Lexmark 2010 Annual Report Download - page 96

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The liability is included in Accrued liabilities on the Company’s Consolidated Statements of Financial
Position.
Employee
Termination
Benefits
Contract
Termination &
Lease Charges Total
Balance at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33.4 $ 5.9 $ 39.3
Costs incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 0.4 20.5
Payments & Other
(1)
............................. (30.4) (3.9) (34.3)
Reversals
(2)
.................................... (4.1) — (4.1)
Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . 19.0 2.4 21.4
Costs incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 — 0.5
Payments & Other
(1)
............................. (14.9) (1.5) (16.4)
Reversals
(2)
.................................... (2.3) (0.9) (3.2)
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . $ 2.3 $ — $ 2.3
(1)
Other consists of changes in the liability balance due to foreign currency translations.
(2)
Reversals due to changes in estimates for employee termination benefits.
6. STOCK-BASED COMPENSATION
Lexmark has various stock incentive plans to encourage employees and nonemployee directors to remain
with the Company and to more closely align their interests with those of the Company’s stockholders. As of
December 31, 2010, awards under the programs consisted of stock options, restricted stock units
(“RSUs”) and deferred stock units (“DSUs”). The Company currently issues the majority of shares
related to its stock incentive plans from the Company’s authorized and unissued shares of Class A
Common Stock. Approximately 49.3 million shares of Class A Common Stock have been authorized for
these stock incentive plans.
For the years ended December 31, 2010, 2009 and 2008, the Company incurred pre-tax stock-based
compensation expense of $19.4 million, $20.7 million, and $32.8 million, respectively, in the Consolidated
Statements of Earnings.
The following table presents a breakout of the stock-based compensation expense recognized for the
years ended December 31:
2010 2009 2008
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.1 $ 1.3 $ 2.8
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 3.1 5.1
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5 16.3 24.9
Stock-based compensation expense before income taxes. . . . . . . . . . . . . 19.4 20.7 32.8
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7.4) (6.9) (12.2)
Stock-based compensation expense after income taxes . . . . . . . . . . . . . . $12.0 $13.8 $ 20.6
Stock Options
Generally, options expire ten years from the date of grant. Options granted during 2010, 2009 and 2008
vest in approximately equal annual installments over a three to four year period based upon continued
employment or service on the Board of Directors.
During 2009, the Company granted a total of 559,000 performance-based stock options to a small number
of senior managers. The terms of the award require satisfaction of both a performance condition and a
service condition for the award recipient to become vested in the stock option. The performance measure
selected for the award is free operating cash flow over four consecutive quarters. As of December 31, 2009
90