Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments

v3.24.2.u1
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

Recurring Measurements

Our assets and liabilities measured at fair value on a recurring basis consist of the following:

 

 

Fair Value Measurements Using

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

June 30, 2024:

 

 

 

 

 

 

 

 

 

Liabilities — Munger make-whole provision

 

$

—

 

 

$

—

 

 

$

8.8

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023:

 

 

 

 

 

 

 

 

 

Assets — Investment in BPC

 

$

—

 

 

$

—

 

 

$

23.4

 

 

 

 

 

 

 

 

 

 

 

Liabilities — Munger make-whole provision

 

$

—

 

 

$

—

 

 

$

7.5

 

Prior the acquisition of BPC, we elected the fair value option to account for our original investment in BPC due to the complexities of the terms of the equity investment. The significant unobservable inputs used in the fair value measurement, which was valued using the income approach and the market approach, are forecasted results and a weighted-average cost of capital. The fair value of this asset is classified as investments in our unaudited condensed consolidated balance sheets. The gains and losses from fair value changes are classified as other income (expense), net in our unaudited condensed consolidated statements of operations for periods prior to the acquisition.

The fair value of the Munger make-whole provision was estimated using a Black-Scholes model. The significant unobservable inputs used in the fair value measurement are the risk-free rate and volatility. At June 30, 2024, the expiration date of the Munger make-whole provision was set to expire in May 2025.

The following is a reconciliation of our recurring Level 3 fair value measurements:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net asset balance at beginning of period

 

$

17.1

 

 

$

40.3

 

 

$

15.9

 

 

$

46.6

 

Change in fair value of Level 3 fair value measurements

 

 

(1.0

)

 

 

(5.8

)

 

 

0.2

 

 

 

(12.1

)

Transfer of investment in BPC to acquisition purchase consideration

 

 

(24.9

)

 

 

—

 

 

 

(24.9

)

 

 

—

 

Net asset (liability) balance at end of period

 

$

(8.8

)

 

$

34.5

 

 

$

(8.8

)

 

$

34.5

 

 

 

Financial Instruments

The estimated fair values of our financial instruments have been determined at discrete points in time based on relevant market information. Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, certain investments, accounts payable, accrued expenses and long-term debt. The carrying amounts of our financial instruments other than long-term debt approximate fair value because of the short-term nature of the items.

The carrying amounts of our term loan facility and ABL credit facility approximate fair value due to the variable interest rate. The fair value of our fixed rate debt, which includes the Monarch note and the Equify note was as follows:

 

 

June 30,
2024

 

 

December 31,
2023

 

Carrying amount of fixed rate debt

 

$

50.7

 

 

$

74.7

 

Fair value of fixed rate debt

 

$

49.9

 

 

$

74.3