Lexmark 2011 Annual Report Download - page 60

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The Company incurred accelerated depreciation charges of $41.4 million and $0.1 million, respectively,
in Cost of revenue and Selling, general and administrative on the Consolidated Statements of
Earnings. Employee termination benefit and contract termination and lease charges of $70.6 million
are included in Restructuring and related charges, and $10.1 million and $19.1 million, respectively, of
restructuring-related project costs are included in Cost of revenue and Selling, general and
administrative on the Company’s Consolidated Statements of Earnings.
For the year ended December 31, 2009, the Company incurred restructuring and related charges and
project costs related to the October 2009 Restructuring Plan of $51.2 million in ISS and $12.3 million in
All other. The Company incurred restructuring and related charges and project costs related to the
Other Restructuring Actions of $57.8 million in ISS and $20.0 million in All other.
ACQUISITION-RELATED ADJUSTMENTS
In connection with acquisitions, Lexmark incurs costs and adjustments (referred to as “acquisition-
related adjustments”) that affect the Company’s financial results. These acquisition-related adjustments
result from business combination accounting rules as well as expenses that would otherwise have not
been incurred by the Company if acquisitions had not taken place.
The following pre-tax acquisition-related adjustments affected the Company’s 2011 financial results.
(Dollars in Millions) 2011 2010
Adjustment to revenue .................................................... $ 4.9 $13.0
Amortization of intangible assets ........................................... 21.2 12.0
Acquisition and integration costs ........................................... 3.3 7.1
Total acquisition-related adjustments ........................................ $29.4 $32.1
Adjustments to revenue result from business combination accounting rules when deferred revenue
balances for service contracts assumed as part of acquisitions are adjusted down to fair value. Fair
value approximates the cost of fulfilling the service obligation, plus a reasonable profit margin.
Subsequent to acquisitions, the Company analyzes the amount of amortized revenue that would have
been recognized had the acquired company remained independent and had the deferred revenue
balances not been adjusted to fair value. The $4.9 million and $13.0 million downward adjustments to
revenue for 2011 and 2010, respectively, are reflected in Revenue presented on the Company’s
Consolidated Statements of Earnings. Downward adjustments to Revenue for the second half of 2011
and the second half of 2010 were $1.4 million and $11.0 million, respectively. The Company expects
future pre-tax adjustments to deferred revenue to be immaterial.
Due to business combination accounting rules, intangible assets are recognized as a result of
acquisitions which were not previously presented on the balance sheet of the acquired company.
These intangible assets consist primarily of purchased technology, customer relationships, trade
names, in-process R&D and non-compete agreements. Subsequent to the acquisition date, some of
these intangible assets begin amortizing and represent an expense that would not have been recorded
had the acquired company remained independent. During 2011 and 2010, the Company incurred
$15.5 million and $9.1 million, respectively, in Cost of revenue and $5.3 million and $2.9 million,
respectively, in Selling, general and administrative, as well as $0.4 million in Research and
development during 2011 on the Company’s Consolidated Statements of Earnings for amortization of
intangible assets. For 2012, the Company expects pre-tax charges for the amortization of intangible
assets to be approximately $24 million.
In connection with its acquisitions, the Company incurs acquisition and integration expenses that would
not have been incurred otherwise. The acquisition costs include items such as investment banking
fees, legal and accounting fees, and costs of retention bonus programs for the senior management of
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