| Debt | (4)
Debt Debt is comprised of the following (in thousands):
Interest Rates at October 1, 2016
October 1, 2016
December 31, 2015
Outstanding Debt:
PNC $120 million revolving credit facility
LIBOR rate advance
2.03%
$
58,000
$
55,000
Domestic rate advance
4.00%
2,700
4,569
Key Equipment credit agreement
3.75%
68,436
83,578
Comerica syndicated credit facility
$40 million term loan
3.02%
35,500
40,000
$20 million revolving credit facility
LIBOR rate advance
2.52%
1,000
6,000
PRIME rate advance
NA
—
5,766
Flagstar $40 million unsecured term loan
NA
—
40,000
Real estate notes
Flagstar real estate notes
2.71%
50,937
—
Crown real estate note
3.50%
2,657
—
Equipment notes
3.24% to 3.69%
31,362
—
UBS secured borrowing facility
1.63%
—
—
250,592
234,913
Less current portion
35,268
61,488
Total long-term debt
$
215,324
$
173,425
December 2015 Debt Refinancing On December 23, 2015, Universal and certain of its wholly-owned subsidiaries entered into a combination of secured and unsecured loans with certain lenders. The Company undertook the action as part of its ongoing organizational streamlining efforts to better align sources of capital used in its asset-light businesses and to fix a portion of its variable interest rate bearing debt. Upon closing, the Company and subsidiaries involved borrowed approximately $234.9 million to pay off existing indebtedness, to terminate its previous syndicated Comerica Bank Revolving Credit and Term Loan Agreement, and to pay fees and expenses associated with the new credit agreements. At October 1, 2016 and December 31, 2015, long-term debt and current maturities of long-term debt are presented net of debt issuance cost totaling $1.7 million and $1.5 million, respectively, in our Consolidated Balance Sheets. PNC $120 million Revolving Credit Facility Universal Truckload, Inc., Universal Dedicated, Inc., Mason Dixon Intermodal, Inc., Logistics Insight Corp., Universal Logistics Solutions International, Inc., Universal Specialized, Inc., Cavalry Logistics, LLC and Universal Management Services, Inc., (each a wholly-owned subsidiary of the Company, a “Borrowing Subsidiary” and, collectively, the “Borrowing Subsidiaries”) entered into a Revolving Credit and Security Agreement with PNC Bank, National Association (“PNC”) to provide for a revolving credit facility of up to $120 million (which amount may be increased by up to $30 million upon request). Borrowings under the revolving credit facility may be made until, and mature on, December 23, 2020. To support daily borrowing and other operating requirements, the revolving credit facility contains a $10.2 million Swing Loan sub-facility and provides for $3.0 million in letters of credit. There were no amounts outstanding under the Swing Loan sub-facility at October 1, 2016 and December 31, 2015, and no letters of credit were issued against the line.
(4)
Debt - continued Borrowings under the Revolving Credit and Security Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each. The applicable margin fluctuates based on the Borrowing Subsidiaries’ quarterly average excess availability, as defined in the Revolving Credit and Security Agreement. Interest on the unpaid balance of all base rate advances is payable quarterly in arrears on the first day of each calendar quarter. Interest on the unpaid balance of each LIBOR based advance of the revolving credit facility is payable on the last day of the applicable LIBOR interest period. At October 1, 2016, interest on a $58.0 million LIBOR rate advance accrued at 2.03% based on 30-day LIBOR plus 1.50%, and interest on a $2.7 million domestic rate advance accrued at 4.0% based on PNC’s prime rate plus 0.50%. The Revolving Credit and Security Agreement includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring a minimum fixed charge coverage ratio to be maintained after a triggering event, as defined in the Revolving Credit and Security Agreement. The Revolving Credit and Security Agreement also includes customary mandatory prepayments provisions and is subject to an unused revolving credit line fee of 0.25%. At October 1, 2016, we were in compliance with the debt covenants. As security for all indebtedness pursuant to the Revolving Credit and Security Agreement, PNC was granted a first priority perfected security interest in cash, deposits and accounts receivable of the Borrowing Subsidiaries and selected other assets. At