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RULE NO. 424(b)(4)
REGISTRATION NO. 333-47707
7,704,577 SHARES
LEXMARK INTERNATIONAL GROUP, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
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Of the 7,704,577 shares of Class A Common Stock offered, 6,164,577 shares
are being offered hereby in the United States and 1,540,000 shares are being
offered in a concurrent international offering outside the United States. The
public offering price and the aggregate underwriting discount per share will
be identical for both offerings. See "Underwriting". As of April 3, 1998 each
share of Class A Common Stock, including the shares offered hereby, will have
associated with it one right to purchase, under the Company's Rights
Agreement, one one-hundredth of a share of the Company's Series A Junior
Participating Preferred Stock at a stipulated price in certain circumstances
relating to changes in ownership of the Company.
All the shares of Class A Common Stock are being sold by the Selling
Stockholders. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of the shares. In addition, the Company will
repurchase from the Selling Stockholders 2,000,000 shares of Class A Common
Stock less any shares sold pursuant to the over-allotment options referred to
below, at a price per share described herein. See "Certain Transactions and
Relationships".
The last reported sale price of the Class A Common Stock, which is listed
under the symbol "LXK", on the New York Stock Exchange on March 18, 1998 was
$45.00 per share. See "Price Range of Class A Common Stock and Dividend
Policy".
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
-------------- ------------ -------------------
<S> <C> <C> <C>
Per Share....................... $45.00 $1.62 $43.38
Total(3)........................ $346,705,965 $12,481,415 $334,224,550
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Expenses of approximately $55,000 and $900,000 are payable by the Company
and the Selling Stockholders, respectively, in connection with the
offerings.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for
30 days to purchase up to an additional 616,458 shares at the public
offering price per share, less the underwriting discount, solely to cover
over-allotments. The Selling Stockholders have granted the International
Underwriters a similar option with respect to an additional 154,000 shares
as part of the concurrent international offering. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to Selling Stockholders will be $381,376,575,
$13,729,557 and $367,647,018, respectively. See "Underwriting".
----------------
The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
shares will be ready for delivery in New York, New York, on or about March 24,
1998, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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The date of this Prospectus is March 18, 1998.
<PAGE>
[COLOR PHOTOS OF SELECTED LEXMARK PRODUCTS]
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended ( the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 7th
Floor, New York, New York 10048. Copies of such materials may also be obtained
upon written request from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C., 20549, at prescribed rates. The
Commission also maintains a Web Site at http://www.sec.gov. which contains
reports and other information regarding registrants that file electronically
with the Commission. In addition, such material may also be inspected and
copied at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20
Broad Street, New York, New York, 10005, on which the Class A Common Stock is
listed.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares (the "Shares") of its Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), being
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. For further information with respect to the Company and the
Shares, reference is hereby made to the Registration Statement.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
1.The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
2. The description of the Common Stock (as defined herein) of the Company,
which is contained in the Company's Registration Statement on Form 8-A
filed with the Commission on October 27, 1995, including any amendments
or reports filed for the purpose of updating such description.
3. The description of certain preferred stock purchase rights that have
attached to the Common Stock (as defined herein), which is contained in
the Company's Registration Statement on Form 8-A filed with the
Commission on February 27, 1998, including any amendments or reports
filed for the purpose of updating such description.
4. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offerings of the Shares.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to the Company,
One Lexmark Centre Drive, Lexington, Kentucky 40550, Attention: Office of the
Secretary, telephone (606) 232-2700.
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Any statement contained in a document or a portion thereof which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
or portion thereof which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified shall
not be deemed to constitute a part of this Prospectus except as so modified,
and any statement so superseded shall not be deemed to constitute part of this
Prospectus.
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
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Lexmark International Group, Inc. ("LIG") is a Delaware corporation that has
as its only significant asset all the outstanding common stock of Lexmark
International, Inc., a Delaware corporation ("Lexmark International").
Hereinafter, "the Company" and "Lexmark" will refer to LIG, or to LIG and
Lexmark International, including its subsidiaries, as the context requires.
Unless otherwise indicated, all information set forth in this Prospectus
assumes no exercise of the over-allotment options to be granted to the
Underwriters by the Selling Stockholders. References herein to the "Common
Stock" refer to the Company's Class A Common Stock and its non-voting Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"), and to
the "IPO" refer to the Company's initial public offering of Class A Common
Stock on November 15, 1995.
THE COMPANY
Lexmark is a global developer, manufacturer and supplier of laser and inkjet
printers and associated consumable supplies for the office and home markets.
Lexmark also sells dot matrix printers for printing single and multi-part
forms by business users. In 1997, revenues from the sale of printers and
associated printer supplies increased 10% from 1996 and accounted for 81% of
total Company revenues of approximately $2.5 billion.
The Company's installed base of printers supports a large and profitable
printer supplies business. Because consumable supplies must be replaced on
average one to three times a year, depending on type of printer and usage,
demand for laser and inkjet print cartridges is increasing at a higher rate
than their associated printer shipments. This is a relatively high margin,
recurring business that management expects to contribute to the stability of
Lexmark's earnings over time.
In addition to its core printer business, Lexmark develops, manufactures and
markets a broad line of other office imaging products which include supplies
for International Business Machines Corporation ("IBM") branded printers,
after-market supplies for original equipment manufacturer ("OEM") products,
and typewriters and typewriter supplies that are sold under the IBM trademark.
In 1997, revenues from the sale of other office imaging products decreased 7%
from 1996, primarily as a result of lower typewriter sales and lower
typewriter and impact printing supplies volume reflecting the continuing
decline of these markets, and accounted for 19% of total Company revenues.
Revenues derived from international sales, including exports from the United
States, represent over half of the Company's revenues. Lexmark's products are
sold in over 150 countries in North and South America, Europe, the Middle
East, Africa, Asia, the Pacific Rim and the Caribbean. As of December 31,
1997, the Company had approximately 8,000 employees worldwide.
The Company's principal executive offices are located at One Lexmark Centre
Drive, Lexington, Kentucky 40550. Telephone: (606) 232-2000.
PRINTERS AND ASSOCIATED SUPPLIES
Lexmark competes primarily in the markets for office desktop laser and color
inkjet printers--two of the fastest growing printer categories. Sales of
office desktop laser and color inkjet printers and their associated supplies
together represented approximately 86% and 87% of Lexmark's total printer and
associated supplies revenues in 1996 and 1997, respectively.
The Company's critical technology and manufacturing capabilities have
allowed Lexmark to effectively manage quality and to reduce its typical new
product introduction cycle times, for example, in the case of laser printers
from 24 months to approximately 12 to 16 months. Management believes its cycle
times are among the fastest in the industry and that these capabilities have
contributed to the Company's success over the last several years.
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LASER PRINTERS. Network laser printer growth is being driven by the office
migration from large mainframe computers to local area networks that link
various types of computers using a variety of protocols and operating systems.
This shift has created strong demand for office desktop laser printers with
network connectivity attributes. Laser printers that print at speeds of 11-30
pages per minute ("ppm") are referred to herein as "office desktop" or
"network" printers, while lower-speed (1-10 ppm) laser printers and inkjet
printers are referred to herein as "personal" printers. The Company's laser
printers primarily compete in the office desktop segment, which the Company
believes is one of the fastest growing segments of the laser printer market.
Lexmark develops and owns most of the technology for its desktop laser
printers and consumable supplies, which differentiates the Company from a
number of its major competitors, including Hewlett-Packard Company ("HP")
which purchases its laser engines from third parties. Lexmark's integration of
research and development, manufacturing and marketing has enabled the Company
to design laser printers with features desired by specific customer groups and
has resulted in substantial market presence for Lexmark within certain
industry segments such as banking, retail/pharmacy, automobile distribution
and health care.
