Annual report pursuant to Section 13 and 15(d)

Long-Term Debt and Borrowing Arrangements

v3.25.0.1
Long-Term Debt and Borrowing Arrangements
 12 Months Ended
Dec. 31, 2024
Debt Disclosure [Abstract]  
Long-Term Debt and Borrowing Arrangements
11. LONG-TERM DEBT AND BORROWING ARRANGEMENTS
The Company’s indebtedness consisted of:
As of December 31,
2024 2023
Long-term debt: (a)
Amount
Weighted Average Rate (b)
Amount
Weighted Average Rate (b)
$750 million revolving credit facility (due April 2027)
 $ 88  7.17% $ 160  7.30%
$400 million term loan A (due April 2027)
364  7.02% 384  6.82%
$1.5 billion term loan B (due May 2030)
1,515  4.20% 1,123  4.10%
$500 million 4.375% senior unsecured notes (due August 2028)
 496  4.38% 495  4.38%
Finance leases —  4.50% 39  4.50%
Total long-term debt 2,463  4.84% 2,201  4.77%
Less: Current portion of long-term debt 43  37 
Long-term debt $ 2,420  $ 2,164 
_____________________
(a)    The carrying amount of the term loans and senior unsecured notes are net of deferred debt issuance costs of $13 million and $16 million as of December 31, 2024 and 2023, respectively. The carrying amount of the term loan B is net of unamortized discounts of $5 million as of both December 31, 2024 and 2023.
(b)    Weighted average interest rates are based on the stated interest rate for the year-to-date periods and include the effects from hedging.
Maturities and Capacity
The Company’s outstanding debt as of December 31, 2024 matures as follows:
Long-Term Debt
Within 1 year $ 43 
Between 1 and 2 years 45 
Between 2 and 3 years 410 
Between 3 and 4 years 512 
Between 4 and 5 years 15 
Thereafter 1,438 
Total $ 2,463 

