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LONG-TERM DEBT AND FINANCING ARRANGEMENTS | 12 Months Ended
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Dec. 31, 2014
LONG-TERM DEBT AND FINANCING ARRANGEMENTS |
LONG-TERM DEBT AND FINANCING ARRANGEMENTS | NOTE H — 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 |
|  | 2014 |  | 2013 |
|  | (in thousands) |
Term Loan (interest rate of 1.4% at December 31, 2014) |  | $ | 70,000 |  | $ | 83,750 |
Notes payable (weighted-average interest rate of 2.0% at December 31, 2014) |  | 56,759 |  | 22,082 |
Capital lease obligations (weighted-average interest rate of 5.8% at December 31, 2014) |  | 971 |  | 7,013 |
|  | 127,730 |  | 112,845 |
Less current portion |  | 25,256 |  | 31,513 |
Long-term debt, less current portion |  | $ | 102,474 |  | $ | 81,332 |
Scheduled maturities under the Credit Facility (further described in Financing Arrangements within this Note) and notes payable and future minimum payments under capital lease obligations included in long-term debt as of December 31, 2014 were as follows:
|  |  |  |  |  | Notes Payable |  | Capital Lease Obligations(2) |
|  |  |  | Credit |  | Revenue |  | Land and |  | Equipment |
|  | Total |  | Facility(1) |  | Equipment |  | Structures |  | and Other |
|  | (in thousands) |
2015 |  | $ | 27,300 |  | $ | 1,124 |  | $ | 25,959 |  | $ | 206 |  | $ | 11 |
2016 |  | 20,899 |  | 1,727 |  | 18,959 |  | 213 |  | — |
2017 |  | 15,699 |  | 2,223 |  | 13,257 |  | 219 |  | — |
2018 |  | 2,607 |  | 2,381 |  | — |  | 226 |  | — |
2019 |  | 2,732 |  | 2,500 |  | — |  | 232 |  | — |
Thereafter |  | 70,019 |  | 70,000 |  | — |  | 19 |  | — |
Total payments |  | 139,256 |  | 79,955 |  | 58,175 |  | 1,115 |  | 11 |
Less amounts representing interest |  | 11,526 |  | 9,955 |  | 1,416 |  | 155 |  | — |
Long-term debt |  | $ | 127,730 |  | $ | 70,000 |  | $ | 56,759 |  | $ | 960 |  | $ | 11 |
| (1) |  | As of December 31, 2014, $70.0 million was outstanding under the Term Loan. On January 2, 2015, the Term Loan was refinanced with the revolving Credit Facility. The future interest payments included in the scheduled maturities due under the Credit Facility are calculated using variable interest rates based on the LIBOR swap curve, plus the anticipated applicable margin. (See Term Loan and Credit Facility within the Financing Arrangements section within this Note.)
| (2) |  | Minimum payments of capital lease obligations include maximum amounts due under rental adjustment clauses contained in the capital lease agreements.
Assets securing notes payable or held under capital leases at December 31 were included in property, plant and equipment as follows:
|  | 2014 |  | 2013(1) |
|  | (in thousands) |
Revenue equipment |  | $ | 88,591 |  | $ | 58,613 |
Land and structures (terminals) |  | 1,794 |  | 1,794 |
Service, office, and other equipment |  | 255 |  | 1,758 |
Total assets securing notes payable or held under capital leases |  | 90,640 |  | 62,165 |
Less accumulated amortization(2) |  | 26,305 |  | 26,847 |
Net assets securing notes payable or held under capital leases |  | $ | 64,335 |  | $ | 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.