INKJET PRINTERS. The color inkjet printer market, the fastest growing
segment of the personal printer market, is expanding rapidly due to growth in
personal computers at home and in business and the development of easy-to-use
color inkjet technology with high quality color and black print capability at
low prices. Based on data from industry analysts, management believes that the
inkjet market grew from 4 million units in 1992 to 33 million units in 1997
and will continue to grow substantially as a result of the increase in the
number of personal computers and as the inkjet market continues to shift from
monochrome to color and as inkjet printers continue to replace low-speed laser
printers. Lexmark introduced its first color inkjet printer using its own
technology in 1994 and has experienced strong sales growth through retail
outlets. The Company has increased its product distribution through retail
outlets, with the number of such outlets worldwide rising from approximately
5,000 retail outlets in 1995 to more than 15,000 in 1996, and remaining
relatively constant during 1997. The Company's ability to increase or maintain
its presence in the retail marketplace with its branded products may be
adversely affected as the Company becomes more successful in its sales and
marketing efforts for OEM opportunities. The Company made substantial capital
investments in its inkjet production capacity in 1995 and 1996 to address the
growing demand for its color inkjet printers.
SUPPLIES. The Company is currently the exclusive source for new print
cartridges for the laser and inkjet printers it manufactures. Management
expects that an increasing percentage of future Company earnings will come
from its consumable supplies business due to the consumer's continual usage
and replacement of cartridges. In 1996, the Company substantially expanded its
inkjet cartridge manufacturing capacity in both North America and Europe.
STRATEGY. Lexmark's laser printer strategy is to target fast growing
segments of the network printer market and to increase market share by
providing high quality, technologically advanced products at competitive
prices. To promote Lexmark brand awareness and market penetration, Lexmark
will continue to identify and focus on customer segments where Lexmark can
differentiate itself by supplying laser printers with features that meet
specific customer needs and represent the best total cost of printing
solution. Management intends to continue to develop and market products with
more functions and capabilities than comparably priced HP printers. The
Company's inkjet printer strategy is to generate demand for the Lexmark color
inkjet printer by offering high-quality products at competitive prices to
retail, business and OEM customers. Management expects that the Company's
associated printer supplies business will continue to grow as its installed
base of laser and inkjet printers increases.
OTHER OFFICE IMAGING PRODUCTS
The Company's other office imaging products category includes many mature
products such as supplies for IBM printers, typewriters and typewriter
supplies and other impact supplies that require
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little investment but provide a significant source of cash flow. The Company
introduced its after-market laser cartridges in May 1995 for the large
installed base of a range of laser printers sold by other manufacturers.
Management believes that the potential for an after-market laser cartridge
business is significant. The Company's strategy for other office imaging
products is to pursue the after-market OEM laser supplies opportunity while at
the same time managing its mature businesses for cash flow.
BACKGROUND
LIG was formed in 1990 by Clayton, Dubilier & Rice, Inc., a private
investment firm ("CD&R"), in connection with the acquisition (the
"Acquisition") of IBM Information Products Corporation (renamed Lexmark
International) from IBM. The Acquisition was completed in March 1991. Upon
completion of the Offerings (as defined herein) and the Share Repurchase (as
defined herein), it is currently expected that The Clayton & Dubilier Private
Equity Fund IV Limited Partnership ("C&D Fund IV"), a private investment fund
managed by CD&R, will no longer own any shares of Class A Common Stock.
Since the Acquisition, Lexmark has made a successful transition from being a
division within a large corporation to an independent company with its own
line of Lexmark-branded products, its own sales and marketing relationships
and more efficient development and manufacturing processes. Important
achievements since the Acquisition include reducing cycle time for most new
product announcements by 30% to 50% and achieving a position of technological
leadership for laser printers while reducing debt from $940 million to $75
million as of December 31, 1997.
THE OFFERINGS
The offering of 6,164,577 shares of Class A Common Stock being offered in
the United States (the "United States Offering") and the offering of 1,540,000
shares of Class A Common Stock being offered outside the United States (the
"International Offering") are referred to herein collectively as the
"Offerings". The closing of the International Offering is conditional upon the
closing of the United States Offering, and vice versa.
<TABLE>
<S> <C>
Class A Common Stock offered by the Selling Stockholders.... 7,704,577 shares
U.S. Offering.............................................. 6,164,577 shares
International Offering..................................... 1,540,000 shares
Class A Common Stock to be outstanding after the
Offerings(1)................................................ 68,281,134 shares
NYSE Symbol................................................. LXK
</TABLE>
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(1) Based upon shares outstanding at February 28, 1998. Does not include
7,420,582 shares of Class A Common Stock issuable pursuant to options and
does not give effect to the Share Repurchase.
The Company will not receive any of the proceeds from the sale of Shares in
the Offerings. See "Selling Stockholders".
The Company has agreed to repurchase from the Selling Stockholders 2,000,000
shares of Class A Common Stock less any shares of Class A Common Stock sold
pursuant to the over-allotment options, at a price per share equal to the
lowest of $44.25 (the closing price of the Class A Common Stock on the NYSE on
March 6, 1998) and the net proceeds per share to the Selling Stockholders
(such repurchase, the "Share Repurchase"). The Share Repurchase is conditioned
upon at least 6,000,000 shares of Class A Common Stock being sold. See
"Certain Transactions and Relationships".
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Lexmark(TM) is a registered trademark of Lexmark International. HP(R) is a
registered trademark of Hewlett-Packard Company. Apple(R) is a registered
trademark of Apple Computer, Inc. Canon(R) is a registered trademark of Canon
Kabushiki Kaisha. IBM(R) is a registered trademark of IBM. Xerox(R) is a
registered trademark of Xerox Corporation.
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RISK FACTORS
Prospective investors should consider carefully the following factors
relating to the Company and the Offerings, together with the information and
financial data set forth elsewhere in this Prospectus, prior to making an
investment decision.
COMPETITION
The markets for printers and associated supplies are highly competitive,
especially with respect to pricing and the introduction of new products and
features. The office desktop laser printer market is dominated by HP, which
has a widely recognized brand name and has been estimated to have an
approximate 65% to 70% market share. Several other large manufacturers such as
Canon, Inc. ("Canon"), Apple Computer, Inc. ("Apple"), Xerox Corporation
("Xerox") and IBM also compete in the laser printer market.
The Company's strategy is to target fast growing segments of the network
printer market and to increase market share by providing high quality,
technologically advanced products at competitive prices. This strategy
requires that the Company continue to develop and market new and innovative
products at competitive prices. New product announcements by the Company's
principal competitors, however, can have and in the past have had a material
adverse effect on the Company's financial results. Such new product
announcements can quickly undermine any technological competitive edge that
one manufacturer may enjoy over another and set new market standards for
quality, speed and function. Knowledge in the marketplace about pending new
product announcements by the Company's competitors may also have a material
adverse effect on the Company inasmuch as purchasers of printers may defer
purchasing decisions until the announcement and subsequent testing of such new
products.
In recent years, the Company and its principal competitors, all of which
have significantly greater financial, marketing and technological resources
than the Company, have regularly lowered prices on printers and are expected
to continue to do so. The Company is vulnerable to these pricing pressures
which, if not mitigated by cost and expense reductions, may result in lower
profitability and could jeopardize the Company's ability to increase or
maintain market share and build an installed base of Lexmark printers. The
Company expects that, as it competes more successfully with its larger
competitors, the Company's increased market presence may attract more frequent
challenges, both legal and commercial, from its competitors, including claims
of possible intellectual property infringement.
HP is also the market leader in the personal color inkjet printer market
and, with Canon and Seiko Epson Corporation ("Epson"), has been estimated to
account for approximately 80% to 90% of worldwide personal color inkjet
printer sales. As with laser printers, if pricing pressures are not mitigated
by cost and expense reductions, the Company's ability to maintain or build
market share and its profitability could be adversely affected. In addition,
as a relatively new entrant to the retail marketplace with a less widely
recognized brand name, the Company must compete with HP, Canon and Epson for
retail shelf space for its inkjet printers. The Company's ability to increase
or maintain its presence in the retail marketplace with its branded products
may be adversely affected as the Company becomes more successful in its sales
and marketing efforts for OEM opportunities.
Like certain of its competitors (including Xerox), the Company is a supplier
of after-market laser cartridges for laser printers utilizing certain models
of Canon engines. There is no assurance that the Company will be able to
compete effectively for a share of the after-market cartridge business for its
competitors' base of laser printers. The Company's participation in this
market may have an adverse effect on the Company's relations with certain of
its suppliers. Although Lexmark is currently the exclusive supplier of new
print cartridges for its laser printers, there can be no assurance that other
companies will not develop new compatible cartridges for Lexmark laser
printers. In addition, refill and
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remanufactured alternatives for the Company's cartridges are available from
independent suppliers and, although generally offering lower print quality,
compete with the Company's supplies business. As the installed base of laser
and inkjet printers grows and ages, the Company expects competitive refill and
remanufacturing activity to increase.
