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:
o Revenue was $967 million compared to $1.060 billion last year.
o Gross profit margin was 34.1 percent versus 37.4 percent in 2011.
o Operating expense was $304 million compared to $303 million last year.
o Operating income margin was 2.6 percent compared to 8.8 percent in 2011.
o Net earnings were $6 million compared to 2011 net earnings of $69 million.
Fourth Quarter 2012 Non-GAAP results:
o Revenue was $968 million compared to $1.061 billion last year.
o Gross profit margin was 36.0 percent versus 38.3 percent in 2011.
o Operating expense was $275 million compared to $283 million last year.
o Operating income margin was 7.7 percent compared to 11.6 percent last
year.
o Net 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:
o Revenue was $3.798 billion compared to $4.173 billion last year.
o Gross profit margin was 36.9 percent versus 37.9 percent in 2011.
o Operating expense was $1.213 billion compared to $1.138 billion last
year.
o Operating income margin was 4.9 percent compared to 10.6 percent in 2011.
o Net earnings were $106 million compared to 2011 net earnings of $321
million.
Full Year 2012 Non-GAAP results:
o Revenue was $3.803 billion compared to $4.178 billion last year.
o Gross profit margin was 38.9 percent versus 38.4 percent in 2011.
o Operating expense was $1.106 billion compared to $1.104 billion last year.
o Operating income margin was 9.9 percent compared to 12.0 percent last
year.
o 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^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.
o Acuo 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.
o Department 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.
o 2012 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 the DMI 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.
o Anheuser-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.
o Lexmark'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 the MPS and printer/MFP arenas.
o Lexmark 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 an MPS environment. By streamlining
complex and dysfunctional business processes, Lexmark's MPS has 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.
o Lexmark also has been positioned by Gartner in the Leaders quadrant
of its 2012 MFP and 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 company expects a continued negative impact
from the decision 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 that helps 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 revenue is 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. Integration costs 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
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page