Attached files
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EX-31.1 - EXHIBIT 31.1 - LEXMARK INTERNATIONAL INC /KY/ | exhibit311.htm |
EX-32.2 - EXHIBIT 32.2 - LEXMARK INTERNATIONAL INC /KY/ | exhibit322.htm |
EX-32.1 - EXHIBIT 32.1 - LEXMARK INTERNATIONAL INC /KY/ | exhibit321.htm |
EX-31.2 - EXHIBIT 31.2 - LEXMARK INTERNATIONAL INC /KY/ | exhibit312.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2016
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to _______.
Commission File No. 1-14050
LEXMARK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
06-1308215 |
(State or other jurisdiction |
(I.R.S. Employer |
of incorporation or organization) |
Identification No.) |
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One Lexmark Centre Drive |
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740 West New Circle Road |
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Lexington, Kentucky |
40550 |
(Address of principal executive offices) |
(Zip Code) |
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(859) 232-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X] |
Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) |
Smaller reporting company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The registrant had 62,641,636 shares outstanding (excluding shares held in treasury) of Class A Common Stock, par value $0.01 per share, as of the close of business on April 22, 2016.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
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Page of Form 10-Q |
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PART I – FINANCIAL INFORMATION
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Item 1. |
FINANCIAL STATEMENTS (Unaudited) |
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Consolidated Condensed Statements of Earnings |
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Three Months Ended March 31, 2016 and 2015 |
2 |
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Consolidated Condensed Statements of Comprehensive Earnings |
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Three Months Ended March 31, 2016 and 2015 |
3 |
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Consolidated Condensed Statements of Financial Position |
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As of March 31, 2016 and December 31, 2015 |
4 |
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Consolidated Condensed Statements of Cash Flows |
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Three Months Ended March 31, 2016 and 2015 |
5 |
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Notes to Consolidated Condensed Financial Statements |
6 |
Item 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
26 |
Item 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
42 |
Item 4. |
CONTROLS AND PROCEDURES |
42 |
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PART II – OTHER INFORMATION |
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Item 1. |
LEGAL PROCEEDINGS |
45 |
Item 1A. |
RISK FACTORS |
45 |
Item 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
46 |
Item 6. |
EXHIBITS |
46 |
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are forward-looking statements. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon the Company, speak only as of the date hereof, and are subject to certain risks and uncertainties. We assume no obligation to update or revise any forward-looking statements contained or incorporated by reference herein to reflect any change in events, conditions or circumstances, or expectations with regard thereto, on which any such forward-looking statement is based, in whole or in part. There can be no assurance that future developments affecting the Company will be those anticipated by management, and there are a number of factors that could adversely affect the Company’s future operating results or cause the Company’s actual results to differ materially from the estimates or expectations reflected in such forward-looking statements, including, without limitation, the factors set forth under the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this report. The information referred to above should be considered by investors when reviewing any forward-looking statements contained in this report, in any of the Company’s public filings or press releases or in any oral statements made by the Company or any of its officers or other persons acting on its behalf. The important factors that could affect forward-looking statements are subject to change, and the Company does not intend to update the factors set forth in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this report. By means of this cautionary note, the Company intends to avail itself of the safe harbor from liability with respect to forward-looking statements that is provided by Section 27A and Section 21E referred to above.
