US Airways 2007 Annual Report Download - page 153

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
As of December 31, 2007 and 2006, US Airways' investments in marketable securities are classified as follows (in millions):
Unrealized
Cost Basis Loss Fair Value
Investments in marketable securities
December 31, 2007
Held to maturity securities:
Corporate bonds $ 125 $ — $ 125
U.S. government sponsored enterprises 81 — 81
Certificates of deposit 20 — 20
Total investments in marketable securities-current $ 226 $ — $ 226
Available for sale securities:
Auction rate securities 401 48 353
Total investments in marketable securites-noncurrent $ 401 $ 48 $ 353
December 31, 2006
Held to maturity securities:
Corporate bonds $ 79 $ — $ 79
U.S. government sponsored enterprises 78 — 78
Commercial paper 20 — 20
Total held to maturity securities 177 — 177
Available for sale securities:
Auction rate securities 1,072 — 1,072
Total investments in marketable securities-current $ 1,249 $ — $ 1,249
All held to maturity securities mature in one year or less.
As of December 31, 2007, US Airways held auction rate securities totaling $411 million at par value, which are classified as
available for sale securities and noncurrent assets on the US Airways' balance sheet. Contractual maturities for these auction rate
securities are greater than nine years with an interest reset date approximately every 28 days. Historically, the carrying value of auction
rate securities approximated fair value due to the frequent resetting of the interest rates. With the liquidity issues experienced in the global
credit and capital markets, US Airways' auction rate securities have experienced multiple failed auctions. While US Airways continues to
earn interest on these investments at the maximum contractual rate, the estimated market value of these auction rate securities no longer
approximates par value.
Given the complexity of auction rate securities, US Airways engaged an investment advisor to assist in determining the fair values
of its investments. US Airways, with the assistance of its advisor, estimated the fair value of these auction rate securities based on the
following: (i) the underlying structure of each security; (ii) the present value of future principal and interest payments discounted at rates
considered to reflect current market conditions; (iii) consideration of the probabilities of default, auction failure, or repurchase at par for
each period; and (iv) estimates of the recovery rates in the event of default for each security. These estimated fair values could change
significantly based on future market conditions.
US Airways concluded that the fair market value of these auction rate securities at December 31, 2007 was $353 million, a decline
of $58 million from par value. Of this amount $48 million was deemed temporary as US Airways believes the decline in market value is
due to general market conditions. Based upon US Airways'
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