Financial Instruments and Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Financial Instruments and Fair Value Measurements

10.    Financial Instruments and Fair Value Measurements

Interest Rate Swaps

The Company uses interest rate swap 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.

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 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 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 in connection with the repayment in full of the Term Loan B under the Corporate Credit Agreement that occurred as part of the Merger Agreement. As a result of the repayment, the hedged interest payments were no longer considered probable of occurring and a loss on termination of $20.1 million that had been previously recorded to Accumulated Other Comprehensive Income (“AOCI”) was recorded in the Predecessor period in “Other (income) expense, net” on the Consolidated Statements of Operations. Cash payments resulting from the termination of the interest rate swaps are classified as operating activities in the Company’s Consolidated Statements of Cash Flows.

As of December 31, 2020, the fair value of the interest rate swap liability was $25.4 million and is recorded in the Consolidated Balance Sheets as follows:

		Predecessor
				Quoted Prices in		Significant		Significant
		December 31,		Active Markets		Observable Inputs		Unobservable Inputs
(dollars in millions)	Balance Sheet Location	2020		Level 1		Level 2		Level 3
Liabilities:
Interest Rate Swap	Other current liabilities	$	9.3	$	—	$	9.3	$	—
Interest Rate Swap	Other noncurrent liabilities	$	16.1	$	—	$	16.1	$	—

The amount of gains (losses) recognized in AOCI (effective portion) net of reclassifications into earnings is as follows:

	Successor		Predecessor		Predecessor
	September 8, 2021 to		January 1, 2021 to		Year Ended
(dollars in millions)	Decemeber 31, 2021		September 7, 2021		December 31, 2020
Interest Rate Swap	$	—	$	5.3	$	(6.4	)

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

		Successor		Predecessor			Predecessor
		September 8, 2021 to		January 1, 2021 to			Year Ended
(dollars in millions)	Statement of Operations Location	Decemeber 31, 2021		September 7, 2021			December 31, 2020
Interest Rate Swap	Other (income) expense, net	$	—	$	(20.1	)	$	—
Interest Rate Swap	Interest expense	$	—	$	(5.4	)	$	(8.4	)

Disclosure on Financial Instruments

The carrying values of the Company's financial instruments approximate the estimated fair values as of December 31, 2021 and December 31, 2020, except for the Company's long-term debt and other financing arrangements. The carrying and fair values of these items are as follows:

	Successor				Predecessor
	December 31, 2021				December 31, 2020
(dollars in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current portion*	$	1,443.0	$	1,443.0	$	1,921.8	$	1,973.4
Other financing arrangements		53.1		51.7		42.1		58.6

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

In connection with the Merger, the Successor period 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, 2021 and December 31, 2020, 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, 2021, the current borrowing rate was estimated by applying the Company's credit spread to the risk-free rate for a similar duration borrowing.