Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk related to commodity prices and to a limited extent, interest rates and credit risks.
Commodity Price Risk
We incur various operating costs that are subject to price risk caused by volatility in underlying commodity values. Commodity price risk is present in electricity costs associated with powering our digital billboard displays and lighting our traditional static billboard displays at night.
We do not currently use derivatives or other financial instruments to mitigate our exposure to commodity price risk. However, we do enter into contracts with commodity providers to limit our exposure to commodity price fluctuations. For the year ended December 31, 2025, such contracts accounted for 10.7% of our total utility costs. As of March 31, 2026, we had active electricity purchase agreements with fixed contract rates for locations in Illinois, Ohio, Pennsylvania and Texas, which expire at various dates through February 2029.
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Interest Rate Risk
We are subject to interest rate risk to the extent we have variable-rate debt outstanding, including under our Senior Credit Facilities and the AR Facility.
As of March 31, 2026, we had a $500.0 million variable-rate Term Loan outstanding, which has an interest rate of 5.7% per year. An increase or decrease of 1/4% in our interest rate on the Term Loan will change our annualized interest expense by approximately $1.3 million.
As of March 31, 2026, there were no outstanding borrowings under the AR Facility.
We are not currently using derivatives or other financial instruments to mitigate interest rate risk, although we may do so in the future.
Credit Risk
In the opinion of our management, credit risk is limited due to the large number of customers and advertising agencies utilized. We perform credit evaluations on our customers and agencies and believe that the allowances for credit losses are adequate. We do not currently use derivatives or other financial instruments to mitigate credit risk.
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