Lexmark reports fourth quarter and full year 2012 results

          Lexmark reports fourth quarter and full year 2012 results

-- Fourth quarter revenue exceeded guidance range

-- Growth in both managed print services and software revenue for quarter,
year

-- Record full year gross profit margin percentage for fourth consecutive year

-- EPS unfavorably impacted by $0.25 per share by higher than expected taxes

-- Cash from operations of $138 million in the quarter, $413 million in full
year

-- Share repurchases and dividends totaled $269 million in 2012

-- Solutions offerings expanded and strengthened by four 2012 acquisitions and
significant advancements in new laser line

PR Newswire

LEXINGTON, Ky., Jan. 29, 2013

LEXINGTON, Ky., Jan. 29, 2013 /PRNewswire/ --Lexmark International, Inc.
(NYSE: LXK) today announced financial results for the fourth quarter and full
year of 2012.

"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.

"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," added Rooke. "We continue
to execute on our capital allocation strategy of rewarding shareholders
through share repurchases and dividends while pursuing acquisitions that
further expand and strengthen our solutions offerings."

Fourth Quarter Results

GAAP revenue of $967 million includes $1 million of acquisition-related
adjustments. Non-GAAP^1 revenue 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 the
company'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).

Earnings Per Share                   4Q12  4Q11
GAAP                                $0.10 $0.94
 Restructuring-related adjustments 0.35  0.21
 Acquisition-related adjustments   0.17  0.11
Non-GAAP                            $0.61 $1.25

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^2 of $170 million grew 3 percent, Non-MPS revenue^3 of
$608 million declined 9 percent and Inkjet Exit revenue^4 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:

  oRevenue was $967 million compared to $1.060 billion last year.
  oGross profit margin was 34.1 percent versus 37.4 percent in 2011.
  oOperating expense was $304 million compared to $303 million last year.
  oOperating income margin was 2.6 percent compared to 8.8 percent in 2011.
  oNet earnings were $6 million compared to 2011 net earnings of $69 million.

Fourth Quarter 2012 Non-GAAP results:

  oRevenue was $968 million compared to $1.061 billion last year.
  oGross profit margin was 36.0 percent versus 38.3 percent in 2011.
  oOperating expense was $275 million compared to $283 million last year.
  oOperating income margin was 7.7 percent compared to 11.6 percent last
    year.
  oNet earnings were $40 million compared to $93 million in 2011.

In the fourth quarter of 2012, net cash provided by operating activities was
$138 million, free cash flow^5 was $101 million, capital expenditures were $38
million, and depreciation and amortization was $76 million.

Full Year 2012 Results

GAAP revenue of $3.798 billion includes $5.5 million of acquisition-related
adjustments. Non-GAAP^1 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.

Earnings Per Share                   2012  2011
GAAP                                $1.53 $4.12
 Restructuring-related adjustments 1.29  0.30
 Acquisition-related adjustments   0.70  0.29
Non-GAAP                            $3.51 $4.71

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 revenue^2 of $624 million grew 7 percent, Non-MPS
revenue^3 of $2.377 billion declined 9 percent and Inkjet Exit revenue^4 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:

  oRevenue was $3.798 billion compared to $4.173 billion last year.
  oGross profit margin was 36.9 percent versus 37.9 percent in 2011.
  oOperating expense was $1.213 billion compared to $1.138 billion last
    year.
  oOperating income margin was 4.9 percent compared to 10.6 percent in 2011.
  oNet earnings were $106 million compared to 2011 net earnings of $321
    million.

Full Year 2012 Non-GAAP results:

  oRevenue was $3.803 billion compared to $4.178 billion last year.
  oGross profit margin was 38.9 percent versus 38.4 percent in 2011.
  oOperating expense was $1.106 billion compared to $1.104 billion last year.
  oOperating income margin was 9.9 percent compared to 12.0 percent last
    year.
  oNet 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^5 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.

