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 September 30, 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.)

8401 McClure Drive

Fort Smith, Arkansas 72916

(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 November 3, 2017
Common Stock, $0.01 par value		25,636,850 shares

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARCBEST CORPORATION

CONSOLIDATED BALANCE SHEETS


	September 30		December 31
	2017		2016
	(Unaudited)
	(in thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	109,034	$	114,280
Short-term investments		57,052		56,838
Restricted cash		—		962
Accounts receivable, less allowances (2017 – $6,313; 2016 – $5,437)		301,941		260,643
Other accounts receivable, less allowances (2017 – $906; 2016 – $849)		15,337		22,041
Prepaid expenses		22,156		22,124
Prepaid and refundable income taxes		4,673		9,909
Other		8,834		4,300
TOTAL CURRENT ASSETS		519,027		491,097
PROPERTY, PLANT AND EQUIPMENT
Land and structures		340,889		324,086
Revenue equipment		773,859		743,860
Service, office, and other equipment		168,627		154,119
Software		127,109		120,877
Leasehold improvements		9,228		8,758
		1,419,712		1,351,700
Less allowances for depreciation and amortization		850,054		819,174
PROPERTY, PLANT AND EQUIPMENT, net		569,658		532,526
GOODWILL		108,981		108,875
INTANGIBLE ASSETS, net		77,103		80,507
DEFERRED INCOME TAXES		2,747		2,978
OTHER LONG-TERM ASSETS		66,916		66,095
TOTAL ASSETS	$	1,344,432	$	1,282,078

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	147,889	$	133,301
Income taxes payable		167		—
Accrued expenses		202,408		198,731
Current portion of long-term debt		62,837		64,143
TOTAL CURRENT LIABILITIES		413,301		396,175
LONG-TERM DEBT, less current portion		200,181		179,530
PENSION AND POSTRETIREMENT LIABILITIES		40,168		35,848
OTHER LONG-TERM LIABILITIES		16,585		16,790
DEFERRED INCOME TAXES		60,632		54,680
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, authorized 70,000,000 shares; issued 2017: 28,478,150 shares; 2016: 28,174,424 shares		285		282
Additional paid-in capital		317,677		315,318
Retained earnings		403,868		386,917
Treasury stock, at cost, 2017: 2,851,578 shares; 2016: 2,565,399 shares		(86,064)		(80,045)
Accumulated other comprehensive loss		(22,201)		(23,417)
TOTAL STOCKHOLDERS’ EQUITY		613,565		599,055
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,344,432	$	1,282,078

See notes to consolidated financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2017		2016		2017		2016
	(Unaudited)
	(in thousands, except share and per share data)
REVENUES	$	744,280	$	713,923	$	2,115,736	$	2,012,005

OPERATING EXPENSES		719,931		693,553		2,078,906		1,984,246

OPERATING INCOME		24,349		20,370		36,830		27,759

OTHER INCOME (COSTS)
Interest and dividend income		346		390		905		1,178
Interest and other related financing costs		(1,706)		(1,296)		(4,410)		(3,774)
Other, net		1,079		1,091		2,231		2,028
TOTAL OTHER INCOME (COSTS)		(281)		185		(1,274)		(568)

INCOME BEFORE INCOME TAXES		24,068		20,555		35,556		27,191

INCOME TAX PROVISION		9,280		7,615		12,398		10,123

NET INCOME	$	14,788	$	12,940	$	23,158	$	17,068

EARNINGS PER COMMON SHARE
Basic	$	0.57	$	0.50	$	0.90	$	0.66
Diluted	$	0.56	$	0.49	$	0.87	$	0.64

AVERAGE COMMON SHARES OUTSTANDING
Basic		25,671,535		25,724,550		25,699,306		25,779,166
Diluted		26,393,359		26,211,524		26,373,382		26,263,732

CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.08	$	0.08	$	0.24	$	0.24

See notes to consolidated financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended				Nine Months Ended
	September 30				September 30
	2017		2016		2017		2016
	(Unaudited)
	(in thousands)
NET INCOME	$	14,788	$	12,940	$	23,158	$	17,068

