Lexmark 2009 Annual Report Download - page 46

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Operating Income (Loss)
The following table provides operating income by market segment:
(Dollars in Millions) 2009 2008 Change 2008 2007 Change
PSSD . . . . . . . . . . . . . . . . . . . . . . $ 379.3 $ 497.1 (24)% $ 497.1 $ 612.0 (19)%
% of revenue ............... 14.4% 16.7% (2.3)pts 16.7% 20.4% (3.7)pts
ISD . . . . . . . . . . . . . . . . . . . . . . . . 114.3 137.1 (17)% 137.1 93.4 47%
% of revenue ............... 9.1% 8.9% 0.2 pts 8.9% 4.7% 4.2pts
All other . . . . . . . . . . . . . . . . . . . . . (277.5) (357.0) 22% (357.0) (384.1) 7%
Total operating income (loss) . . . . . $ 216.1 $ 277.2 (22)% $ 277.2 $ 321.3 (14)%
% of total revenue ........... 5.6% 6.1% (0.5)pts 6.1% 6.5% (0.4)pts
For the year ended December 31, 2009, the decrease in consolidated operating income was due to
decreased gross profits partially offset by lower operating expenses. Operating income for PSSD and ISD
decreased YTY due to lower supplies revenue reflecting lower volumes, partially offset by lower operating
expenses.
For the year ended December 31, 2008, the decrease in consolidated operating income was due to
decreased gross profits and higher operating expenses. Operating income for PSSD decreased YTY due
to higher operating expenses, reflecting higher product development investments, and lower hardware
gross profits, reflecting the impact of aggressive pricing as well as a negative impact due to product mix.
Operating income for ISD increased YTY due to increased hardware gross margin, due to lower hardware
unit sales, and decreased operating expenses, partially offset by lower supplies revenue.
During 2009, the Company incurred total pre-tax restructuring-related charges and project costs of
$64.6 million in PSSD, $44.4 million in ISD and $32.3 million in All other. During 2008, the Company
incurred total pre-tax restructuring-related charges and project costs of $24.4 million in PSSD,
$27.3 million in ISD and $41.0 million in All other. During 2007, the Company incurred restructuring-
related charges and project costs of $12.1 million in PSSD, $12.2 million in ISD and $27.7 million in All
other. See “Restructuring and Related Charges and Project Costs” that follows for further discussion.
Interest and Other
The following table provides interest and other information:
(Dollars in Millions) 2009 2008 2007
Interest (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.4 $(6.1) $(21.2)
Other (income) expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 7.4 (7.0)
Net impairment losses on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 — —
Total interest and other (income) expense, net . . . . . . . . . . . . . . . . . . . . . $29.1 $ 1.3 $(28.2)
Total interest and other (income) expense, net, was expense of $29 million in 2009 compared to expense of
$1 million in 2008. The 2009 net expense increase YTY was primarily due to lower interest income from
declining interest rates on the Company’s investments and lower investment balances as well as increased
interest expense from the $650 million debt the Company issued in May 2008.
Total interest and other (income) expense, net, was expense of $1 million in 2008 compared to income of
$28 million in 2007. The 2008 decrease YTY was primarily due to increased interest expense from the
$650 million debt the Company issued in May 2008 as well as the $8 million pre-tax gain the Company
recognized in 2007 from the substantial liquidation of the Company’s Scotland entity that did not recur in
2008. Additionally, the Company recognized $8 million in net losses in 2008 related to its marketable
securities.
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