Maintaining Capital Allocation Discipline to Deliver Shareholder Value

Lexmark is continuing to execute on its stated capital allocation framework of
returning more than 50 percent of free cash flow^5 to shareholders, on
average, through quarterly dividends and share repurchases while building and
growing its solutions and software business through expansion and
acquisitions. Lexmark has returned more than $500 million to shareholders
through dividends and share repurchases since July 2011.

In the fourth quarter of 2012, Lexmark paid a dividend of $0.30 per share
totaling $19 million. Also, 0.7 million of share repurchases executed in the
third quarter settled in the fourth quarter.

In the full year 2012, Lexmark paid a dividend of $1.15 per share totaling $79
million. The company also repurchased 8.1 million of the company's shares for
$190 million during the year. The company's remaining share repurchase
authorization is currently$251 million.

Also in the fourth quarter, the company acquired Acuo Technologies, a
recognized leader in high performance medical software and services. Acuo was
the fourth acquisition in 2012, showcasing Lexmark's transition to being a key
solutions provider to enterprise-sized businesses and organizations across the
globe.

Lexmark's Perceptive Software Expands Healthcare Presence and Expertise

Perceptive Software's expanded healthcare sector presence and expertise are
evident in the acquisition of Acuo Technologies, the U.S. Department of
Defense's selection of its Universal Clinical Platform, and Perceptive
Software's ranking as the top healthcare Document Management and Imaging
software product by a leading industry research firm.

  oAcuo Technologies Acquisition - Lexmark recently announced the acquisition
    of Acuo Technologies for a cash purchase price of approximately $45
    million. A leading software provider of clinical content management, data
    migration and vendor neutral archives (VNA), Acuo Technologies is now a
    part of Perceptive Software. Together the companies will offer a unique
    set of technologies to the healthcare sector—enterprise content management
    (ECM), VNA with clinical content viewing, and database conversion—that
    combine to manage the entire range of content within the healthcare
    enterprise. With this acquisition, Perceptive Software becomes the only
    vendor to own this technology to provide this powerful healthcare
    solution, driving better patient care, an enhanced clinician experience
    and cost savings through a single, enterprise-wide and content-based
    medical record that is accessible via any electronic medical records
    system.
  oDepartment of Defense Selection - In the fourth quarter, Acuo announced
    that the Defense Logistics Agency of the U.S. Department of Defense (DoD)
    has selected the Acuo Universal Clinical Platform (UCP) as a new VNA
    solution for enterprise patient imaging logistics. UCP will consolidate
    imaging studies from 39 U.S. Army picture archiving and communication
    system (PACS) sites and 23 U.S. Navy PACS sites located at military
    healthcare facilities throughout the world. The nine-year contract, worth
    approximately $40 million, comprises products and services from BRIT
    Systems, Dell™ Computer Systems and Acuo.
  o2012 Best in KLAS - Also in the fourth quarter, Perceptive Software
    announced its healthcare products and solutions have been ranked the top
    healthcare Document Management and Imaging (DMI) software product,
    according to the 2012 Best in KLAS Awards: Software & Services report, an
    independent ranking based on customer feedback on top healthcare
    information technology vendors. Perceptive Software has ranked among the
    top five vendors in theDMI category every year since 2007.

Lexmark's Demonstrated Leadership Continues with Global MPS Wins and Industry
Accolades

Lexmark continues to reinforce ISS' global MPS expertise and smart MFP
technology through the announcements of geographic expansion with a
well-recognized, global brewer and also once again being ranked as a leader by
one of the industry's most prominent research firms.

  oAnheuser-Busch InBev MPS Win - Lexmark recently signed a new, five-year
    agreement with Anheuser-Busch InBev that extends its services into Europe
    to drive improved productivity and cost savings for the leading global
    brewer. In January 2012, the company announced a similar deal with
    Anheuser-Busch that covered locations across North America. This new
    multi-country services contract calls for world-class MPS, a standardized
    fleet of innovative printers and multifunction products (MFPs) and
    improved business processes to be provided to Anheuser-Busch InBev. The
    scope of services includes corporate offices in addition to breweries.
  oLexmark's Leadership Positioning - Lexmark has again garnered notable
    distinctions from leading industry analyst firm Gartner, Inc. by earning
    Leader positions in two Magic Quadrants, attesting to the company's
    knowledge and expertise in theMPSand printer/MFParenas.

