- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
X For the Quarterly Period Ended March 31, 1998
OR
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File No.1-14050
LEXMARK INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3074422
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Lexmark Centre Drive
740 New Circle Road NW
Lexington, Kentucky 40550
(Address of principal executive offices) (Zip Code)
(606) 232-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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 ___
The registrant had 66,450,977 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 30, 1998.
- --------------------------------------------------------------------------------
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
INDEX
Page of
Form 10-Q
PART I
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997.........................2
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION (Unaudited)
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997.........................3
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997........................4
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited).....5-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Unaudited).....................9-12
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................13
1
Part I - Financial Information
Item 1. Financial Statements
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31
------------------
1998 1997
---- ----
Revenues $672.1 $583.4
Cost of revenues 425.5 383.6
------ ------
Gross profit 246.6 199.8
Research and development 36.6 30.6
Selling, general and administrative 132.1 113.5
------ ------
Operating expenses 168.7 144.1
------ ------
Operating income 77.9 55.7
Interest expense 2.0 4.9
Amortization of deferred financing costs and other 1.5 2.4
------ ------
Earnings before income taxes and
extraordinary item 74.4 48.4
Provision for income taxes 24.9 17.7
------ ------
Earnings before extraordinary item 49.5 30.7
Extraordinary loss on extinguishment of debt
(net of related tax benefit of $8.4) - (14.0)
------ ------
Net earnings $ 49.5 $ 16.7
====== ======
Basic earnings per share:
Before extraordinary item $ 0.73 $ 0.42
Extraordinary loss - (0.19)
------ ------
Net earnings per share $ 0.73 $ 0.23
====== ======
Diluted earnings per share:
Before extraordinary item $ 0.69 $ 0.40
Extraordinary loss - (0.18)
------ ------
Net earnings per share $ 0.69 $ 0.22
====== ======
Shares used in per share calculation:
Basic 68.1 72.9
====== ======
Diluted 72.2 76.9
====== ======
See notes to consolidated condensed financial statements.
2
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
(In Millions, Except Share Amounts)
(Unaudited)
March 31 December 31
1998 1997
-------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 24.9 $ 43.0
Trade receivables, net of allowance of $17 in
1998 and $19 in 1997 353.7 318.9
Inventories 374.2 353.8
Prepaid expenses and other current assets 50.5 60.4
-------- --------
Total current assets 803.3 776.1
Property, plant and equipment, net 403.7 409.6
Other assets 23.1 22.5
-------- --------
Total assets $1,230.1 $1,208.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 30.2 $ 18.0
Accounts payable 254.7 302.0
Accrued liabilities 247.3 227.5
-------- --------
Total current liabilities 532.2 547.5
Long-term debt 125.0 57.0
Other liabilities 106.8 103.0
-------- --------
Total liabilities 764.0 707.5
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 1,600,000
shares authorized, no shares issued and
outstanding - -
Common stock $.01 par value:
Class A, 160,000,000 shares authorized;
66,317,240 and 67,539,935 outstandin
in 1998 and 1997, respectively 0.7 0.7
Class B, 10,000,000 shares authorized; 0 and
410,537 outstanding in 1998 and 1997,
respectively - -
Capital in excess of par 541.4 537.2
Retained earnings 218.3 168.8
Accumulated other comprehensive earnings (loss) (25.4) (23.8)
Treasury stock, at cost; 8,438,114 and 6,438,114
shares in 1998 and 1997, respectively (268.9) (182.2)
-------- --------
Total stockholders' equity 466.1 500.7
-------- --------
Total liabilities and stockholders' equity $1,230.1 $1,208.2
======== ========
See notes to consolidated condensed financial statements.
