Lexmark reports record revenue and EPS for fourth quarter and full year 2002
Friday, January 24, 2003
LEXINGTON, Ky., Jan. 23 -- Lexmark International, Inc. today announced record financial results for both the fourth quarter and full year 2002. Fourth-quarter revenue was a record $1.207 billion and full year 2002 revenue was a record $4.356 billion, each up 6 percent from the same periods in 2001. Net earnings per share for the fourth quarter of 2002 were a record 90 cents, up sharply from 27 cents in the year-ago quarter. Reported earnings per share in the 2002 quarter were positively impacted by $6 million from the reversal of previously accrued restructuring charges. Reported earnings per share in the 2001 quarter were negatively impacted by $88 million from restructuring related charges, and positively impacted by $40 million from the resolution of income tax matters. Adjusting for these items, fourth-quarter 2002 earnings per share would have been 86 cents compared to 46 cents in the year-ago quarter, an increase of 89 percent. "We are pleased to report record financial results during these weak economic times," stated Paul J. Curlander, chairman and CEO. "Overall, our results again demonstrate the stability of our supplies-driven business model." Fourth-quarter financial highlights: Laser and inkjet supplies revenue grows 23 percent Lexmark's revenue for the fourth quarter ended Dec. 31, 2002 was $1.207 billion, up 6 percent from $1.140 billion in the same period of 2001. Without the impact of foreign currency translation, revenue growth would have been 2 percent versus the prior year. Laser and inkjet supplies revenue was $654 million, a 23 percent increase over $530 million a year ago, and now represents 54 percent of total revenue, up from 46 percent in the prior-year quarter. Laser and inkjet printer revenue was $456 million, down 6 percent from $487 million in the fourth quarter of 2001. Gross profit was $384 million or 31.8 percent of revenue for the quarter versus $279 million or 24.5 percent a year ago. The improvement in gross profit margin was due to an increase of supplies in the product mix, a restructuring-related inventory charge of approximately $29 million in 2001 and higher supplies margins, somewhat offset by lower printer margins. Operating expense was $224 million or 18.6 percent of revenue compared to $278 million in the prior year. After adjusting for a $6 million benefit from the reversal of previously accrued restructuring charges in the fourth quarter of 2002, and a restructuring charge of approximately $58 million in the year- ago quarter, the operating expense as a percentage of revenue improved as a result of the company's continuing focus on expense management and benefits from the restructuring. Operating income for the fourth quarter was $160 million (13.2 percent of revenue) versus $0.3 million a year earlier. Net earnings were $116 million in the fourth quarter, up substantially from $37 million reported a year ago. Diluted net earnings per share for the period were 90 cents, an increase of 226 percent from the same period of 2001. Lexmark's debt-to-total-capital ratio at December 31, 2002 was 13 percent, down from 14 percent at September 30, 2002. Net cash provided by operating activities in the fourth quarter was $284 million versus $198 million in the same period of 2001. Capital expenditures were $41 million in the fourth quarter with most spending for infrastructure support and new product development. Full-year review: Reduction in cash cycle pushes cash from operations to $816 million Lexmark's 2002 annual revenue was $4.356 billion, an increase of 6 percent over 2001 revenue of $4.104 billion. Laser and inkjet supplies revenue was $2.335 billion for 2002, a 19 percent increase from $1.958 billion a year earlier, and represents 54 percent of total revenue versus 48 percent in 2001. Laser and inkjet printer revenue was $1.631 billion, a slight increase from $1.623 billion a year ago. Gross profit margin was 31.5 percent in 2002 versus 30.2 percent in 2001. Operating expense for 2002 was 19.7 percent of revenue, an improvement of 2.2 points from 21.9 percent a year ago, reflecting the company's continuing focus on expense management. Operating income grew 50 percent to $511 million, compared to $341 million in the prior year, due to the higher gross profit margin and lower operating expense. Diluted net earnings per share were $2.79 versus $2.05 reported in 2001, an increase of 36 percent. Lexmark's cash from operations was $816 million in 2002 versus $196 million in the prior year. Capital expenditures for the year totaled $112 million. "The company did an outstanding job of generating cash in 2002 due to our increased focus on reducing cash cycle days. We are pleased with this progress and we continue to focus on improving this metric," said Curlander. Lexmark repurchased approximately 6.1 million shares of its common stock during the year for $331 million, at prices ranging from $41.97 to $60.96 per share, for an average price of $54.22 per share. The company's remaining share repurchase authorization was $188 million as of December 31, 2002. At December 31, 2002, the company estimated that its installed base of laser printers was 4.9 million units versus 4.4 million units at the end of 2001. Likewise, the company estimated that its installed base of inkjet printers at the end of 2002 was 45 million units compared to 37 million units at the prior year end. Looking forward: "As we look forward to the first quarter, we believe that our business model and industry trends that favor distributed printing will keep us well-positioned for earnings growth," said Curlander. "However, we continue to be cautious due to a soft corporate and consumer spending environment and aggressive competition. In the first quarter of 2003, we expect a year-over-year revenue growth rate in the low- to mid-single digits. Earnings per share for the first quarter are expected to be in the range of 62 to 72 cents as stated in the company's press release on Jan. 9, 2003. This range represents solid growth in earnings per share over the 53 cents reported in 2002."