Lexmark International's Perceptive Software unit posted an operating loss of $4 million in 2011. Executives at the Lexington-based printer maker cautioned analysts during their recent year-end earnings call not to be troubled by the loss, though, because it's a result of the company rapidly expanding Perceptive's operations.
During the fourth quarter, Perceptive had revenues of $31 million, up 41 percent from the same period in 2010. That growth rate was far above a year-over-year jump of 15 percent in the third quarter that led executives to comment at the time that the growth wasn't as high as their expectations.
Overall, Chief Executive Paul Rooke said, it was a strong year for Perceptive, which specializes in creating software that makes a wide variety of documents available in a company's work flow. He said the company grew nearly three times the growth rate of its industry.
"From the very beginning when we acquired Perceptive, we said we weren't operating it for profit initially; we were operating for growth," Rooke told the Herald-Leader recently. "Their margins are very much in line with software margins, which are quite good.
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"What we're doing is taking the profit and plowing it back into them. We're investing for growth. ... In time, expect those margins to flow through."
Ink and toner outlook good
Lexmark saw double-digit percentage growth of ink and toner for certain products in 2011, but the growth rate slacked some in the fourth quarter.
The growth rates are for what Lexmark calls its "core" products — laser printers and business-focused inkjet printers.
Ink and toner for those products grew 7 percent year over year in the fourth quarter, but that was down from year-over-year growth rates of 12 percent in the third quarter and 13 percent in both the first and second quarters of 2011.
"We had a fourth-quarter comparison that was a very tough one, as the fourth quarter of 2010 was a very strong quarter for Lexmark," Rooke said in explaining the slower growth rate. "Seven (percent) is still quite good."
Rooke said he expects to see the growth rate of ink and toner for core products in 2012 to be between the various 2011 growth rates.
"We remain encouraged by what we see," he said of the company's overall view of 2012. "We're still in a kind of a sluggish market out there. But our European performance was up even in a tough market. We see that as good news."
Shares bought back
Lexmark recently disclosed in a U.S. Securities and Exchange Commission filing that it bought back $30 million of shares of its outstanding stock in early February.
The move comes as the company emphasized late last year that it plans to spend more than 50 percent of its free cash flow on dividends and share repurchases, with the remainder on acquisitions and other cash needs.
The company's first dividend in its 20-year history was announced in October. The next payment date for the quarterly 25-cent dividend is March 16.
Dell the top customer
Computer maker Dell remained Lexmark's top customer in 2011. Dell accounted for at least 10 percent of Lexmark's revenue during the year. The company will disclose the exact amount in a forthcoming quarterly statement to be filed with the U.S. Securities and Exchange Commission.
In 2010, Dell accounted for 11 percent of revenues, or $461 million. That was down from 13 percent, or $496 million, in 2009 and 13 percent, or $596 million, in 2008.
Lexmark manufactures printers for Dell, which then sells them under the Dell brand. That business, commonly called OEM for original equipment manufacturer, has declined in recent years. Dell accounted for 15 percent of revenue in 2005, 2006 and 2007, when Lexmark's total revenue was higher than it is today.
Thailand flooding costly
Flooding last year in Thailand is expected to cost Lexmark $10 million to $15 million in the first quarter of 2012, Chief Financial Officer John Gamble Jr. told analysts during the company's recent earnings conference call.
Lexmark does not have a manufacturing presence in Thailand, but executives have said they expect to see an effect on operations because several company suppliers were affected by the flooding. Rooke previously said only printer hardware and not ink and toner would be affected by the crisis.
The costs beyond the first quarter are expected to be less than $5 million, Gamble said.
The company said the majority of the costs will be covered by insurance in the future.
Delivery problems solved
Also during the earnings announcement, Gamble said Lexmark has resolved problems that caused the company to spend more to deliver its products from factories to customers. Those extra costs came from the company's efforts in the latter half of 2010 to restructure its North American distribution infrastructure.