OTHER COMPREHENSIVE INCOME (LOSS), net of tax

Pension and other postretirement benefit plans:
Net actuarial gain (loss), net of tax of: (2017 – Three-month period $1,011, Nine-month period $2,010; 2016 – Three-month period $822, Nine-month period $2,637)		(1,589)		1,294		(3,158)		(4,141)
Pension settlement expense, net of tax of: (2017 – Three-month period $366, Nine-month period $1,417; 2016 – Three-month period $313, Nine-month period $882)		577		490		2,227		1,385
Amortization of unrecognized net periodic benefit costs, net of tax of: (2017 – Three-month period $331, Nine-month period $1,084; 2016 – Three-month period $496, Nine-month period $1,410)
Net actuarial loss		547		807		1,788		2,301
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: (2017 – Three-month period $16, Nine-month period $156; 2016 – Three-month period $168, Nine-month period $278)		25		262		241		(430)
Change in foreign currency translation, net of tax of: (2017 – Three-month period $190, Nine month-period $132; 2016 – Three-month period $127, Nine-month period $158)		294		(420)		205		29

OTHER COMPREHENSIVE INCOME (LOSS), net of tax		(175)		2,404		1,216		(943)

TOTAL COMPREHENSIVE INCOME	$	14,613	$	15,344	$	24,374	$	16,125

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 income							23,158							23,158
Other comprehensive income, net of tax												1,216		1,216
Issuance of common stock under share-based compensation plans	304		3		(3)									—
Tax effect of share-based compensation plans					(2,708)									(2,708)
Share-based compensation expense					5,070									5,070
Purchase of treasury stock								287		(6,019)				(6,019)
Dividends declared on common stock							(6,207)							(6,207)
Balance at September 30, 2017	28,478	$	285	$	317,677	$	403,868	2,852	$	(86,064)	$	(22,201)	$	613,565

See notes to consolidated financial statements.

ARCBEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended
	September 30
	2017		2016
	(Unaudited)
	(in thousands)
OPERATING ACTIVITIES
Net income	$	23,158	$	17,068
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		73,417		73,633
Amortization of intangibles		3,404		3,059
Pension settlement expense		3,644		2,267
Share-based compensation expense		5,070		6,151
Provision for losses on accounts receivable		705		787
Deferred income tax provision		5,846		14,199
Gain on sale of property and equipment		(409)		(2,581)
Changes in operating assets and liabilities:
Receivables		(35,590)		(17,465)
Prepaid expenses		(37)		1,108
Other assets		(3,962)		(3,655)
Income taxes		5,180		2,583
Accounts payable, accrued expenses, and other liabilities		17,915		(7,812)
NET CASH PROVIDED BY OPERATING ACTIVITIES		98,341		89,342

INVESTING ACTIVITIES
Purchases of property, plant and equipment, net of financings		(44,377)		(45,774)
Proceeds from sale of property and equipment		3,585		7,296
Purchases of short-term investments		(50,274)		(51,760)
Proceeds from sale of short-term investments		49,980		54,027
Business acquisitions, net of cash acquired		—		(24,805)
Capitalization of internally developed software		(7,225)		(7,660)
NET CASH USED IN INVESTING ACTIVITIES		(48,311)		(68,676)

FINANCING ACTIVITIES
Borrowings under accounts receivable securitization program		10,000		—
Payments on long-term debt		(52,262)		(36,579)
Net change in book overdrafts		2,289		(3,829)
Deferred financing costs		(959)		—
Payment of common stock dividends		(6,207)		(6,249)
Purchases of treasury stock		(6,019)		(7,594)
Payments for tax withheld on share-based compensation		(3,080)		(1,415)
NET CASH USED IN FINANCING ACTIVITIES		(56,238)		(55,666)

NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(6,208)		(35,000)
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	$	109,034	$	131,357

NONCASH INVESTING ACTIVITIES
Equipment financed	$	61,607	$	61,684
Accruals for equipment received	$	851	$	9,391

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 70% of the Company’s total revenues before other revenues and intercompany eliminations for the nine months ended September 30, 2017. As part of our corporate restructuring (further described in “Financial Statement Presentation” within this Note), effective January 1, 2017, certain nonunion sales, pricing, customer service, marketing, and capacity sourcing employees were transferred to our shared services (reported in “Other and eliminations”), which increased the percentage of union employees within the Asset-Based segment. As of September 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, 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.

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.

During the third quarter of 2017, the Company modified the presentation of segment expenses allocated from shared services. Previously, expenses allocated from company-wide functions were categorized in individual segment expense line items by type of expense. Allocated expenses are now presented on a single shared services line within the Company’s operating segment disclosures. Reclassifications have been made to the prior period operating segment expenses to conform to the current year presentation. There was no impact on each segment’s total expenses as a result of the reclassifications.

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. These reclassifications were previously reported in the Company’s first quarter 2017 Quarterly Report on Form 10-Q. The prior period impact of the reclassification of the insurance receivable is also reflected in the consolidated statements of cash flows for the nine months ended September 30, 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 nine months ended September 30, 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”) 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.

In the first quarter of 2017, the Company adopted an amendment to ASC Topic 718, Compensation – Stock 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. 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 as previously disclosed in the Company’s first quarter 2017 Quarterly Report on Form 10‑Q. 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 are classified as cash provided by investing activities, and cash payments for premiums on such insurance policies are 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. While the Company continues to assess some elements of the standard, the Company is in the process of finalizing review of customer contracts and system requirements in preparation for adopting the revenue recognition standard. The Company plans to adopt this standard on the modified retrospective basis and does not expect a significant impact on the consolidated financial statements; however, there are expected to be additional disclosures regarding disaggregated revenue, contract assets and liabilities, and performance obligations, and judgement will be used in applying the disclosure requirements. It is anticipated that upon adoption of the standard, revenue recognition for the Asset-Based and FleetNet segments will not change. However, revenue for the ArcBest segment will be recognized on a relative-transit-time basis instead of the current recognition method at final delivery. Due to relatively short transit times of the ArcBest segment, the financial impact at any period-end is not expected to be significant.

An amendment to ASC Topic 715, Compensation – Retirement Benefits will require the service cost component of net periodic pension cost related to pension and other postretirement benefits 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 require the other components of net periodic pension cost, including pension settlement expense, to be presented separately from the service cost component and outside of the subtotal of income from operations. These

provisions of the amendment are required to be applied retrospectively and are effective for the Company beginning January 1, 2018. Other than the reclassifications described, the Company does not anticipate the amendment to have an impact on the consolidated financial statements.

ASC Topic 718 Compensation-Stock Compensation, was amended to provide guidance about which changes to the terms or conditions of a share-based payment award require the application of modification accounting. The amendment is effective for the Company beginning January 1, 2018 and is not expected to have a significant impact 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, which is required to be adopted on the modified retrospective basis, on the consolidated financial statements and disclosures.

ASC Topic 815, Derivatives and Hedging, was amended to change the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results to simplify hedge accounting treatment and better align an entity’s risk management activities and financial reporting for hedging relationships. The amendment is effective for the Company beginning January 1, 2019 and is not expected to have a significant impact on the consolidated financial statements.

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:


	September 30		December 31
	2017		2016
	(in thousands)
Cash and cash equivalents
Cash deposits(1)	$	67,140	$	92,520
Variable rate demand notes(1)(2)		19,677		16,057
Money market funds(3)		22,217		5,703
Total cash and cash equivalents	$	109,034	$	114,280

Short-term investments
Certificates of deposit(1)	$	57,052	$	56,838

Restricted cash
Cash deposits(1)	$	—	$	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).

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 short-term investments primarily in FDIC-insured certificates of deposit. However, certain cash deposits and certificates of deposit may exceed federally insured limits. At September 30, 2017 and December 31, 2016, cash and cash equivalents totaling $46.9 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:


	September 30				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)		45,000		45,000		35,000		35,000
Notes payable(3)		147,490		147,278		138,032		137,503
	$	262,490	$	262,278	$	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.


	September 30, 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)	$	22,217	$	22,217	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)		2,231		2,231		—		—
Interest rate swap(3)		86		—		86		—
	$	24,534	$	24,448	$	86	$	—
Liabilities:
Contingent consideration(4)	$	6,790	$	—	$	—	$	6,790
Interest rate swap(3)		231		—		231		—
	$	7,021	$	—	$	231	$	6,790


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets — September 30, 2017 and December 31, 2016	3

	Consolidated Statements of Operations — For the Three Months and Nine Months Ended September 30, 2017 and 2016	4

	Consolidated Statements of Comprehensive Income — For the Three Months and Nine Months Ended September 30, 2017 and 2016	5

	Consolidated Statement of Stockholders’ Equity — For the Nine Months Ended September 30, 2017	6

	Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2017 and 2016	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	53

Item 4.	Controls and Procedures	54

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	56

SIGNATURES		57