DEBT

6 Months Ended

Jun. 30, 2022

DEBT

DEBT

NOTE 6 – DEBT

Long-term debt consisted of the following:

	June 30, 2022		December 31, 2021
	(in thousands)
Revolving credit agreement	$	—	$	38,000
Sale-leaseback finance obligations		28,906		32,739
Term loans		39,473		—
Insurance premium financing		1,762		3,601
Other		56		84
		70,197		74,424
Less current maturities		(16,956)		(11,069)
Total long-term debt	$	53,241	$	63,355

New credit facility

On January 31, 2022, the Company entered into a new senior secured revolving credit facility (the “Credit Facility”) with a group of lenders and BMO Harris Bank, N.A., as agent (“Agent”).  Contemporaneously with the funding of the Credit Facility, the Company paid off the obligations under its prior credit facility and terminated such facility.

The Credit Facility is structured as a $130.0 million revolving credit facility, with an accordion feature that, so long as no event of default exists, allows the Company to request an increase in the revolving credit facility of up to $60 million, exercisable in increments of $20 million.  The Credit Facility is a five-year facility scheduled to terminate on January 31, 2027.  Borrowings under the Credit Facility are classified as either secured overnight financing rate (“SOFR”) loans or “Base Rate Loans”.  SOFR Loans accrue interest at SOFR plus an applicable margin that adjusts quarterly to between 1.25% and 1.75% based on the Company’s consolidated fixed charge coverage ratio.  Base Rate Loans accrue interest at a base rate equal to the Agent’s prime rate plus an applicable margin that adjusts quarterly to between 0.25% and 0.75% based on the Company’s consolidated fixed charge coverage ratio.  The Credit Facility includes, within its $130.0 million revolving credit facility, a letter of credit sub-facility in an aggregate amount of $15.0 million and a swing line sub-facility in an aggregate amount of $25.0 million.  An unused line fee of 0.25% is applied to the average daily amount by which the lenders’ aggregate revolving commitments exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility.  The Credit Facility is secured by a pledge of certain of the Company’s assets, with the notable exclusions of any real estate or revenue equipment financed outside the Credit Facility. 

Borrowings under the Credit Facility are subject to a borrowing base limited to (A) the sum of (i) 85.0% of eligible accounts receivable, plus (ii) 90.0% of eligible investment grade accounts receivable (reduced to 85.0% in certain situations), plus (iii) the lesser of (a) 85.0% of eligible unbilled accounts receivable and (b) $17.5 million, plus (iv) the product of 85.0% multiplied by the net orderly liquidation value percentage applied to the net book value of eligible revenue equipment.  The borrowing base is reduced by an availability reserve, including reserves based on dilution and certain other customary reserves.  The Credit Facility contains a single springing financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0.  The financial covenant springs only in the event excess availability under the Credit Facility drops below (i) 10.0% of the lenders’ total commitments under the Credit Facility and (ii) $13.0 million.  As of June 30, 2022, availability under the Credit Facility was $130.0 million.  Availability in future periods will be reduced as the $7.9 million in existing letters of credit are transitioned to collateralization by the

Credit Facility.   In July 2022, approximately $6.7 million of the collateralized cash was unrestricted and made available to the Company.  

The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts outstanding under the Credit Facility may be accelerated, and the lenders’ commitments may be terminated.  The Credit Facility contains certain restrictions and covenants relating to, among other things, dividends, liens, acquisitions and dispositions, affiliate transactions, and other indebtedness.

Previous credit facility

The previous credit facility was a $170.0 million revolving credit facility, with a $75.0 million accordion feature exercisable in increments of at least $20.0 million.  The previous credit facility was a five-year facility scheduled to terminate on January 31, 2024.  Borrowings under the previous credit facility were classified as either “base rate loans” or “LIBOR loans”, and included a letter of credit sub-facility in aggregate of $15.0 million and a swingline sub-facility in aggregate of $25.0 million.  An unused line fee of 0.25% was applied to the average daily amount by which the lenders’ aggregate revolving commitments exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the previous credit facility.  The previous credit facility was secured by a pledge of substantially all of the Company’s assets, except for any real estate or revenue equipment financed outside the previous credit facility.

The previous credit facility contained a single financial covenant that was triggered in the event excess availability fell below 10.0% of the lenders’ total commitments, and certain restrictions regarding the Company’s ability to pay dividends, make certain investments, prepay certain indebtedness, execute share repurchase programs and enter into certain acquisitions and hedging arrangements were triggered in the event excess availability fell below 20.0% of the lenders’ total commitments.  Additionally, the Company recognized charges in the first quarter of 2022 of $0.3 million associated with the write-off of unamortized debt issuance costs associated with the previous credit facility to the interest expense line item.  

Restricted cash

The Company has $7.9 million in letters of credit that were supported by the previous credit facility.  Upon termination of the previous credit facility, the Company was required to cash collateralize the letters of credit at 105% of the outstanding amounts, or $8.3 million.  In future periods, as the letters of credit are transitioned to the Credit Facility, the funds will be transferred to an unrestricted account and the restrictions will lapse.  In July 2022, approximately $6.7 million of the collateralized cash was unrestricted and made available to the Company.  

Term loans

In January 2022, the Company entered into a series of term loans totaling approximately $42.0 million.  These term loans are secured by operating equipment with varying degrees of remaining lives, with loan durations corresponding to the remaining useful lives and ranging from 36 to 96 months.  The average interest rate on the loans was 3.2%. The proceeds from these loans were used to pay off the balance of our previous credit facility.  Under these agreements, the Company will make monthly payments of approximately $0.7 million for the first 36 months.  After that time, the monthly obligation will reduce as each term loan is repaid.

Sale-leaseback transactions

In December 2021, the Company entered into a sale-leaseback transaction whereby it sold trailers for approximately $24.5 million and concurrently entered into a finance lease agreement for the sold trailers with a 48 month term.  Under the lease agreement, the Company will make monthly payments of approximately $0.5 million, and at the end of the lease, has the option to purchase the trailers for nominal consideration.  This transaction does not qualify for sale-leaseback accounting due to the bargain purchase option and is therefore treated as a financing obligation.

Insurance premium financing

In October 2021, the Company entered into a short-term agreement to finance approximately $5.5 million with a third-party financing company for a portion of the Company’s annual insurance premiums.