arcb_Current folio

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 March 31, 2017

☐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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


	Large accelerated filer ☐		Accelerated filer ☒
	Non-accelerated filer ☐ (Do not check if a smaller reporting company)
	Smaller reporting company ☐		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 May 4, 2017
Common Stock, $0.01 par value		25,835,826 shares

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS


	March 31		December 31
	2017		2016
	(Unaudited)
	(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	82,253	$	114,280
Short-term investments		56,984		56,838
Restricted cash		962		962
Accounts receivable, less allowances (2017 – $5,283; 2016 – $5,437)		258,931		260,643
Other accounts receivable, less allowances (2017 – $875; 2016 – $849)		18,687		22,041
Prepaid expenses		27,012		22,124
Prepaid and refundable income taxes		11,008		9,909
Other		8,226		4,300
TOTAL CURRENT ASSETS		464,063		491,097
PROPERTY, PLANT AND EQUIPMENT
Land and structures		330,909		324,086
Revenue equipment		742,394		743,860
Service, office, and other equipment		155,618		154,119
Software		123,857		120,877
Leasehold improvements		8,993		8,758
		1,361,771		1,351,700
Less allowances for depreciation and amortization		838,147		819,174
PROPERTY, PLANT AND EQUIPMENT, net		523,624		532,526
GOODWILL		108,981		108,875
INTANGIBLE ASSETS, net		79,371		80,507
DEFERRED INCOME TAXES		3,064		2,978
OTHER LONG-TERM ASSETS		65,380		66,095
TOTAL ASSETS	$	1,244,483	$	1,282,078

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	130,750	$	133,301
Accrued expenses		190,829		198,731
Current portion of long-term debt		59,995		64,143
TOTAL CURRENT LIABILITIES		381,574		396,175
LONG-TERM DEBT, less current portion		167,075		179,530
PENSION AND POSTRETIREMENT LIABILITIES		37,541		35,848
OTHER LONG-TERM LIABILITIES		15,844		16,790
DEFERRED INCOME TAXES		50,773		54,680
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2017: 28,193,117 shares; 2016: 28,174,424 shares		282		282
Additional paid-in capital		316,802		315,318
Retained earnings		377,444		386,917
Treasury stock, at cost, 2017: 2,565,399 shares		(80,045)		(80,045)
Accumulated other comprehensive loss		(22,807)		(23,417)
TOTAL STOCKHOLDERS’ EQUITY		591,676		599,055
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,244,483	$	1,282,078

See notes to consolidated financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended
	March 31
	2017		2016
	(Unaudited)
	(in thousands, except share and per share data)
REVENUES	$	651,088	$	621,455

OPERATING EXPENSES		663,341		630,720

OPERATING LOSS		(12,253)		(9,265)

OTHER INCOME (COSTS)
Interest and dividend income		274		401
Interest and other related financing costs		(1,315)		(1,247)
Other, net		647		366
TOTAL OTHER INCOME (COSTS)		(394)		(480)

LOSS BEFORE INCOME TAXES		(12,647)		(9,745)

INCOME TAX BENEFIT		(5,240)		(3,642)

NET LOSS	$	(7,407)	$	(6,103)

LOSS PER COMMON SHARE
Basic	$	(0.29)	$	(0.24)
Diluted	$	(0.29)	$	(0.24)

AVERAGE COMMON SHARES OUTSTANDING
Basic		25,684,475		25,822,522
Diluted		25,684,475		25,822,522

CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.08	$	0.08

See notes to consolidated financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended
	March 31
	2017		2016
	(Unaudited)
	(in thousands)
NET LOSS	$	(7,407)	$	(6,103)

OTHER COMPREHENSIVE INCOME (LOSS), net of tax

Pension and other postretirement benefit plans:
Net actuarial loss, net of tax of: (2017 – $935; 2016 – $2,230)		(1,471)		(3,504)
Pension settlement expense, net of tax of: (2017 – $761; 2016 – $350)		1,196		550
Amortization of unrecognized net periodic benefit costs, net of tax of: (2017 – $401; 2016 – $437)
Net actuarial loss		660		714
Prior service credit		(29)		(29)

Interest rate swap and foreign currency translation:
Change in unrealized income (loss) on interest rate swap, net of tax of: (2017 – $88; 2016 – $353)		135		(546)
Change in foreign currency translation, net of tax of: (2017 – $76 ; 2016 – $371)		119		584

OTHER COMPREHENSIVE INCOME (LOSS), net of tax		610		(2,231)

TOTAL COMPREHENSIVE LOSS	$	(6,797)	$	(8,334)

See notes to consolidated financial statements.

