Business Wire | Jul 30, 2020 04:06PM EDT

Forward Air Corporation Reports Second Quarter 2020 Results

Jul. 30, 2020

GREENEVILLE, Tenn.--(BUSINESS WIRE)--Jul. 30, 2020--Forward Air Corporation (NASDAQ:FWRD) today reported financial results for the three and six months ended June 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 second quarter results said, "I could not be more proud of our teams for stepping up in a huge way for our customers, bringing them back up from April lows in the toughest circumstances with record service levels. By June our top and bottom lines were ahead of last year on a continuing operations basis and were comparable to last year when adjusted for one-time items."

Continuing Operations Three months ended

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

Operating revenue $ 281,678 $ 302,887 $ (21,209 ) (7.0 ) %

Income from operations $ 13,914 $ 29,070 $ (15,156 ) (52.1 ) %

Operating margin 4.9 % 9.6 % (470 ) bps

Net income $ 9,225 $ 21,244 $ (12,019 ) (56.6 ) %

Net income per diluted $ 0.33 $ 0.74 $ (0.41 ) (55.4 )share %

Cash provided by operating $ 29,101 $ 25,715 $ 3,386 13.2 %activities



Non-GAAP Financial Measures: ^2

EBITDA $ 23,327 $ 38,296 $ (14,969 ) (39.1 ) %

Free cash flow $ 17,806 $ 14,436 $ 3,370 23.3 %

^1 Results for the three months ended June 30, 2020 include severalnon-recurring items including a $2.1 million gain from changes in fair value onan earn-out due to the timing of expected new business wins, partially offsetby $1.0 million of severance and $0.7 million in reserves for customersnegatively impacted by COVID-19.

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

Michael J. Morris, CFO, commenting on the Company's third quarter 2020 guidance for continuing operations said "We expect third quarter year-on-year revenue growth to be 1% to 5% and net income per diluted share to be between $0.40 and $0.44."

On July 21, 2020, our Board of Directors declared a quarterly cash dividend of $0.18 per share of common stock. The dividend is payable to shareholders of record at the close of business on August 20, 2020 and is expected to be paid on September 9, 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 $0.72 for the full year 2020, payable in quarterly increments of $0.18 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 and position.

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 June 30, 2020 expected to be filed with the Securities and Exchange Commission (the "SEC") on July 31, 2020.

Review of Financial ResultsForward Air will hold a conference call to discuss second quarter 2020 results on Friday, July 31, 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, where investors can easily find or navigate to pertinent information about us, or by dialing (844) 767-5679, Access Code: 147112. A replay of the conference call will be available on the Investor Relations portion of the Company's website at www.forwardaircorp.com beginning shortly after completion of the live call.

About Forward Air CorporationForward Air keeps your business moving forward by providing services within three business segments: Expedited Freight (provides expedited regional, inter-regional and national LTL services, including local pick-up and delivery, final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling); Intermodal (provides 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 (provides 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 Six months ended

June 30, June 30, June 30, June 30, 2020 2019 2020 2019

(As (As Adjusted) Adjusted)

Operating revenue:

Expedited Freight $ 235,658 $ 253,286 $ 489,287 $ 478,944

Intermodal 46,428 50,539 98,888 104,654

Eliminations and other (408 ) (938 ) (940 ) (1,750 )operations

Operating revenue 281,678 302,887 587,235 581,848

Operating expenses:

Purchased transportation 142,069 143,436 292,667 275,987

Salaries, wages and 63,772 63,841 133,331 123,798 employee benefits

Operating leases 17,387 16,124 35,271 31,001

Depreciation and 9,413 9,227 18,747 18,515 amortization

Insurance and claims 7,722 11,757 17,766 19,745

Fuel expense 2,519 4,467 6,532 8,582

Other operating expenses 24,882 24,965 53,234 51,448

Total operating expenses 267,764 273,817 557,548 529,076

Income (loss) from continuing operations:

Expedited Freight 11,753 28,187 26,933 49,093

Intermodal 4,413 5,245 8,126 11,426

Other operations (2,252 ) (4,362 ) (5,372 ) (7,747 )

Income from continuing 13,914 29,070 29,687 52,772 operations

Other expense:

Interest expense (1,198 ) (581 ) (2,051 ) (1,156 )

Other, net - (1 ) - (2 )

