Liquidity

For a description of our outstanding debt, please refer to the "Debt and Financing" footnote to our consolidated financial statements.

Credit Facility Covenants

On November 12, 2013, YRC Worldwide entered into an amendment to its amended and restated credit agreement (the "Credit Agreement Amendment") and its ABL facility (together the "Amendments"), which, among other things, resets future covenants regarding minimum Consolidated EBITDA, maximum Total Leverage Ratio and minimum Interest Coverage Ratio (as defined in Amendments, if applicable) until December 31, 2014 and resets the minimum cash balance requirement.

The covenants as of September 30, 2013 and the amended 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, 2013	$260,000,000	6.0 to 1.00	1.60 to 1.00
December 31, 2013	$245,000,000	5.7 to 1.00	1.50 to 1.00
March 31, 2014	$220,000,000	6.4 to 1.00	1.30 to 1.00
June 30, 2014	$225,000,000	6.5 to 1.00	1.30 to 1.00
September 30, 2014	$245,000,000	6.5 to 1.00	1.40 to 1.00
December 31, 2014	$260,000,000	6.2 to 1.00	1.40 to 1.00

The Credit Agreement Amendment resets the minimum available cash requirement by providing that the minimum cash requirement will be $100.0 million for the period from November 12, 2013 through December 31, 2013, $50.0 million for the period from January 1, 2014 through January 31, 2014 and $100.0 million for the period from February 1, 2014 thereafter at all times; provided that, if Pro Forma Consolidated EBITDA (described below) is greater than or equal to $375.0 million on or prior to February 1, 2014, the minimum available cash requirement will be $50.0 million at all times.

Further, the Credit Agreement Amendments, among other things, (i) includes a new definition of Pro Forma Consolidated EBITDA added for the purposes of the minimum available cash requirement as described above to be calculated by adding to Consolidated EBITDA, subject to certain limitations, the amount of cost savings, operating expense reductions, other operating improvements and initiatives and synergies associated with any restructuring transactions (and implementation thereof) (but not to exceed the actual amount deducted from revenues in determining Consolidated Net Income for any such costs and expenses), in the case of each such restructuring transaction (and implementation thereof), occurring on or after November 12, 2013, and projected by us in good faith to be reasonably anticipated to be realizable within ninety (90) days of the date thereof; (ii) increases the interest rate and commitment fee payable under our credit agreement by 50 basis points; (iii) waives the requirement to continue to cash collateralize letters of credit with existing net cash proceeds received from asset sales up to $12.5 million (including release of such cash proceeds); (iv) requires payment of an amendment fee to each consenting lender of 1.0% of their outstanding exposure; and (v) adds a new “Event of Default” that requires the 6% Convertible Senior Notes to be repaid, refinanced, replaced, restructured or extended on or prior to February 1, 2014 using either cash generated from the sale of qualified equity by the Borrower, certain qualified equity issuances by the Borrower or certain permitted indebtedness.

On November 12, 2013, YRC Receivables, LLC, a wholly-owned subsidiary of the Company, entered into an amendment to the ABL facility, which, among other things, resets the minimum Consolidated EBITDA covenant (as defined in the ABL facility) for each of the remaining test periods in a manner identical to the amendment of minimum Consolidated EBITDA in the Credit Agreement Amendment and increases the interest rate payable under the ABL Facility by 50 basis points. The Company agreed to pay all consenting lenders a fee equal to 1.0% of their outstanding loans and unused commitments.

Consolidated EBITDA, as defined in our Amendments, is a non-GAAP 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 permitted restructuring professional fees, certain one-time cash restructuring charges occurring on or after November 12, 2013 in an aggregate amount not to exceed $40.0 million and results of permitted dispositions and discontinued operations.

Our adjusted EBITDA for the four quarters ended September 30, 2013 was $274.8 million compared to the covenant requirement of $260 million.

Our minimum cash balance as of September 30, 2013 was $181.2 million.

The credit facilities were also amended to obtain relief from any potential going concern language in our independent registered public accounting firm's audit opinion to be delivered in connection with our December 31, 2013 financial statements.

Risks and Uncertainties Regarding Future Liquidity Including Our Ability to Continue as a Going Concern

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our $400 million ABL facility and any prospective net operating cash flows from operations. As of September 30, 2013, we had cash and cash equivalents and availability under the ABL facility totaling $233.7 million with a $388.7 million borrowing base under our ABL facility. For the nine months ended September 30, 2013, our cash flow from operating activities used net cash of $3.0 million.

