Lexmark 2015 Annual Report Download - page 42

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38
During 2015, total Lexmark revenue declined 4% YTY, reflecting an unfavorable YTY currency impact of 6% and an unfavorable
impact of approximately 3% due to the Company’s exit of inkjet technology. The change in YTY revenues reflected a positive impact
of 6% for growth in Enterprise Software revenue, primarily due to the acquisitions of Kofax in the second quarter of 2015 and
ReadSoft in the third quarter of 2014. Additionally, the Company benefited from continued growth in MPS supplies revenue.
Operating income for the year ended December 31, 2015 decreased 116% YTY primarily due to higher operating expenses mainly
associated with the acquisition-related adjustments related to the acquisition of Kofax in May of 2015 and restructuring related
charges and project costs due to the newly announced restructuring plans. During 2015, net earnings declined 151% from the prior
year, primarily due to lower operating income. Net earnings for the year ended December 31, 2015 included $272.7 million of pre-tax
acquisition-related adjustments, $88.2 million of pre-tax restructuring charges and project costs, a pension and other postretirement
benefit plan actuarial net loss $8.7 million and $7.5 million of remediation-related charges. The Company uses the term “acquisition-
related adjustments” for purchase accounting adjustments and incremental acquisition and integration costs related to acquisitions. The
Company uses the term “project costs” for incremental charges related to the execution of its restructuring plans. The Company uses
the term “remediation-related charges” for professional fees associated with analysis and remediation of the Company’s previously
disclosed material weakness in internal controls over income tax accounting.
During 2014, total Lexmark revenue increased 1% compared to prior year. Gross profit decreased 2%, Operating expense increased
22% and Operating income decreased 64% when compared to the same period in 2013.
Net earnings for the year ended December 31, 2014 declined 69% from the prior year primarily due to lower operating income. Net
earnings for the year ended December 31, 2014 included $119.1 million of pre-tax acquisition-related adjustments, a pension and
other postretirement benefit plan asset and actuarial net loss of $80.5 million and $45.8 million of pre-tax restructuring charges and
project costs.
Revenue
The following tables provide a breakdown of the Company’s revenue by segment and by product:
Revenue by Reportable Segment
(Dollars in millions)
2015
2014
% Change
2014
2013
% Change
ISS
$
3,017.4
$
3,414.8
(12)
%
$
3,414.8
$
3,444.0
(1)
%
Enterprise Software
533.8
295.7
81
%
295.7
223.6
32
%
Total revenue
$
3,551.2
$
3,710.5
(4)
%
$
3,710.5
$
3,667.6
1
%
Revenue by Product
(Dollars in millions)
2015
2014
% Change
2014
2013
% Change
Hardware (1)
$
705.5
$
782.1
(10)
%
$
782.1
$
762.8
3
%
Supplies (2)
2,128.8
2,445.9
(13)
%
2,445.9
2,484.4
(2)
%
Software and Other (3)
716.9
482.5
49
%
482.5
420.4
15
%
Total revenue
$
3,551.2
$
3,710.5
(4)
%
$
3,710.5
$
3,667.6
1
%
(1) Includes laser, inkjet, and dot matrix hardware and the associated features sold on a unit basis or through a managed service agreement
(2) Includes laser, inkjet, and dot matrix supplies and associated supplies services sold on a unit basis or through a managed service agreement
(3) Includes parts and service related to hardware maintenance and includes software licenses and the associated software maintenance services sold
on a unit basis or as a subscription service
ISS
For the year ended December 31, 2015, ISS revenue declined 12% compared to prior year, which reflected an unfavorable inkjet exit
impact of approximately 3% and an unfavorable currency impact of 5% compared to the prior year. Laser hardware revenue decreased
10% YTY. Large workgroup laser hardware revenue, which represented about 86% of total hardware revenue for the year ended
December 31, 2015, declined 8% YTY reflecting a 6% decline in units, primarily driven by competitive pressures during 2015 and a
2% decline in average unit revenue (“AUR”), reflecting unfavorable currency movements, partially offset by favorable product mix
during 2015. Small workgroup laser hardware revenue, which for the year ended December 31, 2015 represented 14% of total
hardware revenue, declined 23% YTY due to a 20% decrease in units driven by strong sales during the fourth quarter of 2014 and
competitive pressures during 2015 and a 4% decrease in AUR driven by unfavorable currency movements. There was no inkjet exit
hardware revenue for the year ended December 31, 2015. The Company uses the term “large workgroup” to include departmental,
large workgroup and medium workgroup lasers, which are typically attached directly to large workgroup networks, as well as dot