Annual report pursuant to Section 13 and 15(d)

Goodwill and Long-Lived Assets (Notes)

v2.4.0.6
Goodwill and Long-Lived Assets (Notes)
12 Months Ended
Dec. 31, 2011
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Long-Lived Assets
Goodwill and Other Long-Lived Assets
 
The Company conducts an annual (or more frequently if circumstances indicate possible impairment) impairment test of goodwill for each reporting unit at June 30 of each year.  The first step of the goodwill impairment test is the estimation of the reporting unit’s fair value.  If step one indicates that impairment potentially exists, the second step is performed to measure the amount of the impairment, if any.  Goodwill impairment exists when the calculated implied fair value of goodwill is less than its carrying value.  Changes in strategy or market conditions could significantly impact these fair value estimates and require adjustments to recorded asset balances.   
 

The Company conducted its annual impairment test of goodwill for each reporting unit as of June 30, 2011 and no impairment charges were required. In addition, due to FASI’s results from operations not meeting the Company’s projections for the nine months ended September 30, 2011, the Company conducted an impairment test of goodwill for the FASI reporting unit as of September 30, 2011. There were no impairment charges required as a result of the September 30, 2011 FASI impairment test.

During the three months ended March 31, 2009, the Company determined there were indicators of potential impairment of the goodwill assigned to the FASI segment.  This determination was based on the continuing economic recession, declines in current market valuations and FASI operating losses in excess of expectations.  As a result, the Company performed an interim impairment test in accordance with the Company accounting policy discussed above as of March 31, 2009.  Based on the results of the interim impairment test, the Company concluded that an impairment loss was probable and could be reasonably estimated.  Consequently, the Company recorded a non-cash goodwill impairment charge of $6,953 related to the FASI segment during the three months ended March 31, 2009.  
 
For each of the goodwill impairment calculations, the Company calculated the fair value of the applicable reporting units, using a combination of discounted projected cash flows and market valuations as of the valuation date for comparable companies.  The Company's fair value calculations for goodwill are classified within level 3 of the fair value hierarchy as defined in the FASB Codification.
 
As of December 31, 2011, the carrying value of goodwill related to the Forward Air and FASI segments was $37,926 and $5,406, respectively. The estimation of fair value related to the impairment test for goodwill is particularly sensitive to projected financial information used in the calculations.  Earnings estimated to be generated by the Forward Air segment are expected to continue supporting the carrying value of its goodwill.  The FASI segment is currently facing the challenges of building, expanding and diversifying its revenue base. If FASI’s efforts are significantly delayed, future estimates of projected financial information may be reduced, and the Company may be required to record an impairment charge against the carrying value of FASI’s goodwill.
 
The changes in the carrying value of goodwill by segment for the year ended December 31, 2009 are as follows:
 
Forward Air
 
FASI
 
Total
 
Goodwill
 
Accumulated
Impairment
 
Goodwill
 
Accumulated
Impairment
 
Net
Beginning balance, December 31, 2008
$
37,926

 
$

 
$
12,304

 
$

 
$
50,230

Adjustment to Service Express acquisition

 

 
55

 

 
55

Impairment loss

 

 

 
(6,953
)
 
(6,953
)
Ending balance, December 31, 2009
$
37,926

 
$

 
$
12,359

 
$
(6,953
)
 
$
43,332


 
There were no changes in the carrying amount of goodwill during the years ended December 31, 2011 and 2010.  All goodwill is deductible for tax purposes.
 
Through acquisitions between 2005 and 2008, the Company acquired customer relationships and non-compete agreements of $46,350 and $1,780, respectively, having weighted-average useful lives of 11.4 and 5.6 years, respectively.  Amortization expense on acquired customer relationships and non-compete agreements for each of the three years ended December 31, 2011, 2010 and 2009 was $4,591, $4,590 and $4,654, respectively.

The estimated amortization expense for the next five years on definite-lived intangible assets as of December 31, 2011 is as follows:
 
2012
 
2013
 
2014
 
2015
 
2016
Customer relationships
$
4,255

 
$
4,255

 
$
4,067

 
$
3,261

 
$
2,730

Non-compete agreements
311

 
24

 
20

 
20

 
20

Total
$
4,566

 
$
4,279

 
$
4,087

 
$
3,281

 
$
2,750



    
Additionally, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is recognized on assets classified as held and used when the sum of undiscounted estimated cash flows expected to result from the use of the asset is less than the carrying value. If such measurement indicates a possible impairment, the estimated fair value of the asset is compared to its net book value to measure the impairment charge, if any.  During 2009 an impairment charge of $204 was incurred in the Forward Air segment to write off the net book value of certain truckload and cargo handling customer relationships purchased during 2007.  These impairment charges were recorded as the related customer relationships and services were discontinued during the first quarter of 2009.