19. Fair Value Measurements

ASC 820, "Fair Value Measurements and Disclosures," establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The levels of the hierarchy are described below:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3: Unobservable inputs that reflect the reporting entity's own assumptions, as there is little, if any, related market activity.

The Company'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.

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

Cash and cash equivalents

The fair value of the Company's cash and cash equivalents approximates the carrying value of the Company's cash and cash equivalents, due to the short maturity of the cash equivalents.

Long-term debt

The fair value of the Company's Term Loan A and B components of its senior secured credit facility and senior unsecured notes is estimated based on quoted prices in active markets and as such is a Level 1 measurement. The fair value of the remainder of the Company's senior secured credit facility approximates its carrying value as it is revolving, variable rate debt and as such is a Level 2 measurement.

Other long term obligations at December 31, 2015 include the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course, and the repayment obligation of a hotel and event center located near Hollywood Casino Lawrenceburg. The fair value of the relocation fees for Hollywood Gaming at Dayton Raceway and Hollywood Gaming at Mahoning Valley Race Course approximates its carrying value as the discount rate of 5.0% approximates the market rate of similar debt instruments and as such is a Level 2 measurement. Finally, the fair value of the repayment obligation for the hotel and event center is estimated based on a rate consistent with comparable municipal bonds and as such is a Level 2 measurement.

Other Liabilities

Other liabilities at December 31, 2015, include the contingent purchase price consideration related to the purchase of Plainridge Racecourse. The fair value of the Company's contingent purchase price consideration related to its Plainridge Racecourse acquisition is estimated based on an income approach using a discounted cash flow model and as such is a Level 3 measurement. At each reporting period, the Company assesses the fair value of this obligation and changes in its value are recorded in earnings. The amount included in general and administrative expenses related to the change in fair value of this obligation was a credit of $5.4 million for the year ended December 31, 2015 and a charge of $0.7 million for the year ended December 31, 2014.

The carrying amounts and estimated fair values by input level of the Company's financial instruments during the years ended December 31, 2015 and 2014 are as follows (in thousands):

	December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	237,009	$	237,009	$	237,009	$	—	$	—
Financial liabilities:
Long-term debt
Senior secured credit facility		1,239,049		1,251,975		1,251,975		—		—
Senior unsecured notes		296,252		291,000		291,000		—		—
Other long-term obligations		146,992		147,358		—		147,358		—
Other liabilities		13,815		13,815						13,815

	December 31, 2014
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	208,673	$	208,673	$	208,673	$	—	$	—
Financial liabilities:
Long-term debt
Senior secured credit facility		785,683		799,556		714,556		85,000		—
Senior unsecured notes		295,610		276,000		276,000		—		—
Other long-term obligations		135,000		135,000		—		135,000		—
Other liabilities		19,189		19,189		—		—		19,189

The following table summarizes the changes in fair value of the Company's Level 3 liabilities (in thousands):

	Twelve Months Ended December 31, 2015
	Liabilities
	Contingent Purchase Price
Balance at December 31, 2014	$	19,189
Total (gains) (realized or unrealized):
Included in earnings		(5,374	)

Balance at December 31, 2015	$	13,815

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

		Valuation Technique		Unobservable Input		Rate
Contingent purchase price		Discounted cash flow		Discount rate			8.30	%

The following tables set forth the assets measured at fair value on a non-recurring basis during the years ended December 31, 2015 and 2014 (in thousands):

	Balance Sheet Location	Level 1		Level 2		Level 3		Balance at December 31, 2015 Total		Total Reduction in Fair Value Recorded during the year ended December 31, 2015
Assets:
Intangible assets	Other intangible assets	$	—	$	—	$	110,436	$	110,436	$	(40,042	)

											(40,042	)

	Balance Sheet Location	Level 1		Level 2		Level 3		Balance at December 31, 2014 Total		Total Reduction in Fair Value Recorded during the year ended December 31, 2014
Assets:
Goodwill	Goodwill	$	—	$	—	$	9,863	$	9,863	$	(80,821	)
Intangible assets	Other intangible assets		—		—		66,703		66,703		(74,603	)
Long-lived assets	Other assets		—		—		300		300		(4,560	)

										$	(159,984	)

Goodwill and intangible assets

The valuation technique used to measure the fair value of goodwill and intangible assets was the income approach. See Note 4 for a description of the inputs and the information used to develop the inputs in calculating the fair value measurements of goodwill and indefinite-life intangible assets.

For the year ended December 31, 2015, the Company recorded other intangible assets impairment charges of $40.0 million, as of the valuation date of October 1, 2015, related to the write-off of our Plainridge Park Casino gaming license and a partial write-down of the gaming license at Hollywood Gaming at Dayton Raceway due to a reduction in the long term earnings forecast at both of these locations.

For the year ended December 31, 2014, the Company recorded goodwill and other intangible assets impairment charges of $80.8 million and $74.5 million, respectively, as of the valuation date of October 1, 2014, as it determined that a portion of the value of its goodwill and other intangible assets was impaired due to the Company's outlook of continued challenging regional gaming conditions at certain properties which persisted in 2014 in its Southern Plains segment, as well as for the write-off of a trademark intangible asset in the West segment.

Long-lived assets

The valuation technique used to measure the fair value of long-lived assets was the market approach. See Note 4 for a description of the inputs and the information used to develop the inputs in calculating the fair value measurements of long-lived assets.

During the second quarter of 2014, the Company recorded an impairment charge of $4.6 million to write-down certain idle assets to their estimated salvage value of $0.3 million.