Inventories, net and Notes Payable - Floor Plan, net

3 Months Ended

Mar. 31, 2020

Inventories, net and Notes Payable - Floor Plan, net

Inventories, net and Notes Payable - Floor Plan, net

3. Inventories and Floor Plan Payable

Inventories consisted of the following (in thousands):

	March 31,		December 31,
	2020		2019
Good Sam services and plans	$	38	$	590
New RVs		1,053,802		966,134
Used RVs		151,058		165,927
Products, parts, accessories and other		234,555		225,888
	$	1,439,453	$	1,358,539

New RV inventory, included in the RV and Outdoor Retail segment, is 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 LIBOR plus 2.15% as of March 31, 2020 and December 31, 2019. LIBOR was 1.58% at March 31, 2020 and 1.71% as of December 31, 2019. Borrowings are tied to specific vehicles and principal is due upon the sale of the related vehicle or upon reaching certain aging criteria.

As of March 31, 2020 and December 31, 2019, 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 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 March 31, 2020 allowed FR to borrow (a) up to $1.38 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 $57.0 million under the revolving line of credit, which maximum amount outstanding further decreases by $3.0 million on the last day of each fiscal quarter. The maturity date of the Floor Plan Facility is March 15, 2023.

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 operations.

Management has determined that the credit agreement governing the Floor Plan Facility includes subjective acceleration clauses which could impact debt classification. Management has determined that no events have occurred at March 31, 2020 that would trigger a subjective acceleration clause. Additionally, the credit agreement governing the Floor Plan Facility contains certain financial covenants. FR was in compliance with all debt covenants at March 31, 2020 and December 31, 2019.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of March 31, 2020 and December 31, 2019 (in thousands):

	March 31,		December 31,
	2020		2019
Floor Plan Facility
Notes payable - floor plan:
Total commitment	$	1,379,750	$	1,379,750
Less: borrowings, net		(846,424)		(848,027)
Less: flooring line aggregate interest reduction account		(173,853)		(87,016)
Additional borrowing capacity		359,473		444,707
Less: accounts payable for sold inventory		(32,934)		(27,892)
Less: purchase commitments		(10,133)		(8,006)
Unencumbered borrowing capacity	$	316,406	$	408,809

	March 31,		December 31,
	2020		2019
Revolving line of credit:	$	57,000	$	60,000
Less borrowings		(40,885)		(40,885)
Additional borrowing capacity	$	16,115	$	19,115
Letters of credit:
Total commitment	$	15,000	$	15,000
Less: outstanding letters of credit		(11,175)		(11,175)
Additional letters of credit capacity	$	3,825	$	3,825