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LEASE OBLIGATIONS AND LONG-TERM DEBT

Lease Obligations

The Company leases certain revenue and service equipment under long-term lease agreements, payable in monthly installments.

Equipment obtained under a capital lease is reflected on the Company's consolidated balance sheet and the related leases bears interest at rates ranging from 1.6% to 3.6% per annum, maturing at various dates through 2022.

Assets held under operating leases are not recorded on the Company's consolidated balance sheet. The Company leases revenue and service equipment under non-cancellable operating leases expiring at various dates through 2023.

The Company leases warehouse and office space under non-cancellable operating leases expiring at various dates through 2019. Certain real estate leases contain renewal options.

Total rental expense under operating leases was as follows for 2016, 2015, and 2014 (in thousands):

	2016		2015		2014
Revenue and service equipment	$	19,481	$	9,109	$	6,351
Office facilities and terminals		6,741		5,041		3,353
	$	26,222	$	14,150	$	9,704

Future minimum lease payments relating to capital leases and to operating leases with initial or remaining terms in excess of one year are as follows (in thousands):

Year ended June 30,	Capital Leases		Operating Leases
2017	$	58,163	$	25,788
2018		128,879		19,145
2019		39,891		8,079
2020		16,997		7,654
2021		9,885		5,168
Thereafter		65,813		9,072
Total minimum lease payments	$	319,628	$	74,906
Less amounts representing interest		20,848
Present value of minimum lease payments	$	298,780
Less current maturities		51,397
Non-current portion	$	247,383

The Company is obligated for lease residual value guarantees of $62.0 million, with $0 due in fiscal 2017. The guarantees are not included in the future minimum lease payments above. To the extent the expected equipment value at lease termination date is lower than the residual value guarantee; we would accrue for the difference over the remaining lease term. As of June 30, 2016, the Company believes the expected equipment value at lease termination date is greater than the residual value guarantee.

During the second quarter of fiscal 2016, we converted capital leases pertaining to approximately 530 tractors to operating leases, which reduced our on balance sheet debt by $61.2 million. Our future minimum lease payments relating to this agreement are $21.9 million and are included in the table above and go through June 2018.

During the fourth quarter of fiscal 2016, we completed a sale-leaseback transaction of approximately 4,700 trailers, which reduced our debt obligations by $69.2 million and resulted in a deferred gain of $1.2 million. The purpose of the arrangement was to dispose of the units while providing enough time to turn in the units to the purchaser and minimally disrupt our operations. Of these trailers, we expect to refresh approximately 2,700, starting in the second half of calendar year 2017. The base lease term is twelve months and we are to pay a rental fee on each unit until turned in to the purchaser. Once the unit is turned in, we have no further obligation on the unit. Our future minimum lease payments relating to this agreement are $5.7 million and included in the table above.

Debt

The Company had debt, excluding its line of credit, of $0.7 million at June 30, 2016, of which $0 is classified as current, compared to $1.8 million at June 30, 2015, of which $0.9 million was classified as current. Debt includes revenue equipment installment notes of $0.7 million with an average interest rate of 6.2 percent at June 30, 2016 due in monthly installments with final maturities at various dates through June 2019.

Line of Credit

In December 2010, the Company entered into a five-year revolving credit facility agented by Bank of America, N.A. The facility refinanced our previous credit facility and provides for our ongoing working capital needs and other general corporate purposes. Bank of America, N.A. serves as the lead agent in the facility and Wells Fargo Bank, N.A. also participates in the new facility. In December 2014, we increased our credit facility and extended the maturity. The facility permits borrowings up to a maximum of $300.0 million and expires December 2019. The applicable interest rate under this agreement is based on either a base rate, equal to Bank of America, N.A.'s prime rate or LIBOR, plus an applicable margin between 0.825% and 1.45% that is adjusted quarterly based on our lease adjusted total debt to EBITDAR ratio. At June 30, 2016, the credit facility had an outstanding balance of $151.4 million and $3.2 million utilized for letters of credit compared to an outstanding balance of $132.4 million and $1.7 million utilized for letters of credit as of June 30, 2015. The facility is collateralized by the assets of all the U.S. and Canadian subsidiaries of the Company. The Company is obligated to comply with certain financial covenants under the credit agreement and the Company was in compliance with these covenants at June 30, 2016.