CHANGING TECHNOLOGIES
To compete effectively in the printer and associated supplies markets, the
Company must continue to introduce new products and features that address the
needs and preferences of its target markets. The printer market is
characterized by short product development cycles that are driven by rapidly
changing technology and consumer preferences as well as declining product
prices. There can be no assurance that the Company will be able to continue to
introduce new competitively priced products, that the market will be receptive
to its new products or features or that its competitors will not introduce
advancements ahead of Lexmark. Furthermore, there can be no assurance that the
Company will have access to new competitive technology to permit it to
introduce new products and features for its target markets. In addition, the
Company must make strategic decisions from time to time as to which new
technologies will produce products in market segments that will experience the
greatest future growth. If the Company is not successful in continuing to
introduce new products in the growing segments of the market, there could be a
material adverse effect on the Company's business and financial results.
OTHER OFFICE IMAGING PRODUCTS
The Company's traditional other office imaging products business includes
consumable supplies for IBM and other OEM products, typewriters and typewriter
supplies. This business accounted for 23%, 22% and 19% of the Company's
revenues in 1995, 1996 and 1997, respectively. Although the Company is less
dependent on revenue and profitability from its other office imaging products
business than it has been historically and intends to focus on the growing
portions of that market, such as the after-market laser cartridge supplies
category, there is no assurance that the Company will be able to compete in
the after-market supplies business effectively or that the declining market
areas in its other office imaging products business will not adversely affect
the Company's operating results.
KEY SUPPLIES AND SUPPLIERS
The Company procures a wide variety of components for the manufacture of its
products, some of which are sourced from preferred suppliers. The Company
generally must place commitments for its projected component needs
approximately three to six months in advance and occasionally faces capacity
constraints when there has been more demand for its printers and associated
supplies than initially projected. Certain finished products, certain print
engines and certain components of the Company's products are only available
from one supplier and should such products, print engines and components not
be available, there can be no assurance that production of the Company's
products would not be disrupted for significant periods of time or that
certain of the Company's products would be available. Such a disruption could
interfere with the Company's ability to manufacture and sell products and
materially adversely affect the Company's financial results.
DEPENDENCE ON KEY PERSONNEL
As is typical of technology based companies, the Company is dependent on
certain key personnel, including senior members of its research and
development staff. The future success of the Company's research and
development efforts depends on its continuing ability to attract and retain
highly qualified technical personnel. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. The loss of the services of such key
personnel, or the inability to attract additional qualified personnel, could
have a material adverse effect on the Company's business.
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INTERNATIONAL OPERATIONS
Revenues derived from international sales, including exports from the United
States, represent over half of the Company's consolidated revenues, with
European revenues accounting for about 69% of international revenues. While
currency translation has significantly affected international revenues and
cost of revenues, it did not have a material impact on operating income
through 1997. Although the Company manages its net exposure to exchange rate
fluctuations through operational hedges, such as pricing actions and product
sourcing changes, and financial instruments, such as forward exchange
contracts and currency options, there can be no assurances that currency
fluctuations will not have a material impact on operating income in the
future. As the Company's international operations continue to grow, more
management effort will be required to focus on the operation and expansion of
the Company's global business and to manage the cultural, language and legal
differences inherent in international operations. In addition, the Company
believes that international operations in new geographic markets will be less
profitable than operations in 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. Although the current economic conditions in
some of the Asian markets may adversely affect the Company's growth in that
region, management does not expect the impact will result in the Company's not
being able to achieve its 1998 operating income growth objective.
INTELLECTUAL PROPERTY RIGHTS
The Company's success depends in part on its ability to obtain patents,
copyrights and trademarks, maintain trade secret protection and operate
without infringing the proprietary rights of others.
As is typical in technology industries, the Company receives notices from
time to time by third parties claiming infringement of certain patent and/or
other intellectual property rights of others. As the Company competes more
successfully with its larger competitors, the Company's increased market
presence may attract more frequent legal challenges from its competitors,
including claims of possible intellectual property infringement. If the
Company were infringing the intellectual property rights of others and were
unable to obtain licenses to use the protected technology, the Company could
incur substantial costs to redesign its products or to defend against
infringement actions. The Company's inability to obtain such licenses on
favorable terms or a finding of infringement could have a material adverse
effect on the Company.
In addition, the Company also relies on trade secrets, technical know-how
and other unpatented proprietary information relating to its product
development and manufacturing activities which it seeks to protect, in part,
through confidentiality agreements. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any such breach or that the Company's trade secrets and know-how will not
otherwise become known or independently discovered by others. The Company
could also incur significant expenses in enforcing its intellectual property
rights against others.
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
Part of the Company's business strategy is to expand its business through
the acquisition of related businesses. There can be no assurance that suitable
acquisitions can be accomplished on terms favorable to the Company. Further,
there can be no assurance that the Company will be able to operate profitably
any businesses or other assets it may acquire, effectively integrate the
operations of such acquisitions or otherwise achieve the intended benefits of
such acquisitions.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL
Although the Offerings will not constitute a "change of control", several of
the patent cross-licenses that the Company considers to be material to its
business, including those that permit the
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Company to manufacture its current design of laser and inkjet printers and
after-market laser cartridges for OEM printers, terminate as to future
products upon certain "changes of control" of the Company. Similarly, a
trademark license agreement and other agreements entered into by the Company
with IBM permit IBM to terminate those agreements upon certain "changes of
control" of the Company. Although the definition of "change of control" in the
Company's cross-licenses and trademark license agreement vary from agreement
to agreement, generally in order for a "change of control" to occur under such
agreements either (a) more than 50% of the voting stock of the Company must be
acquired by an unaffiliated party which, in some instances, must be engaged in
the business of manufacturing or marketing printers or related products or (b)
a third party must obtain the power to control or direct the affairs of the
Company, either through the ownership of voting stock or otherwise, except
that a change of control can be deemed to occur, in very limited
circumstances, upon an acquisition of substantially less than 50% of the
Company's voting shares. Such provisions could discourage potential acquirors
from making a bid to acquire control of the Company. In addition, the
Company's Rights Agreement may also have the effect of making an acquisition
of the Company more difficult.
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PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY
Since November 15, 1995, as part of the Company's IPO, the Class A Common
Stock has been traded on the NYSE under the symbol "LXK". The following table
sets forth the high and low reported sale prices for the Class A Common Stock
as quoted by the NYSE for the periods indicated.
<TABLE>
<CAPTION>
MARKET PRICE
------------- ---
<S> <C> <C> <C>
HIGH LOW
------ ------
1995
Fourth Quarter (from November 15, 1995).................... $22.38 $15.50
1996
First Quarter.............................................. $23.25 $16.00
Second Quarter............................................. $23.13 $17.88
Third Quarter.............................................. $20.88 $13.38
Fourth Quarter............................................. $27.75 $18.88
1997
First Quarter.............................................. $29.63 $22.00
Second Quarter............................................. $30.50 $19.13
Third Quarter.............................................. $36.31 $26.88
Fourth Quarter............................................. $38.00 $29.56
1998
First Quarter (through March 18, 1998)..................... $45.13 $35.00
</TABLE>
The last reported sale price for the Class A Common Stock by the NYSE on
March 18, 1998 was $45.00 per share. As of December 31, 1997 the Company had
approximately 67,539,935 shares of Class A Common Stock outstanding (excluding
6,438,114 shares held in treasury) and 410,537 shares of Class B Common Stock
outstanding. As of December 31, 1997, there were approximately 1,207 holders
of record of the Class A Common Stock, and five holders of record of the Class
B Common Stock.
Other than the dividend to stockholders of record on April 3, 1998 of one
right to purchase under certain circumstances one one-hundredth of a share of
Series A Junior Participating Preferred Stock, the Company has never declared
or paid any dividends on the Class A Common Stock and has no current plans to
pay cash dividends on the Class A Common Stock. The payment of any future cash
dividends will be determined by the Board of Directors in light of conditions
then existing, including the Company's earnings, financial condition and
capital requirements, restrictions in financing agreements, business
conditions, certain corporate law requirements and other factors.
