Inventories and Floor Plan Payable

9 Months Ended

Sep. 30, 2019

Inventories and Floor Plan Payable

Inventories and Floor Plan Payable

3. Inventories and Floor Plan Payable

Inventories consisted of the following (in thousands):

	September 30,		December 31,
	2019		2018
Good Sam services and plans	$	—	$	459
New RVs		874,168		1,017,910
Used RVs		163,348		124,527
Products, parts, accessories and miscellaneous		342,698		416,074
	$	1,380,214	$	1,558,970

New and used RV inventory, included in the RV and Outdoor Retail segment, are primarily financed by floor plan arrangements through a syndication of banks. The arrangements 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 London Interbank Offered Rate (“LIBOR”) plus 2.15% as of September 30, 2019 and as of December 31, 2018. LIBOR was 2.10% at September 30, 2019 and 2.35% as of December 31, 2018. Borrowings are tied to specific vehicles and principal is due upon the sale of the related vehicle.

As of September 30, 2019 and December 31, 2018, 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 “Amendment”). The Amendment reduces the total commitment under the Floor Plan Facility to $1.38 billion and extends the maturity date of the Floor Plan Facility from December 12, 2020 to March 15, 2023, among other immaterial changes. 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 September 30, 2019 allowed FR to borrow (a) up to $1.415 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 $60.0 million under the revolving line of credit, which maximum amount outstanding will decrease by $3.0 million on the last day of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2020.

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 income.

The credit agreement governing the Floor Plan Facility contains certain financial covenants. FR was in compliance with all debt covenants at September 30, 2019 and December 31, 2018.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of September 30, 2019 and December 31, 2018 (in thousands):

	September 30,		December 31,
	2019		2018
Floor Plan Facility
Notes payable - floor plan:
Total commitment	$	1,415,000	$	1,415,000
Less: borrowings, net		(693,889)		(885,980)
Less: flooring line aggregate interest reduction account		(156,751)		(97,757)
Additional borrowing capacity		564,360		431,263
Less: accounts payable for sold inventory		(55,804)		(33,928)
Less: purchase commitments		(33,962)		(22,530)
Unencumbered borrowing capacity	$	474,594	$	374,805
Revolving line of credit:	$	60,000	$	60,000
Less borrowings		(46,340)		(38,739)
Additional borrowing capacity	$	13,660	$	21,261
Letters of credit:
Total commitment	$	15,000	$	15,000
Less: outstanding letters of credit		(10,280)		(10,380)
Additional letters of credit capacity	$	4,720	$	4,620