       oLexmark recently announced its positioning in the Leaders quadrant of
         Gartner's "Magic Quadrant: Managed Print Services Worldwide"
         report^6. Lexmark offers a comprehensive set of MPS and capabilities
         that provide a consistent, global infrastructure to manage devices
         effectively and drive significant cost reductions. In addition,
         Lexmark's dynamic solutions are customized to bring unique value to
         each customer when deployed in anMPSenvironment. By streamlining
         complex and dysfunctional business processes, Lexmark'sMPShas the
         capacity to deliver an immediate return on investment through
         increased worker productivity and effectiveness – enabling Lexmark's
         customers to better focus on their core business and clients at the
         point of service.
       oLexmark also has been positioned by Gartner in the Leaders quadrant
         of its 2012MFPand Printer Magic Quadrant^7. As evidenced by
         Lexmark's 2012 laser product announcement, the company is extending
         its leadership in smart MFPs with several next-generation devices,
         that when combined with the Perceptive Software portfolio, increase
         productivity by enabling users to capture and access their data at
         the right time and in the right format. With a wide breadth of laser
         product offerings, Lexmark can provide the best product to address a
         customer's unique requirements.

Looking Forward

In the first quarter of 2013, the companyexpects a continuednegative impact
from thedecision to exit inkjet. Revenue is currently expected to decline 11
to 13 percent year on year. GAAP earnings per share in the first quarter of
2013 are expected to be around $0.43 to $0.53, compared with GAAP earnings per
share of $0.84 in the first quarter of 2012. Non-GAAP earnings per share in
the first quarter of 2013 are expected to be around $0.80 to $0.90, compared
with non-GAAP earnings per share of $1.05 in the first quarter of 2012.

Conference Call Today

The company will be hosting a conference call with securities analysts today
at 8:30 a.m. (EST). A live broadcast and a complete replay of this call can be
accessed from Lexmark's investor relations website at
http://investor.lexmark.com. If you are unable to connect to the Internet, you
can access the call via telephone at 888-693-3477 (outside the U.S. by calling
973-582-2710) using access code 81765633.

Lexmark's earnings presentation slides, including reconciliations between GAAP
and non-GAAP financial measures, will be available on Lexmark's investor
relations website prior to the live broadcast.

About Lexmark

Lexmark International, Inc. (NYSE: LXK) provides businesses of all sizes with
a broad range of printing and imaging products, software, solutions and
services that help customers to print less and save more. Perceptive Software,
a Lexmark company, is a leading provider of process and content management
software thathelps organizations fuel greater operational efficiency. In
2012, Lexmark sold products in more than 170 countries and reported $3.8
billion in revenue.

To learn more about Lexmark, please visit www.lexmark.com. For more
information on Perceptive Software, please visit www.perceptivesoftware.com.

For more information on Lexmark, see the Lexmark Facebook page and follow us
on Twitter.

