Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements

Fair Value Measurements

17. FAIR VALUE MEASUREMENTS:

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The investments held by the Company in connection with its deferred compensation plan consist of mutual funds traded in an active market. The Company determined the fair value of these mutual funds based on the net asset value per unit of the funds or the portfolio, which is based upon quoted market prices in an active market. Therefore, the Company has categorized these investments as Level 1.

The Company’s interest rate swaps consist of over-the-counter swap contracts, which are not traded on a public exchange. The Company determines the fair value of these swap contracts based on a widely accepted valuation methodology of netting the discounted future fixed cash flows and the discounted expected variable cash flows, using interest rates derived from observable market interest rate curves and volatilities, with appropriate adjustments for any

significant impact of non-performance risk of the parties to the swap contracts. Therefore, these swap contracts have been classified as Level 2.

The Company has consistently applied the above valuation techniques in all periods presented and believes it has obtained the most accurate information available for each type of instrument.

The Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and December 31, 2022, were as follows (in thousands):

			Markets for		Observable		Unobservable
	September 30,		Identical Assets		Inputs		Inputs
	2023		(Level 1)		(Level 2)		(Level 3)
Deferred compensation plan investments	$	31,334	$	31,334	$	—	$	—
Variable to fixed interest rate swaps		1,480		—		1,480		—
Total assets measured at fair value	$	32,814	$	31,334	$	1,480	$	—

			Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2022		(Level 1)		(Level 2)		(Level 3)
Deferred compensation plan investments	$	29,245	$	29,245	$	—	$	—
Variable to fixed interest rate swaps		11,350		—		11,350		—
Total assets measured at fair value	$	40,595	$	29,245	$	11,350	$	—
Variable to fixed interest rate swaps	$	1,164	$	—	$	1,164	$	—
Total liabilities measured at fair value	$	1,164	$	—	$	1,164	$	—

The remainder of the assets and liabilities held by the Company at September 30, 2023 are not required to be recorded at fair value, and financial assets and liabilities approximate fair value, except as described below.

The Company has outstanding $600.0 million in aggregate principal amount of $600 million 4.50% senior notes. The carrying value of these notes at September 30, 2023 was $592.7 million, net of unamortized deferred financing costs (“DFCs”). The fair value of these notes, based upon quoted market prices (Level 1), was $516.5 million at September 30, 2023.

The Company has outstanding $700.0 million in aggregate principal amount of $700 million 4.75% senior notes. The carrying value of these notes at September 30, 2023 was $694.6 million, net of unamortized DFCs and premiums. The fair value of these notes, based upon quoted market prices (Level 1), was $640.2 million at September 30, 2023.

See Note 2, “JW Marriott Hill Country Transaction,” for additional disclosures related to the fair value measurements used in accounting for the purchase of JW Marriott Hill Country.