Lexmark 2010 Annual Report Download - page 90

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assets or liabilities measured at fair value on a nonrecurring basis subsequent to initial recognition during
2010.
2009
Fair Value at
Dec. 31,
2009
Quoted Prices in
Active Markets
(Level 1)
Other Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
Total Gains
(Losses)
4th Qtr 2009
Total Gains
(Losses)
YTD 2009
Fair Value Measurements Using
Private equity investment. . . . . $ — $— $— $ — $ — $(3.0)
Long-lived assets held and
used — Leased Products . . . $2.4 $— $— $2.4 $(2.1) $(2.1)
$(2.1) $(5.1)
Private equity investment
The Company purchased preferred shares of a private company for $3 million in the fourth quarter of 2008.
In the third quarter of 2009, the Company was notified of a new offering by the investee at a price that was
lower than the previous shares sold. A short time later, the Company was notified that the latest stock
offering had failed to produce the necessary cash flow to meet the investee’s needs and that the decision
had been made to temporarily suspend operations until such time that the necessary capital could be
raised. After considering these events, the Company decided that the investment was more than likely
other-than-temporarily impaired and should be written down to its estimated fair value through earnings.
The Company believes that selling this investment would be difficult and the investment’s exit value, if any,
would be difficult to substantiate. Given these conditions and the high risk associated with such an
investment, the Company estimated the fair value to be of minimal value or no value at all. The $3 million
investment was written off in full to Other (income) expense, net on the Consolidated Statements of
Earnings in the third quarter of 2009. In the fourth quarter of 2009, the private company filed bankruptcy
under Chapter 7 (liquidation) under the U.S. Bankruptcy laws.
Long-lived assets held and used
In the fourth quarter of 2008, the Company executed a five year operating lease with a customer whereby
Lexmark would install and manage various printing devices over the contract period. In the fourth quarter
of 2009, sufficient information was available that indicated the original cash flow and profitability
assumptions were different than the actual experience with the customer. In accordance with the
guidance on impairment or disposal of long-lived assets, the leased products with a carrying value of
$4.5 million were written down to their fair value of $2.4 million, resulting in an impairment charge of
$2.1 million, which was included in Cost of revenue in 2009. The fair value of $2.4 million was determined
based on non-binding used retail prices in the secondary market after considering the highest and best use
of the asset from the perspective of market participants in the most advantageous market.
4. BUSINESS COMBINATIONS
Acquisition of Perceptive Software, Inc.
On June 7, 2010, the Company acquired all issued and outstanding stock of Perceptive Software, Inc.
(“Perceptive Software”), a leading provider of ECM software and solutions, for $280 million in cash. The
acquisition builds upon and strengthens Lexmark’s current industry-focused document workflow solutions
and managed print services and enables the Company to immediately participate in the adjacent, growing
market segment of ECM software solutions.
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