Inventories, net and Notes Payable - Floor Plan, net

12 Months Ended

Dec. 31, 2020

Inventories, net and Notes Payable - Floor Plan, net

Inventories, net and Notes Payable - Floor Plan, net

4. Inventories, net and Notes Payable — Floor Plan, net

Inventories consisted of the following at December 31, (in thousands):

	December 31,		December 31,
	2020		2019
Good Sam services and plans	$	109	$	590
New RVs		691,114		966,134
Used RVs		178,336		165,927
Products, parts, accessories and other		266,786		225,888
	$	1,136,345	$	1,358,539

New RV inventory included in the RV and Outdoor Retail segment is primarily financed by a floor plan credit agreement with a syndication of banks. The borrowings under the floor plan credit agreement are collateralized by substantially all of the assets of FreedomRoads, LLC (“FR”), a wholly-owned subsidiary of FreedomRoads, which operates the RV dealerships, and bear interest at one-month LIBOR plus 2.05% as of December 31, 2020 and at one-month LIBOR plus 2.15% for the years ended December 31, 2019 and December 31, 2018. LIBOR was 0.15%, 1.71% and 2.35% as of December 31, 2020, 2019, and 2018, respectively. The floor plan borrowings are tied to specific vehicles and principal is due upon the sale of the related vehicle or upon reaching certain aging criteria.

As of December 31, 2020 and 2019, FR maintained floor plan financing through the Seventh Amended and Restated Credit Agreement (“Floor Plan Facility”). On October 8, 2019, FR entered into a Second Amendment to the Seventh Amended and Restated Credit Agreement (the “Second Amendment”). The applicable borrowing rate margin on LIBOR and base rate loans ranges from 2.05% to 2.50% and 0.55% and 1.00%, respectively, based on the consolidated current ratio at FR. The Floor Plan Facility at December 31, 2020 allowed FR to borrow (a) up to $1.38 billion under a floor plan facility, (b) up to $15.0 million under a letter of credit facility and (c) up to a maximum amount outstanding of $48.0 million under the revolving line of credit, which maximum amount outstanding further decreases by $3.0 million on the last day of each fiscal quarter. The maturity date of the Floor Plan Facility is March 15, 2023.

On May 12, 2020, FR entered into a Third Amendment to the Seventh Amended and Restated Credit Agreement (“Third Amendment”) that provides FR with a one-time option to request a temporary four-month reduction (“Current Ratio Reduction Period”) of the minimum consolidated current ratio at any time during 2020 and the first seven days of 2021. FR did not exercise that option. During the Current Ratio Reduction Period, the applicable borrowing rate margin on LIBOR and base rate loans ranges from 2.05% to 3.00% and 0.55% and 1.50%, respectively, based on the consolidated current ratio at FR. Effective May 12, 2020 through July 31, 2020, FR was not allowed to draw further Revolving Credit Loans (as defined in the Floor Plan Facility).

The Floor Plan Facility includes a flooring line aggregate interest reduction (“FLAIR”) offset account that allows the Company to transfer cash as an offset to the payable under the Floor Plan Facility. These transfers reduce the amount of liability outstanding under the floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the FLAIR offset account into the Company’s operating cash accounts. As a result of using the FLAIR offset account, the Company experiences a reduction in floor plan interest expense in its consolidated statements of operations. As of December 31, 2020 and December 31, 2019, FR had $133.6 million and $87.0 million, respectively, in the FLAIR offset account. The Third Amendment raised the maximum FLAIR percentage of outstanding floor plan borrowings from 20% to 30% for the period of May 12, 2020 through August 31, 2020 before returning to 20%.

Management has determined that the credit agreement governing the Floor Plan Facility includes subjective acceleration clauses, which could impact debt classification. Management has determined that no events have occurred at December 31, 2020 that would trigger a subjective acceleration clause. Additionally, the credit agreement governing the Floor Plan Facility contains certain financial covenants. FR was in compliance with all debt covenants at December 31, 2020 and December 31, 2019. On June 29, 2020, FR made a voluntary $20.0 million principal payment on the revolving line of credit.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of December 31, 2020 and December 31, 2019 (in thousands):

	December 31,		December 31,
	2020		2019
Floor Plan Facility:
Notes payable — floor plan:
Total commitment	$	1,379,750	$	1,379,750
Less: borrowings, net		(522,455)		(848,027)
Less: flooring line aggregate interest reduction account		(133,639)		(87,016)
Additional borrowing capacity		723,656		444,707
Less: accounts payable for sold inventory		(28,980)		(27,892)
Less: purchase commitments		(39,121)		(8,006)
Unencumbered borrowing capacity	$	655,555	$	408,809
Revolving line of credit	$	48,000	$	60,000
Less: borrowings		(20,885)		(40,885)
Additional borrowing capacity	$	27,115	$	19,115
Letters of credit:
Total commitment	$	15,000	$	15,000
Less: outstanding letters of credit		(11,732)		(11,175)
Additional letters of credit capacity	$	3,268	$	3,825