FULL HOUSE RESORTS INC Fair Value Disclosure
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
Methods and assumptions used to estimate the fair value of financial instruments are affected by the duration of the instruments and other factors used by market participants to estimate value. The carrying amounts for cash and equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value because of the short durations of the instruments and inconsequential rates of interest. Management also believes that the carrying value of variable long-term debt also approximates their estimated fair value because the terms of the facilities are representative of current market conditions. While management believes the carrying value of our finance lease obligation approximates its fair value because certain terms of the lease were renegotiated, management also believes that precise estimates are not practical because of the unique nature of the relationships. Similarly, contract liabilities represent the sum of certain annual prepayments of contracted revenue and all six of one-time market access fees from the Company’s Sports Agreements.
On March 31, 2021, the Interest Rate Cap the Company purchased to help manage potential interest rate increases on the Prior Notes expired.
The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows as of December 31, 2021 and 2020.
(In thousands) | ||||||||||||||
Financial instruments | ||||||||||||||
not designated | December 31, 2021 | |||||||||||||
for hedging: |
| Balance Sheet Location |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Interest rate cap |
| Deposits and other assets | $ | — | $ | — | $ | — | $ | — | ||||
Common stock warrants |
| Common stock warrant liability | $ | — | $ | — | $ | — | $ | — | ||||
(In thousands) | ||||||||||||||
Financial instruments | ||||||||||||||
not designated | December 31, 2020 | |||||||||||||
for hedging: |
| Balance Sheet Location |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Interest rate cap |
| Deposits and other assets | $ | — | $ | — | $ | — | $ | — | ||||
Common stock warrants |
| Common stock warrant liability | $ | — | $ | — | $ | 2,653 | $ | 2,653 | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2021 | Mar 15, 2022 | Showing above |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Mar 14, 2019 | |
| 2017 | Mar 8, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.