The Company is a holding company and thus its ability to pay cash dividends
on the Class A Common Stock depends on the Company's subsidiaries' ability to
pay cash dividends to the Company.
12
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents,
short-term debt and capitalization of the Company as of December 31, 1997.
This table should be read in conjunction with the Consolidated Financial
Statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
(IN MILLIONS)
<S> <C>
CASH AND CASH EQUIVALENTS........................................ $ 43.0
======
SHORT-TERM DEBT.................................................. $ 18.0
======
LONG-TERM DEBT
Term loan...................................................... $ 37.0
Other.......................................................... 20.0
------
Total long-term debt......................................... 57.0
STOCKHOLDERS' EQUITY(1):
Preferred stock, $.01 par value, 1,600,000 shares authorized,
no
shares outstanding............................................ --
Class A common stock, $.01 par value, 160,000,000 shares autho-
rized,
67,539,935 outstanding........................................ 0.7
Class B common stock, $.01 par value, 10,000,000 shares autho-
rized,
410,537 outstanding(2)........................................ --
Additional paid-in capital..................................... 537.2
Retained earnings.............................................. 168.8
Accumulated translation adjustment............................. (23.8)
Treasury stock, at cost........................................ (182.2)
------
Total stockholders' equity................................... 500.7
------
Total capitalization......................................... $557.7
======
</TABLE>
- --------
(1) In April 1996, the Company's board of directors authorized the repurchase
of up to $50 million of its Class A Common Stock. In May 1997, the
Company's board of directors authorized the repurchase of an additional
$150 million of its Class A Common Stock. The repurchase authority allows
the Company 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. As of December 31, 1997, the Company had
repurchased 6,438,114 shares at prices ranging from $21.25 to $33.75 per
share for an aggregate cost of approximately $182 million, including
3,000,000 shares of Class A Common Stock repurchased by the Company from
certain of its stockholders, including one of the Selling Stockholders, at
a price equal to $29.90 per share (the "1997 Share Repurchase"). In
February 1998, the Company's board of directors authorized the repurchase
of up to an additional $200 million of its Class A Common Stock. 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. The Company has agreed to repurchase
from the Selling Stockholders 2,000,000 shares of Class A Common Stock
less any shares of Class A Common Stock sold pursuant to the over-
allotment options, at a price per share equal to the lowest of $44.25 (the
closing price of the Class A Common Stock on the NYSE on March 6, 1998)
and the net proceeds per share to the Selling Stockholders. The Company
expects to use available borrowings under its existing credit facilities
to finance the Share Repurchase. See "Certain Transactions and
Relationships."
(2) As of February 12, 1998, all of the outstanding shares of Class B Common
Stock had been converted into Class A Common Stock.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT SHARE DATA)
The following table sets forth selected financial data of the Company on a
consolidated basis. The statement of earnings data for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997 and the statement of financial
position data as of December 31, 1993, 1994, 1995, 1996 and 1997 were derived
from the audited Consolidated Financial Statements of the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1993 1994 1995(1) 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Revenues................ $ 1,675.7 $ 1,852.3 $ 2,157.8 $ 2,377.6 $ 2,493.5
Cost of revenues........ 1,107.4 1,298.8 1,487.9 1,630.2 1,623.5
---------- ---------- ---------- ---------- ----------
Gross profit............ 568.3 553.5 669.9 747.4 870.0
Research and
development............. 111.7 101.0 116.1 123.9 128.9
Selling, general and
administrative......... 322.0 292.9 359.1 388.0 466.5
---------- ---------- ---------- ---------- ----------
Operating income before
option compensation
related to IPO and
amortization of
intangibles............ 134.6 159.6 194.7 235.5 274.6
Option compensation
related to IPO......... -- -- 60.6 -- --
Amortization of
intangibles(2)......... 64.0 44.7 25.6 5.1 --
---------- ---------- ---------- ---------- ----------
Operating income........ 70.6 114.9 108.5 230.4 274.6
Interest expense........ 63.9 50.6 35.1 20.9 10.8
Amortization of deferred
financing costs and
other expense.......... 13.1 13.6 10.1 7.9 9.1
---------- ---------- ---------- ---------- ----------
Earnings (loss) before
income taxes and
extraordinary item..... (6.4) 50.7 63.3 201.6 254.7
Provision for income
taxes.................. 3.0 6.1 15.2 73.8 91.7
---------- ---------- ---------- ---------- ----------
Earnings (loss) before
extraordinary item..... (9.4) 44.6 48.1 127.8 163.0
Extraordinary loss(3)... -- -- (15.7) -- (14.0)
---------- ---------- ---------- ---------- ----------
Net earnings (loss)..... $ (9.4) $ 44.6 $ 32.4 $ 127.8 $ 149.0
========== ========== ========== ========== ==========
Diluted earnings (loss)
per common share before
extraordinary item(4).. $ (0.35) $ (0.48) $ 0.65 $ 1.69 $ 2.17
Diluted net earnings
(loss) per common
share(4)............... $ (0.35) $ (0.48) $ 0.44 $ 1.69 $ 1.98
Shares used in diluted
earnings per share
calculation............ 58,880,761 58,853,416 74,200,279 75,665,734 75,168,776
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL
POSITION DATA:
Working capital......... $ 293.6 $ 237.5 $ 227.7 $ 343.8 $ 228.6
Total assets............ 1,215.0 960.9 1,142.9 1,221.5 1,208.2
Total long-term debt
(including current
portion)................ 650.7 290.0 195.0 165.3 75.0
Redeemable senior
preferred stock(5)...... 85.0 -- -- -- --
Stockholders'
equity(5)............... 173.7 295.5 390.2 540.3 500.7
</TABLE>
- --------
(1) The Company recognized a non-cash compensation charge of $60.6 ($38.5 net
of tax benefit) in the fourth quarter of 1995 and will recognize
additional amounts totalling $2.2 ($1.4 net of tax benefit) in the years
1996-2000, resulting from the vesting of certain of the Company's
outstanding employee stock options at the time of the IPO.
(2) Acquisition-related intangibles were fully amortized at March 31, 1996.
(3) Represents extraordinary after-tax loss caused by early extinguishments of
debt related to the refinancing of the Company's term loan in April 1995
and prepayment of the Company's senior subordinated notes in March 1997.
(4) Earnings per share amounts have been calculated and presented under the
provisions of SFAS No. 128. Diluted earnings (loss) per common share are
net of dividends of $11.5 and $11.8 paid on the Company's redeemable
senior preferred stock in 1993 and 1994, respectively. Earnings
attributable to common stock in 1994 are also net of a $61.3 preferred
stock redemption premium related to the exchange of redeemable senior
preferred stock for Class A Common Stock on December 30, 1994. No senior
preferred stock is currently outstanding.
(5) Redeemable senior preferred stock with a liquidation preference of $85.0
was exchanged for 9,750,000 shares of Class A Common Stock on December 30,
1994. As of December 31, 1997, the Company had repurchased 6,438,114
shares of Class A Common Stock in the open market for an aggregate cost of
approximately $182.2 million.
14
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Selling Stockholders and their beneficial ownership of the Class A Common
Stock as of February 28, 1998 and as adjusted to reflect the sale of the Class
A Common Stock offered by the Selling Stockholders hereby, and other than as
noted below, includes information with respect to positions, offices or other
material relationships of the Selling Stockholders with the Company or any
predecessor or affiliate thereof, other than as a stockholder thereof, during
the past three years. For information with respect to material relationships
during the past three years between the Company and C&D Fund IV, see "Certain
Transactions and Relationships". Unless otherwise indicated, each Selling
Stockholder named has sole voting and dispositive power with respect to its
shares.
