Inkjet & Digital Printing

Lexmark reports second quarter 2012 results

Tuesday 24. July 2012 - Lexmark International, Inc. (NYSE: LXK) today announced financial results for the second quarter of 2012.

“Lexmark’s second quarter results were below our April guidance, reflecting weaker than expected demand, particularly in Europe, and unfavorable currency impacts,” said Paul Rooke, Lexmark chairman and chief executive officer. “While economic headwinds are impacting our results, we’re encouraged that Lexmark’s managed print services and Perceptive Software businesses continue to grow, demonstrating that our software and solutions value propositions resonate even in today’s difficult market.
“We remain focused on advancing our position in the higher value, higher growth segments of the business market,” said Rooke. “We are confident in our strategy and competitive strength, and will continue to closely monitor the challenging demand environment and make adjustments accordingly as we move through the year.”
Second Quarter Results
GAAP revenue of $919 million includes $2.4 million of acquisition-related adjustments. Non-GAAP(1) revenue of $921 million declined 12 percent compared with last year.
Earnings Per Share 2Q12 2Q11
—————— —- —-
GAAP $0.55 $1.27
Restructuring-related adjustments 0.10 0.05
Acquisition-related adjustments 0.24 0.05
—- —-
Non-GAAP $0.89 $1.36
GAAP earnings per share for the second quarter of 2012 were $0.55, compared with GAAP earnings of $1.27 per share in the second quarter of 2011. Non-GAAP earnings were $0.89 per share, compared with non-GAAP earnings of $1.36 per share in the second quarter of 2011.
Hardware revenue and Supplies revenue declined 17 percent and 14 percent, respectively. Software and Other revenue grew 24 percent, or 26 percent excluding acquisition-related adjustments. Core(2) revenue, which principally includes laser and business inkjet hardware and supplies, managed print services and software, declined 9 percent year to year while Legacy(2) revenue, which includes consumer inkjet hardware and supplies that the company is exiting, declined 35 percent. Lexmark’s focus continues to be on growing the company’s Core, as Legacy, which in the second quarter of 2012 represented about 9 percent of Lexmark’s revenue, continues to become a less significant portion of the company’s revenue mix.
Imaging Solutions and Services (ISS) revenue of $875 million declined 14 percent compared to the same period last year. Perceptive Software revenue was $44 million. Perceptive Software revenue excluding acquisition-related adjustments of $2.4 million was $46 million and grew 88 percent compared to the same period in 2011.
Second Quarter 2012 GAAP results:
— Revenue was $919 million compared to $1.044 billion last year.
— Gross profit margin was 39.3 percent versus 39.6 percent in 2011.
— Operating expense was $301 million compared to $276 million last year.
— Operating income margin of 6.6 percent compared to 13.2 percent in 2011.
— Net earnings were $39 million compared to 2011 net earnings of $101
million.
Second Quarter 2012 non-GAAP results:
— Revenue was $921 million compared to $1.045 billion last year.
— Gross profit margin was 40.5 percent versus 40.0 percent in 2011.
— Operating expense was $280 million compared to $270 million last year.
— Operating income margin was 10.1 percent compared to 14.2 percent last
year.
— Net earnings were $64 million compared to $109 million in 2011.
Continued Solid Execution of Lexmark’s Capital Allocation Framework
Lexmark’s overall capital allocation framework is to return more than 50 percent of free cash flow(3) to shareholders, on average, through quarterly dividends and share repurchases while pursuing acquisitions that support the strengthening and growth of the company.
In the second quarter of 2012, Lexmark paid a dividend of $0.30 per share totaling $21 million and repurchased $25 million, or 0.8 million of the company’s shares. The company’s remaining share repurchase authorization was about $186 million at quarter end.
The company ended the quarter with $916 million in cash and current marketable securities. Net cash provided by operating activities was $49 million. Free cash flow was $11 million. Capital expenditures were $38 million. Depreciation and amortization was $57 million.
Lexmark Again Named an MPS Leader
During the second quarter, Lexmark announced it was named a Managed Print Services (MPS) leader by two additional independent research firms, Forrester Research, Inc. and Quocirca. This follows the company’s announcements in the fourth quarter of 2011 regarding MPS leadership positioning in Gartner and IDC reports.
Lexmark was named a leader in the May 10, 2012, Forrester Wave report, The Forrester Wave(TM): Managed Print Services, Q2 2012. Lexmark was among the select companies invited by Forrester Research, Inc. to participate in this evaluation of top MPS providers and received the highest score possible for its strategy, MPS market experience, technology and solution ownership, integration with business processes, mobile printing and global delivery.
Lexmark also has been positioned by leading European-based industry analyst firm Quocirca as a market leader in the firm’s 2012 report, Vendor Landscape: Managed Print Services. Quocirca defines a market leader as a provider that leads the MPS market in both strategic vision and depth of service offering. Leaders have made significant investments in their service portfolio and infrastructure and are supported by strong delivery capabilities.
Lexmark Awarded 5-Year, $21 Million Printing Contract From FAA
Lexmark has been awarded a five-year (one base year and four one-year options) contract valued at $21 million that will make it the sole provider of printing technology for the Federal Aviation Administration (FAA). Lexmark will utilize its proven track record in optimizing heavily distributed printing environments to bring greater efficiency, user productivity and cost reductions to more than 900 FAA locations across the U.S.
Distributed Intelligent Capture Solution
During the second quarter, Lexmark announced its Distributed Intelligent Capture Solution that integrates Lexmark Document Distributor with Brainware software allowing customers to intelligently connect business documents and processes. This release marks the first solution announcement consolidating Lexmark and Brainware software since Lexmark acquired Brainware in March 2012.
The Distributed Intelligent Capture Solution enables the accurate extraction of critical data from hard copy documents – plus the validation of the extracted data. The solution can then intelligently pass the content on to a data management system, enterprise resource planning system or financial management system. The Distributed Intelligent Capture Solution eliminates the need for templates, keywords, zones or other rules-based techniques, allowing it to work with a variety of document types and layouts.
Perceptive Software Customer Wins
Perceptive Software announced in the second quarter that the University of Kansas plans to expand use of Perceptive Software solutions from a few individual units to a university-wide contract. Under the initial expansion, seven business units will focus on improving the efficiency of multiple business processes. In phase one of the expansion, university business units will receive updates to core processes, such as in the Comptroller’s Office where Brainware Distiller will be implemented to streamline invoice processing.
Also during the quarter, Brainware announced that:
— Concur, the leading provider of integrated travel and expense management
services, now utilizes Brainware Distiller – replacing a prior,
template-based application for data capture.
— The Icelandair Group selected Brainware Distiller for invoice processing
efficiency in the company’s shared services center.
— Advocate Health Care selected Brainware Distiller for its accounts
payable automation.
Looking Forward
In the third quarter of 2012, the company currently expects revenue to decline 9 to 11 percent year on year. GAAP earnings per share in the third quarter of 2012 are expected to be around $0.52 to $0.62, compared with GAAP earnings per share of $0.86 in the third quarter of 2011. Non-GAAP earnings per share in the third quarter of 2012 are expected to be around $0.75 to $0.85, compared with non-GAAP earnings per share of $0.95 in the third quarter of 2011.