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, 2016	28,174	$	282	$	315,318	$	386,917	2,565	$	(80,045)	$	(23,417)	$	599,055
Net loss							(7,407)							(7,407)
Other comprehensive income, net of tax												610		610
Issuance of common stock under share-based compensation plans	19		—		—									—
Tax effect of share-based compensation plans					(247)									(247)
Share-based compensation expense					1,731									1,731
Dividends declared on common stock							(2,066)							(2,066)
Balance at March 31, 2017	28,193	$	282	$	316,802	$	377,444	2,565	$	(80,045)	$	(22,807)	$	591,676

See notes to consolidated financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended
	March 31
	2017		2016
	(in thousands)
OPERATING ACTIVITIES
Net loss	$	(7,407)	$	(6,103)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		24,258		24,164
Amortization of intangibles		1,136		987
Pension settlement expense		1,957		900
Share-based compensation expense		1,731		1,709
Provision for losses on accounts receivable		442		82
Deferred income tax provision (benefit)		(4,197)		5,212
Gain on sale of property and equipment		(613)		(311)
Changes in operating assets and liabilities:
Receivables		3,345		9,569
Prepaid expenses		(5,174)		(3,998)
Other assets		(3,357)		(2,954)
Income taxes		(1,205)		(10,211)
Accounts payable, accrued expenses, and other liabilities		(9,155)		(6,706)
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,761		12,340

INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings		(12,273)		(13,357)
Proceeds from sale of property and equipment		1,692		2,435
Purchases of short-term investments		(6,223)		(15,745)
Proceeds from sale of short-term investments		6,125		7,840
Capitalization of internally developed software		(2,440)		(2,668)
NET CASH USED IN INVESTING ACTIVITIES		(13,119)		(21,495)

FINANCING ACTIVITIES
Payments on long-term debt		(17,297)		(11,066)
Net change in book overdrafts		(981)		(5,095)
Payment of common stock dividends		(2,066)		(2,088)
Purchases of treasury stock		—		(2,602)
Payments for tax withheld on share-based compensation		(325)		(178)
NET CASH USED IN FINANCING ACTIVITIES		(20,669)		(21,029)

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(32,027)		(30,184)
Cash and cash equivalents and restricted cash at beginning of period		115,242		166,357
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	83,215	$	136,173

NONCASH INVESTING ACTIVITIES
Equipment financed	$	694	$	1,947
Accruals for equipment received	$	440	$	8,486

See notes to consolidated financial statements.

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

ArcBest Corporation® (the “Company”) is the parent holding company of businesses providing integrated logistics solutions. The Company’s operations are conducted through its three reportable operating segments: Asset-Based, which consists of ABF Freight System, Inc. and certain other subsidiaries; ArcBest, the Company’s asset-light logistics operation; and FleetNet. References to the Company in this Quarterly Report on Form 10-Q are primarily to the Company and its subsidiaries on a consolidated basis.

The Asset-Based segment represented approximately 71% of the Company’s total revenues before other revenues and intercompany eliminations for the three months ended March 31, 2017. As of March 2017, approximately 83% of the Asset-Based segment’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 the Asset-Based segment’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, the ArcBest segment 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 two years following the acquisition upon the achievement of certain financial targets. As the LDS acquisition is 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 date 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 transaction and the provisional measurements are subject to change during the measurement period.

Financial Statement Presentation

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 2016 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.

Certain restatements have been made to the prior year’s operating segment data to conform to the current year presentation, reflecting the realignment of the Company’s organizational structure as announced on November 3, 2016. Under the new structure, the segments previously reported as Premium Logistics (Panther), Transportation Management (ABF Logistics), and Household Goods Moving Services (ABF Moving) are consolidated as a single Asset-Light logistics operation under ArcBest. Segment revenues and expenses were adjusted to eliminate certain intercompany charges consistent with the

manner in which they are reported under the new corporate structure. Certain intercompany charges among the previously reported Panther, ABF Logistics, and ABF Moving segments which were previously eliminated in the “Other and eliminations” line, are now eliminated within the ArcBest segment. There was no impact on the Company’s consolidated revenues, operating expenses, operating income, or earnings per share as a result of the restatements.

