Financial Instruments and Fair Value Measurements

Fair Value Measurements

The financial instruments measured at fair value on a recurring basis at December 31, 2017 were as follows:



	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	10,505	$	—	$	—	$	10,505
Commercial paper	159,970		—		—		159,970
	170,475		—		—		170,475
Investments:
U.S. Treasury securities	9,870		—		—		9,870
Corporate debt securities	—		66,375		—		66,375
Preferred stock	10,717		24,306		—		35,023
	20,587		90,681		—		111,268
Restricted investments:
Short-term bond	4,251		—		—		4,251
Money market fund	218		—		—		218
	4,469		—		—		4,469
	$	195,531	$	90,681	$	—	$	286,212

The financial instruments measured at fair value on a recurring basis at December 31, 2016 were as follows:



	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	86,236	$	—	$	—	$	86,236
Commercial paper	129,671		—		—		129,671
	215,907		—		—		215,907
Investments:
Corporate debt securities	57,788		81,344		—		139,132
Preferred stock	19,177		17,416		—		36,593
	76,965		98,760		—		175,725
Restricted investments:
Short-term bond	4,226		—		—		4,226
Money market fund	1,410		—		—		1,410
	5,636		—		—		5,636
	$	298,508	$	98,760	$	—	$	397,268

Money market funds, commercial paper, U.S. Treasury securities, certain preferred stocks and short-term bonds were measured based on quoted market prices in an active market and categorized within level 1 of the fair value hierarchy. In addition, during 2016 certain corporate debt securities were also classified as level 1 of the fair value hierarchy. Money market funds and commercial paper with a maturity date of 90 days or less from the date of purchase are classified as cash equivalents in the Company’s consolidated balance sheets.

The Company’s corporate debt securities and certain preferred stocks are not traded on a nationally recognized exchange but rather are traded in the U.S. over-the-counter market where there is less trading activity and the investments are measured primarily using pricing data from external pricing services that report prices observed for recently executed market transactions. For these reasons, the Company has determined that certain corporate debt securities and certain preferred stocks are categorized as level 2 financial instruments since their fair values were determined from market inputs in an inactive market.

Restricted investments include certain of the surplus assets that were transferred from the Company’s Pension Plan to a suspense account in the Company’s 401(k) Plan in December 2014. The Company has retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account are included in the Company’s consolidated financial statements until they are allocated to participants. As of December 31, 2017 and 2016, the assets held in the suspense account were invested in Vanguard Money Market Funds, which invest in short-term, high quality securities or short-term U.S. government securities and seek to provide current income and preserve shareholders’ principal investment and a Vanguard Short-Term Bond Fund, which invests in money market instruments and short-term high quality bonds, including asset-backed, government, and investment grade corporate securities with an expected maturity of 0-3 years. The Vanguard Money Market Funds and Vanguard Short-Term Bond Fund are measured based on quoted market prices in an active market and categorized within level 1 of the fair value hierarchy. The Company’s Retirement Plan Investment Committee is responsible for investing decisions and allocation decisions of the suspense account. Refer to Note 17. Employee Benefit Plan.

Long-lived Assets

The Company reviews its long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and impairments during the year. During 2017, the Company recorded an impairment charge of $0.7 million included in cost of resorts and leisure revenue, related to a non-strategic resorts and leisure asset. During 2016, the Company recorded an impairment charge of $0.4 million, included in cost of real estate revenue, related to a commercial leasing and sales property. During 2015 there were no impairments.

Fair Value of Financial Instruments

The Company uses the following methods and assumptions in estimating fair value for financial instruments:


•	The fair value of the Company’s retained interest investments is based on the present value of the expected future cash flows at the effective yield.


•	The fair value of the Investments held by SPE - time deposit is based on the present value of future cash flows at the current market rate.


•	The fair value of the Investments held by SPE - U.S. Treasury securities are measured based on quoted market prices in an active market.


•	The fair value of the senior notes held by SPE is based on the present value of future cash flows at the current market rate.

The carrying amount and fair value, measured on a nonrecurring basis, of the Company’s financial instruments were as follows:



	December 31, 2017					December 31, 2016
	Carrying value		Fair value		Level	Carrying value		Fair value		Level
Assets
Retained interest investments	$	11,147	$	14,106	3	$	10,635	$	13,669	3
Investments held by SPEs:
Time deposit	$	200,000	$	200,000	3	$	200,000	$	200,000	3
U.S. Treasury securities and cash equivalents	$	7,989	$	7,797	1	$	8,590	$	8,398	1
Liabilities
Senior Notes held by SPE	$	176,537	$	198,530	3	$	176,310	$	199,691	3

Retained Interest Investments

The Company has a beneficial interest in certain bankruptcy-remote qualified SPEs used in the installment sale monetization of certain sales of timberlands in 2007 and 2008. The SPEs’ assets are not available to satisfy the Company’s liabilities or obligations and the liabilities of the SPEs are not the Company’s liabilities or obligations. Therefore, the SPEs’ assets and liabilities are not consolidated in the Company’s consolidated financial statements as of December 31, 2017 and 2016. The Company’s continuing involvement with the SPEs is the receipt of the net interest payments and the remaining principal of approximately $16.8 million to be received at the end of the installment notes’ fifteen year maturity period, in 2022 through 2024. The Company has a beneficial or retained interest investment related to these SPEs of $11.1 million and $10.6 million as of December 31, 2017 and 2016, respectively, recorded in other assets on the Company’s consolidated balance sheets.

Investments and Senior Notes Held by Special Purpose Entities

In connection with a real estate sale in 2014, the Company received consideration including a $200.0 million fifteen-year installment note (the “Timber Note”) issued by Panama City Timber Finance Company, LLC. The Company contributed the Timber Note and assigned its rights as a beneficiary under a letter of credit to Northwest Florida Timber Finance, LLC. Northwest Florida Timber Finance, LLC monetized the Timber Note by issuing $180.0 million aggregate principal amount of its 4.8% Senior Secured Notes due in 2029 at an issue price of 98.5% of face value to third party investors. The investments held by Panama City Timber Finance Company, LLC as of December 31, 2017, consist of a $200.0 million time deposit that, subsequent to April 2, 2014, pays interest at 4.0% and matures in March 2029, U.S. Treasuries of $7.6 million and cash of $0.4 million. The Senior Notes held by Northwest Florida Timber Finance, LLC as of December 31, 2017 consist of $176.5 million, net of the $3.5 million discount and debt issuance costs. Panama City Timber Finance Company, LLC and Northwest Florida Timber Finance, LLC are VIEs, which the Company consolidates as the primary beneficiary of each entity.