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
	2018		2017
	(in thousands)
Credit Facility (interest rate of 3.6%(1) at June 30, 2018)	$	70,000	$	70,000
Accounts receivable securitization borrowings (interest rate of 2.9% at June 30, 2018)		45,000		45,000
Notes payable (weighted-average interest rate of 2.9% at June 30, 2018)		134,258		153,441
Capital lease obligations (weighted-average interest rate of 5.6% at June 30, 2018)		374		478
		249,632		268,919
Less current portion		51,562		61,930
Long-term debt, less current portion	$	198,070	$	206,989

⁽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, 2018.

Scheduled maturities of long-term debt obligations as of June 30, 2018 were as follows:


					Accounts
					Receivable
			Credit		Securitization		Notes		Capital Lease
	Total		Facility(1)		Program(1)		Payable		Obligations(2)
	(in thousands)
Due in one year or less	$	59,036	$	2,771	$	1,507	$	54,521	$	237
Due after one year through two years		80,391		3,069		46,271		30,908		143
Due after two years through three years		29,575		3,097		—		26,471		7
Due after three years through four years		25,258		3,076		—		22,177		5
Due after four years through five years		77,443		70,050		—		7,393		—
Due after five years		225		—		—		225		—
Total payments		271,928		82,063		47,778		141,695		392
Less amounts representing interest		22,296		12,063		2,778		7,437		18
Long-term debt	$	249,632	$	70,000	$	45,000	$	134,258	$	374

⁽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⁾

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
	2018		2017
	(in thousands)
Revenue equipment	$	257,827	$	269,950
Land and structures (service centers)		1,794		1,794
Software		486		486
Service, office, and other equipment		101		100
Total assets securing notes payable or held under capital leases		260,208		272,330
Less accumulated depreciation and amortization(1)		92,558		87,691
Net assets securing notes payable or held under capital leases	$	167,650	$	184,639

⁽¹⁾

Amortization of assets under held 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 second amended and restated credit agreement (the “Credit Agreement”) with an initial maximum credit amount of $200.0 million, including a swing line facility in an aggregate amount of up to $20.0 million 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 Company may request additional revolving commitments or incremental term loans thereunder up to an aggregate additional amount of $100.0 million, subject to certain additional conditions as provided in the Credit Agreement. As of June 30, 2018, the Company had available borrowing capacity of $130.0 million under the Credit Facility.

Principal payments under the Credit Facility are due upon maturity of the facility on July 7, 2022; 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 Credit Agreement can either be, at the Company’s election: (i) at an alternate base rate (as defined in the Credit Agreement) plus a spread; or (ii) at a Eurodollar rate (as defined in the Credit Agreement) plus a spread. The applicable spread is dependent upon the Company’s adjusted leverage ratio (as defined in the Credit Agreement). The 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 Credit Agreement at June 30, 2018.

Interest Rate Swaps

The Company has a five-year 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 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, 2018. The fair value of the interest rate swap of $0.5 million and $0.1 million was recorded in other long-term assets in the consolidated balance sheet at June 30, 2018 and December 31, 2017, 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 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, 2018. The fair value of the interest rate swap of $1.0 million and $0.4 million was recorded in other long-term assets in the consolidated balance sheet at June 30, 2018 and December 31, 2017, respectively.

The unrealized gain or 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, 2018 and December 31, 2017, and the change in the unrealized income (loss) on the interest rate swaps for the three months ended June 30, 2018 and 2017 was reported in other comprehensive loss, net of tax, in the consolidated statements 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, 2018.

Accounts Receivable Securitization Program

The Company’s accounts receivable securitization program, which matures on April 1, 2020, allows for cash proceeds of $125.0 million to be provided under the facility and has 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. As of June 30, 2018, $45.0 million was borrowed under the program. The Company was in compliance with the covenants under the accounts receivable securitization program at June 30, 2018.

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, 2018, standby letters of credit of $17.7 million have been issued under the program, which reduced the available borrowing capacity to $62.3 million.

In August 2018, the Company amended and extended its accounts receivable securitization program to modify certain covenants and conditions and extend the maturity date of the program to October 1, 2021.

Letter of Credit Agreements and Surety Bond Programs

As of June 30, 2018, the Company had letters of credit outstanding of $18.3 million (including $17.7 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, 2018, surety bonds outstanding related to the self-insurance program totaled $53.1 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 $14.3 million and $14.4 million for revenue equipment and software during the three and six months ended June 30, 2018, respectively.

The Company financed the purchase of an additional $19.9 million of revenue equipment through promissory note arrangements as of August 1, 2018.