3
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Three Months Ended
March 31
------------------
1998 1997
---- ----
Cash flows from operating activities:
Net earnings $49.5 $ 16.7
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Depreciation and amortization 17.5 18.6
Extraordinary loss on extinguishment of debt - 22.4
Deferred taxes (1.0) 1.1
Other non-cash charges to operations 4.7 4.6
----- ------
70.7 63.4
Change in assets and liabilities:
Trade receivables (34.5) (10.0)
Trade receivables programs (0.3) 9.9
Inventories (20.4) 15.0
Accounts payable (47.3) 0.6
Accrued liabilities 19.8 (18.0)
Other assets and liabilities 10.8 (20.3)
----- ------
Net cash provided by (used for) operating
activities (1.2) 40.6
----- ------
Cash flows from investing activities:
Purchases of property, plant and equipment (12.8) (11.7)
Proceeds from sale of property, plant and equipment 0.1 0.2
----- ------
Net cash used for investing activities (12.7) (11.5)
----- ------
Cash flows from financing activities:
Increase in short-term debt 12.2 60.6
Principal payments on long-term debt (57.0) (120.0)
Proceeds from issuance of long-term debt 125.0 -
Charges related to extinguishment of debt - (22.4)
Purchase of treasury stock (86.7) (22.6)
Exercise of stock options and warrants 2.5 4.0
----- ------
Net cash used for financing activities (4.0) (100.4)
----- ------
Effect of exchange rate changes on cash (0.2) (1.4)
----- ------
Net decrease in cash and cash equivalents (18.1) (72.7)
Cash and cash equivalents - beginning of period 43.0 119.3
----- ------
Cash and cash equivalents - end of period $24.9 $ 46.6
===== ======
See notes to consolidated condensed financial statements.
4
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying interim financial statements are unaudited; however, in
the opinion of Lexmark International Group, Inc. (together with its
subsidiaries, the "company") management, all adjustments (which comprise
only normal and recurring accruals) necessary for a fair presentation of
the interim financial results have been included. The results for the
interim periods are not necessarily indicative of results to be expected
for the entire year. 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, 1997.
2. INVENTORIES
(Dollars in millions)
Inventories consist of the following:
March 31 December 31
1998 1997
-------- -----------
Work in process $209.4 $211.2
Finished goods 164.8 142.6
------ ------
$ 374.2 $ 353.8
======= =======
3. STOCKHOLDERS' EQUITY
As of March 31, 1998, the company had received authorization from the
board of directors to repurchase at management's discretion up to $400
million of its Class A common stock in the open market or in privately
negotiated transactions depending upon market price and other factors. As
of March 31, 1998, the company had repurchased 8,438,114 shares in the
open market at prices ranging from $21.25 to $43.38 for an aggregate cost
of approximately $268.9 million. The company has approximately $131
million of share repurchase authorization remaining.
4. OTHER COMPREHENSIVE EARNINGS (LOSS)
(Dollars in millions)
Effective January 1, 1998 the company adopted Statement of Financial
Accounting Standard ("SFAS") No. 130, Reporting Comprehensive Income.
This statement requires that all items recognized under accounting
standards as components of comprehensive earnings be reported in a
financial statement. This statement also requires that an entity classify
items of other comprehensive earnings by their nature in a financial
statement. For example, other comprehensive earnings may include foreign
currency translation adjustments, minimum pension liability adjustments,
and unrealized gains and losses on certain marketable securities.
Financial statements for prior periods will be reclassified, as required.