The information presented in the preceding discussion and in the following
table assumes that the over-allotment options are exercised in full, but does
not give effect to the Share Repurchase.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES
OWNED BENEFICIALLY OWNED
NAME AND ADDRESS OF PRIOR TO NUMBER OF AFTER
BENEFICIAL OWNER OFFERINGS(1) SHARES OFFERINGS(1)(3)
------------------- ----------------- --------- ---------------------
NUMBER PERCENT OFFERED NUMBER PERCENT
--------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
The Clayton & Dubilier
Private Equity
Fund IV Limited
Partnership................. 6,654,829 9.7 5,811,681 843,148 1.2
270 Greenwich Avenue
Greenwich, CT 06830
Mellon Bank, N.A., as trustee
for First
Plaza Group Trust(2)........ 3,049,748 4.5 2,663,354 386,394 *
One Mellon Bank Center
Pittsburgh, PA 15258
- ---------------------------
</TABLE>
* Less than 1%
(1) The percentage of the issued and outstanding shares of Common Stock of the
Company held by each individual or group has been calculated on the basis
of 68,281,134 shares of Class A Common Stock issued and outstanding
(excluding 6,438,114 shares held in treasury) on February 28, 1998.
(2) Mellon Bank, N.A., acts as the trustee (the "Trustee") for First Plaza
Group Trust ("FPGT"), a trust under and for the benefit of certain
employee benefit plans for General Motors Corporation ("GM") and its
subsidiaries. These shares may be deemed to be owned beneficially by
General Motors Investment Management Corporation ("GMIMCo"), a wholly-
owned subsidiary of GM. GMIMCo's principal business is providing
investment advice and investment management services with respect to the
assets of certain employee benefit plans of GM and its subsidiaries and
with respect to the assets of certain direct and indirect subsidiaries of
GM and associated entities. GMIMCo is serving as FPGT's investment manager
with respect to these shares and in that capacity it has the sole power to
direct the Trustee as to the voting and disposition of these shares.
Because of the Trustee's limited role, beneficial ownership of the shares
by the Trustee is disclaimed.
(3) Pursuant to the Share Repurchase, the Company will repurchase from the
Selling Stockholders, an aggregate of 2,000,000 shares of Class A Common
Stock less any shares of Class A Common Stock sold pursuant to the over-
allotment options, at a price per share equal to the lowest of $44.25 (the
closing price of the Class A Common Stock on the NYSE on March 6, 1998)
and the net proceeds to the Selling Stockholders. The Share Repurchase is
conditioned upon at least 6,000,000 shares of Class A Common Stock being
sold. C&D Fund IV has the right to assign its rights and obligations
pursuant to the Stock Disposition Agreement (as defined herein) to any
other Selling Stockholder. See "Certain Transactions and Relationships."
Upon completion of the Offerings and the Share Repurchase, it is currently
expected that C&D Fund IV and Mellon Bank, N.A., as trustee for First
Plaza Group Trust ("Mellon"), will no longer own any shares of Class A
Common Stock.
15
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
CD&R AND C&D FUND IV
C&D Fund IV, which is the Company's largest stockholder, is a private
investment fund managed by CD&R. Amounts contributed to C&D Fund IV by its
limited partners are invested at the discretion of the general partner in
equity or equity-related securities of entities formed to effect leveraged
buy-out transactions and in the equity of corporations where the infusion of
capital coupled with the provision of managerial assistance by CD&R can be
expected to generate returns on investments comparable to returns historically
achieved in leveraged buy-out transactions. The general partner of C&D Fund IV
is Clayton & Dubilier Associates IV Limited Partnership ("Associates IV"). B.
Charles Ames, Donald J. Gogel, Andrall E. Pearson and Joseph L. Rice, III,
each of whom is a principal of CD&R and a general partner of Associates IV,
have served as directors of the Company since the Acquisition. Messrs. Pearson
and Rice resigned from the Board of Directors in February 1997. LIG was formed
by CD&R to effect the Acquisition. C&D Fund IV currently owns 6,654,829 shares
of Class A Common Stock of which 5,283,346 shares are being offered hereby.
See "Selling Stockholders".
The Company paid CD&R a fee of $500,000 during each of 1995, 1996, and 1997,
respectively, for advisory, management consulting and monitoring services. The
Company will pay CD&R a fee of $125,000 for services rendered for the first
three months of 1998, after which time the Company will cease paying such fee.
None of the principals of CD&R who serve as directors of the Company receive
directors' fees. Two principals of CD&R, Messrs. Ames and Gogel, continue to
serve as Class II directors.
The Company paid fees to the law firm of Debevoise & Plimpton during 1996
and 1997 for legal services rendered. Franci J. Blassberg, Esq., a member of
Debevoise & Plimpton, is married to Joseph L. Rice, III, who was until
February 1997 a director of the Company and who is currently a general partner
of the general partner of C&D Fund IV.
The Company has entered into an indemnification agreement with CD&R and C&D
Fund IV pursuant to which the Company has agreed, subject to certain
exceptions, to indemnify the members of its boards of directors, as well as
CD&R, C&D Fund IV and certain of their associates and affiliates (the
"Indemnitees"), to the fullest extent allowable under applicable Delaware law,
and to indemnify the Indemnitees against any suits, claims, damages or
expenses which may be made against or incurred by them under applicable
securities laws in connection with offerings of securities of the Company,
including the Offerings, liabilities to third parties arising out of any
action or failure to act by the Company, and, except in cases of gross
negligence or intentional misconduct, the provision by CD&R of advisory,
management consulting and monitoring services.
1997 SHARE REPURCHASE
On October 21, 1997, the Company entered into an agreement with C&D Fund IV
(the "1997 Stock Disposition Agreement") pursuant to which the Company agreed
concurrently with the consummation in November 1997 of a secondary offering
(the "1997 Secondary Offering"), to repurchase from C&D Fund IV 3,000,000
shares of Class A Common Stock at a price per share equal to the lesser of
$34.8125 and the initial public offering price of the 1997 Secondary Offering
net of the underwriting discount. Although C&D Fund IV had the right to assign
its rights and obligations pursuant to the 1997 Stock Disposition Agreement to
other selling stockholders participating in the 1997 Secondary Offering, the
Company repurchased substantially all of such shares from C&D Fund IV on
November 4, 1997 at a price equal to $29.90 per share, the initial offering
price for the 1997 Secondary Offering net of the underwriting discount.
SHARE REPURCHASE FROM THE SELLING STOCKHOLDERS
The Company has entered into an agreement, dated as of March 9, 1998 (the
"Stock Disposition Agreement"), with C&D Fund IV pursuant to which the Company
has agreed to repurchase from C&D
16
<PAGE>
Fund IV 2,000,000 shares of Class A Common Stock less any shares sold pursuant
to the over-allotment options, at a price per share equal to the lowest of
$44.25 (the closing price of the Class A Common Stock on the NYSE on March 6,
1998) and the net proceeds per share to the Selling Stockholders. The Share
Repurchase is conditioned upon at least 6,000,000 shares of Class A Common
Stock being sold. C&D Fund IV has the right to assign its rights and
obligations pursuant to the Stock Disposition Agreement to any other Selling
Stockholder and has assigned its rights and obligations to Mellon with respect
to 628,517 shares less any shares sold by Mellon pursuant to the over-
allotment options.
HOLDBACK ARRANGEMENTS
The Selling Stockholders and the directors and executive officers (as
defined in Section 16 of the Exchange Act) of the Company who own Class A
Common Stock and certain other stockholders of the Company have each agreed
not to enter into any agreement providing for, or to effect, any public sale,
distribution or other disposition of any shares of Common Stock, including
sales pursuant to Rule 144 or Rule 144A under the Securities Act, or grant any
public option for any such sale, or otherwise cause the Company to register
any securities of the Company pursuant to any registration rights previously
granted to them, for a period of 60 days after the date of this Prospectus
without the prior written consent of Goldman, Sachs & Co. on behalf of the
Underwriters, except for the shares of Class A Common Stock offered in
connection with the Offerings. After the expiration of such 60-day period,
such stockholders will in general be entitled to dispose of their shares that
are currently outstanding pursuant to Rule 144 under the Securities Act and
those who are not "affiliates" of the Company may do so without regard to the
volume limit and certain other requirements of Rule 144. Approximately
3,000,000 shares of Class A Common Stock will be available for sale pursuant
to Rule 144 under the Securities Act upon expiration of such 60-day period.