October 1, 2016, our $60.7 million revolver advance was secured by, among other assets, net eligible accounts receivable totaling $98.5 million. At October 1, 2016, availability, as defined in the Revolving Credit and Security Agreement, was $28.0 million. Key Equipment Credit Agreement LGSI Equipment of Indiana, LLC, a wholly-owned subsidiary of the Company (the “Equipment Borrowing Subsidiary”), entered into a Master Security Agreement and five Promissory Notes (collectively the “Equipment Credit Agreement”) with Key Equipment Finance, a division of KeyBank National Association (“KeyBank”). Under the Equipment Credit Agreement, the Equipment Borrowing Subsidiary borrowed approximately $83.6 million. The promissory notes are being paid in 60 monthly installments, including interest, beginning on January 23, 2016 and bear interest at a fixed rate of 3.75%. Additionally, all obligations under the Equipment Credit Agreement are guaranteed by Universal Dedicated, Inc., Logistics Insight Corp., Universal Truckload, Inc., Universal Specialized, Inc. and Mason Dixon Intermodal, Inc. (each a wholly-owned subsidiary of the Company) in connection with each subsidiary’s lease of equipment. The Equipment Credit Agreement also includes financial covenants requiring the Equipment Borrowing Subsidiary to maintain a ratio of operating cash flow to fixed charges of not less than 1.1:1, as defined in the agreement. At October 1, 2016, we were in compliance with the debt covenants. As security for all indebtedness pursuant to the Equipment Credit Agreement, KeyBank was granted liens on selected titled vehicles of the Equipment Borrowing Subsidiary set forth on various collateral schedules. The Equipment Borrowing Subsidiary may sell or dispose of equipment secured under the Equipment Credit Agreement provided the disposed equipment is replaced with acceptable equipment as collateral, if we pay down of a portion of the loan plus breakage charges and handling charges, as defined in the promissory notes, or if KeyBank, at its option, releases the equipment without pay down or pre-payment. At October 1, 2016, the aggregate principal outstanding pursuant to the five promissory notes totaled $68.4 million.
(4)
Debt - continued Comerica Syndicated Credit Facility Westport Axle Corp., a wholly-owned subsidiary of the Company (“Westport”), entered into a Revolving Credit and Term Loan Agreement (the “Credit Agreement”), with and among the lenders party thereto and Comerica Bank, as administrative agent, arranger and documentation agent, providing for aggregate borrowing facilities of up to $60 million. The Credit Agreement consists of a $40 million term loan and a $20 million revolving credit facility. Borrowings under the term loan were advanced on December 23, 2015 and mature on December 23, 2020. The term loan shall be repaid in 20 equal quarterly installments of $1.5 million over five years beginning March 1, 2016, with the remaining balance due at maturity. Borrowings under the revolving credit facility may be made until, and mature on, December 23, 2020. Borrowings under the Credit Agreement bear interest at LIBOR or a base rate, plus an applicable margin for each. The applicable margin fluctuates based on Westport’s total debt to EBITDA ratio, as defined in the Credit Agreement. At October 1, 2016, interest on the $35.5 million term loan accrued at 3.02% based on 30-day LIBOR plus 2.50%, and interest on the $1.0 million LIBOR rate revolving credit advance accrued at 2.52% based on 30-day LIBOR plus 2.00%. To support daily borrowing and other operating requirements, the revolving credit facility contains a $4.0 million Swing Line sub-facility and provides for $2.0 million in letters of credit. Swing Line borrowings incur interest at either the base rate plus the applicable margin or, alternatively, at a quoted rate offered by Comerica Bank in its sole discretion. There were no amounts outstanding under the Swing Line at October 1, 2016 and December 31, 2015, and no letters of credit were issued against the line. Interest on the unpaid balance of all revolving credit facility and swing line base rate advances is payable quarterly in arrears commencing on March 1, 2016, and on the first day of each June, September, December and March thereafter. Interest on the unpaid balance of each Eurodollar-based advance of the revolving credit facility is payable on the last day of