Lexmark International today announced financial results for its third quarter ended 30 September 2004.
Third quarter revenue was $1.266 billion, an increase of 9% compared to $1.157 billion last year.
Diluted net earnings per share for the quarter were $1.17 and include a non-recurring benefit of 15c per share from the resolution of income tax matters. Without this tax benefit, earnings per share would have been $1.02, an increase of 29% compared to a year ago.
"Lexmark continued to perform well with 9% overall revenue growth and 31% operating income growth," said Paul J Curlander, Lexmark chairman and chief executive officer. "This was driven by double-digit unit growth in both our business and consumer segments, despite encountering weaker market conditions than we had anticipated."
Gross profit margin was 35.2% for the quarter versus 32.1% a year ago due to improved product margins. Operating expenses were $262 million compared with $231 million in the prior year. Operating income margin improved 2.5 points to 14.6% in the third quarter of 2004 versus last year. Diluted net earnings per share for the period were $1.17 compared to 79c a year earlier.
Net cash provided by operating activities was $205 million in the third quarter. Capital expenditures for the quarter were $56 million. Lexmark repurchased 850 000 shares of its common stock during the quarter for $73 million. The company`s remaining share repurchase authorisation was approximately $40 million as of 30 September 2004.
Nine-month financial results
Revenue for the nine months ended 30 September 2004 was $3.770 billion, an increase of 11% versus $3.385 billion in the same period of 2003.
Gross profit margin was 34.4%, up 1.7 points from the prior year. Operating income was $535 million versus $406 million a year earlier, an increase of 32%.
Net earnings per share on a diluted basis for the period were $3.10. Excluding the non-recurring tax benefit, earnings per share would have been $2.95, up 29% compared to $2.29 per share recorded in the same period of 2003. Net cash provided by operating activities for the first nine months was $491 million.
Looking forward
Due to recent US legislation extending corporate research and development tax credits and an extension of a non-US tax holiday, the company`s full year 2004 tax rate will be adjusted from 27.5% to 26.5% in the fourth quarter. This is expected to provide a benefit to fourth-quarter earnings of about 5c per share. Additionally, as part of Lexmark`s strategic initiative to improve brand awareness, the company is increasing its marketing spending to support a new advertising campaign. This spending is expected to negatively impact fourth-quarter earnings in the range of 7c to 8c per share both sequentially and year-over-year.
"Looking forward to the fourth quarter, we believe the strength of our product lineup and supplies-driven business model will keep us well-positioned for continued growth," Curlander said. "Nevertheless, we continue to be cautious due to uncertainty in the market and the potential for aggressive price competition. In the fourth quarter of 2004, we expect a year-over-year revenue growth rate of mid- to high-single digits and earnings per share of $1.05 to $1.15 including the effect of the tax benefits and the projected increase in marketing expenses. This compares to earnings per share of $1.05 in the same quarter a year ago."
For further information, please contact Louisa Craig at telephone (011) 329 0943; fax (011) 329 0824; e-mail louisa.craig@lexmark.co.za.
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Lexmark International, Inc is a leading developer, manufacturer and supplier of printing solutions -- including laser and inkjet printers, multifunction products, associated supplies and services - for offices and homes in more than 150 countries. Founded in 1991, Lexmark reported approximately $4.8 billion in revenue in 2003, and can be found on the Internet at www.lexmark.com.
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