Our principal uses of cash are to fund our operations, including making contributions to our single-employer pension plans and various multi-employer pension funds, and to meet our other cash obligations including, but not limited to, 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 have a considerable amount of indebtedness. As of September 30, 2013, we had $1,359.1 million in aggregate par value of outstanding indebtedness, which may increase over time as a portion of our indebtedness accrues paid-in-kind interest. Of that amount, $69.4 million matures on February 15, 2014, $325.5 million matures on September 30, 2014 and $664.7 million matures on March 31, 2015. We also have considerable future funding obligations for our single-employer pension plans and various multi-employer pension funds. We expect our funding obligations for the remainder of 2013 for our single-employer pension plans and multi-employer pension funds will be $13.7 million and $22.5 million, respectively. In addition, we have, and will continue to have, substantial operating lease obligations. As of September 30, 2013, our minimum rental expense under operating leases for the remainder of the year is $13.3 million. As of September 30, 2013, our operating lease obligations through 2025 totaled $165.6 million and is expected to increase as we lease additional revenue equipment.

Our capital expenditures for the nine months ended September 30, 2013 and 2012 were $56.5 million and $48.1 million, respectively. These amounts were principally used to fund replacement engines and trailer refurbishments for our revenue fleet and capitalized costs for our network facilities and technology infrastructure. Additionally, for the nine months ended September 30, 2013, we entered into new operating lease commitments for revenue equipment for $44.9 million, payable over the average lease term of six years. In light of our recent operating results and liquidity needs, we have deferred certain capital expenditures and expect to continue to do so for the foreseeable future, including the remainder of 2013. As a result, the average age of our fleet is increasing, which may affect our maintenance costs and operational efficiency unless we are able to obtain suitable lease financing to meet our replacement equipment needs.

In the third quarter of 2013, driven, in part, by a decline of our service levels due to driver shortages and transition issues related to the network optimization plan implemented in May 2013, our YRC Freight reporting segment experienced decreases in our financial performance compared to our management forecast. As a result, we significantly decreased our expectations regarding our future financial performance and entered into the Amendments described above.

The Amended Credit Agreement requires us to repay, refinance, replace, restructure or extend our 6% Convertible Senior Notes on or prior to February 1, 2014 using either cash generated from the sale of qualified equity by the Borrower, certain qualified equity issuances by the Borrower or certain permitted indebtedness. These actions with regard to the 6% Convertible Senior Notes are outside of our control and, as a result, we cannot provide any assurances that we will be successful in taking these actions. In the event that we are unable to take these actions we will need to refinance or restructure our debt or seek an amendment or waiver from our lenders or otherwise we will be in default under our Amended Credit Agreement, which would enable lenders thereunder to accelerate the repayment of amounts outstanding and exercise remedies with respect to collateral. In the event that our lenders under our Amended Credit Agreement demand payment, we will not have sufficient cash to repay such indebtedness. In addition, a default under our credit facilities or the lenders exercising their remedies thereunder would trigger cross-default provisions in our other indebtedness and certain other operating agreements.

We do not expect our liquidity will allow us to retire our borrowings as they mature in September of 2014 and thereafter and therefore we will be required to refinance or restructure the portions of our debt that matures in September of 2014 and March of 2015. Our recent and forecasted operating results may have an adverse effect on our ability to complete such restructuring or refinancing. The refinancing or restructuring of these debt obligations is outside of our control and there can be no assurance that such transaction will occur, or if it does occur, on what terms.

Our ability to continue as a going concern over the next twelve months is dependent on a number of factors, many of which are outside of our control. In the near term, we must repay, refinance, replace, restructure or extend our 6% Convertible Senior Notes on or prior to February 1, 2014 in order to comply with the terms of our Amended Credit Agreement and thereafter we will need to refinance or restructure our other debt obligations prior to their upcoming maturities in 2014 and 2015. Other factors include:


•	achieving forecasted results in order to comply with covenants and other terms of our credit facilities so as to have access to the borrowings available to us under our credit facilities;


•	securing suitable lease financing arrangements to replace revenue equipment;

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generating operating cash flows that are sufficient to meet the minimum cash balance requirement under our credit facilities, cash requirements for pension contributions to our single-employer pension plan and our 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 management will be successful or that such plans will be achieved.

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.