Lexmark International Reports Record Results for Fourth Quarter and Year
Fourth-quarter Earnings Per Share Growth of 32 Percent Caps Record 1997 Earnings Performance
LEXINGTON, Ky.--(BUSINESS WIRE)--Jan. 26, 1998--Lexmark International Group, Inc. (NYSE: LXK - news) today announced record revenues, operating
income and net earnings for both the fourth quarter of 1997 and the full year.
''Lexmark's record financial performance for both the quarter and the year reflects our continuing ability to deliver superior printer solutions to our customers,'' said
Marvin L. Mann, chairman and CEO. ''Our double-digit unit volume growth in both network laser and color inkjet printers in 1997 is evidence that our strategies
are working.''
Full-year review: Operating income up 19 percent
Revenues for 1997 were $2.5 billion, an increase of 5 percent over 1996 revenues of $2.4 billion. Revenues would have increased 10 percent versus 1996 without
the impact of foreign currency translation. Revenues from printers and associated supplies increased 10 percent versus a year ago and would have increased 16
percent without the currency translation impact. Printers and associated supplies contributed 81 percent of total revenues versus 77 percent in 1996.
Operating income was $275 million versus $230 million a year ago, an increase of 19 percent. Earnings in 1997 before an extraordinary charge for prepayment of
subordinated notes were $163 million, or $2.17 per share on a diluted basis, an increase of 28 percent versus $128 million, or $1.69 per share in 1996. Net
earnings per share on a diluted basis for 1997 were $1.98 after the extraordinary item.
''It was an exciting and prosperous year for Lexmark,'' noted Mann. ''We continued to introduce industry-leading technology in both the network laser and color
inkjet printer markets, delivering unparalleled printer solutions to our customers. Our Optra S modular family of network laser printers, introduced in May 1997,
brought superior performance, printing management and overall value to the market.
''During 1997, Lexmark's Color Jetprinter 7000 and 7200 products continued to be the industry's only desktop color inkjet printers delivering 1,200 x 1,200
dots-per-inch print quality,'' Mann added. ''Lexmark's printer solutions included industry-leading printer management software and quality consumables that have
helped Lexmark customers reduce their total cost of printing. Lexmark's MarkVision printer management continued to provide ease-of-use for the printer user and
cost-effective printer management for the network administrator with active alerts for low toner, low paper supply and full output bins.
''Lexmark's innovations in 1997 extended to Optra S supplies, which are compatible across the laser printer family, and our Prebate program which provides
high-quality Lexmark laser cartridges to our customers with an up-front discount,'' Mann said. ''We are pleased with the extensive product introductions we made in
1997 and we intend to continue our efforts to improve our product offerings in the future.''
Gross profit margins increased by 3.5 points in 1997 to 34.9 percent as a result of improved printer margins and a richer mix of supplies versus printer hardware.
Operating expenses were 23.9 percent of revenues, up 2.4 points from last year, reflecting planned increases in sales and marketing expenses to launch new
products and provide continuing support for Lexmark products in the marketplace. Earnings were favorably affected by the net increase in operating margins, lower
income tax rates and reduced interest expense. The 1997 tax rate was 36.0 percent versus 36.6 percent in 1996. Interest expense was reduced as high interest rate
subordinated notes were prepaid in the first quarter and replaced with lower-cost short term borrowings.
Lexmark has implemented the Statement of Financial Accounting Standards 128 and now reports two separate earnings per share (EPS) numbers, basic EPS and
diluted EPS. Diluted EPS is approximately 1 cent higher on an annual basis for both 1997 and 1996 as compared to Lexmark's previously reported fully diluted
earnings per share amounts.
Fourth-quarter review: Earnings increase 26 percent
Fourth-quarter revenues were $736 million, an increase of 7 percent over revenues of $687 million a year ago. Revenues would have increased 13 percent versus
last year without the impact of foreign currency translation. Revenues from printers and associated supplies increased 10 percent versus last year and would have
been up 16 percent without the impact of foreign currency. Operating income was $94 million versus $78 million a year ago, an increase of 20 percent. Net earnings
in the quarter increased 26 percent to $57 million, compared to $45 million in 1996. Net earnings per share were 78 cents on a diluted basis, up 32 percent from 59
cents a year ago.
Additional 1997 achievements: Strong financial position maintained
Lexmark's debt-to-total-capital ratio at the close of 1997 was 13 percent compared to 23 percent at the end of 1996. The company purchased 3,216,700 shares of
its common stock during the fourth quarter for approximately $97 million at prices ranging from $29.90 to $32.94. Lexmark has now utilized $182 million of the total
$200 million board authorization to repurchase shares. Capital expenditures were $70 million in 1997, with most spending made in support of new products. Return
on average equity for the year was 30 percent before the extraordinary charge from prepayment of subordinated notes, an increase of 3 points from the prior year.