5
Comprehensive earnings consists of the following:
Three Months Ended
March 31
------------------
1998 1997
---- ----
Net earnings $49.5 $16.7
Other comprehensive earnings (loss):
Foreign currency translation adjustment
(net of related tax benefit of $0 in
1998 and 1997) (0.1) (12.4)
Minimum pension liability adjustment
(net of related tax benefit of $0.8 in 1998) (1.5) -
----- -----
Comprehensive earnings $47.9 $ 4.3
===== =====
Accumulated other comprehensive earnings (loss) consists of the
following:
Foreign Minimum Accumulated
Currency Pension Other
Translation Liability Comprehensive
Adjustment Adjustment Earnings (Loss)
---------- ---------- ---------------
Balance, December 31, 1997 $(23.8) $ - $(23.8)
Current period change (0.1) (1.5) (1.6)
------ ------ ------
Balance, March 31, 1998 $(23.9) $ (1.5) $(25.4)
====== ====== ======
6
5. EARNINGS PER SHARE (EPS)
(Dollars in millions, except share amounts)
The following is a reconciliation of the weighted average shares used in
the basic and diluted EPS calculations:
Three Months Ended
March 31
------------------
1998 1997
---- ----
Earnings before extraordinary item used
for both basic and dilutive EPS $49.5 $30.7
===== =====
Weighted average shares used for basic EPS 68,088,864 72,931,264
Effect of Dilutive Securities
Warrants - 406,933
Long-term incentive plan 36,198 63,201
Stock options 4,047,201 3,514,667
---------- ----------
Weighted average shares used for diluted EPS 72,172,263 76,916,065
========== ==========
Basic EPS before extraordinary item $0.73 $0.42
Diluted EPS before extraordinary item $0.69 $0.40
Options to purchase an additional 19,337 and 10,808 shares of Class A
common stock were outstanding at March 31, 1998 and 1997, respectively,
but were not included in the computation of diluted earnings per share
because their effect would be antidilutive.
6. SUMMARIZED FINANCIAL INFORMATION
(Dollars in millions)
The following is consolidated summarized financial information of Lexmark
International, Inc., a wholly-owned subsidiary of Lexmark International
Group, Inc.
March 31 December 31
1998 1997
-------- -----------
Statement of Financial Position Data:
Current assets $ 803.3 $ 776.1
Noncurrent assets 426.8 432.1
Current liabilities 536.0 551.4
Noncurrent liabilities 231.8 160.0
7
Three Months Ended
March 31
------------------
1998 1997
---- ----
Statement of Earnings Data:
Revenues $ 672.1 $ 583.4
Gross profit 246.6 199.8
Earnings before extraordinary item 49.5 30.7
Net earnings 49.5 16.7
Current liabilities at March 31, 1998 and December 31, 1997 include $3.8
million and $3.9 million, respectively, that is owed to Lexmark
International Group, Inc.
7. NEW ACCOUNTING STANDARDS
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits, effective for fiscal
years beginning after December 15, 1997. This statement revises
employer's disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans.
It standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer as useful. Restatement of disclosures for
earlier periods provided for comparative purposes is required unless the
information is not readily available. This statement is disclosure
oriented and, therefore, will not have a material impact on the company's
financial position, results of operations or liquidity. This statement is
effective for the company's financial statements for the year ended
December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Opinion ("SOP") 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. This SOP
provides guidance on accounting for the costs of computer software
developed or obtained for internal use, and requires that entities
capitalize certain internal-use software costs once certain criteria are
met. Currently the company generally expenses the costs of developing or
obtaining internal-use software as incurred. The company is currently
evaluating SOP 98-1, but does not expect it to have a material impact on
its consolidated financial statements. This SOP is effective for
financial statements for fiscal years beginning after December 15, 1998.
8. SUBSEQUENT EVENT
In May 1998, Lexmark International, Inc. (the "Issuer") completed a
public offering of $150 million principal amount of its 6.75% senior
notes due May 15, 2008. The senior notes were priced at 98.998%, to yield
6.89% to maturity. The senior notes are guaranteed by Lexmark
International Group, Inc. A substantial portion of the net proceeds from
the sale of the senior notes were used to reduce existing debt
outstanding under the company's credit facility. There are no sinking
fund requirements on the senior notes and they may be redeemed at any
time, in whole or in part, at the option of the Issuer.
