Lexmark International today announced financial results for the third quarter of 2006. Third-quarter revenue was $1.235 billion compared to $1.216 billion last year, an increase of 1.6%. Third-quarter earnings per share were $0.85 and include $0.06 per share for share-based compensation expenses resulting from the company`s adoption of SFAS123R. Earnings per share would have been $0.95 excluding $0.10 per share restructuring related charges for actions announced in January. Third-quarter 2005 earnings were $0.59, and included third quarter 2005 costs of $0.05 per share from a work force reduction.
"This was a good quarter for Lexmark. EPS were better than expected and we continued to generate solid cash flow. We have more work ahead, but we continue to invest in the brand, market and product initiatives that support our long-term growth strategy," said Lexmark chairman and CEO Paul J Curlander.
Third-quarter business segment revenue of $696 million increased 8% year-to-year, and consumer segment revenue of $539-million declined 5% compared to a year ago. Third-quarter results include restructuring related pretax charges totalling $13 million comprised of $4 million in cost of revenue and $9 million in operating expense. Third-quarter 2005 results included $9 million pretax work force reduction costs impacting operating expenses.
Including 3Q06 restructuring related charges and 3Q05 work force reduction charges:
* 3Q06 gross profit margin was 32.6%, up from 29.4% in the same period last year.
* 3Q06 operating expense to revenue ratio was 23.3 percent, up from 22.6 percent in the same quarter last year.
* 3Q06 operating income margin was 9.3%, up from 6.8% last year.
Excluding 3Q06 restructuring related charges and 3Q05 work force reduction charges:
* 3Q06 gross profit margin would have been 32.9%, up from 29.4% in the same period last year. This 350 basis point improvement was driven primarily by a change in the mix between hardware and supplies.
* 3Q06 operating expense to revenue ratio would have been 22.5%, up from 21.9% in the same quarter last year. This 60 basis point increase was due mainly to SFAS123R expenses and increased investment in research and development.
* 3Q06 operating income margin was 10.4%, up from 7.5% last year.
Third-quarter net cash provided by operating activities was $167 million. Capital expenditures for the quarter were $52 million. Lexmark repurchased approximately $130 million of its stock during the quarter. The company`s remaining share repurchase authorization was about $600 million at quarter end.
Looking forward
In the fourth quarter, the company expects revenue to be flat to down in the low-single digit percentage range year over year. It expects fourth-quarter 2006 EPS to be in the range of $0.70 to $0.80. This includes restructuring related charges of approximately $0.10 per share. EPS excluding restructuring related charges in the fourth quarter of 2006 are expected to be in the range of $0.80 to $0.90. EPS in the fourth quarter of 2005 were $0.71.
For more information on the Lexmark range of printers www.lexmark.co.za or sales (011) 244 2777
For further information, please contact Louisa Craig at tel. (011) 244 2650; fax (011) 244 2629; e-mail louisa.craig@lexmark.co.za
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Lexmark International 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 2005, Lexmark reported $5.2 billion in revenue and employed more than 13 000 people globally. Learn how Lexmark can help you get more done at www.lexmark.com.
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