A souring economy in the United States and around the globe helped push Lexmark's profits down 19 percent in the third quarter of 2008, and the outlook for the fourth quarter isn't much better.
Lexmark International Inc.'s stock, which trades as LXK, took a pounding after Tuesday's announcement. It closed at $25.71, down $3.28 a share, or 11.3 percent.
The Lexington-based computer printer maker earned 42 cents a share after non-recurring restructuring expenses reduced its profit by 21 cents a share from 63 cents.
Wall Street analysts surveyed by Thomson Reuters had expected 65 cents a share, excluding one-time items like the restructuring charge.
The problem in the third quarter included a weakening economy and a worldwide credit crunch, stiff competition from other printer makers, and declining sales of the toner and other supplies that keep printers operating, Lexmark chief executive Paul Curlander and chief financial officer John Gamble told analysts during a conference call Tuesday.
The company's revenue slid 10 percent in the United States because of "a weak back-to-school market," and 3 percent in Europe, Curlander said.
Sales of printer cartridges and supplies — "the largest part of our revenue" — led the revenue decline, Gamble said later in an interview.
Supplies sales were down 1 percent in the third quarter and are forecast to be down "in the high single digits" in the fourth quarter, he said.
Some customers stocked up earlier and are buying less now, and others are just buying less because of the economy, he said.
"We think that the general economic weakness and what's going on in the financial markets does have an effect on our customers ... and therefore on our revenue," Gamble said.
He declined to say how long Lexmark expects the situation to last beyond the current quarter.
Lexmark was once the top private employer in Lexington, employing more than 5,500 in 1995. Now with about 3,000 employees in Lexington, it is behind the Saint Joseph Health System, which employs 3,500.
Overall, the company's revenue for the third quarter fell more than 5 percent to $1.13 billion — analysts had expected $1.1 billion — and a "low- to mid-teens" percentage decline is expected for the current quarter.
The forecast is for fourth-quarter earnings per share of 40 cents to 50 cents.
Third-quarter revenue from business customers, who represent about two thirds of Lexmark's customer base, was up 4 percent, and revenue from home users and other non-business consumers was down 21 percent.
Curlander and Gamble emphasized to analysts that the economy might be struggling, but Lexmark is strong financially. It has $1.09 billion in cash and marketable securities, a $300 million revolving line of credit locked in until 2010, and no major debt maturing before 2013.
The company also is a proven cash generator, including $117 million from operations in the third quarter.
"When there's a credit crisis," Gamble said, "it's nice not to have to need money."