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LONG-TERM DEBT AND FINANCING ARRANGEMENTS | 9 Months Ended
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Sep. 30, 2014
LONG-TERM DEBT AND FINANCING ARRANGEMENTS |
LONG-TERM DEBT AND FINANCING ARRANGEMENTS | NOTE E — 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:
|  | September 30 |  | December 31 |
|  | 2014 |  | 2013 |
|  | (in thousands) |
Term Loan (interest rate of 1.4% at September 30, 2014) |  | $ | 73,750 |  | $ | 83,750 |
Notes payable (weighted average interest rate of 2.1% at September 30, 2014) |  | 49,387 |  | 22,082 |
Capital lease obligations (weighted average interest rate of 5.0% at September 30, 2014) |  | 2,686 |  | 7,013 |
|  | 125,823 |  | 112,845 |
Less current portion |  | 40,088 |  | 31,513 |
Long-term debt, less current portion |  | $ | 85,735 |  | $ | 81,332 |
Scheduled maturities of long-term debt obligations as of September 30, 2014 were as follows:
|  |  |  | Term |  | Notes |  | Capital Lease |
|  | Total |  | Loan(1) |  | Payable |  | Obligations(2) |
|  | (in thousands) |
Due in one year or less |  | $ | 42,012 |  | $ | 16,670 |  | $ | 24,328 |  | $ | 1,014 |
Due after one year through two years |  | 34,025 |  | 18,759 |  | 14,109 |  | 1,157 |
Due after two years through three years |  | 53,895 |  | 41,481 |  | 12,197 |  | 217 |
Due after three years through four years |  | 224 |  | — |  | — |  | 224 |
Due after four years through five years |  | 231 |  | — |  | — |  | 231 |
Due after five years |  | 78 |  | — |  | — |  | 78 |
Total payments |  | 130,465 |  | 76,910 |  | 50,634 |  | 2,921 |
Less amounts representing interest |  | 4,642 |  | 3,160 |  | 1,247 |  | 235 |
Long-term debt |  | $ | 125,823 |  | $ | 73,750 |  | $ | 49,387 |  | $ | 2,686 |
| (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 securitizing notes payable or held under capital leases were included in property, plant and equipment as follows:
|  | September 30 |  | December 31 |
|  | 2014 |  | 2013(1) |
|  | (in thousands) |
Revenue equipment |  | $ | 83,622 |  | $ | 58,613 |
Land and structures (terminals) |  | 1,794 |  | 1,794 |
Service, office, and other equipment |  | 1,759 |  | 1,758 |
Total assets securitizing notes payable or held under capital leases |  | 87,175 |  | 62,165 |
Less accumulated depreciation and amortization(2) |  | 28,000 |  | 26,847 |
Net assets securitizing notes payable or held under capital leases |  | $ | 59,175 |  | $ | 35,318 |
| (1) |  | The individual line items in this table for 2013 are the same as those previously presented in Note H to the consolidated financial statements in Part II, Item 8 of the Company’s 2013 Annual Report on Form 10-K; however, the total amounts for the 2013 period have been revised to reflect proper calculation. (The corresponding December 31, 2012 amount of assets securitizing notes payable or held under capital leases totaled $96.6 million and $61.4 million net of accumulated amortization.)
| (2) |  | Amortization of assets under capital leases and depreciation of assets securitizing notes payable are included in depreciation expense.
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. 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 such 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 September 30, 2014, the Company was in compliance with the covenants. Notes Payable and Capital Leases ABF Freight has financed the purchase of certain revenue equipment through promissory note arrangements, including $18.2 million and $41.0 million of revenue equipment in the three and nine months ended September 30, 2014, respectively. The Company has financed revenue equipment, real estate, and certain other equipment through capital lease agreements, but did not enter into such agreements in the nine months ended September 30, 2014. 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, 2014, the Company was in compliance with the covenants. There have been no borrowings under this facility. The Company is in the process of negotiating an extension of the facility prior to its maturity date. 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, 2014, standby letters of credit of $17.8 million have been issued under the facility, which resulted in available borrowing capacity of $57.2 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. Certain LC Agreements require cash or short-term investments to be pledged as collateral for outstanding letters of credit. As of September 30, 2014 and December 31, 2013, the Company had letters of credit outstanding of $19.8 million and $22.8 million, respectively, (including $17.8 million and $20.3 million, respectively, which were issued under the accounts receivable securitization facility previously described within this Note) of which $1.4 million and $1.9 million, respectively, were collateralized by restricted cash under the LC Agreements. The Company had up to $58.6 million available as of September 30, 2014 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 unsecured surety bonds in support of the self-insurance program previously discussed within this Note. Surety bonds outstanding under the uncollateralized bond program related to the Company’s self-insurance program totaled $43.8 million as of September 30, 2014 and December 31, 2013. The Company was not required to collateralize bonds under its self-insurance program as of September 30, 2014. As of December 31, 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. Interest Rate Swap On November 5, 2014, the Company entered into a five-year forward-starting interest rate swap agreement with a $50.0 million notional amount maturing on January 2, 2020. Under the agreement, beginning in January 2015, the Company will receive floating-rate interest amounts based on one-month LIBOR in exchange for fixed-rate interest payments of 1.8 5% over the life of the agreement. The interest rate swap agreement was entered in contemplation of a probable financing transaction to amend and increase borrowing capacity under the Credit Agreement.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References No definition available. + Details
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