Fair Value Measurements and Derivative Instruments Reporting

12 Months Ended

Dec. 31, 2015

Fair Value Measurements and Derivative Instruments Reporting [Abstract]

Fair Value Measurements and Derivative Instruments Reporting

12. FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS REPORTING

Fair Value Measurements

The Company follows fair value measurement authoritative accounting guidance for all assets and liabilities measured at fair value. That authoritative accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs:

· Level 1 – quoted prices in active markets for identical assets or liabilities

· Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable

· Level 3 – significant inputs to the valuation model are unobservable

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.  The Company reflects transfers between the three levels at the beginning of the reporting period in which the availability of observable inputs no longer justifies classification in the original level. 

Recurring Fair Value Measurements

The estimated fair value and basis of valuation of the Company’s financial liabilities that are measured at fair value on a recurring basis were as follows:

Amounts in thousands	December 31, 2015
	Level 1		Level 2		Level 3
Interest rate swaps (1)	$	0	$	(194)	$	0
(1)See “Derivative Instruments Reporting” below for detailed information regarding the Company’s interest rate swaps.

The Company determines the fair value of its interest rate swap agreements based on the notional amount of the swaps and the forward rate CAD-CDOR curve provided by Bloomberg and zero-coupon Canadian spot rates as of the valuation date. The Company classifies these instruments as Level 2 because the inputs into the valuation model can be corroborated utilizing observable benchmark market rates at commonly quoted intervals. There were no recurring fair value measurements as of December 31, 2014.

Nonrecurring Fair Value Measurements

The Company applies the provisions of the fair value measurement standard to its non-recurring, non-financial assets and liabilities measured at fair value. During 2014, the Company determined that the fair value of the Sosnowiec leasehold improvements and casino license was zero based on the decision to suspend operations at the casino. As a result, $0.7 million was charged to operating costs and expenses during the year ended December 31, 2014. There were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2015 and 2014.

Long-Term Debt – The carrying value of the Company’s long-term debt approximates fair value because it bears interest at the lender’s variable rate for the debt related to the BMO Credit Agreement, the CPL credit agreements and CPL credit facility as of December 31, 2015 and December 31, 2014.The estimated fair values of the outstanding balances under the BMO Credit Agreement and CPL debt are designated as Level 2 measurements in the fair value hierarchy due to quoted prices in active markets for similar liabilities.

Other Estimated Fair Value Measurements – The estimated fair values of other assets and liabilities, such as cash and cash equivalents, accounts receivable, inventory, accrued payroll and accounts payable, have been determined to approximate carrying value based on the short-term nature of those financial instruments.As of December 31, 2015 and 2014, the Company had no cash equivalents.

Derivative Instruments Reporting

As of April 2015, the Company began using interest rate swaps to mitigate the risk of variable interest rates under its BMO Credit Agreement. As of December 31, 2015, the Company had two interest rate swap agreements, each with a notional amount of CAD 10.4 million ($7.5 million based on the exchange rate in effect on December 31, 2015) at a fixed CDOR rate of 3.92% and 3.89%, respectively, which were not designated as accounting hedges. These interest rate swaps reset monthly and expire on August 15, 2019. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements are recognized in interest expense on the Company’s consolidated statement of earnings (loss).The following table summarizes the location and effects of derivative instruments in the consolidated statements of earnings (loss) for the year ended December 31, 2015.  

Amounts in thousands
Derivatives not designated as	Income Statement	For the year                                                                           ended December 31,
ASC 815 hedges	Classification	2015		2014		2013
Interest Rate Swaps	Interest Expense	$	651	$	0	$	0

There were no derivative instruments for the years ended December 31, 2014 and 2013.

The following table summarizes the location and fair value amounts of the Company’s derivative instruments in the consolidated balance sheets.

Amounts in thousands		As of December 31, 2015
Derivatives not designated as                                ASC 815 hedges	Balance Sheet Classification	Gross Recognized Liabilities		Gross Amounts Offset		Net Recognized Fair Value Liabilities
Derivative liabilities:
Interest rate swaps - current	Accrued liabilities	$	(86)	$	0	$	(86)
Interest rate swaps - non-current	Taxes payable and other		(108)		0		(108)
Total derivative liabilities		$	(194)	$	0	$	(194)

There were no derivative instruments as of December 31, 2014.