Lexmark's increasing global presence was evidenced by revenue growth outside the U.S. in 1997. Despite the difficult comparison due to currency translation,
revenues from outside the U.S. increased from 54 percent of total revenues in 1996 to 55 percent in 1997. Revenue growth was particularly strong in Latin America
and Canada, while revenues in Asia/Pacific were lower than expected.
Looking forward:
''Our long-term goal for average annual operating income growth remains 20 percent.'' noted Mann. ''Based on our current view, we believe at this time our 1998
performance will be in line with that goal.''
Lexmark International Group, Inc. is the parent company of Lexmark International, Inc., a global developer, manufacturer and supplier of printer solutions and
products, including laser, inkjet and dot matrix printers and associated consumable supplies for the office and home markets. Lexmark has executive offices and a
manufacturing center in Lexington, Ky.; other manufacturing centers are in Boulder, Colo.; Juarez, Mexico; Rosyth, Scotland; Orlans, France and Sydney, Australia.
''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, including, but not limited to, the impact of competitive products and pricing, increased investment to support product
introductions and enter new geographies, currency fluctuations, market acceptance of new products and programs, product transitions by the company and its
competitors, management of inventory levels, production and supply difficulties, intellectual property infringement claims and expenses, and other risks described in
the company's registration statement and other Securities and Exchange Commission filings.
Lexmark, Optra and MarkVision are trademarks of Lexmark International, Inc., registered in the U.S. and/or other countries. Color Jetprinter is a trademark of
Lexmark International, Inc.
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended Percent
December 31 Change
1997 1996
Revenues $735.5 $686.9 7%
Cost of revenues 474.3 468.0
Gross profit 261.2 218.9 19
Research and development 34.5 31.8
Selling, general and
administrative 132.3 108.7
Operating expenses 166.8 140.5 19
Operating income 94.4 78.4 20
Interest expense, net 2.8 4.9
Amortization of deferred
financing costs
and other 2.5 2.1
Earnings before income
taxes 89.1 71.4 25
Provision for income taxes 32.1 26.2
Net earnings $ 57.0 $45.2 26
Earnings per share:
Basic $ 0.83 $0.62 32
Diluted $ 0.78 $0.59 32
Shares used in per share
calculation:
Basic 69.1 72.5
Diluted 72.9 76.5
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Year Ended Percent
December 31 Change
1997 1996
Revenues $2,493.5 $2,377.6 5%
Cost of revenues 1,623.5 1,630.2
Gross profit 870.0 747.4 16
Research and development 128.9 123.9
Selling, general and
administrative 466.5 388.0
Amortization of intangibles - 5.1
Operating expenses 595.4 517.0 15
Operating income 274.6 230.4 19
Interest expense, net 10.8 20.9
Amortization of deferred
financing costs
and other 9.1 7.9
Earnings before income
taxes and extraordinary
item 254.7 201.6 26
Provision for income taxes 91.7 73.8
Earnings before
extraordinary item 163.0 127.8 28
Extraordinary loss on
extinguishment of debt
(net of related
tax benefit of $8.4) (14.0) -
Net earnings $ 149.0 $ 127.8 17
Basic earnings per share:
Before extraordinary
item $ 2.29 $ 1.78 28
Extraordinary loss (0.20) -
Net earnings $ 2.09 $ 1.78 17
Diluted earnings per
share:
Before extraordinary
item $ 2.17 $ 1.69 28
Extraordinary loss (0.19) -
Net earnings $ 1.98 $ 1.69 17
Shares used in per share
calculation:
Basic 71.3 71.6
Diluted 75.2 75.7
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions)
(Unaudited)
December 31, December 31,
ASSETS 1997 1996
Current assets:
Cash and cash equivalents $ 43.0 $ 119.3
Trade receivables, net 318.9 304.7
Inventories 353.8 271.0
Prepaid expenses and other
current assets 60.4 70.1
Total current assets 776.1 765.1
Property, plant and
equipment, net 409.6 434.1
Other assets 22.5 22.3
Total assets $1,208.2 $1,221.5
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 37.9 $ 2.1
Current maturities of
long-term debt 37.1 -
Accounts payable 302.0 197.2
Accrued liabilities 227.5 222.0
Total current
liabilities 604.5 421.3
Long-term debt - 163.2
Other liabilities 103.0 96.7
Total liabilities 707.5 681.2
Stockholders' equity:
Preferred stock - -
Common stock and capital
in excess of par 537.9 520.0
Retained earnings 168.8 19.8
Accumulated translation
adjustment (23.8) 0.5
Treasury stock (182.2) -
Total stockholders'
equity 500.7 540.3
Total liabilities
and stockholders'
equity $1,208.2 $1,221.5 |
