Lexmark 2013 Annual Report Download - page 57

Financing activities
The fluctuations in the net cash flows used for financing activities were principally due to the Company’s share repurchases and net
proceeds from the issuance of senior notes. In 2013, cash flows used for financing activities were $107.7 million, due mainly to net
proceeds from debt activities of $47.3 million, share repurchases of $82.0 million and dividend payments of $75.3 million. In 2012,
cash flows used for financing activities were $263.4 million, due mainly to share repurchases of $190.0 million and dividend
payments of $78.6 million, less proceeds from employee stock plans of $5.8 million. In 2011, cash flows used for financing activities
were $272.3 million, due mainly to share repurchases of $250 million, dividend payment of $18 million as well as the $7.1 million
repayment of debt assumed by the Company in the fourth quarter acquisition of Pallas Athena.
Intra-period financing activities
The Company used its trade receivables facility, bank overdrafts and other financing sources to supplement daily cash needs of the
Company and its subsidiaries in 2013. Such borrowings were repaid in very short periods of time and were not material to the
Company’s overall liquidity position or its financial statements.
Share repurchases and dividend payments
The Company’s capital return framework is to return, on average, more than 50 percent of free cash flow to its shareholders through
dividends and share repurchases. During 2013, the Company repurchased approximately 2.7 million shares of its Class A Common
Stock at a cost of $82 million through four accelerated share repurchase agreements executed during the period. As of December 31,
2013, there was approximately $169 million of remaining share repurchase authority from the Board of Directors. 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. Refer to Part II, Item 8, Note 15 of the Notes to
Consolidated Financial Statements for additional information regarding share repurchases. During 2012, the Company repurchased
approximately 8.1 million shares of its Class A Common Stock at a cost of $190 million through four accelerated share repurchase
agreements executed during the period. During 2011, the Company repurchased approximately 7.9 million shares of its Class A
Common Stock at a cost of $250 million through two accelerated share repurchase agreements executed during the period.
The Company’s board declared dividends each quarter during 2013. Refer to Part II, Item 8, Note 15 of the Notes to Consolidated
Financial Statements for additional information.
On February 20, 2014, subsequent to the date of the financial statements, the Company’s Board of Directors declared a cash dividend
of $0.30 per share. The cash dividend will be paid on March 14, 2014, to shareholders of record as of the close of business on March
3, 2014. Future declarations of quarterly dividends are subject to approval by the Board of Directors and may be adjusted as business
needs or market conditions change.
After the close of the markets on January 28, 2014, the Company entered into an ASR Agreement with a financial institution
counterparty to repurchase additional shares of the Company’s Class A Common Stock. Refer to Part II, Item 8, Note 21 of the Notes
to Consolidated Financial Statements for additional information.
Senior Note Debt
In March 2013, the Company completed a public debt offering of $400.0 million aggregate principal amount of fixed rate senior
unsecured notes. The notes with an aggregate principal amount of $400.0 million and 5.125% coupon were priced at 99.998% to have
an effective yield to maturity of 5.125% and will mature March 15, 2020 (referred to as the “2020 senior notes”). The 2020 senior
notes will rank equally with all existing and future senior unsecured indebtedness. The notes from the May 2008 public debt offering
with an aggregate principal amount of $300.0 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, 2013 and December 31, 2012, the
outstanding balance of senior note debt was $699.6 million and $649.6 million, respectively, net of discount.
The 2020 senior notes pay interest on March 15 and September 15 of each year, beginning September 15, 2013. The 2018 senior notes
pay interest on June 1 and December 1 of each year. The interest rate payable on the notes of each series will be 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 agreements, 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.
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