Lexmark 2015 Annual Report Download - page 58

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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 subsidiaries.
Additional sources of liquidity
The Company has additional liquidity available through its trade receivables facility and committed and uncommitted revolving credit
facilities. 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.
Trade Receivables Facility
In the U.S., the Company, Lexmark Enterprise Software, LLC (“LESL”) and Kofax, Inc. transfer a majority of their receivables to a
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. At December 31,
2015, the Company had total accounts receivable pledged as collateral of $114.6 million held by LRC which were included in Trade
receivables in the Company’s Consolidated Statements of Financial Position.
On August 27, 2015, the trade receivables facility was amended by extending the term of the facility to October 6, 2017. In addition,
Kofax, Inc. became a new originator under the facility, permitting advancements under the facility as accounts receivables are
originated by Kofax, Inc. and sold to LRC. The maximum capital availability under the facility remains at $125 million under the
amended agreement. The secured borrowings outstanding under the trade receivables facility at December 31, 2015 was $76.0 million.
There was no outstanding balance as of December 31, 2014. The average daily balance under the trade receivables facility during
2015 and 2014 was $81.4 million and $12.7 million, respectively.
The amended 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. On October 20, 2015, the
trade receivables facility was amended to correspond to the changes made to the credit facility, discussed below, on October 19, 2015.
Further information on the amendments can be found in the Form 8-K report that was filed with the SEC by the Company on October
23, 2015.
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 revolving 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 revolving 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 revolving credit facility can be found in the Form 8-K report that was filed with the SEC by the
Company on February 6, 2014. On October 19, 2015, the revolving credit facility was further amended to reduce the impact of certain
cash restructuring charges incurred by the Company and certain fees and expenses incurred by the Company in connection with
permitted acquisitions. Further information on the amendments can be found in the Form 8-K report that was filed with the SEC by
the Company on October 23, 2015.