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Inventories and Floor Plan Payables

6 Months Ended

Jun. 30, 2023

3. Inventories and Floor Plan Payables

Inventories consisted of the following (in thousands):


	June 30,		December 31,		June 30,
	2023		2022		2022
Good Sam services and plans	$	565	$	625	$	343
New RVs		1,206,493		1,411,016		1,329,604
Used RVs		651,396		464,310		358,060
Products, parts, accessories and other		218,570		247,907		307,789
	$	2,077,024	$	2,123,858	$	1,995,796

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 (“Floor Plan Lenders”). 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.

As of June 30, 2023, December 31, 2022, and June 30, 2022, FR maintained floor plan financing through the Eighth Amended and Restated Credit Agreement (“Floor Plan Facility”). The Floor Plan Facility at June 30, 2023 allowed FR to borrow (a) up to $1.70 billion under a floor plan facility, (b) up to $30.0 million under a letter of credit facility and (c) up to a maximum amount outstanding of $70.0 million under the revolving line of credit. The maturity date of the Floor Plan Facility is September 30, 2026.

The Floor Plan Facility also includes an accordion feature allowing FR, at its option, to request to increase the aggregate amount of the floor plan notes payable in $50.0 million increments up to a maximum amount of $200.0 million. In July 2023, FR and the Floor Plan Lenders entered into a first amendment to the Floor Plan Facility (“Floor Plan Amendment”) to exercise FR’s existing option under the accordion feature to increase the aggregate amount of the committed floor plan notes payable by $150.0 million to $1.85 billion and reset the accordion feature to allow FR, at its option, to request to increase the aggregate amount of the floor plan notes payable in $50.0 million increments up to a maximum amount of $300.0 million. The Floor Plan Lenders are not under any obligation to provide commitments in respect of any future increase under the accordion feature. Additionally, the Floor Plan Amendment increased the percentage of the aggregate amount of the floor plan notes payable that may be used to finance used RV inventory to 30% from 20%. No incremental funds were drawn at the time of closing of the Floor Plan Amendment.

As of June 30, 2023, December 31, 2022, and June 30, 2022, the applicable interest rate for the floor plan notes payable under the Floor Plan Facility was 7.00%, 6.01%, and 2.93%, respectively. Under the 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 (a) 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, (b) the base rate (as described below) plus the applicable rate of 0.40% to 1.00% determined based on FR’s consolidated current ratio.

As of June 30, 2023, December 31, 2022, and June 30, 2022, the applicable interest rate for revolving line of credit borrowings under the Floor Plan Facility was 7.35%, 6.21%, and 3.13%, respectively. Under the 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 Floor Plan Facility, the revolving line of credit borrowings are limited by a borrowing base calculation, which did not limit the borrowing capacity at June 30, 2023, December 31, 2022, and June 30, 2022.

The Floor Plan Facility includes a flooring line aggregate interest reduction (“FLAIR”) offset account that allows the Company to transfer cash to the Floor Plan Lenders 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 withdraw amounts from the FLAIR offset account subject to the financial covenants under the Floor Plan Facility. As a result of using the FLAIR offset account, the Company experiences a reduction in floor plan interest expense in its condensed consolidated statements of operations. As of June 30, 2023, December 31, 2022, and June 30, 2022, FR had $133.5 million, $217.7 million, and $277.9 million, respectively, in the FLAIR offset account. The maximum FLAIR percentage of outstanding floor plan borrowings is 35% under the Floor Plan Facility. The FLAIR offset account does not reduce the outstanding amount of loans under the Floor Plan Facility for purposes of determining the unencumbered borrowing capacity under the Floor Plan Facility.

Management has determined that the credit agreement governing the Floor Plan Facility includes subjective acceleration clauses, which could impact debt classification. Management believes that no events have occurred at June 30, 2023 that would trigger a subjective acceleration clause. Additionally, the credit agreement governing the Floor Plan Facility contain certain financial covenants. FR was in compliance with all debt covenants at June 30, 2023, December 31, 2022, and June 30, 2022.

The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of June 30, 2023 and December 31, 2022, and June 30, 2022 (in thousands):


	June 30,		December 31,		June 30,
	2023		2022		2022
Floor Plan Facility
Notes payable - floor plan:
Total commitment	$	1,700,000	$	1,700,000	$	1,700,000
Less: borrowings, net of FLAIR offset account		(1,155,356)		(1,319,941)		(1,000,808)
Less: FLAIR offset account		(133,483)		(217,669)		(277,867)
Additional borrowing capacity		411,161		162,390		421,325
Less: short-term payable for sold inventory⁽¹⁾		(66,624)		(33,501)		(78,945)
Less: purchase commitments⁽²⁾		(22,039)		(43,807)		(31,491)
Unencumbered borrowing capacity	$	322,498	$	85,082	$	310,889

Revolving line of credit:	$	70,000	$	70,000	$	70,000
Less: borrowings		(20,885)		(20,885)		(20,885)
Additional borrowing capacity	$	49,115	$	49,115	$	49,115

Letters of credit:
Total commitment	$	30,000	$	30,000	$	30,000
Less: outstanding letters of credit		(11,371)		(11,371)		(11,500)
Additional letters of credit capacity	$	18,629	$	18,629	$	18,500

(1)

The short-term payable represents the amount due for sold inventory. A payment for any floor plan units sold is due within three to ten business days of sale. Due to the short-term nature of these payables, the Company reclassifies the amounts from notes payable‒floor plan, net to accounts payable in the condensed consolidated balance sheets. Changes in the vehicle floor plan payable are reported as cash flows from financing activities in the condensed consolidated statements of cash flows.

(2)	Purchase commitments represent vehicles approved for floor plan financing where the inventory has not yet been received by the Company from the supplier and no floor plan borrowing is outstanding.