LONG-TERM DEBT AND FINANCING ARRANGEMENTS

6 Months Ended

Jun. 30, 2011

LONG-TERM DEBT AND FINANCING ARRANGEMENTS

LONG-TERM DEBT AND FINANCING ARRANGEMENTS

NOTE D — LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-Term Debt Obligations

Long-term debt consisted of capital lease obligations and a note payable related to the financing of revenue equipment (tractors and trailers used primarily in ABF’s operations), real estate and certain office equipment as follows:

	June 30		December 31
	2011		2010
	($ thousands)
Capital lease obligations	$	51,552	$	56,658
Note payable	1,994		—
	53,546		56,658
Less current portion	15,386		14,001
Long-term debt, less current portion	$	38,160	$	42,657

The future minimum payments of long-term debt obligations as of June 30, 2011 are shown in the table below.

			Capital Lease		Note
	Total		Obligations(1)		Payable
	($ thousands)
Due in one year or less	$	17,340	$	16,700	$	640
Due after one year through two years	22,137		21,439		698
Due after two years through three years	12,362		11,664		698
Due after three years through four years	2,555		2,496		59
Due after four years through five years	2,433		2,433		—
Due after five years	803		803		—
Total minimum payments	57,630		55,535		2,095
Less amounts representing interest	4,084		3,983		101
Present value of net minimum payments included in long-term debt	$	53,546	$	51,552	$	1,994

(1) Minimum payments of capital lease obligations include maximum amounts due under rental adjustment clauses contained in the capital lease agreements.

Assets held under capital leases or securitized by a note payable were included in property, plant and equipment as follows:

	June 30		December 31
	2011		2010
	($ thousands)
Land and structures (terminals)	$	1,794	$	1,794
Revenue equipment	65,397		61,515
Service, office and other equipment	1,813		1,813
	69,004		65,122
Less accumulated amortization(1)	17,283		10,058
	$	51,721	$	55,064

(1) Amortization of assets under capital leases is included in depreciation expense.

Financing Arrangements

The Company has an asset-backed securitization program with SunTrust Bank which provides for cash proceeds of an amount up to $75.0 million. Under this agreement, which matures on February 18, 2013, ABF continuously sells 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 interest in the trade accounts receivables. Advances under the facility bear interest based upon LIBOR, plus a margin. The Company pays annual fees equal to 0.575% of the unused portion of the accounts receivable facility. This agreement contains representations and warranties, affirmative and negative covenants and events of default that are customary for financings of this type, including having consolidated tangible net worth, as defined, of $375.0 million and maintaining certain characteristics of the receivables, such as rates of delinquency, default and dilution. As of June 30, 2011, the Company was in compliance with the covenants. There have been no borrowings under this facility, and the borrowing capacity was at the facility limit of $75.0 million as of June 30, 2011.

The Company has agreements with four financial institutions to provide collateralized facilities for the issuance of letters of credit (“LC Agreements”). The Company issues 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 LC Agreements require cash or short-term investments to be pledged as collateral for outstanding letters of credit. As of June 30, 2011, the Company had $45.7 million of letters of credit outstanding of which $45.2 million were collateralized by restricted cash equivalents and short-term investments under the LC Agreements. The Company has $39.4 million available as of June 30, 2011 for the issuance of letters of credit under the LC Agreements and committed by the financial institutions subject to the Company’s compliance with the requirements of issuance.

The Company also has a program in place with an insurance carrier for the issuance of surety bonds in support of the self-insurance program mentioned in the previous paragraph. As of June 30, 2011, surety bonds outstanding related to the self-insurance program totaled $12.7 million collateralized by $6.5 million of restricted short-term investments in certificates of deposit.

In June 2011, the Company entered into a master security agreement to finance the purchase of revenue equipment during 2011. The master security agreement provides for funding structured as promissory notes totaling up to $28.5 million. The Company entered into a 36-month promissory note under the master security agreement to finance $2.0 million of revenue equipment purchased in June 2011. As of June 30, 2011, $2.0 million was outstanding under the note payable, of which $1.4 million was included in long-term debt and $0.6 million was included in current portion of long-term debt.