Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Financial Instruments and Fair Value Measurements

Recurring Fair Value Measurements

Debt Securities Available for Sale

The fair value of debt securities is estimated based on observable inputs, therefore classified as a Level 2 asset within the fair value hierarchy. The fair value of the Costa Rica Government Obligations was $2.1 million and $2.2 million as of September 30, 2023 and December 31, 2022.

Derivative Instruments

The fair value of the Company's interest rate swaps are estimated using Level 2 inputs under the fair value hierarchy. These derivatives were in an asset position with a balance of $11.5 million and $7.4 million as of September 30, 2023 and December 31, 2022, respectively.

The fair value of the foreign currency swap entered into during the third quarter of 2023 to fix the acquisition price of the Sinqia transaction described in Note 18, Subsequent events, is estimated using Level 2 inputs under the fair value hierarchy. This derivative was in a liability position of $29.2 million as of September 30, 2023.

Equity Securities

During the third quarter of 2023, the Company purchased 4.8 million shares of Sinqia, S.A., a public company traded in B3, the Brazilian stock exchange. The shares were purchased in the open market for $26.5 million and at September 30, 2023 the fair value of the equity securities, classified as a Level 1 input, amounted to $26.0 million. For both the three and nine month periods ended September 30, 2023, the Company recognized unrealized gains of $0.1 million in the unaudited condensed consolidated statement of income and translation losses of $0.6 million through other comprehensive income (loss).

The following table presents the carrying value, as applicable, and estimated fair value for financial instruments at September 30, 2023 and December 31, 2022:


	September 30, 2023				December 31, 2022
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Costa Rica government obligations	$	2,079	$	2,079	$	2,203	$	2,203
Equity securities	$	25,992	$	25,992	$	—	$	—
Interest rate swaps	11,492		11,492		7,440		7,440
Financial liabilities:


Term Loan Facility	395,406		397,840		410,248		413,494
Foreign currency hedge liability	29,225		29,225		—		—

The fair value of the term loan at September 30, 2023 and December 31, 2022 was obtained using prices provided by third party service providers. Their pricing is based on various inputs such as market quotes, recent trading activity in a non-active market or imputed prices. These inputs are considered Level 3 inputs under the fair value hierarchy. Also, the pricing may include the use of an algorithm that could take into account movements in the general high yield market, among other variants. The secured term loan is not accounted for at fair value in the balance sheet.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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