FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2023

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Schedule components of cash and cash equivalents, short term investments, and restricted funds

	June 30		December 31
	2023		2022
	(in thousands)
Cash and cash equivalents
Cash deposits(1)	$	161,176	$	137,247
Variable rate demand notes(1)(2)		122		9,285
Money market funds(3)		25,988		11,732
Total cash and cash equivalents	$	187,286	$	158,264
Short-term investments
Certificates of deposit(1)	$	113,542	$	88,851
U.S. Treasury securities(4)		39,574		78,811
Total short-term investments	$	153,116	$	167,662

(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) Recorded at amortized cost plus accrued interest, which approximates fair value. U.S. Treasury securities included in short-term investments are held-to-maturity investments with maturity dates of less than one year.

Schedule of fair value and carrying value disclosures of financial instruments

	June 30				December 31
	2023				2022
	(in thousands)
		Carrying		Fair		Carrying		Fair
		Value		Value		Value		Value
Credit Facility(1)	$	50,000	$	50,000	$	50,000	$	50,000
Notes payable(2)		182,987		178,490		214,623		207,778
New England Pension Fund withdrawal liability(3)		19,755		18,726		20,100		18,911
	$	252,742	$	247,216	$	284,723	$	276,689

(1) The revolving credit facility (the “Credit Facility”) carries a variable interest rate based on Secured Overnight Financing Rate (“SOFR”), plus a margin, priced at market for debt instruments having similar terms and collateral requirements (Level 2 of the fair value hierarchy).

(2) 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).

(3) ABF Freight’s multiemployer pension plan obligation with the New England Teamsters and Trucking Industry Pension Fund (the “New England Pension Fund”) was restructured under a transition agreement effective on August 1, 2018, which resulted in a related withdrawal liability. The fair value of the outstanding withdrawal liability is equal to the present value of the future withdrawal liability payments, discounted at an interest rate of 5.2% and 5.3% at June 30, 2023 and December 31, 2022, respectively, determined using the 20-year U.S. Treasury rate plus a spread (Level 2 of the fair value hierarchy). As of June 30, 2023, the outstanding withdrawal liability totaled $19.8 million, of which $0.7 million was recorded in accrued expenses, and the remaining portion was recorded in other long-term liabilities.

Schedule of financial assets and liabilities measured at fair value on a recurring basis

	June 30, 2023
			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)	$	25,988	$	25,988	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)		4,159		4,159		—		—
Interest rate swap(3)		2,955		—		2,955		—
	$	33,102	$	30,147	$	2,955	$	—
Liabilities:
Contingent consideration(4)		117,040		—		—		117,040
	$	117,040	$	—	$	—	$	117,040

	December 31, 2022
			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)	$	11,732	$	11,732	$	—	$	—
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2)		3,982		3,982		—		—
Interest rate swap(3)		3,526		—		3,526		—
	$	19,240	$	15,714	$	3,526	$	—
Liabilities:
Contingent consideration(4)		112,000		—		—		112,000
	$	112,000	$	—	$	—	$	112,000

(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 other long-term assets. The fair value of the interest rate swap 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 generally considered to be in Level 3 of the fair value hierarchy. However, the Company assessed Level 3 inputs as insignificant to the valuation at June 30, 2023 and December 31, 2022, and considers the interest rate swap valuation in Level 2 of the fair value hierarchy.

(4) As part of the Agreement and Plan of Merger (the “Merger Agreement”) of MoLo, executed in November 2021, certain additional cash consideration is required to be paid by the Company based on the achievement of certain incremental targets of adjusted earnings before interest, taxes, depreciation, and amortization for each of the years ended December 31, 2023, 2024, and 2025. At 100% of the target, the cumulative additional consideration for years 2023 through 2025 would be $215.0 million, with the possible undiscounted cash consideration due ranging from a total of $95.0 million at 80% of target to $455.0 million at 300% of target, as outlined in the Merger Agreement. The estimated fair value of contingent earnout consideration is determined by assessing Level 3 inputs. The Level 3 assessments utilize a Monte Carlo simulation with inputs including scenarios of estimated revenues and earnings before interest, taxes, depreciation, and amortization to be achieved for the applicable performance periods, volatility factors applied to the simulations, and the discount rate applied, which was 14.2% and 14.0% as of June 30, 2023 and December 31, 2022, respectively. Changes in the significant unobservable inputs might result in a significantly higher or lower fair value at the reporting date. As of June 30, 2023, the contingent earnout consideration totaled $117.0 million, which was recorded in long-term liabilities. The increase in fair value of contingent earnout consideration as of June 30, 2023, compared to December 31, 2022, reflects revised assumptions for business growth in 2024 and 2025, partially offset by the impact of continuing softer market conditions during 2023 and a higher discount rate at the June 30, 2023 remeasurement date. Based on the most recent

remeasurement, achievement of the 2023 target is not expected; therefore, the current portion of the contingent consideration was reduced to zero as of June 30, 2023. Adjustments to the contingent earnout consideration liability are included in operating income.

Schedule of changes in fair value of liabilities measured at fair value using inputs categorized in Level 3

	Contingent Consideration
	(in thousands)
Balance at December 31, 2022	$	112,000
Change in fair value included in operating income		5,040
Balance at June 30, 2023	$	117,040

Schedule of assets measured at fair value on a nonrecurring basis

	Equity Investment(1)
	(in thousands)
Balance at December 31, 2022	$	25,000
Change in fair value included in operating income		3,739
Balance at June 30, 2023	$	28,739

(1) Represents the Company’s equity investment in Phantom Auto, the leading provider of human-centered remote operation software. The equity investment is accounted for as a nonmarketable equity security without a readily determinable value using the measurement alternative, which allows for the investment to be recorded at cost, less any impairment and adjusted for observable price changes in orderly transactions for an identical or similar equity security of the same issuer. The $3.7 million increase in fair value of the Company’s equity investment was measured as of April 26, 2023, based on an observable price change upon the closing of Phantom Auto’s Series B-2 funding round. The fair value of the investment was estimated using a hybrid method of the Black-Scholes option pricing model and the probability-weighted expected return method. This method produces a per-share value based on a probability-weighted scenario analysis. The scenarios reflect changes to the liquidation preferences based on the potential liquidity event. The Black-Scholes option pricing model used various inputs, including expected volatility, expected term to liquidity, risk-free rate over the expected term, breakpoints values, and liquidation preferences.