SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 20, 1997
Lexmark International Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-14050 22-3074422
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
One Lexmark Centre Drive, Lexington, Kentucky 40550
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(Address of principal executive offices) (Zip
code)
Registrant's telephone number, including area code: (606) 232-2000
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On October 20, 1997, the Registrant issued the attached press
release announcing its financial results for the three months and nine months
ended September 30, 1997.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 20 - Press Release dated October 20, 1997.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEXMARK INTERNATIONAL GROUP, INC.
By: /s/ David L. Goodnight
----------------------
David L. Goodnight
Corporate Controller
Date: October 20, 1997
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Jim Joseph
Media relations
Lexmark International, Inc.
(606) 232-2249
[email protected]
Kurt Braun
Investor relations
(606) 232-5108
[email protected]
LEXMARK INTERNATIONAL REPORTS
RECORD THIRD QUARTER
- -- Revenues increase 13 percent, net earnings increase 36 percent --
LEXINGTON, Ky., October 20, 1997 -- Lexmark International Group, Inc. (NYSE:
LXK) today announced record third-quarter net earnings of $41 million, or 54
cents per share, on revenues of $618 million. Net earnings per share were 36
percent higher than the 40 cents recorded in the third quarter of 1996, while
revenues were 13 percent higher than the $548 million reported a year ago.
Revenues would have increased 19 percent versus last year without the impact of
foreign currency translation. The company also reported record third-quarter
operating income of $67 million, an increase of 22 percent over the $55 million
earned in the same period a year ago.
THIRD QUARTER REVIEW:
PRINTERS AND ASSOCIATED SUPPLIES REVENUES UP 18 PERCENT
"We are very pleased with our record quarterly performance," said Marvin L.
Mann, chairman and CEO. "Our double-digit increases in unit volumes, revenues,
operating income and earnings were driven by strong customer acceptance of our
recent printer product introductions, the continuing contribution of our
associated supplies business and our effectiveness in managing product costs and
operating expenses. We have achieved these results despite the challenges of the
largest product transition in Lexmark history. The integration of our
development, manufacturing and marketing efforts gives Lexmark a competitive
advantage that has allowed us to deliver industry-leading value solutions to
customers in a timely and cost-effective manner."
"Our record results were driven by printers and associated supplies, where
revenues increased 18 percent versus a year ago, and would have increased 25
percent without the impact of foreign currency translation" noted Mann. "Our
Lexmark Optra S line of network laser printers, introduced in May, accounted for
most of our network laser printer volume during the quarter. This compatible
family of network laser printers utilizing common features and supplies is
delivering superior performance and reduced total cost of printing to our
customers. The modular design, extensive paper handling features, 1,200 x 1,200
dots per inch print quality and leading network management software allow
Lexmark printers to be easily configured to meet a wide range of customers'
needs."
Mann noted that gross profit margins continued to show year-on-year gains in the
quarter. Gross profit margin was 34.9 percent, up over 3 points from the third
quarter of 1996. Operating expenses were 24.0 percent of revenues in the quarter
versus 21.7 percent last year. Earnings were favorably affected by lower
interest expense and a lower income tax rate compared to the third quarter of
1996. The tax rate in the third quarter brought the year-to-date tax rate to 36
percent, the rate now expected for the full year. The lower tax rate in the
quarter added 1 cent to net earnings per share. Return on average equity over
the past four quarters was 28 percent, before the extraordinary charge from
prepayment of subordinated notes in the first quarter of 1997. At the end of the
quarter, debt to total capital was 21 percent compared to 17 percent at the end
of the second quarter.
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During the third quarter, the company repurchased 1,127,900 shares of Lexmark
common stock for approximately $36 million at prices ranging from $30.38 to
$33.75. The company has now utilized $86 million of the total $200 million board
authorization to repurchase common stock.
THIRD-QUARTER ACHIEVEMENTS:
CONTINUING TECHNOLOGICAL INNOVATION
Lexmark continues to introduce innovative printer solutions, including the
recently announced 7200 series of Color Jetprinters, offering 1,200 x 1,200 dots
per inch print resolution and print speeds of up to 8 pages per minute in black
draft mode and 3 pages per minute in color draft mode. The Lexmark 7200 series
works with Windows 3.x, Windows 95, and Windows NT 4.0, delivering six-color
printing capability and laser-quality text printing. The Lexmark 7200V Color
Jetprinter lets the user attach a camcorder, VCR or digital camera directly to
the printer.
New product introductions made during the quarter included:
* The Lexmark 1000 Color Jetprinter, targeted for home offices and
student use, where desk space is limited. With print resolutions
of up to 600 x 600 dpi and a retail selling price of about $139,
the Lexmark 1000 has drawn positive reviews from the trade and
general press.
* Four new Lexmark MarkNet Pro print servers, delivering
performance up to three times faster than competitive products.
The MarkNet Pro print servers are Web-ready with links to
Lexmark's internet site and customizable links to
customer-designated sites.
* Five Lexmark SunReady laser printing solutions specially
configured for users of Sun Solaris systems. The five Lexmark
Optra S laser printers come with Sun-specific documentation and
MarkVision for Sun Systems for easy network printer
administration.
Lexmark also continued to make progress during the quarter in implementation of
state-of-the-art software applications integrating the company's manufacturing,
order entry, distribution and financial data. Investment in these integrated
systems allows improved response to customer needs and more cost-effective
transactions processing.
