Lexmark 2014 Annual Report Download - page 48

Net earnings for the year ended December 31, 2014 declined 70% from the prior year primarily due to lower operating income and a
higher effective tax rate. For 2014, the YTY decrease in basic and diluted earnings per share was primarily due to lower net earnings,
partially offset by a reduction in weighted-average shares outstanding, due to the Company’s share repurchases.
Net earnings for the year ended December 31, 2013 increased 143% from the prior year primarily due to higher operating income and
a lower effective tax rate. For 2013, the YTY increase in basic and diluted earnings per share was primarily due to higher net earnings
and a reduction in weighted-average shares outstanding, due to the Company’s share repurchases.
RESTRUCTURING CHARGES AND PROJECT COSTS
Summary of Restructuring Impacts
The Company’s 2014 financial results are impacted by its restructuring plans and related projects. Project costs consist of additional
charges related to the execution of the restructuring plans. These project costs are incremental to the Company’s normal operating
charges and are expensed as incurred, and include such items as compensation costs for overlap staffing, travel expenses, consulting
costs and training costs.
As part of Lexmark’s ongoing strategy to increase the focus of its talent and resources on higher usage business platforms, the
Company announced restructuring actions on January 31 and August 28, 2012 (the “2012 Restructuring Actions”). These actions
better align the Company’s sales, marketing and development resources, and align and reduce its support structure consistent with its
focus on business customers. The 2012 Restructuring Actions include exiting the development and manufacturing of the Company’s
inkjet technology, with reductions primarily in the areas of inkjet-related manufacturing, research and development, supply chain,
marketing and sales as well as other support functions. The Company will continue to provide service, support and aftermarket
supplies for its inkjet installed base. As previously reported, in the second quarter of 2013, the Company sold inkjet-related technology
and assets. Refer to Note 4 of the Notes to Consolidated Financial Statements for more information.
The 2012 Restructuring Actions are expected to impact about 2,063 positions worldwide, including 300 manufacturing positions. The
2012 Restructuring Actions will result in total pre-tax charges, including project costs, of approximately $242 million with $223.2
million incurred to date and the remaining $18.8 million to be incurred in 2015. The Company expects the total cash costs of the 2012
Restructuring Actions to be approximately $159 million with $140.7 million incurred to date and the remaining $18.3 million
impacting 2015. The anticipated timing of cash outlays for the 2012 Restructuring Actions is $32.8 million in 2015, with cash outlays
of approximately $35.3 million in 2014, $49.7 million in 2013, $38.0 million in 2012 and $3.2 million in 2011.
Lexmark expects the 2012 Restructuring Actions to generate ongoing annual savings of approximately $178 million, of which
approximately $155 million will be cash savings. These ongoing savings should be split approximately 70% to Operating expense and
30% to Cost of revenue. The Company expects these actions to be complete by the end of 2015.
Refer to Part II, Item 8, Note 5 of the Notes to Consolidated Financial Statements for a description of the Company’s Other
Restructuring Actions. In 2013 and 2014, charges were incurred for actions that were not a part of an announced plan. The Other
Restructuring Actions are substantially completed and any remaining charges to be incurred are expected to be immaterial.
Refer to Part II, Item 8, Note 5 of the Notes to Consolidated Financial Statements for a rollforward of the liability incurred for the
2012 Restructuring Actions and the Other Restructuring Actions.
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