Derivative Instruments and Fair Value Accounting

3 Months Ended

Mar. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Instruments

We use derivative instruments to mitigate interest rate risk, including risks associated with the impact of changes in interest rates in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding. We also use derivative instruments to mitigate the impact of changes in foreign currency exchange rates. Derivative instruments that are designated and qualify as cash flow hedges are accounted for by recording the effective portion of the gain or loss on the derivative instrument in accumulated other comprehensive income or loss ("AOCI") as a separate component of stockholders' equity. These accumulated gains or losses are reclassified into earnings in the periods during which the hedged transactions affect earnings. Derivative instruments that are not designated as hedges are accounted for by recording the realized and unrealized gains or losses on the derivative instrument in other, net (income) expense in our Consolidated Statements of Operations. We continuously monitor our derivative positions and the credit ratings of our counterparties and do not anticipate losses due to non-performance. See Note 8 for a description of our debt instruments.

Derivatives Designated as Hedging Instruments

Interest Rate Hedges


					Included in accompanying balance sheet at March 31, 2024
							AOCI – loss/(income)
	Notional Amount		Interest Rate (1)		Asset/(Liability)		Controlling Interest		Noncontrolling Interest
	($ in millions)
Expired hedges:
2018 secured railcar equipment notes	$	249.3	4.41	%	$	—	$	0.2	$	—

Tribute Rail secured railcar equipment notes	$	256.0	2.86	%	$	—	$	0.4	$	0.5
2017 promissory notes – interest rate cap	$	169.3	3.00	%	$	—	$	(0.1)	$	—
Open hedges:
2017 promissory notes – interest rate swap	$	401.4	2.31	%	$	14.4	$	(13.8)	$	—
TRL-2023 term loan	$	265.4	3.79	%	$	2.2	$	(2.1)	$	—

(1) Weighted average fixed interest rate, except for the interest rate cap on the 2017 promissory notes.


		Effect on interest expense – increase/(decrease)
	Three Months Ended March 31,			Expected effect during next twelve months
		2024				2023
		(in millions)
Expired hedges:
2018 secured railcar equipment notes		$	—	$	—		$	0.2
TRIP Holdings warehouse loan		$	—	$	0.1		$	—

Tribute Rail secured railcar equipment notes		$	0.2	$	0.2		$	0.7
2017 promissory notes – interest rate cap		$	—	$	—		$	(0.1)
Open hedges (1):
2017 promissory notes – interest rate swap		$	(3.1)	$	(2.5)		$	(12.4)
TRL-2023 term loan		$	(1.0)	$	—		$	(2.9)

(1) Based on the fair value of open hedges as of March 31, 2024.

Foreign Currency Hedges

Our exposure related to foreign currency transactions is currently hedged for up to a maximum of twelve months. Information related to our foreign currency hedges is as follows:


			Included in accompanying balance sheet at March 31, 2024					Effect on cost of revenues – increase/(decrease)
	Notional Amount		Asset/ (Liability)		AOCI – loss/(income)		Three Months Ended March 31,			Expected effect during next twelve months (1)
Instrument								2024				2023
	(in millions)
Forward contracts	$	99.0	$	7.7	$	(9.7)		$	(1.5)	$	(1.7)		$	(9.5)
Options	$	5.9	$	0.5	$	(0.6)		$	0.3	$	—		$	(0.6)

(1) Based on the fair value of open hedges as of March 31, 2024.

Derivatives Not Designated as Hedging Instruments (1)


					Asset/(Liability) at March 31, 2024			Effect on other, net (income) expense – increase/(decrease)
	Notional Amount		Interest Rate				Three Months Ended March 31,
								2024		2023
	($ in millions)
Interest rate derivatives – open:
TILC warehouse facility – interest rate cap	$	680.0	2.50	%	$	36.0		$	0.7	$	—
TILC – interest rate cap (2)	$	680.0	2.50	%	$	(36.0)		$	2.4	$	—
Interest rate derivatives – expired (3):
TILC warehouse facility – interest rate cap	$	800.0	2.50	%	$	0.9		$	1.0	$	(0.9)
TILC – interest rate cap	$	800.0	2.50	%	$	(0.9)		$	(1.0)	$	0.9

(1) Comprised of back-to-back interest rate caps entered into with the same counterparty in connection with our risk management objectives.

(2) The amount recorded to other, net (income) expense in our Consolidated Statements of Operations for the three months ended March 31, 2024 includes a fee of $3.1 million related to the execution of back-to-back interest rate caps associated with the new TILC warehouse loan facility. See Note 8 for further information.

(3) These interest rate caps matured in March 2024 and were settled in April 2024.

Fair Value Disclosures [Abstract]

Fair Value Accounting

Fair Value Measurements

Fair value is defined as 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 that asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are listed below.

Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. Our cash equivalents and restricted cash are instruments of the U.S. Treasury or highly-rated money market mutual funds. The assets measured on a recurring basis as Level 1 in the fair value hierarchy are summarized below:


	Level 1
	March 31, 2024		December 31, 2023
	(in millions)
Assets:
Cash equivalents	$	43.9	$	78.7
Restricted cash	116.3		129.4
Total assets	$	160.2	$	208.1

Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Interest rate swaps and interest rate caps are valued at exit prices obtained from each counterparty. Foreign currency hedges are valued at exit prices obtained from each counterparty, which are based on currency spot and forward rates and forward points. The assets and liabilities measured on a recurring basis as Level 2 in the fair value hierarchy are summarized below:


	Level 2
	March 31, 2024		December 31, 2023
	(in millions)
Assets (1):
Derivatives designated as hedging instruments:
Interest rate hedges	$	16.6	$	13.1
Foreign currency forward contracts	7.7		5.8
Foreign currency options	0.5		1.0
Derivatives not designated as hedging instruments:
TILC warehouse facility – interest rate caps	36.9		6.6


Total assets	$	61.7	$	26.5

Liabilities (2):
Derivatives designated as hedging instruments:
Interest rate hedges	$	—	$	2.5

Derivatives not designated as hedging instruments:
TILC – interest rate caps	36.9		6.6
Total liabilities	$	36.9	$	9.1

(1) Included in other assets in our Consolidated Balance Sheets.

(2) Included in accrued liabilities in our Consolidated Balance Sheets.

Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. As of March 31, 2024 and December 31, 2023, we have no assets or liabilities measured on a recurring basis as Level 3 in the fair value hierarchy, except as described in Note 2.

See Note 2 for more information regarding fair value measurements involving Level 3 inputs resulting from acquisition activity. See Note 8 for the estimated fair values of our debt instruments. The fair values of all other financial instruments are estimated to approximate carrying value.

- 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.

+ References + Details