8
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
(Unaudited)
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
Results of Operations
- ---------------------
Consolidated revenues for the three months ended March 31, 1998 were $672
million, an increase of 15% over the same period of 1997. Revenues were
adversely affected by foreign currency exchange rates due to the strengthening
of the U.S. dollar. Without the currency effect, year-to-year revenue growth
would have been 20%. Printers and associated supplies revenues were $557
million, an increase of 22%. Revenues from other office imaging products were
$115 million, a decrease of 9% from 1997. Total U.S. revenues were up $36
million or 12%, and international revenues were up $53 million or 18%.
The revenue growth for the quarter ended March 31, 1998 over the same period in
1997 was driven by unit volume increases in printers and even stronger growth
from associated supplies.
Consolidated gross profit was $247 million for the three months ended March 31,
1998, an increase of 23% from the same period of 1997. This was driven by
improved printer margins and a richer mix of supplies versus printer hardware.
Gross profit as a percentage of revenues for the first quarter of 1998 increased
to 37% from 34% in 1997. Gross profit attributable to printers and associated
supplies increased by 35%, principally due to reductions in product costs and
growth in higher margin associated consumable supplies.
Total operating expenses increased 17% in the first quarter of 1998 compared to
the same period of 1997. Expenses as a percentage of revenues remained at 25%
for both the first quarter of 1998 and the corresponding period of 1997,
principally reflecting in 1998 expense increases in line with revenue growth.
Consolidated operating income was $78 million for the first quarter of 1998, an
increase of 40% over the corresponding period of 1997. This increase was due
principally to improved printer margins and growth in associated consumable
supplies.
Earnings before extraordinary item for the first quarter of 1998 were $50
million, an increase of 61% compared to the same period of 1997. This increase
is principally due to the 40% increase in operating income. The income tax
provision was approximately 34% of earnings before tax for the first quarter of
1998 as compared to approximately 37% in the same period of 1997. The decrease
in the income tax rate is primarily due to the effect of lower tax rates on
manufacturing activities in certain countries.
Net earnings for the first quarter of 1998 were $50 million, an increase of 196%
compared to the same period of 1997. Net earnings for the first quarter of 1997
were affected by an extraordinary charge of $22 million ($14 million net of tax
benefit) caused by a prepayment premium and other fees associated with the
prepayment of the company's senior subordinated notes.
Basic net earnings per share were $0.73 for the first quarter of 1998 compared
to $0.23 in the first quarter of 1997, or $0.42 before extraordinary item, an
increase of 217% and 73%, respectively. Diluted net earnings per share were
$0.69 for the first three months of 1998 compared to $0.22 in the first three
months of 1997, or $0.40 before extraordinary item, an increase of 216% and 72%,
respectively.
Looking forward, it is currently expected that the company will have strong
results in the second quarter of 1998, and management is confident about the
company's prospects for the full year. However, results in the second half of
the year will face a more difficult comparison to last year than the first half
comparison.
9
Financial Condition
- -------------------
The company's financial position remains strong at March 31, 1998, with working
capital of $271 million compared to $229 million at December 31, 1997. At March
31, 1998, the company had outstanding $30 million of short-term debt and $125
million of long-term debt. The debt to total capital ratio was 25% at the end of
the first quarter of 1998 compared to 13% at December 31, 1997. The increase in
debt reflects higher revolver usage for a stock repurchase mentioned below.
In February 1998, the company's board of directors declared a dividend
distribution of one right (a "Right") for each outstanding share of the
company's Class A common stock and Class B common stock. The distribution is
payable to holders of record on April 3, 1998. Each Right entitles the
registered holder to purchase from the company one one-hundredth of a share of
Series A Junior Participating Preferred Stock at a price of $200 per one
hundredth of a share, subject to adjustment.
In March 1998, the public offering of 7,704,577 shares of the company's Class A
common stock by certain of its stockholders was completed at a public offering
price of $45.00 per share. The company and current members of management chose
not to sell any shares in either offering and, therefore, did not receive any of
the proceeds from the sale of the shares.
In March 1998, the company repurchased an additional 2 million shares (the
"Repurchase Shares") from certain of the stockholders participating in the March
1998 offering at a price of $43.38 per share (which was equal to the net
proceeds per share received by the selling stockholders participating in the
offering) for an aggregate purchase price of approximately $87 million.
