Long-Term Debt

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Long-Term Debt

8. Long-Term Debt

Long-term debt consisted of the following as of:

	March 31, 2023			December 31, 2022
	(in thousands)
Revolving credit facility (1)	$	481,000		$	264,000
4.25% 2032 notes		1,300,000			1,300,000
6.375% 2032 notes		700,000			700,000
2030 notes		550,000			550,000
Other finance obligations		194,264			197,281
Finance lease obligations		4,071			4,105
		3,229,335			3,015,386
Unamortized debt discount/premium and debt issuance costs		(30,477	)		(31,189	)
		3,198,858			2,984,197
Less: current maturities of long-term debt		4,430			6,355
Long-term debt, net of current maturities, discounts and issuance costs	$	3,194,428		$	2,977,842

(1)The weighted average interest rate was 7.8% and 3.7% as of March 31, 2023 and December 31, 2022, respectively.

2022 Debt Transactions

On January 21, 2022, the Company completed a private offering of an additional $300.0 million in aggregate principal amount of 4.25% senior unsecured notes due 2032 (“4.25% 2032 notes”) at an issue price equal to 100.50% of par value. The net proceeds from the offering were used to repay indebtedness outstanding under the Revolving Facility and pay related transaction fees and expenses. The 4.25% 2032 notes issued in January 2022 form part of the same series of notes as the $1.0 billion of 4.25% 2032 notes issued in July 2021.

The additional $1.5 million in proceeds received in excess of par value represents a debt premium which has been recorded as an increase to long-term debt. In connection with the offering, we incurred approximately $4.4 million of various third-party fees and expenses which have been recorded as a reduction to long-term debt. The debt premium and third-party costs will be amortized over the contractual life of the 4.25% 2032 notes using the effective interest method.

On February 4, 2022, the Company amended the Revolving Facility to increase the total commitments by an aggregate amount of $400.0 million, resulting in a new $1.8 billion amended credit facility. All other material terms of the Revolving Facility remain unchanged from those of the previous agreement. Effective with this amendment, the eurodollar rate loans and related interest rate benchmark were changed to the Secured Overnight Financing Rate (“SOFR”). The applicable margin ranges for term SOFR loans were amended to be from 1.35% to 1.60% and there are no changes to base rate loan borrowings. In connection with this amendment, we incurred approximately $2.0 million of new debt issuance costs which have been recorded as other assets and will be amortized straight-line through December 2026. The Revolving Facility is discussed in more detail below.

2023 Debt Transactions

On January 17, 2023, the Company amended the Revolving Facility to extend the maturity of a portion of the Revolving Facility. Under the agreement, we have a total of $1,620.0 million commitments with a maturity date of January 17, 2028 and $180.0 million commitments with a maturity date of December 17, 2026. Additionally, the amendment included additional interest pricing tiers for the amounts under the extended facility, which range from 1.10% to 1.60% in the case of SOFR loans, and 0.00% to 0.50% in the case of base rate loans. The letters of credit under the extended facility were assessed at a rate between 1.00% to 1.50% based on the average excess availability. Amounts under the non-extended facility borrowings were subject to interest, at our option, at either the SOFR or a base rate, plus, in each case, an applicable margin. The applicable margin ranged from 1.35% to 1.60% per annum in the case of term SOFR loans and 0.25% to 0.50% per annum in the case of base rate loans. The margin in either case is based on a measure of availability under the Revolving Facility.

In connection with this amendment, we incurred approximately $1.2 million of new debt issuance costs which, together with the previous unamortized debt issuance costs, will be deferred and amortized over the remaining contractual life.

Subsequent to quarter-end, on April 3, 2023, the Company further amended the Revolving Facility to extend the maturity of the remaining $180.0 million commitments to January 17, 2028. This amendment also updated the interest pricing tiers for borrowings and letters of credits, and other terms to be consistent with the $1,620.0 million commitments amended on January 17, 2023. The Revolving Facility is discussed in more detail below.

Revolving Credit Facility

The Revolving Facility provides for a $1.8 billion revolving credit line to be used for working capital, general corporate purposes and funding capital expenditures and growth opportunities. In addition, we may use borrowings under the Revolving Facility to facilitate debt repayment and consolidation. The available borrowing capacity, or borrowing base, is derived from a percentage of the Company’s eligible receivables and inventory, as defined by the agreement evidencing the Revolving Facility, subject to certain reserves. As of March 31, 2023, we had $481.0 million in outstanding borrowings under our Revolving Facility and our net excess borrowing availability was $1.2 billion after being reduced by outstanding letters of credit totaling $95.9 million.

Borrowings under the Revolving Facility bear interest, at our option, at either the SOFR or a base rate, plus, in each case, an applicable margin. The applicable margin ranges from 1.10% to 1.60% per annum in the case of term SOFR loans and 0.00% to 0.50% per annum in the case of base rate loans. The margin in either case is based on a measure of availability under the Revolving Facility. A commitment fee, currently 0.20% per annum, is charged on the unused amount of the revolver based on quarterly average loan utilization. Letters of credit under the Revolving Facility are assessed at a rate equal to 1.00% to 1.50%, based on the average excess availability, as well as a fronting fee at a rate of 0.125% per annum. These fees are payable quarterly in arrears at the end of March, June, September, and December.

