UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2016

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from   to  

Commission file number 000-19969

ARCBEST CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of
incorporation or organization) 71-0673405 (I.R.S. Employer Identification No.)

3801 Old Greenwood Road

Fort Smith, Arkansas 72903

(479) 785-6000

(Address, including zip code, and telephone number, including

area code, of the registrant’s principal executive offices)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒ Yes  ☐No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ☒ Yes  ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐ Yes  ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 3, 2016
Common Stock, $0.01 par value	25,622,506 shares

ARCBEST CORPORATION

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — September 30, 2016 and December 31, 2015	3
	Consolidated Statements of Operations — For the Three and Nine Months Ended September 30, 2016 and 2015	4
	Consolidated Statements of Comprehensive Income — For the Three and Nine Months Ended September 30, 2016 and 2015	5
	Consolidated Statement of Stockholders’ Equity — For the Nine Months Ended September 30, 2016	6
	Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2016 and 2015	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
SIGNATURES		54

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS

	September 30		December 31
	2016		2015
	(Unaudited)
	(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	130,395	$	164,973
Short-term investments		59,346		61,597
Restricted cash		962		1,384
Accounts receivable, less allowances (2016 – $5,118; 2015 – $4,825)		256,316		236,097
Other accounts receivable, less allowances (2016 – $830; 2015 – $1,029)		8,927		6,718
Prepaid expenses		19,622		20,801
Deferred income taxes		39,097		38,443
Prepaid and refundable income taxes		13,934		18,134
Other		4,275		3,936
TOTAL CURRENT ASSETS		532,874		552,083
PROPERTY, PLANT AND EQUIPMENT
Land and structures		296,324		273,839
Revenue equipment		738,350		699,844
Service, office, and other equipment		156,536		145,286
Software		134,312		127,010
Leasehold improvements		27,040		25,419
		1,352,562		1,271,398
Less allowances for depreciation and amortization		822,623		788,351
PROPERTY, PLANT AND EQUIPMENT, net		529,939		483,047
GOODWILL		110,487		96,465
INTANGIBLE ASSETS, net		82,068		76,787
OTHER LONG-TERM ASSETS		65,500		54,527
TOTAL ASSETS	$	1,320,868	$	1,262,909
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	149,971	$	130,869
Income taxes payable		—		91
Accrued expenses		187,822		188,727
Current portion of long-term debt		61,251		44,910
TOTAL CURRENT LIABILITIES		399,044		364,597
LONG-TERM DEBT, less current portion		176,363		167,599
PENSION AND POSTRETIREMENT LIABILITIES		42,520		51,241
OTHER LONG-TERM LIABILITIES		15,159		12,689
DEFERRED INCOME TAXES		92,629		78,055
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2016: 28,122,385 shares; 2015: 27,938,319 shares		281		279
Additional paid-in capital		313,794		309,653
Retained earnings		387,646		376,827
Treasury stock, at cost, 2016: 2,499,879 shares; 2015: 2,080,187 shares		(78,129)		(70,535)
Accumulated other comprehensive loss		(28,439)		(27,496)
TOTAL STOCKHOLDERS’ EQUITY		595,153		588,728
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,320,868	$	1,262,909

See notes to consolidated financial statements.

3

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
	(Unaudited)
	(in thousands, except share and per share data)
REVENUES	$	713,923	$	709,380	$	2,012,005	$	2,018,771
OPERATING EXPENSES		693,553		675,942		1,984,246		1,950,588
OPERATING INCOME		20,370		33,438		27,759		68,183
OTHER INCOME (COSTS)
Interest and dividend income		390		378		1,178		882
Interest and other related financing costs		(1,296)		(1,157)		(3,774)		(3,183)
Other, net		1,091		(613)		2,028		(15)
TOTAL OTHER INCOME (COSTS)		185		(1,392)		(568)		(2,316)
INCOME BEFORE INCOME TAXES		20,555		32,046		27,191		65,867
INCOME TAX PROVISION		7,615		12,892		10,123		26,001
NET INCOME	$	12,940	$	19,154	$	17,068	$	39,866
EARNINGS PER COMMON SHARE
Basic	$	0.50	$	0.73	$	0.66	$	1.52
Diluted	$	0.49	$	0.72	$	0.64	$	1.48
AVERAGE COMMON SHARES OUTSTANDING
Basic		25,724,550		26,009,344		25,779,166		26,033,467
Diluted		26,211,524		26,508,482		26,263,732		26,569,800
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.08	$	0.06	$	0.24	$	0.18

See notes to consolidated financial statements.