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the current year presentation. The insurance receivable for the amount of workers’ compensation and third-party casualty claims in excess of self-insurance retention limits, which was previously offset against the reserve included in accrued expenses, has been reclassed to other accounts receivable, resulting in an $8.7 million increase in other accounts receivable and a corresponding increase in accrued expenses in the consolidated balance sheet at December 31, 2016. Amounts totaling $18.6 million related to certain service centers of the Company’s Asset-Based operations previously recorded in leasehold improvements were reclassed to land and structures in the consolidated balance sheet at December 31, 2016. Other reclassifications were made to the consolidated financial statements to apply the provisions of accounting pronouncements adopted during the first quarter of 2017 related to deferred income taxes, share-based compensation, and cash flow classification (see Adopted Accounting Pronouncements within this Note). The Company’s deferred tax assets were reclassed, by jurisdiction, from current to long-term in the consolidated balance sheets. The net change in restricted cash previously presented in financing activities of the Company’s consolidated statements of cash flows was removed and restricted cash was included in the reconciliation of beginning- and end-of-period totals of cash and cash equivalents and restricted cash. Cash paid by the Company when directly withholding shares from an employee’s share-based compensation award for tax-withholding purposes was reclassified from an operating activity within changes in income taxes to a financing activity in the consolidated statements of cash flows. There was no impact on the Company’s consolidated revenues, operating expenses, operating income, or earnings per share as a result of the reclassifications.

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 consolidated financial statements included in Part II, Item 8 of the Company’s 2016 Annual Report on Form 10-K. The following policy became effective for the Company during the three months ended March 31, 2017.

Share-Based Compensation: The fair value of restricted stock awards is determined based upon the closing market price of the Company’s common stock on the date of grant. The restricted stock units generally vest at the end of a five‑year period following the date of grant, except for certain awards granted to non-employee directors that typically vest at the end of a one-year period for awards granted on or after January 1, 2016 and at the end of a three-year period for previous grants, subject to accelerated vesting due to death, disability, retirement, or change in control provisions. When restricted stock units become vested, the Company issues new shares which are subsequently distributed. Dividends or dividend equivalents are paid on certain restricted stock units during the vesting period. The Company recognizes the income tax benefits of dividends on share-based payment awards as income tax expense or benefit in the consolidated statements of operations when awards vest or are settled.

Share based awards are amortized to compensation expense on a straight line basis over the vesting period of awards or over the period to which the recipient first becomes eligible for retirement, whichever is shorter, with vesting accelerated upon death or disability. The Company recognizes forfeitures as they occur.

Adopted Accounting Pronouncements

In the first quarter of 2017, the Company adopted guidance issued by the Financial Accounting Standards Board (the “FASB”) which amended Accounting Standards Codification (“ASC”) ASC Topic 740 with the addition of Balance Sheet Classification of Deferred Taxes. The amendment was retrospectively adopted and resulted in reclassifications to the consolidated balance sheets to present all deferred tax assets and liabilities as noncurrent by jurisdiction.

An amendment to ASC Topic 718, Compensation – Stock Compensation, was issued to simplify the accounting for share-based compensation, which requires the income tax effects of awards to be recognized in the statement of operations when awards vest or are settled and allows employers to make a policy election to account for forfeitures as they occur. The Company adopted the amendment in the first quarter of 2017. As a result of applying the provisions of the amendment, the Company recognized a $0.2 million cumulative effect adjustment to the opening balance of retained earnings for the three months ended March 31, 2017. The Company also made a policy election to account for forfeitures as they occur. The Company may experience volatility in its income tax provision as a result of recording all excess tax benefits and tax deficiencies in the income statement upon settlement of awards, which is primarily during the second quarter of each year. This provision of the amendment related to recognition of excess tax benefits and tax deficiencies was adopted prospectively; therefore, the prior period has not been adjusted for this provision. Cash paid by the Company to taxing authorities on the employee’s behalf for withheld shares was reclassified from an operating activity within changes in accounts payable, accrued expenses, and other liabilities to a financing activity in the consolidated statements of cash flows. The other provisions of the adopted amendment did not have a significant impact on the Company’s consolidated financial statements.

In the first quarter of 2017, the Company also adopted amendments to ASC Topic 230, Statement of Cash Flows, which provide classification guidance for restricted cash and certain cash receipts and cash payments presented in the statement of cash flows. The retrospective adoption of the amendments resulted in reclassification to the consolidated statement of cash flows to include restricted cash in the reconciliation of beginning- and end-of-period totals of cash and cash equivalents. Proceeds from the settlement of corporate-owned life insurance policies will be classified as cash provided by investing activities, and cash payments for premiums on such insurance policies will be classified as cash used in operating activities in the consolidated statements of cash flows.

