Lexmark Notebook: Company to buy back $250 million in stock

Lexington-based printermaker Lexmark International plans to once again buy back some of its outstanding stock.

The company announced recently that it plans to repurchase $250 million of its shares in the second half of 2011.

It's the first time since 2008 that Lexmark has repurchased shares. The company halted purchases in recent quarters as much of its cash was overseas, and it would have had to pay a certain amount to be able to bring it back to the United States to fund share repurchases. The company noted it will use U.S. cash to fund the new repurchases.

Prior to halting the repurchases, the company had been aggressively buying back stock, including spending more than $1 billion in 2005 to buy 17 million shares.

The company had billed the program as a way to return value to shareholders, but some industry analysts were skeptical, preferring instead that the company either begin issuing a dividend to shareholders or look to acquire other firms.

CEO Paul Rooke noted in a statement announcing the resumption of buybacks that the company is still focused on acquisitions for its burgeoning software business.

"Our balance sheet and cash flow remain strong, which gives us the flexibility to continue to invest in strategic acquisitions to grow our software and solutions business, while at the same time return excess U.S. cash to our shareholders through our share repurchase program," he said.

Software business growing

During its recent second-quarter earnings announcement, Lexmark noted that its recently acquired Perceptive Software business generated revenue of $25 million in the second quarter, up 16 percent from the first quarter. The Kansas-based company develops software that helps businesses manage content.

"This is encouraging for us," Rooke said. "Perceptive saw good activity in the U.S., across their industry segments, with particular success in the higher education, financial services and health care segments.

"We're also beginning to see activity outside of the U.S. as our new international teams ramp up. And while Perceptive represents only about 2 percent of our second-quarter revenue, we expect it to grow faster than the other parts of our business and become a larger share of our mix over time."

Working on increased cost

Also during the earnings announcement, Lexmark leaders said they expect to soon resolve issues that have caused the company to spend more to deliver its products from factories to customers.

In the first quarter, the issues resulted in increased costs between $15 million and $20 million.

Those extra costs came from the company's efforts in the latter half of 2010 to restructure its North American distribution infrastructure.

"We are confident we will continue to make consistent progress addressing the remaining issues" in the third and fourth quarter, said Chief Financial Officer John Gamble Jr.

New customer overseas

South African retailer Woolworths recently signed a three-year deal for Lexmark to manage its printing. The company, which is not connected to the famed American retailer of the past, has more than 400 stores throughout South Africa and employs 21,000.

Former Scottish factory finds new owner

Lexmark's former inkjet-cartridge manufacturing plant in Rosyth, Scotland, will soon see new life as a fish factory, according to a report by the Dunfermline Press in that region.

Lexmark announced in January 2006 that it would close the facility as part of a restructuring. Nearly 700 people were employed there at the time, according to the report.

Norwegian fish giant Morpol, reportedly the world's largest smoked salmon producer, bought the building from a redevelopment group.

This story was originally published August 29, 2011 at 12:00 AM with the headline "Lexmark Notebook: Company to buy back $250 million in stock."