Lexmark to Focus on ‘Core Revenue’ After ‘Legacy’ Saw 35% Decrease in 2011
LEXINGTON, Ky. – Lexmark International, Inc. announced financial results for the full year and fourth quarter of 2011.
"2011 was a good year for Lexmark given the challenging global economic environment," said Paul Rooke, Lexmark chairman and chief executive officer. "Lexmark delivered record laser supplies revenue, record gross profit margin and a strong operating income margin.
"We continued solid execution of our strategic initiatives in 2011, focusing our significant imaging talent and resources squarely on business customers and aggressively growing our software business," Rooke added. "We remain confident in our ongoing ability to generate positive free cash flow as we have for each of the past 10 years, and going forward we plan to return more than 50 percent of free cash flow to our shareholders through dividends and share repurchases."
Full Year 2011 Results
GAAP revenue of $4.173 billion includes $5 million of acquisition-related adjustments. Non-GAAP revenue of $4.178 billion declined less than 1 percent compared with last year. The company delivered record laser supplies revenue for the year, which increased 9 percent above the record set last year.
GAAP earnings per share for the full year of 2011 were $4.12. Excluding $0.59 per share for restructuring-related and acquisition-related adjustments, earnings per share for the full year of 2011 would have been $4.71. GAAP earnings per share for the full year of 2010 were $4.28. Earnings per share for the full year of 2010 would have been $4.96 excluding $0.68 per share for restructuring-related and acquisition-related adjustments.
Hardware revenue of $989 million declined 7 percent while Supplies revenue of $2.912 billion was flat in 2011. Software and Other revenue was $272 million, or $277 million excluding acquisition-related adjustments. Software and Other revenue grew 22 percent, or 17 percent excluding acquisition-related adjustments. Core revenue, which principally includes laser and business inkjet hardware and supplies, managed print services and software, grew 7 percent year to year while Legacy revenue, which includes consumer inkjet hardware and supplies that the company is exiting, declined 35 percent. Lexmark's focus continues to be on growing the company's Core, as Legacy, which in 2011 represented about 12 percent of Lexmark's revenue, continues to become a less significant portion of the company's revenue mix.
Imaging Solutions and Services (ISS) revenue of $4.078 billion declined 2 percent compared to the same period last year. Perceptive Software revenue was $95 million. Perceptive Software revenue excluding acquisition-related adjustments was $100 million and grew 98 percent compared to the 2010 post-acquisition period of June 8 – Dec. 31, 2010.
The company ended the year with $1.1 billion in cash and current marketable securities. Net cash provided by operating activities was $391 million. Capital expenditures were $156 million for the year. Depreciation and amortization was $222 million in 2011. The company repurchased $250 million, or 7.9 million of the company's shares during 2011. The company's remaining share repurchase authorization was about $241 million at year end.
Fourth Quarter 2011 Results
GAAP revenue of $1.060 billion includes $1 million of acquisition-related adjustments. Non-GAAP revenue $1.061 billion declined 4 percent compared with the same quarter last year. The company delivered record laser supplies revenue in the quarter.
GAAP earnings per share for the fourth quarter of 2011 were $0.94. Excluding $0.32 per share for restructuring-related and acquisition-related adjustments, earnings per share for the fourth quarter of 2011 would have been $1.25. GAAP earnings per share for the fourth quarter of 2010 were $1.10. Earnings per share for the fourth quarter of 2010 would have been $1.29 excluding $0.19 per share for restructuring-related and acquisition-related adjustments.
In the fourth quarter, Hardware revenue declined 9 percent and Supplies revenue declined 3 percent. Software and Other revenue increased 5 percent, or declined 1 percent excluding acquisition-related adjustments. Core revenue grew 2 percent while Legacy revenue declined 38 percent.
ISS revenue of $1.030 billion declined 5 percent in the fourth quarter compared to the same period last year. Perceptive Software revenue was $30 million. Perceptive Software revenue of $31 million, excluding acquisition-related adjustments, grew 41 percent.
In the fourth quarter, net cash provided by operating activities was $164 million, capital expenditures were $46 million, and depreciation and amortization was $64 million. Lexmark repurchased approximately 3.8 million of its shares during the fourth quarter for $125 million. The company paid its first quarterly dividend of $0.25 per share totaling $18 million during the quarter.
Lexmark Announces Restructuring Actions
Lexmark is announcing restructuring initiatives today that are a continuation of its strategy to increase the focus of the company's talent and resources on higher usage business platforms. The company expects to redeploy a significant portion of the savings from these initiatives toward business products, solutions and channels.
These January 2012 actions will result in total pre-tax charges of approximately $35 million with approximately $8 million incurred in the fourth quarter of 2011. Lexmark expects these January 2012 actions will generate cash savings of approximately $15 million in 2012 and ongoing cash savings of $28 million beginning in 2013, with approximately 80 percent impacting operating expense and 20 percent impacting cost of goods sold. The company expects these actions to be principally complete by the end of the first quarter of 2013.