Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk disclosures involve forward-looking statements. Actual results could differ materially from those projected in such forward-looking statements. We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and commodity price risk.
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Interest Rate Risk
We have exposure to changes in interest rates on our debt, as follows:
Term Loan Facility . As of December 31, 2025, we had an aggregate principal amount outstanding of $985 million on our Term Loan Facility. The interest rate fluctuates based on the Secured Overnight Financing Rate (“SOFR”) or a Base Rate, as defined in the agreement, plus an applicable margin. Assuming an average annual aggregate principal amount outstanding of $985 million, a hypothetical 1% increase in the interest rate would have increased our annual interest expense by $10 million. Additionally, we utilize short-term interest rate swaps to mitigate variability in forecasted interest payments on our Term Loan Facility. The interest rate swaps convert floating-rate interest payments into fixed rate interest payments.
Revolving Credit Facility . The interest rates on our Revolving Credit Facility fluctuate based on SOFR, the Canadian Overnight Repo Rate (“CORRA”) or a Base Rate, as defined in the agreement, plus an applicable margin. Assuming our Revolving Credit Facility was fully drawn throughout 2025, a hypothetical 1% increase in the interest rate would have increased our annual interest expense by $6 million.
Fixed Rate Debt. As of December 31, 2025, we had $2.3 billion of fair value of indebtedness (excluding finance leases and asset financings) that bears interest at fixed rates. A 1% decrease in market interest rates as of December 31, 2025 would increase the fair value of our fixed-rate indebtedness by approximately 2%. For additional information concerning our debt, see Note 11—Debt to our Consolidated Financial Statements.
We also have exposure to changes in interest rates as a result of our cash balances, which totaled $310 million as of December 31, 2025 and generally earn interest income that approximates the federal funds rate. Assuming an annual average cash balance of $310 million, a hypothetical 1% increase in the interest rate would reduce our net interest expense by $3 million.
Foreign Currency Exchange Risk
A proportion of our net assets and income are in non-U.S. dollar (“USD”) currencies, primarily the euro (“EUR”) and British pound sterling (“GBP”). We are exposed to currency risk from potential changes in functional currency values of our foreign currency denominated assets, liabilities and cash flows. Consequently, a depreciation of the EUR or the GBP relative to the USD could have an adverse impact on our financial results.
As of December 31, 2025, a uniform 10% strengthening in the value of the USD relative to the EUR would have resulted in an increase in net assets of $12 million, including the impacts from cross currency swaps. As of December 31, 2025, a uniform 10% strengthening in the value of the USD relative to the GBP would have resulted in a decrease in net assets of $36 million. These theoretical calculations assume that an instantaneous, parallel shift in exchange rates occurs, which is not consistent with our actual experience in foreign currency transactions. Fluctuations in exchange rates also affect the volume of sales or the foreign currency sales price as competitors’ services become more or less attractive. The sensitivity analysis of the impact of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices.
Commodity Price Risk
We are exposed to price fluctuations for diesel fuel purchased for use in our vehicles. During the year ended December 31, 2025, diesel prices fluctuated by as much as 14% in France, 32% in the United Kingdom, and 11% in the United States. We include fuel surcharge programs or other cost-recovery mechanisms in many of our customer contracts to mitigate the effect of any fuel price increases over base amounts established in the contract. For our North American LTL business, pricing agreements with customers include a fuel surcharge that is typically indexed to fuel prices published weekly by the U.S. Department of Energy. The extent to which we are able to recover increases in fuel costs may also be impacted by the amount of empty or out-of-route truck miles or engine idling time. See the applicable discussion under Item 1A, “Risk Factors.”
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