v3.24.2
Debt
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
DEBT DEBT
The carrying value of our credit facilities, finance leases and long-term debt as of June 30, 2024 and December 31, 2023 is listed in the following table, and is adjusted for unamortized discounts, deferred issuance costs and the unamortized portion of adjustments to fair value recorded in purchase accounting. Original issue discounts, deferred issuance costs, and adjustments to fair value recorded in purchase accounting are amortized to interest expense over the term of the applicable instrument using the effective interest method.
  June 30, 2024December 31, 2023
MaturityInterest RatePrincipalAdjustmentsCarrying ValuePrincipalAdjustmentsCarrying Value
Credit facilities:
Uncommitted Credit Facility
Variable$— $— $— $— $— $— 
$3.5 billion - August 2026
Variable182.7 — 182.7 297.1 — 297.1 
Term LoanVariable— — — 500.0 — 500.0 
Commercial PaperVariable180.0 (0.1)179.9 496.0 (0.7)495.3 
Senior notes:
August 20242.500900.0 (0.2)899.8 900.0 (1.2)898.8 
March 20253.200500.0 (0.5)499.5 500.0 (0.9)499.1 
November 20250.875350.0 (0.9)349.1 350.0 (1.2)348.8 
July 20262.900500.0 (1.3)498.7 500.0 (1.6)498.4 
November 20273.375650.0 (2.1)647.9 650.0 (2.5)647.5 
May 20283.950800.0 (8.0)792.0 800.0 (8.9)791.1 
April 20294.875750.0 (7.0)743.0 750.0 (6.9)743.1 
November 20295.000400.0 (3.8)396.2 — — — 
March 20302.300600.0 (4.2)595.8 600.0 (4.5)595.5 
February 20311.450650.0 (5.8)644.2 650.0 (6.2)643.8 
February 20321.750750.0 (5.1)744.9 750.0 (5.4)744.6 
March 20332.375700.0 (6.2)693.8 700.0 (6.5)693.5 
December 20335.000650.0 (9.5)640.5 650.0 (8.9)641.1 
April 20345.000800.0 (10.3)789.7 800.0 (10.7)789.3 
November 20345.200500.0 (5.6)494.4 — — — 
March 20356.086181.9 (11.2)170.7 181.9 (11.5)170.4 
March 20406.200399.9 (3.2)396.7 399.9 (3.3)396.6 
May 20415.700385.7 (4.6)381.1 385.7 (4.7)381.0 
March 20503.050400.0 (6.7)393.3 400.0 (6.8)393.2 
Debentures:
September 20357.400148.1 (28.2)119.9 148.1 (28.8)119.3 
Tax-exempt:
2024 - 2054
3.500 - 4.375
1,439.1 (9.7)1,429.4 1,289.1 (8.5)1,280.6 
Finance leases:
2024 - 2063
0.810 - 9.750
276.5 — 276.5 251.3 — 251.3 
Total Debt$13,093.9 $(134.2)12,959.7 $12,949.1 $(129.7)12,819.4 
Less: current portion
(1,432.9)(932.3)
Long-term portion$11,526.8 $11,887.1 
Credit Facilities
Uncommitted Credit Facility
In January 2022, we entered into a $200.0 million unsecured uncommitted revolving credit facility (the Uncommitted Credit Facility). The Uncommitted Credit Facility bears interest at an annual percentage rate to be agreed upon by both parties.
Borrowings under the Uncommitted Credit Facility can be used for working capital, letters of credit, and other general corporate purposes. The agreement governing our Uncommitted Credit Facility requires us to comply with certain covenants. The Uncommitted Credit Facility may be terminated by either party at any time. As of both June 30, 2024 and December 31, 2023, we had no borrowings outstanding under our Uncommitted Credit Facility.
The Credit Facility
In August 2021, we entered into a $3.0 billion unsecured revolving credit facility (as amended, the Credit Facility). Borrowings under the Credit Facility mature in August 2026. As permitted by the Credit Facility, we have the right to request two one-year extensions of the maturity date, but none of the lenders are committed to participate in such extensions. The Credit Facility also includes a feature that allows us to increase availability, at our option, by an aggregate amount of up to $1.0 billion through increased commitments from existing lenders or the addition of new lenders. In October 2023, we completed an upsize of the Credit Facility to $3.5 billion.
