Inventories and Floor Plan Payables

12 Months Ended

Dec. 31, 2021

Inventories and Floor Plan Payables

Inventories and Floor Plan Payables

4. Inventories and Floor Plan Payables

Inventories consisted of the following at December 31, 2021 and 2020 (in thousands):

	December 31,		December 31,
	2021		2020
Good Sam services and plans	$	—	$	109
New RVs		1,108,836		691,114
Used RVs		406,398		178,336
Products, parts, accessories and other		277,631		266,786
	$	1,792,865	$	1,136,345

Substantially all of the Company’s new RV inventory and certain of its used RV inventory, included in the RV and Outdoor Retail segment, is financed by a floor plan credit agreement with a syndication of banks. The borrowings under the floor plan credit agreement are collateralized by substantially all of the assets of FreedomRoads, LLC (“FR”), a wholly-owned subsidiary of FreedomRoads, which operates the RV dealerships. The floor plan borrowings are tied to specific vehicles and principal is due upon the sale of the related vehicle or upon reaching certain aging criteria.

In September 2021, FR entered into the Eighth Amended and Restated Credit Agreement (“Post-Amendment Floor Plan Facility”) that amended the Seventh Amended and Restated Credit Agreement (“Pre-Amendment Floor Plan Facility” and collectively the “Floor Plan Facility”) that was previously entered into in December 2017. The Post-Amendment Floor Plan Facility allows FR to borrow (a) up to $1.70 billion of floor plan notes payable, an increase from $1.38 billion under the Pre-Amendment Floor Plan Facility, (b) up to $30.0 million under a letter of credit facility, an increase from $15.0 million under the Pre-Amendment Floor Plan Facility, and (c) up to a maximum amount outstanding of $70.0 million under the revolving line of credit, an increase from $42.0 million under the Pre-Amendment Floor Plan Facility. The Post-Amendment Floor Plan Facility removes the $3.0 million quarterly reduction in the maximum amount outstanding under the revolving line of credit under the Pre-Amendment Floor Plan Facility. The Post-Amendment Floor Plan Facility also includes an accordion feature allowing FR, at its option, to increase the aggregate amount of the floor plan notes payable in $50 million increments up to a maximum amount of $200 million. The lenders under the Post-Amendment Floor Plan Facility are not under any obligation to provide commitments in respect of any such increase. In addition, the maturity of the Post-Amendment Floor Plan Facility was extended to September 2026 from March 2023 under the Pre-Amendment Floor Plan Facility.

As December 31, 2021 and 2020, the applicable interest rate for the floor plan notes payable under the Floor Plan Facility was 1.96% and 2.20%, respectively. Effective October 1, 2021 under the Post-Amendment Floor Plan Facility, at the Company’s option, the floor plan notes payable, and borrowings for letters of credit, in each case, bear interest at a rate per annum equal to the floating Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.90% to 2.50% determined based on FR’s consolidated current ratio, or, the base rate plus the applicable rate of 0.40% to 1.00% determined based on FR’s consolidated current ratio.

As of December 31, 2021 and 2020, the applicable interest rate for revolving line of credit borrowings under the Floor Plan Facility was 2.31% and 2.55%, respectively. Effective October 1, 2021 under the Post-Amendment Floor Plan Facility, revolving line of credit borrowings bear interest at a rate per annum equal to, at the Company’s option, either: (a) a floating BSBY rate, plus 2.25%, in the case of floating BSBY rate loans, or (b) a base rate determined by reference to the greatest of: (i) the federal funds rate plus 0.50%, (ii) the prime rate published by Bank of America, N.A. and (iii) the floating BSBY rate plus 1.75%, plus 0.75%, in the case of base rate loans. Additionally, under the Post-Amendment Floor Plan Facility, the revolving line of credit borrowings are limited by a borrowing base calculation. The applicable interest rate for the revolving line of credit borrowings under the Pre-Amendment Floor Plan Facility was based on one month LIBOR plus 2.40%.

In May 2020, FR entered into a Third Amendment to the Seventh Amended and Restated Credit Agreement that provided FR with a one-time option to request a temporary four-month reduction of the minimum consolidated current ratio at any time during 2020 and the first seven days of 2021. FR did not exercise that option. Effective May 12, 2020 through July 31, 2020, FR was not allowed to draw further Revolving Credit Loans (as defined in the Pre-Amendment Floor Plan Facility).

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 payables under the Floor Plan Facility. These transfers reduce the amount of liability outstanding under the floor plan borrowings 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. As of December 31, 2021 and 2020, FR had $92.1 million and $133.6 million, respectively, in the FLAIR offset account. The Post-Amendment Floor Plan Facility raised the maximum FLAIR percentage of outstanding floor plan borrowings to 35% from 20% under the Pre-Amendment Floor Plan Facility.

Management has determined that the credit agreements governing the Floor Plan Facility include subjective acceleration clauses, which could impact debt classification. Management has determined that no events have occurred at December 31, 2021 that would trigger a subjective acceleration clause. Additionally, the credit agreements governing the Floor Plan Facility contain certain financial covenants. FR was in compliance with all debt covenants at December 31, 2021 and December 31, 2020. In June 2020, FR made a voluntary $20.0 million principal payment on the revolving line of credit. An additional $20.0 million of borrowing on the revolving line of credit was made in November 2021 and was repaid in December 2021.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of December 31, 2021 and December 31, 2020 (in thousands):

	December 31,		December 31,
	2021		2020
Floor Plan Facility:
Notes payable — floor plan:
Total commitment	$	1,700,000	$	1,379,750
Less: borrowings, net		(1,011,345)		(522,455)
Less: flooring line aggregate interest reduction account		(92,108)		(133,639)
Additional borrowing capacity		596,547		723,656
Less: accounts payable for sold inventory		(28,036)		(28,980)
Less: purchase commitments		(34,612)		(39,121)
Unencumbered borrowing capacity	$	533,899	$	655,555
Revolving line of credit	$	70,000	$	48,000
Less: borrowings		(20,885)		(20,885)
Additional borrowing capacity	$	49,115	$	27,115
Letters of credit:
Total commitment	$	30,000	$	15,000
Less: outstanding letters of credit		(11,500)		(11,732)
Additional letters of credit capacity	$	18,500	$	3,268