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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements ASC Topic 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. The fair value of the Company’s trade accounts receivable and payables approximates the carrying amounts. Cash and cash equivalents The fair value of the Company’s cash and cash equivalents approximates the carrying amount of the Company’s cash and cash equivalents, due to the short maturity of the cash equivalents. Held-to-maturity Securities and Promissory Notes As discussed in Note 5, “Acquisitions and Other Investments,” the Company holds local government bonds, which are classified as held-to-maturity securities, and promissory notes. The fair values of such investments are principally based on appraised values of the land associated with Retama Park Racetrack, which are classified as Level 2 inputs. Loan to the JIVDC The fair value of the Company’s Term Loan C to the JIVDC as of December 31, 2017 was based on the present value of the projected future cash flows discounted at 14%, which we believed approximated the return a market participant would require. Since the projections are based on management’s internal projections, the Company concluded that this instrument should be classified as a Level 3 measurement. As discussed in Note 5, “Acquisitions and Other Investments,” during the year ended December 31, 2018, the Company sold all outstanding rights and obligations under the JIVDC commitments. Long-term debt The fair value of the Company’s Term Loan A Facility, Term Loan B-1 Facility and 5.625% Notes is estimated based on quoted prices in active markets and as such is a Level 1 measurement. The fair value of the Company’s Revolving Credit Facility approximates its carrying amount as it is revolving, variable rate debt, which we classify as a Level 2 measurement. Other long-term obligations as of December 31, 2018 and 2017 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, which are discussed in Note 9, “Long-term Debt.” The fair values of these long-term obligations are estimated based on rates consistent with the Company’s credit rating for comparable terms and debt instruments and as such are Level 2 measurements. Other Liabilities Other liabilities as of December 31, 2018 and 2017 principally consists of contingent consideration relating to Plainridge Park Casino, which was acquired in September 2013. The contingent consideration is calculated based on actual earnings of the gaming operations over the first 10 years of operations, which commenced on June 24, 2015. As of December 31, 2018 and 2017, we were contractually obligated to make seven and eight remaining annual payments, respectively. The fair value of this liability, which is included within our Consolidated Balance Sheet in “Other current liabilities” or “Other noncurrent liabilities,” depending on the timing of the next payment, is estimated based on an income approach using a discounted cash flow model and has been classified as a Level 3 measurement. The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:
| December 31, 2018
(in thousands) | Carrying Amount |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 479,598 |  |  | $ | 479,598 |  |  | $ | 479,598 |  |  | $ | — |  |  | $ | — |
Held-to-maturity securities | $ | 7,466 |  |  | $ | 7,879 |  |  | $ | — |  |  | $ | 7,879 |  |  | $ | — |
Promissory notes | $ | 16,853 |  |  | $ | 17,415 |  |  | $ | — |  |  | $ | 17,415 |  |  | $ | — |
Financial liabilities: |  |  |  |  |  |  |  |  |
Long-term debt |  |  |  |  |  |  |  |  |
Senior Secured Credit Facilities | $ | 1,907,932 |  |  | $ | 1,886,333 |  |  | $ | 1,886,333 |  |  | $ | — |  |  | $ | — |
5.625% Notes | $ | 399,332 |  |  | $ | 360,000 |  |  | $ | 360,000 |  |  | $ | — |  |  | $ | — |
Other long-term obligations | $ | 104,583 |  |  | $ | 96,338 |  |  | $ | — |  |  | $ | 96,338 |  |  | $ | — |
Other liabilities | $ | 21,863 |  |  | $ | 21,857 |  |  | $ | — |  |  | $ | 2,815 |  |  | $ | 19,042 |
| December 31, 2017
(in thousands) | Carrying Amount |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 277,953 |  |  | $ | 277,953 |  |  | $ | 277,953 |  |  | $ | — |  |  | $ | — |
Loan to the JIVDC | $ | 20,900 |  |  | $ | 16,533 |  |  | $ | — |  |  | $ | — |  |  | $ | 16,533 |
Financial liabilities: |  |  |  |  |  |  |  |  |
Long-term debt |  |  |  |  |  |  |  |  |
Senior Secured Credit Facilities | $ | 730,787 |  |  | $ | 760,456 |  |  | $ | 760,456 |  |  | $ | — |  |  | $ | — |
5.625% Notes | $ | 399,249 |  |  | $ | 412,000 |  |  | $ | 412,000 |  |  | $ | — |  |  | $ | — |
Other long-term obligations | $ | 119,310 |  |  | $ | 113,460 |  |  | $ | — |  |  | $ | 113,460 |  |  | $ | — |
Other liabilities | $ | 22,696 |  |  | $ | 22,696 |  |  | $ | — |  |  | $ | — |  |  | $ | 22,696 |
The following table summarizes the changes in fair value of the Company’s Level 3 liabilities measured on a recurring basis:
| Other Liabilities
(in thousands) | Contingent Purchase Price
Balance at January 1, 2016 | $ | 13,815 |
Additions | 34,945 |
Payments | (1,793 | )
Included in earnings (1) | 1,277 |
Balance at December 31, 2016 | 48,244 |
Additions | 905 |
Payments | (19,613 | )
Included in earnings (1) | (6,840 | )
Balance at December 31, 2017 | 22,696 |
Payments | (4,108 | )
Included in earnings (1) | 454 |
Balance at December 31, 2018 | $ | 19,042 |
(1) | The charge (benefit) is included within “General and administrative” within our Consolidated Statement of Operations.
The following table sets forth the assets measured at fair value on a non-recurring basis during the years ended December 31, 2018 and 2017:
(in thousands) | Valuation Date |  | Valuation Technique |  | Level 1 |  | Level 2 |  | Level 3 |  | Total Balance |  | Total Reduction in Fair Value Recorded
Goodwill (1) | 9/30/2017 |  | Discounted Cash Flow |  | $ | — |  |  | $ | — |  |  | $ | 598 |  |  | $ | 598 |  |  | $ | (18,026 | )
Property and equipment (2) | 12/31/2018 |  | Cost and Market Approach |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (34,288 | )
(1) | See Note 3, “Summary of Significant Accounting Policies” for a description of the inputs and the information used to develop the inputs in calculating the fair value measurements of goodwill and indefinite-lived intangible assets.
(2) | The fair value, which was concluded to be zero, of our property and equipment associated with Resorts Casino Tunica was determined using Level 2 inputs. See Note 7, “Property and Equipment” for more information.
The following table summarizes the significant unobservable inputs used in calculating fair value for our Level 3 liabilities as of December 31, 2018:
| Valuation Technique |  | Unobservable Input |  | Discount Rate
Recurring basis: |  |  |  |  |
Contingent purchase price - Plainridge Park Casino | Discounted cash flow |  | Discount rate |  | 7.53%

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- 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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