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
	2015		2014
	(in thousands)
Credit Facility (interest rate of 1.4% at September 30, 2015)	$	70,000	$	—
Term Loan(1)		—		70,000
Accounts receivable securitization borrowings (interest rate of 1.0% at September 30, 2015)		35,000		—
Notes payable (weighted-average interest rate of 1.9% at September 30, 2015)		85,758		56,759
Capital lease obligations (weighted-average interest rate of 5.8% at September 30, 2015)		845		971
		191,603		127,730
Less current portion		35,050		25,256
Long-term debt, less current portion	$	156,553	$	102,474

⁽¹⁾

The Term Loan was converted to the Credit Facility on January 2, 2015.

Scheduled maturities of long-term debt obligations as of September 30, 2015 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	$	38,008	$	1,171	$	434	$	36,192	$	211
Due after one year through two years		36,955		1,513		606		34,619		217
Due after two years through three years		53,947		1,814		35,180		16,729		224
Due after three years through four years		2,643		2,074		—		339		230
Due after four years through five years		70,645		70,567		—		—		78
Total payments		202,198		77,139		36,220		87,879		960
Less amounts representing interest		10,595		7,139		1,220		2,121		115
Long-term debt	$	191,603	$	70,000	$	35,000	$	85,758	$	845

⁽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
	2015		2014
	(in thousands)
Revenue equipment	$	109,379	$	88,591
Land and structures (terminals)		1,794		1,794
Service, office, and other equipment		255		255
Total assets securing notes payable or held under capital leases		111,428		90,640
Less accumulated depreciation and amortization(1)		20,340		26,305
Net assets securing notes payable or held under capital leases	$	91,088	$	64,335

⁽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 the Company’s credit agreement (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement refinanced the $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 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 on January 2, 2020; 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, and purchases and sales of assets. The Company was in compliance with the covenants under the Amended and Restated Credit Agreement at September 30, 2015.

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, 2015. The fair value of the interest rate swap of $1.6 million and $0.6 million was recorded in other long-term liabilities in the consolidated balance sheet at September 30, 2015 and December 31, 2014, respectively. At September 30, 2015, the unrealized loss on the interest rate swap instrument was reported as a component of accumulated other comprehensive income, 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, 2015 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, 2015.

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 with PNC Bank 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, 2015, $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, 2015.

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, 2015, standby letters of credit of $19.4 million have been issued under the program, which reduced the available borrowing capacity to $45.6 million.

Letter of Credit Agreements and Surety Bond Programs

As of September 30, 2015, the Company had letters of credit outstanding of $21.3 million (including $19.4 million issued under the accounts receivable securitization program), of which $1.4 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, 2015, surety bonds outstanding related to the self-insurance program totaled $45.0 million.

Notes Payable and Capital Leases

ABF Freight has financed the purchase of certain revenue equipment through promissory note arrangements, including $38.3 million and $51.0 million of revenue equipment during the three and nine months ended September 30, 2015. The Company has financed revenue equipment, real estate, and certain other equipment through capital lease agreements, but did not enter into such agreements in the nine months ended September 30, 2015.

ABF Freight financed the purchase of an additional $6.2 million of revenue equipment through promissory note arrangements during October 2015.