Newsroom

Lexmark reports fourth quarter results

• Strong branded unit growth in targeted segments
• Cash generation of $143 million remained strong

LEXINGTON, Ky., Jan. 30, 2007 – Lexmark International, Inc. (NYSE: LXK) today
announced financial results for the fourth quarter of 2006. Fourth-quarter revenue was
$1.369 billion, about flat compared to revenue of $1.365 billion last year. Fourth-quarter
earnings per share were $0.91 and include $0.06 per share for share-based
compensation expenses resulting from the company’s adoption of SFAS 123R. The tax
rate in the fourth quarter was 15.9 percent, primarily reflecting the retroactive extension
of the U.S. Research and Experimentation tax credit. Earnings per share would have
been $1.05, excluding $0.14 per share restructuring-related charges for actions
announced in January 2006. Fourth-quarter 2005 earnings per share were $0.71.
“Overall, this was a good quarter for Lexmark and we believe we are on course with our
strategy. We saw strong branded unit growth in the quarter in our targeted growth
segments of low-end monochrome lasers, color lasers, laser all-in-ones, and inkjet all-inones.
Our ongoing investments in product and brand development are better positioning
us in these targeted segments, which are the engine for long-term growth,” said Lexmark
Chairman and Chief Executive Officer Paul J. Curlander.
Fourth-quarter business segment revenue of $772 million grew 11 percent year to year,
and consumer segment revenue of $597 million declined 11 percent compared to a year
ago. Fourth-quarter 2006 gross profit margin was 30.8 percent, the operating expense to
revenue ratio was 23.3 percent, and operating income margin was 7.5 percent. These
results include restructuring-related pretax charges totaling $19 million, comprised of $3
million in cost of revenue and $16 million in operating expense. Excluding restructuringrelated
charges:
Fourth-quarter 2006 gross profit margin would have been 31.1 percent, up from 28.3
percent in the same period last year. This improvement was driven primarily by a
change in the mix between hardware and supplies.
Fourth-quarter 2006 operating expense to revenue ratio would have been 22.1
percent, up from 20.0 percent in the same quarter last year. This increase was due
mainly to increased research and development investment, increased marketing
investment, and SFAS 123R expenses.
Fourth-quarter 2006 operating income margin was 8.9 percent, up from 8.3 percent
last year.
Fourth-quarter net cash provided by operating activities was $143 million. Capital
expenditures for the quarter were $58 million. Lexmark repurchased approximately 2.1
million shares of its stock during the quarter for $141 million. The company’s remaining
share repurchase authorization was about $460 million at quarter end.
Recent wins showcase strength of Lexmark’s value proposition
The U.S. Federal Aviation Administration (FAA), The Children’s Hospital at Westmead,
and Health First are among customers who have recently chosen Lexmark to help them
print smarter, move information faster and more effectively, and better manage their
printing environment.

The FAA chose Lexmark to provide monochrome and color laser printers and
multifunction products (MFP) to the FAA’s more than 800 offices, serving more than
45,000 employees. After a rigorous multi-vendor review, Lexmark was selected
based on the company’s products, federal-industry expertise, and ability to help FAA
achieve cost savings objectives and bring value to FAA employees around the
country.
Lexmark won a five-year contract with The Children’s Hospital at Westmead, a
leading pediatric hospital in Australia. Lexmark’s solutions will improve workflow for
hospital staff, reducing complicated, multi-step processes to the touch of an icon,
and allowing staff to quickly complete critical tasks such as patient admission and
pharmacy requests. These solutions will help ensure accurate information is
transmitted to help prevent errors and will also give staff more time to spend directly
with patients.
Lexmark won a three-year agreement to help Health First, an 850-bed health care
network located in Central Florida, implement a world-class, proactive, fleet
management solution. Once the implementation is completed, Lexmark will manage
approximately 1,000 devices throughout Health First’s network.
Accolades for Lexmark’s products continue
Lexmark is continuing to garner industry recognition for its innovative new products, the
introduction of which has been supported by its increased level of investment in research
and development. Lexmark’s 2006 success in winning awards for its products is being
featured in updated television advertising. The advertising highlights the fact that, last
year, the top U.S. independent test labs awarded Lexmark more laser printer awards in
its class than any other leading printer brand.
Among the recognition received during the fourth quarter, Lexmark received Fall Pick of
the Year awards from Buyers Laboratory, Inc., for laser hardware and software
solutions, including:

