Slow Tech Market? Lexmark Continues to Grow and Set Earnings Records
Press release from the issuing company
NEW YORK, Nov. 14 -- Senior executives of Lexmark today said that its future will be influenced by the same factors that have contributed to the company's historical performance: projected growth of the distributed printing market, the company's supplies-driven business model, and Lexmark's unique position and strategies.
Those key messages were delivered as part of Lexmark's annual Analyst Day conference, which was held today at the New York Stock Exchange. Senior management rang the Exchange bell to open the day's trading on the floor before beginning the four-hour conference in the NYSE boardroom.
"It's an honor to be able to hold our Analyst Day in these historic facilities that represent so much to the corporate world and the free enterprise system," said Paul J. Curlander, Lexmark's chairman and chief executive officer.
In addition to recapping results, the executive team praised the work of Lexmark's 12,000 employees in achieving a number of objectives in 2002 that have strengthened the company and resulted in record earnings per share in the most-recent quarter. Those initiatives include strengthening Lexmark's cost position, improving its operating-expense and overhead position, strengthening cash flow and working capital, delivering significant new technologies, and outperforming the market in a challenging competitive environment.
As Lexmark looks ahead, Curlander outlined the key points that investors need to understand.
The market: Lexmark believes the number of pages of information that are printed on demand and closer to the end user is growing rapidly. This "distributed printing" phenomenon favors Lexmark's strengths, as do the surging popularity of inkjet all-in-ones, the projected growth in demand for color printing in the office, and the changing role of output devices, as several functions can now be performed by one product, versus several devices.
The business model: Lexmark's business model is based on a stable, recurring revenue stream from aftermarket supplies. Revenue from those supplies grew at a rate of 33 percent per year from 1998 to 2001, and laser and inkjet supplies grew from 28 percent of total revenue in 1998 to 48 percent in 2001. They represented 55 percent of total revenue in the third quarter of 2002.
Strategic focus: Lexmark is the only major printer company that is focused exclusively on printers. That focus yields a number of strategic advantages, including ownership of its own technologies that afford the opportunity to save costs and develop innovative applications to satisfy specific customer needs. Moving forward, Curlander said key drivers of continued growth include inkjet AIOs, color in the office, and the convergence of printers and copiers in the corporate space.
The broad technology capabilities offered by the Printing Solutions and Services Division (PS&SD) have established Lexmark as the world's second- largest laser printer company. The company believes there are significant opportunities to capture an even greater share of office output pages as a result of:
-- the Internet's creation of more distributed pages,
-- technology convergence, allowing more copier and fax pages to be
printed by Lexmark's multifunction devices, and
-- the rise of color output in the office.
As it approaches large accounts through its direct sales force, Lexmark differentiates itself with solutions and services. The company's multifunction devices, when combined with software such as its document portal solution, serve as electronic on-ramps for digitized information, and can help companies print smarter, move information faster, and manage their business more efficiently.
Lexmark's Consumer Printer Division (CPD) has experienced strong growth in 2002. With the 2000 introduction of inkjet AIOs at sub-$200 price points, Lexmark transformed the all-in-one into a consumer category that is driving the growth of inkjet products worldwide. Based in part on the success of its AIOs, Lexmark-branded inkjets gained three points of market share - to 17 percent - through July 2002, compared to December 2001.
The strength of the operational execution is reflected in the financial performance. Revenue from the core laser and inkjet printers and associated supplies increased at a rate of 15 percent per year from 1998 to 2001. On the bottom line, earnings per share have improved sequentially every quarter this year, reaching a record 70 cents for the third quarter.
In addition to Curlander, speakers at today's conference included Paul Rooke, executive vice president and president of PS&SD, Tim Craig, vice president and president of CPD, and Gary Morin, executive vice president and chief financial officer.
An audio replay of today's conference, as well as the presented slides, is available at the investor relations section of Lexmark's Web site: http://investor.lexmark.com
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 more than $4.1 billion in revenue in 2001, and can be found on the Internet at www.lexmark.com.
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