All obligations under the Revolving Facility are guaranteed jointly and severally by the Company and all other subsidiaries that guarantee our 5.00% senior unsecured notes due 2030 (the “2030 notes”), our 4.25% 2032 notes, and our 6.375% 2032 notes (such subsidiaries, the “Debt Guarantors”). All obligations and the guarantees of those obligations are secured by substantially all of the assets of the Company and the Debt Guarantors, subject to certain exceptions and permitted liens, including, with respect to the Revolving Facility, a first-priority security interest in such assets that constitute ABL Collateral (as defined below) and a second-priority security interest in such assets that constitute Notes Collateral (as defined below).

“ABL Collateral” includes substantially all presently owned and after-acquired accounts receivable, inventory, rights of unpaid vendors with respect to inventory, deposit accounts, commodity accounts, securities accounts and lock boxes, investment property, cash and cash equivalents, and general intangibles, books and records, supporting obligations and documents and related letters of credit, commercial tort claims or other claims related to and proceeds of each of the foregoing. “Notes Collateral” includes all collateral that is not ABL Collateral.

The Revolving Facility contains restrictive covenants which, among other things, limit the Company’s ability to incur additional indebtedness, incur liens, engage in mergers or other fundamental changes, sell certain assets, pay dividends, make acquisitions or investments, prepay certain indebtedness, change the nature of our business, and engage in certain transactions with affiliates. In addition, the Revolving Facility also contains a financial covenant requiring the satisfaction of a minimum fixed charge ratio of 1.00 to 1.00 if our excess availability falls below the greater of $80.0 million or 10% of the maximum borrowing amount, which was $180.0 million as of March 31, 2023.

Senior Unsecured Notes due 2032

As described above, during 2022, the Company issued $300.0 million of 4.25% 2032 notes, which form part of the same series of notes as the $1.0 billion of 4.25% 2032 notes issued in July 2021, and $700.0 million of 6.375% 2032 notes (collectively, the “2032 notes”). The 4.25% 2032 notes mature on February 1, 2032, with interest accruing at a rate of 4.25% per annum and interest payable semi-annually on February 1 and August 1 of each year. The 6.375% 2032 notes mature on June 15, 2032, with interest accruing at a rate of 6.375% per annum and interest payable semi-annually on June 15 and December 15 of each year.

The terms of the 4.25% 2032 notes and the 6.375% 2032 notes are governed by the indentures, dated as of July 23, 2021 and June 15, 2022 (collectively the “2032 Indentures”), respectively, The 2032 Indentures contain consistent terms and are among the Company, the guarantors named therein and Wilmington Trust, National Association, as trustee.

The 2032 notes, subject to certain exceptions, are guaranteed, jointly and severally, on a senior unsecured basis, by the Debt Guarantors. Subject to certain exceptions, future subsidiaries that guarantee the Revolving Facility, the 2030 notes or certain other indebtedness will also guarantee the 2032 notes.

The 2032 notes constitute senior unsecured obligations of the Company and Debt Guarantors, pari passu in right of payment, with all of the existing and future senior indebtedness of the Company, including indebtedness under the Revolving Facility and the 2030 notes, effectively subordinated to all existing and future secured indebtedness of the Company and the Debt Guarantors (including indebtedness under the Revolving Facility and 2032 notes) to the extent of the value of the assets securing such indebtedness, senior to all of the future subordinated indebtedness of the Company and the Debt Guarantors and structurally subordinated to any existing and future indebtedness and other liabilities, including preferred stock, of the Company’s subsidiaries that do not guarantee the 2032 notes.

The 2032 Indentures contain restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional debt or issue preferred stock, create liens, create restrictions on the Company’s subsidiaries’ ability to make payments to the Company, pay dividends and make other distributions in respect of the Company’s and its subsidiaries’ capital stock, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers and consolidations.

The Company may redeem the 2032 notes within five years from the date of issuance, in whole or in part, at a redemption price equal to 100% of the principal amount of each of the 2032 notes plus the “applicable premium” set forth in the 2032 Indentures. The Company may, within three years of the date of issuance, redeem up to 40% of the aggregate principal amount of each of the 2032 notes with the net cash proceeds of one or more equity offerings at a premium of the principal amount thereof, as described in the 2032 Indentures, plus accrued and unpaid interest, if any, to the redemption date. After the five-year period from original issuance, the Company may redeem each of the 2032 notes at the redemption prices set forth in the 2032 Indentures, plus accrued and unpaid interest, if any, to the redemption date. If the Company experiences certain change of control triggering events, holders of each of the 2032 notes may require it to repurchase all or part of their notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.

Fair Value

As of March 31, 2023 and December 31, 2022, the Company does not have any financial instruments that are measured at fair value on a recurring basis. We have elected to report the value of our 2030 notes, 4.25% 2032 notes, 6.375% 2032 notes, and Revolving Facility at amortized cost. The fair values of the 2030 notes, 4.25% 2032 notes, and 6.375% 2032 notes at March 31, 2023 were approximately $511.5 million, $1,137.5 million, and $700.0 million, respectively, and were determined using Level 2 inputs based on market prices. The carrying value of the Revolving Facility at March 31, 2023 approximates fair value as the rates are comparable to those at which we could currently borrow under similar terms, are variable and incorporate a measure of our credit risk. As such, the fair value of the Revolving Facility was also classified as Level 2 in the hierarchy.

We were not in violation of any covenants or restrictions imposed by any of our debt agreements at March 31, 2023.