Lexmark International, Inc today announced record financial results for its first quarter ended 31 March 2005. First quarter revenue was $1.358 billion, an increase of 8% compared to $1.256 billion last year. EPS was $0.96 and would have been $0.99 without the items described below. Market conditions were particularly challenging in the first quarter as a result of aggressive pricing and soft consumer market demand.
"Our revenue growth in the quarter was driven mainly by supplies, reflecting the consistency of our business model, and also by strong demand for our laser printers. We continued our increased investments in R&D and branding in the first quarter in support of our strategic initiatives to drive long-term growth," said Paul J Curlander, Lexmark chairman and chief executive officer.
First quarter operating income includes a $9.6 million, or 5c per share, charge which represents management`s best estimate of probable losses relating to 2002 through 2004 accounts receivable in Spain due to inappropriate conduct by a former employee of Lexmark Spain. Also included in earnings per share is a benefit of 2c from the retroactive extension of a favourable non-US tax rate. Diluted net earnings per share for the first quarter were a record $0.96. Excluding these items, earnings per share would have been $0.99, up from $0.91 in the same quarter last year.
Gross profit margin was 33% for the quarter, a 30 basis point improvement compared to 32.7% a year ago. Operating expenses were 21% of revenue, up from 19.6% in the prior year, driven by the charge and continued strategic investments in development and marketing. Operating income was $161.7 million compared to $165.2 million last year. Excluding the charge, operating income would have been a record $171.3 million.
Lexmark repurchased a record $227 million of its common stock during the quarter. The company`s remaining share repurchase authorisation was approximately $675 million at quarter-end. Net cash provided by operating activities was $77 million in the first quarter and capital expenditures for the quarter were $53 million.
Looking forward
In the second quarter of 2005, the company expects a year-over-year revenue growth rate in the mid-single digit range and earnings per share of $1.01 to $1.11, compared to $1.02 in the same quarter a year ago. The company believes that the appeal and ease of use of its product line and the strength of its supplies-driven business model will contribute to future growth. However, the potential for weakening market demand and for aggressive price competition continues.
During the second quarter, the company will be evaluating a plan to repatriate funds under the American Jobs Creation Act. If implemented to the maximum, it would result in repatriation of $684 million of dividends during 2005 with a tax cost of up to $70 million, which would be included in the company`s second quarter results. The impact of this repatriation is not included in the company`s guidance.
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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