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Acquisitions, Goodwill and Other Long-Lived Assets (Notes) | 12 Months Ended
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Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract] |
Acquisitions, Goodwill and Other Long-Lived Assets | Acquisitions, Goodwill and Other Long-Lived Assets 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 3. Towne was 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 LTL network provided scheduled deliveries to 61 service points. A fleet of approximately 525 independent contractor tractors provided the line-haul between those service points. The acquisition of Towne provided the Expedited LTL segment with opportunities to expand its service points and service offerings, such as pick up and delivery services. Additional benefits of the acquisition included increased linehaul network shipping density and a significant increase to our owner operator fleet, both of which are key to the profitability of Expedited LTL. Towne had 2014 revenue of approximately $230,000. 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 included in the Expedited LTL reportable segment. As the operations of Towne were fully integrated into the existing Expedited LTL network and operations, the Company is not able to provide the revenue and operating results of Towne which are included in the 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 year ended December 31, 2015, the Company recognized expense of $2,624 and $11,722 for severance obligations and reserves for idle facilities, respectively. The expenses associated with the severance obligations and idle facilities were recognized in the salaries, wages and benefits and operating lease line items, respectively. The Company also incurred expense of $9,197 for various other integration and transaction related costs which are largely included in other operating expenses. During 2015, the Company vacated certain duplicate facilities under long-term non-cancelable leases and recorded contract termination costs. 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 |
Acquisition of CST On February 2, 2014, the Company acquired all of the outstanding capital stock of Central States Trucking Co. and Central States Logistics, Inc. (collectively referred to as “CST”). Pursuant to the terms of the Agreement and concurrently with the execution of the Agreement, the Company acquired all of the outstanding capital stock of CST in exchange for $82,997 in net cash and $11,215 in assumed debt. With the exception of capital leases, the assumed debt was immediately paid in full after funding of the acquisition. The acquisition and settlement of the assumed debt were funded using the Company's cash on hand. Under the purchase agreement, $10,000 of the purchase price was paid into an escrow account to protect the Company against potential unknown liabilities. The amount held in escrow was remitted to the sellers in February 2015. CST provides industry leading container and intermodal drayage services primarily within the Midwest region of the United States. CST also provides dedicated contract and Container Freight Station (“CFS”) warehouse and handling services. The acquisition of CST provides us with a scalable platform for which to enter the intermodal drayage space and thereby continuing to expand and diversify our service offerings. For the acquisition of CST, the Company incurred total transaction costs related to the acquisitions of approximately $900, which were expensed during the year ended December 31, 2014. These transaction costs were primarily included in "Other operating expenses" in the consolidated statements of comprehensive income. 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 |
As part of our strategy to scale Intermodal operations, we have executed several smaller acquisitions in the Intermodal market. In September 2014, we acquired certain assets of Recob Great Lakes Express, Inc. ("RGL") for $1,350 and in November 2014, acquired Multi-Modal Trucking, Inc. and Multi-Modal Services, Inc. (together referred to as "MMT") for approximately $5,825 in cash and $1,000 in available earn out. The earn out was fully settled in 2016. In January 2016, the Company also acquired certain assets of Ace Cargo, LLC ("Ace") for $1,700, and in August 2016, we acquired certain assets of Triumph Transport, Inc. and Triumph Repair Service, Inc. (together referred to as “Triumph”) for $10,100 and a potential earnout of $1,250. These acquisitions provided an opportunity for our Intermodal operations to expand into additional Midwest markets. The assets, liabilities, and operating results of these collective acquisitions have been included in the Company's consolidated financial statements from their dates of acquisition and have been included in the Intermodal reportable segment. Allocations of Purchase Prices 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 |
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 |
Goodwill The Company conducted its annual impairment assessments and tests of goodwill for each reporting unit as of June 30, 2016. The first step of the goodwill impairment test is the Company's assessment of 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 the estimation of fair value indicates the impairment potentially exists, the Company will then measure the amount of the impairment, if any. Goodwill impairment exists when the estimated 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. Our 2016 assessments and calculations for Expedited LTL, Intermodal and Pool Distribution indicated that, as of June 30, 2016, the fair value of each reporting unit exceeded the carrying value. However, due to the financial performance of the Total Quality, Inc. ("TQI") reporting unit falling notably short of previous projections, declining revenue from significant customers and strategic initiatives not having the required impact on financial results, the estimate of TQI's fair value no longer exceeded the respective carrying value. As a result, the Company recorded a goodwill impairment charge of $25,686 for the TQI reporting unit during the year ended December 31, 2016. 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 |
Other Acquired Intangibles Through acquisitions, the Company acquired customer relationships, non-compete agreements and trade names having weighted-average useful lives of 16.0, 5.3 and 4.0 years, respectively. Amortization expense on acquired customer relationships, non-compete agreements and trade names for each of the years ended December 31, 2016, 2015 and 2014 was $10,122, $10,905 and $8,517, respectively. 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 |
Additionally, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate 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. In conjunction with the TQI goodwill impairment assessment the Company determined there were indicators that TQI's customer relationship and non-compete intangible assets were impaired, as the undiscounted cash flows associated with the applicable assets no longer exceeded the related assets' net book values. The Company estimated the current market values of the customer relationship and non-compete assets 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. As a result of these estimates the Company recorded an impairment charge of $16,501 related to TQI customer relationships. In addition, during the year ended December 31, 2016, the Company discontinued use of an owned maintenance facility and began efforts to sell the property. In conjunction with these actions, the Company incurred a $255 impairment charge that was estimated using current offers received to sell the property less estimated selling costs.

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- 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
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