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 user 2008-07-22 at 12:25:47 pm Views: 39
  • #20057
    Lexmark to close another cartridge plant
    conjunction with its second-quarter earnings announcement on Tuesday,
    Lexmark International said it will close another of its inkjet
    cartridge-manufacturing plants in Mexico.The move, which will cost the
    company about $24 million before taxes, will affect about 650 jobs. The
    company estimates most of the jobs at the Chihuahua, Mexico, plant will
    be moved to a lower-cost country. The company continues to operate a
    plant in Juarez, Mexico, where it closed one of two plants last year.
    It also has a plant in Lapu-Lapu City in the Philippines.

    The closure is expected to save the company about $9 million annually beginning in 2009.
    goal is to improve the company’s struggling inkjet division, which has
    dragged on the health of the company since the latter half of 2005 and
    continues to weigh down earnings, as evidenced in Tuesday’s
    announcement.Earnings for the second quarter included a 6 percent
    revenue drop but exceeded analysts’ expectations. That revenue drop was
    linked to the inkjet division, which sold 49 percent fewer printers in
    the quarter than in the same period a year earlier.The company
    generated $1.14 billion in revenue total in the second quarter and
    recorded a net income of $83.7 million, up from $64.2 million in the
    same period a year ago.Earnings per share were 89 cents but would have
    been 96 cents excluding a 7 cents-per-share restructuring charge
    related to last year’s inkjet strategic shift that included the earlier
    announcement of the Juarez plant closure. Analysts expected earnings of
    78 cents per share excluding restructuring, according to a survey by
    Thomson Financial.

    The inkjet division’s revenue fell 21 percent
    year-over-year to $376 million in the quarter, as the company continued
    to withdraw from some of its inkjet sales that it has said were not
    meeting profit expectations. The company also attributed the slide to a
    “slowdown in the inkjet market.”Shipments of inkjet hardware fell a
    staggering 49 percent year-over-year as the company suffered from
    weakness in the U.S. and European markets, losses in shelf space at
    domestic retailers, and its previously announced decision to exit 30
    percent of its inkjet sales. The company has not named specific
    retailers, but the company’s products were taken off shelves earlier
    this year at major electronics retailer Best Buy. Several remain
    available at http://www.bestbuy.com.The lower-than-expected inkjet printer
    sales boosted operating income, as many of those types of printers are
    sold at a loss with the expectation that cartridge sales will bring the

    Earnings also were helped by a one-time $5 million tax
    benefit that dropped the tax rate to 19.2 percent rather than the
    expected 26 percent rate.Company executives were discuss the earnings
    with analysts today during an 8:30 a.m. conference call that is to be
    blogged live on Kentucky.com.In the second quarter, the laser printer
    division’s revenue grew 4 percent to $763 million. Unit shipments
    declined 12 percent but reflected a strong growth in multi-function
    products, the company said. Average unit revenue on laser shipments
    increased 4 percent, reflecting the shift to the higher-priced units.

    company saw record revenue for laser toner, but that was offset by a
    drop in the sale of ink.Operating expenses company-wide continued to
    climb, a move that has been criticized by some analysts. Much of those
    expenses in recent quarters have been in the laser division, where the
    company has invested in hiring more sales people to pitch a product
    line that has expanded in recent years due to increased research and
    development spending.In the second quarter, operating expense rose 2.6
    percent to $312 million and the company attributed it principally to
    increasing demand generation, which typically means hiring salespeople,
    as well as increased marketing.The company also announced that it
    recently signed a five-year, multi-million dollar contract with
    Washington Mutual to manage more than 25,000 printers throughout the
    consumer and small-business bank’s 2,300 locations in the United
    States.Lexmark also repurchased shares during the second quarter for
    the first time in a few quarters. The company, which issued $650
    million in long-term debt in a series of bonds during the quarter,
    announced that it repurchased $158 million in shares, or about 4.5
    million, during the quarter.The company had not bought back shares in
    recent quarters because it probably would have been forced to finance
    them by repatriating cash from overseas and paying the taxes that come
    with that.Looking forward, the company said it expects revenue to be
    down in the third quarter in the mid- to high-single digit percentage
    range year-over-year. The company expects earnings per share of between
    53 cents to 63 cents, excluding restructuring charges.Before Tuesday’s
    announcement, analysts expected 58 cents per share, according to
    Thomson Financial.