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended |
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March 31 |
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2016 |
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2015 |
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Revenue: |
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Product |
$ |
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$ |
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Service |
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Total Revenue |
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Cost of revenue: |
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Product |
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Service |
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Restructuring-related costs |
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Total Cost of revenue |
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Gross profit |
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Research and development |
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Selling, general and administrative |
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Restructuring and related reversals |
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Operating expense |
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Operating (loss) income |
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Interest expense (income), net |
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Other expense (income), net |
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(Loss) earnings before income taxes |
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(Benefit) provision for income taxes |
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Net (loss) earnings |
$ |
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$ |
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Net (loss) earnings per share: |
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Basic |
$ |
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$ |
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Diluted |
$ |
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$ |
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Shares used in per share calculation: |
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Basic |
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Diluted |
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Cash dividends declared per common share |
$ |
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$ |
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See Notes to Consolidated Condensed Financial Statements.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE EARNINGS
(In Millions)
(Unaudited)
Three Months Ended |
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March 31 |
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2016 |
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2015 |
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Net (loss) earnings |
$ |
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$ |
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Other comprehensive (loss) earnings, net of tax: |
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Foreign currency translation adjustment |
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Recognition of pension and other postretirement benefit plans prior service credit, net of (amortization) |
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Net unrealized gain on marketable securities |
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Unrealized (loss) gain on cash flow hedges |
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Total other comprehensive (loss) earnings, net of tax |
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Comprehensive (loss) earnings |
$ |
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$ |
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See Notes to Consolidated Condensed Financial Statements.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions, Except Par Value)
(Unaudited)
March 31, |
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December 31, |
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2016 |
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2015 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ |
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$ |
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Trade receivables, net of allowances of $26.4 in 2016 and $24.4 in 2015 |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangibles, net |
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Other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
$ |
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$ |
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Accounts payable |
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Accrued liabilities |
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Total current liabilities |
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Long-term debt, net of unamortized issuance costs |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders' equity: |
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Preferred stock, $.01 par value, 1.6 shares authorized; no shares issued and outstanding |
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Common stock, $.01 par value: |
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Class A, 900.0 shares authorized; 62.6 and 61.9 outstanding in 2016 and 2015, respectively |
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Class B, 10.0 shares authorized; no shares issued and outstanding |
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Capital in excess of par |
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Retained earnings |
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Treasury stock, net; at cost; 36.5 and 36.4 shares in 2016 and 2015, respectively |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
$ |
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$ |
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See Notes to Consolidated Condensed Financial Statements.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Three Months Ended |
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March 31 |
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2016 |
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2015 |
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Cash flows from operating activities: |
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Net (loss) earnings |
$ |
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$ |
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Adjustments to reconcile net (loss) earnings to net cash flows provided by (used for) operating activities: |
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Depreciation and amortization |
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Deferred taxes |
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Stock-based compensation expense |
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Pension and other postretirement expense (income) |
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Other |
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Change in assets and liabilities, net of acquisitions: |
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Trade receivables |
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Inventories |
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Accounts payable |
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Accrued liabilities |
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Other assets and liabilities |
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Pension and other postretirement contributions |
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Net cash flows provided by (used for) operating activities |
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Cash flows from investing activities: |
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Purchases of property, plant and equipment |
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Purchases of marketable securities |
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Proceeds from sales of marketable securities |
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Proceeds from maturities of marketable securities |
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Purchase of business, net of cash acquired |
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Other |
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Net cash flows (used for) provided by investing activities |
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Cash flows from financing activities: |
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Repayment of assumed debt |
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Payments on long-term debt |
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Purchase of shares from noncontrolling interest |
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Payment of cash dividend |
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Purchase of treasury stock |
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Proceeds from employee stock plans |
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Other |
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Net cash flows used for financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Net change in cash and cash equivalents |
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Cash and cash equivalents - beginning of period |
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Cash and cash equivalents - end of period |
$ |
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$ |
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See Notes to Consolidated Condensed Financial Statements.
LEXMARK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In Millions, Except Per Share Amounts)
(Unaudited)
The accompanying interim Consolidated Condensed Financial Statements are unaudited; however, in the opinion of management of Lexmark International, Inc. (together with its subsidiaries, the “Company” or “Lexmark”), all adjustments necessary for a fair statement of the interim financial results have been included. All adjustments included were of a normal recurring nature. The results for the interim periods are not necessarily indicative of results to be expected for the entire year. The Consolidated Condensed Statements of Financial Position data as of December 31, 2015 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.”). The Company filed with the Securities and Exchange Commission (“SEC”) audited consolidated financial statements for the year ended December 31, 2015, on Form 10-K, which included all information and notes necessary for such presentation. Accordingly, these financial statements and notes should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2015.
