Q4 revenue exceeded guidance range, company sees growth in managed print services and software revenue
LEXINGTON, Ky. (Jan. 29, 2013) — Lexmark International, Inc. today announced its financial results for the fourth quarter and full year of 2012.
Lexmark is transitioning its business model to phase out its inkjet printer production and development. In 2012, revenue was down 9 percent to $3.798 billion from $4.173 billion the previous year. The company’s net earnings were $106 million compared to 2011’s net earnings of $321 million.
“Our fourth quarter financial results were highlighted by revenue that exceeded expectation, solid cash flow generation, and ongoing growth in Perceptive Software and managed print services revenue,” said Paul Rooke, Lexmark chairman and chief executive officer.
“In 2012 we strengthened our solutions portfolio through four software company acquisitions, and launched one of Lexmark’s most significant laser line advancements with solutions-enabled devices that extend our smart MFP and managed print services leadership,” Rooke said. “We are expecting to deliver savings of $85 million in 2013 from the actions announced last August, and we are well positioned to generate positive free cash flow as we have for each of the past 11 years.”
Lexmark continues to execute its capital allocation strategy of rewarding shareholders through share repurchases and dividends while pursuing acquisitions that further expand and strengthen our solutions offerings, he said.
Full year results
GAAP revenue of $3.798 billion includes $5.5 million of acquisition-related adjustments. Non-GAAP revenue of $3.803 billion declined 9 percent compared with last year. As with fourth quarter results, full year 2012 EPS were impacted by a higher overall tax rate resulting from the geographic mix of earnings and the delay in passage of the R&E tax credit.
GAAP earnings per share for the full year of 2012 were $1.53, compared with GAAP earnings of $4.12 per share in the full year of 2011. Non-GAAP earnings were $3.51 per share, compared with non-GAAP earnings of $4.71 per share in the full year of 2011.
ISS revenue of $3.642 billion declined 11 percent compared to the same period last year. Within ISS, MPS revenue2 of $624 million grew 7 percent, Non-MPS revenue3 of $2.377 billion declined 9 percent and Inkjet Exit revenue4 of $640 million declined 27 percent year to year.
Perceptive Software revenue was $156 million. Perceptive Software revenue, excluding acquisition-related adjustments of $5.5 million, was $162 million and grew 62 percent compared to the full year of 2011.
Hardware revenue of $827 million and Supplies revenue of $2.640 billion declined 17 percent and 9 percent, respectively. Software and Other revenue of $337 million grew 22 percent, including and excluding acquisition-related adjustments.
Full Year 2012 GAAP results:
Revenue was $3.798 billion compared to $4.173 billion last year.
Gross profit margin was 36.9 percent versus 37.9 percent in 2011.
Operating expense was $1.213 billion compared to $1.138 billion last year.
Operating income margin was 4.9 percent compared to 10.6 percent in 2011.
Net earnings were $106 million compared to 2011 net earnings of $321 million.
Full Year 2012 Non-GAAP results:
Revenue was $3.803 billion compared to $4.178 billion last year.
Gross profit margin was 38.9 percent versus 38.4 percent in 2011.
Operating expense was $1.106 billion compared to $1.104 billion last year.
Operating income margin was 9.9 percent compared to 12.0 percent last year.
Net earnings were $244 million compared to $367 million in 2011.
During the full year of 2012, net cash provided by operating activities was $413 million, free cash flow was $251 million, capital expenditures were $162 million, and depreciation and amortization was $276 million. The company ended the year with $906 million in cash and current marketable securities.
Fourth quarter results
GAAP revenue of $967 million includes $1 million of acquisition-related adjustments. Non-GAAPrevenue of $968 million declined 9 percent compared with last year.
Fourth quarter EPS were negatively impacted by $0.25 per share ($17 million) from higher than expected taxes. A mix shift of earnings toward higher tax geographies resulted in an unfavorable impact of $11 million ($0.16 per share) as compared to the company’s October guidance.
Also, because the enactment of the American Taxpayer Relief Act of 2012 was not completed until 2013, certain provisions of the Act benefitting Lexmark’s 2012 federal taxes, including the extension of the research and experimentation (R&E) tax credit for 2012, cannot be recognized in the company’s 2012 financial results and instead will be reflected in the company’s 2013 financial results. This delay unfavorably impacted earnings by $6 million ($0.09 per share).
GAAP earnings per share for the fourth quarter of 2012 were $0.10, compared with GAAP earnings of $0.94 per share in the fourth quarter of 2011. Non-GAAP earnings were $0.61 per share compared with non-GAAP earnings of $1.25 per share in the fourth quarter of 2011.
Imaging Solutions and Services (ISS) revenue of $925 million declined 10 percent compared to the same period last year. Within ISS, Managed Print Services (MPS) revenue of $170 million grew 3 percent, Non-MPS revenue of $608 million declined 9 percent and Inkjet Exit revenue4 of $147 million declined 26 percent year to year. Inkjet Exit revenue represented 15 percent of total company revenue and is expected to decline as a percentage of total revenue with the company’s decision to exit its remaining inkjet hardware for improved profitability.
Perceptive Software revenue was $42 million. Perceptive Software revenue, excluding acquisition-related adjustments of $1 million, was $43 million and grew 37 percent compared to the same period in 2011.
Hardware revenue of $222 million and Supplies revenue of $656 million declined 15 percent and 10 percent, respectively. Software and Other revenue of $89 million grew 27 percent, or 25 percent excluding acquisition-related adjustments.
Lexmark continues to focus on growing workgroup laser hardware and supplies, MPS, and software revenue as inkjet continues to become a less significant portion of the company’s revenue mix.
Fourth Quarter 2012 GAAP results:
Revenue was $967 million compared to $1.060 billion last year.
Gross profit margin was 34.1 percent versus 37.4 percent in 2011.
Operating expense was $304 million compared to $303 million last year.
Operating income margin was 2.6 percent compared to 8.8 percent in 2011.
Net earnings were $6 million compared to 2011 net earnings of $69 million.
Fourth Quarter 2012 Non-GAAP results:
Revenue was $968 million compared to $1.061 billion last year.
Gross profit margin was 36.0 percent versus 38.3 percent in 2011.
Operating expense was $275 million compared to $283 million last year.
Operating income margin was 7.7 percent compared to 11.6 percent last year.
Net earnings were $40 million compared to $93 million in 2011.
In the fourth quarter of 2012, net cash provided by Lexmark operating activities was $138 million, free cash flow5 was $101 million, capital expenditures were $38 million, and depreciation and amortization was $76 million.