For more information about Perceptive Software, please visit the company's
Facebook and Twitter profiles.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this release which are not historical facts are
forward-looking and involve risks and uncertainties which may cause the
company's actual results or performance to be materially different from the
results or performance expressed or implied by the forward-looking statements.
Factors that may impact such forward-looking statements include, but are not
limited to, continued economic uncertainty related to volatility of the global
economy, market acceptance of new products; inability to realize all of the
anticipated benefits of the Company's acquisitions; fluctuations in foreign
currency exchange rates; decreased supplies consumption; possible changes in
the size of expected restructuring costs, charges, and savings; aggressive
pricing from competitors and resellers; the inability to develop new products
and enhance existing products to meet customer needs on a cost competitive
basis; reliance on international production facilities, manufacturing partners
and certain key suppliers; increased investment to support product development
and marketing; the financial failure or loss of business with a key customer
or reseller; periodic variations affecting revenue and profitability;
excessive inventory for the Company's reseller channel; failure to manage
inventory levels or production capacity; credit risk associated with the
Company's customers, channel partners, and investment portfolio; entrance into
the market of additional competitors focused on imaging and software
solutions, including enterprise content management, intelligent capture and
business process management solutions; inability to perform under managed
print services contracts; increased competition in the aftermarket supplies
business; changes in the Company's tax provisions or tax liabilities; fees on
the Company's products or litigation costs required to protect the Company's
rights; inability to obtain and protect the Company's intellectual property
rights and defend against claims of infringement and/or anticompetitive
conduct; the outcome of litigation or regulatory proceedings to which the
Company may be a party; unforeseen cost impacts as a result of new
legislation; the inability to attract, retain and motivate key employees;
changes in a country's political or economic conditions; the failure of
information technology systems; disruptions at important points of exit and
entry and distribution centers; business disruptions; terrorist acts; acts of
war or other political conflicts; or the outbreak of a communicable disease;
and other risks described in the company's Securities and Exchange Commission
filings. The company undertakes no obligation to update any forward-looking
statement.

Lexmark and Lexmark with diamond design are trademarks of Lexmark
International, Inc., registered in the U.S. and/or other countries. All other
trademarks are the property of their respective owners.

1.In an effort to provide investors with additional information regarding
    the company's results as determined by generally accepted accounting
    principles (GAAP), the company has also disclosed in this press release
    non-GAAP earnings per share amounts and related income statement items
    which management believes provides useful information to investors.When
    used in this press release, "non-GAAP" earnings per share amounts and
    related income statement items exclude restructuring-related and
    acquisition-related adjustments. The rationale for management's use of
    non-GAAP measures is included in Appendix A to the financial information
    attached hereto.
2.MPS revenue is defined as ISS laser hardware, supplies and fleet
    management solutions sold through a managed services agreement.
3.Non-MPS revenue is defined as ISS laser hardware, laser supplies, dot
    matrix hardware, and dot matrix supplies not sold as a part of an MPS
    agreement. Non-MPS also includes parts and service related to hardware
    maintenance.
4.Inkjet Exit revenueis defined as consumer and business inkjet hardware
    and supplies that the company is exiting.
5.Free Cash Flow is defined as net cash flows provided by operating
    activities minus purchases of property, plant and equipment plus proceeds
    from sale of fixed assets.
6.Gartner, Inc., Magic Quadrant for Managed Print Services, Worldwide, Ken
    Weilerstein, Cecile Drew, Yulan Li, October 25, 2012.
7.Gartner, Inc., Magic Quadrant for MFPs and Printers, Worldwide, Sharon
    McNee, Federico De Silva, October 24, 2012.



LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
                         Three Months Ended         Year Ended
                         December 31                December 31
                         2012         2011          2012          2011
Revenue                 $   967.4  $  1,059.6   $  3,797.6   $  4,173.0
Cost of revenue         637.9        663.5         2,397.6       2,592.4
Gross profit             329.5        396.1         1,400.0       1,580.6
Research and development 88.1         98.3          372.7         374.5
Selling, general and     208.3        200.8         804.1         761.2
administrative
Restructuring and        7.9          4.2           36.1          2.0
related charges
Operating expense        304.3        303.3         1,212.9       1,137.7
Operating income         25.2         92.8          187.1         442.9
Interest expense         7.5          7.6           29.6          29.9
(income), net
Other (income) expense,  (1.0)        0.0           (0.5)         (0.6)
net
Earnings before income   18.7         85.2          158.0         413.6
taxes
Provision for income     12.4         15.9          51.7          92.7
taxes
Net earnings             $        $    69.3  $   106.3   $   320.9
                         6.3
Net earnings per share:
Basic                    $         $    0.95  $    1.55  $    4.16
                         0.10
Diluted                  $         $    0.94  $    1.53  $    4.12
                         0.10
Shares used in per share
calculation:
Basic                    64.4         73.0          68.6          77.1
Diluted                  65.4         74.0          69.5          77.9
Cash dividends declared  $         $    0.25  $    1.15  $    0.25
per common share         0.30





LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions)
(Unaudited)
                                           December 31      December 31
                                           2012             2011
ASSETS
Current assets:
Cash and cash equivalents                  $     212.4  $     356.1
Marketable securities                      693.4            793.3
Trade receivables, net                     523.6            457.8
Inventories                                277.3            335.5
Prepaid expenses and other current assets  214.9            266.1
Total current assets                       1,921.6          2,208.8
Property, plant and equipment, net         845.3            888.8
Marketable securities                      6.3              11.5
Goodwill                                   376.8            216.4
Intangibles, net                           231.4            151.2
Other assets                               142.0            160.3
Total assets                               $   3,523.4   $   3,637.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt          $     350.0  $       -
Accounts payable                           512.5            486.5
Accrued liabilities                        580.6            636.8
Total current liabilities                  1,443.1          1,123.3
Long-term debt                             299.6            649.3
Other liabilities                          499.5            472.7
Total liabilities                          2,242.2          2,245.3
Stockholders' equity:
Common stock and capital in excess of par  901.6            867.5
Retained earnings                          1,507.5          1,482.3
Treasury stock, net                        (844.4)          (654.4)
Accumulated other comprehensive loss       (283.5)          (303.7)
Total stockholders' equity                 1,281.2          1,391.7
Total liabilities and stockholders' equity $   3,523.4   $   3,637.0





LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
Net Earnings (In Millions)                     4Q12              4Q11
GAAP                                           $          $      
                                               6                 69
Restructuring-related charges & project        23                15
costs
Acquisition-related adjustments                11                8
Non-GAAP                                       $       40  $      
                                                                 93
Net Earnings (In Millions)                     2012              2011
GAAP                                           $      106  $     
                                                                 321
Restructuring-related charges & project        90                23
costs
Acquisition-related adjustments                49                23
Non-GAAP                                       $      244  $     
                                                                 367
Earnings Per Share                            4Q12              4Q11
GAAP                                           $      0.10  $     
                                                                 0.94
Restructuring-related charges & project        0.35              0.21
costs
Acquisition-related adjustments                0.17              0.11
Non-GAAP                                       $      0.61  $     
                                                                 1.25
Earnings Per Share                            2012              2011
GAAP                                           $      1.53  $     
                                                                 4.12
Restructuring-related charges & project        1.29              0.30
costs
Acquisition-related adjustments                0.70              0.29
Non-GAAP                                       $      3.51  $     
                                                                 4.71
Earnings Per Share Guidance                    1Q13              1Q12
GAAP                                           $0.43 - $0.53   $     
                                                                 0.84
Restructuring-related charges & project        0.16              0.11
costs
Acquisition-related adjustments                0.21              0.10
Non-GAAP                                       $0.80 - $0.90   $     
                                                                 1.05
       Refer to Appendix 1 for discussion of management's use of GAAP and
       Non-GAAP measures.
       Totals may not foot due to rounding.



LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
Revenue (In Millions) *                          4Q12             4Q11
GAAP                                             $           $    
                                                 967             1,060
Acquisition-related adjustments (1)(2)           1                1
Non-GAAP                                         $           $    
                                                 968             1,061
Software and Other Revenue (In                   4Q12             4Q11
Millions) **
GAAP                                             $          $     
                                                 89                70
Acquisition-related adjustments (1)(2)           1                1
Non-GAAP                                         $          $     
                                                 89                72
Perceptive Software Revenue (In                  4Q12             4Q11
Millions) ***
GAAP                                             $          $     
                                                 42                30
Acquisition-related adjustments (1)(2)           1                1
Non-GAAP                                         $          $     
                                                 43                31
Gross Profit (In Millions)                       4Q12             4Q11
GAAP                                             $           $     
                                                 330             396
Restructuring-related charges & project          11               4
costs (3)(4)
Acquisition-related adjustments(1)(2)            8                6
Non-GAAP                                         $           $     
                                                 349             406
Gross Profit Margin (%)                          4Q12             4Q11
GAAP                                             34.1%            37.4%
Restructuring-related charges & project          1.2%             0.4%
costs
Acquisition-related adjustments                  0.8%             0.5%
Non-GAAP                                         36.0%            38.3%
Operating Expense (In Millions)                  4Q12             4Q11
GAAP                                             $           $     
                                                 304             303
Restructuring-related charges & project          (22)             (16)
costs (3)(4)
Acquisition-related adjustments(1)(2)            (8)              (5)
Non-GAAP                                         $           $     
                                                 275             283
Operating Income (In Millions)                  4Q12             4Q11
GAAP                                             $          $     
                                                 25                93
Restructuring-related charges & project          33               20
costs (3)(4)
Acquisition-related adjustments(1)(2)            16               10
Non-GAAP                                         $          $     
                                                 74               123
Operating Income Margin (%)                    4Q12             4Q11
GAAP                                             2.6%             8.8%
Restructuring-related charges & project          3.4%             1.9%
costs
Acquisition-related adjustments                  1.6%             1.0%
Non-GAAP                                         7.7%             11.6%
         Refer to Appendix 1 for discussion of management's use of GAAP and
         Non-GAAP measures.
         Totals may not foot due to
         rounding.
*        Year-to-year Revenue growth was approximately -9% on a GAAP basis
         and -9% on a non-GAAP basis. Earnings in the fourth quarter of 2012
        include those of Brainware, ISYS, and Nolij acquired in the first
         quarter of 2012.

**       Year-to-year Software and Other Revenue growth was approximately 27%
         on a GAAP basis and 25% on a non-GAAP basis. Earnings in the fourth
        quarter of 2012 include those of Brainware, ISYS, and Nolij acquired
         in the first quarter of 2012.

***      Year-to-year Perceptive Software Revenue growth was approximately
         41% on a GAAP basis and 37% on a non-GAAP basis. Earnings in the
        fourth quarter of 2012 include those of Brainware, ISYS, and Nolij
         acquired in the first quarter of 2012.

^(1)    Amounts for the three months ended December 31, 2012, include total
         acquisition-related adjustments of $15.8 million with $0.6 million,
        $7.3 million, $0.2 million and $7.7 million included in Revenue, Cost
         of revenue, Research and development and Selling, general and
        administrative, respectively.
^(2)    Amounts for the three months ended December 31, 2011, include total
         acquisition-related adjustments of $10.3 million with $1.3 million,
        $4.2 million, $0.1 million and $4.7 million included in Revenue, Cost
         of revenue, Research and development and Selling, general and
        administrative, respectively.
^(3)    Amounts for the three months ended December 31, 2012, include total
         restructuring-related charges and project costs of $33.1 million with
        $11.3 million and $13.9 million included in Cost of revenue and
         Selling, general and administrative, respectively, in addition to the
        $7.9 million in Restructuring and related charges.
^(4)    Amounts for the three months ended December 31, 2011, include total
         restructuring-related charges and project costs of $19.9 million with
        $4.4 million and $11.2 million included in Cost of revenue and
         Selling, general and administrative, respectively, in addition to the
        $4.3 million in Restructuring and related charges.



LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(Unaudited)
Revenue (In Millions) *                  2012               2011
GAAP                                     $              $     4,173
                                         3,798
Acquisition-related adjustments (1)(2)   5                  5
Non-GAAP                                 $              $     4,178
                                         3,803
Software and Other Revenue (In Millions) 2012               2011
**
GAAP                                     $             $     
                                         331               272
Acquisition-related adjustments (1)(2)   5                  5
Non-GAAP                                 $             $     
                                         337               277
Perceptive Software Revenue (In          2012               2011
Millions) ***
GAAP                                     $             $      
                                         156               95
Acquisition-related adjustments (1)(2)   5                  5
Non-GAAP                                 $             $     
                                         162               100
Gross Profit (In Millions)               2012               2011
GAAP                                     $              $     1,581
                                         1,400
Restructuring-related charges & project  48                 5
costs (3)(4)
Acquisition-related adjustments(1)(2)    33                 20
Non-GAAP                                 $              $     1,606
                                         1,480
Gross Profit Margin (%)                  2012               2011
GAAP                                     36.9%              37.9%
Restructuring-related charges & project  1.3%               0.1%
costs
Acquisition-related adjustments          0.9%               0.5%
Non-GAAP                                 38.9%              38.4%
Operating Expense (In Millions)          2012               2011
GAAP                                     $              $     1,138
                                         1,213
Restructuring-related charges & project  (74)               (25)
costs (3)(4)
Acquisition-related adjustments(1)(2)    (33)               (9)
Non-GAAP                                 $              $     1,104
                                         1,106
Operating Income (In Millions)          2012               2011
GAAP                                     $             $     
                                         187               443
Restructuring-related charges & project  122                30
costs (3)(4)
Acquisition-related adjustments(1)(2)    66                 29
Non-GAAP                                 $             $     
                                         375               502
Operating Income Margin (%)            2012               2011
GAAP                                     4.9%               10.6%
Restructuring-related charges & project  3.2%               0.7%
costs
Acquisition-related adjustments          1.7%               0.7%
Non-GAAP                                 9.9%               12.0%
       Refer to Appendix 1 for discussion of management's use of GAAP and
       Non-GAAP measures.
       Totals may not foot due to
       rounding.
*
       Year-to-year Revenue growth was approximately -9% on a GAAP basis
      and -9% on a non-GAAP basis. Earnings in 2012 include those of
       Brainware, ISYS, and Nolij subsequent to the date of acquisition.

**     Year-to-year Software and Other Revenue growth was approximately 22%
       on a GAAP basis and 22% on a non-GAAP basis. Earnings in 2012
      include those of Brainware, ISYS, and Nolij subsequent to the date
       of acquisition.

***    Year-to-year Perceptive Software Revenue growth was approximately
       65% on a GAAP basis and 62% on a non-GAAP basis. Earnings in 2012
      include those of Brainware, ISYS, and Nolij subsequent to the date
       of acquisition.

^(1)  Amounts for the year ended December 31, 2012, include total
       acquisition-related adjustments of $65.8 million with $5.5 million,
      $27.2 million, $0.9 million and $32.2 million included in Revenue,
       Cost of revenue, Research and development and Selling, general and
      administrative, respectively.
^(2)  Amounts for the year ended December 31, 2011, include total
       acquisition-related adjustments of $29.4 million with $4.9 million,
      $15.5 million, $0.4 million and $8.6 million included in Revenue,
       Cost of revenue, Research and development and Selling, general and
      administrative, respectively.
^(3)  Amounts for the year ended December 31, 2012, include total
       restructuring-related charges and project costs of $121.8 million
      with $47.8 million and $37.9 million included in Cost of revenue and
       Selling, general and administrative, respectively, in addition to the
      $36.1 million in Restructuring and related charges.
^(4)  Amounts for the year ended December 31, 2011, include total
       restructuring-related charges and project costs of $29.9 million with
      $5.2 million and $22.7 million included in Cost of revenue and
       Selling, general and administrative, respectively, in addition to the
      $2.0 million in Restructuring and related charges.