The Company determined that these errors were not material to any of the Company’s prior annual and interim period consolidated financial statements and therefore, amendments of previously filed reports were not required. However, the Company determined that the impact of the corrections would be too significant to record during 2015. As such, the revision for the corrections is reflected in the financial information of the applicable prior periods in this Form 10-Q filing and disclosure of the revised amount on other prior periods will be reflected in future filings containing the applicable period. There was no impact to cash flows from operations on the Consolidated Condensed Statements of Cash Flows for the period ending March 31, 2015.
The impact of this revision for periods presented within this quarterly report on Form 10-Q are shown in the tables below:
Consolidated Condensed Statements of Earnings and Consolidated Condensed Statements of Other Comprehensive Earnings
Three Months Ended |
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March 31, 2015 |
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As Previously |
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Reported |
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Adjustment |
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As Revised |
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Provision for income taxes |
$ |
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$ |
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$ |
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Net earnings |
$ |
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$ |
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$ |
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Net earnings per share: |
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Basic |
$ |
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$ |
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$ |
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Other comprehensive (loss) earnings, net of tax: |
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Foreign currency translation adjustment |
$ |
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$ |
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$ |
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Total other comprehensive earnings, net of tax |
$ |
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$ |
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$ |
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Comprehensive earnings |
$ |
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$ |
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$ |
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2. FAIR VALUE
General
The accounting guidance for fair value measurements defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles (“GAAP”), and requires disclosures about fair value measurements. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. As part of the framework for measuring fair value, the guidance establishes a hierarchy of inputs to valuation techniques used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Fair Value Hierarchy
The three levels of the fair value hierarchy are:
- Level 1 — Quoted prices (unadjusted) in active markets for identical, unrestricted assets or liabilities that the Company has the ability to access at the measurement date;
- Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and
- Level 3 — Unobservable inputs used in valuations in which there is little market activity for the asset or liability at the measurement date.
Fair value measurements of assets and liabilities are assigned a level within the fair value hierarchy based on the lowest level of any input that is significant to the fair value measurement in its entirety.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
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March 31, 2016 |
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December 31, 2015 |
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Based on |
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Based on |
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Quoted |
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Quoted |
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prices in |
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Other |
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prices in |
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Other |
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active |
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observable |
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Unobservable |
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active |
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observable |
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Unobservable |
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markets |
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inputs |
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inputs |
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markets |
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inputs |
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inputs |
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Fair value |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Fair value |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Assets: |
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Cash equivalents - money market funds (1) |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Foreign currency derivatives (2) |
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Total |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Liabilities: |
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Foreign currency derivatives (2) |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Contingent consideration |
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Total |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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(1) Included in Cash and cash equivalents on the Consolidated Condensed Statements of Financial Position.
(2) Foreign currency derivative assets and foreign currency derivative liabilities are included in Prepaid expenses and other current assets and Accrued liabilities, respectively, on the Consolidated Condensed Statements of Financial Position. Refer to Note 11 for disclosure of derivative assets and liabilities on a gross basis.
Transfers
In determining where measurements lie in the fair value hierarchy, the Company uses default assumptions regarding the general characteristics of the financial instrument as the starting point. The Company then adjusts the level assigned to the fair value measurement for financial instruments held at the end of the reporting period, as necessary, based on the weight of the evidence obtained by the Company. Except for the levels assigned to its pension plan assets, which are reviewed annually, the Company reviews the levels assigned to its fair value measurements on a quarterly basis and recognizes transfers between levels of the fair value hierarchy as of the beginning of the quarter in which the transfer occurs. There were no transfers between levels of the fair value hierarchy during the first quarter of 2016 or the first quarter of 2015.
