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FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 9 Months Ended
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Sep. 30, 2024
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS |
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | NOTE B – FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS ​ Financial Instruments ​ The following table presents the components of cash and cash equivalents and short-term investments: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30 |  | December 31 |
​ | ​ | 2024 | ​ | 2023 |
​ | ​ | (in thousands) | ​
Cash and cash equivalents | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cash deposits(1) | ​ | $ | 118,367 | ​ | $ | 168,472 | ​
Money market funds(2) | ​ |  | 32,094 | ​ |  | 93,754 | ​
Total cash and cash equivalents | ​ | $ | 150,461 | ​ | $ | 262,226 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Short-term investments | ​ | ​ | ​ | ​ | ​ | ​ | ​
Certificates of deposit(1) | ​ | $ | 40,639 | ​ | $ | 67,842 | ​
​
(1) | Recorded at cost plus accrued interest, which approximates fair value.
(2) | 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 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 and short-term investments in accounts and certificates of deposit which are primarily FDIC-insured or in direct obligations of the U.S. government. However, certain cash deposits and certificates of deposit may exceed federally insured limits. At September 30, 2024 and December 31, 2023, cash deposits and short-term investments totaling $54.3 million and $76.3 million, respectively, were not FDIC insured. The Company also holds money market funds, which are invested in U.S. government securities and repurchase agreements collateralized solely by U.S. government securities. ​ 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 (based on the 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 | ​
​ |  | 2024 |  | 2023 |
​ | ​ | (in thousands) | ​
​ | ​ | ​ | Carrying |  | ​ | Fair |  | ​ | Carrying |  | ​ | Fair | ​
​ | ​ | ​ | Value |  | ​ | Value |  | ​ | Value |  | ​ | Value | ​
Credit Facility(1) | ​ | $ | — | ​ | $ | — | ​ | $ | 50,000 | ​ | $ | 50,000 | ​
Notes payable(2) | ​ |  | 180,511 | ​ |  | 181,503 | ​ |  | 178,938 | ​ |  | 177,149 | ​
New England Pension Fund withdrawal liability(3) | ​ | ​ | 18,857 | ​ | ​ | 17,761 | ​ | ​ | 19,402 | ​ | ​ | 18,220 | ​
​ | ​ | $ | 199,368 | ​ | $ | 199,264 | ​ | $ | 248,340 | ​ | $ | 245,369 | ​
​
(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). The Company paid down the $50.0 million debt under the Credit Facility on September 30, 2024.
(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 5.3% at both September 30, 2024 and December 31, 2023, determined using the 20-year U.S. Treasury rate plus a spread (Level 2 of the fair value hierarchy). As of September 30, 2024, the outstanding withdrawal liability totaled $18.9 million, of which $0.8 million was recorded in accrued expenses, and the remaining portion was recorded in other long-term liabilities.
​ Assets and Liabilities Measured at Fair Value on a Recurring Basis ​ The following table presents the assets and liabilities that are measured at fair value on a recurring basis: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2024 | ​
​ | ​ | ​ | ​ | ​ | 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) | ​ | $ | 32,094 | ​ | $ | 32,094 | ​ | $ | — | ​ | $ | — | ​
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2) | ​ |  | 5,435 | ​ |  | 5,435 | ​ |  | — | ​ |  | — | ​
Interest rate swap(3) | ​ | ​ | 219 | ​ | ​ | — | ​ | ​ | 219 | ​ | ​ | — | ​
​ | ​ | $ | 37,748 | ​ | $ | 37,529 | ​ | $ | 219 | ​ | $ | — | ​
Liabilities: | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration(4) | ​ | $ | 12,160 | ​ | $ | — | ​ | $ | — | ​ | $ | 12,160 | ​
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31, 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) | ​ | $ | 93,754 | ​ | $ | 93,754 | ​ | $ | — | ​ | $ | — | ​
Equity, bond, and money market mutual funds held in trust related to the Voluntary Savings Plan(2) | ​ |  | 4,627 | ​ |  | 4,627 | ​ |  | — | ​ |  | — | ​
Interest rate swap(3) | ​ | ​ | 1,710 | ​ | ​ | — | ​ | ​ | 1,710 | ​ | ​ | — | ​
​ | ​ | $ | 100,091 | ​ | $ | 98,381 | ​ | $ | 1,710 | ​ | $ | — | ​
Liabilities: | ​ |  | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration(4) | ​ | $ | 92,900 | ​ | $ | — | ​ | $ | — | ​ | $ | 92,900 | ​
​
(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) | 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 September 30, 2024 and December 31, 2023 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, 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 (“EBITDA”) for each of the years ended December 31, 2023, 2024, and 2025. The estimated fair value of contingent 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 adjusted EBITDA to be achieved for the applicable performance periods, volatility factors applied to the simulations, and the discount rate applied, which was 12.7% and 13.3% as of September 30, 2024 and December 31, 2023, respectively. Changes in the significant unobservable inputs might result in a significantly higher or lower fair value at the reporting date. The decrease in fair value of contingent earnout consideration as of September 30, 2024 compared to December 31, 2023 primarily reflects the reduction in payout assumptions projected for the earnout in 2025, due to the continued soft truckload environment and the latest industry expectations for a truckload market recovery being pushed further into 2025 than previously estimated.
