Annual report pursuant to Section 13 and 15(d)

Debt And Derivatives

v3.23.3
Debt And Derivatives
 12 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Debt And Derivatives DEBT AND DERIVATIVES
Table 8.1: Details of Debt
As of September 30,
2023 2022
(in thousands)
Term Loan A, due 2026 $ 909,375  $ 971,250 
Term Loan B, due 2028 344,934  395,000 
Subsidiary loan agreements 3,220  64 
Funded Debt 1,257,529  1,366,314 
Less: Unamortized debt-issuance costs and discounts (7,536) (10,373)
Total debt 1,249,993  1,355,941 
Less: Current portion of long-term debt (86,844) (63,458)
Long-term debt $ 1,163,149  $ 1,292,483 
Our principal debt agreement is with JPMorgan Chase Bank, N.A., as Administrative Agent ("Credit Agreement"), comprising of the following:
•A term loan A facility ("Term Loan A"), initially comprising $1.1 billion, which matures on May 28, 2026;
•A term loan B facility ("Term Loan B"), initially comprising $400 million, which matures May 28, 2028;
•A $600 million revolving credit facility ("Revolver"), which matures May 28, 2026.
Since December 2022, the interest rates applicable to loans under the Credit Agreement are floating rates based upon the Secured Overnight Financing Rate ("SOFR") plus a margin. Term Loan A and the Revolver margins range between 1% and 2%, based upon our leverage ratio. Term Loan B is set to SOFR plus 2.00%, subject to a SOFR floor of 0.50%. Prior to December 2022, our Credit Agreement utilized the London Interbank Offered Rate as the basis for floating rates. As of September 30, 2023, the annual effective interest rate, including the original issue discount and amortization of debt issuance costs, was 5.97%.
The Credit Agreement provides for an annual commitment fee payable on funds not borrowed or utilized for letters of credit. This charge is based upon our leverage and varies between 0.125% and 0.30%. Commitment fees are recorded as interest expense on the consolidated statements of operations.
The Credit Agreement is available for general corporate purposes, including the funding of working capital, capital expenditures, and possible future acquisitions. In addition to borrowings, it allows us to continue to issue letters of credit when necessary.
Under the terms of the Credit Agreement, the Company is required to comply with certain covenants, the terms of which are customary and include a Consolidated Net Total Leverage Ratio and a Consolidated Net Interest Coverage Ratio. The Consolidated Net Total Leverage Ratio is calculated as total outstanding debt less the lower of (a) unrestricted cash or (b) $75.0 million divided by Consolidated EBITDA (as defined by the Credit Agreement). With certain exceptions, the covenant requires the Consolidated Net Total Leverage Ratio to be less than 4.00, calculated over the previous twelve months. The Consolidated Net Interest Coverage Ratio is calculated as Consolidated EBITDA divided by Consolidated Net Interest Expense over the previous twelve months, all defined by the Credit Agreement. The covenant requires a Consolidated Net Interest Coverage Ratio of 3.00 or greater. As of September 30, 2023, the Company calculated a Consolidated Net Total Leverage Ratio of 2.19 and Consolidated Net Interest Coverage Ratio of 6.28. The Company was in compliance with all applicable covenants under the Credit Agreement as of September 30, 2023. We do not believe that the covenants represent a significant restriction to our ability to successfully operate the business or to pay our dividends.
Costs incurred in establishing the Credit Agreement have been reported as a reduction to the gross debt balance and will be amortized over the respective lives of the arrangements.
In addition to the corporate Credit Agreement, we hold smaller credit facilities in Australia, Canada, and the United Kingdom. These allow our businesses to borrow to meet any short-term working capital needs.
