Lexmark 2008 Annual Report Download - page 88

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Proceeds from the sales and maturities of the Company’s available-for-sale marketable securities were
$533.8 million in 2008, $855.3 million in 2007 and $1,721.0 million in 2006. For the year ended
December 2008, the Company recognized $7.9 million in net losses on its marketable securities, of
which $7.3 million was recognized as other-than-temporary impairment and $0.6 million was net realized
losses. The realized gains and losses in 2007 and 2006 were immaterial. The Company uses the specific
identification method when accounting for the costs of its available-for-sale marketable securities sold.
Impairment
The Company assesses its marketable securities for other-than-temporary declines in value by
considering several factors that include, among other things, any events that may affect the
creditworthiness of a security’s issuer, current and expected market conditions, the length of time and
extent to which fair value is less than cost, and the Company’s ability and intent to hold the security until a
forecasted recovery of fair value that may include holding the security to maturity.
Market conditions continue to indicate significant uncertainty on the part of investors on the economic
outlook for the U.S. and for financial institutions. This uncertainty has created reduced liquidity across the
fixed income investment market, including the securities in which Lexmark is invested. As a result, some of
the Company’s investments have experienced reduced liquidity including unsuccessful auctions for its
auction rate security holdings as well as temporary and other than temporary impairment of other
marketable securities.
In 2008 there were several significant market events, including the bankruptcy of Lehman Brothers
Holdings and the failure of many auction rate securities. In 2008, Lexmark recognized, based on indicative
pricing, charges of $4.4 million for other-than-temporary impairment of its Lehman Brothers corporate debt
securities, and $1.0 million for other-than-temporary impairment related to distressed corporate debt,
mortgage-backed and asset-backed securities. Additionally in 2008, the Company recognized a
$1.9 million charge for other-than-temporary impairment in connection with its auction rate fixed
income securities; the fair value of which was determined using an internal discount cash flow
valuation model. All charges for other-than-temporary impairment are recognized in Other (income)
expense, net on the Consolidated Statements of Earnings. In addition, the Company has recognized a
cumulative, pre-tax valuation allowance of $1.7 million included in Accumulated other comprehensive loss
on the Consolidated Statements of Financial Position, representing a temporary impairment of the overall
portfolio.
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