Lexmark Reports 33% Growth in EPS, Increases fourth-quarter guidance
Tuesday, October 22, 2002
- EPS exceeds First Call consensus estimate - LEXINGTON, Ky., Oct. 21 -- Lexmark International, Inc. today announced record revenue and earnings per share for the third quarter of 2002 that included a 5 percent increase in revenue to $1.041 billion and earnings per share of 70 cents, upfrom 52 cents a year earlier, an increase of 33 percent. As reported earlier this month, third-quarter earnings include an asset impairment write-off of $15.8 million, or 9 cents per share, related to the abandonment of a customer relationship management (CRM) software project. Excluding this write-off, earnings per share would have been 79 cents, up 50 percent from last year and exceeds the First Call consensus estimate of 78 cents. "Our third-quarter earnings exceeded our original expectations," stated Paul J. Curlander, chairman and CEO. "Overall, our results again demonstrate the stability of our supplies-driven business model that enables us to generate solid returns to stockholders, even in difficult economic times." Financial highlights: Laser and inkjet supplies revenue grows 19 percent Lexmark's revenue for the third quarter ended September 30, 2002 was $1.041 billion, up 5 percent from $996 million in the same period of 2001. Without the impact of foreign currency translation, revenue growth would have been 2 percent versus last year. Laser and inkjet supplies revenue was $568 million, a 19 percent increase over $476 million a year ago and now represents 55 percent of total revenue, up from 48 percent in the prior year and 53 percent in the prior quarter. Laser and inkjet printer revenue was $381 million, down 3 percent from $393 million in the third quarter of 2001. Gross profit margin was 32.5 percent for the quarter versus 30.3 percent a year ago due to an increase of supplies in the product mix and higher supplies margins. Operating expenses were $215 million, a growth rate of 7 percent. Operating income was $124 million in the third quarter of 2002, 23 percent higher than the $101 million reported last year. Diluted net earnings per share for the period were 70 cents, an increase of 33 percent from a year ago. Excluding the asset impairment write-off, gross profit would have been $354 million or 34.0 percent of revenue, and operating income would have been $140 million or 38 percent higher than a year earlier. Lexmark's debt-to-total-capital ratio at September 30, 2002 was 14 percent, unchanged from June 30, 2002. Net cash provided by operating activities in the third quarter was $183 million versus $7 million in the same period of 2001. Capital expenditures were $25 million in the third quarter with most spending for new product development and infrastructure support. Lexmark repurchased approximately 1.1 million shares of its common stock during the third quarter for $52 million, at prices ranging from $41.97 to $47.90 per share. During the first nine months of this year, the company repurchased 6.1 million shares of its common stock for $331 million, at prices ranging from $41.97 to $60.96. The company's remaining share repurchase authorization was $188 million as of September 30, 2002. Other highlights: During the quarter, the company introduced the Lexmark X85 All-In-One Print Center, which offers Lexmark's award-winning inkjet print technology coupled with a flatbed scanner, PC-free color copying and scan-to-PC fax capabilities. The X85 is competitively priced at $179 and builds on the momentum created by the highly successful X-family of All-In-One products. Also announced was the Lexmark Z65p Photo Jetprinter, featuring on-board camera card readers that make it easy to print images from digital cameras. Priced at only $179, the Z65p delivers outstanding 4800 x 1200 dots per inch resolution in black and color on multiple paper types and boasts a three picolitre drop size, allowing for better color transitions and more detailed textures. On September 24, 2002 Lexmark and Dell Computer Corporation announced that Lexmark will become Dell's initial supplier for Dell-branded inkjet and laser printers and related aftermarket cartridges. No volumes have been set for this agreement. Nine-month review: Laser and inkjet supplies account for 53 percent of revenue Revenue for the nine months ended September 30, 2002 was $3.149 billion, an increase of 6 percent versus $2.964 billion in the same period of 2001. Revenue from laser and inkjet supplies of $1.681 billion increased 18 percent from $1.428 billion a year ago. Laser and inkjet printer revenue of $1.176 billion grew 3 percent from $1.136 billion in the first nine months of 2001. Operating income was $351 million versus $341 million a year earlier. Net earnings for the period were $250 million, or $1.89 per share on a diluted basis, versus net earnings of $237 million, or $1.77 per share in the same period of 2001. Excluding the asset impairment write-off in the third quarter, operating income would have been $367 million, net earnings would have been $262 million, and earnings per share would have been $1.98. Looking forward: "Looking forward to the fourth quarter of 2002, we believe that we are well-positioned for continued earnings growth," said Curlander. "However, we remain cautious due to uncertain future information technology spending, a relatively weak consumer market, and aggressive competition. In the fourth quarter of 2002, we expect a year-over-year revenue growth rate in the low- to mid-single digits and earnings per share of 70 to 80 cents. This range exceeds the guidance we provided on October 10, 2002 by 3 cents." The company reported earnings per share in the fourth quarter of 2001 of 46 cents on an operational basis, before non-recurring charges.