Lexmark 2009 Annual Report Download - page 109

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position. The gross unrealized loss of $3.7 million, pre-tax, is recognized in accumulated other
comprehensive income:
(In Millions)
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Less than 12 Months 12 Months or More Total
Auction rate securities . . . . . . . . $ — $ — $20.6 $(2.3) $ 20.6 $(2.3)
Corporate debt securities . . . . . 135.0 (0.3) 2.6 (0.2) 137.6 (0.5)
Asset-backed and
mortgage-backed securities. . . . 38.3 (0.1) 7.4 (0.7) 45.7 (0.8)
Government and Agency. . . . . . 107.4 (0.1) — — 107.4 (0.1)
Total . . . . . . . . . . . . . . . . . . . . . $280.7 $(0.5) $30.6 $(3.2) $311.3 $(3.7)
The following table provides information, at December 31, 2009, about the Company’s marketable
securities with gross unrealized losses for which other-than-temporary impairment has been incurred,
and the length of time that individual securities have been in a continuous unrealized loss position. The
gross unrealized loss of $0.7 million, pre-tax, is recognized in accumulated other comprehensive income:
(In Millions)
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Less than 12 Months 12 Months or More Total
Corporate debt securities . . . . . . . . $— $— $0.1 $(0.1) $0.1 $(0.1)
Asset-backed and
mortgage-backed securities . . . . . . . — — 6.5 (0.6) 6.5 (0.6)
Total . . . . . . . . . . . . . . . . . . . . . . . . $— $— $6.6 $(0.7) $6.6 $(0.7)
The table below is a summary of the Company’s marketable securities at December 31, 2008, for which the
fair value is less than cost (impaired), and for which other-than-temporary impairments have not been
recognized.
(In Millions)
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Less than 12 Months 12 months or More Total
Auction rate securities . . . . . . . . $ 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)
As of February 26, 2010, 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.
Auction rate securities
The Company’s valuation process for its auction rate security portfolio began with a credit analysis of each
instrument. Under this method, the security is analyzed for factors impacting its future cash flows, such as
the underlying collateral, credit ratings, credit insurance or other guarantees, and the level of seniority of
the specific tranche of the security. The discount rate used to determine the present value of cash flows
expected to be collected is based on those outlined in the authoritative guidance on creditors’ accounting
for impairment of a loan. In this method, the interest rate used for amortizing the security is used to derive
the present value (with no adjustment to the discount rate for increases in credit risk or other risk factors)
and the present value will generally be significantly different from par only if estimated cash flows are
significantly different from contractual cash flows. Based on the analysis, the estimated future cash flows
are equal to contractual cash flows for all but one auction rate security for which the amount related to
credit loss has been written down through earnings. The Company has the intent to hold the remaining
103