Lexmark 2009 Annual Report Download - page 63

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Financing activities
The fluctuations in the net cash flows provided by (used for) financing activities were principally due to the
Company’s share repurchases and debt activity. In 2009, cash flows provided by financing activities were
$3.8 million due mainly to the increase in bank overdrafts of $9.9 million included in Other offset partially by
$6.6 million repayment of foreign currency short-term debt. In 2008, cash flows used for financing activities
were $48.1 million driven by share repurchases of $554.5 million and the repayment of $150.0 million of
maturing debt, offset partially by $644.5 million of net proceeds from the issuance of new long-term debt. In
2007, cash flows used for financing were $147.0 million due mostly to $165.0 million of share repurchases
offset partially by proceeds from employee stock plans of $15.6 million. Refer to the sections that follow for
additional information regarding these financing activities.
Share Repurchases
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, 2009, 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. The Company did not repurchase any shares of its Class A Common Stock
in 2009 due to the decline in cash flow from operations as well as the increase in capital spending. 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, 2009,
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, 2009, 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, 2009, 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 of 2008. 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 guidance on accounting as equity instruments
for derivative financial instruments indexed to, and potentially settled in, a company’s own stock. 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 to which 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
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