Investments

Investments consist of available-for-sale securities and are recorded at fair value, which is based on observable market inputs. Unrealized gains and temporary losses on investments, net of tax, are recorded in Other comprehensive (loss) income. Realized gains and losses are determined using the specific identification method. The amortized cost of debt securities are adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization is included in Investment income, net. In addition, at September 30, 2015, the Company had investments in short term commercial paper that are classified as cash equivalents, since they had maturity dates of ninety days or less from the date of purchase.

At September 30, 2015 investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
Commercial paper ⁽¹⁾	$	98,962	$	22	$	—	$	98,984
U.S. Treasury securities	234,674		187		—		234,861
Corporate debt securities	5,269		—		—		5,269
Preferred stock	11,858		37		—		11,895
	$	350,763	$	246	$	—	$	351,009



(1)	Recorded in Cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets.

At December 31, 2014 investments classified as available-for-sale securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities	$	509,783	$	32	$	—	$	509,815
Corporate debt securities	101,587		—		1,482		100,105
Preferred stock	26,963		—		5		26,958
	$	638,333	$	32	$	1,487	$	636,878

Fairholme Capital Management, L.L.C., or one of its affiliates (“Fairholme Capital”), has served as an investment advisor to the Company since April 2013. As of September 30, 2015, funds managed by Fairholme Capital beneficially owned approximately 32.5% of the Company’s common stock. Mr. Bruce Berkowitz is the Managing Member of Fairholme Capital and the Chairman of the Company’s Board of Directors. Fairholme Capital does not receive any compensation for services as the Company’s investment advisor.

Pursuant to the terms of the Company’s Investment Management Agreement as amended (the “Agreement”) with Fairholme Capital, Fairholme Capital 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. The investment guidelines are set forth in the Agreement and require that, as of the date of any investment: (i) at least 50% of the investment account be held in cash or cash equivalents, as defined in the Agreement, (ii) no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) and (iii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10%, but not 15%, requires the consent of at least two members of the Investment Committee. The investment account may not be invested in common stock securities.

As of September 30, 2015, the investment account included $30.9 million of money market funds and $99.0 million of commercial paper (all of which are classified within cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets), $234.9 million of U.S. Treasury securities, $5.3 million of corporate debt securities in an issuer that is a national retail chain that is non-investment grade and $11.9 million of preferred stock investments (all of which are classified within investments on the Company’s Condensed Consolidated Balance Sheets).

During the three months ended September 30, 2015, realized gains from the sale of available-for-sale securities were $5.3 million and proceeds from the sale of available-for-sale securities were $182.7 million. During the nine months ended September 30, 2015, realized gains from the sale of available-for-sale securities were $5.3 million, proceeds from the sale of available-for-sale securities were $322.8 million and proceeds from the maturity of available-for-sale securities were $310.0 million.

During the three months ended September 30, 2014, proceeds from the sale of available-for-sale securities were $75.0 million and proceeds from the maturity of U.S. Treasury securities were $40.0 million. During the nine months ended September 30, 2014, realized losses from the sale of available-for-sale securities were $0.8 million, proceeds from the sale of available-for-sale securities were $83.2 million and proceeds from the maturity of available-for-sale securities were $100.0 million.

As of September 30, 2015, there were no unrealized losses related to commercial paper, U.S. Treasury securities, corporate debt securities or preferred stock investments. As of December 31, 2014, certain of the Company’s U.S. Treasuries and preferred stock had immaterial unrealized losses. The Company previously reported in its Annual Report on Form 10-K that it had no continuous unrealized losses greater than twelve months as a result of recognizing a portion of the unrealized loss in earnings as of September 30, 2014. The Company has revised this disclosure in the following table that provides the corporate debt securities continuous unrealized loss position and its related fair values:



	As of September 30, 2015								As of December 31, 2014
	Less Than 12 Months				12 Months or Greater				Less Than 12 Months				12 Months or Greater
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate debt securities	$	—	$	—	$	—	$	—	$	85,845	$	1,294	$	14,260	$	188

The Company had no unrealized losses as of September 30, 2015. The Company’s unrealized losses as of December 31, 2014 relate to investments in senior secured debt securities in one issuer that is a national retail chain that is non-investment grade. The Company purchased these investments between the second quarter of 2013 through the second quarter of 2014. During the third quarter of 2014, the Company determined that these investments were other-than-temporarily impaired and recorded $1.3 million related to credit-related losses in Investment income, net on the Company's Condensed Consolidated Statements of Operations. The credit-losses were measured as the difference between the present value of the expected cash flows of the corporate debt securities discounted using the effective interest rate at the date of purchase and the amortized cost of the corporate debt securities. The Company sold these investments during the three months ended September 30, 2015 and recorded a realized gain of $5.3 million.

As of December 31, 2014, the Company did not intend to sell the investments with unrealized losses and it was not more likely than not that the Company would have been required to sell the security prior to its anticipated recovery, which could have been maturity; therefore, the Company does not believe that its investment in the corporate debt securities was other-than-temporarily impaired at December 31, 2014.

The net carrying value and estimated fair value of investments classified as available-for-sale at September 30, 2015, by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations.



	Amortized Cost		Fair Value
Due in one year or less	$	333,636	$	333,845
Due after one year through five years	5,269		5,269
	338,905		339,114
Preferred stock	11,858		11,895
	$	350,763	$	351,009