Note 10. Fair Value Measurements The fair values of cash and cash equivalents, receivables and trade payables approximate their carrying values due to the short-term nature of these instruments. For assets and liabilities of a long-term nature, the Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. The Company applies the following hierarchy in determining fair value: | ● | Level 1, defined as observable inputs being quoted prices in active markets for identical assets; |
| ● | Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
| ● | Level 3, defined as values determined using models that utilize significant unobservable inputs for which little or no market data exists, discounted cash flow methodologies or similar techniques, or other determinations requiring significant management judgment or estimation. |
During the first quarter of 2024, the Company entered into five interest rate swap arrangements. The Company’s derivative instruments are accounted for at fair value on a recurring basis and classified within Level 2 of the valuation hierarchy. The following table reflects the Company’s financial assets and liabilities measured at fair value as of June 30, 2025. | | | | | | | | | | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | | (in millions) | Financial Liabilities | | | | | | | | | | | | | Interest rate swaps (1) | | $ | — | | $ | 6.3 | | $ | — | | $ | 6.3 | Long-term debt, net (2) | | | — | | | 826.7 | | | — | | | 826.7 | Total | | $ | — | | $ | 833.0 | | $ | — | | $ | 833.0 |
| (1) | Measured as the present value of all expected future cash flows based on the SOFR-based swap yield curves as of June 30, 2025. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties. |
| (2) | Measured based on dealer quotes considering current market rates for the Company’s credit facility. The ratio of the Company’s aggregate debt balance has trended from quoted market prices in active markets to quoted prices in non-active markets. Debt fair value does not include debt issuance costs and discount. The First Out Term Loan had a fair value of $319.8 million while the Second Out Term Loan had a fair value of $506.9 million for the period ended June 30, 2025. |
The following table reflects the Company’s financial assets and liabilities measured at fair value as of December 31, 2024. | | | | | | | | | | | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | | (in millions) | Financial Liabilities | | | | | | | | | | | | | Interest rate swaps (1) | | $ | — | | $ | 2.9 | | $ | — | | $ | 2.9 | Long-term debt, net (2) | | | — | | | 864.7 | | | — | | | 864.7 | Total | | $ | — | | $ | 867.6 | | $ | — | | $ | 867.6 |
| (1) | Measured as the present value of all expected future cash flows based on the SOFR-based swap yield curves as of December 31, 2024. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties. |
| (2) | Measured based on dealer quotes considering current market rates for the Company’s credit facility. The ratio of the Company’s aggregate debt balance has trended from quoted market prices in active markets to quoted prices in non-active markets. Debt fair value does not include debt issuance costs and discount. The First Out Term Loan had a fair value of $324.6 million while the Second Out Term Loan had a fair value of $540.1 million for the period ended December 31, 2024. |
There were no transfers into or out of Level 1, 2 or 3 during the periods ended June 30, 2025 and December 31, 2024. The Company’s nonfinancial assets such as franchise operating rights, property, plant, and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.
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