We are pleased to deliver third-quarter financial results in line with our previous guidance especially given the further deterioration in the worldwide economy, said Paul J. Curlander, chairman and CEO. Lexmark’s supplies-driven business model has enabled us to increase sales and profits during a year that has been particularly challenging for many technology companies.

Lexmark also announced that a restructuring plan is being developed which will include a reduction in its global workforce of up to 12 percent. This plan will result in fourth-quarter 2001 pre-tax charges of $100-120 million, with an impact on diluted net earnings per share of 54 to 65 cents. Annual savings from the restructuring should approximate $50-60 million, with about $35-45 million being achieved in 2002.

These difficult steps are necessary to intensify our focus on being the low-cost producer in the industry. They will also help us to make the required investment in research and development, and to continue gaining share in both the laser and inkjet markets, Curlander added.

Printers and associated supplies revenue up 13 percent in constant currency

Revenue for the quarter ended Sept. 30 was $1.004 billion, an increase of 8 percent versus $927 million in the same period of 2000. Revenue growth would have been 9 percent versus last year without the negative impact of foreign currency translation. Printers and associated supplies revenue was up 11 percent from a year earlier, and would have grown 13 percent if not for the negative currency impact. Gross profit margin was 30.9 percent for the quarter, down 1.0 point from 31.9 percent a year ago due to lower margins on printer hardware, somewhat offset by a favorable mix shift to supplies.

Operating expense was $209 million versus $197 million for the same period of 2000. Operating income was up 3 percent to $101 million, versus the $98 million reported a year ago. Net earnings for the quarter were $70 million, or 52 cents per share on a diluted basis, an earnings per share increase of 5 percent versus net earnings of $66 million, or 50 cents per share in the third quarter of 2000.

Lexmark’s debt-to-total-capital ratio at Sept. 30, 2001 was 21 percent, up slightly from June 30, 2001. Capital expenditures were $53 million in the third quarter.

During the quarter, the company launched the X63 All-In-One Office Center, rounding out its recently announced line of multifunction products, which includes the highly successful X83 and X73. This sub-$200 device prints black text faster than any machine in its class and features high-quality color scanning and stand-alone fax and copy capabilities. Like our desktop inkjet printers before them, Lexmark’s new All-In-Ones have redefined the category, resulting in significant market share gains this year, said Curlander.

Revenue for the nine months ended Sept. 30, 2001 was $2.991 billion, an increase of 10 percent versus $2.711 billion in the same period of 2000. Without the negative impact of foreign currency translation, revenue growth would have been 13 percent versus last year. Nine-month revenue from printers and associated supplies increased 13 percent from a year ago and would have grown 16 percent if not for the negative currency impact. Operating income was $341 million, an increase of 2 percent over the $333 million reported for the first nine months of 2000. Net earnings for the period were $237 million, or $1.77 per share on a diluted basis, an earnings per share increase of 4 percent versus earnings of $230 million, or $1.71 per share in the first nine months of 2000.

SOURCE: COMPANY PRESS RELEASE