Lexmark 2007 Annual Report Download - page 22

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The Company’s reliance on international production facilities, international manufacturing partners and
certain key suppliers could negatively impact the Company’s operating results.
• The Company relies in large part on its international production facilities and international
manufacturing partners, many of which are located in China and the Philippines, for the
manufacture of its products and key components of its products. Future operating results may
also be adversely affected by several other factors, including, without limitation, if the Company’s
international operations or manufacturing partners are unable to perform or supply products reliably,
if there are disruptions in international trade, disruptions at important geographic points of exit and
entry, if there are difficulties in transitioning such manufacturing activities among the Company, its
international operations and/or its manufacturing partners, or if there arise production and supply
constraints which result in additional costs to the Company. The financial failure or loss of a sole
supplier or significant supplier of products or key components, or their inability to produce the
required quantities, could result in a material adverse impact on the Company’s operating results.
Due to the international nature of our business, changes in a country’s or region’s political or
economic conditions or other factors could negatively impact the Company’s revenue, financial
condition or operating results.
• Revenue derived from international sales make up about half of the Company’s revenue.
Accordingly, the Company’s future results could be adversely affected by a variety of factors,
including changes in a specific country’s or region’s political or economic conditions, foreign
currency exchange rate fluctuations, trade protection measures and unexpected changes in
regulatory requirements. In addition, changes in tax laws and the ability to repatriate cash
accumulated outside the U.S. in a tax efficient manner may adversely affect the Company’s
financial results, investment flexibility and operations. Moreover, margins on international sales
tend to be lower than those on domestic sales, and the Company believes that international
operations in new geographic markets will be less profitable than operations in the U.S. and
European markets, in part, because of the higher investment levels for marketing, selling and
distribution required to enter these markets.
• In many foreign countries, particularly those with developing economies, it is common for local
business practices to be prohibited by laws and regulations applicable to the Company, such as
employment laws, fair trade laws or the Foreign Corrupt Practices Act. Although the Company
implements policies and procedures designed to ensure compliance with these laws, our
employees, contractors and agents, as well as those business partners to which we outsource
certain of our business operations, may take actions in violation of our policies. Any such violation,
even if prohibited by our policies, could have a material adverse effect on our business and our
reputation. Because of the challenges in managing a geographically dispersed workforce, there
also may be additional opportunities for employees to commit fraud or personally engage in
practices which violate the policies and procedures of the Company.
Conflicts among various sales channels may negatively impact the Company’s operating results.
• The Company markets and sells its products through several sales channels. The Company has
also advanced a strategy of forming alliances and OEM arrangements with many companies. The
Company’s future operating results may be adversely affected by any conflicts that might arise
between or among its various sales channels, the volume reduction in or loss of any alliance or OEM
arrangement or the loss of retail shelf space. Aggressive pricing on laser and inkjet products and/or
associated supplies from customers and resellers, including, without limitation, OEM customers,
could result in a material adverse impact on the Company’s strategy and financial results.
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