LONG-TERM DEBT AND FINANCING ARRANGEMENTS

3 Months Ended

Mar. 31, 2023

LONG-TERM DEBT AND FINANCING ARRANGEMENTS

LONG-TERM DEBT AND FINANCING ARRANGEMENTS

NOTE G – LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-Term Debt Obligations

Long-term debt consisted of borrowings outstanding under the Company’s revolving credit facility, which is further described in Financing Arrangements within this Note, notes payable and finance lease obligations related to the financing of revenue equipment (tractors and trailers used primarily in Asset-Based segment operations), certain other equipment, and software as follows:

	March 31		December 31
	2023		2022
	(in thousands)
Credit Facility (interest rate of 6.0%(1) at March 31, 2023)	$	50,000	$	50,000
Notes payable (weighted-average interest rate of 3.4% at March 31, 2023)		200,452		214,623
		250,452		264,623
Less current portion		64,491		66,252
Long-term debt, less current portion	$	185,961	$	198,371

(1) The interest rate swap mitigates interest rate risk by effectively converting the $50.0 million of borrowings under the Credit Facility from variable-rate interest to fixed-rate interest with a per annum rate of 1.55% based on the margin of the Credit Facility as of both March 31, 2023 and December 31, 2022.

Scheduled maturities of long-term debt obligations as of March 31, 2023, were as follows:

			Credit		Notes
	Total		Facility(1)		Payable
	(in thousands)
Due in one year or less	$	73,256	$	2,981	$	70,275
Due after one year through two years		113,166		51,217		61,949
Due after two years through three years		40,882		—		40,882
Due after three years through four years		29,413		—		29,413
Due after four years through five years		11,261		—		11,261
Total payments		267,978		54,198		213,780
Less amounts representing interest		17,526		4,198		13,328
Long-term debt	$	250,452	$	50,000	$	200,452

(1) The future interest payments included in the scheduled maturities due are calculated using variable interest rates based on the SOFR swap curve, plus the anticipated applicable margin, exclusive of payments on the interest rate swap.

Assets securing notes payable or held under finance leases were included in property, plant and equipment as follows:

	March 31		December 31
	2023		2022
	(in thousands)
Revenue equipment	$	305,925	$	294,700
Service, office, and other equipment		39,121		41,522
Total assets securing notes payable or held under finance leases		345,046		336,222
Less accumulated depreciation and amortization(1)		130,896		119,244
Net assets securing notes payable or held under finance leases	$	214,150	$	216,978

(1) Amortization of assets held under finance leases and depreciation of assets securing notes payable are included in depreciation expense.

Financing Arrangements

Credit Facility

As of March 31, 2023, the Company has a revolving credit facility (the “Credit Facility”) under its Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), with an initial maximum credit amount of up to $250.0 million, including a swing line facility in an aggregate amount of up to $40.0 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 amount of $125.0 million, subject to the satisfaction of certain additional conditions as provided in the Credit Agreement. As of March 31, 2023, the Company had available borrowing capacity of $200.0 million under the initial maximum credit amount of the Credit Facility.

Principal payments under the Credit Facility are due upon maturity of the facility on October 7, 2027; 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. In addition, the Credit Facility requires the Company to pay a fee on unused commitments. 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, and sales of assets. The Company was in compliance with the covenants under the Credit Agreement at March 31, 2023.

Interest Rate Swaps

The Company has an interest rate swap agreement with a $50.0 million notional amount, which will end on October 1, 2024. The Company received floating-rate interest amounts based on one-month SOFR in exchange for fixed-rate interest payments of 0.33% throughout the remaining term of the agreement. The interest rate swap agreement effectively converted $50.0 million of borrowings under the Credit Facility from variable-rate interest to fixed-rate interest with a per annum rate of 1.55% based on the margin of the Credit Facility as of March 31, 2023. The fair value of the interest rate swap of $2.9 million and $3.5 million was recorded in other long-term assets at March 31, 2023 and December 31, 2022, respectively.

The unrealized gain or loss on the interest rate swap instruments in effect at the balance sheet date was reported as a component of accumulated other comprehensive income, net of tax, in stockholders’ equity at March 31, 2023 and December 31, 2022, and the change in the unrealized gain or loss on the interest rate swaps for the three months ended March 31, 2023 and 2022 was reported in other comprehensive income (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 settlement of the fair value liability or asset upon violation of any or all of the provisions. The Company was in compliance with all provisions of the interest rate swap agreement at March 31, 2023.

Accounts Receivable Securitization Program

The Company’s accounts receivable securitization program, which matures on July 1, 2024, provides available cash proceeds of $50.0 million to be provided under the program and has an accordion feature allowing the Company to request additional borrowings up to $100.0 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 lenders’ interest in the trade accounts receivables. Borrowings under the accounts receivable securitization program bear interest based upon SOFR, 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. The Company was in compliance with the covenants under the accounts receivable securitization program at March 31, 2023.

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 March 31, 2023, standby letters of credit of $10.0 million have been issued under the program, which reduced the available borrowing capacity to $40.0 million.

Letter of Credit Agreements and Surety Bond Programs

As of March 31, 2023, the Company had letters of credit outstanding of $10.6 million (including $10.0 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 March 31, 2023, surety bonds outstanding related to the self-insurance program totaled $64.9 million.

Notes Payable

The Company has financed the purchase of certain revenue equipment, other equipment, and software through promissory note arrangements, including $3.5 million for revenue equipment during the three months ended March 31, 2023.