Total other expense (1,198 ) (582 ) (2,051 ) (1,158 )

Income before income 12,716 28,488 27,636 51,614 taxes

Income tax expense 3,491 7,244 6,995 12,683

Net income from 9,225 21,244 20,641 38,931 continuing operations

(Loss) income fromdiscontinued operations, (6,071 ) 1,086 (9,112 ) 1,806 net of tax

Net income and $ 3,154 $ 22,330 $ 11,529 $ 40,737 comprehensive income



Net income per share:

Basic net income (loss) per share:

Continuing operations $ 0.33 $ 0.74 $ 0.72 $ 1.35

Discontinued operations (0.22 ) 0.04 (0.31 ) 0.07

Net income per share $ 0.11 $ 0.78 $ 0.41 $ 1.42



Diluted net income (loss) per share:

Continuing operations $ 0.33 $ 0.74 $ 0.72 $ 1.35

Discontinued operations (0.22 ) 0.04 (0.32 ) 0.06

Net income per share $ 0.11 $ 0.78 $ 0.40 $ 1.41

Dividends per share: $ 0.18 $ 0.18 $ 0.36 $ 0.36

Expedited Freight Segment Information

(In millions)

(Unaudited)



Three months ended

June 30, Percent June 30, Percent Percent of of

2020 ^1 Revenue 2019 Revenue Change Change

(As Adjusted)

Operating revenue:

Network ^2 $ 134.2 56.9 % $ 172.5 68.1 % $ (38.3 ) (22.2 ) %

Truckload 41.9 17.8 48.6 19.2 (6.7 ) (13.8 )

Final Mile 53.4 22.7 25.0 9.9 28.4 113.6

Other 6.2 2.6 7.2 2.8 (1.0 ) (13.9 )

Totaloperating 235.7 100.0 253.3 100.0 (17.6 ) (6.9 )revenue



Operating expenses:

Purchased 127.5 54.1 125.8 49.7 1.7 1.4 transportation

Salaries,wages and 50.5 21.4 50.9 20.1 (0.4 ) (0.8 )employeebenefits

Operating 13.3 5.6 12.1 4.8 1.2 9.9 leases

Depreciationand 6.7 2.8 7.5 3.0 (0.8 ) (10.7 )amortization

Insurance and 5.7 2.4 6.6 2.6 (0.9 ) (13.6 )claims

Fuel expense 1.4 0.6 2.7 1.1 (1.3 ) (48.1 )

Otheroperating 18.8 8.0 19.5 7.7 (0.7 ) (3.6 )expenses

Totaloperating 223.9 95.0 225.1 88.9 (1.2 ) (0.5 )expenses

Income from $ 11.8 5.0 % $ 28.2 11.1 % $ (16.4 ) (58.2 )operations %



^1 Includes revenues and operating expenses from the acquisition of FSA andLinn Star, which were acquired in April 2019 and January 2020, respectively.FSA results are partially included in the prior period. Linn Star results arenot 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 andFinal Mile revenue.

Expedited Freight Operating Statistics



Three months ended

June 30, June 30, Percent

2020 2019 Change

(As Adjusted)



Business days 64 64 - %



Tonnage ^1,2

Total pounds 522,031 626,748 (16.7 )

Pounds per day 8,157 9,793 (16.7 )



Shipments ^1,2

Total shipments 963 1,014 (5.0 )

Shipments per day 15.0 15.8 (5.0 )



Weight per shipment 542 618 (12.3 )



Revenue per hundredweight ^3 $ 26.32 $ 27.39 (3.9 )

Revenue per hundredweight, ex fuel ^3 $ 23.09 $ 22.91 0.8



Revenue per shipment ^3 $ 139 $ 171 (18.7 )

Revenue per shipment, ex fuel ^3 $ 122 $ 144 (15.3 )



Network revenue from door-to-door shipments as 49.9 % 39.9 % 25.1 a percentage of network revenue ^3,4

Network gross margin ^5 50.6 % 55.8 % (9.3 ) %



^1 In thousands

^2 Excludes accessorial, full 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

June 30, Percent June 30, Percent Percent of of

2020 ^1 Revenue 2019 Revenue Change Change

Operating revenue $ 46.4 100.0 % $ 50.5 100.0 % $ (4.1 ) (8.1 ) %



Operating expenses:

