Lexmark International reports record third quarter results; Sixteen consecutive quarters of year-on-year earnings growth.LEXINGTON Lexington. 1 City (1990 pop. 225,366), seat of Fayette co., N central Ky., in the heart of the bluegrass region; inc. 1832, made coextensive with Fayette co. 1974. , Ky.--(BUSINESS WIRE)--Oct. 18, 1999-- Lexmark (Lexmark International, Inc., Lexington, KY, www.lexmark.com) A manufacturer of desktop and network printers that was spun off from IBM in 1991. For five years, IBM and Lexmark agreed not to compete with each other, and IBM continued to market printers to its own mainframe and International Group, Inc. (NYSE NYSE See: New York Stock Exchange : LXK) today announced record revenues, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. and earnings per share for the quarter ended September September: see month. 30, 1999. Net earnings were $77 million, or 56 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, an earnings-per-share increase of 38 percent versus the 41 cents earned in the same period last year. "Lexmark has grown earnings every quarter since going public in 1995, generating excellent returns for our stockholders," said Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. J. Curlander, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "These financial results validate To prove something to be sound or logical. Also to certify conformance to a standard. Contrast with "verify," which means to prove something to be correct. For example, data entry validity checking determines whether the data make sense (numbers fall within a range, numeric data our strategy of developing products and services with the technology leadership that meets our customers' needs. The new products introduced in the third quarter support a continuation of our success." Third-quarter review: Revenues grow 14 percent; earnings per share up 38 percent Lexmark's third-quarter revenues were $845 million, an increase of 14 percent over 1998 revenues of $744 million. Without the negative impact of foreign currency translation, revenue growth would have been 15 percent versus last year. Printer hardware and associated consumable A material that is used up and needs continuous replenishment, such as paper and toner. "The low-tech end of the high-tech field!" supplies revenues increased in all major geographies and were up 17 percent from the same period a year ago, and would have grown 19 percent if not for the negative currency impact. Gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. in 1999 were 35.9 percent, down slightly from 36.0 percent last year. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased 6 percent in the quarter, but declined to 22.2 percent of revenues, an improvement of 1.5 points from a year earlier. Operating income of $116 million increased 27 percent over the $91 million reported last year. Net earnings were $77 million, up 32 percent from $58 million a year ago, reflecting the increased revenues and higher operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . Lower effective income tax rates and fewer shares outstanding also contributed to improved earnings per share. Lexmark's debt-to-total-capital ratio at September 30, 1999 was 20 percent compared to 21 percent at the end of the second quarter. Capital expenditures were $68 million in the third quarter, primarily related to inkjet See inkjet printer. capacity expansion and new products. The company repurchased 410,000 shares of its common stock in the quarter for $25 million, resulting in remaining share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. authorization The right or permission to use a system resource; the process of granting access. See access control. of $248 million at the end of the quarter. Other achievements: New family of laser printers introduced In the largest product launch in its history, Lexmark announced on September 21 the Optra T family of monochrome Also called "mono." Refers to display screens that use one foreground and one background color; for example, black on white, white on black or green on black. The first terminals connected to mainframes and minicomputers were monochrome, and monochrome screens were widely used on early laser printers, ranging in speed from 15 to 35 pages per minute (ppm (Pages Per Minute) The measurement of printer speed. See gppm. PPM - Portable Pixmap ), replacing the successful Optra S line. This family of laser printers shares identical user interfaces, drivers and common supplies Those supplies common to two or more Services. , including a new industry-leading 25,000-page toner An electrically charged ink used in copy machines and laser printers. It adheres to an invisible image that has been charged with the opposite polarity onto a plate or drum or onto the paper itself. cartridge (1) See phono cartridge. (2) A removable storage module that contains magnetic disks, optical discs, magnetic tape or memory chips. Cartridges are inserted into slots in the drive, printer or computer. that delivers reduced operating costs operating costs npl → gastos mpl operacionales . The product launch also included two other new monochrome laser printers - the Optra M410 at 12 ppm and the 35 ppm wide-format Optra W810. "We have effectively replaced our entire line-up line-up Noun 1. people or things assembled for a particular purpose: Christmas TV line-up 2. of monochrome laser printers with the most technologically advanced and, at $699 to $2,529, the most competitively priced products available in the market today," said Curlander. Multifunction products and options were also announced providing customers with a wide array of new print/copy/scan/fax solutions, in both color and monochrome. These modular and scalable offerings will help companies reduce document production and delivery costs and improve productivity, particularly versus copiers. Coinciding co·in·cide intr.v. co·in·cid·ed, co·in·cid·ing, co·in·cides 1. To occupy the same relative position or the same area in space. 