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 (No balances were outstanding on the revolving credit facility at December 31, 2013). The fair value of the Company's contingent purchase price consideration related to its Plainridge Racecourse acquisition, which is classified in other long-term obligations, is estimated based on a discounted cash flow model (See Note 11) 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 interest expense related to the change in fair value of this obligation was $0.7 million for the year ended December 31, 2014. The fair value of the Company's remaining other long-term obligations related to 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.

The carrying amounts and estimated fair values by input level of the Company's financial instruments during the years ended December 31, 2014 and 2013 are as follows (in thousands):

	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		806,444		799,556		714,556		85,000		—
Senior unsecured notes		300,000		276,000		276,000		—		—
Other long-term obligations		154,189		154,189		—		135,000		19,189

	December 31, 2013
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	292,995	$	292,995	$	292,995	$	—	$	—
Financial liabilities:
Long-term debt
Senior secured credit facility		748,777		748,150		748,150		—		—
Senior unsecured notes		300,000		297,000		297,000		—		—

The following tables set forth the assets measured at fair value on a non-recurring basis during the years ended December 31, 2014 and 2013 (in thousands):

	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	$	—	$	—	$	32,122	$	32,122	$	(212,193	)
Intangible assets	Other intangible assets		—		—		121,536		121,536		(104,336	)
Long-lived assets	Other assets		—		—		300		300		(4,560	)

										$	(321,089	)

	Balance Sheet Location	Level 1		Level 2		Level 3		Balance at December 31, 2013 Total		Total Reduction in Fair Value Recorded during the year ended December 31, 2013
Assets:
Goodwill	Goodwill	$	—	$	—	$	136,975	$	136,975	$	(807,464	)
Intangible assets	Other intangible assets		—		—		234,819		234,819		(322,753	)
Long-lived assets	Other assets		—		6,452		—		6,452		(2,200	)

										$	(1,132,417	)

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, 2014, the Company recorded pre-tax goodwill and other intangible assets impairment charges of $212.2 million and $104.3 million, respectively, 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.

For the year ended December 31, 2013, primarily as a result the Spin-Off, the Company recorded pre-tax goodwill and other intangible assets impairment charges of $738.8 million and $319.6 million, respectively, as it determined that a portion of the value of its goodwill and other intangible assets was impaired. Additionally, as a result of a new gaming license being awarded for the development of a new casino in Sioux City, Iowa to another applicant in April 2013 (see Note 12 for further details), the Company recorded a pre-tax goodwill and other intangible asset impairment charge of $68.7 million and $3.1 million, respectively, for Argosy Casino Sioux City during the year ended December 31, 2013, as the Company determined that the fair value of its Sioux City reporting unit was less than its carrying amount based on the Company's analysis of the estimated future expected cash flows the Company anticipated receiving from the operations of the Sioux City facility.

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 a pre-tax impairment charge of $4.6 million to write-down certain idle assets to their estimated salvage value of $0.3 million.

For the year ended December 31, 2013, in conjunction with the relocation of the Company's two racetracks in Ohio, the Company recorded a pre-tax impairment charge of $2.2 million for the parcels of land that the racetracks resided on, as the land was reclassified as held for sale. The fair value of the land was based on the expected proceeds to be received by the Company upon completion of the sale.