Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we are exposed to market risks, including changes in interest rates and certain foreign currency rates, primarily relating to the Canadian dollar.
Interest Rate Risk
Our philosophy in managing interest rate risk is to maintain a debt portfolio inclusive of both variable and fixed-rate debt in order to limit our exposure to interest rate volatility. As of December 31, 2025, before taking into account any interest rate swap agreements then in place, we held $1,260.0 million of variable rate debt under our secured senior term loans due in 2032, or our 2032 Term Loans, which bear interest at the Term Secured Overnight Financing Rate, or SOFR, rate plus a margin of 1.50%.
To hedge interest rate exposure on a portion of this outstanding variable debt, we entered into interest rate swap agreements. Under the terms of the interest rate swaps entered into in 2022, or our 2022 Swaps, which hedge the interest rate exposure on the 2032 Term Loans, as of December 31, 2025, we would receive interest based on the one-month Term SOFR index and we would pay interest at the fixed rate of 1.965% on a notional amount of $600.0 million. When combined with the 1.50% interest rate margin for Term SOFR borrowings under the 2032 Term Loans, the effective annual interest rate on such $600.0 million aggregate principal amount of the 2032 Term Loans was approximately 3.46%. The remaining balance of the 2032 Term Loans subject to interest rate risk as of December 31, 2025, was $660.0 million.
We designated our interest rate swap instruments as effective cash flow hedges at inception, and therefore, the change in fair value is recorded in stockholders' equity as a component of accumulated other comprehensive loss and included in interest expense at the same time as interest expense is affected by the hedged transactions. Differences paid or received over the life of the agreements are recorded as additions to or reductions of interest expense on the underlying debt.
The following table provides information regarding our total borrowings at December 31, 2025 (in thousands):
Scheduled Maturity Dates 2026 2027 2028 2029 2030 Thereafter Total
Secured senior term loans due 2032 $ 12,600 $ 12,600 $ 12,600 $ 12,600 $ 12,600 $ 1,197,000 $ 1,260,000
Unsecured senior notes due 2029 — — — 300,000 — — 300,000
Unsecured senior notes due 2031 — — — — — 500,000 500,000
Unsecured senior notes due 2033 — — — — — 745,000 745,000
Long term debt, at par $ 12,600 $ 12,600 $ 12,600 $ 312,600 $ 12,600 $ 2,442,000 $ 2,805,000
The interest rate on the $300.0 million unsecured senior notes due July 15, 2029, is fixed at 5.125%. Interest payments on this debt are due semiannually on January 15 and July 15 in the amount of $7.7 million upon each date.
The interest rate on the $500.0 million unsecured senior notes due February 1, 2031, is fixed at 6.375%. Interest payments on this debt are due semiannually on February 1 and August 1 in the amount of $15.9 million upon each date.
The interest rate on the $745.0 million unsecured senior notes due October 15, 2033, is fixed at 5.750%. Interest payments on this debt are due semiannually on April 15 and October 15 in the amount of $21.4 million upon each date.
As of December 31, 2025, interest payments on the $600.0 million of our secured senior term loan, that is effectively fixed by the 2022 Swaps, are approximately $1.7 million per month, inclusive of the 1.50% interest rate margin and 1.965% fixed swap rate, discussed above. We continue to have variable interest rate risk relative to the portion of our secured senior term loans that exceeds the $600.0 million of notional of the 2022 Swaps. Should the average interest rate on the remaining variable portion of our long-term debt change by 100 basis points, we estimate that our annual interest expense would change by up to approximately $6.5 million.
In addition to the fixed and variable borrowings described above, we have a revolving credit agreement with a maximum borrowing of up to $600.0 million. As of December 31, 2025, we had no borrowings outstanding under the facility, letters of credit of $146.5 million issued under the facility and $453.5 million available to borrow. Borrowings under this facility would be subject to interest rate variability.
Foreign Currency Risk
We view our investment in our foreign subsidiaries as long-term; thus, we have not entered into any hedging transactions between any two foreign currencies or between any of the foreign currencies in which we transact business and the U.S. Dollar. Given our significant investment in Canada and operations in India and the fluctuations that have and can occur
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between the U.S. Dollar and Canadian Dollar or Indian Rupee exchange rates, significant movements in cumulative translation adjustment amounts recorded as a component of other comprehensive loss can occur in any given period.
During 2025, our Canadian subsidiaries transacted a portion of their business in U.S. Dollars and at any period end had cash on deposit in U.S. Dollars and outstanding U.S. Dollar accounts receivable and payable balances related to their operations. Those U.S.-denominated balances are subject to foreign currency gains or losses. Additionally, exchange rate movements also affect the translation of Canadian generated profits and losses into U.S. Dollars. Had the Canadian Dollar been 10.0% stronger or weaker against the U.S. Dollar, we would have reported increased or decreased net income of $18.4 million for the year ended December 31, 2025.
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