Valuation Techniques
Money Market Funds
The money market funds in which the Company is invested are considered cash equivalents and are generally highly liquid investments. Money market funds are valued at the per share (unit) published as the basis for current transactions.
The Company employs foreign currency and interest rate risk management strategies that periodically utilize derivative instruments to protect its interests from unanticipated fluctuations in earnings and cash flows caused by volatility in currency exchange rates and interest rates. Fair values for the Company’s derivative financial instruments are based on pricing models or formulas using current market data. Variables used in the calculations include forward points, spot rates, volatility assumptions and benchmark interest rates at the time of valuation, as well as the frequency of payments to and from counterparties and effective and termination dates. The Company believes there is minimal risk of nonperformance. At March 31, 2016 and December 31, 2015, all of the Company’s derivative instruments were designated as Level 2 measurements in the fair value hierarchy. Refer to Note 11 of the Notes to Consolidated Condensed Financial Statements for more information on the Company’s derivatives.
Senior Notes
The Company’s outstanding senior notes consist of $300 million of fixed rate senior unsecured notes issued in a public debt offering in May 2008 and due on June 1, 2018 (the “2018 senior notes”) and $400 million of fixed rate senior unsecured notes issued in a public debt offering completed in March 2013 and due on March 15, 2020 (the “2020 senior notes”).
The fair values shown in the table below are based on the prices at which the bonds have recently traded in the market as well as the overall market conditions on the date of valuation, stated coupon rates, the number of coupon payments each year and the maturity dates. The fair value of the debt is not recorded on the Company’s Consolidated Condensed Statements of Financial Position and is therefore excluded from the fair value table above. This fair value measurement is classified as Level 2 within the fair value hierarchy. Carrying values shown in the table below are net of unamortized discount and debt issuance costs.
March 31, 2016 |
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December 31, 2015 |
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Unamortized |
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Unamortized |
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Carrying |
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discount and |
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Carrying |
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discount and |
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Fair value |
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value |
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issuance costs |
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Fair value |
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value |
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issuance costs |
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2018 senior notes |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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2020 senior notes |
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Total |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Refer to Note 4 of the Notes to Consolidated Condensed Financial Statements for more information on the senior notes.
Contingent Consideration
In the first quarter of 2016 the Company settled the contingent consideration liability for the amount at which it had been accrued as of December 31, 2015.
Other Financial Instruments
The fair values of cash and cash equivalents, trade receivables and accounts payable approximate their carrying values due to the relatively short-term nature of the instruments. Since the borrowings under the revolving credit facility and the accounts receivable program utilize variable interest rate setting mechanisms such as one-month LIBOR, the fair value of these borrowings is deemed to approximate the carrying values. Refer to Note 4 of the Notes to Consolidated Condensed Financial Statements for more information on the accounts receivable and revolving credit facilities.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Subsequent to Initial Recognition
There were no material fair value adjustments to assets or liabilities measured at fair value on a nonrecurring basis subsequent to initial recognition during the first three months of 2016 or 2015.
2016 Restructuring Actions
General
On February 23, 2016, the Company announced restructuring actions (the “2016 Restructuring Actions”) designed to increase profitability and operational efficiency primarily in its ISS segment. These restructuring actions are focused on optimizing the Company’s ISS structure, primarily as a result of the continued strong U.S. dollar, and are also aligned with the previously announced strategic alternatives process.
The 2016 Restructuring Actions will impact about 550 positions worldwide through December 2016, with a portion of the positions being shifted to low-cost countries. The 2016 Restructuring Actions will result in total pre-tax charges of approximately $37 million, with approximately $33 million incurred to date, and approximately $4 million remaining to be incurred in 2016. The total cash costs of the 2016 Restructuring Actions will be approximately $34 million, of which $33 million has been incurred to date and approximately $1 million remaining to be incurred in 2016.
