own right with duplex and built-in productivity solutions⁸. As the fastest compact A4 monochrome laser printer⁹, it prints up to 16,000 pages per month, up to 50 pages per minute, and a first page in as little as six-and-a-half seconds. The easy-to-use 4.3-inch color touch screen⁸ also enables users to manage jobs right at the device.

Lexmark's Value Proposition Resonates with Fortune Global 50 Companies

Statoil, a leading energy company within the oil and gas production industry, has chosen Lexmark for a five-year printing solution services agreement approximately valued at $20 million for the initial contract period. Lexmark is now the sole printing solution services provider for Statoil operations worldwide. Lexmark solutions and services will be executed globally throughout Statoil's organization, providing consistency and visibility to its output fleet.

Siemens, a global powerhouse in electronics and electrical engineering, has selected Perceptive Intelligent Capture, powered by Brainware, for the automation of accounts payable operations within the company's European Shared Services Center in Germany. The customer will implement Perceptive Software's intelligent data capture platform for the processing of more than 1.5 million invoices annually, with the possibility of expanding these capabilities to other document-driven routines throughout the organization. This contract represents another clear example of Perceptive Intelligent Capture's value proposition as an enabler of world-class efficiency and process transparency within the framework of global shared services.

Perceptive Software recently announced that ING Group, one of the world's largest banks with more than $1.6 trillion in assets, has implemented Perceptive Intelligent Capture, powered by Brainware, for the efficient capture and validation of header and line-item data from paper-based documents at the financial institution's headquarters in Amsterdam, The Netherlands. No other data capture offering can match Perceptive Intelligent Capture's out-of-the-box capabilities for integration with disparate content management platforms, handling numerous languages, addressing different and complex reporting requirements, and touchless processing of P.O.-based invoices.

Looking Forward

In the fourth quarter of 2012, the company currently expects revenue to decline 10 to 12 percent year on year. GAAP earnings per share in the fourth quarter of 2012 are expected to be around $0.17 to $0.27, compared with GAAP earnings per share of $0.94 in the fourth quarter of 2011.  Non-GAAP earnings per share in the fourth quarter of 2012 are expected to be around $0.82 to $0.92, compared with non-GAAP earnings per share of $1.25 in the fourth quarter of 2011.

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 website 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) using access code 33692937.

Lexmark's earnings presentation slides, including reconciliations between GAAP and non-GAAP financial measures, will be available on Lexmark's investor relations website prior to the live broadcast.

About Lexmark
Lexmark International, Inc. (NYSE: LXK) provides businesses of all sizes with a broad range of printing and imaging products, software, solutions and services that help customers to print less and save more. Perceptive Software, a Lexmark company, is a leading provider of process and content management software that helps organizations fuel greater operational efficiency. In 2011, Lexmark sold products in more than 170 countries and reported more than $4 billion in revenue.

To learn more about Lexmark, please visit www.lexmark.com. For more information on Perceptive Software, please visit www.perceptivesoftware.com.

For more information on Lexmark, see the Lexmark Facebook page and follow us on Twitter.

For more information about Perceptive Software, please visit the company's Facebook and Twitter profiles.

"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 which may cause the company's actual results or performance to be materially different from the results or performance expressed or implied by the forward-looking statements. Factors that may impact such forward-looking statements include, but are not limited to, continued economic uncertainty related to volatility of the global economy, fluctuations in foreign currency exchange rates; inability to realize all of the anticipated benefits of the Company's acquisitions; market acceptance of new products and pricing programs; decreased supplies consumption; inability to be successful in the Company's transition to a higher-usage, higher value product portfolio; possible changes in the size of expected restructuring costs, charges, and savings; failure to implement workforce reductions and execute planned cost reduction measures; reliance on international production facilities, manufacturing partners and certain key suppliers; increased investment to support product development and marketing; the financial failure or loss of business with a key customer or reseller, including loss of retail shelf placements; periodic variations affecting revenue and profitability; excessive inventory for the Company and/or its reseller channel; failure to manage inventory levels or production capacity; credit risk associated with the Company's customers, channel partners, and investment portfolio; aggressive pricing from competitors and resellers; the inability to develop new products and enhance existing products to meet customer needs on a cost competitive basis; entrance into the market of additional competitors focused on imaging and software solutions, including enterprise content management and business process management solutions; inability to perform under managed print services contracts; increased competition in the aftermarket supplies business; changes in the Company's tax provisions or tax liabilities; 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 rights and defend against claims of infringement and/or anticompetitive conduct; the outcome of litigation or regulatory proceedings to which the Company may be a party; unforeseen cost impacts as a result of new legislation; the inability to attract, retain and motivate key employees; changes in a country's political or economic conditions; conflicts among sales channels; the failure of information technology systems; disruptions at important points of exit and entry and distribution centers; business disruptions; 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. Unison is a trademark of Lexmark International, Inc. All prices are estimated street prices in U.S. dollars – actual prices may vary.  All prices, features, specifications and capabilities are subject to change without notice. PANTONE® is a registered trademark of Pantone, Inc.                     

(1)    In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release non-GAAP earnings per share amounts and related income statement items which management believes provides useful information to investors.  When used in this press release, "non-GAAP" earnings per share amounts and related income statement items exclude restructuring-related and acquisition-related adjustments.  The rationale for management's use of non-GAAP measures is included in Appendix A to the financial information attached hereto.

(2)    MPS revenue is defined as ISS laser hardware, supplies and fleet management solutions sold through a managed services agreement.

(3)    Non-MPS revenue is defined as ISS laser hardware, laser supplies, dot matrix hardware, and dot matrix supplies not sold as a part of an MPS agreement. Non-MPS also includes parts and service related to hardware maintenance.

(4)    Inkjet Exit revenue is defined as consumer and business inkjet hardware and supplies that the company is exiting.

(5)    Free Cash Flow is defined as net cash flows provided by operating activities minus purchases of property, plant and equipment plus proceeds from sale of fixed assets.

(6)    Based on a comparison of A4 monochrome multifunction laser printers priced $2,000 and above. Data sourced from manufacturers' websites and independent competitive intelligence analysts as of August 2012.     

(7)    Based on a comparison of A4 monochrome multifunction laser printers priced under $2,000. Data sourced from manufacturers' websites and independent competitive intelligence analysts as of August 2012.

(8)    Applies to the Lexmark MS610de and MS610dte configurations only.

(9)    Based on a comparison of A4 monochrome laser printers that weigh less than 40 lbs. Data sourced from manufacturers' websites and independent competitive intelligence analysts as of August 2012.

SOURCE Lexmark International, Inc.