Liquidity

Credit Facility Amendments

On April 27, 2012, we entered into an amendment to our amended and restated credit agreement, which reset the minimum Consolidated EBITDA, maximum Total Leverage Ratio and minimum Interest Coverage Ratio covenants (as defined in the amended and restated credit agreement). Among other things, the amendment also (i) permits the sale of certain specified parcels of real estate without counting such asset sales against the annual $25.0 million limit on asset sales and permits us to retain the net cash proceeds from such asset sales for the payment or settlement of workers’ compensation and bodily injury and property damage claims and (ii) allows us to addback to Consolidated EBITDA, for purposes of the applicable financial covenants the fees, costs and expenses incurred in connection with the amendment, the ABL facility amendment and our contribution deferral agreement.

The covenants for each of the remaining test periods are as follows:



Four Consecutive Fiscal Quarters Ending	Minimum Consolidated EBITDA	Maximum Total Leverage Ratio	Minimum Interest Coverage Ratio
September 30, 2012	$155,000,000	9.6 to 1.00	0.95 to 1.00
December 31, 2012	$170,000,000	8.6 to 1.00	1.05 to 1.00
March 31, 2013	$200,000,000	7.4 to 1.00	1.20 to 1.00
June 30, 2013	$235,000,000	6.5 to 1.00	1.45 to 1.00
September 30, 2013	$260,000,000	6.0 to 1.00	1.60 to 1.00
December 31, 2013	$275,000,000	5.7 to 1.00	1.65 to 1.00
March 31, 2014	$300,000,000	5.1 to 1.00	1.80 to 1.00
June 30, 2014	$325,000,000	4.8 to 1.00	1.90 to 1.00
September 30, 2014	$355,000,000	4.6 to 1.00	2.10 to 1.00
December 31, 2014	$365,000,000	4.4 to 1.00	2.15 to 1.00

Minimum Consolidated EBITDA, as defined in our credit facilities, is a measure that reflects our earnings before interest, taxes, depreciation, and amortization expense, and further adjusted for letter of credit fees, equity-based compensation expense, net gains or losses on property disposals and certain other items, including restructuring professional fees and results of permitted dispositions and discontinued operations. We were in compliance with each of these covenants as of September 30, 2012.

Risk and Uncertainties Regarding Future Liquidity

Our principal sources of liquidity are cash and cash equivalents and available borrowings under our $400 million ABL facility as well as any prospective net operating cash flows resulting from improvements in operations. In addition, we have generated liquidity through the sale and leaseback of assets and the disposal of property, assets and lines of business. As of September 30, 2012, we had cash and cash equivalents and availability under the ABL facility of $237.5 million and the borrowing base under our ABL facility was $375.9 million.

Our principal uses of cash are to fund our operations, including making contributions to our single-employer pension plans and the multi-employer pension funds, and to meet our other cash obligations, including paying cash interest and principal on our funded debt, payments on our equipment leases, letter of credit fees under our credit facilities and funding capital expenditures. We are also required, under the terms of our credit facilities, to maintain a minimum cash balance of at least $50.0 million. This requirement gradually increases to $120.0 million starting in August of 2013, a portion of which must be used to pay the outstanding balance of our 6% convertible senior notes, which mature in February of 2014.

For the nine months ended September 30, 2012, our cash flow from operating activities used net cash of $48.0 million, and we reported a net loss of $101.2 million. In the nine months ended September 30, 2012, our operating revenues increased by $25.4 million compared to the same period in 2011 and our operating loss decreased by $94.2 million in the nine months ended September 30, 2012 compared to the same period in 2011.

We have a considerable amount of indebtedness, a substantial portion of which will mature in late 2014 or early 2015. As of September 30, 2012, we had $1,377.4 million in aggregate principal amount of outstanding indebtedness, which will increase over time as we continue to accrue paid-in-kind interest on our Series A and Series B Notes. Our level of indebtedness increases the risk that we may be unable to generate cash sufficient to service the indebtedness or pay principal when due. Although we are not required to pay cash interest on our Series A and Series B Notes, accrued interest is added to the principal amount payable at maturity. We also have considerable future funding obligations for our single-employer pension plans and the multi-employer pension funds. We expect our funding obligations for the remainder of the year for our single-employer pension plans and multi-employer pension funds will be $9.1 million and $21.7 million, respectively. In addition, we have, and will continue to have, substantial operating lease obligations. As of September 30, 2012, our minimum rental expense under operating leases for the remainder of 2012 is $12.3 million. As of September 30, 2012, our operating lease obligations through 2025 totaled $150.8 million.

Our capital expenditures for the nine months ended September 30, 2012 and 2011 were $48.1 million and $36.1 million, respectively. These amounts were principally used to fund replacement engines and trailer refurbishments for our revenue fleet, capitalized costs for our network facilities and technology infrastructure. Additionally, for the nine months ended September 30, 2012, we entered into new operating lease commitments for $55.1 million, payable over the average lease term of 3 years. In light of our recent operating results and liquidity needs, we have deferred the majority of capital expenditures and expect to continue to do so for the foreseeable future, including the remainder of 2012. As a result, the average age of our fleet has increased.

We expect that our cash and cash equivalents, improvements in operating results we are working to achieve, retention of cash proceeds from asset sales and availability under our credit facilities will be sufficient to allow us to comply with the financial covenants in our credit facilities, fund our operations, increase working capital as necessary to support any revenue growth and fund planned capital expenditures for the foreseeable future, including the next twelve months. Our ability to satisfy our liquidity needs over the next twelve months is dependent on a number of factors, many of which are outside of our control. These include:


•	we must achieve improvements in our operating results, which rely upon pricing and shipping volumes and may, in part, rely upon general economic factors, particularly in market segments where we have a significant concentration of customers;


•	we must continue to comply with covenants and other terms of our credit facilities so as to have access to the borrowings available to us under them;


•	we must complete real estate sale transactions as anticipated;


•	we must continue to defer purchases of replacement revenue equipment or secure suitable operating leases for such equipment;


•	we must continue to implement and realize cost savings measures to match our costs with business levels in a manner that does not harm operations and our productivity and efficiency initiatives must be successful;


•	we must continue to carefully manage receipts and disbursements, including amounts and timing, focusing on days sales outstanding for trade receivables and managing days outstanding for trade payables; and

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we must be able to generate operating cash flows that are sufficient to meet the minimum cash balance requirement under our credit facilities, cash requirements for pension contributions to single-employer pension plans and multi-employer pension funds, cash interest and principal payments on our funded debt, payments on our equipment leases, letter of credit fees under our credit facilities and for capital expenditures or additional lease payments for new revenue equipment.

There can be no assurance that we will be successful or that these plans will be achieved. We expect to continue to monitor our liquidity, work to alleviate these uncertainties and address our cash needs through a combination of one or more of the following actions:


•	we will continue to aggressively seek additional and return business from customers;


•	we will continue to attempt to reduce our escrow deposits and letter of credit collateral requirements related to our self-insurance programs;


•	if appropriate, we may sell additional equity or pursue other capital market transactions; and


•	we may consider selling additional assets or business lines, which would require lenders’ consent in most cases.

While we have experienced consecutive quarters of operating income during the second and third quarters of 2012, we have still experienced net losses and operating cash flow deficits. Our ability to continue as a going concern is dependent on many factors, including among others, improvements in our operating results necessary to comply with the financial covenants in our credit facilities. These conditions raise significant uncertainty about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of the foregoing uncertainties.