2. To happen at the same time or during the same period. 3. with these releases, Lexmark also introduced a complete centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. solution to printer and multifunction device management across the network with enhancements to Lexmark's MarkVision and NetPnP software. To improve network administrator productivity, the company extended the installation, updates, support and asset management capabilities of its industry-leading printer management software to the multifunction solutions and extended the usage tracking capabilities to copying and faxing. Lexmark and Kodak partner to print digital photos The Kodak Personal Picture Maker by Lexmark began shipping in the third quarter as the first product representing a strategic alliance between the companies to jointly develop and market co-branded printing appliances that make digital photography higher quality, easier and more affordable. This $149 printer enables digital photographers to edit, print or store their digital images without using a personal computer, thus providing an easy way for people to print and share pictures. Inkjet production expansion Lexmark announced during the quarter the groundbreaking of a new inkjet plant in Chihuahua Chihuahua, state, Mexico Chihuahua (chēwä`wä), state (1990 pop. 2,441,873), 94,831 sq mi (245,612 sq km), N Mexico, on the border of N.Mex. and Texas. The city of Chihuahua is the capital. , Mexico and the expansion of its existing Juarez, Mexico facility. In addition, the new inkjet facility in Cebu, Philippines started production this month. Nine-month review: Operating income up 30 percent Revenues for the nine months ended September 30 were $2.449 billion, an increase of 16 percent versus revenues of $2.113 billion in the same period of 1998. Revenues from printer hardware and associated consumable supplies increased 20 percent versus 1998. The impact of foreign currency translation was insignificant. Gross profit margins in 1999 were 36.1 percent, down from 36.5 percent a year earlier. Operating expenses declined 1.8 points to 22.6 percent of revenues, compared to last year. Operating income was $332 million, an increase of 30 percent over the $255 million reported for the first nine months of 1998. Net earnings for the period were $219 million, or $1.58 per share on a diluted basis, an earnings per share increase of 41 percent versus earnings of $161 million, or $1.13 per share in 1998. All share amounts and per share data have been adjusted for the two-for-one stock split effective June 10, 1999. Looking forward: "We are very pleased with the strong financial performance we have achieved in the first nine months of this year," said Curlander. "Our revenue growth of 14 percent in the third quarter reflected the start of a major product transition in the corporate market, production constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. in the consumer market, and adverse currency movements. Combined with Y2K See Y2K problem and Y2K compliant. Y2K - Year 2000 uncertainties, these effects will continue into the fourth quarter, with slightly lower revenue growth expected than in the third quarter. The current range of analysts' estimates for earnings per share for the fourth quarter is 66 to 80 cents. We expect that achievement will be in the lower half of that range. "We are excited about our business prospects for 2000, when product transition and capacity issues will be behind us. We have significantly strengthened our product lineup A criminal investigation technique in which the police arrange a number of individuals in a row before a witness to a crime and ask the witness to identify which, if any, of the individuals committed the crime. during 1999 and are now in the strongest competitive position in our history. We continue to expect to achieve our average long term earnings per share growth goal of 20 percent," Curlander added. ---------- A complete replay and transcript A generic term for any kind of copy, particularly an official or certified representation of the record of what took place in a court during a trial or other legal proceeding. A transcript of record of Lexmark's conference call with securities analysts will be available over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the on Lexmark's investor relations Investor relations The process by which the corporation communicates with its investors. home page at http://investor.lexmark.com and at www.streetfusion.com Lexmark International Group, Inc. is the parent company of Lexmark International, Inc., a global developer, manufacturer and supplier of