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Investments | 9 Months Ended
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Sep. 30, 2017
Investments Debt And Equity Securities [Abstract] |
Investments | 6. INVESTMENTS At September 30, 2017, we held the following securities and investments, recorded at either fair value or cost:
|  | Amortized |  |  | Gross Unrealized |  |  | Carrying |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Deferred compensation plan assets |  | $ | 15,898 |  |  | $ | 3,230 |  |  | $ | (15 | ) |  | $ | 19,113 |
Corporate bonds |  |  | 45,223 |  |  |  | 75 |  |  |  | (79 | ) |  |  | 45,219 |
Municipal fixed-rate bonds |  |  | 4,887 |  |  |  | 4 |  |  |  | (17 | ) |  |  | 4,874 |
Asset-backed bonds |  |  | 7,791 |  |  |  | 5 |  |  |  | (11 | ) |  |  | 7,785 |
Mortgage/Agency-backed bonds |  |  | 7,364 |  |  |  | 7 |  |  |  | (41 | ) |  |  | 7,330 |
U.S. government bonds |  |  | 21,000 |  |  |  | 3 |  |  |  | (109 | ) |  |  | 20,894 |
Foreign government bonds |  |  | 725 |  |  |  | 3 |  |  | — |  |  |  | 728 |
Marketable equity securities |  |  | 32,394 |  |  |  | 2,649 |  |  |  | (961 | ) |  |  | 34,082 |
Available-for-sale securities held at fair value |  | $ | 135,282 |  |  | $ | 5,976 |  |  | $ | (1,233 | ) |  | $ | 140,025 |
Restricted investment held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 27,800 |
Other investments held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 547 |
Total carrying value of available-for-sale investments |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 168,372 |
At December 31, 2016, we held the following securities and investments, recorded at either fair value or cost:
|  | Amortized |  |  | Gross Unrealized |  |  | Carrying |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Deferred compensation plan assets |  | $ | 12,367 |  |  | $ | 2,271 |  |  | $ | (42 | ) |  | $ | 14,596 |
Corporate bonds |  |  | 66,522 |  |  |  | 64 |  |  |  | (174 | ) |  |  | 66,412 |
Municipal fixed-rate bonds |  |  | 11,799 |  |  |  | 12 |  |  |  | (37 | ) |  |  | 11,774 |
Asset-backed bonds |  |  | 10,201 |  |  |  | 19 |  |  |  | (14 | ) |  |  | 10,206 |
Mortgage/Agency-backed bonds |  |  | 13,080 |  |  |  | 15 |  |  |  | (91 | ) |  |  | 13,004 |
U.S. government bonds |  |  | 30,022 |  |  |  | 15 |  |  |  | (270 | ) |  |  | 29,767 |
Foreign government bonds |  |  | 3,729 |  |  |  | 2 |  |  |  | (1 | ) |  |  | 3,730 |
Variable rate demand notes |  |  | 11,855 |  |  |  | — |  |  |  | — |  |  |  | 11,855 |
Marketable equity securities |  |  | 30,571 |  |  |  | 311 |  |  |  | (1,503 | ) |  |  | 29,379 |
Available-for-sale securities held at fair value |  | $ | 190,146 |  |  | $ | 2,709 |  |  | $ | (2,132 | ) |  | $ | 190,723 |
Restricted investment held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 27,800 |
Other investments held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 767 |
Total carrying value of available-for-sale investments |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 219,290 |
As of September 30, 2017, our corporate bonds, municipal fixed-rate bonds, asset-backed bonds, mortgage/agency-backed bonds, U.S. government bonds and foreign government bonds had the following contractual maturities:
(In thousands) |  | Corporate bonds |  |  | Municipal fixed-rate bonds |  |  | Asset- backed bonds |  |  | Mortgage / Agency- backed bonds |  |  | U.S. government bonds |  |  | Foreign government bonds |
Less than one year |  | $ | 20,232 |  |  | $ | 2,250 |  |  | $ | — |  |  | $ | — |  |  | $ | 8,903 |  |  | $ | — |
One to two years |  |  | 11,678 |  |  |  | 724 |  |  | $ | 2,638 |  |  |  | — |  |  |  | — |  |  |  | — |
Two to three years |  |  | 10,029 |  |  |  | 730 |  |  |  | 2,235 |  |  |  | — |  |  |  | 10,413 |  |  |  | 728 |
Three to five years |  |  | 3,280 |  |  |  | 1,170 |  |  |  | 1,550 |  |  |  | 917 |  |  |  | 1,578 |  |  |  | — |
Five to ten years |  |  | — |  |  |  | — |  |  |  | 450 |  |  |  | 1,348 |  |  |  | — |  |  |  | — |
More than ten years |  |  | — |  |  |  | — |  |  |  | 912 |  |  |  | 5,065 |  |  |  | — |  |  |  | — |
