Lexmark 2011 Annual Report Download - page 17

Download and view the complete annual report

Please find page 17 of the 2011 Lexmark annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 164

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164

preferred suppliers maintain alternate processes and/or facilities to ensure continuity of supply. ISS
occasionally faces capacity constraints when there has been more demand for its products than initially
projected. From time to time, ISS may be required to use air shipment to expedite product flow, which
can adversely impact ISS’ operating results. Conversely, in difficult economic times, ISS’ inventory can
grow as market demand declines.
During 2011, ISS continued to execute supplier managed inventory (“SMI”) agreements with its primary
suppliers to improve the efficiency of the supply chain. Lexmark’s management believes these SMI
agreements improve ISS’ supply chain inventory pipeline and supply chain flexibility which enhances
responsiveness to our customers. In addition, the Company’s management believes these agreements
improve supplier visibility to product demand and therefore improve suppliers’ timeliness and
management of their inventory pipelines. As of December 31, 2011, a significant majority of printers
were purchased under SMI agreements. Any impact on future operations would depend upon factors
such as ISS’ ability to negotiate new SMI agreements and future market pricing and product costs.
Many components of ISS’ products are sourced from sole suppliers, including certain custom
chemicals, microprocessors, electro-mechanical components, application specific integrated circuits
and other semiconductors. In addition, ISS sources some printer engines and finished products from
OEMs. Although ISS 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 ISS’
products would not be disrupted. Such a disruption could interfere with ISS’ ability to manufacture and
sell products and materially adversely affect ISS’ business. Conversely, during economic slowdowns,
ISS may build inventory of components as demand decreases.
• Backlog — ISS
Although ISS experiences availability constraints from time to time for certain products, ISS generally
fills its orders within 30 days of receiving them. Therefore, ISS usually has a backlog of less than
30 days at any one time, which the Company does not consider material to its business.
• Seasonality — ISS
ISS experiences some seasonal market trends in the sale of its products and services. For example,
ISS’ sales are often stronger during the second half of the year and ISS’ sales in Europe are often
weaker in the summer months. The impact of these seasonal trends on ISS has become less
predictable.
Segment Information — Perceptive Software
• Products — Perceptive Software
Perceptive Software offers a complete suite of ECM and BPM software products and solutions.
o Software
Perceptive Software ECM, BPM, and DOM software products, including ImageNow document
management, document imaging and workflow and Pallas Athena BPM and DOM products and
solutions, enable users to design, capture, process, manage, and collaborate on important documents,
information, and business processes, protect data integrity throughout its lifecycle and access precise
content in the context of the users’ everyday business processes. These components are developed
and maintained by Perceptive Software.
13