In February 2023, we entered into Amendment No. 1 to the Credit Facility to add our subsidiary, USE Canada Holdings, Inc.(the Canadian Borrower), as an additional borrower under the Credit Facility, and provided that the aggregate of (i) all loans to the Canadian Borrower and (ii) all loans denominated in Canadian dollars cannot exceed $500.0 million (the Canadian Sublimit). In October 2023, we entered into Amendment No. 2 to the Credit Facility which increased the Canadian Sublimit to $1.0 billion. The Canadian Sublimit is part of, and not in addition to, the aggregate commitments under the Credit Facility.
Borrowings under the Credit Facility in United States dollars bear interest at a Base Rate, a daily floating SOFR or a term SOFR plus a current applicable margin of 0.910% based on our Debt Ratings (all as defined in the Credit Facility agreement). The Canadian dollar-denominated loans bear interest based on the Canadian Prime Rate or the Canadian Dollar Offered Rate plus a current applicable margin of 0.910% based on our Debt Ratings. As of June 30, 2024 and December 31, 2023, C$249.9 million and C$201.5 million, respectively, were outstanding against the Canadian Sublimit. The weighted average interest rate for borrowings outstanding as of June 30, 2024 was 6.223%.
The Credit Facility is subject to facility fees based on applicable rates defined in the Credit Facility agreement and the aggregate commitment, regardless of usage. The Credit Facility can be used for working capital, capital expenditures, acquisitions, letters of credit and other general corporate purposes. The Credit Facility agreement requires us to comply with financial and other covenants. We may pay dividends and repurchase common stock if we are in compliance with these covenants.
We had $182.7 million and $297.1 million of borrowings outstanding under the Credit Facility as of June 30, 2024 and December 31, 2023, respectively. We had $315.4 million and $336.5 million of letters of credit outstanding under the Credit Facility as of June 30, 2024 and December 31, 2023, respectively. We also had $179.9 million and $495.3 million of principal borrowings outstanding (net of related discount on issuance) under the commercial paper program as of June 30, 2024 and December 31, 2023, respectively. As a result, availability under our Credit Facility was $2,821.9 million and $2,371.2 million as of June 30, 2024 and December 31, 2023, respectively.
Term Loan Facility
On April 29, 2022, we entered into a $1.0 billion term loan facility (the Term Loan Facility) which bears interest at a base rate or a forward-looking SOFR, plus an applicable margin based on our debt ratings. We had $500.0 million of borrowings outstanding under the Term Loan Facility as of December 31, 2023. During the six months ended June 30, 2024, we paid down the remaining balance of the Term Loan Facility.
Commercial Paper Program
We have entered into a commercial paper program for the issuance and sale of unsecured commercial paper in an aggregate principal amount not to exceed $1.5 billion outstanding at any one time. The weighted average interest rate for borrowings outstanding as of June 30, 2024 was 5.515% with a weighted average maturity of 24 days.
We had $180.0 million and $496.0 million in aggregate principal amount of commercial paper issued and outstanding under the program as of June 30, 2024 and December 31, 2023, respectively. In the event of a failed re-borrowing, we currently have availability under our Credit Facility to fund the commercial paper program until it is re-borrowed successfully. Accordingly, we have classified these borrowings as long-term in our consolidated balance sheet as of June 30, 2024.
Senior Notes and Debentures
In March 2023, we issued $400.0 million of 4.875% senior notes due 2029 (the Existing 2029 Notes) and $800.0 million of 5.000% senior notes due 2034. We used the proceeds from the March 2023 notes issuance for general corporate purposes, including the repayment of a portion of amounts outstanding under the Uncommitted Credit Facility, the Commercial Paper Program, the Credit Facility, and the Term Loan Facility. As a result of the Term Loan Facility repayment, we incurred a non-cash loss on the early extinguishment of debt related to the ratable portion of unamortized deferred issuance costs of $0.2 million.
In December 2023, we issued an additional $350.0 million of 4.875% senior notes due 2029 (the New 2029 Notes, and together with the Existing 2029 Notes, the 2029 Notes). After giving effect to the issuance of the New 2029 Notes, $750.0 million in aggregate principal amount of the 2029 Notes is outstanding. The New 2029 Notes are fungible with the Existing 2029 Notes, and taken together, the 2029 Notes are treated as a single series.