| (2) |  | Amortization of assets securing 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 1.7% at December 31, 2014. The Company paid interest of $2.7 million, $3.6 million, and $4.5 million in 2014, 2013 and 2012, respectively, net of capitalized interest which totaled $0.1 million for the years ended December 31, 2014 and 2013 and less than $0.1 million for the year ended December 31, 2012. 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 provided 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 were no borrowings under the revolving commitments. The Term Loan was 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 required 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 could 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 allowed for the election of interest at a base rate or LIBOR plus a margin based on the adjusted leverage ratio, as defined in the Credit Agreement, which was measured at the end of each fiscal quarter. The Credit Agreement contained 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. The Company was in compliance with the covenants under the Credit Agreement at December 31, 2014. The Term Loan outstanding amount of $70.0 million at December 31, 2014 was included in long-term debt on the consolidated balance sheet because the balance was converted to long-term borrowings under the Credit Facility subsequent to the balance sheet date. Credit Facility Subsequent to year end, on January 2, 2015, the Company and its lenders entered into an agreement to amend and restate the Credit Agreement. The Amended and Restated Credit Agreement refinanced the $70.0 million outstanding Term Loan with a revolving credit facility. The revolving credit facility (the “Credit Facility”) has an initial maximum credit amount of $150.0 million, including a swing line facility and a letter of credit sub-facility providing for the issuance of letters of credit up to an aggregate amount of $20.0 million. The Credit Facility allows the Company to request additional revolving commitments or incremental term loans thereunder up to an aggregate additional amount of $75.0 million, subject to certain additional conditions as provided in the Amended and Restated Credit Agreement. Principal payments under the Credit Facility are due upon maturity on January 2, 2020; however, borrowings may be repaid, at the Company’s discretion, in whole or in part at any time, without penalty subject to required notice periods and compliance with minimum prepayment amounts. Borrowings under the Amended and Restated Credit Agreement can either be, at our election: (i) at the Alternate Base Rate (as defined in the Amended and Restated Credit Agreement) plus a spread; or (ii) at the Eurodollar Rate (as defined in the Amended and Restated Credit Agreement) plus a spread. The applicable spread is dependent upon our Adjusted Leverage Ratio (as defined in the Amended and Restated Credit Agreement). The Amended and Restated 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 interest coverage ratio, a maximum adjusted leverage ratio, and limitations on incurrence of debt, investments, liens on assets, certain sale and leaseback transactions, transactions with affiliates, mergers, consolidations, and purchases and sales of assets. Interest Rate Swap On November 5, 2014, in contemplation of the Credit Facility previously discussed in this Note, 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. Effective January 2, 2015, the Company will receive floating-rate interest amounts based on one-month LIBOR in exchange for fixed-rate interest payments of 1.85% over the life of the interest rate swap agreement. The interest rate swap mitigates interest rate risk by effectively converting $50.0 million of borrowings under the Credit Facility from variable-rate interest to fixed rate interest. The fair value of the interest rate swap of $0.6 million was recorded in other long-term liabilities in the consolidated balance sheet at December 31, 2014. The interest rate swap is subject to certain customary provisions that could allow the counterparty to request immediate payment of the fair value liability upon violation of any or all of the provisions. The Company was in compliance with all provisions of the interest rate swap agreement at December 31, 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 December 31, 2014, 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, 2014, standby letters of credit of $20.1 million have been issued under the facility, which reduced the available borrowing capacity to $54.9 million. Subsequent to year end, on January 2, 2015, the Company entered into an amendment to extend the maturity date of the accounts receivable securitization program until January 2, 2018. On February 1, 2015, the Company amended and restated the receivables loan agreement to increase the amount of cash proceeds provided under the facility to $100.0 million, with an accordion feature allowing the Company to request additional borrowings up to an aggregate amount of $25.0 million, subject to certain conditions. Letter of Credit Agreements and Surety Bond Programs As of December 31, 2014, the Company had letters of credit outstanding of $22.1 million (including $20.1 million issued under the accounts receivable securitization program), of which $1.4 million were collateralized by restricted cash. During 2014 and 2013, the Company had agreements with certain financial institutions to provide collateralized facilities for the issuance of letters of credit (“LC Agreements”). These financial institutions issued letters of credit on behalf of the Company primarily in support of the self-insurance program previously discussed within this Note. The LC Agreements contained no financial ratios or financial covenants which the Company was required to maintain. Certain LC Agreements required cash or short-term investments to be pledged as collateral for outstanding letters of credit. The LC Agreements were no longer in place as of December 31, 2014. As of December 31, 2013, 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), of which $1.9 million were collateralized by restricted cash under the LC Agreements. The Company has programs in place with multiple surety companies for the issuance of surety bonds in support of its self-insurance program. As of December 31, 2014 and 2013, surety bonds outstanding related to the self-insurance program totaled $43.8 million. The Company was not required to collateralize bonds under its self-insurance program as of December 31, 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. Notes Payable and Capital Leases ABF Freight has financed the purchase of certain revenue equipment through promissory note arrangements, including $55.3 million and $38.0 million of revenue equipment in 2014 and 2012, respectively. The Company did not enter into any promissory note arrangements in 2013. The Company has financed revenue equipment, real estate, and certain other equipment through capital lease agreements. The Company did not enter into capital lease agreements during 2014 and 2012. Newly entered capital leases to finance the purchase of certain equipment totaled less than $0.1 million in 2013.

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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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