Lexmark Document Distributor software, which helps customers reduce cost and
increase productivity by intelligently routing electronic content captured from MFPs to
network folders, e-mail, fax servers, databases and enterprise content management
systems;
Most Outstanding Monochrome Multifunction Printer line; and
The Lexmark X642e, X646ef, X850e and X852e received individual awards in their
respective workgroup MFP categories.
Lexmark also earned recognition for Best Hardware Solution across its line of products
at CMP Media’s 2006 XChange Tech Innovator Conference.
Also during the quarter, PC Magazine named the new Lexmark C534dn color laser
printer as an Editors’ Choice.
In addition, Lexmark’s new X5470 inkjet four-in-one was named as an International
Consumer Electronics Show (CES) Innovations 2007 Design and Engineering Awards
honoree in the Mobile/Home Office Category.
Full-year results
2006 revenue was $5.108 billion, down 2 percent compared to revenue of $5.222 billion
in 2005. 2006 business segment revenue grew 3 percent, and consumer segment
revenue declined 8 percent.
2006 operating income of $443 million includes $41 million for share-based
compensation expenses resulting from the company’s adoption of SFAS 123R.
Operating income would have been $568 million, excluding $135 million for
restructuring-related charges and $10 million pension curtailment benefit for actions
announced in January 2006. 2005 operating income was $534 million, or $544 million
excluding 2005 workforce reduction charges.
2006 earnings per share were $3.27 and include $0.24 per share for share-based
compensation expenses resulting from the company’s adoption of SFAS 123R.
Excluding $0.85 per share restructuring-related charges and pension curtailment benefit
for actions announced in January 2006, earnings per share would have been $4.12.
2005 earnings per share were $2.91. 2005 EPS would have been $3.37 excluding $0.06
per share workforce reduction charges and the net tax cost of $0.40 per share primarily
resulting from the approval to repatriate $684 million during 2005 under the American
Jobs Creation Act.
2006 net cash provided by operating activities was $671 million. Capital expenditures for
the year were $202 million. Lexmark repurchased approximately 16.5 million shares of
its stock during the year for $871 million.
Looking forward
In the first quarter of 2007, the company expects revenue to decline in the low- to midsingle
digit percentage range year over year. It expects first-quarter 2007 EPS to be in
the range of $0.90 to $1.00. This includes restructuring-related charges of approximately
$0.03 per share. EPS excluding restructuring-related charges in the first quarter are
expected to be in the range of $0.93 to $1.03. EPS in the first quarter of 2006 were
$0.78, or $1.03 excluding $0.31 per share restructuring-related charges and $0.06 per
share pension curtailment benefit.
Conference Call
The company will be hosting a conference call with securities analysts today at 8:30 a.m.
(EST). A live broadcast and a complete replay of this call can be accessed from
Lexmark’s investor relations Web site at http://investor.lexmark.com. If you are unable
to connect to the Internet, you can access the call via telephone at 800-632-2975
(outside the U.S. by calling 973-935-8755) or the replay shortly afterward by calling 877-
519-4471 (outside the U.S. by calling 973-341-3080) using access code 8309376. The
telephone replay of the conference call will be available until 12 noon on Tuesday, Feb.
6, 2007.
Supplemental information slides, including reconciliations between GAAP and non-
GAAP financial measures, will be available on Lexmark’s investor relations Web site
prior to the live broadcast.
About Lexmark
Lexmark International, Inc. (NYSE: LXK) provides businesses and consumers in more
than 150 countries with a broad range of printing and imaging products, solutions and
services that help them to be more productive. In 2006, Lexmark reported $5.1 billion in
revenue. Learn how Lexmark can help you get more done at www.lexmark.com.
Lexmark and Lexmark with diamond design are trademarks of Lexmark International, Inc., registered in the U.S. and/or
other countries.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this release which are
not historical facts are forward-looking and involve risks and uncertainties, including, but not limited to, increased
investment to support product development and marketing, aggressive pricing from competitors and resellers, market
acceptance of new products and pricing programs, financial failure or loss of business with a key customer, reseller or
supplier, supplies consumption, management of the company’s and resellers’ inventory levels, market conditions, the
impact of competitors’ products, unforeseen cost impacts including those as a result of new legislation, litigation or actions
taken to maintain a competitive cost and expense structure, the ability and/or incremental expense to produce and deliver
products to satisfy customer demand, production and supply difficulties including disruptions at important points of exit
and entry and distribution centers, competition in aftermarket supplies, the outcome of pending and future litigation or
governmental proceedings, intellectual property and other legal claims and expenses, changes in a country’s or region’s
political or economic conditions, currency fluctuations, China’s revaluation of its currency, conflicts among sales channels, difficulties or delays in software and information systems implementations, and other risks described in the company's Securities and Exchange Commission filings. The company undertakes no obligation to update any forward-looking statement.