Appendix 1
Note:   Management believes that presenting non-GAAP measures is useful
        because they enhance investors' understanding of how management
       assesses the performance of the Company's businesses. Management uses
        non-GAAP measures for budgeting purposes, measuring actual results to
       budgeted projections, allocating resources and in certain
        circumstances for employee incentive compensation. Adjustments to GAAP
       results in determining non-GAAP results fall into two broad general
        categories that are described below:
        1) Restructuring-related charges
        In recent years, the Company has initiated restructuring plans which
        have resulted in operating expenses which otherwise would not have
        been incurred. The size of these items can vary significantly from
        period to period and the Company does not consider these items to be
        part of core operating expenses of the business. Restructuring and
        related charges that are excluded from GAAP earnings to determine
        non-GAAP earnings consist of accelerated depreciation, asset
        impairments, employee termination benefits, pension and postretirement
        plan curtailments, inventory-related charges and contract termination
        and lease charges. They also include project costs that relate to the
        execution of the restructuring plans. These project costs are
        incremental to normal operating charges and are expensed as incurred,
        such as compensation costs for overlap staffing, travel expenses,
        consulting costs and training costs.
        2) Acquisition-related adjustments
        In connection with acquisitions, management provides supplementary
        non-GAAP financial measures of revenue and expenses to normalize for
        the impact of business combination accounting rules as well as to
        exclude certain expenses which would not have been incurred otherwise.
        a. Adjustments to Revenue
        Due to business combination accounting rules, deferred revenue
        balances for service contracts assumed as part of acquisitions are
        adjusted down to fair value. Fair value approximates the cost of
        fulfilling the service obligation, plus a reasonable profit margin.
        Subsequent to acquisitions, management adds back the amount of
        amortized revenue that would have been recognized had the acquired
        company remained independent and had the deferred revenue balances not
        been adjusted to fair value.Management reviews non-GAAP revenue to
        allow for more complete comparisons to historical performance as well
        as to forward-looking projections and also uses it as a metric for
        employee incentive compensation.
        b. Amortization of intangible assets
        Due to business combination accounting rules, intangible assets are
        recognized which were not previously presented on the balance sheet of
        the acquired company. These intangible assets consist primarily of
        purchased technology, customer relationships, trade names, in-process
        R&D and non-compete agreements. Subsequent to the acquisition date,
        some of these intangible assets begin amortizing and represent an
        expense that would not have been recorded had the acquired company
        remained independent. The total amortization of the acquired
        intangible assets varies from period to period, due to the mix in
        value and useful lives of the different assets. For the purpose of
        comparing financial results to historical performance as well as for
        defining targets for employee incentive compensation, management
        excludes the amortization of the acquired intangible assets on a
        non-GAAP basis.
        c. Acquisition and integration costs
        In connection with its acquisitions, the Company incurs expenses that
        would not have been incurred otherwise. The acquisition costs include
        items such as investment banking fees, legal and accounting fees, and
        costs of retention bonus programs for the senior management of the
        acquired company. Integrationcosts may consist of information
        technology expenses, consulting costs and travel expenses as well as
        non-cash charges related to the abandonment of assets under
        construction by the Company that are determined to be duplicative of
        assets of the acquired company. The costs are expensed as incurred and
        can vary substantially in size from one period to the next. For these
        reasons, management excludes these expenses from non-GAAP earnings in
        order to evaluate the Company's performance on a continuing and
        comparable basis.
        In addition to GAAP results, management presents these non-GAAP
        financial measures to provide investors with additional information
        that they can utilize in their own methods of evaluating the Company's
        performance.
        Management compensates for the material limitations associated with
        the use of non-GAAP financial measures by having specific initiatives
        associated with restructuring actions and acquisitions approved by
        management, along with their budgeted costs. Subsequently, actual
        costs incurred as a part of these approved restructuring plans and
        acquisitions are monitored and compared to budgeted costs to assure
        that the Company's non-GAAP financial measures only exclude
        pre-approved restructuring-related costs and acquisition-related
        adjustments. Any non-GAAP measures provided by the Company may not be
        comparable to similar measures of other companies as not all companies
        calculate these measures in the same manner.



SOURCE Lexmark International, Inc.

Website: http://www.lexmark.com
Contact: Investor Contact - John Morgan, +1-859-232-5568, jmorgan@lexmark.com;
Media Contact - Jerry Grasso, +1-859-232-3546, ggrasso@lexmark.com
 
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