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Lexmark beats target; will cut 900 jobs

Lexmark International Inc. (NYSE: LXK) beat estimates for its third quarter, but announced 900 layoffs Monday, and said it will take a charge of up to $45 million as it restructures.

Shares in the maker of printing equipment, including laser and inkjet printers closed down 0.75 to 29.5 Friday. The stock tumbles in September, as analysts downgraded the stock after Lexmark issued warnings for its third and fourth quarters.

The company said third quarter revenue was $927 million, up 10 percent from 1999, and diluted net earnings per share were 50 cents, down from 56 cents in 1999's third quarter, and down from the previous quarter's 62 cents a share. First Call was expecting a profit of 47 cents a share.

The company's restructuring plan will result in fourth quarter pre-tax charges of $35 million to $45 million and dent earnings per share by 19 to 24 cents. The non-recurring charge will be taken as the company relocates the manufacturing of laser printers to Latin America and Asia, and reduces associated infrastructure. Lexmark will also lay off up to 900 employees, and will take charges from related pension costs, and the write-off of certain assets.

Annual savings from the restructuring should be about $100 million by 2002, the company said, adding that the move will strengthen its competitive position.

Going forward, the company sees fourth quarter revenue growth rate at 10 to 15 percent, with diluted earnings per share between 55 and 65 cents, before restructuring charges. Lexmark said it also expects it will have 15 to 20 percent EPS growth in 2001.

The company said that without the negative impact of foreign currency translation, revenue growth would have been 15 percent versus last year. Gross profit margin in the third quarter of was 31.9 percent versus 35.9 percent last year due to unfavorable foreign currency impact, lower hardware margins, and a mix shift among products. The company repurchased 595,000 shares of during the third quarter for $25 million, at prices ranging from $36.88 to $48.81. At the end of the quarter, remaining share repurchase authorization was $128 million.