NOTE E – LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-Term Debt Obligations

Long-term debt consisted of borrowings outstanding under the Company’s revolving credit facility and accounts receivable securitization program, both of which are further described in Financing Arrangements within this Note, and notes payable and capital lease obligations related to the financing of revenue equipment (tractors and trailers used primarily in Asset-Based segment operations), real estate, and certain other equipment as follows:


	June 30		December 31
	2017		2016
	(in thousands)
Credit Facility (interest rate of 2.7%(1) at June 30, 2017)	$	70,000	$	70,000
Accounts receivable securitization borrowings (interest rate of 2.0% at June 30, 2017)		45,000		35,000
Notes payable (weighted-average interest rate of 2.4% at June 30, 2017)		141,741		138,032
Capital lease obligations (weighted-average interest rate of 5.7% at June 30, 2017)		577		641
		257,318		243,673
Less current portion		62,588		64,143
Long-term debt, less current portion	$	194,730	$	179,530

⁽¹⁾

The interest rate swap mitigates interest rate risk by effectively converting $50.0 million of borrowings under the Credit Facility from variable-rate interest to fixed-rate interest with a per annum rate of 3.35% based on the margin of the Credit Facility as of June 30, 2017.

Scheduled maturities of long-term debt obligations as of June 30, 2017 were as follows:


					Accounts
					Receivable
			Credit		Securitization		Notes		Capital Lease
	Total		Facility(1)(2)		Program(1)		Payable		Obligations(3)
	(in thousands)
Due in one year or less	$	68,166	$	2,026	$	1,029	$	64,880	$	231
Due after one year through two years		45,379		2,251		1,173		41,718		237
Due after two years through three years		135,177		71,199		45,948		17,887		143
Due after three years through four years		13,459		—		—		13,452		7
Due after four years through five years		9,160		—		—		9,155		5
Due after five years		257		—		—		257		—
Total payments		271,598		75,476		48,150		147,349		623
Less amounts representing interest		14,280		5,476		3,150		5,608		46
Long-term debt	$	257,318	$	70,000	$	45,000	$	141,741	$	577

⁽¹⁾

The future interest payments included in the scheduled maturities due are calculated using variable interest rates based on the LIBOR swap curve, plus the anticipated applicable margin.

⁽²⁾

In July 2017, the Company amended and extended the credit agreement which extended the maturity date of the Credit Facility to July 7, 2022.

⁽³⁾

Minimum payments of capital lease obligations include maximum amounts due under rental adjustment clauses contained in the capital lease agreements.

Assets securing notes payable or held under capital leases were included in property, plant and equipment as follows:


	June 30		December 31
	2017		2016
	(in thousands)
Revenue equipment	$	258,412	$	220,566
Land and structures (service centers)		1,794		1,794
Software		486		—
Service, office, and other equipment		40		7
Total assets securing notes payable or held under capital leases		260,732		222,367
Less accumulated depreciation and amortization(1)		83,554		61,643
Net assets securing notes payable or held under capital leases	$	177,178	$	160,724

⁽¹⁾

Amortization of assets under capital leases and depreciation of assets securing notes payable are included in depreciation expense.

Financing Arrangements

Credit Facility

The Company has a revolving credit facility (the “Credit Facility”) under its credit agreement which was amended and restated on January 2, 2015 (the “Amended and Restated Credit Agreement”). The Credit Facility, which matures on January 2, 2020, has an initial maximum credit amount of $150.0 million, including a swing line facility and a letter of credit sub-facility providing for the issuance of letters of credit up to an aggregate amount of $20.0 million. The Credit Facility allows the Company to request additional revolving commitments or incremental term loans thereunder up to an aggregate additional amount of $75.0 million, subject to certain additional conditions as provided in the Amended and Restated Credit Agreement. Principal payments under the Credit Facility are due upon maturity; however, borrowings may be repaid, at the Company’s discretion, in whole or in part at any time, without penalty, subject to required notice periods and compliance with minimum prepayment amounts. Borrowings under the Amended and Restated Credit Agreement can either be, at the Company’s election: (i) at an alternate base rate (as defined in the Amended and Restated Credit Agreement) plus a spread; or (ii) at a Eurodollar rate (as defined in the Amended and Restated Credit Agreement) plus a spread. The applicable spread is dependent upon the Company’s adjusted leverage ratio (as defined in the Amended and Restated Credit Agreement). The Amended and Restated Credit Agreement contains conditions, representations and warranties, events of default, and indemnification provisions that are customary for financings of this type, including, but not limited to, a minimum interest coverage ratio, a maximum adjusted leverage ratio, and limitations on incurrence of debt, investments, liens on assets, certain sale and leaseback transactions, transactions with affiliates, mergers, consolidations, purchases and sales of assets, and certain restricted payments. The Company was in compliance with the covenants under the Amended and Restated Credit Agreement at June 30, 2017.