Table 8.2: Details of Future Minimum Principal Payments Due
Amount Due
(in thousands)
Year ended September 30, 2024 $ 89,205 
Year ended September 30, 2025 92,860 
Year ended September 30, 2026 740,985 
Year ended September 30, 2027 3,485 
Year ended September 30, 2028 330,994 
Total Payments $ 1,257,529 
Interest Rate Derivative Instrument
We utilize derivatives to reduce our variable interest rate risk. At September 30, 2023, we held the following interest rate swap agreements:
•An agreement for a notional amount of $500.0 million, which hedges the floating rate of our Term Loan A debt to a fixed amount of 2.31%. This agreement expires in May 2026;
•An agreement for a notional amount of $150.0 million, which hedges the floating rate on the next $150 million of our Term Loan A debt to a fixed amount of 4.38%. This agreement expires in September 2024.
The balance of the debt pays interest based upon an index. The floating interest rate on these instruments was converted from LIBOR to SOFR in December 2022, concurrent with our debt agreements. In converting our debt and interest-rate swaps, we utilized the practical expedients allowed under ASU No. 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which allowed us to treat these amendments as though the modification was not substantial.
The Company elected to designate these interest rate swaps as cash flow hedges for accounting purposes.
As of September 30, 2023 and 2022, we had assets of $31.0 million and $31.4 million, respectively, which were recorded in "other assets" on our Consolidated Balance Sheet. As these derivatives are considered effective, all gains and losses are reflected within "accumulated other comprehensive income" ("AOCI") in the Consolidated Statements of Comprehensive Income.
Table 8.3: Gains/(Losses) on Derivatives
For the Year Ended September 30,
2023 2022 2021
(in thousands)
Gain/(loss) recognized in AOCI on derivatives, net of tax $ 8,558  $ 23,004  $ (811)
Amounts reclassified to earnings from accumulated other comprehensive income (8,837) 447  508 
Net current period other comprehensive income $ (279) $ 23,451  $ (303)
Counterparty Risk
The Company is exposed to credit losses in the event of nonperformance by the counterparty to our derivative instrument. Our counterparty has investment-grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy its obligations under the contracts. Our agreements outline the conditions upon which it or the counterparty are required to post collateral. As of September 30, 2023 and 2022, there was no collateral posted with the Company's counterparty related to the derivatives.
Debt And Derivatives DEBT AND DERIVATIVES
Table 8.1: Details of Debt
As of September 30,
2023 2022
(in thousands)
Term Loan A, due 2026 $ 909,375  $ 971,250 
Term Loan B, due 2028 344,934  395,000 
Subsidiary loan agreements 3,220  64 
Funded Debt 1,257,529  1,366,314 
Less: Unamortized debt-issuance costs and discounts (7,536) (10,373)
Total debt 1,249,993  1,355,941 
Less: Current portion of long-term debt (86,844) (63,458)
Long-term debt $ 1,163,149  $ 1,292,483 
Our principal debt agreement is with JPMorgan Chase Bank, N.A., as Administrative Agent ("Credit Agreement"), comprising of the following:
•A term loan A facility ("Term Loan A"), initially comprising $1.1 billion, which matures on May 28, 2026;
•A term loan B facility ("Term Loan B"), initially comprising $400 million, which matures May 28, 2028;
•A $600 million revolving credit facility ("Revolver"), which matures May 28, 2026.
Since December 2022, the interest rates applicable to loans under the Credit Agreement are floating rates based upon the Secured Overnight Financing Rate ("SOFR") plus a margin. Term Loan A and the Revolver margins range between 1% and 2%, based upon our leverage ratio. Term Loan B is set to SOFR plus 2.00%, subject to a SOFR floor of 0.50%. Prior to December 2022, our Credit Agreement utilized the London Interbank Offered Rate as the basis for floating rates. As of September 30, 2023, the annual effective interest rate, including the original issue discount and amortization of debt issuance costs, was 5.97%.
The Credit Agreement provides for an annual commitment fee payable on funds not borrowed or utilized for letters of credit. This charge is based upon our leverage and varies between 0.125% and 0.30%. Commitment fees are recorded as interest expense on the consolidated statements of operations.
The Credit Agreement is available for general corporate purposes, including the funding of working capital, capital expenditures, and possible future acquisitions. In addition to borrowings, it allows us to continue to issue letters of credit when necessary.
