Forward Air Corporation Reports Fourth Quarter and Fiscal 2007 Results

Forward Air Reports Record Quarterly and Annual Revenues and Quarterly EPS Forward Air Announces Appointment of Michael P. McLean as Chief Accounting Officer

GREENEVILLE, Tenn.--(BUSINESS WIRE)--

Forward Air Corporation (NASDAQ:FWRD) today reported results for the fourth quarter and fiscal year ended December 31, 2007.

Operating revenue for the quarter ended December 31, 2007 increased 22.8% to a record $114.5 million from $93.2 million for the same quarter in 2006. Income from operations was $20.0 million, compared with $18.9 million in the prior-year quarter, an increase of 5.9%. As a percent of operating revenue, income from operations declined to 17.5% from 20.3% for the same quarter last year. Net income for the quarter ended December 31, 2007 was $12.4 million, compared with $12.2 million in the prior-year quarter. Net income per diluted share increased 7.5% for the fourth quarter of 2007 to a record $0.43 compared to $0.40 in the prior-year quarter.

Operating revenue for the year ended December 31, 2007 increased 11.3% to $392.7 million from $352.8 million for the same period in 2006. Income from operations was $71.0 million, compared with $75.4 million in the prior year, a decrease of 5.8%. As a percent of operating revenue, income from operations decreased to 18.1% from 21.4% in 2006. Net income during the year decreased 8.2% to $44.9 million from $48.9 million in the prior year. Net income per diluted share for 2007 was $1.50 compared with $1.55 in 2006, a decrease of 3.2%.

Commenting on the Company's fourth quarter results, Bruce A. Campbell, President and CEO, said, "We are most pleased with our performance in the fourth quarter. Our team, in addition to maintaining our standard operating discipline, was able to successfully complete the acquisition of Black Hawk Freight Services, as well as selectively obtain business from a fallen competitor."

Commenting further, Mr. Campbell said, "Without a doubt, 2007 presented one of the most-challenging freight environments in the history of our Company. However, due to our business model being at its current scale and the ability of our team to quickly react to change, we were able to mitigate the impact of a slowing economy once again producing one of the best operating ratios in the industry. We continue to be even more vigilant controlling costs as we anticipate the current operating conditions to persist throughout 2008."

Rodney L. Bell, Senior Vice President and CFO, said, "Early in 2007, we announced and began implementation of our "Completing the Model" strategic initiative which was designed to supplement the growth in our core airport-to-airport business with other faster growth-potential complementary transportation services. We knew that while these ancillary services had good margins, they lacked the superior margins enjoyed in our core business. Depending upon our business mix, we anticipate our 2008 margins will be comparable to those experienced in the fourth quarter of 2007."

Commenting further Mr. Bell said, "Once again, we posted a record year for cash flows generated from operations. Year-over-year, we were able to increase cash flows from operations 18.9% to $62.4 million further exhibiting the strength of our operating model. Our guidance for the first quarter is as follows: Revenue should be within a growth range over the prior year first quarter of 8 to 12%. Net income per diluted share should be within $0.32 to $0.36."

Lastly, Mr. Bell commented, "We are pleased to announce the appointment of Michael P. McLean as Chief Accounting Officer. In his relatively short time with our Company, Mike has proven himself an invaluable member of our management team. Mr. McLean has been Vice President and Controller since May 2006 and will continue in that capacity. Mr. McLean is a Certified Public Accountant who joined the Company as Vice President, Accounting in February 2006.

Review of Financial Results

Forward Air will hold a conference call to discuss fourth quarter and fiscal year 2007 results on Tuesday, February 12, 2008 at 9:00 a.m. EST. The Company's conference call will be available online at www.forwardair.com or by dialing 800-841-9385. A replay of the conference call will be available at www.forwardair.com beginning shortly after the completion of the live call.

About Forward Air

Forward Air is a high-service-level contractor to the air cargo industry providing time-definite ground transportation services through a network of 85 terminals located on or near major airports in the United States and Canada. The Company provides these services as a cost-effective alternative to air transportation of cargo that must be delivered at a specific time but is relatively less time-sensitive than traditional air freight or when air transportation is not economical.

                       Forward Air Corporation
             Condensed Consolidated Statements of Income
                (In thousands, except per share data)
                             (Unaudited)


                                 Three Months Ended    Year Ended
                                 ------------------ -----------------
                                 December  December December December
                                    31,       31,      31,      31,
                                   2007      2006     2007     2006
                                 --------- -------- -------- --------
Operating revenue:
Forward Air
  Airport-to-airport             $  86,034 $ 78,433 $313,162 $301,551
  Logistics                         11,976    9,357   42,626   31,321
  Other                              5,524    5,418   20,923   19,886
Forward Air Solutions (FASI)
  Pool distribution                 10,956       --   16,026       --
                                 --------- -------- --------  -------
Total operating revenue            114,490   93,208  392,737  352,758

Operating expenses:
Purchased transportation
Forward Air
  Airport-to-airport                33,608   32,796  123,658  119,011
  Logistics                          9,176    7,041   32,727   22,767
  Other                              1,737    1,375    6,049    4,943
Forward Air Solutions (FASI)
  Pool distribution                  1,292       --    2,003       --
                                 --------- -------- -------- --------
    Total purchased
     transportation                 45,813   41,212  164,437  146,721
    Salaries, wages and employee
     benefits                       27,800   18,941   88,803   74,448
    Operating leases                 4,670    3,839   16,761   14,458
    Depreciation and
     amortization                    3,095    2,400   10,824    8,934
    Insurance and claims             2,434    1,220    7,685    5,967
    Other operating expenses        10,687    6,711   33,179   26,834
                                 --------- -------- -------- --------
Total operating expenses            94,499   74,323  321,689  277,362
                                 --------- -------- -------- --------
Income from operations              19,991   18,885   71,048   75,396

