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LONG-TERM DEBT AND FINANCING ARRANGEMENTS | 9 Months Ended
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Sep. 30, 2018
LONG-TERM DEBT AND FINANCING ARRANGEMENTS |
LONG-TERM DEBT AND FINANCING ARRANGEMENTS | 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:
|  | September 30 |  | December 31 |
|  | 2018 |  | 2017 |
|  | (in thousands) |
Credit Facility (interest rate of 3.5%(1) at September 30, 2018) |  | $ | 70,000 |  | $ | 70,000 |
Accounts receivable securitization borrowings (interest rate of 3.0% at September 30, 2018) |  |  | 45,000 |  |  | 45,000 |
Notes payable (weighted-average interest rate of 3.3% at September 30, 2018) |  |  | 175,206 |  |  | 153,441 |
Capital lease obligations (weighted-average interest rate of 5.6% at September 30, 2018) |  |  | 320 |  |  | 478 |
|  |  | 290,526 |  |  | 268,919 |
Less current portion |  |  | 54,556 |  |  | 61,930 |
Long-term debt, less current portion |  | $ | 235,970 |  | $ | 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 3.10% based on the margin of the Credit Facility as of September 30, 2018.
Scheduled maturities of long-term debt obligations as of September 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 |  | $ | 63,922 |  | $ | 2,752 |  | $ | 1,609 |  | $ | 59,323 |  | $ | 238 |
Due after one year through two years |  |  | 45,366 |  |  | 3,041 |  |  | 1,794 |  |  | 40,446 |  |  | 85 |
Due after two years through three years |  |  | 43,085 |  |  | 3,030 |  |  | 1,789 |  |  | 38,259 |  |  | 7 |
Due after three years through four years |  |  | 149,390 |  |  | 72,292 |  |  | 45,151 |  |  | 31,944 |  |  | 3 |
Due after four years through five years |  |  | 16,257 |  |  | — |  |  | — |  |  | 16,257 |  |  | — |
Due after five years |  |  | 1,771 |  |  | — |  |  | — |  |  | 1,771 |  |  | — |
Total payments |  |  | 319,791 |  |  | 81,115 |  |  | 50,343 |  |  | 188,000 |  |  | 333 |
Less amounts representing interest |  |  | 29,265 |  |  | 11,115 |  |  | 5,343 |  |  | 12,794 |  |  | 13 |
Long-term debt |  | $ | 290,526 |  | $ | 70,000 |  | $ | 45,000 |  | $ | 175,206 |  | $ | 320 |
| (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:
|  | September 30 |  | December 31 |
|  | 2018 |  | 2017 |
|  | (in thousands) |
Revenue equipment |  | $ | 276,268 |  | $ | 269,950 |
Land and structures (service centers) |  |  | 1,794 |  |  | 1,794 |
Software |  |  | 486 |  |  | 486 |
Service, office, and other equipment |  |  | 5,941 |  |  | 100 |
Total assets securing notes payable or held under capital leases |  |  | 284,489 |  |  | 272,330 |
Less accumulated depreciation and amortization(1) |  |  | 87,868 |  |  | 87,691 |
Net assets securing notes payable or held under capital leases |  | $ | 196,621 |  | $ | 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 September 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 September 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 3.10% based on the margin of the Credit Facility as of September 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 September 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 3.24% based on the margin of the Credit Facility as of September 30, 2018. The fair value of the interest rate swap of $1.2 million and $0.4 million was recorded in other long-term assets in the consolidated balance sheet at September 30, 2018 and December 31, 2017, respectively. The unrealized gain on the interest rate swap instruments was reported as a component of accumulated other comprehensive loss, net of tax, in stockholders’ equity at September 30, 2018 and December 31, 2017, and the change in the unrealized income on the interest rate swaps for the three months ended September 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 September 30, 2018. Accounts Receivable Securitization Program The Company’s accounts receivable securitization program was amended and extended in August 2018 to modify certain covenants and conditions and extend the maturity date of the program to October 1, 2021. The program 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 September 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 September 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 September 30, 2018, standby letters of credit of $17.6 million have been issued under the program, which reduced the available borrowing capacity to $62.4 million. In October 2018, the Company repaid $5.0 million of its borrowed amount under the accounts receivable securitization program. Letter of Credit Agreements and Surety Bond Programs As of September 30, 2018, the Company had letters of credit outstanding of $18.2 million (including $17.6 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 September 30, 2018, surety bonds outstanding related to the self-insurance program totaled $49.4 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 $57.2 million and $71.6 million for revenue equipment, other equipment, and software during the three and nine months ended September 30, 2018, respectively. Subsequent to September 30, 2018, the Company financed the purchase of $16.7 million of revenue equipment through promissory note arrangements as of November 1, 2018.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 840 -URI http://asc.fasb.org/topic&trid=2208923 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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