printing solutions and products, including laser, inkjet and dot matrix printers A printer that uses hammers and a ribbon to form images out of dots. It is widely used to print multipart forms and address labels. Also known as a "serial dot matrix printer," the tractor and sprocket mechanism in these devices handles thicker media better than laser and inkjet printers. and associated consumable supplies for the office and home markets. Lexmark is on the Internet at www.lexmark.com. Lexmark, Lexmark with diamond design and Optra are trademarks of Lexmark International, Inc., registered in the U.S. and/or other countries. MarkVision is a trademark of Lexmark International, Inc. Kodak is a registered trademark of Eastman Kodak Company, and is used under license. Prices are estimated street prices after rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. , in U.S. dollars. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: Statements in this release which are not historical facts are forward-looking and involve risks and uncertainties, including, but not limited to, the potential impact on our customers and suppliers as they prepare for the Year 2000 conversion, the impact of competitors' products and pricing, the ability to increase printer and associated supplies manufacturing capacity, product transitions by the company, production and supply difficulties, market acceptance of new products and programs, increased investment to support product introductions, expand capacity and enter new geographies, currency fluctuations, conflicts between sales channels, intellectual property and other legal claims and expenses, the ability of the company to effectively address the Year 2000 issue, the outcome of pending and future litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. or governmental proceedings, changes in a country's or region's political or economic conditions, and other risks described in the company's Securities and Exchange Commission filings. -0-
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
--
Three Months Ended Percent
September 30 Change
--------------------- -------
--
1999 1998
-------- --------
--
--
Revenues $ 845.0 $ 743.8 14%
Cost of revenues 541.4 475.9
-------- --------
--
Gross profit 303.6 267.9 13
Research and development 44.5 44.0
Selling, general and
administrative 143.3 132.5
-------- --------
--
Operating expenses 187.8 176.5 6
-------- --------
--
Operating income 115.8 91.4 27
Interest expense 2.8 3.3
Other 1.4 1.2
-------- --------
--
Earnings before income
taxes 111.6 86.9 28
Provision for income
taxes 35.1 29.1
-------- --------
--
Net earnings $ 76.5 $ 57.8 32
======== ========
Basic net earnings per
share $ 0.59 $ 0.44 36
======== ========
Diluted net earnings per
share $ 0.56 $ 0.41 38
======== ========
Shares used in per share calculation:
Basic 129.3 132.5
======== ========
Diluted 136.8 142.3
======== ========
Note: All share and per share data for all periods presented has been
adjusted to reflect a 2-for-1 stock split of the common stock
effective June 10, 1999.
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended Percent
September 30 Change
--------------------- -------
--
1999 1998
-------- --------
--
Revenues $2,449.3 $2,113.2 16%
Cost of revenues 1,564.9 1,342.3
-------- --------
--
Gross profit 884.4 770.9 15
Research and development 138.5 118.7
Selling, general and
administrative 414.3 397.6
-------- --------
--
Operating expenses 552.8 516.3 7
-------- --------
--
Operating income 331.6 254.6 30
Interest expense 7.6 8.4
Other 4.6 4.0
-------- --------
--
Earnings before income
taxes 319.4 242.2 32
Provision for income
taxes 100.6 81.1
-------- --------
--
Net earnings $ 218.8 $ 161.1 36
======== ========
Basic net earnings per share $ 1.69 $ 1.20 40
======== ========
Diluted net earnings per share $ 1.58 $ 1.13 41
======== ========
Shares used in per share calculation:
Basic 129.6 133.9
======== ========
Diluted 138.1 143.1
======== ========
Note: All share and per share data for all periods presented has been
adjusted to reflect a 2-for-1 stock split of the common stock
effective June 10, 1999.
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions)
(Unaudited)
-
September 30 December 31
1999 1998
-------- --------
--
-
ASSETS
Current assets:
Cash and cash
equivalents $ 122.3 $ 149.0
Trade receivables, net 487.8 469.4
Inventories 397.0 333.0
Prepaid expenses and
other current assets 93.5 68.6
-------- --------
--
Total current assets 1,100.6 1,020.0
Property, plant and
equipment, net 512.0 430.5
Other assets 45.3 32.9
-------- --------
--
Total assets $1,657.9 $1,483.4
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 13.4 $ 11.7
Accounts payable 290.3 267.1
Accrued liabilities 395.9 326.9
-------- --------
--
Total current 699.6 605.7
liabilities
Long-term debt 148.7 148.7
Other liabilities 155.7 150.9
-------- --------
--
Total liabilities 1,004.0 905.3
Stockholders' equity:
Preferred stock -- --
Common stock and capital
in excess of par 606.1 565.6
Retained earnings 630.6 411.8
Treasury stock (551.6) (370.3)
Accumulated other
comprehensive
earnings (loss) (31.2) (29.0)
-------- --------
--
Total stockholders'
equity 653.9 578.1
-------- --------
--
Total liabilities and
stockholders' equity $1,657.9 $1,483.4
======== ========
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