VALIDITY OF THE SHARES
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Debevoise & Plimpton, New York, New York, and
for the Underwriters by Sullivan & Cromwell, New York, New York. Debevoise &
Plimpton also acts and may hereafter act as counsel to CD&R and its affiliates
and to the Company and its affiliates. Franci J. Blassberg, Esq., a member of
Debevoise & Plimpton, is married to Joseph L. Rice, III, who was until
February 1997 a director of the Company and who is currently a general partner
of the general partner of C&D Fund IV.
EXPERTS
The consolidated statements of financial position as of December 31, 1996
and 1997 and the consolidated statements of earnings, cash flows and
stockholders' equity for each of the three years in the period ended December
31, 1997 incorporated by reference in this Prospectus from the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 have been
incorporated by reference herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus and in documents incorporated by
reference herein contain forward-looking statements that are based on current
expectations, estimates and projections and management's beliefs and
assumptions. Words such as "believes", "expects", "intends", "plans",
"estimates", or variations of such words and similar expressions, are intended
to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks and uncertainties
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
17
<PAGE>
Such risks and uncertainties include, but are not limited to, the impact of
competitive products and pricing, increased investment to support product
introductions and enter new markets, currency fluctuations, market acceptance
of new products and programs, product transitions by the Company and its
competitors, management of inventory levels, production and supply
difficulties, intellectual property infringement claims and expenses, the
outcome of pending and future litigation or governmental proceedings, changes
in a country's or region's political or economic conditions, and other risks
described herein and in other filings by the Company with the Commission.
18
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Selling Stockholders have agreed to sell to each of the U.S. Underwriters
named below, and each of such U.S. Underwriters has severally agreed to
purchase from the Selling Stockholders, the respective number of shares of
Class A Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OF CLASS
A
COMMON
UNDERWRITER STOCK
----------- ---------
<S> <C>
Goldman, Sachs & Co. .............................................. 1,387,030
Lehman Brothers Inc. .............................................. 616,457
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................. 1,387,030
Morgan Stanley & Co. Incorporated.................................. 1,387,030
Smith Barney Inc................................................... 1,387,030
---------
Total............................................................ 6,164,577
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers
at such price less a concession of $0.98 per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $0.10 per
share to certain brokers and dealers. After the shares of Class A Common Stock
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the U.S. Underwriters.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters
of the International Offering (the "International Underwriters" and, together
with the U.S. Underwriters, the "Underwriters") providing for the concurrent
offer and sale of an aggregate of 1,540,000 shares of Class A Common Stock in
an international offering outside the United States. The public offering price
and underwriting discounts and commissions per share for the two offerings are
identical. The closing of the offering made hereby is a condition to the
closing of the International Offering, and vice versa. The several
International Underwriters are Goldman Sachs International, Lehman Brothers
International (Europe), Merrill Lynch International, Morgan Grenfell & Co.
Limited, Morgan Stanley & Co. International Limited and Smith Barney Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions,
it will offer, sell or deliver the shares of Class A Common Stock, directly or
indirectly, only in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase
is located in the United States. Each of the International Underwriters has
agreed pursuant to the Agreement Between that, as a part of the distribution
of the shares offered in the International Offering, and subject to certain
exceptions, it will not, directly or indirectly, offer, sell or deliver shares
of Class A Common Stock in the United States or to any U.S. persons.
U-1
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so
sold shall be the public offering price, less an amount not greater than the
selling concession.
The Selling Stockholders have granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 616,458 additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-
allotment option, the U.S. Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of shares to be purchased by each of them, as shown in the
foregoing table, bears to the 6,164,577 shares of Class A Common Stock
initially offered hereby. The Selling Stockholders have granted the
International Underwriters a similar option exercisable for up to an aggregate
of 154,000 additional shares of Class A Common Stock.
The Company and the Selling Stockholders have each agreed, for a period of
60 days after the date of this Prospectus, not to file a registration
statement with respect to, enter into any agreement providing for or effect
any public sale, distribution or other disposition (including, without
limitation, any sale pursuant to Rule 144 or Rule 144A under the Securities
Act and any sale in a broker's transaction or through a market maker) of,
except as provided under the Underwriting Agreement and under the
International Underwriting Agreement, any Class A Common Stock, Class B Common
Stock or securities of the Company that are substantially similar to the Class
A Common Stock or Class B Common Stock, including but not limited to any
securities that are convertible into or exchangeable for, or that represent
the right to receive, Class A Common Stock, Class B Common Stock or any such
substantially similar securities (other than pursuant to employee benefit or
incentive plans existing on, or upon the conversion or exchange of convertible
or exchangeable securities outstanding as of, the date of this Prospectus),
without the prior written consent of Goldman, Sachs & Co. In addition, the
Selling Stockholders and certain other stockholders of the Company have
entered into "holdback" agreements with the Underwriters. See "Holdback
Arrangements".
In connection with the Offerings, the Underwriters may purchase and sell the
Class A Common Stock in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the Offerings. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or
retarding a decline in the market price of the Class A Common Stock, and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Class A Common Stock than they are required to purchase
from the Company in the Offerings. The Underwriters also may impose a penalty
bid, whereby selling concessions allowed to syndicate members or other broker-
dealers in respect of the Class A Common Stock sold in the Offerings for their
account may be reclaimed by the syndicate if such Class A Common Stock is
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Class A Common Stock, which may be higher than the price that might otherwise
prevail in the open market, and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
The Class A Common Stock is traded on the New York Stock Exchange.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
U-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by
Reference................................................................. 3
The Company................................................................ 5
The Offerings.............................................................. 7
Risk Factors............................................................... 8
Price Range of Class A Common Stock and Dividend Policy.................... 12
Capitalization............................................................. 13
Selected Consolidated Financial Data....................................... 14
Selling Stockholders....................................................... 15
Certain Transactions and Relationships..................................... 16
Holdback Arrangements...................................................... 17
Validity of the Shares..................................................... 17
Experts.................................................................... 17
Forward Looking Statements................................................. 17
Underwriting............................................................... U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7,704,577 SHARES
LEXMARK
INTERNATIONAL GROUP, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------
LEXMARK
---------------
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
7,704,577 SHARES
LEXMARK INTERNATIONAL GROUP, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------
Of the 7,704,577 shares of Class A Common Stock offered, 1,540,000 shares
are being offered hereby in an international offering outside the United
States and 6,164,577 shares are being offered in a concurrent offering in the
United States. The public offering price and the aggregate underwriting
discount per share will be identical for both offerings. See "Underwriting".
As of April 3, 1998 each share of Class A Common Stock, including the shares
offered hereby, will have associated with it one right to purchase, under the
Company's Rights Agreement, one one-hundreth of a share of the Company's
Series A Junior Participating Preferred Stock at a stipulated price in certain
circumstances relating to changes in ownership of the Company.
All the shares of Class A Common Stock are being sold by the Selling
Stockholders. See "Selling Stockholders". The Company will not receive any of
the proceeds from the sale of the shares. In addition, the Company will
repurchase from the Selling Stockholders 2,000,000 shares of Class A Common
Stock less any shares sold pursuant to the over-allotment options referred to
below at a price per share described herein. See "Certain Transactions and
Relationships".
The last reported sale price of the Class A Common Stock, which is listed
under the symbol "LXK", on the New York Stock Exchange on March 18, 1998 was
$45.00 per share. See "Price Range of Class A Common Stock and Dividend
Policy".
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDERS(2)
-------------- ------------ -------------------
<S> <C> <C> <C>
Per Share....................... $45.00 $1.62 $43.38
Total(3)........................ $346,705,965 $12,481,415 $334,224,550
</TABLE>
- --------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Expenses of approximately $55,000 and $900,000 are payable by the Company
and the Selling Stockholders, respectively, in connection with the
offerings.
(3) The Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 154,000 shares at the
public offering price per share, less the underwriting discount, solely to
cover over-allotments. The Selling Stockholders have granted the U.S.
Underwriters a similar option with respect to an additional 616,458 shares
as part of the concurrent offering in the United States. If such options
are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Selling Stockholders will be
$381,376,575, $13,729,557 and $367,647,018, respectively. See
"Underwriting".
