Annual report [Section 13 and 15(d), not S-K Item 405]

Long-Term Debt and Borrowing Arrangements

v3.25.4
Long-Term Debt and Borrowing Arrangements
 12 Months Ended
Dec. 31, 2025
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,
2025 2024
Long-term debt: (a)
Amount
Weighted Average Rate (b)
Amount
Weighted Average Rate (b)
$1.0 billion revolving credit facility (due October 2030)
 $ 224  6.03% $ 88  7.17%
$400 million term loan A (due April 2027)
337  6.10% 364  7.02%
$1.5 billion term loan B (due May 2030)
1,502  5.42% 1,515  4.20%
$500 million 4.375% senior unsecured notes (due August 2028)
 497  4.38% 496  4.38%
Total long-term debt 2,560  5.36% 2,463  4.84%
Less: Current portion of long-term debt 45  43 
Long-term debt $ 2,515  $ 2,420 
_____________________
(a)    The carrying amount of the term loans and senior unsecured notes are net of deferred debt issuance costs of $10 million and $13 million as of December 31, 2025 and 2024, respectively. The carrying amount of the term loan B is net of unamortized discounts of $4 million and $5 million as of December 31, 2025 and 2024, respectively.
(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, 2025 matures as follows:
Long-Term Debt
Within 1 year $ 45 
Between 1 and 2 years 323 
Between 2 and 3 years 513 
Between 3 and 4 years 15 
Between 4 and 5 years 1,664 
Thereafter — 
Total $ 2,560 

As of December 31, 2025, the available capacity under the Company’s revolving credit facility was as follows:
Revolving Credit Facility
Total capacity $ 1,000 
Less: Borrowings 224 
Available capacity $ 776 
Long-Term Debt
$1.0 billion Revolving Credit Facility 
In October 2025, the Company entered into the Sixth Amendment to the credit agreement dated May 30, 2018 (“Sixth Amendment”) which amended its existing five-year $750 million revolver to increase the capacity to $1.0 billion and extend the term to October 2030. The revolver is subject to an interest rate equal to, at the Company’s option, either (i) Secured Overnight Funding Rate (“SOFR”), plus a margin 1.75%, subject to reductions to 1.50%, 1.25%, and 1.00% or (ii) base rate, plus a margin of 0.75%, subject to reductions to 0.50%, 0.25% and 0.00%, in either case based upon the total leverage ratio of the Company and its restricted subsidiaries. The Sixth Amendment removed the credit spread adjustment previously applicable to the existing revolver based on SOFR. The revolver is subject to the same prepayment provisions and covenants applicable to the previous revolver.
The Company had $224 million and $88 million of outstanding borrowings on its revolving credit facility as of December 31, 2025 and 2024, 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, 2025. 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 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
The Company has $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
As of December 31, 2025, the Company had no finance leases. Prior to the fourth quarter of 2024, the Company’s finance leases consisted of the lease of its corporate headquarters. 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 $4 million and $2 million as of December 31, 2025 and 2024, respectively.
Cash Flow Hedge
As of December 31, 2025, the Company had pay-fixed/receive-variable interest rate swaps which hedge the interest rate exposure on $1.4 billion, effectively representing nearly 95% of the outstanding amount of its term loan B. These swaps carry 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, 2025 and 2024, the weighted average fixed rate (plus applicable spreads) for the swaps were 3.58% and 1.86%, respectively. The aggregate fair value of these interest rate swaps was a net liability of $10 million and a net asset of $18 million as of December 31, 2025 and 2024, which was included within other non-current liabilities and 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 was $10 million of income during 2025 and $36 million of income during both 2024 and 2023.
There was no hedging ineffectiveness recognized in 2025, 2024 or 2023. The Company expects to reclassify approximately $3 million of losses from AOCI to interest expense during the next 12 months.
Interest Expense, Net
The Company incurred interest expense of $147 million, $129 million and $108 million in 2025, 2024 and 2023, respectively. Cash paid related to such interest was $142 million, $126 million and $103 million for 2025, 2024 and 2023, respectively. Interest income was $8 million, $5 million and $6 million for 2025, 2024 and 2023, respectively.
Early Extinguishment of Debt
The Company incurred non-cash early extinguishment of debt costs of $3 million during both 2024 and 2023. The 2024 and 2023 amounts relate to the repricing and refinancing of the Company’s term loan B, respectively.