Investments

Investments consist of available-for-sale securities and are recorded at fair value, which is based on quoted market prices. Unrealized gains and temporary losses on investments, net of tax, are recorded in Other comprehensive income (loss). Realized gains and losses are determined using the specific identification method.

At September 30, 2013 investments classified as available-for-sale securities were as follows:



	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities:
U.S. treasury securities	$	124,919	$	54	$	—	$	124,973
Corporate debt securities	22,809		—		1,731		21,078
	$	147,728	$	54	$	1,731	$	146,051

In April 2013, the Company engaged Fairholme Capital Management, L.L.C. (“Fairholme”), to serve as an

investment adviser to the Company. As of September 30, 2013, Fairholme owns approximately 27% of the Company's common stock. Mr. Bruce Berkowitz is the Managing Member of Fairholme and the Chairman of the Company's Board of Directors. Fairholme will receive no compensation for their services as the Company's investment advisor.

Pursuant to the terms of the Investment Management Agreement (the “Agreement”) with Fairholme, Fairholme agreed to supervise and direct the investments of an investment account established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company's Board of Directors, which were set forth in the Agreement. The investment guidelines require that, as of the date of any investment, (i) at least 50% of the investment account be held in cash, investment grade cash equivalents or U.S. treasury securities, (ii) no more than 50% of the investment account be held in corporate debt securities, which may be investment grade or non-investment grade, and (iii) no more than 10% of the investment account be invested in securities of any one issuer (excluding the U.S. Government). The investment account may not be invested in equity securities. As of September 30, 2013, the investment account included $2.4 million of money market funds, $125.0 million of U.S. treasury securities and $21.1 million of corporate debt securities, which were non-investment grade. Money market funds are recorded in Cash and cash equivalents and U.S. treasury securities and corporate debt securities are recorded in Investments on the Company's Condensed Consolidated Balance Sheets.

At September 30, 2013, there were no U.S. treasury securities with unrealized losses. At September 30, 2013, corporate debt securities with a fair value of $21.1 million had $1.7 million of unrealized losses, net of tax, which were included in Accumulated other comprehensive loss for the nine months ended September 30, 2013.

During the three and nine months ended September 30, 2013, realized gains from the sale of available-for-sale securities were $0.1 million and proceeds from the sale or maturity of available-for-sale securities were $32.7 million (which were reinvested in U.S. treasury securities).

The Company evaluates investments with unrealized losses to determine if they experienced an other-than-temporary impairment. This evaluation is based on various factors, including length of time securities were in a loss position, ability and intent to hold investments until unrealized losses are recovered or maturity, investee's industry and amount of the unrealized loss. Based on these factors, at September 30, 2013, the unrealized losses related to the corporate debt securities of $1.7 million were not deemed an other-than-temporary impairment.

At September 30, 2013, the contractual maturities of investments classified as available-for-sale were as follows:



	Cost		Fair Value
Due in one year or less	$	124,919	$	124,973
Due after one year through five years	9,090		7,883
Due after five years through ten years	13,719		13,195
	$	147,728	$	146,051

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations.