Lexmark 2008 Annual Report Download - page 107

Lexmark generally has experienced longer accounts receivable cycles in its emerging markets, in
particular, Latin America, when compared to its U.S. and European markets. In the event that
accounts receivable cycles in these developing markets lengthen further, the Company could be
adversely affected.
Lexmark also procures a wide variety of components used in the manufacturing process. Although many of
these components are available from multiple sources, the Company often utilizes preferred supplier
relationships to better ensure more consistent quality, cost and delivery. The Company also sources some
printer engines and finished products from OEMs. Typically, these preferred suppliers maintain alternate
processes and/or facilities to ensure continuity of supply. Although Lexmark plans in anticipation of its
future requirements, should these components not be available from any one of these suppliers, there can
be no assurance that production of certain of the Company’s products would not be disrupted.
17. COMMITMENTS AND CONTINGENCIES
Commitments
Lexmark is committed under operating leases (containing various renewal options) for rental of office and
manufacturing space and equipment. Rent expense (net of rental income) was $55.6 million, $55.1 million
and $49.9 million in 2008, 2007 and 2006, respectively. Future minimum rentals under terms of non-
cancelable operating leases (net of sublease rental income commitments) as of December 31, 2008, were
as follows:
2009 2010 2011 2012 2013 Thereafter
Minimum lease payments (net of sublease
rental income) . . . . . . . . . . . . . . . . . . . . . . . $35.7 $24.7 $16.0 $9.8 $4.7 $3.0
Contingencies
In accordance with SFAS No. 5, Accounting for Contingencies, Lexmark records a provision for a loss
contingency when management believes that it is both probable that a liability has been incurred and the
amount of loss can be reasonably estimated. The Company believes it has adequate provisions for any
such matters.
Legal proceedings
On December 30, 2002 (“02 action”) and March 16, 2004 (“04 action”), the Company filed claims against
Static Control Components, Inc. (“SCC”) in the U.S. District Court for the Eastern District of Kentucky (the
“District Court”) alleging violation of the Company’s intellectual property and state law rights. Similar claims
in a separate action were filed by the Company in the District Court against David Abraham and Clarity
Imaging Technologies, Inc. (“Clarity”) on October 8, 2004. SCC and Clarity have filed counterclaims
against the Company in the District Court alleging that the Company engaged in anti-competitive and
monopolistic conduct and unfair and deceptive trade practices in violation of the Sherman Act, the Lanham
Act and state laws. SCC has stated in its legal documents that it is seeking approximately $17.8 million to
$19.5 million in damages for the Company’s alleged anticompetitive conduct and approximately $1 billion
for Lexmark’s alleged violation of the Lanham Act. Clarity has not stated a damage dollar amount. SCC and
Clarity are seeking treble damages, attorney fees, costs and injunctive relief. On September 28, 2006, the
District Court dismissed the counterclaims filed by SCC alleging that the Company engaged in anti-
competitive and monopolistic conduct and unfair and deceptive trade practices in violation of the Sherman
Act, the Lanham Act and state laws. On October 13, 2006, SCC filed a Motion for Reconsideration of the
District Court’s Order dismissing SCC’s claims, or in the alternative, to amend its pleadings, which the
District Court denied on June 1, 2007. On October 13, 2006, the District Court issued an order to stay the
action brought against David Abraham and Clarity until a final judgment or settlement are entered into in
the consolidated 02 and 04 actions. On June 20, 2007, the District Court Judge ruled that SCC directly
infringed one of Lexmark’s patents-in-suit. On June 22, 2007, the jury returned a verdict that SCC did not
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