Lexmark 2008 Annual Report Download - page 97

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On November 10, 2005, the FASB issued FSP No. FAS 123R-3, Transition Election Related to Accounting
for the Tax Effects of Share-Based Payment Awards (“FSP 123R-3”). The Company elected to adopt the
alternative transition method provided in FSP 123R-3 for calculating the tax effects of stock-based
compensation pursuant to SFAS 123R. The alternative transition method includes simplified methods
to establish the beginning balance of the additional paid-in capital pool (“APIC pool”) related to the tax
effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool
and Consolidated Statement of Cash Flows of the tax effects of employee stock-based compensation
awards that are outstanding upon the adoption of SFAS 123R.
13. STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE EARNINGS (LOSS)
The Class A Common Stock is voting and exchangeable for Class B Common Stock in very limited
circumstances. The Class B Common Stock is non-voting and is convertible, subject to certain limitations,
into Class A Common Stock.
At December 31, 2008, approximately 790.2 million and 1.8 million shares of Class A and Class B
Common Stock were unissued and unreserved. These shares are available for a variety of general
corporate purposes, including future public offerings to raise additional capital and for facilitating
acquisitions.
In May 2008, the Company received authorization from the board of directors to repurchase an additional
$750 million of its Class A Common Stock for a total repurchase authority of $4.65 billion. As of
December 31, 2008, there was approximately $0.5 billion of share repurchase authority remaining.
This repurchase authority allows the Company, at management’s discretion, to selectively repurchase
its stock from time to time in the open market or in privately negotiated transactions depending upon
market price and other factors. During 2008, the Company repurchased approximately 17.5 million shares
at a cost of approximately $0.6 billion, including two accelerated share repurchase agreements discussed
below. As of December 31, 2008, since the inception of the program in April 1996, the Company had
repurchased approximately 91.6 million shares for an aggregate cost of approximately $4.2 billion. As of
December 31, 2008, the Company had reissued approximately 0.5 million shares of previously
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.
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.
In 1998, the Company’s board of directors adopted a stockholder rights plan (the “Rights Plan”) which
provides existing stockholders with the right to purchase one one-thousandth (0.001) of a share of Series A
Junior Participating preferred stock for each share of Class A and Class B Common Stock held in the event
of certain changes in the Company’s ownership. The rights expired on January 31, 2009.
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
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