4

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2016		2015		2016		2015
	(Unaudited)
	(in thousands)
NET INCOME	$	12,940	$	19,154	$	17,068	$	39,866
OTHER COMPREHENSIVE INCOME (LOSS), net of tax
Pension and other postretirement benefit plans:
Net actuarial gain (loss), net of tax of: (2016 – Three-month period $822, Nine-month period $2,637; 2015 – Three-month period $4,317, Nine-month period $3,968)		1,294		(6,780)		(4,141)		(6,232)
Pension settlement expense, net of tax of: (2016 – Three-month period $313, Nine-month period $882; 2015 – Three-month period $296, Nine-month period $964)		490		466		1,385		1,514
Amortization of unrecognized net periodic benefit costs, net of tax of: (2016 – Three-month period $496, Nine month period $1,410 ; 2015 – Three-month period $330, Nine-month period $1,126)
Net actuarial loss		807		545		2,301		1,854
Prior service credit		(29)		(29)		(87)		(87)
Interest rate swap and foreign currency translation:
Change in unrealized income (loss) on interest rate swap, net of tax of: (2016 – Three-month period $168, Nine month period $278; 2015 – Three-month period $312, Nine-month period $389)		262		(483)		(430)		(603)
Change in foreign currency translation, net of tax of: (2016 – Three-month period $127, Nine-month period $158; 2015 – Three-month period $225, Nine-month period $351)		(420)		(354)		29		(552)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax		2,404		(6,635)		(943)		(4,106)
TOTAL COMPREHENSIVE INCOME	$	15,344	$	12,519	$	16,125	$	35,760

See notes to consolidated financial statements.

5

ARCBEST CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

											Accumulated
				Additional							Other
	Common Stock			Paid-In		Retained		Treasury Stock			Comprehensive		Total
	Shares	Amount		Capital		Earnings		Shares	Amount		Loss		Equity
	(Unaudited)
	(in thousands)
Balance at December 31, 2015	27,938	$	279	$	309,653	$	376,827	2,080	$	(70,535)	$	(27,496)	$	588,728
Net income							17,068							17,068
Other comprehensive loss, net of tax												(943)		(943)
Issuance of common stock under share-based compensation plans	184		2		(2)									—
Tax effect of share-based compensation plans					(2,008)									(2,008)
Share-based compensation expense					6,151									6,151
Purchase of treasury stock								420		(7,594)				(7,594)
Dividends declared on common stock							(6,249)							(6,249)
Balance at September 30, 2016	28,122	$	281	$	313,794	$	387,646	2,500	$	(78,129)	$	(28,439)	$	595,153

See notes to consolidated financial statements.

6

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30
	2016		2015
	(Unaudited)
	(in thousands)
OPERATING ACTIVITIES
Net income	$	17,068	$	39,866
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		73,633		65,142
Amortization of intangibles		3,059		3,079
Pension settlement expense		2,267		2,478
Share-based compensation expense		6,151		6,343
Provision for losses on accounts receivable		787		941
Deferred income tax provision (benefit)		14,199		(7,862)
Gain on sale of property and equipment		(2,581)		(1,691)
Changes in operating assets and liabilities:
Receivables		(18,906)		(14,881)
Prepaid expenses		1,108		2,353
Other assets		(3,655)		505
Income taxes		2,583		14,295
Accounts payable, accrued expenses, and other liabilities		(7,786)		9,006
NET CASH PROVIDED BY OPERATING ACTIVITIES		87,927		119,574
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings		(45,774)		(53,644)
Proceeds from sale of property and equipment		7,296		4,115
Purchases of short-term investments		(51,760)		(48,868)
Proceeds from sale of short-term investments		54,027		25,347
Business acquisitions, net of cash acquired		(24,805)		(5,239)
Capitalization of internally developed software		(7,660)		(6,155)
NET CASH USED IN INVESTING ACTIVITIES		(68,676)		(84,444)
FINANCING ACTIVITIES
Borrowings under credit facilities		—		70,000
Borrowings under accounts receivable securitization program		—		35,000
Payments on long-term debt		(36,579)		(92,136)
Net change in book overdrafts		(3,829)		2,179
Net change in restricted cash		422		(1)
Deferred financing costs		—		(824)
Payment of common stock dividends		(6,249)		(4,740)
Purchases of treasury stock		(7,594)		(10,004)
NET CASH USED IN FINANCING ACTIVITIES		(53,829)		(526)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(34,578)		34,604
Cash and cash equivalents at beginning of period		164,973		157,042
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	130,395	$	191,646
NONCASH INVESTING ACTIVITIES
Equipment financed	$	61,684	$	51,009
Accruals for equipment received	$	9,391	$	7,150

See notes to consolidated financial statements.

