XML 21 R8.htm IDEA: XBRL DOCUMENT
v3.4.0.3

Acquisitions and Goodwill | 3 Months Ended
--- | ---
Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract] |
Acquisitions and Goodwill | Acquisitions and Goodwill Acquisition of Towne On March 9, 2015, the Company acquired CLP Towne Inc. (“Towne”) pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) resulting in Towne becoming an indirect, wholly-owned subsidiary of the Company. For the acquisition of Towne, the Company paid $61,878 in net cash and assumed $59,544 in debt and capital leases. With the exception of assumed capital leases, the assumed debt was immediately paid in full after funding of the acquisition. Of the total aggregate cash consideration paid, $16,500 was placed into an escrow account, with $2,000 of such amount being available to settle any shortfall in Towne’s net working capital and with $14,500 of such amount being available for a period of time to settle certain possible claims against Towne’s common stockholders for indemnification. To the extent the escrow fund is insufficient, certain equity holders have agreed to indemnify Forward Air, subject to certain limitations set forth in the Merger Agreement, as a result of inaccuracies in or breaches of certain of Towne’s representations, warranties, covenants and agreements and other matters. Forward Air financed the Merger Agreement with a $125,000 2 year term loan available under the senior credit facility discussed in note 5. Towne is a full-service trucking provider offering time-sensitive less-than-truckload shipping, full truckload service, an extensive cartage network, container freight stations and dedicated trucking. Towne’s airport-to-airport network provides scheduled deliveries to 61 service points. A fleet of approximately 525 independent contractor tractors provides the line-haul between those service points. The acquisition of Towne provides the Epedited LTL and TLX segments with opportunities to expand their service points and service offerings, such as pick up and delivery services. Additional benefits of the acquisition include increased linehaul network shipping density and a significant increase to our owner operator fleet, both of which are key to the profitability of the Company. The assets, liabilities, and operating results of Towne have been included in the Company's consolidated financial statements from the date of acquisition and have been assigned to the Expedited LTL and TLX reportable segments. As the operations of Towne were fully integrated into the Company's existing networks and operations, the Company is not able to provide the revenue and operating results from Towne included in our consolidated revenue and results since the date of acquisition. Effective with the acquisition of Towne, the Company immediately entered into a restructuring plan to remove duplicate costs, primarily in the form of, but not limited to salaries, wages and benefits and facility leases. As a result of these plans, during the first quarter of 2015 the Company recognized expense and recorded liabilities of $2,109 and $4,664 for severance obligations and remaining net payments on vacated, duplicate facilities, respectively. The expenses associated with the severance obligations and vacated, duplicate facilities were recognized in the salaries, wages and benefits and operating lease line items, respectively. During the first quarter of 2015, the Company also incurred expense of $5,101 for various other integration and transaction related costs which are largely included in other operating expenses. In conjunction with the Towne acquisition, the Company vacated certain duplicate facilities under long-term non-cancelable leases and recorded contract termination costs. As of March 31, 2016, the Company's reserve for remaining payments on vacated facilities was $5,311. During the three months ended March 31, 2016, we paid $1,420 in recurring payments on these non-cancelable leases. Acquisition of Ace As part of the Company's strategy to expand its Intermodal operations, in January 2016, we acquired certain assets of Ace Cargo, LLC, ("Ace") for $1,700. The assets, liabilities, and operating results of Ace have been included in the Company's consolidated financial statements from the date of acquisition and have been assigned to the Intermodal reportable segment. Allocations of Purchase Prices The following table presents the allocations of the Towne and Ace purchase prices to the assets acquired and liabilities assumed based on their estimated fair values and resulting residual goodwill (in thousands):
| Ace |  | Towne
| January 25, 2016 |  | March 9, 2015
Tangible assets: |  |  |  |
Accounts receivable | $ | — |  |  | $ | 24,068 |
Prepaid expenses and other current assets | — |  |  | 2,916 |
Property and equipment | — |  |  | 2,095 |
