Lexmark 2014 Annual Report Download - page 58

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 2014, the Company repurchased approximately 1.9 million shares of its Class A Common
Stock at a cost of $80 million through four accelerated share repurchase agreements executed during the period. As of December 31,
2014, there was approximately $89 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 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. 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.
The Company’s board declared dividends each quarter during 2014. Refer to Part II, Item 8, Note 15 of the Notes to Consolidated
Financial Statements for additional information.
On February 19, 2015, subsequent to the date of the financial statements, the Company’s Board of Directors declared a cash dividend
of $0.36 per share. The cash dividend will be paid on March 13, 2015, to shareholders of record as of the close of business on March
2, 2015. 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 27, 2015, 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 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, 2014 and December 31, 2013, the
outstanding balance of senior note debt was $699.7 million and $699.6 million, respectively, net of discount.
The 2020 senior notes pay interest on March 15 and September 15 of each year. 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.
A “change of control triggering event” is defined as the occurrence of both a change of control and a downgrade in the debt rating
assigned to the notes to a level below investment grade.
In March 2013, the Company repaid its $350.0 million principal amount of 5.90% senior notes that were due on June 1, 2013 (referred
to as the “2013 senior notes”). For the year ended December 31, 2013, a loss of $3.3 million was recognized in the Consolidated
Statements of Earnings, related to $3.2 million of premium paid upon repayment and $0.1 million related to the write-off of related
debt issuance costs.
The Company used a portion of the net proceeds from the 2020 senior notes offering to extinguish the 2013 senior notes and used the
remaining net proceeds for general corporate purposes, including to fund share repurchases, fund dividends, finance acquisitions,
finance capital expenditures and operating expenses and invest in various subsidiaries.
Additional sources of liquidity
The Company has additional liquidity available through its trade receivables facility and revolving credit facility. These sources can
be accessed domestically if the Company is unable to satisfy its cash needs in the United States with cash flows provided by
operations and existing cash and cash equivalents and marketable securities.
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