the applicable Eurodollar interest period. Interest on the unpaid balance of each quoted rate based advance of the swing line is payable on the last day of the applicable quoted rate interest period. Interest on the unpaid principal of all term loan base rate advances is payable quarterly in arrears commencing on January 1, 2016, and on the first day of each April, July, October and January thereafter. Interest on the unpaid principal of each Eurodollar-based advance of the term loan is payable on the last day of the applicable Eurodollar interest period. The revolving credit facility is subject to a facility fee, which is payable quarterly in arrears, of either 0.25% or 0.50%, depending on Westport’s ratio of total debt to EBITDA. Other than in connection with Eurodollar-based advances or quoted rate advances that are paid off and terminated prior to an applicable interest period, there are no premiums or penalties resulting from prepayment. Borrowings outstanding at any time under the revolving credit facility are limited to the value of eligible accounts receivable and inventory of Westport, pursuant to a monthly borrowing base certificate. At October 1, 2016, our $1.0 million revolver advance was secured by, among other assets, net eligible accounts receivable and inventory of $10.5 million and $6.5 million, respectively. At October 1, 2016, availability, as defined in the Credit Agreement, was $11.5 million. The Credit Agreement requires Westport to repay the borrowings made under the term loan and the revolving credit facility as follows: 50% (which percentage shall be reduced to zero subject to Westport attaining a certain leverage ratio) of Westport’s annual excess cash flow, as defined; 100% of the net cash proceeds if we sell Westport’s machining division; 50% of net proceeds from certain equity issuances; 100% of proceeds from the issuance of certain indebtedness; and 100% of net proceeds from the sale of certain assets, insurance and condemnation proceeds.
(4)
Debt - continued As security for all indebtedness pursuant to the syndicated Credit Agreement, Comerica Bank, as lead arranger, was granted first perfected security interest on all of Westport’s tangible and intangible property and in assets acquired in the future. The Company also pledged 100% of its equity interest in Westport. The Credit Agreement also contains a “springing” guaranty requiring the Company to guarantee the indebtedness under certain events, as defined in the Credit Agreement and guarantee. The Credit Agreement includes financial covenants requiring Westport to maintain a minimum fixed charge coverage ratio, minimum quarterly EBITDA amounts, as defined in the Credit Agreement, and a maximum debt to EBITDA ratio, as well as customary affirmative and negative covenants and events of default. At October 1, 2016, Westport was in compliance with the debt covenants. Flagstar $40 million Unsecured Term Loan The Company entered into a Loan and Financing Agreement (the “Loan Agreement”) with Flagstar Bank, F.S.B. (“Flagstar”) to provide for a $40.0 million unsecured term loan. Proceeds of the unsecured term loan were advanced on December 23, 2015, and the outstanding principal balance was due on or before July 15, 2016. Borrowings under the unsecured term loan bore interest at LIBOR, plus 3.5%, and interest on the unpaid balance was payable monthly commencing on February 1, 2016. On June 21, 2016, UTSI Finance, Inc. (“UTSI Finance”), a wholly-owned subsidiary of the Company, borrowed approximately $32.8 million to refinance a portion of the Company’s existing indebtedness with Flagstar pursuant to the $40 million unsecured term loan. At October 1, 2016, the outstanding principal balance was $0. Real Estate Notes On June 21, 2016, UTSI Finance, entered into a Loan and Financing Agreement with Flagstar, along with ten accompanying promissory notes and commercial mortgages (collectively, the “Real Estate Credit Agreement”). Under the Real Estate Credit Agreement, UTSI Finance borrowed approximately $32.8 million to refinance a portion of the Company’s existing indebtedness with Flagstar pursuant to its $40 million unsecured term loan. The promissory notes bear interest at a rate of LIBOR plus 2.25%, and will be repaid in consecutive monthly installment payments of principal and accrued interest beginning July 1, 2016. The promissory notes are due on or before June 30, 2026.
