Forward Air Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Acquisitions, Goodwill and Other Long-Lived Assets Acquisitions, Goodwill and Other Long-Lived Assets (Tables)

Acquisitions, Goodwill and Other Long-Lived Assets Acquisitions, Goodwill and Other Long-Lived Assets (Tables)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Purchase Price Allocation [Table Text Block]

The following table presents the allocations of the CST acquisitions and TQI purchase prices to the assets acquired and liabilities assumed based on their estimated fair values and resulting residual goodwill (in thousands):



	CST		RGL & MMT		TQI
	February 2, 2014		September & November 2014		March 4, 2013
Tangible assets:
Accounts receivable	$	9,339	$	—	$	5,639
Prepaid expenses and other current assets	101		—		1,093
Property and equipment	2,132		287		5,103
Other assets	35		—		728
Deferred income taxes	—		—		947
Total tangible assets	11,607		287		13,510
Intangible assets:
Non-compete agreements	930		92		470
Trade name	500		—		1,000
Customer relationships	36,000		3,590		22,300
Goodwill	51,710		4,206		45,164
Total intangible assets	89,140		7,888		68,934
Total assets acquired	100,747		8,175		82,444

Liabilities assumed:
Current liabilities	6,535		1,000		4,725
Other liabilities	—		—		1,735
Debt and capital lease obligations	11,215		—		20,113
Deferred income taxes	—		—		10,543
Total liabilities assumed	17,750		1,000		37,116
Net assets acquired	$	82,997	$	7,175	$	45,328

Business Acquisition, Pro Forma Information [Table Text Block]

The results of CST, RGL and MMT operations are reflected in the Company's consolidated statements of comprehensive income for the year ended December 31, 2014 from the dates of acquisition are as follows (in thousands, except per share data):



	Dates of Acquisition to December 31, 2014
Logistics revenue	$	52,061
Other revenues	20,253
Operating income	7,525
Net income	4,586
Net income per share
Basic	$	0.15
Diluted	$	0.15

The results of TQI reflected in the Company's consolidated statements of comprehensive income are as follows (in thousands, except per share data):



	March 4, 2013 to December 31, 2013
Logistics revenue	$	41,842
Operating income	3,600
Net income	1,961
Net income per share
Basic	$	0.07
Diluted	$	0.06

The acquired definite-live intangible assets have the following useful lives:



	Useful Lives
	CST	RGL & MMT	TQI
Customer relationships	15 years	15 years	15 years
Non-competes	5 years	5 years	5 years
Trade names	2 years	-	5 years

The fair value of the non-compete agreements, trade name and customer relationship assets were estimated using an income approach (level 3). Under this method, an intangible asset's fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. The fair value of the TQI and CST trades names were estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be paid if the Company did not own the TQI name and had to license the trade name. The Company derived the hypothetical royalty income from the projected revenues of TQI. Cash flows were assumed to extend through the remaining economic useful life of each class of intangible asset.

The following unaudited pro forma information presents a summary of the Company's consolidated results of operations as if the CST acquisitions and TQI acquisition occurred as of January 1, 2013 (in thousands, except per share data).



	Year ended
	December 31, 2014		December 31, 2013
Operating revenue	$	786,048	$	710,107
Income from operations	96,596		91,215
Net income	61,286		58,713
Net income per share
Basic	$	2.00	$	1.95
Diluted	$	1.97	$	1.91

Schedule of Goodwill [Table Text Block]

The following is a summary of the changes in goodwill for the year ended December 31, 2014. All goodwill, except the goodwill assigned to TQI, is deductible for tax purposes.



	Forward Air				FASI					TQI				Total
			Accumulated				Accumulated					Accumulated
	Goodwill		Impairment		Goodwill		Impairment			Goodwill		Impairment		Net
Beginning balance, December 31, 2013	$	37,926	$	—	$	12,359	$	(6,953	)	$	45,164	$	—	$	88,496
CST acquisitions	55,916		—		—		—			—		—		55,916
Ending balance, December 31, 2014	$	93,842	$	—	$	12,359	$	(6,953	)	$	45,164	$	—	$	144,412

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

As of December 31, 2014 the estimated amortization expense for the next five years of capitalized software development costs is as follows:



2015	$	1,374
2016	1,080
2017	767
2018	509
2019	211
Total	$	3,941

The estimated amortization expense for the next five years on definite-lived intangible assets as of December 31, 2014 is as follows:



	2015		2016		2017		2018		2019
Customer relationships	$	7,387	$	6,856	$	6,741	$	5,236	$	5,156
Non-compete agreements	318		318		310		220		30
Trade name	450		221		200		33		—
Total	$	8,155	$	7,395	$	7,251	$	5,489	$	5,186