Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Note 15. Fair Value Measurements

The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practical to estimate fair value:

Cash and Cash Equivalents: Cash equivalents include investments in money market funds. Investments in this category can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short‑term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. The carrying amounts approximate the fair value because of the short maturity of those instruments.

Restricted Cash: The credit support deposit was classified as Level 1 as its carrying value approximates market prices.

Advance to Silver Legacy Joint Venture: The $7.5 million note receivable, which was settled at the Acquisition Date as part of the Circus Reno/Silver Legacy Purchase, due to ELLC from the Silver Legacy Joint Venture (see Note 5) was classified as Level 2 based upon market‑based inputs.

Long‑term Debt: The $375 million in aggregate principal amount of Senior Notes, Resorts Senior Secured Notes and MTR Second Lien Notes were classified as Level 2 based upon market‑based inputs. The fair value of the Senior Notes was calculated based on management’s estimates of the borrowing rates available as of December 31, 2015, for debt with similar terms and maturities. The fair value of Resorts Senior Secured Notes and the MTR Second Lien Notes were based on quoted market prices as of December 31, 2014.

Term Loan: Resorts’ term loan under the New Credit Facility (see Note 9) is classified as Level 2 as it is tied to market rates of interest and its carrying value approximates market value.

Revolving Credit Facility: Resorts’ revolving credit facility under the New Credit Facility (see Note 9) is classified as Level 2 as it is tied to market rates of interest and its carrying value approximates market value.

Acquisition‑Related Contingent Considerations: Contingent consideration related to the July 2003 acquisition of Scioto Downs represents the estimate of amounts to be paid to former stockholders of Scioto Downs under certain earn‑out provisions. We consider the acquisition‑related contingency’s fair value measurement, which includes forecast assumptions, to be Level 3 within the fair value hierarchy. The fair value of the acquisition‑related contingent consideration was based on its fair value as of the Merger Date.

The estimated fair values of the Company’s financial instruments are as follows (amounts in thousands):


	December 31, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	$	78,278	$	78,278	$	87,604	$	87,604
Restricted cash		5,271		5,271		8,234		8,234
Advance to Silver Legacy Joint Venture		—		—		—		4,911
Financial liabilities:
7.0% Senior Notes	$	366,043	$	367,500	$	—	$	—
New Term Loan		408,410		419,796		—		—
New Revolving Credit Facility		90,967		93,500		—		—
8.625% Senior Secured Notes		—		—		164,229		174,720
11.5% Senior Secured Second Lien Notes		—		—		610,827		606,919
Acquisition-related contingent considerations		529		529		524		524

The following table represents the change in acquisition‑related contingent consideration liabilities during the period from the Merger Date to December 31, 2015 (amounts in thousands):


Balance as of Merger Date	$	508
Amortization of present value discount(1)		38
Fair value adjustment for change in consideration expected to be paid(2)		(22)
Settlements		—
Balance as of December 31, 2014		524
Amortization of present value discount(1)		52
Fair value adjustment for change in consideration expected to be paid(2)		38
Settlements		(85)
Balance as of December 31, 2015	$	529

(1) Changes in present value are included as a component of interest expense in the consolidated statements of operations.

(2) Fair value adjustments for changes in earn-out estimates are recorded as a component of general and administrative expense in the consolidated statements of operations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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