NINE MONTH REVIEW:
OPERATING INCOME UP 19 PERCENT
For the nine months ended September 30, earnings per share before an
extraordinary charge from prepayment of subordinated notes were $1.39, a 27
percent increase versus $1.09 a year ago. Net earnings per share were $1.21
after the extraordinary item. Operating income was $180 million, an increase of
19 percent over the $152 million reported for the first nine months of 1996.
Revenues were $1.758 billion versus $1.691 billion a year ago, with printers and
associated supplies revenues up 10 percent versus the first nine months of 1996
or 15 percent without the impact of foreign currency translation.
LOOKING FORWARD:
"We are pleased with our continuing success in this highly competitive
environment and are encouraged by customer acceptance of our printer solutions,"
noted Mann. "Based on our current outlook, we are comfortable with the current
range of analyst estimates for fourth-quarter earnings per share."
Lexmark International Group, Inc. is the parent company of Lexmark
International, Inc., a global developer, manufacturer and supplier of printer
solutions and products, including laser, inkjet and dot matrix printers and
associated consumable supplies for the office and home markets. Lexmark has
executive offices and its largest manufacturing center in Lexington, Ky.; other
manufacturing centers are in Boulder, Colo.; Juarez, Mexico; Rosyth, Scotland;
Orleans, France and Sydney, Australia. More information about Lexmark can be
found on the company's home page at www.lexmark.com on the internet.
Lexmark, Lexmark with diamond design, Optra and MarkNet are trademarks of
Lexmark International, Inc., registered in the U.S. and/or other countries.
Color Jetprinter is a trademark of Lexmark International, Inc. All other
trademarks are the property of their respective holders.
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<PAGE>
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this release which are not historical facts are
forward-looking and involve risks and uncertainties, including, but not limited
to, the impact of competitive products and pricing, increased investment to
support product introductions and enter new geographies, currency fluctuations,
market acceptance of new products and programs, product transitions by the
company and its competitors, management of inventory levels, production and
supply difficulties, intellectual property infringement claims and expenses, and
other risks described in the company's registration statement and other
Securities and Exchange Commission filings.
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LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended Percent
September 30 Change
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1997 1996
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Revenues $618.3 $547.6 13%
Cost of revenues 402.7 373.7
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Gross profit 215.6 173.9 24
Research and development 32.0 28.6
Selling, general and administrative 116.6 90.2
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Operating expenses 148.6 118.8 25
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Operating income 67.0 55.1 22
Interest expense, net 1.7 5.5
Amortization of deferred financing
costs and other 2.2 2.0
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Earnings before income
taxes 63.1 47.6 33
Provision for income taxes 22.1 17.4
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Net earnings $ 41.0 $ 30.2 36
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Earnings per common and common
equivalent share, primary
and fully diluted $ 0.54 $ 0.40 36
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Shares used in per share
calculation 75.8 75.7
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LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Nine Months Ended Percent
September 30 Change
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1997 1996
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Revenues $1,758.0 $1,690.7 4%
Cost of revenues 1,149.2 1,162.2
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Gross profit 608.8 528.5 15
Research and development 94.4 92.1
Selling, general and administrative 334.2 279.3
Amortization of intangibles -- 5.1
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Operating expenses 428.6 376.5 14
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Operating income 180.2 152.0 19
Interest expense, net 8.0 16.0
Amortization of deferred
financing costs and other 6.6 5.8
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Earnings before income
taxes and extraordinary
item 165.6 130.2 27
Provision for income taxes 59.6 47.6
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Earnings before
extraordinary item 106.0 82.6 28
Extraordinary loss on
extinguishment of debt
(net of related tax benefit
of $8.4) (14.0) -
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Net earnings $ 92.0 $ 82.6 11
========== ==========
Earnings per common and common
equivalent share, primary
and fully diluted:
Before extraordinary
item $ 1.39 $ 1.09 27
Extraordinary loss (0.18) -
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Net earnings $ 1.21 $ 1.09 10
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Shares used in per share
calculation 76.3 75.6
========== ==========
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<PAGE>
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions)
(Unaudited)
September 30 December 31
1997 1996
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ASSETS
Current assets:
Cash and cash equivalents ................... $ 55.5 $ 119.3
Trade receivables, net ...................... 307.6 304.7
Inventories ................................. 355.1 271.0
Prepaid expenses and other current assets ... 66.9 70.1
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Total current assets .............. 785.1 765.1
Property, plant and equipment, net ........... 415.9 434.1
Other assets ................................. 21.3 22.3
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Total assets ........................ $ 1,222.3 $ 1,221.5
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt ........................... $ 104.6 $ 2.1
Current maturities of long-term debt ...... 24.5 --
Accounts payable .......................... 220.1 197.2
Accrued liabilities ........................ 230.4 222.0
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Total current liabilities 579.6 421.3
Long-term debt .............................. 12.9 163.2
Other liabilities ........................... 93.1 96.7
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Total liabilities 685.6 681.2
Stockholders' equity:
Preferred stock ..................... -- --
Common stock and capital in excess of par .. 530.5 520.0
Retained earnings ....................... 111.8 19.8
Accumulated translation adjustment ...... (20.0) 0.5
Treasury stock ............................ (85.6) --
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Total stockholders' equity ....... 536.7 540.3
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Total liabilities and stockholders'
equity ..... $ 1,222.3 $1,221.5
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