Other assets | — |  |  | 614 |
Total tangible assets | — |  |  | 29,693 |
Intangible assets: |  |  |  |
Non-compete agreements | 20 |  |  | — |
Customer relationships | 772 |  |  | 66,000 |
Goodwill | 908 |  |  | 61,197 |
Total intangible assets | 1,700 |  |  | 127,197 |
Total assets acquired | 1,700 |  |  | 156,890 |
Liabilities assumed: |  |  |
Current liabilities | — |  |  | 28,920 |
Other liabilities | — |  |  | 3,886 |
Debt and capital lease obligations | — |  |  | 59,544 |
Deferred income taxes | — |  |  | 2,662 |
Total liabilities assumed | — |  |  | 95,012 |
Net assets acquired | $ | 1,700 |  |  | $ | 61,878 |
The acquired definite-live intangible assets have the following useful lives:
| Useful Lives
| Ace |  | Towne
Customer relationships | 15 years |  | 20 years
Non-compete agreements | 5 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 believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the remaining economic useful life of each class of intangible asset. Pro forma The following unaudited pro forma information presents a summary of the Company's consolidated results of operations as if the Towne acquisition occurred as of January 1, 2015 (in thousands, except per share data).
| Three months ended
| March 31, 2016 | March 31, 2015
Operating revenue | $ | 229,549 |  | $ | 240,145 |
Income from operations | 21,405 |  | 5,942 |
Net income | 13,099 |  | 2,358 |
Net income per share |  |
Basic | $ | 0.43 |  | $ | 0.08 |
Diluted | $ | 0.43 |  | $ | 0.08 |
The unaudited pro forma consolidated results for the three month periods are based on the historical financial information of Towne. The unaudited pro forma consolidated results incorporate historical financial information since January 1, 2015. The historical financial information has been adjusted to give effect to pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed these acquisitions on January 1, 2015. Goodwill The following is a summary of the changes in goodwill for the three months ended March 31, 2016. Approximately $100,156 of goodwill, not including the goodwill acquired with the Towne acquisition, is deductible for tax purposes.
| Expedited LTL |  | Truckload Expedited |  | 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 Acquisition | — |  | — |  |  | — |  | — |  |  | — |  | — |  |  | 908 |  | — |  |  | 908 |
Ending balance, March 31, 2016 | $ | 99,123 |  | $ | — |  |  | $ | 45,164 |  | $ | — |  |  | $ | 12,359 |  | $ | (6,953 | ) |  | $ | 56,824 |  | $ | — |  |  | $ | 206,517 |
The Company conducted its annual impairment assessments and tests of goodwill for each reporting unit as of June 30, 2015 and no impairment charges were required. The first step of the goodwill impairment test is the Company assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount, including goodwill. When performing the qualitative assessment, the Company considers the impact of factors including, but not limited to, macroeconomic and industry conditions, overall financial performance of each reporting unit, litigation and new legislation. If based on the qualitative assessments, the Company believes it more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount, or periodically as deemed appropriate by management, the Company will prepare an estimation of the respective reporting unit's fair value utilizing a quantitative approach. If a quantitative fair value estimation is required, the Company estimates the fair value of the applicable reportable units, using a combination of discounted projected cash flows and market valuations for comparable companies as of the valuation date. The Company's inputs into the fair value estimates for goodwill are classified within level 3 of the fair value hierarchy as defined in the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“the FASB Codification”). If this estimation of fair value indicates that impairment potentially exists, the Company will then 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 assessments and tests of goodwill for each reporting unit as of June 30, 2015 and no impairment charges were required. However, due to the performance of our Total Quality, Inc. operating segment, which is included in the TLX reportable segment, falling notably short of the projections used in our June 2015 impairment assessment, the Company believed there were indicators of impairment as of December 31, 2015. Therefore, the Company performed additional fair value calculations, but determined TQI's goodwill was not impaired as of December 31, 2015.

X
- References No definition available. + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16373-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16265-109275 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16323-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration