Business Wire | Oct 29, 2020 04:06PM EDT

Forward Air Corporation Reports Third Quarter 2020 Results

Oct. 29, 2020

GREENEVILLE, Tenn.--(BUSINESS WIRE)--Oct. 29, 2020--Forward Air Corporation (NASDAQ:FWRD) (the "Company," "we," "our," or "us") today reported financial results for the three and nine months ended September 30, 2020 as presented in the tables below on a continuing operations basis (Pool Distribution is being reported as a discontinued operation).

Tom Schmitt, Chairman, President and CEO, commenting on the Company's third quarter results said, "During the third quarter our teams did a great job of continuing to restore volumes in response to COVID-19. To support our efforts to grow our fleet and enhance our network capabilities, we implemented several pricing actions during the back half of the quarter which will drive continued improvements in our operational performance and shipment-level profitability."

Continuing Operations Three months ended

(in thousands, except per September September Change Percentshare data) 30, 2020 ^1 30, 2019 Change

Operating revenue $ 331,997 $ 313,683 $ 18,314 5.8 %

Income from operations $ 23,510 $ 29,186 $ (5,676 ) (19.4 ) %

Operating margin 7.1 % 9.3 % (220) bps

Net income $ 16,992 $ 21,054 $ (4,062 ) (19.3 ) %

Net income per diluted share $ 0.61 $ 0.74 $ (0.13 ) (17.6 ) %

Cash provided by operating $ 20,564 $ 43,553 $ (22,989 ) (52.8 )activities %



Non-GAAP Financial Measures: ^ 2

EBITDA $ 32,682 $ 38,203 $ (5,521 ) (14.5 ) %

Free cash flow $ 18,766 $ 35,213 $ (16,447 ) (46.7 ) %

^1 Results for the three months ended September 30, 2020 include a $2.3 millionone-time charge related to a litigated contract dispute.

^2 EBITDA and free cash flow are non-GAAP financial measures andreconciliations of these non-GAAP financial measures are provided in the belowfinancial tables.

Commenting on the Company's third quarter results, Michael J. Morris, CFO, said, "Our third quarter earnings per share of $0.61 exceeded our guidance range, and reflected a $0.06 one-time charge related to a litigated contract dispute." Regarding the Company's fourth quarter 2020 guidance, Mr. Morris said, "We expect fourth quarter year-on-year revenue growth to be 6% to 10% and net income per diluted share to be between $0.71 and $0.75 in the fourth quarter of 2020."

On October 27, 2020, our Board of Directors approved a 16.7% increase to the Company's quarterly dividend, raising it from $0.18 to $0.21 per share of common stock. The dividend is payable to shareholders of record at the close of business on November 25, 2020 and is expected to be paid on December 10, 2020.

This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.75 per share of common stock for 2020 and $0.84 for the full year 2021, payable in quarterly increments of $0.21 per share of common stock. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the Company's financial performance.

Commenting on the increased dividend payment, Mr. Morris said, "This increase reflects our confidence in the growth potential of our businesses, and the Company's continued focus on returning a portion of its free cash flow back to shareholders. In the past five years, we have returned approximately $358 million to shareholders in the form of dividends and share repurchases."

On April 23, 2020, the Board approved a strategy to divest the Pool Distribution business ("Pool"). Accordingly, the results of operations and cash flows for Pool have been presented as discontinued operations and have been excluded from continuing operations in this release for all periods presented. In addition, Pool assets and liabilities are reflected as "held for sale" on the Consolidated Balance Sheets in this release. For more information regarding Pool discontinued operations, please see the Company's Form 10-Q for the quarter ended September 30, 2020 expected to be filed with the Securities and Exchange Commission (the "SEC") on October 30, 2020.

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2020 results on Friday, October 30, 2020 at 9:00 a.m. EDT. The Company's conference call will be available online on the Investor Relations portion of the Company's website at www.forwardaircorp.com, or by dialing (844) 867-6169, Access Code: 7690610.

A replay of the conference call will be available on the Investor Relations portion of the Company's website at www.forwardaircorp.com, which we use as a primary mechanism to communicate with our investors. Investors are urged to monitor the Investors Relations portion of the Company's website to easily find or navigate to current and pertinent information about us.

About Forward Air Corporation

Forward Air is a leading asset-light freight and logistics company that provides services across the United States and Canada. We provide expedited less-than-truckload ("LTL") services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals; final mile services, including delivery of heavy-bulky freight; truckload brokerage services, including dedicated fleet services, high-security and temperature-controlled logistics services; intermodal first-and last-mile high-value drayage services both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services; and pool distribution services, including high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. For more information, visit our website at www.forwardaircorp.com.

Forward Air Corporation

Consolidated Statements of Comprehensive Income

(Unaudited, in thousands, except per share data)



Three months ended Nine months ended

September September September September 30, 30, 30, 30, 2020 2019 2020 2019

(As (As Adjusted) Adjusted)

Operating revenue:

Expedited Freight $ 283,514 $ 256,115 $ 772,801 $ 735,055

Intermodal 48,948 58,346 147,836 163,000

Eliminations and other (465 ) (778 ) (1,405 ) (2,524 )operations

Operating revenue 331,997 313,683 919,232 895,531

Operating expenses:

Purchased transportation 173,054 150,296 465,721 426,283

Salaries, wages and 66,927 68,532 200,258 192,330 employee benefits

Operating leases 17,327 15,860 52,598 46,861

Depreciation and 9,172 9,016 27,919 27,531 amortization

Insurance and claims 8,671 9,532 26,437 29,276

Fuel expense 2,715 4,637 9,247 13,219

Other operating expenses 30,621 26,624 83,854 78,071

Total operating expenses 308,487 284,497 866,034 813,571

Income (loss) from continuing operations:

Expedited Freight 23,461 27,131 50,394 76,222

Intermodal 4,837 6,900 12,963 18,326

Other operations (4,788 ) (4,845 ) (10,159 ) (12,588 )

Income from continuing 23,510 29,186 53,198 81,960 operations

Other expense:

Interest expense (1,304 ) (761 ) (3,355 ) (1,917 )

Other, net - 1 - (1 )

Total other expense (1,304 ) (760 ) (3,355 ) (1,918 )

Income before income 22,206 28,426 49,843 80,042 taxes

Income tax expense 5,214 7,372 12,209 20,055

Net income from 16,992 21,054 37,634 59,987 continuing operations

(Loss) income fromdiscontinued operations, (345 ) 1,141 (9,458 ) 2,945 net of tax

Net income and $ 16,647 $ 22,195 $ 28,176 $ 62,932 comprehensive income



Net income per share:

Basic net income (loss) per share:

Continuing operations $ 0.61 $ 0.74 $ 1.35 $ 2.10

Discontinued operations (0.01 ) 0.04 (0.34 ) 0.10

Net income per share $ 0.60 $ 0.78 $ 1.01 $ 2.20



Diluted net income (loss) per share:

Continuing operations $ 0.61 $ 0.74 $ 1.35 $ 2.09

Discontinued operations (0.01 ) 0.04 (0.34 ) 0.10

Net income per share $ 0.60 $ 0.78 $ 1.01 $ 2.19

Dividends per share: $ 0.18 $ 0.18 $ 0.54 $ 0.54

Expedited Freight Segment Information

(In millions)

(Unaudited)

Three months ended

September 30,

Percent of

September 30,

Percent of

Percent

2020 1

Revenue

2019

Revenue

Change

Change

(As Adjusted)

Operating revenue:

Network 2

$

169.3

59.7

%

$

169.3

66.1

%

$

-

-

%

Truckload

49.8

17.6

48.1

18.8

1.7

3.5

Final Mile

57.0

20.1

31.6

12.3

25.4

80.4

Other

7.4

2.6

7.1

2.8

0.3

4.2

Total operating revenue

283.5

100.0

256.1

100.0

27.4

10.7

Operating expenses:

Purchased transportation

156.1

55.1

129.8

50.7

26.3

20.3

Salaries, wages and employee benefits

54.1

19.1

52.2

20.4

1.9

3.6

Operating leases

13.4

4.7

11.5

4.5

1.9

16.5

Depreciation and amortization

6.8

2.4

6.5

2.5

0.3

4.6

Insurance and claims

5.8

2.0

5.4

2.1

0.4

7.4

Fuel expense

1.4

0.5

2.5

1.0

(1.1

)

(44.0

)

Other operating expenses

22.4

7.9

21.1

8.2

1.3

6.2

Total operating expenses

260.0

91.7

229.0

89.4

31.0

13.5

Income from operations

$

23.5

8.3

%

$

27.1

10.6

%

$

(3.6

)

(13.3

)%

1 Includes revenues and operating expenses from the acquisition of Linn Star which was acquired in January 2020. Linn Star results are not included in the prior period.

