Lexmark 2008 Annual Report Download - page 89

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The table below is a summary of the Company’s marketable securities, at year end, for which the fair value
is less than cost (impaired), and for which other-than-temporary impairments have not been recognized.
The table is separated into securities that have been in a continuous unrealized loss position for less than
12 months, and those that have been in a continuous unrealized loss position for 12 months or longer. All
securities impaired for 12 months or longer are evaluated individually for other-than-temporary
impairment. Additionally, when the Company becomes aware of certain conditions that may affect its
securities, such as any events that may affect the creditworthiness of a security’s issuer or current and
expected market conditions, securities impaired for less than 12 months are evaluated to determine if an
other-than-temporary impairment has occurred. As of December 31, 2008 the Company does not believe
that it has a material risk in its current portfolio of investments that would impact its financial condition or
liquidity.
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Impaired ⬍12 Months Impaired ⬎= 12 Months Total
Auction rate securities
(1)
. . . . . . $ 22.7 $(0.6) $ — $ — $ 22.7 $(0.6)
Corporate debt securities . . . . . 42.4 (0.8) 26.0 (1.1) 68.4 (1.9)
Asset-backed and
mortgage-backed securities. . . . 54.0 (3.6) 10.1 (2.1) 64.1 (5.7)
Total . . . . . . . . . . . . . . . . . . . . . $119.1 $(5.0) $36.1 $(3.2) $155.2 $(8.2)
(1)
For 2008, the Company’s auction rate securities are located in its municipal debt and preferred securities categories.
Auction rate securities
Auction rate securities that do not successfully auction reset to the maximum rate as prescribed in the
underlying offering statement. During the first quarter of 2008, the Company reclassified $59.4 million in
auction rate fixed income securities from Current assets to Noncurrent assets on its Consolidated
Statement of Financial Position due to the fact that the securities had experienced unsuccessful
auctions and that poor debt market conditions had reduced the likelihood that the securities would
successfully auction within the next 12 months. During the second quarter of 2008, approximately
$32.4 million of auction rate fixed income securities were either sold or redeemed at par. In addition,
$4.1 million were reclassified back to Current assets, as the Company had been notified by the issuer that
the securities would be called at par.
In the third quarter of 2008, approximately $8.1 million of auction rate fixed income securities were either
sold or redeemed at par, and in the fourth quarter, one auction rate security was deemed to be other-than-
temporarily impaired. As of December 31, 2008, the remaining auction rate securities were written down
$0.6 million through Accumulated other comprehensive loss to their estimated fair value based on the
discounted cash flow analysis performed by the Company. As of December 31, 2008, the remaining
balance of auction rate fixed income securities classified in Noncurrent assets is $24.7 million.
Based on Lexmark’s assessment of the credit quality of the underlying collateral and credit support
available to each of the remaining auction rate securities in which the Company is invested, it believes no
additional other-than-temporary-impairment has occurred. The Company has the ability and intent to hold
these securities until liquidity in the market or optional issuer redemption occurs and could also hold the
securities to maturity. Additionally, if Lexmark required capital, the Company has available liquidity through
its accounts receivable program and revolving credit facility.
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