Printer manufacturer Lexmark announced disappointing second quarter earnings as its net profit dropped due to lower consumer demand.
Net income for the second quarter of 2006 decreased 4 percent to $76.7 million from $79.9 million. Earnings per share, however, increased 15 percent to 74 cents from 64 cents for the same quarter last year. Analysts had expected an EPS of $0.84, according to Reuters estimates.
Restructuring expenses and tax benefits were excluded. However if both were combined, the adjusted profit would be $1.07 per share. A share buy-back worth $600 million was also initiated earlier this year.
The Kentucky-based company also recorded a 4 percent drop in revenue from $1.28 billion in 2005 second quarter to $1.23 billion this year. In the same estimate, analysts were expecting revenues of $1.22 billion. This led to a decline in the operating margin for the firm.
The consumer segment was a factor in contributing to a lower operating margin, which was not enough to offset sluggish growth in the business segment. The segment revenue of $516 million declined 10 percent compared to a year ago. The business segment revenue of $713 million increased 1 percent in the space of one year.
Earlier this year, the firm announced a restructuring plan costing $53 million in pre-tax charge for the second quarter. This was made up of $16 million in cost of revenue and $37 million in expense. The plan involves reducing its workforce to obtain cost savings.
Lexmark management warned investors to â€˜expect revenue to be flat to down in the low-single digit range for the year â€¦ (saying) the company expects an inkjet component shortage â€¦ (which) will negatively impact third-quarter EPS by about $0.05 per share.â€™
EPS excluding restructuring related charges in the third quarter of 2006 are expected to be in the range of 65 cents to 75 cents.