Under the terms of the Credit Agreement, the Company is required to comply with certain covenants, the terms of which are customary and include a Consolidated Net Total Leverage Ratio and a Consolidated Net Interest Coverage Ratio. The Consolidated Net Total Leverage Ratio is calculated as total outstanding debt less the lower of (a) unrestricted cash or (b) $75.0 million divided by Consolidated EBITDA (as defined by the Credit Agreement). With certain exceptions, the covenant requires the Consolidated Net Total Leverage Ratio to be less than 4.00, calculated over the previous twelve months. The Consolidated Net Interest Coverage Ratio is calculated as Consolidated EBITDA divided by Consolidated Net Interest Expense over the previous twelve months, all defined by the Credit Agreement. The covenant requires a Consolidated Net Interest Coverage Ratio of 3.00 or greater. As of September 30, 2023, the Company calculated a Consolidated Net Total Leverage Ratio of 2.19 and Consolidated Net Interest Coverage Ratio of 6.28. The Company was in compliance with all applicable covenants under the Credit Agreement as of September 30, 2023. We do not believe that the covenants represent a significant restriction to our ability to successfully operate the business or to pay our dividends.
Costs incurred in establishing the Credit Agreement have been reported as a reduction to the gross debt balance and will be amortized over the respective lives of the arrangements.
In addition to the corporate Credit Agreement, we hold smaller credit facilities in Australia, Canada, and the United Kingdom. These allow our businesses to borrow to meet any short-term working capital needs.
Table 8.2: Details of Future Minimum Principal Payments Due
Amount Due
(in thousands)
Year ended September 30, 2024 $ 89,205 
Year ended September 30, 2025 92,860 
Year ended September 30, 2026 740,985 
Year ended September 30, 2027 3,485 
Year ended September 30, 2028 330,994 
Total Payments $ 1,257,529 
Interest Rate Derivative Instrument
We utilize derivatives to reduce our variable interest rate risk. At September 30, 2023, we held the following interest rate swap agreements:
•An agreement for a notional amount of $500.0 million, which hedges the floating rate of our Term Loan A debt to a fixed amount of 2.31%. This agreement expires in May 2026;
•An agreement for a notional amount of $150.0 million, which hedges the floating rate on the next $150 million of our Term Loan A debt to a fixed amount of 4.38%. This agreement expires in September 2024.
The balance of the debt pays interest based upon an index. The floating interest rate on these instruments was converted from LIBOR to SOFR in December 2022, concurrent with our debt agreements. In converting our debt and interest-rate swaps, we utilized the practical expedients allowed under ASU No. 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which allowed us to treat these amendments as though the modification was not substantial.
The Company elected to designate these interest rate swaps as cash flow hedges for accounting purposes.
As of September 30, 2023 and 2022, we had assets of $31.0 million and $31.4 million, respectively, which were recorded in "other assets" on our Consolidated Balance Sheet. As these derivatives are considered effective, all gains and losses are reflected within "accumulated other comprehensive income" ("AOCI") in the Consolidated Statements of Comprehensive Income.
Table 8.3: Gains/(Losses) on Derivatives
For the Year Ended September 30,
2023 2022 2021
(in thousands)
Gain/(loss) recognized in AOCI on derivatives, net of tax $ 8,558  $ 23,004  $ (811)
Amounts reclassified to earnings from accumulated other comprehensive income (8,837) 447  508 
Net current period other comprehensive income $ (279) $ 23,451  $ (303)
Counterparty Risk
The Company is exposed to credit losses in the event of nonperformance by the counterparty to our derivative instrument. Our counterparty has investment-grade credit ratings; accordingly, we anticipate that the counterparty will be able to fully satisfy its obligations under the contracts. Our agreements outline the conditions upon which it or the counterparty are required to post collateral. As of September 30, 2023 and 2022, there was no collateral posted with the Company's counterparty related to the derivatives.