LONG-TERM DEBT AND FINANCING ARRANGEMENTS

3 Months Ended

Mar. 31, 2012

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 notes 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:

	March 31		December 31
	2012		2011
	($ thousands)
Capital lease obligations	$	40,488	$	44,261
Notes payable	24,449		26,751
	64,937		71,012
Less current portion	30,142		24,262
Long-term debt, less current portion	$	34,795	$	46,750

The future minimum payments of long-term debt obligations as of March 31, 2012 are shown in the table below.

			Capital Lease		Notes
	Total		Obligations(1)		Payable
	($ thousands)
Due in one year or less	$	32,215	$	22,265	$	9,950
Due after one year through two years	23,750		13,800		9,950
Due after two years through three years	8,396		2,806		5,590
Due after three years through four years	3,213		3,213		—
Due after four years through five years	214		214		—
Due after five years	642		642		—
Total minimum payments	68,430		42,940		25,490
Less amounts representing interest	3,493		2,452		1,041
Present value of net minimum payments included in long-term debt	$	64,937	$	40,488	$	24,449

(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 notes payable were included in property, plant and equipment as follows:

	March 31		December 31
	2012		2011
	($ thousands)
Land and structures (terminals)	$	1,794	$	1,794
Revenue equipment	91,753		91,925
Service, office and other equipment	1,813		1,813
	95,360		95,532
Less accumulated amortization(1)	32,209		26,759
	$	63,151	$	68,773

(1)Amortization of assets under capital leases and notes payable 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. The securitization agreement, as amended, 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 March 31, 2012 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 March 31, 2012.

The Company has agreements with certain financial institutions to provide collateralized facilities for the issuance of letters of credit (“LC Agreements”). These financial institutions issue letters of credit on behalf of the Company primarily in support of workers’ compensation and third-party casualty claims liabilities in various states in which the Company is self-insured. The Company pays quarterly fees to the financial institutions based on the amount of letters of credit outstanding. The LC Agreements contain no financial ratios or financial covenants which the Company is required to maintain. The Company has up to $103.1 million of availability for the issuance of letters of credit under the LC Agreements of which $50.0 million is committed subject to the Company’s compliance with the requirements of issuance. The LC Agreements require cash or short-term investments to be pledged as collateral for outstanding letters of credit. During March 2012, the Company reduced the restriction on its cash equivalents and short-term investments under the LC Agreements by transferring $19.6 million of previously collateralized letters of credit to a new, uncollateralized bond program. As of March 31, 2012, the Company had $26.5 million of letters of credit outstanding of which $26.0 million were collateralized by restricted cash equivalents and short-term investments under the LC Agreements. The Company had $40.3 million available as of March 31, 2012 for the issuance of letters of credit under the committed LC Agreements subject to the Company’s compliance with the requirements of issuance. During April 2012, an additional $6.5 million of letters of credit that were collateralized by cash equivalents and short-term investments as of March 31, 2012 were transferred to the uncollateralized bond program and the collateralized funds were released from restriction.

The Company has programs in place with insurance carriers for the issuance of surety bonds in support of the self-insurance program mentioned in the previous paragraph. In March 2012, the collateral requirement under the Company’s collateralized bond program was reduced by $3.5 million, allowing the Company to further reduce its restriction on cash equivalents and short-term investments by this amount. As of March 31, 2012, surety bonds outstanding related to the collateralized self-insurance program totaled $13.8 million collateralized by $3.5 million of restricted short-term investments primarily in certificates of deposit. Under separate uncollateralized bond programs, surety bonds outstanding related to the Company’s self-insurance program totaled $26.4 million as of March 31, 2012.

ABF has a master security agreement to finance the purchase of revenue equipment that provides for funding structured as promissory notes totaling up to $28.5 million. The promissory notes specify the terms of the arrangements, including the monthly payment and interest rates. ABF has entered into 36-month promissory notes under the master security agreement to finance $22.5 million of revenue equipment, of which $18.9 million was outstanding as of March 31, 2012. ABF had $6.0 million available under the master security agreement as of March 31, 2012. ABF also has revenue equipment financed under separate notes payable arrangements for $6.0 million, of which $5.5 million was outstanding as of March 31, 2012.