2 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

Expedited Freight Segment Information

(In millions)

(Unaudited)



Three months ended

September Percent September Percent Percent 30, of 30, of

2020 ^1 Revenue 2019 Revenue Change Change

(As Adjusted)

Operating revenue:

Network ^2 $ 169.3 59.7 % $ 169.3 66.1 % $ - - %

Truckload 49.8 17.6 48.1 18.8 1.7 3.5

Final Mile 57.0 20.1 31.6 12.3 25.4 80.4

Other 7.4 2.6 7.1 2.8 0.3 4.2

Total operating 283.5 100.0 256.1 100.0 27.4 10.7 revenue



Operating expenses:

Purchased 156.1 55.1 129.8 50.7 26.3 20.3 transportation

Salaries, wagesand employee 54.1 19.1 52.2 20.4 1.9 3.6 benefits

Operating leases 13.4 4.7 11.5 4.5 1.9 16.5

Depreciation and 6.8 2.4 6.5 2.5 0.3 4.6 amortization

Insurance and 5.8 2.0 5.4 2.1 0.4 7.4 claims

Fuel expense 1.4 0.5 2.5 1.0 (1.1 ) (44.0 )

Other operating 22.4 7.9 21.1 8.2 1.3 6.2 expenses

Total operating 260.0 91.7 229.0 89.4 31.0 13.5 expenses

Income from $ 23.5 8.3 % $ 27.1 10.6 % $ (3.6 ) (13.3 )operations %



^1 Includes revenues and operating expenses from the acquisition of Linn Starwhich was acquired in January 2020. Linn Star results are not included in theprior period.

^2 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload andFinal Mile revenue.

Expedited Freight Operating Statistics

Three months ended

September 30,

September 30,

Percent

2020

2019

Change

(As Adjusted)

Business days

64

64

-

%

Tonnage 1,2

Total pounds

636,194

613,812

3.6

Pounds per day

9,941

9,591

3.6

Shipments 1,2

Total shipments

1,018

977

4.2

Shipments per day

15.9

15.3

4.2

Weight per shipment

625

628

(0.5

)

Revenue per hundredweight 3

$

26.84

$

27.65

(2.9

)

Revenue per hundredweight, ex fuel 3

$

23.41

$

23.23

0.8

Revenue per shipment 3

$

166

$

176

(5.7

)

Revenue per shipment, ex fuel 3

$

145

$

148

(2.0

)

Network revenue from door-to-door shipments as a percentage of network revenue 3,4

51.3

%

40.7

%

26.0

Network gross margin 5

49.7

%

55.6

%

(10.6

)%

1 In thousands

2 Excludes accessorial, Truckload and Final Mile products

3 Includes intercompany revenue between the Network and Truckload revenue streams

4 Door-to-door shipments include all shipments with a pickup and/or delivery

5 Network revenue less Network purchased transportation as a percentage of Network revenue

Expedited Freight Operating Statistics



Three months ended

September September Percent 30, 30,

2020 2019 Change

(As Adjusted)



Business days 64 64 - %



Tonnage ^1,2

Total pounds 636,194 613,812 3.6

Pounds per day 9,941 9,591 3.6



Shipments ^1,2

Total shipments 1,018 977 4.2

Shipments per day 15.9 15.3 4.2



Weight per shipment 625 628 (0.5 )



Revenue per hundredweight ^3 $ 26.84 $ 27.65 (2.9 )

Revenue per hundredweight, ex fuel ^3 $ 23.41 $ 23.23 0.8



Revenue per shipment ^3 $ 166 $ 176 (5.7 )

Revenue per shipment, ex fuel ^3 $ 145 $ 148 (2.0 )



Network revenue from door-to-door shipments as 51.3 % 40.7 % 26.0 a percentage of network revenue ^3,4