Total |  | $ | 45,219 |  |  | $ | 4,874 |  |  | $ | 7,785 |  |  | $ | 7,330 |  |  | $ | 20,894 |  |  | $ | 728 |
Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Our investment policy provides limitations for issuer concentration, which limits, at the time of purchase, the concentration in any one issuer to 5% of the market value of our total investment portfolio. At September 30, 2017, we held a $27.8 million restricted certificate of deposit, which is carried at cost. This investment serves as a collateral deposit against the principal amount outstanding under loans made to ADTRAN pursuant to an Alabama State Industrial Development Authority revenue bond (the Bond), which totaled $27.8 million at September 30, 2017 and December 31, 2016. At September 30, 2017 and December 31, 2016, the estimated fair value of the Bond using a level 2 valuation technique was approximately $28.0 million and $28.1 million, respectively, based on a debt security with a comparable interest rate and maturity and a Standard and Poor’s credit rating of AAA. We have the right to set-off the balance of the Bond with the collateral deposit in order to reduce the balance of the indebtedness. The Bond matures on January 1, 2020, and bears interest at the rate of 2% per annum. In conjunction with this program, we are eligible to receive certain economic incentives from the state of Alabama that reduce the amount of payroll withholdings we are required to remit to the state for those employment positions that qualify under this program. We are required to make payments in the amounts necessary to pay the interest on the amounts currently outstanding. It is our intent to make annual principal payments in addition to the interest amounts that are due. We review our investment portfolio for potential “other-than-temporary” declines in value on an individual investment basis. We assess, on a quarterly basis, significant declines in value which may be considered other-than-temporary and, if necessary, recognize and record the appropriate charge to write-down the carrying value of such investments. In making this assessment, we take into consideration qualitative and quantitative information, including but not limited to the following: the magnitude and duration of historical declines in market prices, credit rating activity, assessments of liquidity, public filings, and statements made by the issuer. We generally begin our identification of potential other-than-temporary impairments by reviewing any security with a fair value that has declined from its original or adjusted cost basis by 25% or more for six or more consecutive months. We then evaluate the individual security based on the previously identified factors to determine the amount of the write-down, if any. For the three and nine months ended September 30, 2017 and 2016, other-than-temporary impairment charges were not significant. Realized gains and losses on sales of securities are computed under the specific identification method. The following table presents gross realized gains and losses related to our investments:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(In thousands) |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Gross realized gains |  | $ | 1,094 |  |  | $ | 1,346 |  |  | $ | 3,324 |  |  | $ | 5,226 |
Gross realized losses |  | $ | (85 | ) |  | $ | (30 | ) |  | $ | (455 | ) |  | $ | (1,072 | )
As of September 30, 2017 and 2016, gross unrealized losses related to individual securities in a continuous loss position for 12 months or longer were not significant. We have categorized our cash equivalents held in money market funds and our investments held at fair value into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique for the cash equivalents and investments as follows: Level 1 - Values based on unadjusted quoted prices for identical assets or liabilities in an active market; Level 2 - Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly; Level 3 - Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs include information supplied by investees.
