Lexmark 2014 Annual Report Download - page 111

16. EARNINGS PER SHARE (“EPS”)
The following table presents a reconciliation of the numerators and denominators of the basic and diluted EPS calculations for the
years ended December 31:
2014 2013 2012
Numerator:
Net earnings $ 79.1 $ 261.8 $ 107.6
Denominator:
Weighted average shares used to compute basic EPS 62.0 63.0 68.6
Effect of dilutive securities -
Employee stock plans 1.2 1.1 0.9
Wei
g
hted avera
g
e shares used to com
p
ute diluted EPS 63.2 64.1 69.5
Basic net EPS $ 1.28 $ 4.16 $ 1.57
Diluted net EPS $ 1.25 $ 4.08 $ 1.55
Restricted stock units (“RSUs”), stock options, and dividend equivalent units totaling an additional 0.9 million, 2.4 million and 3.8
million shares of Class A Common Stock in 2014, 2013, and 2012, respectively, were outstanding but were not included in the
computation of diluted net EPS because the effect would have been antidilutive.
Under the terms of Lexmark’s RSU agreements, unvested RSU awards contain forfeitable rights to dividends and dividend equivalent
units. Because the dividend equivalent units are forfeitable, they are defined as non-participating securities. As of December 31, 2014,
there were approximately 0.2 million dividend equivalent units outstanding, which will vest at the time that the underlying RSU vests.
In addition to the 0.9 million antidilutive shares for the year ended December 31, 2014, mentioned above, unvested restricted stock
units with a performance condition that were granted in the first quarter of 2014 and 2013 were also excluded from the computation of
diluted EPS. According to FASB guidance on EPS, contingently issuable shares are excluded from the computation of diluted EPS if,
based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency
period. If the performance condition were to become satisfied based on actual financial results and the performance awards would
have a dilutive impact on EPS, the performance awards included in the diluted EPS calculation would be in the range of 0.1 million to
0.4 million shares depending on the level of achievement. Refer to Note 6 of the Notes to Consolidated Financial Statements for
additional information regarding restricted stock awards with a performance condition.
The Company executed four accelerated share repurchase agreements with financial institution counterparties in 2014, resulting in a
total of 1.9 million shares repurchased at a cost of $80 million during the year. The ASRs had a favorable impact to basic and diluted
EPS in 2014.
In addition to the 2.4 million antidilutive shares for the year ended December 31, 2013 mentioned above, unvested restricted stock
units with a performance condition that were granted in the first quarter of 2013 were also excluded from the computation of diluted
EPS.
The Company executed four accelerated share repurchase agreements with financial institution counterparties in 2013, resulting in a
total of 2.7 million shares repurchased at a cost of $82 million during the year. The ASRs had a favorable impact to basic and diluted
EPS in 2013.
The Company executed four accelerated share repurchase agreements with financial institution counterparties in 2012, resulting in a
total of 8.1 million shares repurchased at a cost of $190 million over the third and fourth quarter. The ASRs had a favorable impact to
basic and diluted EPS in 2012.
17. EMPLOYEE PENSION AND POSTRETIREMENT PLANS
Lexmark and its subsidiaries have defined benefit and defined contribution pension plans that cover certain of its regular employees,
and a supplemental plan that covers certain executives. Medical, dental and life insurance plans for retirees are provided by the
Company and certain of its non-U.S. subsidiaries.
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