Alaska Airlines and Horizon Air 2009 Annual Report Download - page 170

Activity for marketable securities for the years
ended December 31, 2009, 2008 and 2007 is
as follows:
2009 2008 2007
Proceeds from sales and
maturities ............. $725.0 $579.6 $1,321.1
Gross realized gains ...... 7.0 7.2 4.8
Gross realized losses ..... 2.3 3.8 2.9
Of the marketable securities on hand at
December 31, 2009, 35% mature in 2010, 24%
in 2011, and 41% thereafter.
Some of the Company’s asset-backed securities
held at December 31, 2009 had credit losses,
as defined in the accounting standards. Based
on a future cash flow analysis, the Company
determined that it does not expect to recover the
full amortized cost basis of certain asset-backed
obligations. This analysis estimated the
expected future cash flows by using a discount
rate equal to the effective interest rate implicit in
the securities at the date of acquisition. The
inputs used to estimate future cash flows
included the default, foreclosure, and bankruptcy
rates on the underlying mortgages and expected
home pricing trends. The Company also looked
at the average credit scores of the individual
mortgage holders and the average loan-to-value
percentage. The majority of the credit losses
were recorded in the second quarter of 2009.
The aggregate credit losses recorded in other
nonoperating expense totaled $2.2 million in
2009 representing the difference between the
present value of future cash flows and the
amortized cost basis of the affected securities.
Management does not believe the securities
associated with the remaining $3.5 million
unrealized loss recorded in AOCL are “other-than-
temporarily” impaired, as defined in the
accounting standards, based on the current facts
and circumstances. Management currently does
not intend to sell these securities prior to their
recovery nor does it believe that it will be more-
likely-than-not that the Company would need to
sell these securities for liquidity or other
reasons.
During 2008, the Company determined that
certain corporate debt securities were other-than-
temporarily impaired. As such, the Company
recorded a $3.5 million loss in other—net
nonoperating expense in 2008 representing the
difference between the estimated fair market
value and the amortized cost of the securities.
Gross unrealized gains and losses at December 31, 2009 are presented in the table below (in millions):
Unrealized
Gains
Unrealized Losses
Net Unrealized
Gains/(Losses)
in AOCL
Fair
Value of
Securities
with
Unrealized
Losses
Less
than 12
months
Greater
than 12
months
Total
Unrealized
Losses
Less: Credit
Loss
Recorded in
Earnings
Net
Unrealized
Losses in
AOCL
U.S. Government
Securities ..... $ 4.7 $(0.2) $ — $(0.2) $ — $(0.2) $ 4.5 $ 76.8
Asset-backed
obligations ..... 2.4 (0.2) (5.1) (5.3) (2.2) (3.1) (0.7) 61.2
Other corporate
obligations ..... 10.4 (0.2) — (0.2) — (0.2) 10.2 37.7
Total ........... $17.5 $(0.6) $(5.1) $(5.7) $(2.2) $(3.5) $14.0 $175.7
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