Lexmark reports soaring net income in fourth quarter

ctruman@herald-leader.comJanuary 28, 2014 

Lexmark International reported Tuesday that its net income skyrocketed in the fourth quarter of 2013, led by substantial growth in its Perceptive Software unit and record revenue in its managed print services segment.

Its adjusted results beat Wall Street predictions, and its shares (LXK:NYSE) closed Tuesday at $38.12, up $3.20, or 9 percent. Its stock is up almost 35 percent for the past year.

The Lexington-based printer and software company reported earnings of $94 million, or $1.48 per share, for the quarter that ended Dec. 31. That's up from $26.3 million, or 40 cents per share, in the same quarter of 2012. Excluding one-time items, the company posted an adjusted profit of $1.18 per share.

Revenue was $1.006 billion, up 4 percent from $967 million for the same period of 2012.

Analysts, on average, expected earnings of $1.08 per share on $931.5 million in revenue, according to FactSet.

For the full year, Lexmark earned $261.8 million, or $4.08 per share, compared with $107.6 million, or $1.55 per share, in 2012. Revenue fell to $3.67 billion from $3.8 billion.

Paul Rooke, Lexmark's chairman and chief executive officer, said the company is at the lower end of its targeted operating margin of 11 percent to 13 percent but hopes to improve.

Rooke said he couldn't signal whether any additional acquisitions were in the pipeline for Lexmark, but "it remains a part of our strategy to grow organically as well as through acquisitions" and expanding the company's core businesses faster than the decline of its inkjet business.

Excluding what the company called "the planned and ongoing decline in inkjet exit revenue," revenue grew 11 percent during the quarter.

Lexmark also reported free-cash-flow generation of $164 million in the fourth quarter and $308 million in 2013 as a whole. Continuing free cash has been described as important, as Lexmark has acquired various companies in its quest to move away from printing solutions into a business-processes company.

Rooke said in a news release, "The synergies we have created with our unique imaging and software solutions resonate well with our customers as we help them solve their unstructured information challenges."

Lexmark projected an adjusted first-quarter profit of about 80 cents to 90 cents per share, down from 95 cents per share a year earlier. Analysts expect 87 cents per share.

First-quarter revenue, excluding revenue from the inkjet business that the company is exiting, is expected to be up from a year ago. Total revenue is expected to be down 3 percent to 5 percent.

Revenue at its Kansas-based Perceptive Software, which Lexmark bought in 2010, was $67 million for the quarter, up 60 percent from $42 million in the same period last year. For the year, revenue for 2013 was $224 million, up 43 percent from $156 million for 2012.

Lexmark's managed print services business saw revenue growth of 22 percent in the fourth quarter, to a record $208 million, and 16 percent for the full year, to $722 million.

The Associated Press contributed to this report. Cheryl Truman: (859) 231-3202. Twitter: @CherylTruman.

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