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Note 15 - Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

15. 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, short-term investments, cost method investments, accounts payable and debt.

For the Company’s cash and cash equivalents, accounts payable and current portion of debt, the carrying amounts approximate fair value because of the short duration of these financial instruments. As of September 28, 2014 and December 29, 2013, the fair value of the Company’s long-term debt approximates the carrying value based upon the Company’s expected borrowing rate for debt with similar remaining maturities and comparable risk.

Balances Measured at Fair Value on a Recurring Basis

The following table (in thousands) shows certain of the Company’s financial instruments measured at fair value on a recurring basis using Level 2 inputs, as they are priced principally by independent pricing services using observable inputs:

		September 28, 2014				December 29, 2013
Short-Term Investments
Commercial paper		$	33,969			$	21,993
Corporate bonds			13,118				27,106
Certificates of deposit			240				—

Balances Measured at Fair Value on a Nonrecurring Basis

The Company’s investment in Rock Ohio Ventures was measured using unobservable (Level 3) inputs as of September 28, 2014. The fair value of zero was calculated using both a discounted cash flow method, which is an application of the income approach, and a comparable public company method, which is an application of the market approach. An option-based method was also employed in the allocation of value among debt and equity investors. Management judgment is required in developing the assumptions used in the calculation of the fair value of the investment. Significant inputs include financial forecasts for Rock Ohio Caesars, LLC (the entity through which Rock Ohio Ventures invests in certain gaming businesses), discount rates, market multiples for similar businesses, expected volatility, the expected timing of a liquidity/refinancing event and a discount for lack of marketability. A change in any significant unobservable input may lead to a change in the estimated fair value of the investment.

See note 7, Investment in Rock Ohio Ventures, LLC, for further discussion regarding the impairment of this investment as of September 28, 2014.

Balances Disclosed at Fair Value

Cost Method Investment – Investment in Rock Ohio Ventures, LLC - The fair value of the Company’s investment in Rock Ohio Ventures was not estimated as of December 29, 2013, as there were no events or changes in circumstances that may have had a significant adverse effect on the fair value of the investment, and Lakes’ management determined that it was not practicable or necessary to estimate the fair value of the investment (see note 7, Investment in Rock Ohio Ventures, LLC).

Cost Method Investment – Investment in Dania Entertainment Center, LLC - As of September 28, 2014, the fair value of the Company’s investment in Dania Entertainment Center, LLC was determined to be approximately $1.4 million, which was the negotiated sale price of Lakes’ remaining investment in DEC (see note 8, Investment in Dania Entertainment Center, LLC). The fair value of this investment was considered impracticable to estimate as of December 29, 2013 without incurring excessive costs relative to the materiality of the investment.

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.

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