Liquidity

For a description of our outstanding debt as of September 30, 2014, please refer to the “Debt and Financing” footnote in our Consolidated Financial Statements.

Credit Facility Covenants

On February 13, 2014, we completed the 2014 Financing Transactions and refinanced the debt associated with our prior credit facilities. We entered into a New Term Loan credit agreement with new financial covenants that, among other things, restricts certain capital expenditures and requires us to maintain a maximum total leverage ratio (defined as Consolidated Total Debt divided by Consolidated Adjusted EBITDA as defined below).

On September 25, 2014, the Company entered into the Credit Agreement Amendment which, among other things, adjusted the maximum permitted total leverage ratio through December 31, 2016 and increased the applicable interest rate over the same period.

The Credit Agreement Amendment resets the total maximum leverage ratio covenants as follows:



Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio	Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio
September 30, 2014	5.25 to 1.00	June 30, 2016	3.75 to 1.00
December 31, 2014	5.25 to 1.00	September 30, 2016	3.75 to 1.00
March 31, 2015	5.00 to 1.00	December 31, 2016	3.50 to 1.00
June 30, 2015	4.75 to 1.00	March 31, 2017	3.25 to 1.00
September 30, 2015	4.50 to 1.00	June 30, 2017	3.25 to 1.00
December 31, 2015	4.25 to 1.00	September 30, 2017	3.25 to 1.00
March 31, 2016	4.00 to 1.00	December 31, 2017 and thereafter	3.00 to 1.00

Upon effectiveness of the Credit Agreement Amendment, each consenting lender received a fee equal to 0.25% of their outstanding exposure, resulting in $1.7 million of fees paid in the third quarter of 2014. These fees have been included in ‘Other Assets’ on the consolidated balance sheet and will be amortized over the remaining life of the New Term Loan.

Consolidated Adjusted EBITDA, defined in our Credit Agreement Amendment as “Consolidated EBITDA,” is a measure that reflects our earnings before interest, taxes, depreciation, and amortization expense, and is further adjusted for, among other things, letter of credit fees, equity-based compensation expense, net gains or losses on property disposals and certain other items, including restructuring professional fees, expenses associated with certain lump sum payments to our International Brotherhood of Teamsters (“IBT”) employees and the results of permitted dispositions and discontinued operations. Consolidated Total Debt, as defined in our Credit Agreement Amendment, is the aggregate principal amount of indebtedness outstanding. Our total leverage ratio for the four consecutive fiscal quarters ending September 30, 2014 was 4.94 to 1.00.

We believe that our results of operations will be sufficient to allow us to comply with the covenants in the Credit Agreement Amendment, fund our operations, increase working capital as necessary to support our planned revenue growth and fund capital expenditures for the next twelve months. In order for us to maintain compliance with the maximum total leverage ratio over the term of the New Term Loan, we must achieve operating results which reflect continuing improvement over our recent results.

Our ability to satisfy our liquidity needs and meet future stepped-up covenants is primarily dependent on improving our profitability. Improvements to our profitability primarily include continued successful implementation and realization of productivity and efficiency initiatives including those identified in the modified labor agreement as well as pricing improvements. Some of these are outside of our control.

In the event our operating results indicate we will not meet our maximum total leverage ratio, we will take action to improve our maximum total leverage ratio which may include paying down our outstanding indebtedness with either cash on hand or from cash proceeds from equity issuances. The issuance of equity is outside of our control and there can be no assurance that we will be able to issue additional equity at terms that are agreeable to us or that we would have sufficient cash on hand to meet the maximum total leverage ratio.

In the event that we fail to comply with any New Term Loan covenant or any New ABL Facility covenant, we would be considered in default, which would enable applicable lenders to accelerate the repayment of amounts outstanding, require the cash collateralization of letters of credit (in the case of the New ABL Facility) and exercise remedies with respect to collateral and we would need to seek an amendment or waiver from the applicable lender groups. In the event that our lenders under our New Term Loan or New ABL Facility demand payment or cash collateralization (in the case of the New ABL Facility), we will not have sufficient cash to repay such indebtedness. In addition, a default under our New Term Loan or New ABL Facility or the applicable lenders exercising their remedies thereunder would trigger cross-default provisions in our other indebtedness and certain other operating agreements. Our ability to amend our New Term Loan or our New ABL Facility or otherwise obtain waivers from the applicable lenders depends on matters that are outside of our control and there can be no assurance that we will be successful in that regard.

Risks and Uncertainties Regarding Future Liquidity

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our New ABL Facility and any prospective net operating cash flows from operations. As of September 30, 2014, we had cash and cash equivalents of $181.4 million, and cash and cash equivalents and amounts able to be drawn on our New ABL Facility totaling $212.9 million. The amount which is actually able to be drawn on our New ABL Facility is limited by certain financial covenants in the New ABL Facility. For the nine months ended September 30, 2014, we used net cash of $26.3 million for our operating activities.

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.

Our New ABL Facility credit agreement, among other things, restricts certain capital expenditures and requires that the Company, in effect, maintain availability of at least 10% of the lesser of the aggregate amount of commitments from all lenders or the borrowing base.

We have a considerable amount of indebtedness. As of September 30, 2014, we had $1,116.8 million in aggregate par value of outstanding indebtedness, the majority of which matures in 2019. 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 2014 for our single-employer pension plans and multi-employer pension funds will be $6.8 million and $23.2 million, respectively. In addition, we have, and will continue to have, substantial operating lease obligations. As of September 30, 2014, our minimum rental expense under operating leases for the remainder of the year is $14.0 million. As of September 30, 2014, our operating lease obligations through 2025 totaled $153.7 million and is expected to increase as we lease additional revenue equipment.

Our capital expenditures for the nine months ended September 30, 2014 and 2013 were $47.6 million and $56.5 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, 2014, we entered into new operating leases for revenue equipment for $11.8 million, payable over the average lease term of three years. In light of our operating results and liquidity needs, we have deferred certain capital expenditures and expect to continue to do so for the remainder of 2014. 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.