7

ARCBEST CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE A – ORGANIZATION AND DESCRIPTION OF THE BUSINESS AND FINANCIAL STATEMENT PRESENTATION

ArcBest Corporation® (the “Company”) is the parent holding company of businesses providing freight transportation services and logistics solutions. The Company’s principal operations are conducted through its Freight Transportation (ABF Freight®) segment, which consists of ABF Freight System, Inc. and certain other subsidiaries. The Company’s other reportable operating segments are the following asset-light logistics businesses: Premium Logistics (Panther), Transportation Management (ABF Logistics®), Emergency & Preventative Maintenance (FleetNet), and Household Goods Moving Services (ABF Moving®). References to the Company in this Quarterly Report on Form 10-Q are primarily to the Company and its subsidiaries on a consolidated basis.

ABF Freight represented approximately 70% of the Company’s total revenues before other revenues and intercompany eliminations for the nine months ended September 30, 2016. As of September 2016, approximately 77% of ABF Freight’s employees were covered under a collective bargaining agreement, the ABF National Master Freight Agreement (the “ABF NMFA”), with the International Brotherhood of Teamsters (the “IBT”), which extends through March 31, 2018. The ABF NMFA included a 7% wage rate reduction upon the November 3, 2013 implementation date, followed by wage rate increases of 2% on July 1 in each of the next three years, which began in 2014, and a 2.5% increase on July 1, 2017; a one-week reduction in annual compensated vacation effective for employee anniversary dates on or after April 1, 2013; the option to expand the use of purchased transportation; and increased flexibility in labor work rules. The ABF NMFA and the related supplemental agreements provide for continued contributions to various multiemployer health, welfare, and pension plans maintained for the benefit of ABF Freight’s employees who are members of the IBT. The estimated net effect of the November 3, 2013 wage rate reduction and the benefit rate increase which was applied retroactively to August 1, 2013 was an initial reduction of approximately 4% to the combined total contractual wage and benefit rate under the ABF NMFA. Following the initial reduction, the combined contractual wage and benefit contribution rate under the ABF NMFA is estimated to increase approximately 2.5% on a compounded annual basis throughout the contract period which extends through March 31, 2018.

On September 2, 2016, ABF Logistics acquired Logistics & Distribution Services, LLC (“LDS”), a private logistics and distribution company, in a transaction valued at $25.0 million (subject to post-closing adjustments), reflecting net cash consideration of $17.0 million paid at closing and an additional $8.0 million of contingent consideration to be paid over the next two years upon the achievement of certain financial targets. On December 1, 2015, ABF Logistics acquired Bear Transportation Services, L.P. (“Bear”), a private, non-asset truckload brokerage firm, for net cash consideration of $24.4 million (subject to post-closing adjustments). On January 2, 2015, ABF Logistics acquired Smart Lines Transportation Group, LLC, a privately-owned truckload brokerage firm, for net cash consideration of $5.2 million. As these acquired businesses are not significant to the Company’s consolidated operating results and financial condition, pro forma financial information and the purchase price allocations of acquired assets and liabilities have not been presented. The results of the acquired operations subsequent to the acquisition dates have been included in the accompanying consolidated financial statements.The Company is in the process of making a final determination of the value of acquired assets and liabilities for the LDS and Bear transactions and the provisional measurements are subject to change during the measurement periods.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable rules and regulations of the Securities and Exchange Commission (the “Commission”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements and, therefore, should be read in conjunction with the audited financial statements and accompanying notes included in the Company’s 2015 Annual Report on Form 10-K and other current filings with the Commission. In the opinion of management, all adjustments (which are of a normal and recurring nature) considered necessary for a fair presentation have been included.

8

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual amounts may differ from those estimates.

Accounting Policies

The Company’s accounting policies are described in Note B to the audited financial statements included in the Company’s 2015 Annual Report on Form 10-K. The following policy became effective for the Company during the three months ended September 30, 2016.

Contingent Consideration: The Company records the estimated fair value of contingent consideration at the acquisition date as part of the purchase price consideration for an acquisition. The fair value of the contingent consideration liability was determined by assessing Level 3 inputs with a discounted cash flow approach using various probability-weighted scenarios. As of September 30, 2016, the fair value of the outstanding contingent consideration of $6.8 million related to the acquisition of LDS was recorded in accrued expenses and other long-term liabilities, based on when expected payouts become due, and the $8.0 million held in escrow for the contingent consideration at the acquisition date was recorded in other long-term assets. The liability for contingent consideration is remeasured at each quarterly reporting period and any change in fair value as a result of the recurring assessments is recognized in operating income.