Purchased 14.9 32.1 18.2 36.0 (3.3 ) (18.1 )transportation

Salaries, wagesand employee 11.7 25.2 12.4 24.6 (0.7 ) (5.6 )benefits

Operating leases 4.0 8.6 4.0 7.9 - -

Depreciation and 2.6 5.6 1.8 3.6 0.8 44.4 amortization

Insurance and 1.8 3.9 1.7 3.4 0.1 5.9 claims

Fuel expense 1.1 2.4 1.7 3.4 (0.6 ) (35.3 )

Other operating 5.9 12.7 5.5 10.9 0.4 7.3 expenses

Total operating 42.0 90.5 45.3 89.7 (3.3 ) (7.3 )expenses

Income from $ 4.4 9.5 % $ 5.2 10.3 % $ (0.8 ) (15.4 )operations %



^1 Includes revenues and operating expenses from the acquisition of OST, whichwas acquired in July 2019 (and is not included in the prior period).

Intermodal Operating Statistics



Three months ended

June 30, June 30, Percent

2020 2019 Change



Drayage shipments 68,974 76,074 (9.3 )%

Drayage revenue per shipment $ 556 $ 571 (2.6 )

Number of locations 24 21 14.3 %



Forward Air Corporation

Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 30, December 2020 31, 2019

Assets

Current assets:

Cash and cash equivalents $ 80,916 $ 64,749

Accounts receivable, net 130,759 136,214

Other current assets 23,745 20,403

Current assets held for sale 11,871 14,952

Total current assets 247,291 236,318



Property and equipment 381,834 373,571

Less accumulated depreciation and amortization 187,239 180,815

Total property and equipment, net 194,595 192,756

Operating lease right-of-use assets 123,925 105,170

Goodwill and other acquired intangibles:

Goodwill 240,933 215,699

Other acquired intangibles, net of accumulated 148,452 124,857 amortization

Total goodwill and other acquired intangibles, net 389,385 340,556

Other assets 42,710 39,374

Noncurrent assets held for sale 74,593 76,704

Total assets $ 1,072,499 $ 990,878



Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $ 27,682 $ 25,411

Accrued expenses 48,041 44,154

Other current liabilities 3,784 5,318

Current portion of debt and finance lease 1,445 1,421 obligations

Current portion of operating lease obligations 42,108 35,886

Current liabilities held for sale 23,792 24,974

Total current liabilities 146,852 137,164



Debt and finance lease obligations, less current 136,549 72,249 portion

Operating lease obligations, less current portion 82,404 69,678

Other long-term liabilities 58,194 56,448

Deferred income taxes 45,883 41,214

Noncurrent liabilities held for sale 36,325 36,943



Shareholders' equity:

Common stock 277 279

Additional paid-in capital 233,086 226,869

Retained earnings 332,929 350,034

Total shareholders' equity 566,292 577,182

Total liabilities and shareholders' equity $ 1,072,499 $ 990,878

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended

June 30, June 30, 2020 2019

Operating activities:

Net income from continuing operations $ 9,225 $ 21,244

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

Depreciation and amortization 9,413 9,227

Change in fair value of earn-out liability (2,108 ) -

Share-based compensation 2,429 3,045

Loss (gain) on disposal of property and equipment, net 75 (137 )

Provision for loss on receivables 887 2

Provision for revenue adjustments 745 738

Deferred income tax expense 3,443 2,367

Changes in operating assets and liabilities

Accounts receivable (61 ) (6,566 )

Prepaid expenses and other current assets (493 ) (7,371 )

Income taxes (1,962 ) (6,599 )

Accounts payable and accrued expenses 7,508 9,765

Net cash provided by operating activities of 29,101 25,715 continuing operations



Investing activities:

Proceeds from disposal of property and equipment 268 624

Purchases of property and equipment (11,563 ) (11,903 )

Acquisition of business, net of cash acquired - (27,000 )

Other - 6

Net cash used in investing activities of continuing (11,295 ) (38,273 )operations



Financing activities:

Payments of finance lease obligations (340 ) (69 )

Proceeds from senior credit facility - 10,000

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

Proceeds from exercise of stock options - 448

Payments of cash dividends (5,037 ) (5,144 )

Repurchase of common stock (repurchase program) - (24,436 )