​ The following table provides the change 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) | ​
Balance at December 31, 2023 | ​ | $ | 92,900 | ​
Change in fair value included in operating income | ​ | ​ | (80,740) | ​
Balance at September 30, 2024 | ​ | $ | 12,160 | ​
​ ​ ​ Assets Measured at Fair Value on a Nonrecurring Basis ​ The Company remeasures certain assets on a nonrecurring basis upon the occurrence of certain events. In November 2021, the Company recorded an equity investment for $25.0 million in Phantom Auto, a startup provider of human-centered remote operation software, and became a lead investor in their Series B Preferred offering. The equity investment was accounted for as a nonmarketable equity security without a readily determinable value using the measurement alternative, which allowed the investment to be recorded at cost, less any impairment and adjusted for observable price changes. During the second quarter of 2023, the fair value of the Company’s investment in Phantom Auto increased by $3.7 million based on an observable price change upon the closing of Phantom Auto’s Series B-2 funding round. During the first quarter of 2024, the Company was notified that Phantom Auto was ceasing operations due to liquidity concerns from failing to secure additional funding from investors or lenders. As a result, the Company assessed the likelihood of recovering its investment as remote and recorded a pre-tax, noncash impairment charge of $28.7 million, to write off the equity investment in Phantom Auto, which was recognized below the operating income line in “Other, net” within “Other income (costs).” ​ The following table provides the change in fair value of equity investments on a nonrecurring basis using inputs categorized in Level 3 of the fair value hierarchy: ​
​ | ​ | ​ | ​ | ​
​ | ​ | Equity Investment |
​ | ​ | (in thousands) | ​
Balance at December 31, 2023 | ​ | $ | 28,739 | ​
Change in fair value included in other income | ​ | ​ | (28,739) | ​
Balance at September 30, 2024 | ​ | $ | — | ​
​ The following table provides the changes in the long-lived assets measured on a nonrecurring basis for which impairment charges were recognized during the three and nine months ended September 30, 2023. The fair value measurements used inputs categorized in Level 3 of the fair value hierarchy. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Lease | ​ | ​ | ​
​ | ​ | Carrying Value |  | Impairment Charges(1) |  | Fair Value |
​ | ​ | (in thousands) | ​
Operating right-of-use assets | ​ | $ | 48,417 | ​ | $ | (28,124) | ​ | $ | 20,293 | ​
Leasehold improvements | ​ | ​ | 3,874 | ​ | ​ | (2,038) | ​ | ​ | 1,836 | ​
​ | ​ | $ | 52,291 | ​ | $ | (30,162) | ​ | $ | 22,129 | ​
​
(1) | During the third quarter of 2023, the Company recorded impairment charges of $30.2 million related to operating right-of-use assets and leasehold improvements associated with a freight handling pilot facility, a service center, and office spaces that were made available for sublease. The fair value of these asset groups was estimated at September 1, 2023, using a discounted cash flow method utilizing market-participant discount rates ranging from 7.5% to 9.5% and certain unobservable inputs, including estimated cash flows based on anticipated future sublease terms as determined using third-party real estate broker quotes. See Note F for additional discussion related to these impairment charges.
​

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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