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Lexmark International Inc LXK
Q2 2012 Earnings Call Transcript

Transcript Call Date 07/24/2012

Operator: Thank you for standing by and welcome to the Lexmark International Second Quarter 2012 Earnings Conference Call. During the Company's opening remarks, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference call is being recorded on Tuesday, July 24, 2012.

I would now like to turn the call over to John Morgan, Lexmark's Director of Investor Relations. Please go ahead, John.

John Morgan - Director, IR: Good morning, and thank you for joining us. Chairman and CEO, Paul Rooke and EVP and CFO, John Gamble, are with me this morning. After their prepared remarks, we'll open the call for your questions as time permits. We ask that you please limit yourself to one question and one follow-up, if needed, so that we can get to everyone.

Please note that Paul and John will be referring to specific earnings presentation slides by number. These slides were posted to our Investor Relations website located at investor.lexmark.com earlier this morning.

Paul and John will be referring to non-GAAP measures during the presentation unless otherwise noted. Pursuant to the requirements of Regulation G, the Company has provided reconciliations of GAAP to non-GAAP measures and a discussion of management's use of non-GAAP measures in the supplemental materials section of the earnings presentation slide.

Regarding our upcoming dividend schedule, Lexmark anticipates that the record date of its third quarter 2012 dividend will be August 31, with an anticipated payment date of September 14. Please note that future quarterly dividend payments are subject to Board approval. We have also included our anticipated dividend schedule for the remainder of 2012 and 2013 in the supplemental section of our earnings presentation.

Following the conclusion of this conference call, a complete replay will also be made available on our IR website.

As a reminder, any of today's remarks that are not statements of historical facts are forward-looking statements and involve certain risks and uncertainties that are disclosed in the Safe Harbor section of our earnings releases and SEC filings. Actual results may differ materially from such statements and Lexmark undertakes no obligation to update any forward-looking statements.

With that I'll turn it over to Paul.

Paul Rooke - President and CEO: Thank you, John, and good morning to everyone. As John said, we'll be using a presentation slide deck, and we'll refer to the slide numbers as we go to keep everyone on the same page. So, let's begin.

Starting with Slide 4, our second quarter financial results were less than we expected and reflected the impact of two dynamics since the first quarter. First, we saw larger than expected impacts from the changing currencies, particularly in the back half of the quarter. This accounted for roughly half of the revenue miss and more than all of the earnings per share miss versus our second quarter guidance in April. Second, we saw weaker demand than expected, particularly in Europe in the quarter. Because of the sudden nature of the decline in demand, including page usage, we believe this change was driven more by belt-tightening dynamics due to economic uncertainty similar to late 2008-2009 versus any new mobile or other secular trends.

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