Cash used for operating activities for the three months ended March 31, 1998 was
$1 million compared to $41 million cash provided by operating activities for the
same period of 1997. The decrease in cash flows from operating activities in the
first quarter of 1998 was attributable primarily to a decrease in accounts
payable and increases in inventories and trade receivables.
Capital expenditures were $13 million in 1998 compared to $12 million in 1997.
It is anticipated that capital expenditures for 1998 will be $90 million to $100
million and will be funded primarily through cash from operations.
In February 1998, the company's board of directors authorized the repurchase of
up to $200 million of its Class A common stock (which authorization was in
addition to prior board authorizations aggregating $200 million). This
repurchase authority, like the prior authorizations, 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. During the three months ended March 31, 1998, the
company repurchased 2,000,000 shares (which was the Repurchase Shares, at the
price and for the aggregate purchase price, referenced above). As of March 31,
1998, the company had repurchased a total of 8,438,114 shares for an aggregate
cost of approximately $269 million. The company has approximately $131 million
of share repurchase authorization remaining.
In May 1998, Lexmark International, Inc. (the "Issuer") completed a public
offering of $150 million principal amount of its 6.75% senior notes due May 15,
2008. The senior notes were priced at 98.998%, to yield 6.89% to maturity. The
senior notes are guaranteed by Lexmark International Group, Inc. A substantial
portion of the net proceeds from the sale of the senior notes were used to
reduce existing debt outstanding under the company's credit facility. There are
no sinking fund requirements on the senior notes and they may be redeemed at any
time, in whole or in part, at the option of the Issuer.
10
New Accounting Standards
- ------------------------
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosure about
Pensions and Other Postretirement Benefits, effective for fiscal years beginning
after December 15, 1997. This statement revises employers' disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer as useful.
Restatement of disclosures for earlier periods provided for comparative purposes
is required unless the information is not readily available. This statement is
disclosure oriented and, therefore, will not have a material impact on the
company's financial position, results of operations or liquidity. This statement
is effective for the company's financial statements for the year ended December
31, 1998
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Opinion ("SOP") 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This SOP provides guidance on accounting
for the costs of computer software developed or obtained for internal use, and
requires that entities capitalize certain internal-use software costs once
certain criteria are met. Currently the company generally expenses the costs of
developing or obtaining internal-use software as incurred. The company in
currently evaluating SOP 98-1, but does not expect it to have a material impact
on its consolidated financial statements. This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998.
Factors That May Affect Future Results and Information Concerning Forward -
- --------------------------------------------------------------------------------
Looking Statements
- ------------------
Certain of the statements contained in this Report may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are made based upon management's current expectations
and belief concerning future developments and their potential effects upon the
company. 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 below:
~ The markets for printers and associated supplies are highly competitive,
especially with respect to pricing and the introduction of new technologies and
products offering improved features and functionality. If it is unable to
continue to develop, manufacture and market products that meet customers' needs,
the company's future operating results may be adversely affected. The company's
major competitors, all of which have significantly greater financial, marketing
and technological resources than the company, have regularly lowered prices on
their laser and inkjet printers and are expected to continue to do so. The
company has also regularly lowered prices on its printers and expects to
continue to do so. In particular, the inkjet printer market has experienced and
is expected to continue to experience significant printer price pressure from
the company's major competitors. Price reductions beyond expectations or the
inability to reduce costs, contain expenses or increase sales as currently
expected, as well as price protection measures, could result in lower
profitability for the company and jeopardize the company's ability to grow or
maintain its market share.
~ The life cycles of the company's products, as well as delays in product
development and manufacturing, variations in the cost of component parts, delays
in customer purchases of existing products in anticipation of new product
introductions by the company or its competitors and market acceptance of new
products and programs, may cause a build up in the company's inventories, make
the transition from current products to new products difficult and could
adversely affect the company's future operating results. Further, some of the
11
company's newly developed products replace or compete with some of the company's
existing products. The competitive pressure to develop technology and products
also could cause significant changes in the level of the company's operating
expenses.
