Lexmark International, Inc. announced its financial results for the second quarter of 2010. Second quarter GAAP revenue of $1.03 billion increased 14 percent compared to the same quarter last year.
Second quarter GAAP earnings per share were $1.07. Excluding $0.16 per share for restructuring-related and acquisition-related adjustments, earnings per share for the second quarter of 2010 would have been $1.23. Second quarter 2009 GAAP earnings per share were $0.22. Earnings per share for the second quarter of 2009 would have been $0.55 excluding $0.33 per share for restructuring-related adjustments.
"Lexmark's second quarter results were significantly better than expected, driven by double-digit growth in both hardware and supplies revenue, as well as operating income margin expansion," said Paul J. Curlander, Lexmark chairman and chief executive officer.
"This strong performance is a reflection of our improved product lines, continued growth in managed print services, the shift in our inkjet focus to business customers, and our ongoing strong growth in workgroup lasers and higher end inkjet products," Curlander added.
Second quarter Printing Solutions and Services Division (PSSD) revenue of $752 million grew 20 percent year to year, Imaging Solutions Division (ISD) revenue of $275 million declined 2 percent year to year, and all other GAAP revenue was $6 million, or $8 million excluding acquisition-related adjustments.
The company ended the quarter with $1.0 billion in cash and current marketable securities. Second quarter net cash provided by operating activities of $91 million compared to $84 million in the same quarter last year. Capital expenditures for the quarter were $37 million. Depreciation and amortization in the quarter was $47 million.
In the second quarter of 2010:
* Gross profit margin was 36.8 percent versus 31.0 percent in 2009.
* Operating expense was $261 million compared to $253 million last year.
* Operating expense to revenue ratio was 25.3 percent compared to 28.0 percent last year.
* Operating income margin of 11.5 percent includes $17 million pretax for restructuring-related and acquisition-related adjustments.
* Operating income margin in 2009 of 3.1 percent included $32 million for pretax restructuring-related adjustments.
* Net earnings for the quarter were $85 million, an increase of 400 percent compared to second quarter 2009 net earnings of $17 million.
On a non-GAAP basis, excluding restructuring-related and acquisition-related adjustments, in the second quarter of 2010:
* Gross profit margin would have been 37.4 percent, up 4.0 percentage points from 33.4 percent in the same period last year.
* Operating expense would have been $251 million, compared to $243 million last year.
* Operating expense to revenue ratio would have been 24.3 percent, down 2.6 percentage points from 26.9 percent last year.
* Operating income margin would have been 13.1 percent, an increase of 6.5 percentage points from 6.6 percent last year.
* Net earnings would have been $98 million, an increase of 126 percent compared to $43 million in the second quarter of 2009.
Perceptive Software Acquisition Completed
During the second quarter, Lexmark completed the acquisition of Perceptive Software in a cash transaction for $280 million. Perceptive Software is a leading provider of Enterprise Content Management (ECM) software and solutions, with significant industry experience in the higher education, healthcare and government segments. Perceptive Software’s ImageNow software platform enables a broad range of industry-specific and cross-industry workflow solutions. A key strength and differentiator of its ECM software platform is the ability to be quickly and easily configured, and integrated with a large number of ERP, CRM and line-of-business applications. Perceptive Software retains its current name and operates as a stand-alone software business within Lexmark.
Strategic benefits of the acquisition include:
* Builds upon and strengthens Lexmark’s current industry-focused document workflow solutions and managed print services
* Expands Lexmark’s market opportunity and adds an ECM software business with strong industry-specific solutions
* Provides significant opportunities to grow Perceptive Software using Lexmark’s global infrastructure and sales channels
* Provides a core strategic component for Lexmark’s future
Through the acquisition of Perceptive Software, Lexmark adds a complementary software business that is aligned with its existing industry-focused value proposition. This acquisition enables Lexmark to immediately participate in the adjacent, growing market segment of ECM software solutions. It also provides additional revenue streams that are not paper usage dependent.
Lexmark Awarded $127 Million Agreement With Social Security Administration
Also during the second quarter, Lexmark announced that it has been awarded a five-year blanket purchase agreement (BPA) for the purchase of monochrome and color laser printers and multifunction products (MFPs) by the Social Security Administration (SSA). The estimated value of the BPA is expected to reach $127 million. The Lexmark printers and MFPs will be used for general office printing and other output requirements by more than 62,000 employees in SSA’s 1,500 U.S. and other worldwide locations.
Looking Forward
In the third quarter of 2010, the company currently expects revenue to be up in the mid to high-single digit percentage range year on year and GAAP earnings per share to be around $0.70 to $0.80, based on an effective tax rate of 24 percent, or $0.90 to $1.00 excluding $0.20 per share for restructuring-related and acquisition-related adjustments. GAAP earnings per share in the third quarter of 2009 were $0.13, or $0.65 excluding $0.52 per share for restructuring-related adjustments.
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