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Investments | 6 Months Ended
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Jun. 30, 2018
Investments Debt And Equity Securities [Abstract] |
Investments | 7. INVESTMENTS Debt Securities and Other Investments At June 30, 2018, we held the following debt securities and other investments, recorded at either fair value or cost:
|  | Amortized |  |  | Gross Unrealized |  |  | Carrying |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Corporate bonds |  | $ | 35,896 |  |  | $ | 27 |  |  | $ | (250 | ) |  | $ | 35,673 |
Municipal fixed-rate bonds |  |  | 2,259 |  |  |  | — |  |  |  | (38 | ) |  |  | 2,221 |
Asset-backed bonds |  |  | 10,355 |  |  |  | 1 |  |  |  | (37 | ) |  |  | 10,319 |
Mortgage/Agency-backed bonds |  |  | 7,292 |  |  |  | — |  |  |  | (85 | ) |  |  | 7,207 |
U.S. government bonds |  |  | 8,953 |  |  |  | — |  |  |  | (104 | ) |  |  | 8,849 |
Foreign government bonds |  |  | 1,036 |  |  |  | 2 |  |  |  | — |  |  |  | 1,038 |
Available-for-sale debt securities held at fair value |  | $ | 65,791 |  |  | $ | 30 |  |  | $ | (514 | ) |  | $ | 65,307 |
Restricted investment held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 26,700 |
Other investments held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 520 |
Total carrying value of available-for-sale investments |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 92,527 |
At December 31, 2017, we held the following debt securities and other investments, recorded at either fair value or cost:
|  | Amortized |  |  | Gross Unrealized |  |  | Carrying |
(In thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Corporate bonds |  | $ | 32,654 |  |  | $ | 44 |  |  | $ | (155 | ) |  | $ | 32,543 |
Municipal fixed-rate bonds |  |  | 2,902 |  |  |  | 2 |  |  |  | (22 | ) |  |  | 2,882 |
Asset-backed bonds |  |  | 6,545 |  |  |  | 1 |  |  |  | (20 | ) |  |  | 6,526 |
Mortgage/Agency-backed bonds |  |  | 5,554 |  |  |  | 1 |  |  |  | (46 | ) |  |  | 5,509 |
U.S. government bonds |  |  | 14,477 |  |  |  | — |  |  |  | (174 | ) |  |  | 14,303 |
Foreign government bonds |  |  | 725 |  |  |  | 5 |  |  |  | — |  |  |  | 730 |
Available-for-sale debt securities held at fair value |  | $ | 62,857 |  |  | $ | 53 |  |  | $ | (417 | ) |  | $ | 62,493 |
Restricted investment held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 27,800 |
Other investments held at cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 547 |
Total carrying value of available-for-sale investments |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 90,840 |
As of June 30, 2018, our debt securities 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 |  | $ | 1,500 |  |  | $ | 490 |  |  | $ | 4,079 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
One to two years |  |  | 16,694 |  |  |  | 603 |  |  |  | 2,270 |  |  |  | — |  |  |  | 1,519 |  |  |  | 729 |
Two to three years |  |  | 12,264 |  |  |  | 1,128 |  |  |  | 556 |  |  |  | — |  |  |  | 3,845 |  |  |  | 309 |
Three to five years |  |  | 5,215 |  |  |  | — |  |  |  | 1,939 |  |  |  | 1,970 |  |  |  | 3,485 |  |  |  | — |
Five to ten years |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 588 |  |  |  | — |  |  |  | — |
More than ten years |  |  | — |  |  |  | — |  |  |  | 1,475 |  |  |  | 4,649 |  |  |  | — |  |  |  | — |
Total |  | $ | 35,673 |  |  | $ | 2,221 |  |  | $ | 10,319 |  |  | $ | 7,207 |  |  | $ | 8,849 |  |  | $ | 1,038 |
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. Realized gains and losses on sales of debt securities are computed under the specific identification method. The following table presents gross realized gains and losses related to our debt securities:
|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
(In thousands) |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Gross realized gains |  | $ | 25 |  |  | $ | 33 |  |  | $ | 25 |  |  | $ | 57 |
Gross realized losses |  | $ | (241 | ) |  | $ | (113 | ) |  | $ | (315 | ) |  | $ | (152 | )
