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2011 Corporate Social Responsibility Report

LEXMARK'S IMPACT ON OUR COMMUNITIES

WHERE WE DO BUSINESS

Lexmark products are sold in more than 170 countries. Lexmark owns or leases 7.4 million square feet of various types of facilities worldwide and operates sales offices in more than 70 countries. We have three manufacturing centers in Boulder, Colorado, Juárez, Mexico and Lapu-Lapu City, Philippines.

Lexmark has programs and policies in place that guide our decision making and operations prior to entering a community, while we are operating in a community and as we exit a community. These programs and policies help to ensure that our impact on the communities we inhabit is positive.

Prior to Entering a Community

Lexmark carefully considers potential social and environmental impacts of doing business in all locations before building or opening a facility in a community. Our Corporate Real Estate and Facilities Team conducts assessments of all proposed locations, taking into consideration, among other things, the potential for severe weather such as floods or tornadoes, the proximity, availability and reliability of police and fire departments, local crime statistics, government stability and our operations’ potential impact on local utilities and ecosystems.

Whenever possible, we choose to do business in locations that have stringent environmental, safety and labor regulations in place that protect the environment and local residents as well as assist Lexmark in compliance. The environmental screening tools and checklists used by Lexmark’s Corporate Real Estate and Facilities Teams have been recently updated with new guidance criteria to ensure that Lexmark sites are as energy efficient as possible from the start.

Whether Lexmark builds a new building or chooses to lease an existing facility, our preference is to do so in a previously industrialized area. That choice precludes the deforestation and habitat destruction that comes with building in undeveloped areas. It also offers the benefit of locating our operations near the homes of employees, thereby reducing commuting time and distance which in turn increases employee transportation options (walking, biking, public transportation).

While Operating in a Community

While Lexmark does not have a global policy for granting preference to local residents when hiring in significant locations of operation, most employees are members of the local community and are offered educational and skill-development opportunities. We also offer transfer programs – where employees in one region may go to another to train for a job for a few weeks to as many as a few years.

Lexmark’s presence has positive impacts on the economies of the communities surrounding our locations through our efforts to provide above-average employee compensation and use of local resources where possible. A significant portion of Lexmark employees – including those in the United States, Mexico and the Philippines – work in locations that have minimum-wage rules. Lexmark is committed to rewarding our employees for their hard work. Lexmark and its subsidiaries around the world offer salaries and benefit plans that are highly competitive in each of the countries in which we operate. Plans are benchmarked frequently to ensure that compensation and salary levels remain competitive and allow us to attract and retain employees in each region. These efforts to provide above-average employee compensation have a favorable economic impact on the markets in which we do business.

The patronage of Lexmark and its employees increases business for local utility companies, service providers, restaurants and retailers. The corporate taxes paid by Lexmark and additional wage taxes paid by our employees help support local governments and schools. These impacts are quantified in terms of dollars spent. For example, highlights of Lexmark’s economic impact on Lexington, Kentucky, in 2011 are:

  • 4,826 trips in and out of Lexington's Blue Grass Airport, producing $3.9 million in airfares.
  • 2,839 overnight Lexington hotel stays valued at $305,369.
  • 3,167 Lexington car rental days generating $117,053 in fees.
  • Average salary of $99,080 for Lexington and surrounding area residents.
  • More than $329 million in local wages – contributing nearly $7.5 million for local government and public schools.

Lexmark’s commitment to its communities, including contributions of equipment, volunteers and financial support to social organizations, can also be quantified. Volunteer hours for 2011 were at an all time high due to the tremendous volunteer efforts of Lexmark employees as part of the company's 20th anniversary celebration. The total number of volunteer hours exceeded 140,000 hours of service at more than 212 non-profit organizations.

Lexmark has not conducted a formal community needs assessment, but based on feedback from local citizens, charities and governments, needs and requests are addressed when reasonably possible.

Making Decisions to Exit a Community

Over the past several years, business needs, including a changing product portfolio and demand for increased operational efficiency, have resulted in the geographical movement of some Lexmark operations. The obsolescence of a particular type of inkjet cartridge, for example, necessitated the closure of the Lexmark facility in Chihuahua, Mexico that manufactured that component. This, in turn, created an increased production burden on the Lexmark facility in Cebu, Philippine, that manufactures the new type of cartridge.

Recent plant closures have included an inkjet facility in Scotland (2006), inkjet supply manufacturing facilities in Juárez, Mexico (2007) and Chihuahua (2008) and a circuit assembly facility, also in Juárez (2009).

Communities experiencing losses have had to deal with increased unemployment and a decreased tax base. Lexmark takes care to reduce the impact on the locations that experience those losses. When exiting buildings, we ensure that the locations are clean and secure. We make every possible effort to avoid leaving an unoccupied building and we comply with all local laws to ensure that employees and local governments are given notice of imminent changes and assistance in their efforts to secure new employment, in some instances, even offering some non-exempt employees the opportunity to continue their employment with us at other Lexmark facilities.

While there are no standard metrics that can be used to gauge the effectiveness of these efforts, we have seen evidence that these initiatives have eased negative impacts.

Lexmark’s inkjet facility in Chihuahua was purchased by a developer who went on to lease this facility to a manufacturer. In transitioning this property to another manufacturer, Lexmark ensured that the existing building was not left unoccupied and the new occupant offered employment opportunities to laborers in the area.

When leaving an area, Lexmark is proactive in assisting employees in finding new employment in their community. The Scottish Government’s Partnership Action for Continuing Employment (PACE), posted the following on its Web site with regard to Lexmark’s closing of the Lexmark facility in Scotland.

“Lexmark has been in Rosyth for 10 years and employed some 700 staff in the production of printer cartridges. Due to a downturn in demand and company restructuring, the decision was reluctantly taken to close the Rosyth operation.

"From the outset, Lexmark was extremely proactive and, prior to meeting the representatives of the PACE team, had set up a well resourced Job Shop.

"Due to the publicity over the closure and successful marketing by both Lexmark Job Shop staff and Jobcentre Plus, employees were made aware of over 1500 vacancies. These covered a wide spectrum of opportunities including engineering, call centre work and care vacancies.”

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Lessons Learned

As Lexmark traverses each step in the business process, we take what we have learned and apply that knowledge to future engagements.