(4)
Debt - continued As security for all indebtedness pursuant to the Real Estate Credit Agreement, Flagstar was granted first mortgages and assignment of leases on specific parcels of real estate and improvements included in the collateral pool, as defined in the agreement. Except for obligations subject to interest rate swap agreements with Flagstar, as defined in the Real Estate Credit Agreement, UTSI Finance may prepay all or a portion of the loans, plus applicable breakage charges and fees. On September 6, 2016, UTSI Finance entered into an additional loan and financing agreement with Flagstar, along with a promissory note and commercial mortgage (collectively, the “Secured Note”). Under the Secured Note, Flagstar loaned UTSI Finance $19.0 million in order to repay a portion of an unsecured promissory note in the principal amount of $22.5 million dated August 8, 2016 (the “Unsecured Note”) issued to an affiliate, Crown Enterprises, Inc. (“Crown”), in connection with the purchase of a terminal. The Unsecured Note is payable in 120 monthly payments of principal and accrued interest starting September 15, 2016, and bears interest at a fixed rate of 3.5% per annum. UTSI Finance may prepay the Unsecured Note at any time, in whole or in part, without premium or penalty. As of October 1, 2016, the remaining principal balance on the Unsecured Note with Crown was approximately $2.7 million, and such amount is due on or before August 15, 2026. See Note 6 for additional information pertaining to the terminal purchase. The Secured Note bears interest at a rate of LIBOR plus 2.25%, and will be repaid in consecutive monthly installment payments of principal and accrued interest beginning October 1, 2016. The Secured Note matures on September 5, 2026. UTSI Finance granted to Flagstar a first priority mortgage on the terminal pursuant to the mortgage as security under the Secured Note. Except for obligations subject to any interest rate swap agreement, UTSI Finance may prepay all or a portion of the Secured Note, plus applicable breakage charges and fees. The Flagstar real estate notes contain customary affirmative and negative covenants and events of default, and requires UTSI Finance to maintain a debt service coverage ratio of not less than 1.02:1. The first test for compliance is due after the fourth quarter of 2016. As of October 1, 2016, the aggregate principal outstanding pursuant to all Flagstar real estate notes was $50.9 million and interest accrued at 2.71%. Equipment Notes During the thirty-nine weeks ended October 1, 2016, a wholly-owned subsidiary of the Company entered into installment obligations totaling approximately $33.6 million for the purpose of purchasing revenue equipment. The promissory notes will be repaid in 60 monthly installments at interest rates ranging from 3.24% to 3.69%. At October 1, 2016, the aggregate principal outstanding pursuant to the promissory notes totaled $31.4 million. UBS Secured Borrowing Facility We also maintain a secured borrowing facility at UBS Financial Services, Inc., or UBS, using our marketable securities as collateral for the short-term line of credit. The line of credit bears an interest rate equal to LIBOR plus 1.10% (effective rate of 1.63% at October 1, 2016), and interest is adjusted and billed monthly. No principal payments are due on the borrowing; however, the line of credit is callable at any time. The amount available under the line of credit is based on a percentage of the market value of the underlying securities. If the equity value in the account falls below the minimum requirement, we must restore the equity value, or UBS may call the line of credit. At both October 1, 2016 and December 31, 2015, there were no amounts outstanding under the line of credit, and the maximum available borrowings were $7.3 million and $7.4 million, respectively.
(4)
Debt - continued Swap Agreements The Company is party to two forward interest rate swap agreements that qualify for hedge accounting. The swap agreements were executed to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $15.7 million at October 1, 2016. Under the swap agreements, the Company receives interest at the one-month LIBOR rate plus 2.25%, and pays a fixed rate. The March 2016 forward swap (swap A) is effective October 2016, has a rate of 4.16% (amortizing notional amount of $10.0 million) and expires July 2026, and the March 2016 forward swap (swap B) is effective October 2016, has a rate of 3.83% (amortizing notional amount of $5.7 million) and expires May 2022. The Company is also party to a third interest rate swap agreement that qualifies for hedge accounting. The swap agreement was executed to fix a portion of its variable rate debt with a notional amount of $12.0 million and expires February 2018 (swap C). Under swap C, the Company receives interest at the one-month LIBOR rate, and pays a fixed rate of 0.78%. The fair value of the three swap agreements was a liability of $0.6 million at October 1, 2016. Since these swap agreements qualify for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax. See Note 5 for additional information pertaining to interest rate swaps. |