Network gross margin ^5 49.7 % 55.6 % (10.6 ) %



^1 In thousands

^2 Excludes accessorial, Truckload and Final Mile products

^3 Includes intercompany revenue between the Network and Truckload revenuestreams

^4 Door-to-door shipments include all shipments with a pickup and/or delivery

^5 Network revenue less Network purchased transportation as a percentage ofNetwork revenue

Intermodal Segment Information

(In millions)

(Unaudited)

Three months ended

September 30,

Percent of

September 30,

Percent of

Percent

2020 1

Revenue

2019

Revenue

Change

Change

Operating revenue

$

48.9

100.0

%

$

58.3

100.0

%

$

(9.4

)

(16.1

)%

Operating expenses:

Purchased transportation

17.3

35.4

21.0

36.0

(3.7

)

(17.6

)

Salaries, wages and employee benefits

11.6

23.7

14.2

24.4

(2.6

)

(18.3

)

Operating leases

3.9

8.0

4.3

7.4

(0.4

)

(9.3

)

Depreciation and amortization

2.4

4.9

2.6

4.5

(0.2

)

(7.7

)

Insurance and claims

2.1

4.3

1.8

3.1

0.3

16.7

Fuel expense

1.2

2.5

2.2

3.8

(1.0

)

(45.5

)

Other operating expenses

5.6

11.5

5.3

9.1

0.3

5.7

Total operating expenses

44.1

90.2

51.4

88.2

(7.3

)

(14.2

)

Income from operations

$

4.8

9.8

%

$

6.9

11.8

%

$

(2.1

)

(30.4

)%

1 Includes revenues and operating expenses from the acquisition of OST, which was acquired in July 2019 (and is partially included in the prior period).

Intermodal Segment Information

(In millions)

(Unaudited)



Three months ended

September Percent September Percent Percent 30, of 30, of

2020 ^1 Revenue 2019 Revenue Change Change

Operating $ 48.9 100.0 % $ 58.3 100.0 % $ (9.4 ) (16.1 )revenue %



Operating expenses:

Purchased 17.3 35.4 21.0 36.0 (3.7 ) (17.6 )transportation

Salaries, wagesand employee 11.6 23.7 14.2 24.4 (2.6 ) (18.3 )benefits

Operating leases 3.9 8.0 4.3 7.4 (0.4 ) (9.3 )

Depreciation and 2.4 4.9 2.6 4.5 (0.2 ) (7.7 )amortization

Insurance and 2.1 4.3 1.8 3.1 0.3 16.7 claims

Fuel expense 1.2 2.5 2.2 3.8 (1.0 ) (45.5 )

Other operating 5.6 11.5 5.3 9.1 0.3 5.7 expenses

Total operating 44.1 90.2 51.4 88.2 (7.3 ) (14.2 )expenses

Income from $ 4.8 9.8 % $ 6.9 11.8 % $ (2.1 ) (30.4 )operations %



^1 Includes revenues and operating expenses from the acquisition of OST, whichwas acquired in July 2019 (and is partially included in the prior period).

Intermodal Operating Statistics

Three months ended

September 30,

September 30,

Percent

2020

2019

Change

Drayage shipments

74,506

84,230

(11.5

)%

Drayage revenue per shipment

$

562

$

597

(5.9

)

Number of locations

24

21

14.3

%

Intermodal Operating Statistics



Three months ended

September 30, September 30, Percent

2020 2019 Change



Drayage shipments 74,506 84,230 (11.5 )%

Drayage revenue per shipment $ 562 $ 597 (5.9 )

Number of locations 24 21 14.3 %

Forward Air Corporation

Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 30,2020

December 31, 2019

Assets

Current assets:

Cash and cash equivalents

$

42,990

$

64,749

Accounts receivable, net

153,070

136,214

Other current assets

22,062

20,403

Current assets held for sale

16,925

14,952

Total current assets

235,047

236,318

Property and equipment

379,306

373,571

Less accumulated depreciation and amortization

189,042

180,815

Total property and equipment, net

190,264

192,756

Operating lease right-of-use assets

115,551

105,170

Goodwill and other acquired intangibles:

Goodwill

240,933

215,699

Other acquired intangibles, net of accumulated amortization

145,086

124,857

Total goodwill and other acquired intangibles, net

386,019

340,556

Other assets

43,266

39,374

Noncurrent assets held for sale

78,063

76,704

Total assets

$

1,048,210

$

990,878

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

32,581

$

25,411

Accrued expenses

52,454

44,154

Other current liabilities

4,277

5,318

Current portion of debt and finance lease obligations

1,557

1,421

Current portion of operating lease obligations

40,258

35,886

Current liabilities held for sale

26,006

24,974

Total current liabilities

157,133

137,164

Debt and finance lease obligations, less current portion

116,583

72,249

Operating lease obligations, less current portion

76,003

69,678

Other long-term liabilities

61,536

56,448

Deferred income taxes

45,532

41,214

Noncurrent liabilities held for sale

39,227

36,943

Shareholders' equity:

Common stock

273

279

Additional paid-in capital

237,497

226,869

Retained earnings

314,426

350,034

Total shareholders' equity

552,196

577,182

Total liabilities and shareholders' equity

$

1,048,210

$

990,878

Forward Air Corporation

Consolidated Balance Sheets

(In thousands)

(Unaudited)

September 30, December 2020 31, 2019

Assets

Current assets:

Cash and cash equivalents $ 42,990 $ 64,749

Accounts receivable, net 153,070 136,214

Other current assets 22,062 20,403

Current assets held for sale 16,925 14,952

Total current assets 235,047 236,318



Property and equipment 379,306 373,571

Less accumulated depreciation and amortization 189,042 180,815

Total property and equipment, net 190,264 192,756

Operating lease right-of-use assets 115,551 105,170

Goodwill and other acquired intangibles:

Goodwill 240,933 215,699

Other acquired intangibles, net of accumulated 145,086 124,857 amortization

Total goodwill and other acquired intangibles, net 386,019 340,556

Other assets 43,266 39,374

Noncurrent assets held for sale 78,063 76,704

Total assets $ 1,048,210 $ 990,878



Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $ 32,581 $ 25,411

Accrued expenses 52,454 44,154

Other current liabilities 4,277 5,318

Current portion of debt and finance lease 1,557 1,421 obligations

Current portion of operating lease obligations 40,258 35,886

Current liabilities held for sale 26,006 24,974

Total current liabilities 157,133 137,164



Debt and finance lease obligations, less current 116,583 72,249 portion

Operating lease obligations, less current portion 76,003 69,678

Other long-term liabilities 61,536 56,448

Deferred income taxes 45,532 41,214

Noncurrent liabilities held for sale 39,227 36,943



Shareholders' equity:

Common stock 273 279

Additional paid-in capital 237,497 226,869

Retained earnings 314,426 350,034

Total shareholders' equity 552,196 577,182

Total liabilities and shareholders' equity $ 1,048,210 $ 990,878

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended

September 30, 2020

September 30, 2019

Operating activities:

Net income from continuing operations

$

16,992

$

21,054

Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations

Depreciation and amortization

9,172

9,016

Change in fair value of earn-out liability

493

890

Share-based compensation

2,345

2,626

Loss on disposal of property and equipment, net

99

999

(Recovery of) provision for loss on receivables

(82

)

184

Provision for revenue adjustments

1,185

962

Deferred income tax (benefit) expense

(351

)

2,591

Changes in operating assets and liabilities

Accounts receivable

(23,415

)

144

Prepaid expenses and other current assets

(484

)

462

Income taxes

1,767

(375

)

Accounts payable and accrued expenses

12,843

5,000

Net cash provided by operating activities of continuing operations

20,564

43,553

Investing activities:

Proceeds from disposal of property and equipment

427

685

Purchases of property and equipment

(2,225

)

(9,025

)

Acquisition of business, net of cash acquired

-

(12,000

)

Net cash used in investing activities of continuing operations

(1,798

)

(20,340

)

Financing activities:

Payments of finance lease obligations

147

(391

)

Proceeds from senior credit facility

-

10,000

Payments on senior credit facility

(20,000

)

-

Proceeds from exercise of stock options

1,901

785

Payments of cash dividends

(5,003

)

(5,088

)

Repurchase of common stock (repurchase program)

