Long-Term Debt

6 Months Ended

Jun. 30, 2022

Long-term Line of Credit [Abstract]

Long-Term Debt

Long-Term Debt

The May 31, 2022 acquisition of Smith Transport included the assumption of $46.8 million of debt and financing lease obligations associated with the fleet of revenue equipment of which $45.7 million was outstanding at June 30, 2022. The $10.9 million debt is made up of installment notes with a weighted average interest rate of 4.5% at June 30, 2022, due in monthly installments with final maturities at various dates ranging from July 2022 to January 2029, secured by related revenue equipment. The $34.7 million finance lease obligations include leases with a weighted average interest rate of 4.0% at June 30, 2022, due in monthly installments with final maturities at various dates ranging from July 2023 to April 2026 with the weighted average remaining lease term of 2.7 years.

In November 2013, Heartland Express, Inc. of Iowa, (the "Borrower"), a wholly owned subsidiary of the Company, entered into a Credit Agreement with Wells Fargo Bank, National Association, (the “Bank”). On August 31, 2021, the Borrower and the Bank entered into the Second Amendment to this Credit Agreement. The Second Amendment (i) provides for a $25.0 million Revolver, which may be used for working capital, equipment financing, permitted acquisitions, and general corporate purposes, (ii) provides an uncommitted accordion feature, which allows the Company a one-time request, at the discretion of the Bank, to increase the Revolver by up to an additional $100.0 million, (iii) decreases the letter of credit subfeature of the Credit Agreement from $30.0 million to $20.0 million, and (iv) extends the maturity of the Credit Agreement to August 31, 2023, subject to the Borrower’s ability to terminate the commitment at any time at no additional cost to the Borrower.

The Credit Agreement is unsecured, with a negative pledge against all assets of our consolidated group, except for debt associated with permitted acquisitions, new purchase-money debt and capital lease obligations as described in the Credit Agreement. Interest on outstanding indebtedness under the Second Amendment is based on the Secured Overnight Financing Rate (“SOFR”) plus a spread based on the Company’s consolidated funded debt to adjusted EBITDA ratio. A non-usage fee is payable on the unused portion of the Revolver based on the Company’s consolidated funded debt to adjusted EBITDA ratio.

The Credit Agreement contains customary financial covenants including, but not limited to, (i) a maximum adjusted leverage ratio of 2:1, measured quarterly on a trailing twelve month basis, (ii) a minimum net income requirement of $1.00, measured quarterly on a trailing twelve month basis, (iii) a minimum tangible net worth of $250.0 million requirement, measured quarterly, and (iv) limitations on other indebtedness and liens. The Credit Agreement also includes customary events of default, covenants, representations and warranties, and indemnification provisions. We were in compliance with the respective financial covenants at June 30, 2022 and during the three and six months then ended.

We had no outstanding debt on the Credit Agreement at June 30, 2022 and December 31, 2021, respectively. Outstanding letters of credit associated with the revolving line of credit at June 30, 2022 were $10.1 million. As of June 30, 2022, the line of credit available for future borrowing was $14.9 million.

Smith Transport has an asset-based credit facility with Citizens Bank of Pennsylvania ("Citizens") that was entered into in June 2020, prior to our acquisition of Smith Transport. The Citizens facility has maximum borrowings of $25.0 million. The available borrowings are subject to a borrowing base calculation, which includes accounts receivable, inventory, and certain identified equipment. There were no outstanding borrowings at June 30, 2022 and the borrowing availability of this facility was frozen for 90 days as a result of the acquisition on May 31, 2022. The Citizens facility contains certain financial covenants, which become triggered upon the borrowing of a predetermined percentage of the borrowing base as calculated based on the trailing four quarters' activity. Smith Transport was in compliance with these covenants at June 30, 2022.