In December 2023, we also issued $650.0 million of 5.000% senior notes due 2033 (the 5.000% 2033 Notes). The proceeds of the December 2023 notes issuance were used for general corporate purposes, including the repayment of a portion of amounts outstanding under the Uncommitted Credit Facility, the Commercial Paper Program, the Credit Facility, and the Term Loan Facility.
In June 2024, we issued $400.0 million of 5.000% senior notes due 2029 (the 5.000% 2029 Notes) and $500.0 million of 5.200% senior notes due 2034, (the 5.200% 2034 Notes). We used the proceeds from the June 2024 notes issuance for general corporate purposes, including the repayment of a portion of amounts outstanding under the Commercial Paper Program and the Credit Facility; and repayment of the remaining amount outstanding under the Term Loan Facility and the Uncommitted Credit Facility.
Our senior notes and debentures are general unsecured and unsubordinated obligations and rank equally with our other unsecured obligations.
Interest Rate Swap and Lock Agreements
Our ability to obtain financing through the capital markets is a key component of our financial strategy. Historically, we have managed risk associated with executing this strategy, particularly as it relates to fluctuations in interest rates, by using a combination of fixed and floating rate debt. From time to time, we also have entered into interest rate swap and lock agreements to manage risk associated with interest rates, either to effectively convert specific fixed rate debt to a floating rate (fair value hedges), or to lock interest rates in anticipation of future debt issuances (cash flow hedges).
Cash Flow Hedges
We have historically entered into multiple swap agreements designated as cash flow hedges to manage exposure to fluctuations in interest rates in anticipation of planned future issuances of senior notes. Upon the expected issuance of senior notes, we terminate the interest rate locks and settle with our counterparties. These transactions are accounted for as cash flow hedges.
The fair value of our interest rate locks is determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (Level 2 in the fair value hierarchy).
During the six months ended June 30, 2023, we recognized an unrealized gain in other comprehensive loss of $1.7 million, net of tax, related to terminated interest rate locks issued in conjunction with the issuance of our 5.000% notes in March 2023. As of June 30, 2024 and December 31, 2023, our previously terminated interest rate locks were recorded as components of accumulated other comprehensive loss of $14.1 million and $15.9 million, respectively, net of tax. The effective portion of the interest rate locks is amortized as an adjustment to interest expense over the life of the issued debt using the effective interest method. For the three months ended June 30, 2024 and 2023, we recognized losses, net of tax, of $0.9 million and $1.0 million, respectively. For the six months ended June 30, 2024 and 2023, we recognized losses, net of tax, of $1.7 million and $2.0 million, respectively. Over the next 12 months, we expect to amortize $1.1 million, net of tax, from accumulated other comprehensive loss to interest expense as a yield adjustment of our senior notes.
In connection with our acquisition of US Ecology, in the second quarter of 2022, we acquired and novated a floating-to-fixed interest rate swap agreement (the 2022 Interest Rate Swap) with an initial effective date of March 6, 2020, an initial notional amount of $500 million relative to our Term Loan Facility and an initial fair value of $29.1 million. The initial fair value was reclassified into earnings as non-cash interest expense on a systematic basis over the life of the interest rate swap. In June 2024, the Company terminated the 2022 Interest Rate Swap and received $23.7 million in conjunction with this settlement. As of December 31, 2023, the 2022 Interest Rate Swap was recorded at its fair value of $24.3 million and was included in other assets in our consolidated balance sheets.
For the three and six months ended June 30, 2024, we recognized unrealized gains of $1.2 million and $6.3 million, respectively, in accumulated other comprehensive income for the 2022 Interest Rate Swap. For the three and six months ended June 30, 2023, we recognized unrealized gains of $7.3 million and $10.8 million, respectively, in accumulated other comprehensive income for the 2022 Interest Rate Swap. As of December 31, 2023, the 2022 Interest Rate Swap was recorded as a gain within accumulated other comprehensive loss of $4.3 million, net of tax. For the three and six months ended June 30, 2024, we recognized gains, net of tax, of $7.7 million and $10.6 million, respectively. For the three and six months ended June 30, 2023, we recognized gains, net of tax, of $3.2 million and $6.8 million, respectively, related to this amortization.
