Lexmark 2014 Annual Report Download - page 59

Trade Receivables Facility
In the U.S., the Company and one of its wholly-owned consolidated entities transfers a majority of their receivables to its wholly-
owned subsidiary, Lexmark Receivables Corporation (“LRC”), which then may transfer the receivables on a limited recourse basis to
an unrelated third party. The financial results of LRC are included in the Company’s consolidated financial results since it is a wholly-
owned subsidiary. LRC is a separate legal entity with its own separate creditors who, in a liquidation of LRC, would be entitled to be
satisfied out of LRC’s assets prior to any value in LRC becoming available for equity claims of the Company. The Company accounts
for transfers of receivables from LRC to the unrelated third party as a secured borrowing with the pledge of its receivables as collateral
since LRC has the ability to repurchase the receivables interests at a determinable price.
In October 2014, the trade receivables facility was amended by extending the term of the facility to October 7, 2016. The maximum
capital availability under the facility remains at $125 million under the amended agreement. There were no secured borrowings
outstanding under the trade receivables facility at December 31, 2014 or December 31, 2013.
This facility contains customary affirmative and negative covenants as well as specific provisions related to the quality of the accounts
receivables transferred. Receivables transferred to the unrelated third party may not include amounts over 90 days past due or
concentrations over certain limits with any one customer. The facility also contains customary cash control triggering events which, if
triggered, could adversely affect the Company’s liquidity and/or its ability to obtain secured borrowings.
Revolving Credit Facility
Effective February 5, 2014, Lexmark amended its $350 million 5-year senior, unsecured, multicurrency revolving credit facility,
entered into on January 18, 2012, by increasing its size to $500 million. In addition, the maturity date of the amended credit facility
was extended to February 5, 2019. Refer to Part II, Item 8, Note 13 of the Notes to Consolidated Financial Statements for more
information on the facility.
The amended credit facility contains customary affirmative and negative covenants and also contains certain financial covenants,
including those relating to a minimum interest coverage ratio of not less than 3.0 to 1.0 and a maximum leverage ratio of not more
than 3.0 to 1.0 as defined in the agreement. The amended credit facility also limits, among other things, the Company’s indebtedness,
liens and fundamental changes to its structure and business.
Additional information related to the 2014 credit facility can be found in the Form 8-K report that was filed with the SEC by the
Company on February 6, 2014.
As of December 31, 2014 and December 31, 2013, there were no amounts outstanding under the revolving credit facilities.
Credit Ratings and Other Information
The Company’s credit ratings by Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. and Fitch Rating, Inc. are
BBB-, Baa3 and BBB-, respectively. The ratings remain investment grade.
The Company’s credit rating can be influenced by a number of factors, including overall economic conditions, demand for the
Company’s products and services and ability to generate sufficient cash flow to service the Company’s debt. A downgrade in the
Company’s credit rating to non-investment grade would decrease the maximum availability under its trade receivables facility,
potentially increase the cost of borrowing under the revolving credit facility and increase the coupon payments on the Company’s
public debt, and likely have an adverse effect on the Company’s ability to obtain access to new financings in the future. The Company
does not have any rating downgrade triggers that accelerate the maturity dates of its Facility or public debt.
The Company was in compliance with all covenants and other requirements set forth in its debt agreements at December 31, 2014.
The Company believes that it is reasonably likely that it will continue to be in compliance with such covenants in the near future.
Off-Balance Sheet Arrangements
At December 31, 2014, the Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a material
current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources. Refer to Note 19 of the Notes to Consolidated Financial Statements for information
regarding the Company future minimum lease rentals under the terms of non-cancelable operating leases.
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