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LONG-TERM DEBT AND FINANCING ARRANGEMENTS | 12 Months Ended
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Dec. 31, 2015
LONG-TERM DEBT AND FINANCING ARRANGEMENTS |
LONG-TERM DEBT AND FINANCING ARRANGEMENTS | NOTE G – LONG‑TERM DEBT AND FINANCING ARRANGEMENTS Long‑Term Debt Obligations Long-term debt consisted of borrowings outstanding under the Company’s revolving credit facility and accounts receivable securitization program, both of which are 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 |
|  |  | 2015 |  | 2014 |
|  |  | (in thousands) |
Credit Facility (interest rate of 1.7% at December 31, 2015) |  |  | $ | 70,000 |  | $ | — |
Term Loan(1) |  |  |  | — |  |  | 70,000 |
Accounts receivable securitization borrowings (interest rate of 1.1% at December 31, 2015) |  |  |  | 35,000 |  |  | — |
Notes payable (weighted-average interest rate of 1.9% at December 31, 2015) |  |  |  | 106,703 |  |  | 56,759 |
Capital lease obligations (weighted-average interest rate of 5.8% at December 31, 2015) |  |  |  | 806 |  |  | 971 |
|  |  |  | 212,509 |  |  | 127,730 |
Less current portion |  |  |  | 44,910 |  |  | 25,256 |
Long-term debt, less current portion |  |  | $ | 167,599 |  | $ | 102,474 |
| (1) |  | The Term Loan was converted to the Credit Facility on January 2, 2015.
Scheduled maturities of long‑term debt obligations as of December 31, 2015 were as follows:
|  |  |  |  |  |  |  | Accounts |  | Notes |  | Capital Lease |
|  |  |  |  |  |  |  | Receivable |  | Payable |  | Obligations(2) |
|  |  |  |  | Credit |  | Securitization |  | Revenue |  | Land and |
|  | Total |  | Facility(1) |  |  | Program(1) |  | Equipment |  | Structures |
|  | (in thousands)
2016 |  | $ | 48,512 |  | $ | 1,375 |  | $ | 536 |  | $ | 46,388 |  | $ | 213 |
2017 |  |  | 43,698 |  |  | 1,802 |  |  | 750 |  |  | 40,927 |  |  | 219 |
2018 |  |  | 59,130 |  |  | 2,101 |  |  | 35,002 |  |  | 21,801 |  |  | 226 |
2019 |  |  | 2,732 |  |  | 2,259 |  |  | — |  |  | 241 |  |  | 232 |
2020 |  |  | 70,025 |  |  | 70,006 |  |  | — |  |  | — |  |  | 19 |
Thereafter |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total payments |  |  | 224,097 |  |  | 77,543 |  |  | 36,288 |  |  | 109,357 |  |  | 909 |
Less amounts representing interest |  |  | 11,588 |  |  | 7,543 |  |  | 1,288 |  |  | 2,654 |  |  | 103 |
Long-term debt |  | $ | 212,509 |  | $ | 70,000 |  | $ | 35,000 |  | $ | 106,703 |  | $ | 806 |
| (1) |  | The future interest payments included in the scheduled maturities due are calculated using variable interest rates based on the LIBOR swap curve, plus the anticipated applicable margin.
| (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:
|  | 2015 |  | 2014 |
|  | (in thousands) |
Revenue equipment |  | $ | 136,698 |  | $ | 88,591 |
Land and structures (terminals) |  |  | 1,794 |  |  | 1,794 |
Service, office, and other equipment |  |  | — |  |  | 255 |
Total assets securing notes payable or held under capital leases |  |  | 138,492 |  |  | 90,640 |
Less accumulated depreciation and amortization(1) |  |  | 25,120 |  |  | 26,305 |
Net assets securing notes payable or held under capital leases |  | $ | 113,372 |  | $ | 64,335 |
| (1) |  | Amortization of assets held under capital leases and depreciation of assets securing notes payable are included in depreciation expense.
The Company’s long‑term debt obligations have a weighted‑average interest rate of 2.1% at December 31, 2015. The Company paid interest of $4.0 million, $2.7 million, and $3.6 million in 2015, 2014, and 2013, respectively, net of capitalized interest which totaled $0.2 million for 2015 and $0.1 million for each of 2014 and 2013. 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 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. On January 2, 2015, t he Credit Agreement was amended and the Term Loan was refinanced, as discussed in the following paragraph. Credit Facility 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”). The Amended and Restated Credit Agreement refinanced the $70.0 million Term Loan, which was outstanding under the Credit Agreement at December 31, 2014 with a revolving credit facility (the “Credit Facility”). The Credit Facility, which matures on January 2, 2020, 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; 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 the Company’s 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 the Company’s 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, purchases and sales of assets, and certain restricted payments. The Company was in compliance with the covenants under the Amended and Restated Credit Agreement at December 31, 2015. Interest Rate Swap In November 2014, in contemplation of the Credit Facility, 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 began receiving 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 with a per annum rate of 3.10% based on the margin of the Credit Facility as of December 31, 2015. The fair value of the interest rate swap of $0.9 million and $0.6 million was recorded in other long-term liabilities in the consolidated balance sheet at December 31, 2015 and 2014, respectively. 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, 2015. Accounts Receivable Securitization Program On January 2, 2015, the Company entered into an amendment to extend the maturity date of its accounts receivable securitization program until January 2, 2018. On February 1, 2015, the Company amended and restated the accounts receivable securitization program to increase the amount of cash proceeds provided under the facility from $75.0 million to $100.0 million, with an accordion feature allowing the Company to request additional borrowings up to $25.0 million, subject to certain conditions. Under this program, 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. Borrowings under the accounts receivable securitization program 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, 2015, $35.0 million was borrowed under the accounts receivable securitization program. The Company was in compliance with the covenants under the accounts receivable securitization program as of December 31, 2015. 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 program. As of December 31, 2015, standby letters of credit of $20.1 million have been issued under the program, which reduced the available borrowing capacity to $44.9 million. Letter of Credit Agreements and Surety Bond Programs 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 as of December 31, 2015 and 2014. During 2014, 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. 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, 2015 and 2014, surety bonds outstanding related to the self-insurance program totaled $44.4 million and $43.8 million, respectively. Notes Payable and Capital Leases ABF Freight has financed the purchase of certain revenue equipment through promissory note arrangements, including $80.6 million and $55.3 million of revenue equipment in 2015 and 2014, 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 2015 or 2014. 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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