LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-Term Debt Obligations

Long-term debt consisted of a Term Loan under the Credit Agreement further described in Financing Arrangements within this Note and notes payable and capital lease obligations related to the financing of revenue equipment (tractors and trailers used primarily in ABF’s operations), real estate, and certain other equipment as follows:



	September 30 2013		December 31 2012
	(in thousands)
Term Loan (interest rate of 1.7% at September 30, 2013)	$	86,875	$	95,000
Notes payable (weighted average interest rate of 3.0% at September 30, 2013)	26,093		37,756
Capital lease obligations (weighted average interest rate of 4.5% at September 30, 2013)	11,278		23,229
	124,246		155,985
Less current portion	35,353		43,044
Long-term debt, less current portion	$	88,893	$	112,941

Scheduled maturities of long-term debt obligations as of September 30, 2013 were as follows:



	Total		Term Loan⁽¹⁾		Notes Payable		Capital Lease Obligations⁽²⁾
	(in thousands)
Due in one year or less	$	37,687	$	14,568	$	16,376	$	6,743
Due after one year through two years	30,633		17,015		10,343		3,275
Due after two years through three years	20,193		18,963		70		1,160
Due after three years through four years	41,819		41,602		—		217
Due after four years through five years	224		—		—		224
Due after five years	308		—		—		308
Total payments	130,864		92,148		26,789		11,927
Less amounts representing interest	6,618		5,273		696		649
Long-term debt	$	124,246	$	86,875	$	26,093	$	11,278


(1)	The future interest payments included in the scheduled maturities due under the Term Loan are calculated using variable interest rates based on the LIBOR swap curve, plus the anticipated applicable margin (see Term Loan within the Financing Arrangements section of this Note).


(2)	Minimum payments of capital lease obligations include maximum amounts due under rental adjustment clauses contained in the capital lease agreements.

Assets securitized by notes payable or held under capital leases were included in property, plant and equipment as follows:



	September 30 2013		December 31 2012
	(in thousands)
Land and structures (terminals)	$	1,794	$	1,794
Revenue equipment	69,417		93,004
Service, office, and other equipment	1,758		1,813
	72,969		96,611
Less accumulated amortization⁽¹⁾	31,715		35,183
Net assets securitized by notes payable or held under capital leases	$	41,254	$	61,428


(1)	Amortization of assets securitized by notes payable and held under capital leases is included in depreciation expense.

Financing Arrangements

Term Loan

The Company has a credit agreement (the “Credit Agreement”) with a syndicate of financial institutions. Pursuant to the Credit Agreement, a five-year, $100.0 million secured term loan (the “Term Loan”) was provided to finance a portion of the cost of the acquisition of Panther (see Note C). The Credit Agreement also provides the Company with the right to request revolving commitments thereunder up to an aggregate amount of $75.0 million, subject to the satisfaction of certain additional conditions provided in the agreement. There have been no borrowings under the revolving commitments. The Term Loan is secured by a lien on certain of the Company’s assets and pledges of the equity interests in certain subsidiaries (with these assets and subsidiaries defined in the Credit Agreement). The Term Loan requires quarterly principal payments and monthly interest payments, with remaining amounts outstanding due upon the maturity date of June 15, 2017. Borrowings under the Term Loan can be repaid in whole or in part at any time, without penalty, subject to required notice periods and compliance with minimum prepayment amounts. The Term Loan allows for the election of the interest rate at a base rate or LIBOR plus a margin based on the adjusted leverage ratio, as defined, which is measured at the end of each fiscal quarter. 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 fixed charge coverage ratio, a maximum adjusted leverage ratio, and limitations on incurrence of debt, investments, liens on assets, transactions with affiliates, mergers, consolidations, and purchases and sales of assets. As of September 30, 2013, the Company was in compliance with the covenants. For the reporting period ended September 30, 2013, the Company’s fixed charge coverage ratio was 1.8 to 1.0, compared to the minimum ratio required by the Credit Agreement of 1.25 to 1.0.

Accounts Receivable Securitization Program

The Company has an accounts receivable securitization program with PNC Bank which provides for cash proceeds of an amount up to $75.0 million. Under this facility, which matures on June 15, 2015, 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 lender’s interest in the trade accounts receivables. Advances under the facility bear interest based upon LIBOR, 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. As of September 30, 2013, the Company was in compliance with the covenants. There have been no borrowings under this facility.

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 facility. As of September 30, 2013, standby letters of credit of $20.5 million have been issued under the facility, which reduced the available borrowing capacity to $54.5 million.

Letter of Credit Agreements

The Company has agreements with certain financial institutions to provide collateralized facilities for the issuance of letters of credit (“LC Agreements”). These financial institutions issue letters of credit on behalf of the Company primarily in support of the self-insurance program previously discussed within this Note. The LC Agreements contain no financial ratios or financial covenants that the Company is required to maintain. The LC Agreements require cash or short-term investments to be pledged as collateral for outstanding letters of credit. As of September 30, 2013, the Company had letters of credit outstanding of $23.0 million (including $20.5 million which were issued under the accounts receivable securitization facility previously described within this Note), of which $1.9 million were collateralized by restricted cash under the LC Agreements. The Company had up to $73.1 million available as of September 30, 2013 for issuance of letters of credit, subject to the Company’s compliance with the requirements of issuance.

The Company has programs in place with multiple surety companies for the issuance of partially secured or unsecured surety bonds in support of the self-insurance program previously discussed. As of September 30, 2013, surety bonds outstanding related to the collateralized self-insurance program totaled $12.7 million, which were collateralized by letters of credit of $3.8 million issued under the previously described accounts receivable securitization facility. Under separate uncollateralized bond programs, surety bonds outstanding related to the Company’s self-insurance program totaled $43.9 million as of September 30, 2013.