Lexington, KY – For the second quarter of 2012, Lexmark International earned $.55 per share, far below the $1.27 per share earnings of the second quarter of 2011, and below expectations for this year.
"It was a challenging quarter for us but we remain quite profitable, just less than where we want to run,” Lexmark’s Chairman and CEO, Paul Rooke, told Business Lexington in an interview.
"We expected some of these things to happen in the quarter. We expected currency to have an effect, we expected some of the supply impact from some of the channel dynamics… these foreign currencies weakened more than we had assumed and we saw a weakness in demand, both hardware and supplies as shown through some of the orders and things that we saw particularly in the back half of the quarter, those softened on us more than we expected,” Rooke said.
Hardware revenue and Supplies revenue declined 17 percent and 14 percent, respectively. Software and Other revenue grew 24 percent, or 26 percent excluding acquisition-related adjustments. Core revenue, which mainly includes laser and business inkjet hardware and supplies, managed print services and software, declined 9 percent year to year while Legacy revenue, which includes consumer inkjet hardware and supplies that the company is exiting, declined 35 percent. Lexmark's focus continues to be on growing the company's Core area. Legacy, which in the second quarter of 2012 represented about 9 percent of Lexmark's revenue, continues to become a less significant portion of the company's revenue, according to a release from the company.
Revenue in the second quarter of 2012 was $919 million compared to $1.044 billion last year. Gross profit margin was down slightly to 39.3 percent from 39.6 percent in 2011. This quarter’s operating expense was $301 million compared to $276 million last year
“We’re expecting more of the same (for the third quarter) and really for the rest of the year. When you’re in these economic patterns they take time to work out of. So we’re reflecting in our outlook what we saw in the second quarter with continued weakness in these non-US currencies, continued weakness in demand and some of the channel contraction in supplies we expect to continue through the second half. On the positive side we do expect continued growth in our work group and in our software.”
The company currently expects revenue to decline 9 to 11 percent year on year for the third quarter. Earnings per share in the third quarter of 2012 are expected to be around $0.52 to $0.62, compared to $0.86 in the third quarter of 2011.
“We have a challenge in front of us,” Rooke told Business Lexington. “We’ve overcome challenges before… we’ll make adjustments accordingly. We’ve got a sense of urgency about it, so we’re very focused here on the actions we need to take to restore the profitability we aspire to.”