For further detail regarding the effect of our cash flow hedging on interest expense, refer to Note 11, Financial Instruments, of the notes to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Derivative Contracts
Contemporaneously with the issuance of our 2.300% notes in February 2020, we amended interest rate lock agreements with an aggregate notional value of $550.0 million, extending the mandatory maturity date from 2020 to 2030, and dedesignated them as cash flow hedges (2020 Extended Interest Rate Locks). Contemporaneously with the issuance of our 2.500% notes in August 2019, we amended interest rate lock agreements with an aggregate notional value of $375.0 million, extending the mandatory maturity date from 2019 to 2024, and dedesignated them as cash flow hedges (2019 Extended Interest Rate Locks and collectively with the 2020 Extended Interest Rate Locks, the Extended Interest Rate Locks). There was no ineffectiveness recognized in the termination of these cash flow hedges. In addition, we entered into interest rate swaps to offset future exposures to fair value fluctuations of the Extended Interest Rate Locks (2019 Offsetting Interest Rate Swap and the 2020 Offsetting Interest Rate Swap, or collectively the Offsetting Interest Rate Swaps). The fair value of these free-standing derivatives was determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (Level 2 in the fair value hierarchy).
As of June 30, 2024, the fair value of the Extended Interest Rate Locks were assets of $59.3 million, which were included in other assets in our consolidated balance sheet. As of December 31, 2023, the fair value of the Extended Interest Rate Locks were assets of $54.0 million, which were included in prepaids and other current assets and other assets in our consolidated balance sheets. As of June 30, 2024 and December 31, 2023, the fair value of the Offsetting Interest Rate Swaps were liabilities of $79.9 million and $78.2 million, respectively, which were included in other accrued liabilities and other long-term liabilities in our consolidated balance sheets.
For the three months ended June 30, 2024 and 2023, we recognized losses of $8.0 million and gains of $9.2 million, respectively, on the change in fair value of the Extended Interest Rate Locks with offsetting gains of $7.9 million and losses of $9.4 million, respectively, on the change in fair value of the Offsetting Interest Rate Swaps. For the six months ended June 30, 2024 and 2023, we recognized gains of $5.5 million and losses of $4.6 million, respectively, on the change in fair value of the Extended Interest Rate Locks with offsetting losses of $5.6 million and gains of $3.3 million, respectively, on the change in fair value of the Offsetting Interest Rate Swaps. The changes in fair value were recorded directly in earnings as an adjustment to interest expense in our consolidated statements of income.
Tax-Exempt Financings
As of June 30, 2024 and December 31, 2023, we had $1,429.4 million and $1,280.6 million, respectively, of certain variable rate tax-exempt financings outstanding, with maturities ranging from 2024 to 2054 and from 2024 to 2053, respectively.
In June 2024, the Mission Economic Development Corporation issued, for our benefit, $50 million in principal amount of Solid Waste Disposal Revenue Bonds. The proceeds from the issuances, after deferred issuance costs, were used to fund the acquisition, construction, improvement, installation, and/or equipping of certain solid waste disposal facilities located within Texas.
In both March 2024 and September 2023, the California Municipal Finance Authority issued, for our benefit, $100 million in principal amount of Solid Waste Disposal Revenue Bonds. The proceeds from the issuances, after deferred issuance costs, were used to fund the acquisition, construction, improvement, installation, and/or equipping of certain solid waste disposal facilities located within California.
The initial remarketing period for these tax-exempt financings is 10 years. Our remaining tax-exempt financings are remarketed either quarterly or semiannually by remarketing agents to effectively maintain a variable yield. The holders of the bonds can put them back to the remarketing agents at the end of each interest period. If the remarketing agents are unable to remarket our bonds, the remarketing agents can put the bonds to us. In the event of a failed remarketing, we currently have availability under our Credit Facility to fund these bonds until they are remarketed successfully. Accordingly, we classified these borrowings as long-term in our consolidated balance sheets as of June 30, 2024 and December 31, 2023.
Finance Leases
As of June 30, 2024 and December 31, 2023, we had finance lease liabilities of $276.5 million and $251.3 million, respectively, with maturities ranging from 2024 to 2063 for both periods.