Financial Instruments and Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Value Measurements

10.Financial Instruments and Fair Value Measurements

Cash Flow Hedging

Cash Flow Hedges Not Designated as Hedging Instruments

The Company uses non-designated cash flow hedges including interest rate swap agreements and interest rate cap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings. Interest rate swaps involve the exchange of fixed and variable rate interest payments and do not represent an actual exchange of the underlying notional amounts between parties. Interest rate caps provide that the counterparty will pay the purchaser at the end of each contractual period in which the index interest rate exceeds the contractually agreed upon cap rate.

In the second quarter of 2022, the Company entered into three forward starting non-amortizing interest rate swaps to convert variable rate debt to fixed rate debt. The interest rate swaps have notional amounts of $175.0 million, $115.0 million and $85.0 million resulting in interest payments based on an average fixed rate per swap of 2.9185%, 2.8520% and 2.8605%, respectively, plus the applicable margin per the requirements in the Credit Agreement. The interest rate swaps expire in May 2026.

In the second quarter of 2022, the Company entered into two interest rate cap agreements to limit exposure to interest rate risk on variable rate debt. The interest rate caps each have a cap rate of 3.0% with notional amounts of $200.0 million and $175.0 million and deferred premiums of $6.7 million and $5.3 million, respectively. The deferred premiums will be paid on a monthly basis over the term of the respective interest rate cap. The interest rate caps expire in May 2026.

In the first quarter of 2023, the Company entered into three forward starting non-amortizing interest rate swaps to convert variable rate debt to fixed rate debt. The interest rate swaps have notional amounts of $150.0 million, $150.0 million and $100.0 million resulting in interest payments based on an average fixed rate per swap of 3.6875%, 3.6500% and 3.5095%, respectively, plus the applicable margin per the requirements in the Credit Agreement. The interest rate swaps expire in March 2027.

In January 2024, the Company entered into a forward starting non-amortizing interest rate swap to convert variable rate debt to fixed rate debt. The interest rate swap has a notional amount of $200.0 million resulting in interest payments based on an average fixed rate per swap of 4.3030%, plus the applicable margin per the requirements in the Credit Agreement. The interest rate swap expires in July 2025.

The fair value of the Company's interest rate swaps and interest rate caps are impacted by the credit risk of both the Company and its counterparties. The Company has agreements with its derivative financial instrument counterparties that contain provisions providing that if the Company defaults on the indebtedness associated with its derivative financial instruments, then the Company could also be declared in default on its derivative financials instruments obligations. In addition, the Company minimizes nonperformance risk on its derivative instruments by evaluating the creditworthiness of its counterparties, which are limited to major banks and financial institutions.

The Company does not apply hedge accounting to the interest rate swaps and interest rate caps and records all mark-to-market adjustments directly to "Other (income) expense, net" in the Consolidated Statements of Operations. The fair values of the interest rate swaps and interest rate caps are categorized as Level 2 in the fair value hierarchy as they are based on well-recognized financial principles and available market data.

As of December 31, 2023, the fair values of the interest rate swaps and interest rate caps are recorded in the Consolidated Balance Sheets as follows:

				Quoted Prices in		Significant		Significant
		December 31,		Active Markets		Observable Inputs		Unobservable Inputs
(dollars in millions)	Balance Sheet Location	2023		Level 1		Level 2		Level 3
Assets:
Interest Rate Swap	Other current assets	$	10.7	$	—	$	10.7	$	—
Interest Rate Swap	Other noncurrent assets	$	1.8	$	—	$	1.8	$	—
Interest Rate Cap	Other current assets	$	3.2	$	—	$	3.2	$	—
Liabilities:
Interest Rate Swap	Other noncurrent liabilities	$	3.8	$	—	$	3.8	$	—
Interest Rate Cap	Other noncurrent liabilities	$	2.6	$	—	$	2.6	$	—

As of December 31, 2022, the fair values of the interest rate swaps and interest rate caps are recorded in the Consolidated Balance Sheets as follows:

				Quoted Prices in		Significant		Significant
		December 31,		Active Markets		Observable Inputs		Unobservable Inputs
(dollars in millions)	Balance Sheet Location	2022		Level 1		Level 2		Level 3
Assets:
Interest Rate Swap	Other current assets	$	7.2	$	—	$	7.2	$	—
Interest Rate Swap	Other noncurrent assets	$	5.1	$	—	$	5.1	$	—
Interest Rate Cap	Other current assets	$	3.8	$	—	$	3.8	$	—
Liabilities:
Interest Rate Cap	Other noncurrent liabilities	$	2.4	$	—	$	2.4	$	—

The following table summarizes the location of gains in the Consolidated Statements of Operations that were recognized during the years ended December 31, 2023 and 2022, in addition to the derivative contract type:

		Year ended			Year ended
(dollars in millions)	Statement of Operations Location	December 31, 2023			December 31, 2022
Interest Rate Swap	Other (income) expense, net	$	(9.3	)	$	(11.7	)
Interest Rate Cap	Other (income) expense, net	$	(3.8	)	$	(0.3	)

Interest Rate Hedges

In the second quarter of 2018, the Company entered into one forward starting non-amortizing interest rate swap with a notional amount of $300.0 million to convert variable rate debt to fixed rate debt. The interest rate swap became effective in June 2018 with an expiration date in June 2023. The interest rate swap resulted in interest payments based on an average fixed rate of 2.938% plus the applicable margin per the requirements in the Company's former Corporate Credit Agreement.

In the first quarter of 2019, the Company entered into three forward starting non-amortizing interest rate swaps, with a notional amount of $89.0 million each, to convert variable rate debt to fixed rate debt. The interest rate swaps became effective in March 2019 with expiration dates in March 2024. The interest rate swaps resulted in interest payments based on an average fixed rate per swap of 2.275%, 2.244% and 2.328% plus the applicable margin per the requirements in the Company's former Corporate Credit Agreement.

Upon inception, the interest rate swaps were designated as cash flow hedges under ASC 815, with gains and losses, net of tax, measured on an ongoing basis recorded in accumulated other comprehensive loss. The fair value of the interest rate swaps was categorized as Level 2 in the fair value hierarchy as they were based on well-recognized financial principles and available market data.

The Company terminated four interest rate swaps in the Predecessor period of the third quarter of 2021 in connection with the repayment in full of the Term Loan B under the Company's former Corporate Credit Agreement that occurred as part of the Merger Agreement.

The amount of gains recognized in Accumulated Other Comprehensive Income ("AOCI") (effective portion) net of reclassifications into earnings is as follows:

	Successor						Predecessor
	Year Ended		Year Ended		September 8, 2021 to		January 1, 2021 to
(dollars in millions)	December 31, 2023		December 31, 2022		December 31, 2021		September 7, 2021
Interest Rate Swap	$	—	$	—	$	—	$	5.3

The amount of losses reclassified from AOCI into earnings is as follows:

		Successor						Predecessor
		Year Ended		Year Ended		September 8, 2021 to		January 1, 2021 to
(dollars in millions)	Statement of Operations Location	December 31, 2023		December 31, 2022		December 31, 2021		September 7, 2021
Interest Rate Swap	Other (income) expense, net	$	—	$	—	$	—	$	(20.1	)
Interest Rate Swap	Interest expense	$	—	$	—	$	—	$	(5.4	)

Disclosure on Financial Instruments

The carrying values of the Company's financial instruments approximate the estimated fair values as of December 31, 2023 and December 31, 2022, except for the Company's long-term debt and other financing arrangements. The carrying and fair values of these items are as follows:

	December 31, 2023				December 31, 2022
(dollars in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current portion*	$	1,842.3	$	1,815.1	$	1,686.5	$	1,647.0
Other financing arrangements		46.6		40.4		50.1		45.3

* Excludes finance leases, other financing arrangements and note issuance costs

In connection with the Merger, the carrying values of the Company's long-term debt and other financing arrangements include fair value adjustments as of the Merger Date. The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at December 31, 2023 and December 31, 2022, which is considered Level 2 of the fair value hierarchy. The fair value of the other financing arrangements was calculated using a discounted cash flow model that incorporates current borrowing rates for obligations of similar duration, which is considered Level 3 of the fair value hierarchy. As of December 31, 2023, the current borrowing rate was estimated by applying the Company's credit spread to the risk-free rate for a similar duration borrowing.