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Lexmark reports first quarter results


Lexmark reports first quarter results Revenue and EPS exceeded expectation Company generated strong cash flow of $220 million in the quarter Lexmark continues to make good progress on core strategic initiatives

LEXINGTON, Ky., April 25, 2006 Lexmark International, Inc. (NYSE: LXK) today
announced financial results for the first quarter of 2006. First-quarter revenue was $1.28
billion compared to $1.36 billion last year, a decline of 6 percent. First-quarter earnings
per share were $0.78 and include FAS123(R) expense of $0.05 per share. Earnings per
share would have been $1.03 excluding $0.31 per share restructuring related charges
and a $0.06 pension curtailment benefit for actions announced in January. First-quarter
2005 earnings were $0.96 per share.

"While our first-quarter results were better than expected, we still have more work to do.
We are executing the restructuring actions that we announced in January to improve our
operating efficiency and, at the same time, we continue to make good progress on our
core strategic initiatives. Our investments in product development are evident in new
products that are winning awards and strengthening our position in key growth
segments," said Paul J. Curlander, chairman and chief executive officer.

In the first quarter, year-over-year business segment revenue of $688 million was down
5 percent. First-quarter consumer segment revenue of $587 million was down 7 percent.
In the first quarter, gross profit margin was 31.7 percent and includes restructuring
related charges of $19 million. First-quarter operating expense as a percent of revenue
was 22.2 percent, and includes $31 million restructuring related charges and a $10
million pension curtailment benefit. Operating income margin in the first quarter was 9.5
percent, and includes $50 million restructuring related charges and the $10 million
pension curtailment benefit.

Gross profit margin excluding restructuring related charges would have been 33.1
percent in the first quarter. Gross profit margin was 33.0 percent in the same period last
year. Operating expense as a percent of revenue excluding restructuring related charges
and pension curtailment benefit would have been 20.6 percent in the first quarter as
year-to-year improvements in marketing expenses outpaced increased investments in
research and development. The operating expense to revenue ratio was 21.0 percent in
the first quarter of 2005. Operating income margin excluding restructuring related
charges and pension curtailment benefit would have been 12.6 percent in the first
quarter. Operating income margin was 11.9 percent in the same quarter last year.
Investor Contact:
John Morgan
(859) 232-5568
jmorgan@lexmark.com


Media Contact:
Tim Fitzpatrick
(859) 232-7527
tfitzpat@lexmark.com


Lexmark International, Inc.
740 West New Circle Road
Lexington, Ky. 40550
www.lexmark.com
First-quarter net cash provided by operating activities was $220 million. Capital
expenditures for the quarter were $47 million. Lexmark repurchased $300 million of its
stock during the quarter. The companys remaining share repurchase authorization was
$1.0 billion at quarter end.

New products, industry recognition highlight progress on core strategic initiatives
Lexmark continues to make good progress on its core strategic initiatives and this
progress is reflected in the companys award-winning products for the enterprise, small
and medium business, and home markets.
Workgroup Monochrome Laser All-in-One: The company announced six new
monochrome laser all-in-one products during the first quarter, all of which were
recognized as industry-leading devices and Editors Choices by Better Buys for
Business. These AIOs feature Lexmarks new embedded solutions framework. Low-End Monochrome Laser: Lexmark announced the Lexmark E120n, which
features its smallest monochrome laser footprint, making it ideal for small
office/home office customers. Color
Laser: The Lexmark C522n color laser printer won a PC Magazine Editors
Choice award. Channel
Support: During the first quarter, for the third consecutive time, Lexmark
was named Best Revenue Generator by channel partners at CMP Medias
XChange Conference. Business Inkjet All-in-One: The Lexmark X8350 AIO Plus Photo business inkjet
earned top honors from Better Buys for Business, which praised the superior
workflow capabilities featured in its software. Inkjet
All-in-One: Today, Lexmark is introducing three new all-in-one products
that deliver industry-leading value and ease of use for the home market.

Looking forward
In the second quarter, the company expects revenue to decline in the low- to mid-single
digit range year over year. It expects second-quarter 2006 EPS to be in the range of
$0.70 to $0.80. This excludes restructuring charges of approximately $0.26 per share.
GAAP EPS in the second quarter of 2006 are expected to be in the range of $0.44 to
$0.54. GAAP EPS in the second quarter of 2005 were $0.64, or $1.06 excluding the tax
cost of $0.42 per share resulting from the approval to repatriate $684 million during 2005
under the American Jobs Creation Act.

Conference Call
The company will be hosting a conference call with securities analysts today at 8:30 a.m.
(EDT). A live broadcast and a complete replay of this call can be accessed from
Lexmarks investor relations Web site at
http://investor.lexmark.com
. If you are unable
to connect to the Internet, you can access the call via telephone at 888-338-6461
(outside the U.S. by calling 973-582-2700) or the replay shortly afterward by calling 877-
519-4471 (outside the U.S. by calling 973-341-3080) using access code 7221909. The
telephone replay of the conference call will be available until 12 noon on Tuesday, May
2, 2006.

Supplemental information slides will be available on Lexmarks investor relations Web
site prior to the live broadcast.
About Lexmark
Lexmark International, Inc. makes it easier for businesses and consumers to move
information between the digital and paper worlds. Since its inception in 1991, Lexmark
has become a leading developer, manufacturer and supplier of printing and imaging
solutions for customers in more than 150 countries. Lexmark reported $5.2 billion in
revenue in 2005, and can be found on the Internet at www.lexmark.com.

Lexmark and Lexmark with diamond design are trademarks of Lexmark International, Inc.,
registered in the U.S. and/or other countries. All other trademarks are the property of their
respective owners.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements
in this release which are not historical facts are forward-looking and involve risks and
uncertainties, including, but not limited to, aggressive pricing from competitors and resellers,
production and supply difficulties including disruptions at important points of exit and entry and
distribution centers, management of the companys and resellers inventory levels, supplies
consumption, market conditions, the impact of competitors products, market acceptance of new
products and pricing programs, unforeseen cost impacts including those as a result of new
legislation, litigation or actions taken to maintain a competitive cost and expense structure,
increased investment to support product development and marketing, the ability and/or
incremental expense to produce and deliver products to satisfy customer demand, competition in
aftermarket supplies, changes in a countrys or regions political or economic conditions, currency
fluctuations, Chinas revaluation of its currency, financial failure or loss of business with a key
customer, reseller or supplier, conflicts among sales channels, the outcome of pending and future
litigation or governmental proceedings, intellectual property and other legal claims and expenses,
difficulties or delays in software and information systems implementations, and other risks
described in the company's Securities and Exchange Commission filings. The company
undertakes no obligation to update any forward-looking statement.


2006
2005
Revenue
1,275.3
$
1,357.6
$
Cost of revenue (1)
871.5
910.3
Gross profit
403.8
447.3
Research and development
87.4
82.6
Selling, general and administrative
174.8
203.0
Restructuring and other, net (1)
21.1
-

Operating expense
283.3
285.6
Operating income
120.5
161.7
Interest (income) expense, net
(6.3)
(6.4)
Other expense (income), net
0.8
2.7
Earnings before income taxes
126.0
165.4
Provision for income taxes
39.8
41.5
Net earnings
86.2
$
123.9
$
Net earnings per share:
Basic
0.79
$
0.97
$
Diluted
0.78
$
0.96
$
Shares used in per share calculation:
Basic
109.8
127.3
Diluted
110.2
129.5
(1)
Amounts for the three months ended March 31, 2006, include