FINANCING ARRANGEMENTS

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

FINANCING ARRANGEMENTS

FINANCING ARRANGEMENTS

Long-Term Debt

The following table is a summary of the Company’s long-term debt (in thousands):

Current Portion of Long-Term Debt:	September 30, 2024		December 31, 2023
Secured senior term loans	$	15,102	$	10,000
Long-Term Debt:
Secured senior term loans due October 8, 2028	1,453,571		970,000
Unsecured senior notes, at 4.875%, due July 15, 2027 (“2027 Notes”)	545,000		545,000
Unsecured senior notes, at 5.125%, due July 15, 2029 (“2029 Notes”)	300,000		300,000
Unsecured senior notes, at 6.375%, due February 1, 2031 (“2031 Notes”)	500,000		500,000
Long-term debt, at par	$	2,798,571	$	2,315,000
Unamortized debt issuance costs and discount	(24,912)		(23,283)
Long-term debt, at carrying value	$	2,773,659	$	2,291,717

Financing Activities

The Company’s significant financing arrangements are described in Note 12, “Financing Arrangements,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and, other than as noted below, there have been no material changes to the arrangements described therein.

On June 28, 2024, the Company and one of the Company’s Canadian subsidiaries (the “Canadian Borrower”) entered into a seventh amended and restated credit agreement (the “Amended Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders party to the Amended Credit Agreement. The Amended Credit Agreement amended and restated the sixth amended and restated credit agreement dated October 28, 2020 (the “Prior Credit Agreement”).

Under the Amended Credit Agreement, the Company has the right to obtain revolving loans and letters of credit for a combined maximum of up to $550.0 million (with a sub-limit of $250.0 million for letters of credit) and the Canadian Borrower has the right to obtain revolving loans and letters of credit for a combined maximum of up to $50.0 million. The maximum borrowing amount of $600.0 million under the Amended Credit Agreement is increased from $400.0 million under the Prior Credit Agreement.

Borrowings by the Company under the Amended Credit Agreement will bear interest at the Company’s option, at either (i) the sum of Term SOFR plus a SOFR Adjustment of 0.1% plus 1.5% per annum, or (ii) the U.S. Base Rate, plus 0.5% per annum, and borrowings by the Canadian Borrower will bear interest, at the Company’s option, at either (i) the sum of Term CORRA plus a Term CORRA adjustment of either 0.29547% or 0.32138% for the one or three month interest period respectively, plus 1.5% per annum, (ii) the Canadian Prime Rate, plus 0.5% per annum, or (iii) the Canadian Base Rate, plus 0.5% per annum, as those terms are defined in the Amended Credit Agreement. Other terms under the Amended Credit Agreement are substantially the same as under the Prior Credit Agreement. Subject to certain customary conditions, the facility will expire on June 28, 2029.

The Company had no outstanding loan balance under the Amended Credit Agreement as of the date of the amendment discussed above, September 30, 2024 or December 31, 2023. As of September 30, 2024, the Company had $469.8 million available to borrow under the revolving credit facility and outstanding letters of credit were $130.2 million.

On March 22, 2024, the Company and substantially all of the Company’s domestic subsidiaries entered into Incremental Facility Amendment No. 5 to the Company’s existing Credit Agreement, dated as of June 30, 2017 (“Term Loan Agreement”). Incremental Facility Amendment No. 5 provided for the incurrence of additional term loans (the “2024 Incremental Term Loans”) under the Term Loan Agreement in the aggregate principal amount of $500.0 million. Proceeds from the issuance of the 2024 Incremental Term Loans were $491.1 million after debt discount and debt issuance costs, and were used to fund the acquisition of HEPACO, with the excess increasing the Company’s cash balances. The 2024 Incremental Term Loans are in addition to the aggregate of $980.0 million of term loans (the “Existing Term Loans”) which were outstanding prior to the issuance of the 2024 Incremental Term Loans. Both the 2024 Incremental Term Loans and the Existing Term Loans (collectively referred to as the “2028 Term Loans”) will mature on October 8, 2028, and may be prepaid at any time without premium or penalty other than customary breakage costs. The Company’s obligations under the 2028 Term Loans are guaranteed by substantially all of the Company’s domestic restricted subsidiaries and secured by liens on substantially all of the assets of the Company and the guarantors.

