Financial Instruments and Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Financial Instruments and Fair Value Measurements

Financial Instruments and Fair Value Measurements

6. Financial Instruments and Fair Value Measurements

Fair Value Measurements

The financial instruments measured at fair value on a recurring basis are as follows:

	December 31, 2021
							Total Fair
	Level 1		Level 2		Level 3		Value
Cash equivalents:
Money market funds	$	40,412	$	—	$	—	$	40,412
U.S. Treasury Bills		4,000		—		—		4,000
		44,412		—		—		44,412
Investments - debt securities:
U.S. Treasury Bills		88,956		—		—		88,956
		88,956		—		—		88,956
Investments - equity securities:
Preferred stock		—		450		—		450
		—		450		—		450
	$	133,368	$	450	$	—	$	133,818

	December 31, 2020
							Total Fair
	Level 1		Level 2		Level 3		Value
Cash equivalents:
Money market funds	$	10,973	$	—	$	—	$	10,973
U.S. Treasury Bills		78,991		—		—		78,991
		89,964		—		—		89,964
Investments - debt securities:
U.S. Treasury Bills		47,991		—		—		47,991
Corporate debt securities		—		60		—		60
		47,991		60		—		48,051
Investments - equity securities:
Preferred stock		—		2,623		—		2,623
		—		2,623		—		2,623
Restricted investments:
Short-term bond		1,171		—		—		1,171
		1,171		—		—		1,171
	$	139,126	$	2,683	$	—	$	141,809

Money market funds, U.S. Treasury Bills 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 short-term U.S. Treasury Bills 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 preferred stock investments are not traded on a nationally recognized exchange, but 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 preferred stock investments are categorized as Level 2 financial instruments since their fair values were determined from market inputs in an inactive market.

As of December 31, 2020, restricted investments were included within other assets on the consolidated balance sheets and included 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 retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account were included in the Company’s consolidated financial statements until they were allocated to participants. The final allocation of the assets occurred in March 2021. As of December 31, 2020, the assets held in the suspense account were invested in 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 Short-Term Bond Fund was 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 was responsible for investing decisions and allocation decisions of the suspense account. See Note 9. Other Assets and Note 17. Employee Benefit Plan.

Assets and liabilities measured at fair value on a recurring basis related to interest rate swap agreements designated as cash flow hedges are as follows:

			Fixed		Notional					Fair	Location in
	Effective	Maturity	Interest		Amount as of	Derivative Asset (Liability) Fair Value				Value	Consolidated
Description	Date	Date	Rate		December 31, 2021	December 31, 2021		December 31, 2020		Level	Balance Sheets
					In Millions	In Thousands
Pier Park Resort Hotel JV Loan (a)	12/10/2022	4/12/2027	3.2%	$	42.0	$	558	$	—	2	Other assets
Watercrest JV Loan (a)	6/1/2021	6/1/2024	4.4%	$	20.0	$	(634)	$	(1,172)	2	Other liabilities
Pier Park TPS JV Loan (b)	1/14/2021	1/14/2026	5.2%	$	14.1	$	(436)	$	(821)	2	Investment in unconsolidated joint ventures

(a) See Note 11. Debt, Net for additional information.

(b) Interest rate swap was entered into by the Pier Park TPS JV, which is unconsolidated and accounted for using the equity method. The derivative liability has been recorded at the Company’s proportionate share of its estimated fair value. The Company’s proportionate share of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into equity in loss from unconsolidated joint ventures in the period during which the hedged transaction affects earnings. See Note 4. Joint Ventures and Note 20. Commitments and Contingencies for additional information.

The following is a summary of the effect of derivative instruments on the Company’s consolidated statements of income and consolidated statements of comprehensive income:

	Year Ended December 31,
	2021		2020		2019
Amount of gain (loss) recognized in other comprehensive income (loss) on derivatives	$	1,061	$	(1,657)	$	(336)
Amount of loss reclassified into interest expense	$	247	$	—	$	—
Amount of loss reclassified into equity in loss from unconsolidated joint ventures	$	173	$	—	$	—

As of December 31, 2021, based on current value, the Company expects to reclassify $0.6 million of net losses on derivative instruments from accumulated other comprehensive loss to earnings during the next twelve months.

Investment in Unconsolidated Joint Ventures

The fair value of the Company’s investment in unconsolidated JVs is determined primarily using a discounted cash flow model to value the underlying net assets and operations of the respective JV. The fair value of investment in unconsolidated JVs required to be assessed for impairment is determined using Level 3 inputs in the fair value hierarchy. No impairment for unconsolidated JVs was recorded during 2021, 2020 or 2019. See Note 4. Joint Ventures for additional information.

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 fair value of long-lived assets required to be assessed for impairment is determined using Level 3 inputs in the fair value hierarchy. During 2021, 2020 and 2019 the Company did not record any impairment charges related to long-lived assets.

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 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 Bills are measured based on quoted market prices in an active market.

● The fair value of debt is based on discounted future expected cash flows based on current market rates for financial instruments with similar risks, terms and maturities.

● 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 estimated fair value, measured on a nonrecurring basis, of the Company’s financial instruments were as follows:

	December 31, 2021					December 31, 2020
	Carrying		Estimated			Carrying		Estimated
	value		Fair value		Level	value		Fair value		Level
Investments held by SPEs:
Time deposit	$	200,000	$	200,000	3	$	200,000	$	200,000	3
U.S. Treasury Bills	$	5,132	$	5,475	1	$	5,759	$	6,363	1
Senior Notes held by SPE	$	177,566	$	204,802	3	$	177,289	$	216,363	3
Debt
Fixed-rate debt	$	129,532	$	126,722	2	$	114,125	$	116,509	2
Variable-rate debt		97,942		97,942	2		47,293		47,293	2
Total debt	$	227,474	$	224,664		$	161,418	$	163,802

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, 2021, 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 $5.1 million and cash of $0.4 million. The Senior Notes held by Northwest Florida Timber Finance, LLC as of December 31, 2021 consist of $177.6 million, net of the $2.4 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.