The Company will incur total charges related to the 2016 Restructuring Actions of approximately $36 million in ISS and approximately $1 million in All Other.
Impact to 2016 Financial Results
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Restructuring |
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and related |
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Impact on |
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charges |
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Operating |
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(reversals) |
|
income |
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Employee termination benefit charges (reversals) |
$ |
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$ |
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2016 |
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ISS |
$ |
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All other |
|
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Total charges (reversals) |
$ |
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For the three months ended March 31, 2016, the Company incurred employee termination benefit charges (reversals), which include severance, medical and other benefits. The Company experienced higher levels of attrition than expected during the first quarter of 2016 as a result of the strategic alternatives process as well as announced restructuring programs. The Company’s cost savings and headcount reduction targets have not changed related to these restructuring actions. Charges (reversals) for the 2016 Restructuring Actions and all of the other restructuring actions were recorded in accordance with FASB guidance on employers’ accounting for postemployment benefits and guidance on accounting for costs associated with exit or disposal activities, as appropriate.
Pension and postretirement plan curtailment and termination benefit losses related to the 2016 Restructuring Actions were not included in the tables above. Refer to Note 10 of the Notes to Consolidated Condensed Financial Statements for more information.
Liability Rollforward
Employee |
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Termination |
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Benefits |
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Balance at January 1, 2016 |
$ |
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Costs incurred |
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Reversals (1) |
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Total restructuring charges (reversals), net |
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Payments and other (2) |
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Balance at March 31, 2016 |
$ |
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(1) Reversals due to changes in estimates for employee termination benefits and attrition.
(2) Other consists of changes in the liability balance due to foreign currency translations.
General
On July 21, 2015, the Company announced restructuring actions (the “2015 Restructuring Actions”) designed to increase profitability and operational efficiency. These Company-wide restructuring actions are broad-based but primarily capture the anticipated cost and expense synergies from the Kofax and ReadSoft acquisitions. Primary Company-wide impact will be general and administrative, marketing and development positions as well as the consolidation of regional facilities.
The 2015 Restructuring Actions will impact about 500 positions worldwide through December 2016, with approximately one-third of the positions being shifted to low-cost countries. The 2015 Restructuring Actions will result in total pre-tax charges of approximately $33 million, with $32 million incurred to date and approximately $1 million remaining to be incurred in 2016. The total cash costs of the 2015 Restructuring Actions will be approximately $32 million, with $31 million accrued to date and approximately $1 million remaining to be incurred in 2016.
The Company will incur total charges related to the 2015 Restructuring Actions of approximately $10 million in ISS, approximately $4 million in All Other and approximately $19 million in Enterprise Software.
Impact to 2016 Financial Results
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Restructuring |
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Selling, |
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and related |
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Impact on |
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general and |
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charges |
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Operating |
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administrative |
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(reversals) |
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income |
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Accelerated depreciation charges |
$ |
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$ |
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$ |
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Employee termination benefit charges (reversals) |
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Total restructuring charges (reversals) |
$ |
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$ |
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$ |
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For the periods indicated above, the Company incurred employee termination benefit charges (reversals), which include severance, medical and other benefits. The Company experienced higher levels of attrition than expected during the first quarter of 2016 as a result of the strategic alternatives process as well as announced restructuring programs. The Company’s cost savings and headcount reduction targets have not changed related to these restructuring actions. Charges (reversals) for the 2015 Restructuring Actions and all of the other restructuring actions were recorded in accordance with FASB guidance on employers’ accounting for postemployment benefits and guidance on accounting for costs associated with exit or disposal activities, as appropriate.
|
2016 |
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ISS |
$ |
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Enterprise Software |
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All other |
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Total charges (reversals) |
$ |
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Liability Rollforward
Employee |
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Termination |
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Benefits |
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Balance at January 1, 2016 |
$ |
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Costs incurred |
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Reversals (1) |
|
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Total restructuring charges (reversals), net |
|
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Payments and other (2) |
|
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Balance at March 31, 2016 |
$ |
|
(1) Reversals due to changes in estimates for employee termination benefits and attrition.