(29,989

)

(9,289

)

Cash settlement of share-based awards for tax withholdings

(158

)

(262

)

(Distributions to) contributions from subsidiary held for sale

(3,590

)

1,079

Net cash used in financing activities from continuing operations

(56,692

)

(3,166

)

Net (decrease) increase in cash of continuing operations

(37,926

)

20,047

Cash from discontinued operations:

Cash (used in) provided by operating activities of discontinued operations, net

(3,418

)

2,412

Cash used in investing activities of discontinued operations, net

(172

)

(1,334

)

Cash provided by (used in) financing activities of discontinued operations, net

3,590

(1,078

)

Net (decrease) increase in cash

(37,926

)

20,047

Cash at beginning of period of continuing operations

80,916

14,777

Cash at beginning of period of discontinued operations/held for sale

-

-

Net (decrease) increase in cash

(37,926

)

20,047

Less: cash at end of period of discontinued operations/held for sale

-

-

Cash at end of period of continuing operations

$

42,990

$

34,824

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended

September September 30, 30, 2020 2019

Operating activities:

Net income from continuing operations $ 16,992 $ 21,054

Adjustments to reconcile net income of continuingoperations to net cash provided by operating activities of continuing operations

Depreciation and amortization 9,172 9,016

Change in fair value of earn-out liability 493 890

Share-based compensation 2,345 2,626

Loss on disposal of property and equipment, net 99 999

(Recovery of) provision for loss on receivables (82 ) 184

Provision for revenue adjustments 1,185 962

Deferred income tax (benefit) expense (351 ) 2,591

Changes in operating assets and liabilities

Accounts receivable (23,415 ) 144

Prepaid expenses and other current assets (484 ) 462

Income taxes 1,767 (375 )

Accounts payable and accrued expenses 12,843 5,000

Net cash provided by operating activities of continuing 20,564 43,553 operations



Investing activities:

Proceeds from disposal of property and equipment 427 685

Purchases of property and equipment (2,225 ) (9,025 )

Acquisition of business, net of cash acquired - (12,000 )

Net cash used in investing activities of continuing (1,798 ) (20,340 )operations



Financing activities:

Payments of finance lease obligations 147 (391 )

Proceeds from senior credit facility - 10,000

Payments on senior credit facility (20,000 ) -

Proceeds from exercise of stock options 1,901 785

Payments of cash dividends (5,003 ) (5,088 )

Repurchase of common stock (repurchase program) (29,989 ) (9,289 )

Cash settlement of share-based awards for tax (158 ) (262 )withholdings

(Distributions to) contributions from subsidiary held (3,590 ) 1,079 for sale

Net cash used in financing activities from continuing (56,692 ) (3,166 )operations

Net (decrease) increase in cash of continuing (37,926 ) 20,047 operations



Cash from discontinued operations:

Cash (used in) provided by operating activities of (3,418 ) 2,412 discontinued operations, net

Cash used in investing activities of discontinued (172 ) (1,334 )operations, net

Cash provided by (used in) financing activities of 3,590 (1,078 )discontinued operations, net

Net (decrease) increase in cash (37,926 ) 20,047

Cash at beginning of period of continuing operations 80,916 14,777

Cash at beginning of period of discontinued operations/ - - held for sale

Net (decrease) increase in cash (37,926 ) 20,047

Less: cash at end of period of discontinued operations/ - - held for sale

Cash at end of period of continuing operations $ 42,990 $ 34,824

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine months ended

September 30, 2020

September 30, 2019

Operating activities:

Net income from continuing operations

$

37,634

$

59,987

Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations

Depreciation and amortization

27,919

27,531

Change in fair value of earn-out liability

(2,209

)

890

Share-based compensation

7,852

8,536

Loss on disposal of property and equipment, net

108

781

Provision for loss on receivables

606

819

Provision for revenue adjustments

2,972

2,239

Deferred income tax expense

4,317

5,881

Changes in operating assets and liabilities

Accounts receivable

(20,436

)

(3,778

)

Prepaid expenses and other current assets

(173

)

(4,380

)

Income taxes

1,426

(2,557

)

Accounts payable and accrued expenses

20,477

11,876

Net cash provided by operating activities of continuing operations

80,493

107,825

Investing activities:

Proceeds from disposal of property and equipment

1,415

1,693

Purchases of property and equipment

(16,439

)

(23,240

)

Acquisition of business, net of cash acquired

(55,931

)

(39,000

)

Net cash used in investing activities of continuing operations

(70,955

)

(60,547

)

Financing activities:

Payments of finance lease obligations

(529

)

(528

)

Proceeds from senior credit facility

65,000

20,000

Payments on senior credit facility

(20,000

)

-

Payments on earn-out liability

(5,284

)

-

Proceeds from exercise of stock options

1,901

2,063

Payments of cash dividends

(15,090

)

(15,421

)

Repurchase of common stock (repurchase program)

(45,248

)

(47,906

)

Proceeds from common stock issued under employee stock purchase plan

294

261

Cash settlement of share-based awards for tax withholdings

(3,444

)

(3,032

)

(Distributions to) contributions from subsidiary held for sale

(8,897

)

6,452

Net cash used in financing activities from continuing operations

(31,297

)

(38,111

)

Net (decrease) increase in cash of continuing operations

(21,759

)

9,167

Cash from discontinued operations:

Cash (used in) provided by operating activities of discontinued operations, net

(8,090

)

9,906

Cash used in investing activities of discontinued operations, net

(807

)

(3,454

)

Cash provided by (used in) financing activities of discontinued operations, net

8,897

(6,452

)

Net (decrease) increase in cash

(21,759

)

9,167

Cash at beginning of period of continuing operations

64,749

25,657

Cash at beginning of period of discontinued operations/held for sale

-

-

Net (decrease) increase in cash

(21,759

)

9,167

Less: cash at end of period of discontinued operations/held for sale

-

-

Cash at end of period of continuing operations

$

42,990

$

34,824

Forward Air Corporation Reconciliation of U.S. GAAP and Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP (also referred to herein as "reported"). However, the Company also uses "Non-GAAP financial measures" that are derived on the basis of methodologies other than in accordance with GAAP. Specifically, the Company believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions and in evaluating the Company's performance.

For the three and nine months ended September 30, 2020 and 2019, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization ("EBITDA") and free cash flow. All non-GAAP financial measures are presented on a continuing operations basis.

The Company believes that EBITDA from continuing operations improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization) and tax impacts as set out in the below tables. The Company believes that free cash flow from continuing operations is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance stockholder value.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the tables below present, for the periods indicated, a reconciliation of the Company's presented non-GAAP financial measures to the most directly comparable GAAP financial measures.

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Nine months ended

September September 30, 30, 2020 2019

Operating activities:

Net income from continuing operations $ 37,634 $ 59,987

Adjustments to reconcile net income of continuingoperations to net cash provided by operating activities of continuing operations

Depreciation and amortization 27,919 27,531

Change in fair value of earn-out liability (2,209 ) 890

Share-based compensation 7,852 8,536

Loss on disposal of property and equipment, net 108 781

Provision for loss on receivables 606 819

Provision for revenue adjustments 2,972 2,239

Deferred income tax expense 4,317 5,881

Changes in operating assets and liabilities

Accounts receivable (20,436 ) (3,778 )

Prepaid expenses and other current assets (173 ) (4,380 )

Income taxes 1,426 (2,557 )

Accounts payable and accrued expenses 20,477 11,876

Net cash provided by operating activities of continuing 80,493 107,825 operations



Investing activities:

Proceeds from disposal of property and equipment 1,415 1,693

Purchases of property and equipment (16,439 ) (23,240 )

Acquisition of business, net of cash acquired (55,931 ) (39,000 )

Net cash used in investing activities of continuing (70,955 ) (60,547 )operations



Financing activities:

Payments of finance lease obligations (529 ) (528 )

Proceeds from senior credit facility 65,000 20,000

Payments on senior credit facility (20,000 ) -

Payments on earn-out liability (5,284 ) -

Proceeds from exercise of stock options 1,901 2,063

Payments of cash dividends (15,090 ) (15,421 )

Repurchase of common stock (repurchase program) (45,248 ) (47,906 )

