Lexmark 2007 Annual Report Download - page 80

swaps with a notional amount of $150.0 million were executed whereby the Company will receive interest
at a fixed rate of 6.75% and pay interest at a variable rate of approximately 2.76% above the six-month
London Interbank Offered Rate (“LIBOR”). These interest rate swaps have a maturity date of May 15,
2008, which is equivalent to the maturity date of the senior notes.
Credit Facility
Effective January 20, 2005, Lexmark entered into a $300 million 5-year senior, unsecured, multi-currency
revolving credit facility with a group of banks. Under the credit facility, the Company may borrow in dollars,
euros, British pounds sterling and Japanese yen. Under certain circumstances, the aggregate amount
available under the facility may be increased to a maximum of $500 million. As of December 31, 2007 and
2006, there were no amounts outstanding under the credit facility.
Lexmark’s credit agreement contains usual and customary default provisions, leverage and interest
coverage restrictions and certain restrictions on secured and subsidiary debt, disposition of assets, liens
and mergers and acquisitions. The $300 million credit facility has a maturity date of January 20, 2010.
Interest on all borrowings under the facility depends upon the type of loan, namely alternative base rate
loans, swingline loans or eurocurrency loans. Alternative base rate loans bear interest at the greater of the
prime rate or the federal funds rate plus one-half of one percent. Swingline loans (limited to $50 million)
bear interest at an agreed upon rate at the time of the borrowing. Eurocurrency loans bear interest at the
sum of (i) a LIBOR for the applicable currency and interest period and (ii) an interest rate spread based
upon the Company’s debt ratings ranging from 0.18% to 0.80%. In addition, Lexmark is required to pay a
facility fee on the $300 million line of credit of 0.07% to 0.20% based upon the Company’s debt ratings. The
interest and facility fees are payable at least quarterly.
Short-term Debt
Lexmark’s Brazilian operation has a short-term, uncommitted line of credit. The interest rate on this line of
credit varies based upon the local prevailing interest rates at the time of borrowing. The interest rate
averaged approximately 15% and 19% during 2007 and 2006, respectively. As of December 31, 2007 and
2006, there were no amounts outstanding under the credit facility.
Other
Total cash paid for interest on the debt facilities amounted to $12.6 million, $12.7 million and $10.8 million in
2007, 2006 and 2005, respectively.
The components of Interest (income) expense, net in the Consolidated Statements of Earnings were as
follows:
2007 2006 2005
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(34.2) $(34.2) $(37.7)
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.0 12.1 11.2
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(21.2) $(22.1) $(26.5)
11. INCOME TAXES
Adoption of FIN 48
The Company adopted the provisions of FIN 48 and related guidance on January 1, 2007. As a result of the
implementation of FIN 48, the Company reduced its liability for unrecognized tax benefits and related
interest and penalties by $7.3 million, which resulted in a corresponding increase in the Company’s
January 1, 2007, retained earnings balance. The Company also recorded an increase in its deferred tax
assets of $8.5 million and a corresponding increase in its liability for unrecognized tax benefits as a result of
adopting FIN 48.
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