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 Freight’s operations), real estate, and certain other equipment as follows:



	December 31
	2013		2012
	(in thousands)

Term Loan (interest rate of 1.7% at December 31, 2013)	$	83,750	$	95,000
Notes payable (weighted‑average interest rate of 3.0% at December 31, 2013)	22,082		37,756
Capital lease obligations (weighted‑average interest rate of 4.8% at December 31, 2013)	7,013		23,229
	112,845		155,985
Less current portion	31,513		43,044
Long‑term debt, less current portion	$	81,332	$	112,941

Scheduled maturities under the Term Loan and notes payable and future minimum payments under capital lease obligations included in long‑term debt as of December 31, 2013 were as follows:



					Notes Payable		Capital Lease Obligations⁽²⁾
			Term		Revenue		Revenue		Land and		Equipment
	Total		Loan⁽¹⁾		Equipment		Equipment		Structures		and Other
	(in thousands)

2014	$	33,659	$	15,178	$	15,561	$	2,425	$	200	$	295
2015	28,467		17,716		7,033		3,061		206		451
2016	19,313		19,100		—		—		213		—
2017	37,121		36,902		—		—		219		—
2018	226		—		—		—		226		—
Thereafter	252		—		—		—		252		—
Total payments	119,038		88,896		22,594		5,486		1,316		746
Less amounts representing interest	6,193		5,146		512		284		215		36
Long‑term debt	$	112,845	$	83,750	$	22,082	$	5,202	$	1,101	$	710


(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 secured by notes payable or held under capital leases at December 31 were included in property, plant and equipment as follows:



	2013			2012
	(in thousands)
Revenue equipment	58,613			93,004
Land and structures (terminals)	$	1,794		$	1,794
Service, office, and other equipment	1,758			1,813
	3,552			3,607
Less accumulated amortization⁽¹⁾	26,847			35,183
Net assets secured by notes payable or held under capital leases	$	(23,295	)	$	(31,576	)


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

The Company’s long‑term debt obligations have a weighted‑average interest rate of 2.1% at December 31, 2013. The Company paid interest of $3.6 million in 2013, $4.5 million in 2012, and $3.3 million in 2011, net of capitalized interest which totaled $0.1 million for the year ended December 31, 2013 and less than $0.1 million for each of the years ended December 31, 2012 and 2011.

Financing Arrangements

Term Loan

On June 15, 2012, the Company entered into 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 obtained to finance a portion of the cost of the acquisition of Panther (see Note D). 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; however, borrowings under the revolving commitments would replace borrowing capacity under the accounts receivable securitization program which is discussed within this Note. 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 interest 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 December 31, 2013, the Company was in compliance with the covenants. For the reporting period ended December 31, 2013, the Company’s fixed charge coverage ratio was 2.21 to 1.0, compared to the minimum ratio required by the Credit Agreement of 1.25 to 1.0.

Notes Payable and Capital Leases

ABF Freight has financed the purchase of certain revenue equipment through promissory note arrangements. The promissory notes specify the terms of the arrangements, including the monthly payment and interest rates. The Company did not enter into any promissory note arrangements in 2013. ABF Freight entered into 36‑month promissory notes during 2012 and 2011 to finance $38.0 million and $28.5 million of revenue equipment, respectively.

The Company has financed revenue equipment, real estate, and certain other equipment through capital lease agreements. ABF Freight entered into capital lease agreements totaling less than $0.1 million in 2013 to finance the purchase of certain equipment. During 2011, ABF Freight entered into 36‑month capital lease agreements to finance $1.9 million of revenue equipment. The capital lease agreements specify the terms of the arrangements, including the monthly base rent and interest rates.

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 December 31, 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 December 31, 2013, standby letters of credit of $20.3 million have been issued under the facility, which reduced the available borrowing capacity to $54.7 million.

Letter of Credit Agreements and Surety Bond Programs

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 which the Company is required to maintain. The LC Agreements generally require cash or short‑term investments to be pledged as collateral for outstanding letters of credit. The Company had letters of credit outstanding of $22.8 million (including $20.3 million issued under the accounts receivable securitization program previously described within this Note) as of December 31, 2013, and $22.7 million as of December 31, 2012, of which $1.9 million and $5.9 million, respectively, were collateralized by restricted cash and short‑term investments under the LC Agreements. The Company had up to $58.1 million available as of December 31, 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 discussed in the previous paragraphs. As of December 31, 2013 and 2012, surety bonds outstanding related to the collateralized self‑insurance program totaled $12.7 million and $13.8 million, respectively. The outstanding bonds were collateralized by letters of credit of $3.8 million at December 31, 2013 issued under the previously described accounts receivable securitization program, and $3.8 million of restricted short‑term investments in certificates of deposit at December 31, 2012. Under separate uncollateralized bond programs, surety bonds outstanding related to the Company’s self‑insurance program totaled $43.8 million and $36.6 million as of December 31, 2013 and 2012, respectively.