Lexmark lowers fourth-quarter expectations, cuts jobs

By Scott Sloan - ssloan@herald-leader.com

Lexmark International announced Tuesday that its fourth-quarter sales came in worse than expected and that it will launch another restructuring, this time aiming to affect 375 jobs.

It's the fifth restructuring or workforce reduction in five years, as the company struggles to turn around its inkjet division.

The announcement comes two weeks before the company is set to release its fourth-quarter earnings, which it said in a statement were impacted by "the weakening global economic environment."

The company did not detail what jobs will be affected by the restructuring nor how many would be at its Lexington headquarters. In the past, Lexmark's restructurings have included both eliminating positions and transferring others to lower-cost countries.

The company currently employs about 3,000 workers at its worldwide headquarters on New Circle Road near Newtown Pike. The headquarters' staff conducts much of Lexmark's product research and development but also includes sales, marketing and more. No manufacturing is done in Lexington.

The restructuring is expected to cost $45 million before taxes but is expected to save $50 million annually once completed.

Company executives plan to discuss the news with analysts at 8:30 a.m. Tuesday. Stay on Kentucky.com for a live blog of the conference call.

Lexmark said revenue fell about 17 percent in the fourth quarter compared to a year ago, worse than its previous prediction of a decline in the low to mid teens.

It attributed the decline to lower sales of laser and inkjet printers.

The company also was affected by "significant currency rate shifts," though that was offset by a massive tax benefit in the quarter that amounted to 30 cents per share.

It said fourth-quarter earnings per share will be in the range of 19 cents to 24 cents per share.

Excluding the 52 cents per share in restructuring charges, EPS is expected to be 71 cents to 76 cents. The company had predicted EPS of 70 cents to 80 cents.

The company said it expects some of the same factors experienced in the fourth quarter to impact the first quarter, where it expects revenue to fall in the mid to high teens percentage range. It expects earnings per share to be around 52 cents to 62 cents including restructuring charges.

The news follows a difficult third quarter, too. The company's profit fell 19 percent compared to a year earlier with executives blaming the struggling economy.

In late November, the company realigned its sales and marketing staff and cut a reported 60 managers and employees across its operations. Among them was Sharon Brindley, who oversaw Lexmark's relationship with the vast network of resellers that pitch its printers to businesses.

It has also been dealt a blow by the struggles of Circuit City, one of its strongest retail partners. The electronics chain has filed for bankruptcy protection and is closing 20 percent of its stores.

Lexmark is among Circuit City's top 50 creditors, according to the filing, and is owed nearly $3 million.

Circuit City sells a variety of Lexmark printers, unlike consumer electronics leader Best Buy, which decided last year to stop selling the company's printers in stores and offer them only on BestBuy.com. A search on the site Tuesday morning indicates one model may now be available in stores, though it is not available in Kentucky.

The travails come as Lexmark continues to struggle with its weakening inkjet division.

Sales of inkjet cartridges have plummeted as Lexmark has walked away from 20 percent and then 30 percent more of its inkjet printer sales since 2006 in an attempt to get away from people who don't print enough.

To find those target users, Lexmark has been tailoring its marketing and sales to countries where customers print the most, mainly developed countries.

Reach Scott Sloan at (859) 231-1447.