Accounting Pronouncements Not Yet Adopted

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 plans to adopt this standard on the modified retrospective basis and does not expect a significant impact on the consolidated financial statements.

An amendment to ASC Topic 715, Compensation – Retirement Benefits will require the service cost component of net benefit cost related to benefit plans accounted for under ASC Topic 715 to be included in the same line item or items as other compensation costs arising from services rendered by the related employees and will allow only the service cost component of the net benefit cost to be eligible for capitalization of internal costs. The amendment will also require the other components of net benefit cost, including pension settlement expense, to be presented in other income (costs) rather than in operating income. The amendment 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 and disclosures.

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 and disclosures.

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 consolidated 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.

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:


	March 31		December 31
	2017		2016
	(in thousands)
Cash and cash equivalents
Cash deposits(1)	$	61,067	$	92,520
Variable rate demand notes(1)(2)		578		16,057
Money market funds(3)		20,608		5,703
Total cash and cash equivalents	$	82,253	$	114,280

Short-term investments
Certificates of deposit(1)	$	56,984	$	56,838

Restricted cash(4)
Cash deposits(1)	$	962	$	962

⁽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. At March 31, 2017 and December 31, 2016, cash and cash equivalents totaling $32.6 million and $39.9 million, respectively, were not FDIC insured.

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:


	March 31				December 31
	2017				2016
	(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)		121,444		120,775		138,032		137,503
	$	226,444	$	225,775	$	243,032	$	242,503

⁽¹⁾

The revolving credit facility (the “Credit Facility”) carries a variable interest rate based on LIBOR, plus a margin, that 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).

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.


	March 31, 2017
			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)	$	20,608	$	20,608	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)		2,271		2,271		—		—
	$	22,879	$	22,879	$	—	$	—
Liabilities:
Contingent consideration(3)	$	6,790	$	—	$	—	$	6,790
Interest rate swap(4)		319		—		319		—
	$	7,109	$	—	$	319	$	6,790


	December 31, 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)	$	5,703	$	5,703	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)		2,220		2,220		—		—
	$	7,923	$	7,923	$	—	$	—
Liabilities:
Contingent consideration(3)	$	6,775	$	—	$	—	$	6,775
Interest rate swap(4)		542		—		542		—
	$	7,317	$	—	$	542	$	6,775

⁽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. Included in other long-term assets, with a corresponding liability reported within other long-term liabilities.

⁽³⁾

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 assessments utilize a Monte Carlo simulation with inputs including 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 12.3% as of March 31, 2017. Subsequent changes to the fair value as a result of recurring assessments will be recognized in operating income.

⁽⁴⁾

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 March 31, 2017 and December 31, 2016 and considers the interest rate swap valuation in Level 2 of the fair value hierarchy.

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)

Balances at December 31, 2016	$	6,775
Change in fair value included in operating expenses		15
Balances at March 31, 2017	$	6,790

NOTE C – GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired. Goodwill by reportable operating segment consisted of the following:



	Total		ArcBest		FleetNet
	(in thousands)
Balances at December 31, 2016	$	108,875	$	108,245	$	630
Purchase accounting adjustments(1)		106		106		—
Balances at March 31, 2017	$	108,981	$	108,351	$	630

⁽¹⁾

Goodwill related to the September 2, 2016 acquisition of LDS is based on preliminary information as of March 31, 2017.

Intangible assets consisted of the following:


		March 31, 2017						December 31, 2016
	Weighted-Average			Accumulated		Net				Accumulated		Net
	Amortization Period	Cost		Amortization		Value			Cost	Amortization		Value
	(in years)	(in thousands)						(in thousands)
Finite-lived intangible assets
Customer relationships(1)	14	$	60,431	$	16,450	$	43,981	$	60,431	$	15,350	$	45,081
Driver network	3		3,200		3,200		—		3,200		3,200		—
Other	9		1,032


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets — March 31, 2017 and December 31, 2016	3

	Consolidated Statements of Operations — For the Three Months Ended March 31, 2017 and 2016	4

	Consolidated Statements of Comprehensive Income — For the Three Months Ended March 31, 2017 and 2016	5

	Consolidated Statement of Stockholders’ Equity — For the Three Months Ended March 31, 2017	6

	Consolidated Statements of Cash Flows — For the Three Months Ended March 31, 2017 and 2016	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	48

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	49

Item 1A.	Risk Factors	49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosures	49

Item 5.	Other Information	49

Item 6.	Exhibits	50

SIGNATURES		52