FAIR VALUE MEASUREMENTS

The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Balances Measured at Fair Value

The following tables show the fair values of certain of our financial instruments:



	March 31, 2016
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	616,201	$	616,201	$	—	$	—
Restricted cash	22,375		22,375		—		—
Investment available for sale	18,394		—		—		18,394

Liabilities
Contingent payments	$	3,560	$	—	$	—	$	3,560



	December 31, 2015
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	158,821	$	158,821	$	—	$	—
Restricted cash	19,030		19,030		—		—
Investment available for sale	17,839		—		—		17,839

Liabilities
Contingent payments	$	3,632	$	—	$	—	$	3,632

Cash and Cash Equivalents and Restricted Cash

The fair value of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, are based on statements received from our banks at March 31, 2016 and December 31, 2015.

Investment Available for Sale

We have an investment in a single municipal bond issuance of $21.4 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale. We are the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The estimate of the fair value of such investment was determined using a combination of current market rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and a discounted cash flows analysis as of March 31, 2016 and December 31, 2015. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income in the stockholders' equity section of the condensed consolidated balance sheets. At both March 31, 2016 and December 31, 2015, $0.4 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets, and at March 31, 2016 and December 31, 2015, $18.0 million and $17.4 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $3.2 million at both March 31, 2016 and December 31, 2015, is netted with the investment balance and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of income.

Contingent Payments

In connection with the development of the Kansas Star Casino ("KSC"), KSC agreed to pay a former casino project developer and option holder 1% of KSC's EBITDA each month for a period of ten years commencing on December 20, 2011. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at both March 31, 2016 and December 31, 2015, is a discount rate of 18.5%. At both March 31, 2016 and December 31, 2015, there was a current liability of $0.9 million related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligation at both March 31, 2016 and December 31, 2015, of $2.7 million, which is included in other liabilities on the respective condensed consolidated balance sheets.

The following table summarizes the changes in fair value of the Company's Level 3 assets and liabilities:



	Three Months Ended
	March 31, 2016
	Assets		Liability
(In thousands)	Investment Available for Sale		Contingent Payments
Balance at January 1, 2016	$	17,839	$	(3,632	)
Total gains (losses) (realized or unrealized):
Included in earnings	33		(154		)
Included in other comprehensive income	522		—
Transfers in or out of Level 3	—		—
Purchases, sales, issuances and settlements:
Settlements	—		226
Balance at March 31, 2016	$	18,394	$	(3,560	)

Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date:
Included in interest income	$	33	$	—
Included in interest expense	—		(154		)



	Three Months Ended March 31, 2015
	Assets		Liabilities
(In thousands)	Investment Available for Sale		Merger Earnout			Contingent Payments
Balance at January 1, 2015	$	18,357	$	(75	)	$	(3,792	)
Total gains (losses) (realized or unrealized):
Included in earnings	31		75			(159		)
Included in other comprehensive income	270		—			—
Transfers in or out of Level 3	—		—			—
Purchases, sales, issuances and settlements:
Settlements	—		—			230
Balance at March 31, 2015	$	18,658	$	—		$	(3,721	)

Gains (losses) included in earnings attributable to the change in unrealized gains relating to assets and liabilities still held at the reporting date:
Included in interest income	$	31	$	—		$	—
Included in interest expense	—		—			(159		)

The table below summarizes the significant unobservable inputs used in calculating fair value for our Level 3 assets and liabilities:



	Valuation Technique	Unobservable Input	Rate
Investment available for sale	Discounted cash flow	Discount rate	9.9	%
Contingent payments	Discounted cash flow	Discount rate	18.5	%

Balances Disclosed at Fair Value

The following tables provide the fair value measurement information about our obligation under minimum assessment agreements and other financial instruments:



	March 31, 2016
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	34,655	$	27,357	$	28,282	Level 3
Other financial instruments	200		189		189		Level 3



	December 31, 2015
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	35,126	$	27,660	$	28,381	Level 3
Other financial instruments	200		186		186		Level 3

The following tables provide the fair value measurement information about our long-term debt:



	March 31, 2016
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Boyd Gaming Corporation Debt
Bank credit facility	$	903,275	$	892,093	$	901,204	Level 2
9.00% senior notes due 2020	350,000		343,353		370,125		Level 1
6.875% senior notes due 2023	750,000		737,475		798,750		Level 1
6.375% senior notes due 2026	750,000		737,065		778,125		Level 1
	2,753,275		2,709,986		2,848,204

Peninsula Segment Debt
Bank credit facility	643,225		631,286		642,479		Level 2
8.375% Senior Notes due 2018	350,000		344,327		357,000		Level 2
	993,225		975,613		999,479
Total debt	$	3,746,500	$	3,685,599	$	3,847,683



	December 31, 2015
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Boyd Gaming Corporation Debt
Bank credit facility	$	1,209,725	$	1,197,277	$	1,202,870	Level 2
9.00% senior notes due 2020	350,000		342,956		372,750		Level 1
6.875% senior notes due 2023	750,000		737,066		772,500		Level 1
	2,309,725		2,277,299		2,348,120

Peninsula Segment Debt
Bank credit facility	662,750		648,607		661,131		Level 2
8.375% senior notes due 2018	350,000		343,643		357,000		Level 2
	1,012,750		992,250		1,018,131
Total debt	$	3,322,475	$	3,269,549	$	3,366,251

The estimated fair values of the Boyd Gaming Credit Facility and the Peninsula Credit Facility are based on a relative value analysis performed on or about March 31, 2016 and December 31, 2015. The estimated fair values of Boyd Gaming's senior notes and Peninsula's senior notes are based on quoted market prices as of March 31, 2016 and December 31, 2015. Debt included in the "Other" category is fixed-rate debt that is not traded and does not have an observable market input; therefore, we have estimated its fair value based on a discounted cash flow approach, after giving consideration to the changes in market rates of interest, creditworthiness of both parties, and credit spreads.

There were no transfers between Level 1, Level 2 and Level 3 measurements during the three months ended March 31, 2016 or 2015.