----------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that the shares will be ready for delivery in New York, New York, on
or about March 24, 1998, against payment therefor in immediately available
funds.
GOLDMAN SACHS INTERNATIONAL
DEUTSCHE MORGAN GRENFELL
LEHMAN BROTHERS
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
----------------
The date of this Prospectus is March 18, 1998.
<PAGE>
Any statement contained in a document or a portion thereof which is
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
or portion thereof which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so modified shall
not be deemed to constitute a part of this Prospectus except as so modified,
and any statement so superseded shall not be deemed to constitute part of this
Prospectus.
----------------
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS
A COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
4
<PAGE>
Fund IV 2,000,000 shares of Class A Common Stock less any shares sold pursuant
to the over-allotment options, at a price per share equal to the lowest of
$44.25 (the closing price of the Class A Common Stock on the NYSE on March 6,
1998) and the net proceeds per share to the Selling Stockholders. The Share
Repurchase is conditioned upon at least 6,000,000 shares of Class A Common
Stock being sold. C&D Fund IV has the right to assign its rights and
obligations pursuant to the Stock Disposition Agreement to any other Selling
Stockholder and has assigned its rights and obligations to Mellon with respect
to 628,517 shares less any shares sold by Mellon pursuant to the over-
allotment options.
HOLDBACK ARRANGEMENTS
The Selling Stockholders and the directors and executive officers (as
defined in Section 16 of the Exchange Act) of the Company who own Class A
Common Stock and certain other stockholders of the Company have each agreed
not to enter into any agreement providing for, or to effect, any public sale,
distribution or other disposition of any shares of Common Stock, including
sales pursuant to Rule 144 or Rule 144A under the Securities Act, or grant any
public option for any such sale, or otherwise cause the Company to register
any securities of the Company pursuant to any registration rights previously
granted to them, for a period of 60 days after the date of this Prospectus
without the prior written consent of Goldman, Sachs & Co. on behalf of the
Underwriters, except for the shares of Class A Common Stock offered in
connection with the Offerings. After the expiration of such 60-day period,
such stockholders will in general be entitled to dispose of their shares that
are currently outstanding pursuant to Rule 144 under the Securities Act and
those who are not "affiliates" of the Company may do so without regard to the
volume limit and certain other requirements of Rule 144. Approximately
3,000,000 shares of Class A Common Stock will be available for sale pursuant
to Rule 144 under the Securities Act upon expiration of such 60-day period.
CERTAIN UNITED STATES TAX
CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of certain United States Federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock by a person other than (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized
in the United States or under the laws of the United States or of any State of
the United States, (iii) an estate whose income is includable in gross income
for United States Federal income tax purposes regardless of its source or (iv)
a trust if (x) a court within the United States is able to exercise primary
supervision over the administration of the trust and (y) at least one United
States person has authority to control all substantial decisions of the trust
(referred to hereafter as a "non-U.S. holder"). Recently enacted legislation
authorizes the issuance of Treasury regulations that, under certain
circumstances, could reclassify as a non-U.S. partnership a partnership that
would otherwise be treated as a U.S. partnership, or could reclassify as a
U.S. partnership a partnership that would otherwise be treated as a non-U.S.
partnership. Such regulations would apply only to partnerships created or
organized after the date that proposed regulations are filed with the Federal
Register (or, if earlier, the date of issuance of a notice substantially
describing the expected contents of the regulations).
The discussion is based on provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Furthermore, this discussion does not consider specific facts and
circumstances that may be relevant to a particular holder's tax position.
Prospective purchasers are urged to consult a tax adviser with respect to the
United States Federal income and estate tax consequences of owning and
disposing of Class A Common Stock, as well as any tax consequences under the
laws of any other taxing jurisdiction.
17
<PAGE>
INCOME TAX
Dividends. Generally, dividends paid on Class A Common Stock to a non-U.S.
holder will be subject to U.S. Federal income tax. Except in the case of
dividends that are effectively connected with the holder's conduct of a trade
or business within the United States, this tax is imposed and withheld at the
rate of 30% of the amount of the dividend, unless reduced by an applicable
income tax treaty. Currently, dividends paid to an address in a foreign
country are presumed to be paid to a resident of such country in determining
the applicability of a treaty for such purposes.
However, under recently finalized United States Treasury regulations
relating to withholding of tax on non-U.S. holders, which by their terms apply
to dividend and other payments made after December 31, 1998 (the "Final
Withholding Regulations"), a non-U.S. holder who is the beneficial owner
(within the meaning of the Final Withholding Regulations) of dividends paid on
Class A Common Stock and who wishes to claim the benefit of an applicable
treaty is generally required to satisfy certain certification and
documentation requirements. Certain special rules apply to claims for treaty
benefits made by non-U.S. holders that are entities rather than individuals
and to beneficial owners (within the meaning of the Final Withholding
Regulations) of dividends paid to entities in which such beneficial owners are
interest holders.
Except as may be otherwise provided in an applicable income tax treaty,
dividends paid on Class A Common Stock to a non-U.S. holder that are
effectively connected with the non-U.S. holder's conduct of a trade or
business within the United States are subject to Federal income tax on a net
income basis, which tax is not collected by withholding (except as described
below under "Backup Withholding and Information Reporting"). All or part of
any effectively connected dividends received by a non-U.S. corporation may
also, under certain circumstances, be subject to an additional "branch
profits" tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. A non-U.S. holder of Class A Common Stock who
wishes to claim an exemption from withholding for effectively connected
dividends is generally required to satisfy certain certification and
documentation requirements.
A non-U.S. holder that is eligible for a reduced rate of U.S. withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the United States
Internal Revenue Service (the "IRS").
Disposition of Class A Common Stock. Generally, non-U.S. holders will not be
subject to United States Federal income tax (including withholding tax) in
respect of gain recognized on a disposition of Class A Common Stock unless (i)
the gain is effectively connected with the non-U.S. holder's conduct of a
trade or business within the United States (in which case the "branch profits"
tax described above may also apply if the holder is a non-U.S. corporation);
(ii) in the case of a non-U.S. holder who is a non-resident alien individual
and holds Class A Common Stock as a capital asset, such holder is present in
the United States for 183 or more days in the taxable year of the sale and
certain other conditions are met; or (iii) the Company is or has been a
"United States real property holding corporation" for Federal income tax
purposes (which the Company does not believe it has been or is currently) and
the non-U.S. holder has held directly or constructively more than 5% of the
outstanding Class A Common Stock within the five-year period ending on the
date of the disposition.
ESTATE TAX
If an individual non-U.S. holder owns, or is treated as owning, Class A
Common Stock at the time of his or her death, such stock would be subject to
U.S. Federal estate tax imposed on the estates of non-resident aliens, in the
absence of a contrary provision contained in any applicable tax treaty.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Dividends. Under current law, dividends paid on Class A Common Stock to a
non-U.S. holder at an address outside the United States are generally exempt
from backup withholding tax and U.S.
18
<PAGE>
information reporting requirements (but not from 30% withholding tax discussed
above). Under the Final Withholding Regulations, for dividends paid after
December 31, 1998, a non-U.S. holder must generally provide proper
documentation indicating non-U.S. status to a withholding agent in order to
avoid backup withholding tax. However, dividends paid to certain exempt
recipients (not including individuals) will not be subject to backup
withholding even if such documentation is not provided if the withholding
agent is allowed to rely on certain regulatory presumptions of the recipient's
non-U.S. status (including payment to an address outside the United States).
Broker Sales. Payments of proceeds from the sale of Class A Common Stock by
a non-U.S. holder made to or through a non-U.S. office of a broker generally
will not be subject to information reporting or backup withholding. However,
payments made to or through (i) a non-U.S. office, of a U.S. broker, or (ii) a
non-U.S. office of a non-U.S. broker that is (x) a controlled foreign
corporation for Federal income tax purposes, (y) a person 50% or more of whose
gross income from all sources for a certain specified period is effectively
connected with a U.S. trade or business, or (z) (effective beginning January
1, 1999) a foreign partnership if, at any time during its tax year, one or
more of its partners are U.S. persons (as defined in U.S. Treasury
regulations) who, in the aggregate, hold more than 50% of the income or
capital interest in the partnership or if, at any time during its tax year,
such foreign partnership is engaged in a U.S. trade or business, are generally
subject to information reporting (but not backup withholding) unless the
holder certifies its non-U.S. status under penalties of perjury or otherwise
establishes its entitlement to an exemption. Payments of proceeds from the
sale of Class A Common Stock by a non-U.S. holder made to or through a U.S.
office of a broker are generally subject to both information reporting and
backup withholding at a rate of 31% unless the holder certifies its non-U.S.
status under penalties of perjury or otherwise establishes an exemption.
