XML 40 R20.htm IDEA: XBRL DOCUMENT v2.4.0.6
Financial Instruments and Fair Value Measurements
 12 Months Ended
Jan. 01, 2012
Financial Instruments and Fair Value Measurements [Abstract]  
Financial Instruments and Fair Value Measurements

14.  Financial Instruments and Fair Value Measurements

Overview

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

  •  

Level 1: Observable inputs such as quoted prices (unadjusted) 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 and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

  •  

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable and other long-term assets related to Indian casino projects, cost method investments, accounts payable and contract acquisition costs payable.

 

For the Company’s cash and cash equivalents, accounts receivable, accounts payable and current portion of contract acquisition costs payable, the carrying amounts approximate fair value because of the short duration of these financial instruments.

Balances Measured at Fair Value on a Recurring Basis

Notes receivable from the Jamul Tribe for a project under development are measured at estimated fair value on a recurring basis using unobservable (Level 3) inputs and carried at their estimated fair value of zero and $11.1 million as of January 1, 2012 and January 2, 2011, respectively. See note 3, Long-Term Assets Related to Indian Casino Projects – Notes and Interest Receivable and Notes Receivable at Fair Value, for further discussion regarding the valuation of the Jamul notes receivable.

Balances Measured at Fair Value on a Nonrecurring Basis

The following table shows the amounts of certain of the Company’s assets measured at fair value on a nonrecurring basis (in thousands):

                                 
   

 

  
    January 1, 2012  
         
      Balance         Level 1         Level 2         Level 3    

Assets

                                

Land held for development

   $     1,130       —       —     $     1,130  

Land held for sale

     1,729       —       —       1,729  
   
   

 

  
    January 2, 2011  
         
    Balance     Level 1     Level 2     Level 3  

Assets

                                

Land held for development

   $ 4,430       —       —     $ 4,430  

Land held for development and land held for sale - Land held for development and land held for sale are measured on a nonrecurring basis using unobservable (Level 3) inputs that utilize the market approach technique and reflect management’s estimates about the assumptions that market participants would use in pricing the asset. Significant inputs include recent transactions of comparable properties as well as consideration of its highest and best use. See note 4, Intangible and Other Assets Related to Indian Casino Projects, for further discussion regarding the valuation of the land held for development and note 7, Land Held for Sale, for further discussion regarding the valuation of the land held for sale.

 

Balances Disclosed at Fair Value

The following table shows the amounts of certain of the Company’s financial instruments disclosed at fair value (in thousands):

 

                         
   

 

  
    January 1, 2012  
    Carrying Value,
net of Current
Portion		     Estimated Fair
Value		     Fair Value
Hierarchy		  

Assets

                        

Shingle Springs notes and interest receivable

   $         34,160     $         18,545       Level 3  

Other assets related to Indian casino projects

     7,315       5,900       Level 3  
   
   

 

  
    January 2, 2011  
    Carrying Value,
net of Current
Portion		     Estimated Fair
Value		     Fair Value
Hierarchy		  

Assets

                        

Shingle Springs notes and interest receivable

   $ 31,192     $ 26,565       Level 3  

Other assets related to Indian casino projects

     4,820       4,154       Level 3  

Shingle Springs notes and interest receivable - Management estimates the fair value of the notes and interest receivable from the Shingle Springs Tribe as of January 1, 2012 to be approximately $18.5 million using a discount rate of 33% and a remaining estimated term of 109 months. Management estimated the fair value of the notes and interest receivable from the Shingle Springs Tribe as of January 2, 2011, to be approximately $26.6 million using a discount rate of 22.5% and a remaining estimated term of 121 months. See note 3, Long-Term Assets Related to Indian Casino Projects – Notes and Interest Receivable and Notes Receivable at Fair Value, for further discussion regarding the Shingle Springs notes and interest receivable.

Other assets related to Indian casino projects - These assets include financial instruments related to deferred management fees and interest due from the Shingle Springs Tribe and amounts due from Mr. Kevin M. Kean. The Company estimates the fair value of other assets related to the Shingle Springs Tribe and Mr. Kean to be $5.9 million as of January 1, 2012 using a discount rate of 19.5%. Management estimated the fair value of these financial instruments related to the Shingle Springs Tribe and Mr. Kean to be $4.2 million as of January 2, 2011 using a discount rate of 18.0%. See note 4, Intangible and Other Assets Related to Indian Casino Projects, for further discussion regarding deferred management fees and interest due from the Shingle Springs Tribe and amounts due from Mr. Kevin M. Kean.

Investment in unconsolidated investee - The fair value of the Company’s investment in unconsolidated investee was not estimated as of January 1, 2012 or January 2, 2011, as there were no events or changes in circumstances that may have a significant adverse effect on the fair value of the investment, and Lakes’ management determined that it was not practicable to estimate the fair value of the investments. See note 6, Investment in Unconsolidated Investee, for further discussion regarding the Company’s investment in Rock Ohio Ventures.

Contract acquisition costs payable - The carrying amount of the liability approximates its estimated fair value of $5.6 million and $7.2 million as of January 1, 2012 and January 2, 2011, respectively. See note 9, Contract Acquisition Costs Payable for further discussion regarding the contract acquisition costs payable.