Financial Instruments | Financial Instruments Assets and Liabilities that are Measured at Fair Value on a Recurring Basis The following table summarizes the valuation of the Company’s financial instruments that are reported at fair value on a recurring basis: Fair Value as of March 31, 2023 Fair Value as of December 31, 2022 (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Current and long-term assets: Interest rate contracts $ — $ 37 $ — $ 37 $ — $ 52 $ — $ 52 Long-term liabilities: Derivative in subordinated notes $ — $ — $ 6,089 $ 6,089 $ — $ — $ 6,132 $ 6,132 The derivative in subordinated notes relates to the Change of Control Redemption Election included in the Subordinated Notes (see Note 7). The fair value of the Change of Control Redemption Election liability was determined using a probability weighted scenario analysis regarding a potential change of control during the seven years from initiation date. The estimated fair values of the Change of Control Redemption Election as of March 31, 2023 and December 31, 2022 use unobservable inputs for probability weighted time until an exit event of 3.4 years and 3.5 years, respectively, and an exit event probability weighting of 22.3% and 22.9%, respectively. The following is a reconciliation of the opening and closing balances for the derivative in subordinated notes liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2023: (in thousands) Balance, December 31, 2022 $ 6,132 Change in fair value (43) Balance, March 31, 2023 $ 6,089 The decrease in the fair value of the derivative in subordinated notes liability was recorded as a gain and included in other non-operating expense (income), net in the Company's condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023. The Company’s interest rate contracts are primarily pay-fixed, receive-variable interest rate swaps related to certain of the Company’s equipment debt. The amount that the Company expects to reclassify from accumulated other comprehensive income to interest expense over the next twelve months is immaterial. Assets and Liabilities for which Fair Value is only Disclosed The estimated fair values of other current and non-current liabilities are as follows: (in thousands) March 31, December 31, 2028 Senior Notes $ 262,463 $ 228,894 2025 Senior Notes 374,063 339,385 Subordinated Notes 283,587 254,951 Equipment Debt 58,705 58,698 $ 978,818 $ 881,928 As of March 31, 2023 and December 31, 2022, the estimated fair values of the 2028 Senior Notes and 2025 Senior Notes were determined using Level 2 inputs and the estimated fair values of the Subordinated Notes and Equipment Debt were determined using Level 3 inputs. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and the current portion of lease liabilities approximates their fair value given their short-term nature. The carrying value of the non-current portion of lease liabilities approximates their fair value given the difference between the discount rates used to recognize the liabilities in the condensed consolidated balance sheets and the normalized expected market rates of interest is insignificant. Financial instruments are classified into one of the following categories: amortized cost, fair value through earnings and fair value through other comprehensive income. The following table summarizes information regarding the carrying value of the Company’s financial instruments: (in thousands) March 31, December 31, Financial assets measured at amortized cost: Cash and cash equivalents $ 45,399 $ 59,424 Accounts receivable 114,696 114,166 $ 160,095 $ 173,590 Financial liabilities measured at amortized cost: Accounts payable $ 25,458 $ 36,618 Current portion of long-term debt 20,432 19,961 Current portion of leases 23,526 25,023 Non-current portion of long-term debt 1,262,708 1,254,652 Non-current portion of leases 172,564 179,980 Accrued liabilities 92,948 86,916 $ 1,597,636 $ 1,603,150 Financial liabilities measured at fair value through earnings: Derivative in subordinated notes $ 6,089 $ 6,132 Financial assets measured at fair value through other comprehensive income: Interest rate contracts $ 37 $ 52 Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis The Company measures certain non-financial assets at fair value on a nonrecurring basis, primarily intangible assets, goodwill and long-lived assets in connection with acquisitions and periodic evaluations for potential impairment. The Company estimates the fair value of these assets using primarily unobservable inputs; therefore, these are considered Level 3 fair value measurements. Interest Rate Risk Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Changes in lending rates can cause fluctuations in interest payments and cash flows. Certain of the Company’s equipment debt arrangements have interest rate swap agreements to hedge the future variable cash interest payments in order to avoid volatility in operating results due to fluctuations in interest rates. As of March 31, 2023 and December 31, 2022, the Company had $0.4 million of variable interest rate equipment debt that is not hedged. In addition, the Company is exposed to variable interest rates related to the 2020 Revolving Facility, which had no outstanding balance as of March 31, 2023 or December 31, 2022. The Company’s exposure to interest rate risk from a 1% increase or decrease in the variable interest rates is not material. |