Financial Instruments and Fair Value Measurements

Fair Value Measurements

The financial instruments measured at fair value on a recurring basis at March 31, 2018 were as follows:



	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	5,690	$	—	$	—	$	5,690
Commercial paper	179,181		—		—		179,181
	184,871		—		—		184,871

Investments - debt securities:
U.S. Treasury securities	9,901		—		—		9,901
Corporate debt securities	—		36,445		—		36,445
	9,901		36,445		—		46,346

Investments - equity securities:
Preferred stock	10,728		34,200		—		44,928

Restricted investments:
Short-term bond	3,227		—		—		3,227
Money market fund	165		—		—		165
	3,392		—		—		3,392
	$	208,892	$	70,645	$	—	$	279,537

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 - debt securities:
U.S. Treasury securities	9,870		—		—		9,870
Corporate debt securities	—		66,375		—		66,375
	9,870		66,375		—		76,245

Investments - equity securities:
Preferred stock	10,717		24,306		—		35,023

Restricted investments:
Short-term bond	4,251		—		—		4,251
Money market fund	218		—		—		218
	4,469		—		—		4,469
	$	195,531	$	90,681	$	—	$	286,212

Money market funds, commercial paper, U.S. Treasury securities, certain preferred stock and short-term bonds are measured based on quoted market prices in an active market and categorized within 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 condensed consolidated balance sheets.

The Company’s corporate debt securities and certain preferred stock 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 corporate debt securities and certain preferred stock 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 condensed consolidated financial statements until they are allocated to participants. As of March 31, 2018 and December 31, 2017, 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 15. Employee Benefit Plan.

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 investments held by special purpose entities - 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 special purpose entities - U.S. Treasury securities are measured based on quoted market prices in an active market.


•	The fair value of the senior notes held by special purpose entity 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:



	March 31, 2018					December 31, 2017
	Carrying value		Fair value		Level	Carrying value		Fair value		Level
Assets
Investments held by special purpose entities:
Time deposit	$	200,000	$	200,000	3	$	200,000	$	200,000	3
U.S. Treasury securities and cash equivalents	$	7,618	$	7,303	1	$	7,989	$	7,797	1
Liabilities
Senior notes held by special purpose entity	$	176,595	$	191,373	3	$	176,537	$	198,530	3

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 (the “Senior Notes”) 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 March 31, 2018, 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 $7.2 million and cash of $0.4 million. The Senior Notes held by Northwest Florida Timber Finance, LLC as of March 31, 2018 consist of $176.6 million, net of the $3.4 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.