This is susposed to be good news..... but is it?
BUSINESS WIRE)--Feb. 28, 1997--Lexmark International, Inc., a
wholly owned subsidiary of Lexmark International Inc , today announced that it has provided
prepayment notice to holders of its $120 million 14.25 percent senior subordinated notes due in
2001. They will be prepaid by the end of March.
"Given our financial strength, cash flow and more attractive borrowing alternatives, there is an
economic benefit to prepay these notes," said Marvin L. Mann, Lexmark chairman and chief
executive officer. The subordinated notes are the last remaining part of the original debt financing
of the purchase of the company from IBM in 1991.
The prepayment will result in an extraordinary charge in the first quarter of 1997 of approximately
$24 million pretax and $15 million after tax, or 19 cents per share. The extraordinary charge will
be due primarily to the prepayment premium. After the first quarter, the refinancing of the notes
should benefit earnings per share by about 2 cents each quarter. The company will also benefit
from increased cash flow resulting from the tax deduction of the prepayment premium and reduced
annual interest expense. The notes carry an annual pretax interest expense of $17.1 million and will
be refinanced at an approximate annual pretax expense of $9.5 million. It should take less than
three years for cash savings to pay back the prepayment premium.
Lexmark International is a global developer, manufacturer and supplier of printing solutions and
products, including laser, inkjet and dot matrix printers and associated consumable supplies for the
office and home markets. Lexmark, which had sales of $2.4 billion in 1996, has executive offices
and its largest manufacturing center in Lexington, Ky.; other manufacturing centers are in Boulder,
Colo.; Juarez, Mexico; Rosyth, Scotland; Orleans, France and Sydney, Australia.
Makes sense, but what does this mean in the short term? |
