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LONG-TERM DEBT AND FINANCING ARRANGEMENTS | 9 Months Ended
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Sep. 30, 2016
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 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:
|  | September 30 |  | December 31 |
|  | 2016 |  | 2015 |
|  | (in thousands) |
Credit Facility (interest rate of 1.8%(1) at September 30, 2016) |  | $ | 70,000 |  | $ | 70,000 |
Accounts receivable securitization borrowings (interest rate of 1.3% at September 30, 2016) |  |  | 35,000 |  |  | 35,000 |
Notes payable (weighted-average interest rate of 2.1% at September 30, 2016) |  |  | 131,882 |  |  | 106,703 |
Capital lease obligations (weighted-average interest rate of 5.8% at September 30, 2016) |  |  | 732 |  |  | 806 |
|  |  | 237,614 |  |  | 212,509 |
Less current portion |  |  | 61,251 |  |  | 44,910 |
Long-term debt, less current portion |  | $ | 176,363 |  | $ | 167,599 |
| (1) |  | 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 September 30, 2016.
Scheduled maturities of long-term debt obligations as of September 30, 2016 were as follows:
|  |  |  |  |  |  |  | Accounts |  |  |  |  |  |  |
|  |  |  |  |  |  |  | Receivable |  |  |  |  |  |  |
|  |  |  |  | Credit |  | Securitization |  | Notes |  | Capital Lease |
|  | Total |  | Facility(1) |  | Program(1) |  | Payable |  | Obligations(2) |
|  | (in thousands) |
Due in one year or less |  | $ | 65,493 |  | $ | 1,514 |  | $ | 532 |  | $ | 63,177 |  | $ | 270 |
Due after one year through two years |  |  | 82,514 |  |  | 1,683 |  |  | 35,149 |  |  | 45,457 |  |  | 225 |
Due after two years through three years |  |  | 21,005 |  |  | 1,768 |  |  | — |  |  | 19,007 |  |  | 230 |
Due after three years through four years |  |  | 74,909 |  |  | 70,466 |  |  | — |  |  | 4,365 |  |  | 78 |
Due after four years through five years |  |  | 3,632 |  |  | — |  |  | — |  |  | 3,632 |  |  | — |
Due after five years |  |  | 24 |  |  | — |  |  | — |  |  | 24 |  |  | — |
Total payments |  |  | 247,577 |  |  | 75,431 |  |  | 35,681 |  |  | 135,662 |  |  | 803 |
Less amounts representing interest |  |  | 9,963 |  |  | 5,431 |  |  | 681 |  |  | 3,780 |  |  | 71 |
Long-term debt |  | $ | 237,614 |  | $ | 70,000 |  | $ | 35,000 |  | $ | 131,882 |  | $ | 732 |
| (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 were included in property, plant and equipment as follows:
|  | September 30 |  | December 31 |
|  | 2016 |  | 2015 |
|  | (in thousands) |
Revenue equipment |  | $ | 198,741 |  | $ | 136,698 |
Land and structures (terminals) |  |  | 1,794 |  |  | 1,794 |
Service, office, and other equipment |  |  | 7 |  |  | — |
Total assets securing notes payable or held under capital leases |  |  | 200,542 |  |  | 138,492 |
Less accumulated depreciation and amortization(1) |  |  | 50,819 |  |  | 25,120 |
Net assets securing notes payable or held under capital leases |  | $ | 149,723 |  | $ | 113,372 |
| (1) |  | Amortization of assets under capital leases and depreciation of assets securing notes payable are included in depreciation expense.
Financing Arrangements Credit Facility On January 2, 2015, the Company and its lenders entered into an agreement to amend and restate its credit agreement (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement refinanced a $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 an alternate base rate (as defined in the Amended and Restated Credit Agreement) plus a spread; or (ii) at a 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 September 30, 2016. 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 September 30, 2016. The fair value of the interest rate swap of $1.6 million and $0.9 million was recorded in other long-term liabilities in the consolidated balance sheet at September 30, 2016 and December 31, 2015, respectively. At September 30, 2016, the unrealized loss on the interest rate swap instrument was reported as a component of accumulated other comprehensive loss, net of tax, in stockholders’ equity, and the change in the unrealized loss on the interest rate swap for the three and nine months ended September 30, 2016 was reported in other comprehensive loss, net of tax, in the consolidated statement of comprehensive income. 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 September 30, 2016. 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 September 30, 2016, $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 September 30, 2016. 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 September 30, 2016, standby letters of credit of $18.3 million have been issued under the program, which reduced the available borrowing capacity to $46.7 million. Letter of Credit Agreements and Surety Bond Programs As of September 30, 2016, the Company had letters of credit outstanding of $19.8 million (including $18.3 million issued under the accounts receivable securitization program), of which $1.0 million were collateralized by restricted cash. 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 September 30, 2016, surety bonds outstanding related to the self-insurance program totaled $56.3 million. Notes Payable and Capital Leases ABF Freight has financed the purchase of certain revenue equipment through promissory note arrangements, including $25.9 million and $61.7 million of revenue equipment during the three and nine months ended September 30, 2016, respectively. ABF Logistics acquired assets held under capital lease arrangements for certain revenue equipment and other equipment totaling less than $0.1 million. The Company did not enter into any other capital lease agreements during the nine months ended September 30, 2016. ABF Freight financed the purchase of an additional $3.0 million of revenue equipment through promissory note arrangements as of November 1, 2016.

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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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