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Floor Plan Notes Payable and Lines of Credit
 12 Months Ended
Dec. 31, 2011
Floor Plan Notes Payable and Lines of Credit/ Long-Term Debt [Abstract]  
FLOOR PLAN NOTES PAYABLE AND LINES OF CREDIT

7. FLOOR PLAN NOTES PAYABLE AND LINES OF CREDIT:

Floor Plan Notes Payable

Floor plan notes are financing agreements to facilitate the Company’s purchase of new and used commercial vehicles. These notes are collateralized by the inventory purchased and accounts receivable arising from the sale thereof. The Company’s credit agreement with GE Capital has the interest rate benchmarked to LIBOR, as defined in the agreement.

 

The interest rate under the credit agreement with GE Capital was LIBOR plus 2.95%. The interest rate applicable to the GE Capital credit agreement was approximately 3.48% at December 31, 2011. The Company’s weighted average interest rate for floor plan notes payable was 1.00% for the year ended December 31, 2011, and 1.09% for the year ended December 31, 2010, which is net of interest income earned from GE Capital. The GE Capital credit agreement allowed for prepayment of the inventory loans, up to 65% of the aggregate inventory loans outstanding, with monthly adjustments to the interest due, which reduced the Company’s weighted average interest rate.

The Company finances substantially all of the purchase price of its new commercial vehicle inventory, and the loan value of its used commercial vehicle inventory under the credit agreement with GE Capital, under which GE Capital pays the manufacturer directly with respect to new commercial vehicles. Amounts borrowed under the agreement are due when the related commercial vehicle inventory (collateral) is sold and the sales proceeds are collected by the Company. This agreement may be modified, suspended or terminated by the lender as described in Note 3. On December 31, 2011, the Company had approximately $496.3 million outstanding under its credit agreement with GE Capital.

On January 31, 2012, the Company entered into an amended and restated $600.0 million credit agreement with GE Capital. The interest rate under the amended credit agreement is LIBOR plus 2.23% on inventory loans up to $500.0 million and LIBOR plus 2.95% on inventory loans between $500.0 million and $600.0 million. The amended credit agreement allows the Company to prepay inventory loans, provided that the prepayment does not exceed the sum of 38% of the aggregate inventory loans made up to $500.0 million plus 100% of the inventory loans above $500.0 million. GE Capital may terminate this credit agreement without cause upon 120 days notice.

Navistar Financial Corporation offers a floor plan program that provides an interest free financing period, which varies depending on the commercial vehicle purchased. If the commercial vehicle financed by Navistar is not sold within the interest free finance period, the Company transfers the financed commercial vehicle to the GE Capital credit agreement. On December 31, 2011, the Company had approximately $24.4 million outstanding under its floor plan program with Navistar Financial Corporation.

Assets pledged as collateral as of December 31, 2011 and 2010 were as follows (in thousands):

 

      September 30,       September 30,  
    December 31,  
    2011     2010  

Inventories, new and used vehicles at cost based on specific identification, net of allowance

   $ 536,827     $ 235,429  

Vehicle sale related accounts receivable

     58,741       16,425  
   

 

 

    

 

 

  
     

Total

   $ 595,568     $ 251,854  
   

 

 

    

 

 

  
     

Floor plan notes payable related to vehicles

   $ 520,693     $ 237,810  
   

 

 

    

 

 

  

Lines of Credit

The Company has a secured line of credit that provides for a maximum borrowing of $10.0 million. There were no advances outstanding under this secured line of credit at December 31, 2011; however, $7.7 million was pledged to secure various letters of credit related to self-insurance products, leaving $2.3 million available for future borrowings as of December 31, 2011.