Proceeds from common stock issued under employee stock 294 261 purchase plan

Cash settlement of share-based awards for tax (3,444 ) (3,032 )withholdings

(Distributions to) contributions from subsidiary held (8,897 ) 6,452 for sale

Net cash used in financing activities from continuing (31,297 ) (38,111 )operations

Net (decrease) increase in cash of continuing (21,759 ) 9,167 operations



Cash from discontinued operations:

Cash (used in) provided by operating activities of (8,090 ) 9,906 discontinued operations, net

Cash used in investing activities of discontinued (807 ) (3,454 )operations, net

Cash provided by (used in) financing activities of 8,897 (6,452 )discontinued operations, net

Net (decrease) increase in cash (21,759 ) 9,167

Cash at beginning of period of continuing operations 64,749 25,657

Cash at beginning of period of discontinued operations/ - - held for sale

Net (decrease) increase in cash (21,759 ) 9,167

Less: cash at end of period of discontinued operations/ - - held for sale

Cash at end of period of continuing operations $ 42,990 $ 34,824

Forward Air Corporation Reconciliation of U.S. GAAP and Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP (also referred to herein as "reported"). However, the Company also uses "Non-GAAP financial measures" that are derived on the basis of methodologies other than in accordance with GAAP. Specifically, the Company believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions and in evaluating the Company's performance.

For the three and nine months ended September 30, 2020 and 2019, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization ("EBITDA") and free cash flow. All non-GAAP financial measures are presented on a continuing operations basis.

The Company believes that EBITDA from continuing operations improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization) and tax impacts as set out in the below tables. The Company believes that free cash flow from continuing operations is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance stockholder value.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the tables below present, for the periods indicated, a reconciliation of the Company's presented non-GAAP financial measures to the most directly comparable GAAP financial measures.

Forward Air Corporation

Reconciliation to U.S. GAAP

(In thousands)

(Unaudited)



Three months ended Nine months ended

September September September SeptemberContinuing Operations 30, 30, 30, 30, 2020 2019 2020 2019

Net income (GAAP) $ 16,992 $ 21,054 $ 37,634 $ 59,987

Interest expense 1,304 761 3,355 1,917

Income tax expense 5,214 7,372 12,209 20,055

Depreciation and amortization 9,172 9,016 27,919 27,531

EBITDA (Non-GAAP) $ 32,682 $ 38,203 $ 81,117 $ 109,490



Three months ended Nine months ended

September September September SeptemberContinuing Operations 30, 30, 30, 30, 2020 2019 2020 2019

Net cash provided by operating $ 20,564 $ 43,553 $ 80,493 $ 107,825 activities (GAAP)

Proceeds from disposal of 427 685 1,415 1,693 property and equipment

Purchases of property and (2,225 ) (9,025 ) (16,439 ) (23,240 )equipment

Free cash flow (Non-GAAP) $ 18,766 $ 35,213 $ 65,469 $ 86,278

The following table summarizes supplemental guidance information that management believes to be useful.

Forward Air Corporation

Additional Guidance Data

(In thousands, except per share data)

(Unaudited)



Three months ended

Actual - Continuing Operations September 30, 2020

Net income from continuing operations $ 16,992

Income allocated to participating securities (150 )

Numerator for diluted income per share - net income $ 16,842



Fully diluted share count 27,606

Diluted earnings per share from continuing operations $ 0.61



Projected Full year 2020

Projected continuing operations and consolidated tax rate 25.5 %



Projected capital expenditures, net $ 26,000



Projected December 31, 2020

Projected year-end fully diluted share count 27,500

Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements included in this press release relate to expected continued improvements in our operational performance and profitability, expected impact of COVID-19, fourth quarter 2020 revenue growth and net income per diluted share, full year 2020 projected tax rate, share count, capital expenditures and the declaration of dividends.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: prolonged impact of COVID-19 and actions taken to mitigate those impacts, economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the creditworthiness of our customers and their ability to pay for services rendered, more limited liquidity than expected which limits our ability to make key investments, the availability and compensation of qualified independent owner-operators and freight handlers as well as contracted, third-party carriers needed to serve our customers' transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers' compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials, the outcome and impact of the 2020 presidential election and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2019.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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CONTACT: Forward Air Corporation Michael J. Morris, 404-362-8933 mmorris@forwardair.com