FAIR VALUE MEASUREMENTS

We have adopted the authoritative accounting guidance for fair value measurements, which does not determine or affect the circumstances under which fair value measurements are used, but defines fair value, expands disclosure requirements around fair value and 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.

As required by the guidance for fair value measurements, 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:



	December 31, 2018
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	249,417	$	249,417	$	—	$	—
Restricted cash	23,785		23,785		—		—
Investment available for sale	15,772		—		—		15,772

Liabilities
Contingent payments	$	2,407	$	—	$	—	$	2,407



	December 31, 2017
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	203,104	$	203,104	$	—	$	—
Restricted cash	24,175		24,175		—		—
Investment available for sale	17,752		—		—		17,752

Liabilities
Contingent payments	$	2,887	$	—	$	—	$	2,887

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, is based on statements received from our banks at December 31, 2018 and 2017.

Investment Available for Sale

We have an investment in a single municipal bond issuance of $20.0 million aggregate principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 that is classified as available for sale with a maturity date of June 1, 2037. 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 December 31, 2018 and 2017. The fair value of the investment is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation as of December 31, 2018 and 2017 is a discount rate of 11.2% and 9.6%, respectively. 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 (loss) in the stockholders' equity section of the consolidated balance sheets. At both December 31, 2018 and 2017, $0.5 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 December 31, 2018 and 2017, $15.3 million and $17.3 million, respectively, is included in investment on the consolidated balance sheets. The discount associated with this investment of $2.8 million and $2.9 million as of December 31, 2018 and 2017, respectively, 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 consolidated statements of operations.

Contingent Payments

In connection with securing the Kansas Management Contract, Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star’s EBITDA each month for a period of 10 years commencing 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 December 31, 2018 and 2017 is a discount rate of 6.8% and 9.2%, respectively. At both December 31, 2018 and 2017, there was a current liability of $0.8 million related to this agreement, which was recorded in accrued liabilities on the respective consolidated balance sheets, and long-term obligations of $1.6 million and $2.1 million, respectively, which were included in other liabilities on the respective consolidated balance sheets.

The following tables summarize the changes in fair value of the Company’s Level 3 assets and liabilities:



	December 31, 2018
	Assets			Liabilities
(In thousands)	Investment Available for Sale			Contingent Payments
Balance at January 1, 2018	$	17,752		$	(2,887	)
Total gains (losses) (realized or unrealized):
Included in interest income (expense)	144			(249		)
Included in other comprehensive income (loss)	(1,649		)	—
Included in other items, net	—			(110		)
Purchases, sales, issuances and settlements:
Settlements	(475		)	839
Balance at December 31, 2018	$	15,772		$	(2,407	)



	December 31, 2017
	Assets			Liabilities
(In thousands)	Investment Available for Sale			Contingent Payments
Balance at January 1, 2017	$	17,259		$	(3,038	)
Total gains (losses) (realized or unrealized):
Included in interest income (expense)	138			(335		)
Included in other comprehensive income (loss)	795			—
Included in other items, net	—			(333		)
Purchases, sales, issuances and settlements:
Settlements	(440		)	819
Balance at December 31, 2017	$	17,752		$	(2,887	)

We are exposed to valuation risk on our Level 3 financial instruments. We estimate our risk exposure using a sensitivity analysis of potential changes in the significant unobservable inputs of our fair value measurements. Our Level 3 financial instruments are most susceptible to valuation risk caused by changes in the discount rate. If the discount in our fair value measurements increased or decreased by 100 basis points, the change would not cause the value of our fair value measurements to change significantly.

The fair value of intangible assets, classified in the fair value hierarchy as Level 3, is utilized in performing its impairment analyses (see Note 4, Intangible Assets).

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:



	December 31, 2018
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	29,943	$	24,477	$	29,591	Level 3



	December 31, 2017
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Liabilities
Obligation under assessment arrangements	$	31,729	$	25,602	$	26,999	Level 3

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



	December 31, 2018
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Credit Facility	$	1,771,330	$	1,748,529	$	1,720,654	Level 2
6.875% Senior Notes due 2023	750,000		742,299		757,500		Level 1
6.375% Senior Notes due 2026	750,000		740,406		724,688		Level 1
6.000% Senior Notes due 2026	700,000		689,361		657,125		Level 1
Other	58,705		58,705		58,705		Level 3
Total debt	$	4,030,035	$	3,979,300	$	3,918,672



	December 31, 2017
(In thousands)	Outstanding Face Amount		Carrying Value		Estimated Fair Value		Fair Value Hierarchy
Credit Facility	$	1,621,054	$	1,595,703	$	1,625,178	Level 2
6.875% Senior Notes due 2023	750,000		740,545		798,750		Level 1
6.375% Senior Notes due 2026	750,000		739,128		810,000		Level 1
Other	504		504		504		Level 3
Total debt	$	3,121,558	$	3,075,880	$	3,234,432

The estimated fair value of the Credit Facility is based on a relative value analysis performed on or about December 31, 2018 and December 31, 2017. The estimated fair values of our Senior Notes are based on quoted market prices as of December 31, 2018 and December 31, 2017. The other debt is fixed-rate debt consisting of the following: (i) Belterra Park Mortgage payable in 96 monthly installments, beginning in 2018; and (2) capital leases with various maturity dates from 2019 to 2026. It is not traded and does not have an observable market input; therefore, we have estimated its fair value to be equal to the carrying value.

There were no transfers between Level 1, Level 2 and Level 3 measurements during the years ended December 31, 2018 and 2017.