The 2028 Term Loans bear interest, at the Company’s election, at either of the following rates: (a) the sum of the Term SOFR Rate (as defined in the Term Loan Agreement) plus 0.11448% (the one-month Term SOFR adjustment) plus a 1.75% margin per annum, or (b) the sum of the Base Rate (as defined in the Term Loan Agreement) plus 0.75% margin per annum. The Term SOFR rate is subject to a floor of 0.00% and the Base Rate is subject to a floor of 1.00%. The Company has elected one-month Term SOFR for interest payments on that debt; however, the Term Loan Agreement provides for Term SOFR adjustments for other interest periods. Interest on the 2028 Term Loans is paid monthly with interest payments on the 2024 Incremental Term Loan portion having commenced in April 2024.

As of September 30, 2024 and December 31, 2023, the estimated fair value of the Company’s outstanding long-term debt, including the current portion, was $2.8 billion and $2.3 billion, respectively. The Company’s estimates of fair value of its long-term debt, including the current portion, are based on quoted market prices or other available market data which are considered Level 2 measures according to the fair value hierarchy. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotation or alternative pricing sources with reasonable levels of price transparency for similar assets and liabilities.

As of September 30, 2024, after taking into account the interest rate swaps discussed under the “Cash Flow Hedges” heading below, the Company’s variable rate debt consisted of $868.7 million of the 2028 Term Loans. The Company’s interest rate on this variable rate debt as of September 30, 2024 was 7.06%.

On October 8, 2024, the Company and substantially all of the Company’s domestic subsidiaries entered into Amendment No. 6 (the “Sixth Amendment”) to the Term Loan Agreement. The Sixth Amendment (i) eliminated the Term SOFR Adjustment (noted above as 0.11448% per annum) and (ii) resets the six month soft call period for a repricing of the 2028 Term Loans. After giving effect to the repricing, the applicable interest rate margins for the 2028 Term Loans are 1.75% for Term SOFR borrowings and 0.75% for base rate borrowings. Under the Sixth Amendment the 2028 Term Loans may be prepaid at any time without premium or penalty other than customary breakage costs or if the Company engages in certain repricing transactions before April 8, 2025, in which event a 1% prepayment premium would be due.

Cash Flow Hedges        

The Company’s strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements.

The Company has entered into interest rate swap agreements with a notional amount of $600.0 million (“2022 Swaps”) to effectively fix the interest rate on $600.0 million principal of the outstanding existing Term Loans. The fixed rate on these instruments is 1.9645% and the variable rate is linked to the Term SOFR to mirror the variable interest payments for the Term Loans. For the nine months ended September 30, 2024, including the 1.75% interest rate margin and the 0.11448% SOFR adjustment for the Term Loans, the effective annual interest rate of this $600.0 million of principal debt was approximately 3.83%. Following the Sixth Amendment, which eliminated the 0.11448% SOFR adjustment, the effective annual rate on the $600.0 million of principal is approximately 3.71%.

Prior to the phase-out of LIBOR as a referenced rate on June 30, 2023, the fixed rate on the 2022 Swaps was 0.931% and the variable rate was linked to LIBOR, to mirror the LIBOR linked variable interest payments for the existing Term Loans. With the then 2.00% interest rate margin for the existing Term Loans, the effective annual interest rate of the $600.0 million of principal debt was 2.931% through June 30, 2023. The 2022 Swaps will expire on September 30, 2027.

At the inception of these instruments, the Company designated the 2022 Swaps as cash flow hedges. As of September 30, 2024, the Company recorded a derivative asset with a fair value of $23.3 million related to the 2022 Swaps. The balance of the derivative asset as of December 31, 2023 was $35.5 million. These assets are included in Other long-term assets on the consolidated balance sheets.

No ineffectiveness has been identified on the 2022 Swaps and, therefore the change in fair value is recorded in stockholders’ equity as a component of accumulated other comprehensive loss. Amounts are reclassified from accumulated other comprehensive loss into interest expense on the unaudited consolidated statement of operations in the same period or periods during which the hedged transactions affect earnings.