|  | Fair Value Measurements at September 30, 2017 Using |
(In thousands) |  | Fair Value |  |  | Quoted Prices in Active Market for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 8,115 |  |  | $ | 8,115 |  |  | $ | — |  |  | $ | — |
Commercial Paper |  |  | 35,436 |  |  |  | — |  |  |  | 35,436 |  |  |  | — |
Cash equivalents |  |  | 43,551 |  |  |  | 8,115 |  |  |  | 35,436 |  |  |  | — |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan assets |  |  | 19,113 |  |  |  | 19,113 |  |  |  | — |  |  |  | — |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 45,219 |  |  |  | — |  |  |  | 45,219 |  |  |  | — |
Municipal fixed-rate bonds |  |  | 4,874 |  |  |  | — |  |  |  | 4,874 |  |  |  | — |
Asset-backed bonds |  |  | 7,785 |  |  |  | — |  |  |  | 7,785 |  |  |  | — |
Mortgage/Agency-backed bonds |  |  | 7,330 |  |  |  | — |  |  |  | 7,330 |  |  |  | — |
U.S. government bonds |  |  | 20,894 |  |  |  | 20,894 |  |  |  | — |  |  |  | — |
Foreign government bonds |  |  | 728 |  |  |  | — |  |  |  | 728 |  |  |  | — |
Available-for-sale marketable equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable equity securities – various industries |  |  | 34,082 |  |  |  | 34,082 |  |  |  | — |  |  |  | — |
Available-for-sale securities |  |  | 140,025 |  |  |  | 74,089 |  |  |  | 65,936 |  |  |  | — |
Total |  | $ | 183,576 |  |  | $ | 82,204 |  |  | $ | 101,372 |  |  | $ | — |
|  | Fair Value Measurements at December 31, 2016 Using |
(In thousands) |  | Fair Value |  |  | Quoted Prices in Active Market for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
Cash equivalents |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 6,878 |  |  | $ | 6,878 |  |  | $ | — |  |  | $ | — |
Commercial Paper |  |  | 17,222 |  |  |  | — |  |  |  | 17,222 |  |  |  | — |
Cash equivalents |  |  | 24,100 |  |  |  | 6,878 |  |  |  | 17,222 |  |  |  | — |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation plan assets |  |  | 14,596 |  |  |  | 14,596 |  |  |  | — |  |  |  | — |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 66,412 |  |  |  | — |  |  |  | 66,412 |  |  |  | — |
Municipal fixed-rate bonds |  |  | 11,774 |  |  |  | — |  |  |  | 11,774 |  |  |  | — |
Asset-backed bonds |  |  | 10,206 |  |  |  | — |  |  |  | 10,206 |  |  |  | — |
Mortgage/Agency-backed bonds |  |  | 13,004 |  |  |  | — |  |  |  | 13,004 |  |  |  | — |
U.S. government bonds |  |  | 29,767 |  |  |  | 29,767 |  |  |  | — |  |  |  | — |
Foreign government bonds |  |  | 3,730 |  |  |  | — |  |  |  | 3,730 |  |  |  | — |
Variable Rate Demand Notes |  |  | 11,855 |  |  |  | — |  |  |  | 11,855 |  |  |  | — |
Available-for-sale marketable equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable equity securities – various industries |  |  | 29,379 |  |  |  | 29,379 |  |  |  | — |  |  |  | — |
Available-for-sale securities |  |  | 190,723 |  |  |  | 73,742 |  |  |  | 116,981 |  |  |  | — |
Total |  | $ | 214,823 |  |  | $ | 80,620 |  |  | $ | 134,203 |  |  | $ | — |
The fair value of our Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security. Our variable rate demand notes have a structure that implies a standard expected market price. The frequent interest rate resets make it reasonable to expect the price to stay at par. These securities are priced at the expected market price.

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