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, 2016

Vacated Facility Reserve [Table Text Block]

The following is a summary of the vacated facility reserve:



Balance at December 31, 2015	$	6,731
Reserves for vacated facilities	990
Payments	(4,058		)
Balance at December 31, 2016	$	3,663

Purchase Price Allocation [Table Text Block]

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



	Towne		CST		Ace & Triumph		RGL & MMT
	March 9, 2015		February 2, 2014		January & August 2016		September & November 2014
Tangible assets:
Accounts receivable	$	24,068	$	9,339	$	—	$	—
Prepaid expenses and other current assets	2,916		101		—		—
Property and equipment	2,095		2,132		1,294		287
Other assets	614		35		—		—
Deferred income taxes	—		—		—		—
Total tangible assets	29,693		11,607		1,294		287
Intangible assets:
Non-compete agreements	—		930		139		92
Trade name	—		500		—		—
Customer relationships	66,000		36,000		5,335		3,590
Goodwill	59,666		51,710		6,282		4,206
Total intangible assets	125,666		89,140		11,756		7,888
Total assets acquired	155,359		100,747		13,050		8,175

Liabilities assumed:
Current liabilities	28,920		6,535		—		1,000
Other liabilities	3,886		—		1,250		—
Debt and capital lease obligations	59,544		11,215		—		—
Deferred income taxes	1,131		—		—		—
Total liabilities assumed	93,481		17,750		1,250		1,000
Net assets acquired	$	61,878	$	82,997	$	11,800	7,175

Business Acquisition, Pro Forma Information [Table Text Block]

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



	Useful Lives
	Towne	CST	Ace & Triumph	RGL & MMT
Customer relationships	20 years	15 years	15 years	15 years
Non-competes	-	5 years	5 years	5 years
Trade names	-	2 years	-	-

The fair value of the non-compete agreements and customer relationships 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 estimate fair value, the Company used cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believed the level and timing of cash flows appropriately reflected market participant assumptions. The fair value of the acquired trade 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 applicable names and had to license the trade name. The Company derived the hypothetical royalty income from the projected revenues of CST. 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 Towne and CST acquisition occurred as of January 1, 2014 (in thousands, except per share data).



	Year ended
	December 31, 2016		December 31, 2015		December 31, 2014
Operating revenue	$	982,530	$	993,352	$	1,017,005
Income from operations	59,979		79,465		89,650
Net income	27,670		53,096		56,092
Net income per share
Basic	$	0.91	$	1.72	$	1.82
Diluted	$	0.90	$	1.70	$	1.79

Schedule of Goodwill [Table Text Block]

The following is a summary of the changes in goodwill for the year ended December 31, 2016. Approximately $105,531 of goodwill is deductible for tax purposes.



	Expedited LTL					Truckload Premium					Pool Distribution					Intermodal				Total
				Accumulated				Accumulated					Accumulated					Accumulated
	Goodwill			Impairment		Goodwill		Impairment			Goodwill		Impairment			Goodwill		Impairment		Net
Beginning balance, December 31, 2015	$	99,123		$	—	$	45,164	$	—		$	12,359	$	(6,953	)	$	55,916	$	—	$	205,609
Ace & Triumph acquisitions	—			—		—		—			—		—			6,282		—		6,282
TQI Impairment	—			—		—		(25,686		)	—		—			—		—		(25,686		)
Adjustment of Towne acquisition	(1,530		)	—		—		—			—		—			—		—		(1,530		)
Ending balance, December 31, 2016	$	97,593		$	—	$	45,164	$	(25,686	)	$	12,359	$	(6,953	)	$	62,198	$	—	$	184,675

Definite-Lived Intangible Assets [Member]

Goodwill [Line Items]

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

As of December 31, 2016, definite-lived intangible assets are comprised of the following:



	Acquired Intangibles		Accumulated Amortization		Accumulated Impairment		Net Acquired Intangibles
Customer relationships	$	179,575	$	57,390	$	16,501	$	105,684
Non-compete agreements	3,410		2,677		—		733
Trade name	1,500		1,267		—		233
Total	$	184,485	$	61,334	$	16,501	$	106,650

The estimated amortization expense for the next five years on definite-lived intangible assets as of December 31, 2016 is as follows:



	2017		2018		2019		2020		2021
Customer relationships	$	8,995	$	7,490	$	7,410	$	7,410	$	7,267
Non-compete agreements	244		232		58		28		15
Trade name	200		33		—		—		—
Total	$	9,439	$	7,755	$	7,468	$	7,438	$	7,282

CST [Member]

Goodwill [Line Items]

Business Acquisition, Pro Forma Information [Table Text Block]

The assets, liabilities, and operating results of CST have been included in the Company's consolidated financial statements from the date of acquisition and are included in the Intermodal reportable segment. The results of CST 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
Intermodal revenue	$	72,314
Operating income	7,525
Net income	4,586
Net income per share
Basic	$	0.15
Diluted	$	0.15