Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

3. Fair value measurements

     The Company follows the provisions of ASC 820 for its financial and non-financial assets and liabilities. ASC 820 among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value on a recurring basis are as follows:

     Fair value as of June 30, 2011

			Quoted Prices in		Significant Other		Significant
	Fair Value		Active Markets for		Observable		Unobservable
	June 30,		Identical Assets		Inputs		Inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Recurring:
Investments in money market and short term treasury instruments	$	186,873	$	186,873	$	—	$	—
Retained interest in entities		10,490		—		—		10,490
Total, net	$	197,363	$	186,873	$	—	$	10,490

     Fair value as of December 31, 2010

			Quoted Prices in		Significant Other		Significant
	Fair Value		Active Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2010		(Level 1)		(Level 2)		(Level 3)
Recurring:
Investments in money market	$	177,816	$	177,816	$	—	$	—
Retained interest in entities		10,283		—		—		10,283
Total, net	$	188,099	$	177,816	$	—	$	10,283

     The Company has recorded a retained interest with respect to the monetization of certain installment notes which is recorded in other assets. The retained interest is an estimate based on the present value of cash flows to be received over the life of the installment notes. The Company's continuing involvement with the entities is in the form of receipts of net interest payments, which are recorded as interest income and approximated $0.3 million for each of the six months ended June 30, 2011 and 2010, respectively. In addition, the Company will receive the payment of the remaining principal on the installment notes during 2022 and 2023.

     In accordance with ASC 325, Investments — Other, Subtopic 40 — Beneficial Interests in Securitized Financial Assets, the Company recognizes interest income over the life of the retained interest using the effective yield method. This income adjustment is being recorded as an offset to loss on monetization of notes over the life of the installment notes. In addition, fair value may be adjusted at each reporting date when, based on management's assessment of current information and events, there is a favorable or adverse change in estimated cash flows from cash flows previously projected. The Company did not make adjustments as a result of changes in previously projected cash flows during the first six months of 2011 or 2010.

     The following is a reconciliation of the Company's retained interest:

	2011
Balance January 1	$	10,283
Additions		—
Accretion of interest income		207
Balance June 30	$	10,490

     In the event of a failure and liquidation of the financial institution involved in our installment sales, the Company could be required to write-off the remaining retained interest recorded on its balance sheet in connection with the installment sale monetization transactions, which would have an adverse effect on the Company's results of operations and financial position.

     On October 21, 2009, the Company entered into a strategic alliance agreement with Southwest Airlines to facilitate the commencement of low-fare air service in May 2010 to the Northwest Florida Beaches International Airport. The Company has agreed to reimburse Southwest Airlines if it incurs losses on its service at the airport during the first three years of service by making specified break-even payments. There was no reimbursement required in 2010 or the first six months of 2011. The agreement also provides that Southwest's profits from the air service during the term of the agreement will be shared with the Company up to the maximum amount of our break-even payments. Profits from any calendar year, however, do not carryover from year to year.

     The term of the agreement extends for a period of three years ending May 23, 2013. Although the agreement does not provide for maximum payments, the agreement may be terminated by the Company if the break-even payments to Southwest exceed $12 million in the second year of air service. Southwest may terminate the agreement if its actual annual revenues attributable to the air service at the airport are less than certain minimum annual amounts established in the agreement. As of June 30, 2011 actual revenues have exceeded these minimum amounts.

     At inception, the Company measured the associated standby guarantee liability at fair value based upon a discounted cash flow analysis based on management's best estimates of future cash flows to be paid by the Company pursuant to the strategic alliance agreement. These cash flows are estimated using numerous estimates including future fuel costs, passenger load factors, air fares, and seasonality. Subsequently, the guarantee is measured at the greater of the fair value of the guarantee liability at inception or the payment amount that is probable and reasonably estimable of occurring, if any. The Company carried a standby guarantee liability of $0.8 million at June 30, 2011 and December 31, 2010 related to this strategic alliance agreement. The Company has made no payments under the standby guarantee.

      In order to mitigate potential losses that may arise from changes in Southwest Airlines jet fuel costs, we entered into a premium neutral collar arrangement with respect to the underlying cost of jet fuel for a portion of Southwest Airlines' estimated fuel volumes. The collar arrangement expired in May 2011 and the Company received payments of $0.4 million during the term of the arrangement.

     The Company did not extend the term of, or enter into a new arrangement because the Company concluded that (i) the cost of jet fuel is a small proportion of the total costs the Company may be obligated to reimburse Southwest Airlines if it incurs losses on its service at the new airport during the first three years of service and (ii) the Company believes that the greatest likelihood of payments to Southwest Airlines pursuant to the strategic alliance agreement occurred during the first year of operations.

     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. Homes and homesites substantially completed and ready for sale, and which management intends to sell in the near term under current market conditions, are measured at lower of carrying value or fair value less costs to sell. The fair value of these properties is determined based upon final sales prices of inventory sold during the period (level 2 inputs) or estimates of selling prices based on current market data (level 3 inputs). Other properties for which management does not intend to sell in the near term under current market conditions, including development and operating properties, are evaluated for impairment based on management's best estimate of the long-term use and eventual disposition of the property. If determined to be impaired, the fair value of these properties is determined based on the net present value of discounted cash flows using estimated future expenditures necessary to maintain and complete the existing project and management's best estimates about future sales prices, sales volumes, sales velocity and holding periods (level 3 inputs). The estimated length of expected development periods, related economic cycles and inherent uncertainty with respect to these projects such as the impact of changes in development plans and the Company's intent and ability to hold the projects through the development period, could result in changes to these estimates. For operating properties, an estimate of undiscounted cash flows requires management to make similar assumptions about the use and eventual disposition of such properties. For the six months ended June 30, 2011, the total impairment losses were $2.5 million. The assets measured at fair value on a nonrecurring basis during the six months ended June 30, 2011 were as follows:

	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable		Fair Value
	Identical Assets		Inputs		Inputs		June 30,		Total Impairment
	(Level 1)		(Level 2)		(Level 3)		2011		Losses
Non-financial assets:
Investment in real estate	$	—	$	1,224	$	1,701	$	2,925	$	1,697

     During the second quarter of 2011, management made the decision to dispose of four homes to avoid the ongoing maintenance and other holding costs. One of these homes included a 53 acre parcel which the Company had initially developed as a rural retreat community. The remainder of the homes and condos owned by the Company are currently being used as rental property. As a result, long-lived assets sold or held for sale with a carrying amount of $4.6 million were written down to their fair value of $2.9 million, resulting in a loss of $1.7 million, which was included in impairment losses for the six months ending June 30, 2011. In addition, the Company impaired $0.8 million of predevelopment costs related to the construction of the Company's proposed new headquarters in Northwest Florida, which has been indefinitely delayed.