LONG-TERM DEBT AND FINANCING ARRANGEMENTS

6 Months Ended

Jun. 30, 2012

LONG-TERM DEBT AND FINANCING ARRANGEMENTS

LONG-TERM DEBT AND FINANCING ARRANGEMENTS

NOTE F — LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-Term Debt Obligations

Long-term debt consisted of a Term Loan under the Credit Agreement further described in Financing Arrangements within this Note and 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:

	June 30		December 31
	2012		2011
	($ thousands)
Term Loan (interest rate of 2.0% at June 30, 2012)	$	100,000	$	—
Capital lease obligations (weighted average interest rate of 4.4% at June 30, 2012)	36,746		44,261
Notes payable (weighted average interest rate of 3.1% at June 30, 2012)	43,332		26,751
	180,078		71,012
Less current portion	46,282		24,262
Long-term debt, less current portion	$	133,796	$	46,750

During the six months ended June 30, 2012, ABF financed $21.4 million of road tractors under 36-month notes payable agreements.

Scheduled maturities under the Term Loan and notes payable and future minimum payments under capital lease obligations included in long-term debt as of June 30, 2012 were as follows:

			Term		Capital Lease		Notes
	Total		Loan		Obligations(1)		Payable
	($ thousands)
Due in one year or less	$	51,115	$	12,528	$	21,417	$	17,170
Due after one year through two years	43,639		14,611		11,620		17,408
Due after two years through three years	29,633		16,779		2,497		10,357
Due after three years through four years	21,559		18,888		2,433		238
Due after four years through five years	46,135		45,919		216		—
Due after five years	587		—		587		—
Total payments	192,668		108,725		38,770		45,173
Less amounts representing interest	12,590		8,725		2,024		1,841
Long-term debt	$	180,078	$	100,000	$	36,746	$	43,332

(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:

	June 30		December 31
	2012		2011
	($ thousands)
Land and structures (terminals)	$	1,794	$	1,794
Revenue equipment	111,892		91,925
Service, office and other equipment	1,813		1,813
	115,499		95,532
Less accumulated amortization(1)	38,470		26,759
	$	77,029	$	68,773

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

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 provided to finance a portion of the cost of the acquisition of Panther (see Note C). The Credit Agreement also provides 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. The Term Loan is 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 requires quarterly installment payments commencing September 30, 2012 (in accordance with terms of the Credit Agreement), with remaining amounts outstanding due upon the maturity date of June 15, 2017. Borrowings under the Term Loan can 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 allows for the election of interest at a base rate or LIBOR plus a margin based on the adjusted leverage ratio, as defined, which is measured at the end of each fiscal quarter. The 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 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. As of June 30, 2012 the Company was in compliance with the covenants.

Accounts Receivable Securitization Program

On June 15, 2012, the Company terminated its accounts receivable securitization program with SunTrust Bank. There were no borrowings made during the term of the program, which became effective December 30, 2009, and no borrowings outstanding under the program on the date of termination. The Company paid no penalties to terminate the program.

On June 15, 2012, the Company entered into a replacement accounts receivable securitization program with PNC Bank which provides for cash proceeds of an amount up to $75.0 million. Under this agreement, which matures on June 15, 2015, 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. Advances under the facility 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 June 30, 2012 the Company was in compliance with the covenants. There have been no borrowings under this facility.

The securitization agreement includes a provision under which the Company may request standby letters of credit, primarily in support of workers’ compensation and third-party casualty claims liabilities. The outstanding standby letters of credit reduce the availability of borrowings under the facility. As of June 30, 2012, standby letters of credit of $2.2 million have been issued under the facility, which reduced the available borrowing capacity to $72.8 million and released $2.2 million of cash and short-term investments from restriction under the Company’s collateralized letter of credit facility.

Letter of Credit Agreements

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 $95.6 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 the six months ended June 30, 2012, the Company reduced the restriction on its cash equivalents and short-term investments under the LC Agreements by transferring $26.1 million of previously collateralized letters of credit to a new, uncollateralized bond program. As of June 30, 2012, the Company had $20.0 million of letters of credit outstanding of which $17.3 million were collateralized by restricted cash equivalents and short-term investments under the LC Agreements. The Company had $49.0 million available as of June 30, 2012 for the issuance of letters of credit under the committed LC Agreements subject to the Company’s compliance with the requirements of issuance.

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. As of June 30, 2012, surety bonds outstanding related to the collateralized self-insurance program totaled $13.8 million collateralized by $3.7 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 $36.6 million as of June 30, 2012.