Lexington-based printer maker Lexmark International turned in a far better fourth-quarter performance than expected, as the company saw growing customer demand and a strong reaction to its newest product lineups.
"Looking back at 2009, we are encouraged by the improved customer demand for our products during the second half ... and the ongoing improvements that we're driving in the fundamentals of our business," chief executive Paul Curlander told analysts during a conference call Tuesday morning.
The company's fourth-quarter revenue was down just 1 percent from the fourth quarter of 2008. That's far better than the first three quarters of 2009, when revenue fell 15 percent to 21 percent year-over-year.
That translated into far better profits, too, although Lexmark continued to be affected by costs related to the company's work-force reductions in previous quarters. The company earned $59.8 million in the quarter, up from $18.1 million a year ago. Earnings per share were 76 cents but would have been $1.16 without the charges. The performance blew away the 63 cents a share predicted by analysts, who don't factor in the charges.
Earnings per share in the fourth quarter of 2008 were 23 cents but would have been 75 cents without restructuring charges.
The company's laser printer division drove the growth, with a 4 percent jump in revenue. It was the first year-over-year revenue growth for the division since the third quarter of 2008. During those quarters, it had seen year-over-year revenue drops of between 10 percent and 19 percent.
The laser division saw gains in key segments for printers used in workgroups, as well as year-over-year growth in color lasers and laser multi-function printers, Curlander said. The company credited the boosts to the launch of more than 70 new products over the course of the past 15 months.
And although the inkjet division continued to decline, seeing a drop in revenue of 10 percent year-over-year, it was a lower decline than expected. The company has been in the midst of a long-term shift in its inkjet strategy, looking to build products that encourage people to print more. The industry business model has traditionally been to sell inkjets for very little profit or even at a loss and make up the difference on cartridges. Lexmark struggled to do that, though, as the customers of its low-end or oftentimes bundled printers didn't print enough.
The company said it saw positive signs in the quarter. Curlander said the reaction was "very strong" to the newest lineup of inkjets, which includes a professional series that offers Internet-connected printers with touch screens and vastly improved potential to customize settings.
"The most important thing to take away is the improved product lineup and better shelf space" at retailers, said Tom Carpenter, vice president and senior equity analyst at Hilliard Lyons in Louisville. "It's paramount for Lexmark's earnings that the improved product lineup translates into higher cartridge sales."