As of December 31, 2024, the available capacity under the Company’s revolving credit facility was as follows:
Revolving Credit Facility
Total capacity $ 750 
Less: Borrowings 88 
Available capacity $ 662 
Long-Term Debt
$750 million Revolving Credit Facility 
In April 2022, the Company entered into the Third Amendment to the credit agreement dated May 30, 2018 (“Third Amendment”) which amended its original five-year $750 million revolver to extend the term to April 2027. The benchmark rate applicable to the revolver has changed from LIBOR to Secured Overnight Funding Rate (“SOFR”). The revolver is subject to an interest rate equal to, at the Company’s option, either (i) a base rate plus a margin ranging from 0.50% to 1.00% or (ii) SOFR, plus a margin ranging from 1.50% to 2.00% and an additional 0.10% SOFR adjustment, in either case based upon the total leverage ratio of the Company and its restricted subsidiaries. The revolver is subject to the same prepayment provisions and covenants applicable to the previous revolver.
The Company had $88 million and $160 million of outstanding borrowings on its revolving credit facility as of December 31, 2024 and 2023, respectively. Such borrowings are included within long-term debt on the Consolidated Balance Sheet.
$400 million Term Loan A Agreement
The Third Amendment provides for a new senior secured term loan A facility (“Term Loan A”) in an aggregate principal amount of $400 million maturing in April 2027, the proceeds of which were used to repay a portion of the existing Term Loan B facility in 2022. The Term Loan A is subject to an interest rate equal to, at the Company’s option, either (i) a base rate plus a margin ranging from 0.50% to 1.00% or (ii) SOFR, plus a margin ranging from 1.50% to 2.00% and an additional 0.10% SOFR adjustment, in either case based upon the total leverage ratio of the Company and its restricted subsidiaries. The Term Loan A is subject to the same prepayment provisions and covenants applicable to the existing Term Loan B. The Term Loan A is subject to quarterly principal payments as follows: (i) 0.0% per year of the initial principal amount during the first year, (ii) 5.0% per year of the initial principal amount payable in equal quarterly installments during the second and third years and (iii) 7.5% per year of the initial principal amount payable in equal quarterly installments during the fourth and fifth years, with final payments of all amounts outstanding, plus accrued interest, being due on the maturity date in April 2027.
$1.5 billion Term Loan B Agreement
In May 2024, the Company entered into a Fifth Amendment to the credit agreement dated May 30, 2018 (the “Fifth Amendment”), in which the Company repriced all of its Term Loan B loans (“Prior Term Loan B Facility”) and borrowed an incremental $400 million. The new Senior Secured Term Loan B Facility (“New Term Loan B”) had an outstanding principal balance of $1.5 billion as of December 31, 2024. The incremental proceeds of the New Term Loan B were used for general corporate purposes, including the repayment of then-outstanding balances under the Company’s revolving credit facility. The New Term Loan B has substantially the same terms as the Prior Term Loan B Facility. The New Term Loan B bears interest at the Borrower’s option at a rate of (a) base rate, plus an applicable rate of 0.75% or (b) Term SOFR, plus an applicable rate of 1.75%. The New Term Loan B is subject to the same prepayment provisions and covenants applicable to the Prior Term Loan B facility.
The Term SOFR with respect to the New Term Loan B is subject to a “floor” of 0.00%. The New Term Loan B is subject to the same prepayment provisions and covenants applicable to the Prior Term Loan B facility, subject to customary exceptions and limitations. These provisions include a standard mandatory prepayment provisions including (i) 100% of the net cash proceeds from issuances or incurrence of debt by the Company or any of its restricted subsidiaries (other than with respect to certain permitted indebtedness); (ii) 100% (with step-downs to 50% and 0% based upon achievement of specified first-lien leverage ratios) of the net cash proceeds from certain sales or other dispositions of assets by the Company or any of its restricted subsidiaries in excess of a certain amount and subject to customary reinvestment provisions and certain other exceptions; and (iii) 50% (with step-downs to 25% and 0% based upon achievement of specified first-lien leverage ratios) of annual (commencing with the 2019 fiscal year) excess cash flow of the Company and its restricted subsidiaries, subject to customary exceptions and limitations.
The revolving credit facility and term loans (the “Credit Facilities”) are guaranteed, jointly and severally, by certain of the Company’s wholly-owned domestic subsidiaries and secured by a first-priority security interest in substantially all of the assets of the Company and those subsidiaries. The Credit Facilities were initially guaranteed by former Parent, which guarantee was released immediately prior to the consummation of the spin-off. The Credit Facilities contain customary covenants that, among other things, restrict, subject to certain exceptions, the Company and its restricted subsidiaries’ ability to grant liens on the Company and its restricted subsidiaries’ assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations and pay certain dividends and other restricted payments. The Credit Facilities require the Company to comply with financial maintenance covenants to be tested quarterly, consisting of a maximum first-lien leverage ratio.
Subject to customary conditions and restrictions, the Company may obtain incremental term loans and/or revolving loans in an aggregate amount not to exceed (i) the greater of $650 million and 100% of EBITDA, plus (ii) the amount of all voluntary prepayments and commitment reductions under the Credit Facilities, plus (iii) additional amounts subject to certain leverage-based ratio tests.
The Credit Facilities also contain certain customary events of default, including, but not limited to: (i) failure to pay principal, interest, fees or other amounts under the Credit Facilities when due, taking into account any applicable grace period; (ii) any representation or warranty proving to have been incorrect in any material respect when made; (iii) failure to perform or observe covenants or other terms of the Credit Facilities subject to certain grace periods; (iv) a cross-default and
cross-acceleration with certain other material debt; (v) bankruptcy events; (vi) certain defaults under ERISA; and (vii) the invalidity or impairment of security interests.
The New Term Loan B is subject to equal quarterly amortization of principal of 0.25% of the initial principal amount, starting in the third quarter of 2024, the first full fiscal quarter after the closing date.
4.375% Senior Unsecured Notes
In August 2020, the Company issued $500 million of senior unsecured notes, which mature in 2028 and bear interest at a rate of 4.375% per year, for net proceeds of $492 million. Interest is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.
Finance Leases
Prior to the fourth quarter of 2024, the Company’s finance leases consisted of the lease of its corporate headquarters. In connection with the Company’s separation from former Parent, it was assigned the lease for its corporate headquarters located in Parsippany, New Jersey from its former Parent, which resulted in the Company recording a finance lease obligation and asset. In the fourth quarter of 2024, the Company purchased the property for its corporate headquarters. See Note 6, Property and Equipment, net for more details.
Deferred Debt Issuance Costs
The Company classifies deferred debt issuance costs related to its revolving credit facility within other non-current assets on the Consolidated Balance Sheets. Such deferred debt issuance costs were $2 million and $3 million as of December 31, 2024 and 2023, respectively.
Cash Flow Hedge
As of December 31, 2024, the Company has pay-fixed/receive-variable interest rate swaps which hedge the interest rate exposure on $1.4 billion, effectively representing over 94% of the outstanding amount of its term loan B. The interest rate swaps have weighted average fixed rates (plus applicable spreads) ranging from 3.31% to 3.84% based on various effective dates for each of the swap agreements, with $475 million of swaps expiring in the fourth quarter of 2027, $600 million expiring in the second quarter of 2028, and $350 million expiring in the third quarter of 2028. For the year ended December 31, 2024 and 2023, the weighted average fixed rate (plus applicable spreads) for the swaps were 1.86% and 1.77%, respectively. The aggregate fair value of these interest rate swaps was a net asset of $18 million and $13 million as of December 31, 2024 and 2023, respectively, which was included within other non-current assets on the Consolidated Balance Sheets, respectively. The effect of interest rate swaps on interest expense, net on the Consolidated Statements of Income were $36 million of income during both 2024 and 2023 and $2 million of expense during 2022.
There was no hedging ineffectiveness recognized in 2024, 2023 or 2022. The Company expects to reclassify approximately $8 million of gains from AOCI to interest expense during the next 12 months.
Interest Expense, Net
The Company incurred interest expense of $129 million, $108 million and $85 million in 2024, 2023 and 2022, respectively. Cash paid related to such interest was $126 million, $103 million and $82 million for 2024, 2023 and 2022, respectively. Interest income was $5 million, $6 million and $5 million for 2024, 2023 and 2022, respectively.
Early Extinguishment of Debt
The Company incurred non-cash early extinguishment of debt costs of $3 million during both 2024 and 2023 and $2 million during 2022. The 2024 and 2023 amounts relate to the repricing and refinancing of the Company’s term loan B, respectively. The 2022 amount relates to the Third Amendment and $400 million partial pay down of its term loan B, as discussed above.