Lexmark 2014 Annual Report Download - page 52

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For the year ended December 31, 2012, restructuring charges and project costs were incurred in the Company’s segments as follows:
(Dollars in millions) 2012 Actions Other Actions Total
ISS $ 91.8 $ 0.8 $ 92.6
All other 26.6 1.9 28.5
Perceptive Software 0.7 – 0.7
Total restructuring charges and project costs $ 119.1 $ 2.7 $ 121.8
ACQUISITION AND DIVESTITURE-RELATED ADJUSTMENTS
Pre-tax acquisition and divestiture-related adjustments affected the Company’s financial results as follows:
(Dollars in Millions) 2014 2013 2012
Reduction in revenue $ 17.1 $ 15.9 $ 5.5
Amortization of intangible assets 73.4 56.9 41.4
Acquisition and integration costs 28.6 17.6 18.9
Total acquisition-related adjustments $ 119.1 $ 90.4 $ 65.8
Gain on sale of inkjet-related technology and assets – (73.5) –
Divestiture costs 1.7 4.3 –
Total divestiture-related adjustments 1.7 (69.2) –
Total acquisition and divestiture-related adjustments $ 120.8 $ 21.2 $ 65.8
Reductions in revenue and amortization of intangible assets were recognized primarily in the Perceptive Software reportable segment.
Acquisition and integration costs were recognized primarily in All other. The net Gain on sale of inkjet-related technology and assets
of $73.5 million was composed of a gain of $103.1 million recognized in the ISS reportable segment offset by a loss of $29.6 million
recognized in All other. Divestiture costs were recognized primarily in ISS.
Acquisitions
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.
Reductions in revenue result from business combination accounting rules when deferred revenue balances 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 $17.1
million, $15.9 million and $5.5 million downward adjustments to revenue for 2014, 2013 and 2012, respectively, are reflected in
Revenue presented on the Company’s Consolidated Statements of Earnings. The Company expects future pre-tax reductions in
revenue of approximately $13 million for 2015.
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 research and development 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. The Company incurred the following on the Consolidated Statements of Earnings for the
amortization of intangible assets.
Amortization of intangible assets:
(Dollars in Millions) 2014 2013 2012
Recorded in Cost of product revenue $ 45.2 $ 36.5 $ 27.2
Recorded in Research and development 0.8 0.7 0.9
Recorded in Selling, general and administrative 27.4 19.7 13.3
Total amortization of intangible assets $ 73.4 $ 56.9 $ 41.4
For 2015, the Company expects pre-tax charges for the amortization of intangible assets to be approximately $71 million.
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