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Financial Instruments and Fair Value Measurements
 3 Months Ended
Apr. 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:

 

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

 

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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.

 

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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 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):

 

                                 
   

 

  
    April 1, 2012 and 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  

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 8, Land, for further discussion regarding the valuation of the land held for sale.

Balances Disclosed at Fair Value

The following table includes the estimated fair value of certain of the Company’s financial instruments (in thousands):

 

                         
   

 

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

Assets

                        

Shingle Springs notes receivable

   $ 35,081     $ 27,936       Level 3  

Other assets related to Indian casino projects

     6,795       5,473       Level 3  
   
   

 

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

Assets

                        

Shingle Springs notes receivable

   $ 34,160     $ 18,545       Level 3  

Other assets related to Indian casino projects

     7,315       5,900       Level 3  

Shingle Springs notes receivable — Management estimates the fair value of the notes and interest receivable from the Shingle Springs Tribe as of April 1, 2012 to be approximately $27.9 million using a discount rate of 24% and a remaining estimated term of 106 months. Management estimated 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.

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 (see note 6, Intangible and Other Assets Related to Indian Casino Projects). The Company estimates the fair value of other assets related to the Shingle Springs Tribe and Mr. Kean to be $5.5 million as of April 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 $5.9 million as of January 1, 2012 using a discount rate of 19.5%.

 

Investment in unconsolidated investee — The fair value of the Company’s investment in unconsolidated investee was not estimated as of April 1, 2012 or January 1, 2012, 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 investment.

Contract acquisition costs payable — The carrying amount of the liability approximates its estimated fair value of $5.4 million and $5.6 million as of April 1, 2012 and January 1, 2012, respectively (see note 10, Contract Acquisition Costs Payable).