Adopted Accounting Pronouncements

In the first quarter of 2016, the Company adopted guidance issued by the Financial Accounting Standards Board (the “FASB”) which amended Accounting Standards Codification (“ASC”) Topic 835, Interest – Imputation of Interest, and addresses the presentation of debt issuance costs in the balance sheet. The Company’s debt issuance costs related to its revolving credit agreements continue to be presented as an asset, as permitted, and amortized over the term of the agreements within interest expense. The new guidance did not result in retrospective adjustments to the consolidated financial statements or disclosures.

During first quarter 2016, the Company adopted amended ASC Topic 805, Business Combinations, issued by the FASB. The amendment eliminated the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively and instead recognize measurement-period adjustments during the period in which it determines the amount of the adjustments, including the effect on earnings of any amounts it would have recorded in previous periods if the accounting had been completed at the acquisition date. The amendment was prospectively adopted and did not result in significant adjustments to financial statements or disclosure presentation.

Accounting Pronouncements Not Yet Adopted

ASC Topic 740 was amended with the addition of Balance Sheet Classification of Deferred Taxes. The amendment is effective for the Company beginning January 1, 2017. The update will result in all deferred tax assets and liabilities being classified as noncurrent in the consolidated balance sheets.

An amendment to ASC Topic 718, Compensation – Stock Compensation, was issued to simplify the accounting for share-based compensation, which will require the income tax effects of awards to be recognized in the statement of operations when awards vest or are settled and will allow employers to make a policy election to account for forfeitures as they occur. The amendment is effective for the Company beginning January 1, 2017. The Company is currently assessing the impact this update will have on the consolidated financial statements or disclosures.

ASC Topic 606, which amends the guidance in former ASC Topic 605, Revenue Recognition, provides a single comprehensive revenue recognition model for all contracts with customers and contains principles to apply to determine the measurement of revenue and timing of when it is recognized. The standard is effective for the Company on January 1, 2018. The Company is evaluating the impact of the new standard on the consolidated financial statements.

9

An amendment to ASC Topic 230, Statement of Cash Flows, which provides classification guidance for certain cash payments and receipts presented in the statement of cash flows, is effective for the Company beginning January 1, 2018. The Company is currently assessing the impact this update will have on the consolidated financial statements.

ASC Topic 842, Leases, which is effective for the Company beginning January 1, 2019, will require leases with a term greater than twelve months to be reflected as liabilities with associated right-of-use assets in the Company’s consolidated balance sheet. The Company is evaluating the impact of the new standard on the consolidated financial statements.

An amendment to ASC Topic 326, Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments, is effective for the Company beginning January 1, 2020. The Company is currently assessing the impact this update will have on the Company’s financial statements or disclosures.

Management believes that there is no other new accounting guidance issued but not yet effective that is relevant to the Company’s current financial statements. However, there are new proposals under development by the standard setting bodies which, if and when enacted, may have a significant impact on the Company’s financial statement disclosures, including changes in disclosure requirements for income taxes and defined benefit plans.

NOTE B – FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial Instruments

The following table presents the components of cash and cash equivalents, short-term investments, and restricted funds:

	September 30		December 31
	2016		2015
	(in thousands)
Cash and cash equivalents
Cash deposits(1)	$	102,598	$	110,279
Variable rate demand notes(1)(2)		19,994		29,790
Money market funds(3)		7,803		24,904
Total cash and cash equivalents	$	130,395	$	164,973
Short-term investments
Certificates of deposit(1)	$	59,346	$	61,597
Restricted cash(4)
Cash deposits(1)	$	962	$	1,384

⁽¹⁾ Recorded at cost plus accrued interest, which approximates fair value.

⁽²⁾ Amounts may be redeemed on a daily basis with the original issuer.

⁽³⁾ Recorded at fair value as determined by quoted market prices (see amounts presented in the table of financial assets and liabilities measured at fair value within this Note).

⁽⁴⁾ Amounts restricted for use are subject to change based on the requirements of the Company’s collateralized facilities (see Note E).

The Company’s long-term investment financial instruments are presented in the table of financial assets and liabilities measured at fair value within this Note.

Concentrations of Credit Risk of Financial Instruments

The Company is potentially subject to concentrations of credit risk related to its cash, cash equivalents, and short-term investments. The Company reduces credit risk by maintaining its cash deposits primarily in FDIC-insured accounts and placing its unrestricted short-term investments primarily in FDIC-insured certificates of deposit. However, certain cash deposits and certificates of deposit may exceed federally insured limits. Cash and cash equivalents totaling $39.0 million and $69.9 million were not FDIC insured at September 30, 2016 and December 31, 2015, respectively.

