Debt and Financing

Our outstanding debt as of September 30, 2016 consisted of the following:



As of September 30, 2016 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value			Stated Interest Rate			Average Effective Interest Rate
Term Loan	$	680.8		$	(3.2	)	$	(9.7	)	$	667.9		8.00	%	^(a)	8.20	%
ABL Facility	—			—			—			—			N/A			N/A
Secured Second A&R CDA	29.0			—			(0.2		)	28.8			3.3-18.3%			7.3	%
Unsecured Second A&R CDA	73.2			—			(0.4		)	72.8			3.3-18.3%			7.3	%
Lease financing obligations	272.4			—			(1.4		)	271.0			9.0-18.2%			12.0	%
Total debt	$	1,055.4		$	(3.2	)	$	(11.7	)	$	1,040.5
Current maturities of Term Loan	(7.0		)	—			—			(7.0		)
Current maturities of lease financing obligations	(9.6		)	—			—			(9.6		)
Long-term debt	$	1,038.8		$	(3.2	)	$	(11.7	)	$	1,023.9

^(a) Variable interest rate of 1, 3 or 6-month LIBOR, with a floor of 1.0% plus a fixed margin of 7.0%.

ABL Facility Amendment

On June 28, 2016, the Company entered into Amendment No. 2 to the asset based loan facility (the “ABL Facility”), which amended several key terms, to include: (1) a 50 bps reduction in interest spread from LIBOR plus 2.25%, to LIBOR plus 1.75%, (2) the option to extend maturity from February 13, 2019 to June 28, 2021, subject to the refinancing, replacement or extension beyond June 28, 2021 of the credit agreement (the “Term Loan Agreement”) governing our term loan facility (the “Term Loan”), and (3) increased flexibility to manage and optimize the amount of cash included in the borrowing base by (i) providing the Company more flexibility as to the timing of testing the eligible borrowing base cash and (ii) reducing the availability limits under our ABL Facility to 10% of the collateral line cap from 15%.

ABL Facility Availability

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our ABL Facility and net cash flow from operations. As of September 30, 2016, we had cash and cash equivalents of $276.4 million and the borrowing base and maximum availability on our ABL Facility were $412.6 million and $55.0 million, respectively. The maximum availability is calculated in accordance with the terms of the ABL Facility and is derived by reducing the borrowing base by our $357.6 million of outstanding letters of credit. While our ABL Agreement permits us to access maximum availability subject to certain financial covenant restrictions (which restrictions did not limit our availability as of September 30, 2016), the maximum amount we expect to access on our ABL Facility at any time is maximum availability less the lower of 10% of the borrowing base ($41.3 million at September 30, 2016) or 10% of the facility size ($45.0 million at September 30, 2016). Thus, of the $55.0 million in maximum availability, we expected to access no more than $13.7 million as of September 30, 2016 (“Managed Accessibility”). As a result, we had cash and cash equivalents and Managed Accessibility of $290.1 million as of September 30, 2016.

Credit Facility Covenants

The Term Loan Agreement governing our Term Loan has certain financial covenants, as amended in September 2014, that, among other things, restricts certain capital expenditures and requires us to not exceed a maximum total leverage ratio (defined as Consolidated Total Debt divided by Consolidated Adjusted EBITDA, each as defined below).

Our total maximum leverage ratio covenants are as follows:



Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio	Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio
September 30, 2016	3.75 to 1.00	June 30, 2017	3.25 to 1.00
December 31, 2016	3.50 to 1.00	September 30, 2017	3.25 to 1.00
March 31, 2017	3.25 to 1.00	December 31, 2017 and thereafter	3.00 to 1.00

Consolidated Adjusted EBITDA, defined in our Term Loan Agreement 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, restructuring professional fees, non-recurring consulting fees, expenses associated with certain lump sum payments to our International Brotherhood of Teamsters (“IBT”) employees and the gains or losses from permitted dispositions and discontinued operations. Consolidated Total Debt, as defined in our Term Loan Agreement, is the aggregate principal amount of indebtedness outstanding. Our total leverage ratio for the four consecutive fiscal quarters ending September 30, 2016 was 3.45 to 1.00.

To maintain compliance with the maximum total leverage ratio over the tenor of the Term Loan and satisfy our liquidity needs, we would have to achieve operating results that reflect significant improvement over our third quarter 2016 results. Means for improving our profitability may include ongoing successful implementation and realization of pricing, productivity and efficiency initiatives, as well as increased volume, some of which are outside of our control.

Although we are currently in compliance with the maximum total leverage ratio covenant under our Term Loan Agreement, the covenant levels tighten in the coming quarters. Our internal forecasts currently indicate that, absent one or more specific actions as described below, we could fail to comply with this covenant in one or more quarters over the next 12 months. As a result, we may decide to pay down a sufficient amount of the Term Loan to comply with the covenant. We currently believe that the results of our operations will be sufficient to allow us to make such payments and fund our operations for the next twelve months. However, we may also be required to pursue certain actions, including but not limited to reducing capital expenditures, curtailing actions relating to our planned revenue growth and/or seeking other cost reductions. Some of those actions might adversely affect our operations and financial performance over the long-term.

Alternatively, we may seek an amendment to the Term Loan that would modify the covenant or pursue some other corporate finance transaction that would reduce our total leverage so that we would remain in compliance. There can be no assurance that we will be successful in obtaining such relief.

Fair Value Measurement

The book value and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:



	September 30, 2016				December 31, 2015
(in millions)	Book Value		Fair value		Book Value		Fair value
Term Loan	$	667.9	$	655.5	$	669.0	$	594.6
Lease financing obligations	271.0		268.3		276.3		282.9
Second A&R CDA	101.6		98.4		117.1		102.1
Total debt	$	1,040.5	$	1,022.2	$	1,062.4	$	979.6

The fair values of the Term Loan and the Secured and Unsecured Second Amended and Restated Contribution Deferral Agreement (the “Second A&R CDA”) were estimated based on observable prices (level two inputs for fair value measurements). The fair value of the lease financing obligations is estimated using a publicly traded secured loan with similar characteristics (level three input for fair value measurement).

Leases

As of September 30, 2016, our operating lease payment obligations through 2030 totaled $323.8 million and are expected to increase as we lease additional revenue equipment. Additionally, for the nine months ended September 30, 2016, we entered into new operating leases for revenue equipment totaling $95.2 million in future lease payments, payable over an average lease term of five years.

Our capital expenditures for the nine months ended September 30, 2016 and 2015 were $75.4 million and $71.8 million, respectively. These amounts were principally used to pay capitalized costs for technology infrastructure, to refurbish engines for our revenue fleet, and to fund the purchase of used tractors and trailers.