Lexmark 2013 Annual Report Download - page 14

Manufacturing operations for laser printer supplies are located in Boulder, Colorado; Juarez, Mexico; Zary, Poland; and Shenzhen,
China. Laser printer cartridges are assembled by a combination of in-house and third-party contract manufacturing. The manufacturing
control center for laser printer supplies is located in Geneva, Switzerland.
Manufacturing operations for inkjet printer supplies are located in Lapu-Lapu City, Philippines and Juarez, Mexico. Inkjet printer
supplies are assembled by a combination of in-house and third-party manufacturing. The manufacturing control center for inkjet
printer supplies is located in Geneva, Switzerland.
ISS procures a wide variety of components used in the manufacturing process, including semiconductors, electro-mechanical
components and assemblies, as well as raw materials, such as plastic resins. Although many of these components are standard off-the-
shelf parts that are available from multiple sources, ISS often utilizes preferred supplier relationships, and in certain cases single
sourced supplier relationships, to better ensure more consistent quality, cost and delivery. In addition, ISS sources some printer
engines and finished products from OEMs. Typically, these preferred suppliers and OEMs 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 2013, 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, 2013, 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.
• 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 product backlog of less than 30 days at any one time, which the Company does not
consider material to its business. Refer to Part II, Item 8, Note 12 of the Notes to Consolidated Financial Statements for information
regarding deferred service revenue, which makes up most of the Company’s service backlog.
• 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 due to the exit of the inkjet business and less consumer exposure.
Segment Information — Perceptive Software
• Products — Perceptive Software
Perceptive Software offers a complete suite of ECM, BPM, DOM, intelligent data capture, search software and medical imaging VNA
software products and solutions.
o Software
Perceptive Software capture, content, search and BPM software products and solutions, enable users to capture, 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.
In 2013, Perceptive Software acquired four new software product companies to enhance the software portfolio. AccessVia is the
leading U.S. provider of Software as a Service (“SaaS”) tools for printing retail signs, labels and tags and publishing electronic shelf
tags and digital displays, adding to Perceptive Software’s domain expertise in retail and expanding its DOM capabilities. Twistage
brings a cloud-based platform for managing video, audio and imaging content. With the addition of Twistage technology, Perceptive
Software can easily capture any type of content—including rich media—from any source, store it on premise or in the cloud, and
provide users immediate access via any form factor. Perceptive Software also acquired Saperion, a leading ECM provider in Europe
and PACSGEAR, a leading provider of connectivity solutions for healthcare providers to capture, manage and share medical images
and related documents and integrate them with existing PACS and EMR systems. Perceptive Software is uniquely positioned to offer a
vendor-neutral, standards-based clinical content platform for capturing, managing, accessing and sharing patient imaging information
and related documents within healthcare facilities through an EMR and between facilities using PACSGEAR technology.
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