Revenues derived from international sales, including exports from the United
States, make up over half of the company's revenues. Accordingly, the company's
future results could be adversely affected by a variety of factors, including
foreign currency exchange rate fluctuations, trade protection measures, changes
in a specific country's or region's political or economic conditions and
unexpected changes in regulatory requirements. Also, margins on international
sales tend to be lower than those on domestic sales. Moreover, the company
believes that international operations in new geographic markets will be less
profitable than operations in the U.S. and European markets as a result, in
part, of the higher investment levels for marketing, selling and distribution
required to enter these markets.
Factors unrelated to the company's operating performance, including the
company's ability to obtain patents, copyrights and trademarks, maintain trade
secret protection and operate without infringing the proprietary rights of
others, as well as expenses incurred by the company in enforcing its
intellectual property rights; economic and business conditions, both national
and international; the loss of significant customers or suppliers; changes in
and execution of the company's business strategy, including the impact of
acquisitions, and the ability to retain and attract key personnel, also may
affect the company's results as well as its Class A common stock price.
12
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) The company's Annual Meeting of Stockholders was held on April 30,
1998.
(b) At said Annual Meeting, the stockholders voted on the following
two proposals:
(i) The election of three Directors for terms expiring in 2001. The
stockholders elected the Directors by the following votes:
Abstentions and
Director Votes For Votes Withheld Broker Non-Votes
-------- --------- -------------- ----------------
Frank T. Cary 59,294,201 208,617 0
Paul J. Curlander 59,317,417 185,401 0
Martin D. Walker 59,315,264 187,554 0
The terms of office of B. Charles Ames, William R. Fields, Ralph E.
Gomory, Stephen R. Hardis, Marvin L. Mann and Michael J. Maples
continued after the meeting.
(ii) The approval of the Stock Incentive Plan, as amended and
restated. The stockholders approved such plan by the following
votes:
Abstentions and
Votes For Votes Against Broker Non-Votes
--------- ------------- ----------------
38,316,593 21,110,626 75,599
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
A list of exhibits is set forth in the Exhibit Index found on
page 15 of this report.
(b) Reports on Form 8-K:
A Current Report on Form 8-K dated February 18, 1998 with respect
to the company's board of directors adopting a Rights Agreement
and declaring a dividend distribution of one Right for each
outstanding share of Class A common stock and Class B common
stock of the company was filed with the Securities and Exchange
Commission by the company.
13
LEXMARK INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, both on behalf of the registrant and in
his capacity as principal accounting officer of the registrant.
Lexmark International Group, Inc.
(Registrant)
Date: May 13, 1998 By: /s/ David L. Goodnight
------------- -----------------------
David L. Goodnight
Corporate Controller
(Principal Accounting Officer)
14
EXHIBIT INDEX
Exhibits:
4.1 Rights Agreement, dated as of February 18, 1998, between Lexmark
International Group, Inc. and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent (Incorporated by reference to Exhibit 4.1 of the
registrant's Current Report on Form 8-K dated February 27, 1998).
10.1 Amended and Restated Purchase Agreement, dated as of March 31, 1998,
between Lexmark International, Inc. ("International"), as Originator,
and Lexmark Receivables Corporation ("LRC"), as Buyer.
10.2 Amended and Restated Receivables Purchase Agreement, dated as of March
31, 1998, among International, as Servicer, LRC, as Seller, Delaware
Funding Corporation, as Buyer, and Morgan Guaranty Trust Company of New
York, as Administrative Agent.
10.3 Lexmark International Group, Inc. Stock Incentive Plan, Amended and
Restated effective April 30, 1998. +
27 Financial Data Schedule
- ----------------
+ Indicates management contract or compensatory plan, contract or arrangement.
15