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Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Note 12. Fair Value Measurements

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. Accordingly, fair value is a market based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there is a three‑tier fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

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Level 1 Inputs: Quoted market prices in active markets for identical assets or liabilities.

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Level 2 Inputs: Observable market‑based inputs or unobservable inputs that are corroborated by market data.

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Level 3 Inputs: Unobservable inputs that are not corroborated by market data.

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 cash held in money market funds and investments that 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. Cash and cash equivalents also include cash maintained for gaming operations. The carrying amounts approximate the fair value because of the short maturity of those instruments (Level 1).

Restricted Cash and Investments: The estimated fair values of our restricted cash and investments are based upon quoted prices available in active markets (Level 1), or quoted prices for similar assets in active and inactive markets (Level 2), or quoted prices available in active markets adjusted for time restrictions related to the sale of the investment (Level 3) and represent the amounts we would expect to receive if we sold our restricted cash and investments.

Marketable Securities: Marketable securities consist primarily of trading securities held the Company’s captive insurance subsidiary. The estimated fair values of the Company’s marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts we would expect to receive if we sold these marketable securities.

Long‑term Debt: The fair value of our long-term debt or other long-term obligations is estimated based on the quoted market price of the underlying debt issue (Level 1) or, when a quoted market price is not available, the discounted cash flow of future payments utilizing current rates available to us for the debt of similar remaining maturities (Level 2). Debt obligations with a short remaining maturity have a carrying amount that approximates fair 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. Acquisition related contingent considerations of $0.5 million is included in accrued other liabilities on the Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018.

Items Measured at Fair Value on a Recurring Basis: The following table sets forth the assets measured at fair value on a recurring basis, by input level, in the Consolidated Balance Sheets at March 31, 2019 and December 31, 2018 (amounts in thousands):

	March 31, 2019
Assets:	Level 1		Level 2		Level 3			Total
Restricted cash and investments	$	19,775	$	3,050	$	41,775		$	64,600
Marketable securities		9,816		7,083		—			16,899

Liabilities:
Other liabilities related to restricted investments		—		—		(8,672	)		(8,672	)

	December 31, 2018
Assets:	Level 1		Level 2		Level 3			Total
Restricted cash and investments	$	19,481	$	4,467	$	16,008		$	39,956
Marketable securities		9,515		7,442		—			16,957

The change in restricted cash and investments valued using Level 3 inputs for the three months ended March 31, 2019 is as follows:

	Level 3 Investments			Level 3 Other Liabilities
Fair value of investment and liabilities at December 31, 2018	$	16,008		$	—
Value of additional investment received		27,329			(8,774	)
Change in other liabilities related to restricted investments		—			102
Unrealized loss in restricted investments		(1,562	)		—
Fair value at March 31, 2019	$	41,775		$	(8,672	)

There were no transfers between Level 1 and Level 2 investments.

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

	March 31, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Financial liabilities:
7% Senior Notes due 2023	$	369,186	$	392,812	$	368,925	$	385,312
6% Senior Notes due 2025		879,884		892,500		880,086		840,000
6% Senior Notes due 2026		580,515		594,000		580,370		567,000
Term Loan		939,071		947,183		938,324		916,088
Revolving Credit Facility		40,000		40,000		245,000		245,000
Lumière Loan		246,000		246,000		246,000		246,000
Other long-term debt		2,910		2,910		3,030		3,030

- 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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