Lexmark 2009 Annual Report Download - page 64

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 to which 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 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 16.0 million shares of Class A
Common Stock in 2008.
Senior Notes — Long-term Debt
In May 2008, the Company repaid its $150 million principal amount of 6.75% senior notes that were due on
May 15, 2008. Additionally, in May 2008, the Company completed a public debt offering of $650 million
aggregate principal amount of fixed rate senior unsecured notes. The notes are split into two tranches of
five- and ten-year notes respectively. The five-year notes with an aggregate principal amount of
$350 million and 5.9% coupon were priced at 99.83% to have an effective yield to maturity of 5.939%
and will mature June 1, 2013 (referred to as the “2013 senior notes”). The ten-year notes with an aggregate
principal amount of $300 million and 6.65% coupon were priced at 99.73% to have an effective yield to
maturity of 6.687% and will mature June 1, 2018 (referred to as the “2018 senior notes”). At December 31,
2009, the outstanding balance was $648.9 million (net of unamortized discount of $1.1 million). At
December 31, 2008, the outstanding balance was $648.7 million (net of unamortized discount of
$1.3 million).
The 2013 and 2018 senior notes (collectively referred to as the “senior notes”) pay interest on June 1 and
December 1 of each year. The interest rate payable on the notes of each series is subject to adjustments
from time to time if either Moody’s Investors Service, Inc. or Standard and Poor’s Ratings Services
downgrades the debt rating assigned to the notes to a level below investment grade, or subsequently
upgrades the ratings.
The senior notes contain typical restrictions on liens, sale leaseback transactions, mergers and sales of
assets. There are no sinking fund requirements on the senior notes and they may be redeemed at any time
at the option of the Company, at a redemption price as described in the related indenture agreement, as
supplemented and amended, in whole or in part. If a “change of control triggering event” as defined below
occurs, the Company will be required to make an offer to repurchase the notes in cash from the holders at a
price equal to 101% of their aggregate principal amount plus accrued and unpaid interest to, but not
including, the date of repurchase. A “change of control triggering event” is defined as the occurrence of
both a change of control and a downgrade in the debt rating assigned to the notes to a level below
investment grade.
Net proceeds from the senior notes have been used for general corporate purposes, such as to fund share
repurchases, finance capital expenditures and operating expenses and invest in subsidiaries.
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