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

Cash settlement of share-based awards for tax (614 ) (49 )withholdings

(Distributions to) contributions from subsidiary (3,154 ) 4,159

Net cash used in financing activities from continuing (14,135 ) (14,830 )operations

Net increase (decrease) in cash of continuing 3,671 (27,388 )operations



Cash from discontinued operations:

Cash (used in) provided by operating activities of (3,010 ) 4,523 discontinued operations, net

Cash used in investing activities of discontinued (144 ) (364 )operations, net

Cash provided by (used in) financing activities of 3,154 (4,159 )discontinued operations, net

Net increase (decrease) in cash 3,671 (27,388 )

Cash at beginning of period of continuing operations 77,245 42,165

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

Net increase (decrease) in cash 3,671 (27,388 )

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

Cash at end of period of continuing operations $ 80,916 $ 14,777

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

June 30, June 30, 2020 2019

Operating activities:

Net income from continuing operations $ 20,641 $ 38,931

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

Depreciation and amortization 18,747 18,515

Change in fair value of earn-out liability (2,702 ) -

Share-based compensation 5,507 5,910

Loss (gain) on disposal of property and equipment, net 9 (218 )

Provision for loss on receivables 688 635

Provision for revenue adjustments 1,787 1,277

Deferred income tax expense 4,668 3,290

Changes in operating assets and liabilities

Accounts receivable 2,979 (3,922 )

Prepaid expenses and other current assets 312 (4,842 )

Income taxes (341 ) (2,182 )

Accounts payable and accrued expenses 7,634 6,876

Net cash provided by operating activities of 59,929 64,270 continuing operations



Investing activities:

Proceeds from disposal of property and equipment 988 1,008

Purchases of property and equipment (14,214 ) (14,214 )

Acquisition of business, net of cash acquired (55,931 ) (27,000 )

Net cash used in investing activities of continuing (69,157 ) (40,206 )operations



Financing activities:

Payments of finance lease obligations (676 ) (137 )

Proceeds from senior credit facility 65,000 10,000

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

Proceeds from exercise of stock options - 1,278

Payments of cash dividends (10,087 ) (10,333 )

Repurchase of common stock (repurchase program) (15,259 ) (38,617 )

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

Cash settlement of share-based awards for tax (3,286 ) (2,770 )withholdings

(Distributions to) contributions from subsidiary (5,307 ) 5,374

Net cash provided by (used in) financing activities 25,395 (34,944 )from continuing operations

Net increase (decrease) in cash of continuing 16,167 (10,880 )operations



Cash from discontinued operations:

Cash (used in) provided by operating activities of (4,672 ) 7,494 discontinued operations, net

Cash used in investing activities of discontinued (635 ) (2,120 )operations, net

Cash provided by (used in) financing activities of 5,307 (5,374 )discontinued operations, net

Net increase (decrease) in cash 16,167 (10,880 )

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

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

Net increase (decrease) in cash 16,167 (10,880 )

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

Cash at end of period of continuing operations $ 80,916 $ 14,777

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 six months ended June 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 Six months ended

Continuing Operations June 30, June 30, June 30, June 30, 2020 2019 2020 2019

Net income (GAAP) $ 9,225 $ 21,244 $ 20,641 $ 38,931

Interest expense 1,198 581 2,051 1,156

Income tax expense 3,491 7,244 6,995 12,683

Depreciation and 9,413 9,227 18,747 18,515 amortization

EBITDA (Non-GAAP) $ 23,327 $ 38,296 $ 48,434 $ 71,285



Three months ended Six months ended

Continuing Operations June 30, June 30, June 30, June 30, 2020 2019 2020 2019

Net cash provided byoperating activities $ 29,101 $ 25,715 $ 59,929 $ 64,270 (GAAP)

Proceeds from disposalof property and 268 624 988 1,008 equipment

Purchases of property (11,563 ) (11,903 ) (14,214 ) (14,214 )and equipment

Free cash flow $ 17,806 $ 14,436 $ 46,703 $ 51,064 (Non-GAAP)

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 June 30, 2020

Net income from continuing operations $ 9,225

Income allocated to participating securities (13 )

Numerator for diluted income per share - net income $ 9,212



Fully diluted share count 27,726

Diluted earnings per share from continuing operations $ 0.33



Projected Full year 2020

Projected continuing operations and consolidated tax rate 26.5 %



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 impact of COVID-19, 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 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005823/en/

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