Lexmark 2008 Annual Report Download - page 57

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repurchased shares in connection with certain of its employee benefit programs. As a result of these
issuances as well as the retirement of 44.0 million, 16.0 million and 16.0 million shares of treasury stock in
2005, 2006 and 2008, respectively, the net treasury shares outstanding at December 31, 2008, were
15.1 million.
Accelerated Share Repurchase Agreements
The Company executed two accelerated share repurchase agreements (“ASR”) with financial institution
counterparties in 2008, resulting in a total of 8.7 million shares repurchased at a cost of $250.0 million over
the third and fourth quarter. The impact of the two ASRs is included in the share repurchase totals provided
in the preceding paragraphs. The settlement provisions of both ASRs were essentially forward contracts,
and were accounted for under the provisions of Emerging Issues Task Force (“EITF”) Issue No. 00-19
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock as equity instruments. The details of each ASR are provided in the following paragraphs.
On August 28, 2008, the Company entered into an accelerated share repurchase agreement with a
financial institution counterparty. Under the terms of the ASR, the Company paid $150.0 million targeting
4.1 million shares based on an initial price of $36.90. On September 3, 2008, the Company took delivery of
85% of the shares, or 3.5 million shares at a cost of $127.5 million. The final number of shares to be
delivered by the counterparty under the ASR was dependent on the average of the daily volume weighted
average price of the Company’s common stock over the agreement’s trading period, a discount, and the
initial number of shares delivered. Under the terms of the ASR, the Company would either receive
additional shares from the counterparty or be required to deliver additional shares or cash to the
counterparty. The Company controlled its election to either deliver additional shares or cash to the
counterparty. On October 21, 2008, the counterparty delivered 1.2 million shares in final settlement of the
agreement, bringing the total shares repurchased under the ASR to 4.7 million at a total cost of
$150.0 million at an average price per share of $31.91.
On October 21, 2008, the Company entered into an accelerated share repurchase agreement with another
financial institution counterparty. Under the terms of the ASR, the Company paid $100.0 million targeting
3.9 million shares based on an initial price of $25.71. On October 24, 2008, the Company took delivery of
85% of the shares, or 3.3 million shares at a cost of $85.0 million. The final number of shares to be
delivered by the counterparty under the ASR was dependent on the average of the daily volume weighted
average price of the Company’s common stock over the agreement’s trading period, a discount, and the
initial number of shares delivered. Under the terms of the ASR, the Company would either receive
additional shares from the counterparty or be required to deliver additional shares or cash to the
counterparty. The Company controlled its election to either deliver additional shares or cash to the
counterparty. On December 26, 2008, the counterparty delivered 0.7 million shares in final settlement of
the agreement, bringing the total shares repurchased under the ASR to 4.0 million at a total cost of
$100.0 million at an average price per share of $25.22.
Retirement of Treasury Shares
In December 2005, October 2006 and October 2008, the Company received authorization from the board
of directors to retire 44.0 million, 16.0 million and 16.0 million shares, respectively, of the Company’s
Class A Common Stock currently held in the Company’s treasury as treasury stock. The retired shares
resumed the status of authorized but unissued shares of Class A Common Stock. Refer to the
Consolidated Statements of Stockholders’ Equity and Comprehensive Earnings for the effects on
Common stock,Capital in excess of par,Retained earnings and Treasury stock from the retirement of
the 16.0 million shares of Class A Common Stock in 2006 and 16.0 million shares of Class A Common
Stock in 2008.
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