Lexmark (LXK) Q3 Earnings Increase Y/Y; Revenues Down
Zacks Investment Research | Oct 31, 2016 09:56PM ET
Lexmark International Inc. (NYSE:LXK) reported third-quarter 2016 non-GAAP earnings of 77 cents per share, up 35.1% year over year.
Lexmark’s third-quarter non-GAAP revenues (excluding acquisition and divestiture-related adjustments) of $846 million dropped 2.5% from the year-ago quarter. On a GAAP basis, revenues came in at $844 million, down 0.8%.
The company’s quarterly revenues suffered due to a strong U.S. dollar, lower-than-expected growth in non-MPS revenues and the ongoing exit of the company from the Inkjet business. Also, lower revenues from Enterprise Software businesses negatively impacted the quarter’s revenues.
Segment-wise, non-GAAP revenues at Enterprise Software were down 4.3%. Imaging Solutions and Services (ISS) however increased 0.4% year over year. Revenues from Non-MPS revenues remained flat on a year-over-year basis at $465 million. Moreover, Inkjet exit business also suffered a loss on a year-over-year basis.
Non-GAAP gross profit in the quarter came in at $349 million, down 1.7%. However, gross margin expanded 40 basis points (bps) to 41.3%. Operating expenses decreased 13.9% to 293.5 million. Operating expenses, as a percentage of revenues, decreased to 34.8% from 40.8% in the prior-year quarter.
Consequently, the company’s non-GAAP operating income increased 29.7% to $83 million, while operating margin expanded 250 bps to 9.9%.
Lexmark’s non-GAAP net income increased 40% year over year to $49 million. Non-GAAP net income excludes restructuring-related charges & project costs, as well as acquisition and other one-time related adjustments.
Balance Sheet & Cash Flow
Lexmark exited the quarter with $117.7 million in cash, cash equivalents and marketable securities, compared with the quarter-ago level of $103.1 million. Trade receivables were $397.5 million whereas inventories were $238.9 million. The company’s long-term debt balance was $1.017 billion compared with $988.7 million in the last quarter.
The company generated $25 million of cash from operational activities. Free cash flow came in at $9 million during the quarter. During the quarter, the company paid a dividend of $23 million (36 cents per share).
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