Lexmark 2009 Annual Report Download - page 16

Many components of the Company’s products are sourced from sole suppliers, including certain custom
chemicals, microprocessors, electro-mechanical components, application specific integrated circuits and
other semiconductors. In addition, Lexmark sources some printer engines and finished products from
OEMs. Although Lexmark plans in anticipation of its future requirements, should these components not be
available from any one of these suppliers, there can be no assurance that production of certain of the
Company’s products would not be disrupted. Such a disruption could interfere with Lexmark’s ability to
manufacture and sell products and materially adversely affect the Company’s business. Conversely,
during economic slowdowns, the Company may build inventory of components as demand decreases.
Research and Development
Lexmark’s research and development activity is focused on laser and inkjet printers, MFPs, and associated
supplies, features, and related technologies. Lexmark’s primary research and development activities are
conducted in Lexington, Kentucky; Boulder, Colorado; Cebu City, Philippines; and Kolkata, India. In the
case of certain products, the Company may elect to purchase products or key components from third-party
suppliers rather than develop them internally.
Lexmark is actively engaged in the design and development of new products and enhancements to its
existing products. Its engineering efforts focus on technologies associated with laser, inkjet, connectivity,
document management and other customer facing solutions, as well as design features that will increase
performance, improve ease of use and lower production costs. Lexmark also develops related applications
and tools to enable it to efficiently provide a broad range of services.
During 2007 and 2008, the Company increased its level of research and development expenditures to
more significantly broaden its product offerings and advance core technologies associated with its
markets. As many of these initial investments were completed and as part of a corporate effort to
improve productivity and efficiency of our research and development investment, the Company reduced its
expenditures in 2009. Research and development expenditures were $375 million in 2009, $423 million in
2008 and $404 million in 2007.
The process of developing new products is complex and requires innovative designs that anticipate
customer needs and technological trends. The Company must make strategic decisions from time to time
as to which technologies will produce products and solutions in market sectors that will experience the
greatest future growth. There can be no assurance that the Company can develop the more
technologically-advanced products required to remain competitive.
Backlog
Although Lexmark experiences availability constraints from time to time for certain products, the Company
generally fills its orders within 30 days of receiving them. Therefore, Lexmark usually has a backlog of less
than 30 days at any one time, which the Company does not consider material to its business.
Employees
As of December 31, 2009, of the approximately 11,900 employees worldwide, 3,400 are located in the
U.S. and the remaining 8,500 are located in Europe, Canada, Latin America, Asia Pacific, the Middle East
and Africa. None of the U.S. employees are represented by a union. Employees in France are represented
by a Statutory Works Council.
Available Information
Lexmark makes available, free of charge, electronic access to all documents (including annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those
reports, as well as any beneficial ownership filings) filed with or furnished to the Securities and Exchange
Commission (“SEC” or the “Commission”) by the Company on its website at http://investor.lexmark.com as
soon as reasonably practicable after such documents are filed. The SEC maintains an Internet site that
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