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 June 30, 2018, we held a $26.7 million restricted certificate of deposit that 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 $26.7 million at June 30, 2018 and December 31, 2017. At June 30, 2018 and December 31, 2017, the estimated fair value of the Bond using a level 2 valuation technique was approximately $26.5 million and $26.7 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. Marketable Equity Securities Our marketable equity securities consist of publicly traded stocks or funds measured at fair value. Prior to January 1, 2018, our marketable equity securities were classified as available-for-sale. Realized gains and losses on marketable equity securities were included in net realized investment gain (loss). Unrealized gains and losses were recognized in accumulated other comprehensive income, net of deferred taxes, on the balance sheet. On January 1, 2018, we adopted ASU 2016-01, which requires us to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value, with any changes in fair value recognized in net realized investment gain (loss). Upon adoption, we reclassified $3.2 million of net unrealized gains related to marketable equity securities from accumulated other comprehensive income (loss) to opening retained earnings. Realized and unrealized gains and losses for our marketable equity securities for the three and six months ended June 30, 2018 were as follows:
|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
(In thousands) |  | 2018 |  |  | 2018 |
Realized gains (losses) on equity securities sold |  | $ | (52 | ) |  | $ | 347 |
Unrealized gains (losses) on equity securities held |  |  | 1,258 |  |  |  | 836 |
Total gain (loss) recognized, net |  | $ | 1,206 |  |  | $ | 1,183 |
As of June 30, 2018 and 2017, gross unrealized losses related to individual investments in a continuous loss position for 12 months or longer were not significant. We have categorized our cash equivalents 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 June 30, 2018 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 |  | $ | 2,008 |  |  | $ | 2,008 |  |  | $ | — |  |  | $ | — |
Foreign government securities |  |  | 350 |  |  |  | — |  |  |  | 350 |  |  |  | — |
Cash equivalents |  |  | 2,358 |  |  |  | 2,008 |  |  |  | 350 |  |  |  | — |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 35,673 |  |  |  | — |  |  |  | 35,673 |  |  |  | — |
Municipal fixed-rate bonds |  |  | 2,221 |  |  |  | — |  |  |  | 2,221 |  |  |  | — |
Asset-backed bonds |  |  | 10,319 |  |  |  | — |  |  |  | 10,319 |  |  |  | — |
Mortgage/Agency-backed bonds |  |  | 7,207 |  |  |  | — |  |  |  | 7,207 |  |  |  | — |
U.S. government bonds |  |  | 8,849 |  |  |  | 8,849 |  |  |  | — |  |  |  | — |
Foreign government bonds |  |  | 1,038 |  |  |  | — |  |  |  | 1,038 |  |  |  | — |
Marketable equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable equity securities – various industries |  |  | 37,600 |  |  |  | 37,600 |  |  |  | — |  |  |  | — |
Deferred compensation plan assets |  |  | 20,379 |  |  |  | 20,379 |  |  |  | — |  |  |  | — |
Available-for-sale securities |  |  | 123,286 |  |  |  | 66,828 |  |  |  | 56,458 |  |  |  | — |
Total |  | $ | 125,644 |  |  | $ | 68,836 |  |  | $ | 56,808 |  |  | $ | — |
|  | Fair Value Measurements at December 31, 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 |  | $ | 5,851 |  |  | $ | 5,851 |  |  | $ | — |  |  | $ | — |
Commercial paper |  |  | 3,999 |  |  |  | — |  |  |  | 3,999 |  |  |  | — |
Cash equivalents |  |  | 9,850 |  |  |  | 5,851 |  |  |  | 3,999 |  |  |  | — |
Available-for-sale debt securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate bonds |  |  | 32,543 |  |  |  | — |  |  |  | 32,543 |  |  |  | — |
Municipal fixed-rate bonds |  |  | 2,882 |  |  |  | — |  |  |  | 2,882 |  |  |  | — |
Asset-backed bonds |  |  | 6,526 |  |  |  | — |  |  |  | 6,526 |  |  |  | — |
Mortgage/Agency-backed bonds |  |  | 5,509 |  |  |  | — |  |  |  | 5,509 |  |  |  | — |
U.S. government bonds |  |  | 14,303 |  |  |  | 14,303 |  |  |  | — |  |  |  | — |
Foreign government bonds |  |  | 730 |  |  |  | — |  |  |  | 730 |  |  |  | — |
Marketable equity securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable equity securities – various industries |  |  | 35,662 |  |  |  | 35,662 |  |  |  | — |  |  |  | — |
Deferred compensation plan assets |  |  | 19,883 |  |  |  | 19,883 |  |  |  | — |  |  |  | — |
Available-for-sale securities |  |  | 118,038 |  |  |  | 69,848 |  |  |  | 48,190 |  |  |  | — |
Total |  | $ | 127,888 |  |  | $ | 75,699 |  |  | $ | 52,189 |  |  | $ | — |
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.

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