A non-U.S. holder may obtain a refund of any excess amounts withheld under
the backup withholding rules by filing the appropriate claim for refund with
the IRS.
VALIDITY OF THE SHARES
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Debevoise & Plimpton, New York, New York, and
for the Underwriters by Sullivan & Cromwell, New York, New York. Debevoise &
Plimpton also acts and may hereafter act as counsel to CD&R and its affiliates
and to the Company and its affiliates. Franci J. Blassberg, Esq., a member of
Debevoise & Plimpton, is married to Joseph L. Rice, III, who until February
1997 was a director of the Company and who is currently a general partner of
the general partner of C&D Fund IV.
EXPERTS
The consolidated statements of financial position as of December 31, 1996
and 1997 and the consolidated statements of earnings, cash flows and
stockholders' equity for each of the three years in the period ended December
31, 1997 incorporated by reference in this Prospectus from the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 have been
incorporated by reference herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.
FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus and in documents incorporated by
reference herein contain forward-looking statements that are based on current
expectations, estimates and projections and management's beliefs and
assumptions. Words such as "believes", "expects", "intends", "plans",
"estimates", or variations of such words and similar expressions, are intended
to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks and uncertainties
which are difficult to predict. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
19
<PAGE>
Such risks and uncertainties include, but are not limited to, the impact of
competitive products and pricing, increased investment to support product
introductions and enter new markets, currency fluctuations, market acceptance
of new products and programs, product transitions by the Company and its
competitors, management of inventory levels, production and supply
difficulties, intellectual property infringement claims and expenses, the
outcome of pending and future litigation or governmental proceedings, changes
in a country's or region's political or economic conditions, and other risks
described herein and in other filings by the Company with the Commission.
20
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Selling Stockholders have agreed to sell to each of the International
Underwriters named below, and each of such International Underwriters has
severally agreed to purchase from the Selling Stockholders, the respective
number of shares of Class A Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
COMMON
UNDERWRITER STOCK
----------- ---------
<S> <C>
Goldman Sachs International....................................... 280,000
Lehman Brothers International (Europe)............................ 140,000
Merrill Lynch International....................................... 280,000
Morgan Grenfell & Co. Limited..................................... 280,000
Morgan Stanley & Co. International Limited........................ 280,000
Smith Barney Inc. ................................................ 280,000
---------
Total........................................................... 1,540,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Class A Common
Stock in part directly to the public at the initial public offering price set
forth on the cover page of this Prospectus, and in part to certain securities
dealers at such price less a concession of $0.98 per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.10 per share to certain brokers and dealers. After the shares of
Class A Common Stock are released for sale to the public, the offering price
and other selling terms may from time to time be varied by the International
Underwriters.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the
United States Offering (the "U.S. Underwriters" and, together with the
International Underwriters, the "Underwriters") providing for the concurrent
offer and sale of an aggregate of 6,164,577 shares of Class A Common Stock in
an offering in the United States. The public offering price and underwriting
discounts and commissions per share for the two offerings are identical. The
closing of the offering made hereby is a condition to the closing of the
United States Offering, and vice versa. The several U.S. Underwriters are
Goldman, Sachs & Co., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co. Incorporated and Smith Barney Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions,
it will offer, sell or deliver the shares of Class A Common Stock, directly or
indirectly, only in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase
is located in the United States. Each of the International Underwriters has
agreed pursuant to the Agreement Between that, as a part of the distribution
of the shares offered in the International Offering, and subject to certain
exceptions, it will not, directly or indirectly, offer, sell or deliver shares
of Class A Common Stock in the United States or to any U.S. persons.
U-1
<PAGE>
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so
sold shall be the public offering price, less an amount not greater than the
selling concession.
The Selling Stockholders have granted the International Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 154,000 additional shares of Class A Common Stock solely
to cover over-allotments, if any. If the International Underwriters exercise
their over-allotment option, the International Underwriters have severally
agreed, subject to certain conditions, to purchase approximately the same
percentage thereof that the number of shares to be purchased by each of them,
as shown in the foregoing table, bears to the 1,540,000 shares of Class A
Common Stock initially offered hereby. The Selling Stockholders have granted
the U.S. Underwriters a similar option exercisable for up to an aggregate of
616,458 additional shares of Class A Common Stock.
The Company and the Selling Stockholders have each agreed, for a period of
60 days after the date of this Prospectus, not to file a registration
statement with respect to, enter into any agreement providing for or effect
any public sale, distribution or other disposition (including, without
limitation, any sale pursuant to Rule 144 or Rule 144A under the Securities
Act and any sale in a broker's transaction or through a market maker) of,
except as provided under the Underwriting Agreement and under the U.S.
Underwriting Agreement, any Class A Common Stock, Class B Common Stock or
securities of the Company that are substantially similar to the Class A Common
Stock or Class B Common Stock, including but not limited to any securities
that are convertible into or exchangeable for, or that represent the right to
receive, Class A Common Stock, Class B Common Stock or any such substantially
similar securities (other than pursuant to employee benefit or incentive plans
existing on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date of this Prospectus), without the prior
written consent of Goldman Sachs & Co. In addition, the Selling Stockholders
and certain other stockholders of the Company have entered into "holdback"
agreements with the Underwriters. See "Holdback Arrangements".
Each International Underwriter has also agreed that (a) it has not offered
or sold and, prior to the expiry of the period of six months from the Closing
Date, will not offer or sell any shares of Class A Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995 of Great Britain, (b) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 of Great Britain
with respect to anything done by it in relation to the shares of Class A
Common Stock in, from or otherwise involving the United Kingdom, and (c) it
has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the shares
of Class A Common Stock to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 of Great Britain or is a person to whom such document
may otherwise lawfully be issued or passed on.
Buyers of shares of Class A Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practice of
the country of purchase in addition to the initial public offering price.
In connection with the Offerings, the Underwriters may purchase and sell the
Class A Common Stock in the open market. These transactions may include over-
allotment and stabilizing transactions and purchases to cover syndicate short
positions created in connection with the Offerings. Stabilizing
U-2
<PAGE>
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Class A Common
Stock, and syndicate short positions involve the sale by the Underwriters of a
greater number of shares of Class A Common Stock than they are required to
purchase from the Company in the Offerings. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Class A Common Stock sold in the Offerings
for their account may be reclaimed by the syndicate if such Class A Common
Stock is repurchased by the syndicate in stabilizing or covering transactions.
These activities may stabilize, maintain or otherwise affect the market price
of the Class A Common Stock, which may be higher than the price that might
otherwise prevail in the open market, and these activities, if commenced, may
be discontinued at any time. These transactions may be effected on the New
York Stock Exchange, in the over-the-counter market or otherwise. In the
United Kingdom, any such transactions will be effected by Goldman Sachs
International.
The Class A Common Stock is traded on the New York Stock Exchange.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
U-3
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents by
Reference................................................................. 3
The Company................................................................ 5
The Offerings.............................................................. 7
Risk Factors............................................................... 8
Price Range of Class A Common Stock
and Dividend Policy....................................................... 12
Capitalization............................................................. 13
Selected Consolidated Financial Data....................................... 14
Selling Stockholders....................................................... 15
Certain Transactions and Relationships..................................... 16
Holdback Arrangements...................................................... 17
Certain United States Tax Consequences to Non-U.S. Holders................. 17
Validity of the Shares..................................................... 19
Experts.................................................................... 19
Forward Looking Statements................................................. 19
Underwriting............................................................... U-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7,704,577 SHARES
LEXMARK
INTERNATIONAL GROUP, INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------
LEXMARK
---------------
GOLDMAN SACHS INTERNATIONAL
DEUTSCHE MORGAN GRENFELL
LEHMAN BROTHERS
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
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