Lexmark International Inc.
) has posted second quarter 2012 earnings per share (EPS) of 89
cents, missing the Zacks Consensus Estimate by a penny. The
reported EPS also missed the company's guidance range of 95 cents
to $1.05. A challenging macro environment, Euro concerns and
currency headwind impacted Lexmark's results in the quarter. Shares
slumped 12.75% in the day's trade and 0.06% after hours.
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Lexmark's second quarter revenue of $918.6 million dropped 12.0%
from $1.04 billion in the year-ago quarter and was much lower than
the Zacks Consensus Estimate of $946.0 million. The year-over-year
decline was worse than the company's expected range of 7.0-9.0%.
On a year-over-year basis, Hardware revenues declined 17.0% while
Supplies dropped 14.0%. However, Software and Other revenue climbed
Core revenue declined 9%, while Legacy revenue declined 35% year
over year. Imaging Solutions and Services revenue decreased 14.0%
year over year to $875.0 million. Perceptive Software revenue grew
88.0% year over year to $46.0 million.
Gross margin in the quarter was 39.3%, down from 39.6% in the
year-ago quarter due to unfavorable mix.
Reported operating margin was 6.6% compared to 13.2% in the
year-ago quarter. Total operating expense increased 9.0% due to a
10.2% rise in selling, general and administrative expense and 4.4%
rise in research and development expenses.
Net income on a GAAP basis was $39.2 million or 55 cents per share
compared to $101.3 million or $1.27 in the year-ago quarter.
Adjusting for restructuring-related charges and project costs as
well as acquisition-related adjustments, non-GAAP net income was
$64.0 million or 89 cents per share compared to $109.0 million or
$1.36 in the year-ago quarter.
Balance Sheet & Cash Flow
Lexmark ended the quarter with $915.8 million in cash, cash
equivalents and marketable securities, down from $949.4 million in
the previous quarter. The reduced cash balance was due to share
buyback and dividend payment during the quarter. Trade receivables
were $479.1 million and inventories were $305.7 million. The
company's long-term debt balance remained flat sequentially at
The company generated $49.0 million in cash from operations, down
from $92.0 million in the previous quarter. Capital expenditures
totaled $38.0 million versus $48.0 million in the prior quarter.
Lexmark bought back shares worth $25.0 million during the second
quarter. The company had roughly $186.0 million remaining under its
existing share repurchase authorization at quarter end. Moreover,
the company paid a quarterly dividend of 30 cents per share,
totaling $21.0 million.
For the third quarter of 2012, management expects revenue to
decline 9.0% to 11.0% year over year. Earnings on a GAAP basis are
expected in the range of 52-62 cents per share.
Excluding 7 cents per share for restructuring charges and 16 cents
for acquisition-related adjustments, non-GAAP earnings are expected
in the range of 75 cents-85 cents. However, the Zacks Consensus
Estimate for the third quarter is pegged at 96 cents, which is
above the company's guided range.
Lexmark's second quarter results were disappointing with both the
top and bottom lines missing the Zacks Consensus Estimates. The
company also provided an unimpressive revenue and earnings outlook
for the third quarter of 2012. Though new products launched during
the quarter could win back lost market share, their impact on
results could still be some way off.
Lexmark is doing really well in the Managed Printing Services (MPS)
market. It has been declared a leader in this market by the
research firms IDC and Gartner. The company recently clinched a
5-year deal from the Federal Aviation Administration for a sum of
Lexmark operates in a highly competitive market. So, there is a
constant price war among major players such as
) to snatch market share from one another. On top of that, the
market is narrowing with the advent of digital technology and
Currently, Lexmark has a Zacks #5 Rank, implying a short-term
"Strong Sell" rating.