In July 2017, the Company amended and extended its credit agreement (the “Second Amended and Restated Credit Agreement”) to increase the initial maximum credit amount of its Credit Facility from $150.0 million to $200.0 million, including a swing line facility and a letter of credit sub-facility providing for the issuance of letters of credit up to an aggregate amount of $20.0 million, and to increase the additional revolving commitments or incremental term loans the Company may request under the facility from $75.0 million to $100.0 million. The maturity date of the Credit Facility was extended to July 7, 2022. The covenants and conditions of the Second Amended and Restated Credit Agreement are consistent with the previously amended credit agreement.

Interest Rate Swap

The Company has an interest rate swap agreement with a $50.0 million notional amount maturing on January 2, 2020. The Company receives floating-rate interest amounts based on one-month LIBOR in exchange for fixed-rate interest payments of 1.85% over the life of the interest rate swap agreement. The interest rate swap mitigates interest rate risk by effectively converting $50.0 million of borrowings under the Credit Facility from variable-rate interest to fixed-rate interest with a per annum rate of 3.35% based on the margin of the Credit Facility as of June 30, 2017. The fair value of the interest rate swap of $0.3 million and $0.5 million was recorded in other long-term liabilities in the consolidated balance sheet at June 30, 2017 and December 31, 2016, respectively.

In June 2017, the Company entered into a forward-starting interest rate swap agreement with a $50.0 million notional amount which will start on January 2, 2020 upon maturity of the current interest rate swap agreement, and mature on June 30, 2022. The Company will receive floating-rate interest amounts based on one-month LIBOR in exchange for fixed-rate interest payments of 1.99% over the life of the interest rate swap agreement. The interest rate swap mitigates interest rate risk by effectively converting $50.0 million of borrowings under the Credit Facility from variable-rate interest to fixed-rate interest with a per annum rate of 3.49% based on the margin of the Credit Facility as of June 30, 2017. The fair value of the interest rate swap of $0.2 million was recorded in other long-term assets in the consolidated balance sheet at June 30, 2017.

The unrealized loss on the interest rate swap instruments was reported as a component of accumulated other comprehensive loss, net of tax, in stockholders’ equity at June 30, 2017 and December 31, 2016, and the change in the unrealized income (loss) on the interest rate swaps for the three and six months ended June 30, 2017 and 2016 was reported in other comprehensive loss, net of tax, in the consolidated statement of comprehensive income. The interest rate swaps are subject to certain customary provisions that could allow the counterparty to request immediate payment of the fair value liability upon violation of any or all of the provisions. The Company was in compliance with all provisions of the interest rate swap agreements at June 30, 2017.

Accounts Receivable Securitization Program

In March 2017, the Company entered into a second amendment to extend the maturity date of its accounts receivable securitization program until April 1, 2020 and increase the amount of cash proceeds provided under the facility from $100.0 million to $125.0 million, with an accordion feature allowing the Company to request additional borrowings up to $25.0 million, subject to certain conditions. Under this program, certain subsidiaries of the Company continuously sell a designated pool of trade accounts receivables to a wholly owned subsidiary which, in turn, may borrow funds on a revolving basis. This wholly owned consolidated subsidiary is a separate bankruptcy-remote entity, and its assets would be available only to satisfy the claims related to the lender’s interest in the trade accounts receivables. Borrowings under the accounts receivable securitization program bear interest based upon LIBOR, plus a margin, and an annual facility fee. The securitization agreement contains representations and warranties, affirmative and negative covenants, and events of default that are customary for financings of this type, including a maximum adjusted leverage ratio covenant. In April 2017, the Company borrowed $10.0 million under the accounts receivable securitization program. As of June 30, 2017, $45.0 million was borrowed under the program. The Company was in compliance with the covenants under the accounts receivable securitization program as of June 30, 2017.

The accounts receivable securitization program includes a provision under which the Company may request and the letter of credit issuer may issue standby letters of credit, primarily in support of workers’ compensation and third-party casualty claims liabilities in various states in which the Company is self-insured. The outstanding standby letters of credit reduce the availability of borrowings under the program. As of June 30, 2017, standby letters of credit of $19.0 million have been issued under the program, which reduced the available borrowing capacity to $61.0 million.

Letter of Credit Agreements and Surety Bond Programs

As of June 30, 2017, the Company had letters of credit outstanding of $19.6 million (including $19.0 million issued under the accounts receivable securitization program). The Company has programs in place with multiple surety companies for the issuance of surety bonds in support of its self-insurance program. As of June 30, 2017, surety bonds outstanding related to the self-insurance program totaled $59.4 million.

Notes Payable and Capital Leases

The Company has financed the purchase of certain revenue equipment, other equipment, and software through promissory note arrangements, including $37.9 million and $38.6 million for revenue equipment and software during the three and six months ended June 30, 2017, respectively.