Lexmark Reports Results for 2001, Lower Profits and Pricing Pressures
Press release from the issuing company
LEXINGTON, Ky.--Jan. 24, 2002--Lexmark today announced financial results for both the fourth quarter and full year 2001. Fourth-quarter revenue was $1.152 billion, up 5 percent from the same period in 2000. Diluted net earnings per share for the fourth quarter were 46 cents on an operational basis, before non-recurring charges associated with the company's previously announced restructuring plan and before the non-recurring benefit from the resolution of income tax matters. Full-year revenue for 2001 increased 9 percent to $4.143 billion.
"These fourth quarter financial results are in line with our previous guidance,'' stated Paul J. Curlander, chairman and CEO. "Lexmark continues to gain market share, fueling our supplies-driven business model. This makes us one of only a handful of technology companies to consistently grow revenue and generate profit in each quarter of 2001.''
Laser and inkjet supplies revenue grows 23 percent
Lexmark's revenue for the fourth quarter ended Dec. 31 was $1.152 billion, an increase of 5 percent versus $1.096 billion in the same period of 2000. Revenue was not significantly impacted by foreign currency translation. Laser and inkjet supplies revenue was $531 million, a 23 percent increase over $433 million a year ago and now represents 46 percent of total revenue, up from 39 percent in the prior year. Laser and inkjet printer revenue was $498 million in the fourth quarter.
On an operational basis, gross profit margin was 27.8 percent for the quarter versus 30.8 percent a year ago due to lower laser and inkjet printer margins and lower inkjet supplies margins resulting from reduced cartridge production, partially offset by an increased mix of supplies. Operating income was $88 million versus $124 million in the fourth quarter of 2000 primarily due to the lower gross profit margin. Diluted net earnings per share for the period were 46 cents versus 64 cents in 2000.
The reported fourth quarter financial results include $88 million of restructuring and related charges and associated inventory write-offs. On a reported basis, gross profit was $291 million in 2001, which includes the $29 million impact of associated restructuring-related inventory write-offs from the company's decision to eliminate its business class inkjet printer, limit the period over which the company will provide replacement parts for products no longer in production, and exit the electronic card manufacturing business. Operating income of $0.3 million includes the $58 million restructuring and related charges plus the $29 million associated inventory write-off. As announced on Oct. 22, 2001, annual savings from the restructuring should be approximately $55 million, with about $40 million being achieved in 2002. These savings will be used to offset competitive impacts and new investments. Additionally, diluted net earnings per share of 27 cents reflect a benefit of $40 million from the resolution of income tax matters.
Lexmark's debt-to-total-capital ratio at Dec. 31, 2001 was 13 percent compared to 21 percent at Sept. 30, 2001. Capital expenditures were $45 million in the fourth quarter with most spending in support of new products and capacity expansion.
Constant currency revenue growth of 11 percent
Lexmark's 2001 annual revenue was $4.143 billion, an increase of 9 percent over 2000 revenue of $3.807 billion. Without the negative impact of foreign currency translation, revenue growth would have been 11 percent versus the prior year. Laser and inkjet supplies revenue was $1.962 billion for 2001, a 27 percent increase from $1.548 billion a year earlier, and represents 47 percent of total revenue versus 41 percent in 2000. Laser and inkjet printer revenue was $1.657 billion.
On an operational basis, gross profit margin was 31.5 percent in 2001 versus 33.0 percent last year. Operating income was $429 million versus $457 million in the prior year primarily due to the lower gross profit margin. Diluted net earnings per share for the year were $2.23 versus $2.35 in 2000.
The reported full year financial results include $88 million of restructuring and related charges and associated inventory write-offs. On a reported basis, gross profit margin was 30.8 percent in 2001 versus 33.0 percent last year. Operating income was $341 million versus $416 million in the prior year. Diluted net earnings per share for the year were $2.05 versus $2.13 in 2000.
During the fourth quarter, Lexmark announced a new range of office devices and document management tools that make processing information faster, easier and more affordable. The Lexmark C750, featuring Lexmark's internally developed color laser technology, and the Lexmark C910 establish new standards for business color performance and affordability. The new Lexmark E320 and E322 with print speeds up to 16 pages-per-minute (ppm), are the highest-performing monochrome laser printers on the market at under $400. The new Lexmark X820e, with its network-centric printer foundation and color touch-screen interface, is a 45 ppm multifunction device that reduces hardcopy output costs and improves document workflow.
In addition to the printers introduced in the fourth quarter, a new family of Lexmark monochrome laser and multifunction solutions were introduced in June, establishing new industry standards for price performance. These highly versatile products deliver print speeds from 20 to 45 ppm at prices beginning as low as $699. In 2001 the company also launched the Lexmark C720, a networkable color laser printer that can be configured as a multifunction device, as well as the Lexmark E210, a sub-$200 monochrome laser printer for home users, students and small businesses.
Also in 2001, the company refreshed its entire line of PC-attached inkjet printers. The four new Z-line inkjet models include best-in-class features, functionality and ease-of-use. Lexmark redefined the all-in-one (AIO) category during the year with two photo-quality multifunction printers - the Lexmark X73 and X83 - that feature industry-leading print, copy and flatbed scanning performance for under $200. Lexmark responded to the outstanding customer demand for those devices by offering the Lexmark X63, a sheetfed AIO that also includes standalone faxing capabilities.
"While the technology market continues to be weak, Lexmark is well positioned due to our strong product announcements in 2001 and market share gains. Although we expect to continue to outperform the market, we are cautious as we look forward due to these market conditions and the potential for aggressive competition and pricing,'' said Curlander. "In the first quarter of 2002, we anticipate revenue will be about flat year-over-year, but will be down sequentially from the fourth quarter due to normal seasonality. We expect gross profit margin to improve sequentially due to a higher mix of supplies, and earnings per share to be in the range of 43 to 53 cents.''
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