Investments

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Investments

5. INVESTMENTS

At March 31, 2016, we held the following securities and investments, recorded at either fair value or cost.

(In thousands)	Amortized Cost		Gross Unrealized					Carrying Value
			Gains		Losses
Deferred compensation plan assets	$	11,440	$	1,634	$	(70	)	$	13,004
Corporate bonds		61,154		89		(386	)		60,857
Municipal fixed-rate bonds		15,659		54		(1	)		15,712
Asset-backed bonds		20,540		28		(8	)		20,560
Mortgage/Agency-backed bonds		14,959		19		(82	)		14,896
Government bonds		33,205		216		(2	)		33,419
Variable Rate Demand Notes		2,235		—		—			2,235
Marketable equity securities		31,798		2,886		(1,647	)		33,037
Available-for-sale securities held at fair value	$	190,990	$	4,926	$	(2,196	)	$	193,720
Restricted investment held at cost									30,000
Other investments held at cost									1,266
Total carrying value of available-for-sale investments								$	224,986

At December 31, 2015, we held the following securities and investments, recorded at either fair value or cost.

(In thousands)	Amortized Cost		Gross Unrealized					Carrying Value
			Gains		Losses
Deferred compensation plan assets	$	11,325	$	1,575	$	(66	)	$	12,834
Corporate bonds		58,328		20		(734	)		57,614
Municipal fixed-rate bonds		26,414		28		(18	)		26,424
Asset-backed bonds		19,281		2		(44	)		19,239
Mortgage/Agency-backed bonds		15,463		1		(91	)		15,373
Government bonds		35,646		—		(248	)		35,398
Marketable equity securities		31,643		4,301		(1,693	)		34,251
Available-for-sale securities held at fair value	$	198,100	$	5,927	$	(2,894	)	$	201,133
Restricted investment held at cost									30,000
Other investments held at cost									1,289
Total carrying value of available-for-sale investments								$	232,422

As of March 31, 2016, our corporate bonds, municipal fixed-rate bonds, asset-backed bonds, mortgage/agency-backed bonds, and government bonds had the following contractual maturities:

(In thousands)	Corporate bonds		Municipal fixed-rate bonds		Asset- backed bonds		Mortgage / Agency- backed bonds		Government bonds
Less than one year	$	17,668	$	7,147	$	—	$	1,000	$	1,253
One to two years		29,883		5,566		190		1,300		4,751
Two to three years		12,490		1,373		8,158		1,774		17,992
Three to five years		816		226		9,496		—		9,423
Five to ten years		—		—		2,540		1,180		—
More than ten years		—		1,400		176		9,642		—
Total	$	60,857	$	15,712	$	20,560	$	14,896	$	33,419

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 March 31, 2016, we held a $30.0 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). At March 31, 2016, the estimated fair value of the Bond using a level 2 valuation technique was approximately $29.1 million, based on a debt security with a comparable interest rate and maturity and a Standard and Poor’s credit rating of AAA. For more information on the Bond, see “Debt” under “Liquidity and Capital Resources” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 2 of Part I of this report.

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 months ended March 31, 2016 and 2015, 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
	March 31,
(In thousands)	2016			2015
Gross realized gains	$	2,364		$	3,145
Gross realized losses	$	(636	)	$	(30	)

As of March 31, 2016 and 2015, 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 March 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	$	2,110	$	2,110	$	—	$	—
Commercial Paper		26,442		—		26,442		—
Cash equivalents		28,552		2,110		26,442		—
Available-for-sale securities
Deferred compensation plan assets		13,004		13,004		—		—
Available-for-sale debt securities
Corporate bonds		60,857		—		60,857		—
Municipal fixed-rate bonds		15,712		—		15,712		—
Asset-backed bonds		20,560		—		20,560		—
Mortgage/Agency-backed bonds		14,896		—		14,896		—
Government bonds		33,419		33,419		—		—
Variable Rate Demand Notes		2,235		—		2,235		—
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		4,709		4,709		—		—
Marketable equity securities – other		28,328		28,328		—		—
Available-for-sale securities		193,720		79,460		114,260		—
Total	$	222,272	$	81,570	$	140,702	$	—

	Fair Value Measurements at December 31, 2015 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	$	1,271	$	1,271	$	—	$	—
Commercial Paper		11,696		—		11,696		—
Cash equivalents		12,967		1,271		11,696		—
Available-for-sale securities
Deferred compensation plan assets		12,834		12,834		—		—
Available-for-sale debt securities
Corporate bonds		57,614		—		57,614		—
Municipal fixed-rate bonds		26,424		—		26,424		—
Asset-backed bonds		19,239		—		19,239		—
Mortgage/Agency-backed bonds		15,373		—		15,373		—
Government bonds		35,398		35,398		—		—
Available-for-sale marketable equity securities
Marketable equity securities – technology industry		5,384		5,384		—		—
Marketable equity securities – other		28,867		28,867		—		—
Available-for-sale securities		201,133		82,483		118,650		—
Total	$	214,100	$	83,754	$	130,346	$	—

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 municipal 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.