(2) Other consists of changes in the liability balance due to foreign currency translations.
Summary of Other Restructuring Actions
General
As part of Lexmark’s ongoing strategy to increase the focus of its talent and resources on higher usage business platforms, the Company announced various restructuring actions (“Other Restructuring Actions”) over the past several years. The Other Restructuring Actions primarily include exiting the development and manufacturing of the Company’s remaining inkjet hardware, 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 Other Restructuring Actions are considered substantially completed and any remaining charges to be incurred from these actions are expected to be immaterial.
Impact to 2016 and 2015 Financial Results
|
Three Months Ended |
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March 31, 2016 |
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March 31, 2015 |
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Restructuring |
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Restructuring |
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and related |
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Impact on |
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and related |
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Impact on |
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charges |
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operating |
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Restructuring- |
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Impact on |
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charges |
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operating |
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(reversals) |
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income |
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related costs |
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Gross Profit |
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(reversals) |
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income |
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Accelerated depreciation charges |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Employee termination benefit charges (reversals) |
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Contract termination and lease charges (reversals) |
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Total restructuring charges (reversals) |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Three Months Ended |
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March 31, |
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March 31, |
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2016 |
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2015 |
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ISS |
$ |
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$ |
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All other |
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Enterprise Software |
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Total charges (reversals) |
$ |
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$ |
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Liability Rollforward
Employee |
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Contract |
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Termination |
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Termination & |
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Benefits |
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Lease Charges |
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Total |
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Balance at January 1, 2016 |
$ |
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$ |
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$ |
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Costs incurred |
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Reversals (1) |
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Total restructuring charges (reversals), net |
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Payments and other (2) |
|
|
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|
|
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Balance at March 31, 2016 |
$ |
|
$ |
|
$ |
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(1) Reversals due to changes in estimates for employee termination benefits.
(2) Other consists of changes in the liability balance due to foreign currency translations.
4. DEBT
The carrying value of the Company’s outstanding long-term debt consists of the following:
March 31, |
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December 31, |
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2016 |
|
2015 |
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Trade receivables facility |
$ |
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$ |
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Revolving credit facility |
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Senior notes, due 2018 |
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Senior notes, due 2020 |
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$ |
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$ |
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Less: Current portion of long-term debt |
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Less: Unamortized issuance costs |
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|
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Total long-term debt, net of unamortized issuance costs |
$ |
|
$ |
||
In addition to the information in the table above, during the first quarter of 2016, the Company repaid $66.0 million of borrowings which is presented gross on the Consolidated Condensed Statements of Cash Flows. The Company presents borrowings and repayments of less than 90 days on a net basis on the Consolidated Statements of Cash Flows and such amounts were $206.5 million and $206.5 million, respectively, for the three months ended March 31, 2016 and $104.0 million and $104.0 million, respectively, for the three months ended March 31, 2015.
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 March 31, 2016, the Company had total accounts receivable pledged as collateral of $121.5 million held by LRC which were included in Trade receivables in the Company’s Consolidated Condensed 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. Interest on borrowings is calculated using daily 1-month LIBOR index or conduit commercial paper rates plus a spread of 0.40% along with a liquidity fee of 0.40%.
This facility contains customary affirmative and negative covenants as well as specific provisions related to the quality of the accounts receivables transferred. As collections reduce previously transferred receivables, the Company, LESL and Kofax, Inc. may replenish these with new receivables. Lexmark, LESL and Kofax, Inc. bear a limited risk of bad debt losses on the trade receivables transferred, since the Company, LESL and Kofax, Inc. over-collateralize the receivables transferred with additional eligible receivables. Lexmark, LESL and Kofax, Inc. address this risk of loss in the allowance for doubtful accounts. 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