Fair Value Measurements |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | 9. FAIR VALUE MEASUREMENTS The Company follows the authoritative guidance for fair value measurements relating to financial and non-financial assets and liabilities, including presentation of required disclosures herein. This guidance establishes a fair value framework requiring the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities. Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Recurring Fair Value Measurements Prior to the adoption of ASU 2025-07, the Company marked-to-market its derivative at each reporting date, or more frequently as deemed necessary, with the changes in fair value recognized in the Company’s consolidated statements of operations. See Note 8: Derivatives for further information. Embedded Derivative within the 2024 Debt Repayment Prior to the adoption of ASU 2025-07, the embedded derivative relating to the 2024 Debt Repayment was valued using a discounted cash flow model. The most significant input used in the fair value measurement was the discount yield, which was 6.05% at December 31, 2025. As the discount yield used in the valuation process increased, the fair value of the embedded derivative decreased. Similarly, as the length of time between the reporting date and the start date of the interest payments decreased, the present value of the projected interest savings increased, resulting in a higher derivative asset value. The significant unobservable input that drove the cash flows used in the fair value measurement included the estimated achievement of project milestones (as amended in April 2026). As the probability of reaching the relevant milestones increased, the fair value of the embedded derivative also increased. Upon adoption of ASU 2025-07, the Company is no longer required to mark-to-market the fair value of the embedded derivative relating to the 2024 Debt Repayment. Rollforward of Recurring Level 3 Assets and Liabilities The following table presents a rollforward for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):
Nonrecurring Fair Value Measurements 2023 Funding Agreement The Company's June 2026 draw under the 2023 Funding Agreement had a fair value of $20.8 million and was calculated using projected future cash flows discounted using the prevailing market rate of interest for a similar transaction. The discount yield used for this calculation was 5.27%. Due to the significant unobservable inputs utilized in the valuation of the June 11, 2026 draw, the fair value of the draw was classified as a Level 3 fair value measurement. 2024 Debt Repayment In connection with the adoption of ASU 2025-07 on January 1, 2026, the Company was required to fair value the rights and privileges within the 2024 Debt Repayment pursuant to the guidance in ASC 835. The cash flows associated with the future interest savings were valued using a discounted cash flow model. The discount yield for this calculation was 6.05% resulting in a total fair value of $162.8 million and was classified as a Level 3 fair value measurement. Further discussion of the 2024 Debt Repayment is in Note 7: Long-Term Debt and Other Financing Arrangements. Fair Value of Debt Instruments and Other Financing Arrangements The carrying amount of the Company's long-term debt approximates its fair value as the debt was recently issued and current market rates for instruments with similar terms, credit characteristics, and remaining maturities are not significantly different from the contractual rates of the Company's outstanding debt. When the Company makes draws under the 2023 Funding Agreement, each draw is recorded at fair value based on market rates at the time of the draw. In connection with the adoption of ASU 2025-07, the Company recorded the fair value of the 2024 Debt Repayment on January 1, 2026.
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