Debt and Financing

Our outstanding debt as of September 30, 2017 consisted of the following:



As of September 30, 2017 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value			Stated Interest Rate			Average Effective Interest Rate
Term Loan	$	599.1		$	(11.0	)	$	(8.5	)	$	579.6		9.7	%	^(a)	10.1	%
ABL Facility	—			—			—			—			N/A			N/A
Secured Second A&R CDA	26.9			—			(0.1		)	26.8			4.3-18.3%			7.5	%
Unsecured Second A&R CDA	73.2			—			(0.3		)	72.9			4.3-18.3%			7.5	%
Lease financing obligations	263.2			—			(1.0		)	262.2			9.0-18.2%			12.0	%
Total debt	$	962.4		$	(11.0	)	$	(9.9	)	$	941.5
Current maturities of Term Loan	(17.0		)	—			—			(17.0		)
Current maturities of lease financing obligations	(11.5		)	—			—			(11.5		)
Long-term debt	$	933.9		$	(11.0	)	$	(9.9	)	$	913.0


(a)	Variable interest rate of 1, 3 or 6-month LIBOR, with a floor of 1.0%, plus a fixed margin of 8.50%.

ABL Facility Availability

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our asset-based loan facility (the

“ABL Facility”) and any prospective net cash flow from operations. As of September 30, 2017, our availability under our ABL Facility was $94.0 million, which is derived by reducing the amount that may be advanced against eligible receivables plus eligible borrowing base cash by certain reserves imposed by the ABL Agent and our $356.0 million of outstanding letters of credit. Of the $94.0 million in availability, we do not expect to access more than $49.0 million (“Managed Accessibility”) based on our springing fixed charge coverage ratio (as set forth in our ABL Facility). Our cash and cash equivalents and Managed Accessibility was $209.8 million as of September 30, 2017.

Term Loan Amendment

On July 26, 2017, the Company entered into Amendment No. 4 (the “Amendment”) to the credit agreement (the “Term Loan Agreement”) governing our term loan facility (the “Term Loan”), which extended the maturity date to July 26, 2022 subject to the extension of the Secured and Unsecured Second Amended and Restated Contribution Deferral Agreement (the “Second A&R CDA”) on or before November 1, 2019 to a date that is at least 91 days after the final maturity date of the Term Loan.

If the Second A&R CDA is not extended, the maturity date of the Term Loan will spring back to November 1, 2019. The Amendment provided that the outstanding term loans under the Term Loan Agreement are satisfied and discharged in full and that the Company incurred new term loans in the aggregate principal amount of $600 million. The Amendment increased the annual principal payments from 1% to 3% per annum and increased the applicable interest rate, at either the applicable LIBOR (subject to a floor of 1%), plus a margin of 8.50% or an alternative base rate (as defined in the Term Loan Agreement) plus a margin of 6.50%. In connection with the Amendment, the Company paid $35.2 million in principal and incurred $9.7 million in original issuance discount and an estimated $8.1 million in transaction costs for third party fees.

The Amendment resulted in a partial extinguishment of $1.5 million in capitalized original issuance discount and unamortized deferred debt issuance costs relating to the existing Term Loan. The $9.7 million in original issuance discount relating to the Amendment was capitalized and will be amortized through interest expense over the life of the Term Loan. Of the $8.1 million in transaction fees, $6.7 million was expensed as debt issuance costs in proportion to the Term Loan that was modified in the third quarter (presented within “Other, net” on the statement of consolidated comprehensive income) and the remaining $1.4 million was capitalized and will be amortized over the life of the Term Loan.

As a result of the extension in the maturity date under the Term Loan, the maturity date of the ABL will extend to June 28, 2021, as provided under Amendment No. 2 to the ABL, provided the final condition to the Term Loan’s extension is met upon the extension of the Second A&R CDA. Otherwise, the maturity date of the ABL is February 13, 2019.

Credit Facility Covenants

The Term Loan Agreement governing our Term Loan has certain financial covenants, as amended on July 26, 2017, that, among other things, restrict certain capital expenditures and require us to comply with a maximum total leverage ratio covenant (defined as Consolidated Total Debt divided by Consolidated Adjusted EBITDA 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, 2017	3.75 to 1.00	September 30, 2019	3.25 to 1.00
December 31, 2017	3.50 to 1.00	December 31, 2019	3.00 to 1.00
March 31, 2018	3.50 to 1.00	March 31, 2020	3.00 to 1.00
June 30, 2018	3.50 to 1.00	June 30, 2020	3.00 to 1.00
September 30, 2018	3.50 to 1.00	September 30, 2020	2.75 to 1.00
December 31, 2018	3.50 to 1.00	December 31, 2020	2.75 to 1.00
March 31, 2019	3.25 to 1.00	March 31, 2021	2.75 to 1.00
June 30, 2019	3.25 to 1.00	June 30, 2021 and thereafter	2.50 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 and other transaction costs related to issuances of debt, non-recurring consulting fees, expenses associated with certain lump sum payments to our union 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, 2017 was 3.52 to 1.00.

We believe that our results of operations will be sufficient to allow us to comply with the covenants in the Term Loan Agreement, fund our operations, increase working capital as necessary to support our planned revenue growth and fund capital expenditures for at least the next twelve months. 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 a slight improvement to our 2016 Adjusted EBITDA. Means for improving our profitability may include streamlining our support structure, as well as ongoing successful implementation and realization of pricing, productivity and efficiency initiatives, in addition to increased volume, some of which are outside of our control.

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, 2017				December 31, 2016
(in millions)	Book Value		Fair value		Book Value		Fair value
Term Loan	$	579.6	$	590.8	$	627.2	$	638.1
Lease financing obligations	262.2		212.3		268.6		259.1
Second A&R CDA	99.7		98.7		101.3		101.8
Total debt	$	941.5	$	901.8	$	997.1	$	999.0

The fair values of the Term Loan and 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, 2017, our operating lease payment obligations through 2030 totaled $282.5 million and are expected to increase as we lease additional revenue equipment. Additionally, for the nine months ended September 30, 2017, we entered into new operating leases for revenue equipment totaling $26.2 million in future lease payments, payable over an average lease term of five years.

Our capital expenditures for the nine months ended September 30, 2017 and 2016 were $70.8 million and $75.4 million, respectively. These amounts were principally used to fund the purchase of used tractors and trailers, to refurbish engines for our revenue fleet, and for capitalized costs to improve our technology infrastructure.