10

Fair Value Disclosure of Financial Instruments

Fair value disclosures are made in accordance with the following hierarchy of valuation techniques based on whether the inputs of market data and market assumptions used to measure fair value are observable or unobservable:

· Level 1 — Quoted prices for identical assets and liabilities in active markets.

· Level 2 — Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

· Level 3 — Unobservable inputs (Company’s market assumptions) that are significant to the valuation model.

Fair value and carrying value disclosures of financial instruments are presented in the following table:

	September 30				December 31
	2016				2015
	(in thousands)
		Carrying		Fair		Carrying		Fair
		Value		Value		Value		Value
Credit Facility(1)	$	70,000	$	70,000	$	70,000	$	70,000
Accounts receivable securitization borrowings(2)		35,000		35,000		35,000		35,000
Notes payable(3)		131,882		131,822		106,703		106,495
	$	236,882	$	236,822	$	211,703	$	211,495

⁽¹⁾ The revolving credit facility (the “Credit Facility”) under the Company’s Amended and Restated Credit Agreement carries a variable interest rate based on LIBOR, plus a margin. The Credit Facility is considered to be priced at market for debt instruments having similar terms and collateral requirements (Level 2 of the fair value hierarchy).

⁽²⁾ Borrowings under the Company’s accounts receivable securitization program carry a variable interest rate based on LIBOR, plus a margin. The borrowings are considered to be priced at market for debt instruments having similar terms and collateral requirements (Level 2 of the fair value hierarchy).

⁽³⁾ Fair value of the notes payable was determined using a present value income approach based on quoted interest rates from lending institutions with which the Company would enter into similar transactions (Level 2 of the fair value hierarchy).

11

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the assets and liabilities that are measured at fair value on a recurring basis.

	September 30, 2016
			Fair Value Measurements Using
			Quoted Prices		Significant		Significant
			In Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Assets:
Money market funds(1)(3)	$	7,803	$	7,803	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)(3)		2,072		2,072		—		—
	$	9,875	$	9,875	$	—	$	—
Liabilities:
Contingent consideration(4)	$	6,775	$	—	$	—	$	6,775
Interest rate swap(5)		1,605		—		1,605		—
	$	8,380	$	—	$	1,605	$	6,775

	December 31, 2015
			Fair Value Measurements Using
			Quoted Prices		Significant		Significant
			In Active		Observable		Unobservable
			Markets		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Assets:
Money market funds(1)(3)	$	24,904	$	24,904	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)(3)		2,127		2,127		—		—
	$	27,031	$	27,031	$	—	$	—
Liabilities:
Interest rate swap(5)	$	897	$	—	$	897	$	—

⁽¹⁾ Included in cash and cash equivalents.

⁽²⁾ Nonqualified deferred compensation plan investments consist of U.S. and international equity mutual funds, government and corporate bond mutual funds, and money market funds which are held in a trust with a third-party brokerage firm. Quoted market prices are used to determine fair values of the investments which are included in other long-term assets, with a corresponding liability reported in other long-term liabilities.

⁽³⁾ Fair value measured using quoted prices of identical assets in active markets.

⁽⁴⁾ Included in accrued expenses and other long-term liabilities, based on when expected payouts become due. The estimated fair value of contingent consideration for an earn-out agreement related to the September 2016 acquisition of LDS was determined by assessing Level 3 inputs with a discounted cash flow approach using various probability-weighted scenarios. The Level 3 inputs include scenarios of estimated revenues and gross margins to be achieved for the applicable performance periods, probability weightings assigned to the performance scenarios, and the discount rate applied, which was 11.5% as of September 30, 2016. Subsequent changes to the fair value as a result of recurring assessments will be recognized in operating income.

⁽⁵⁾ Included in other long-term liabilities. The interest rate swap fair value was determined by discounting future cash flows and receipts based on expected interest rates observed in market interest rate curves adjusted for estimated credit valuation considerations reflecting nonperformance risk of the Company and the counterparty, which are considered to be in Level 3 of the fair value hierarchy. The Company assessed Level 3 inputs as insignificant to the valuation at September 30, 2016 and December 31, 2015 and considers the interest rate swap valuation in Level 2 of the fair value hierarchy.

12

The following table provides the changes in fair value of the liabilities measured at fair value using inputs categorized in Level 3 of the fair value hierarchy:

Contingent Consideration

(in thousands)