Other income (expense):
Interest expense                      (355)     (23)    (491)     (81)
Other, net                             231      915    1,756    3,229
                                 --------- -------- -------- --------
Total other (expense) income          (124)     892    1,265    3,148
                                 --------- -------- -------- --------
Income before income taxes          19,867   19,777   72,313   78,544
Income taxes                         7,463    7,608   27,388   29,621
                                 --------- -------- -------- --------
Net income                       $  12,404 $ 12,169 $ 44,925 $ 48,923
                                 --------- -------- -------- --------

Net income per share:
Basic                            $    0.43 $   0.40 $   1.52 $   1.57
                                 ========= ======== ======== ========
Diluted                          $    0.43 $   0.40 $   1.50 $   1.55
                                 ========= ======== ======== ========
Weighted average shares
 outstanding
Basic                               28,832   30,453   29,609   31,091
Diluted                             29,154   30,803   29,962   31,521
                       Forward Air Corporation
                Condensed Consolidated Balance Sheets
                  (In thousands, except share data)
                             (Unaudited)

                                             December 31, December 31,
                                                 2007         2006
                                             ------------ ------------

Assets
Current assets:
Cash                                         $      4,909 $      8,231
Short-term investments                                522       61,650
Accounts receivable, net                           59,734       48,486
Other current assets                                6,285        9,196
                                             ------------ ------------
Total current assets                               71,450      127,563

Property and equipment                            158,354      101,190
Less accumulated depreciation and
 amortization                                      55,322       47,875
                                             ------------ ------------
Total property and equipment, net                 103,032       53,315
Goodwill and other acquired intangibles:
Goodwill                                           36,053       15,588
Other acquired intangibles, net                    29,991       10,731
                                             ------------ ------------
Total goodwill and other acquired
 intangibles                                       66,044       26,319
Other assets                                        1,358        5,817
                                             ------------ ------------
Total assets                                 $    241,884 $    213,014
                                             ============ ============

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable                             $     11,714 $      7,949
Accrued expenses                                   14,274       11,144
Current portion of capital lease and note
 obligations                                          830           40
                                             ------------ ------------
Total current liabilities                          26,818       19,133

Capital lease and note obligations, less
 current portion                                    1,486          796
Other long-term liabilities                         4,476        1,271
Senior credit facility                             30,000           --
Deferred income taxes                               7,371        6,587

Shareholders' equity:
Common stock                                          286          304
Retained earnings                                 171,447      184,923
                                             ------------ ------------
Total shareholders' equity                        171,733      185,227
                                             ------------ ------------
Total liabilities and shareholders' equity   $    241,884 $    213,014
                                             ============ ============
                       Forward Air Corporation
           Condensed Consolidated Statements of Cash Flows
                            (In thousands)
                             (Unaudited)
                                                    Year Ended
                                             -------------------------
                                             December 31, December 31,
                                                 2007         2006
                                             ------------ ------------
Operating activities:
Net income                                   $    44,925  $    48,923
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Depreciation and amortization                  10,824        8,934
   Share-based compensation                        3,710        1,307
   Gain on sale of property and equipment           (172)         (42)
   Recovery on receivables                           (33)        (223)
   Provision for revenue adjustments               2,237        2,095
   Deferred income taxes                             596         (136)
   Tax benefit of stock options exercised         (1,261)      (1,967)
   Changes in operating assets and
    liabilities:
      Accounts receivable                        (11,399)      (6,516)
      Other current assets                           291          407
      Accounts payable and accrued expenses       12,675         (315)
                                             -----------  -----------
Net cash provided by operating activities         62,393       52,467

Investing activities:
Proceeds from disposal of property and
 equipment                                           574        3,665
Purchases of property and equipment              (47,026)     (15,454)
Deposits in escrow for construction of
 facilities                                           --       (4,793)
Proceeds from sales or maturities of
 available-for-sale securities                   143,410      229,330
Purchases of available-for-sale securities       (82,282)    (211,980)
Acquisition of businesses                        (48,627)          --
Other                                               (119)          26
                                             -----------  -----------
Net cash (used in) provided by investing
 activities                                      (34,070)         794

Financing activities:
Payments on line of credit                       (10,000)      (1,504)
Borrowings under line of credit                   40,000           --
Payments of capital lease obligations               (493)         (39)
Proceeds from exercise of stock options            1,017        4,362
Dividends                                         (8,305)      (8,694)
Proceeds from common stock issued under
 employee stock purchase plan                        259          268
Repurchase of common stock                       (55,384)     (41,722)
Tax benefit of stock options exercised             1,261        1,967
                                             -----------  -----------
Net cash used in financing activities            (31,645)     (45,362)
                                             -----------  -----------
Net (decrease) increase in cash                   (3,322)       7,899
Cash at beginning of year                          8,231          332
                                             -----------  -----------
Cash at end of year                          $     4,909  $     8,231
                                             ===========  ===========
                       Forward Air Corporation
                         Segment Information
                            (In thousands)
                             (Unaudited)


                             Three Months Ended December 31,
                   ---------------------------------------------------
                             Percent          Percent
                                of               of              %
                     2007    Revenue    2006  Revenue   Change Change
                    -------  -------   ------ -------   ------ ------


Operating Revenue
   Forward Air     $103,534     90.4% $93,208   100.0% $10,326   11.1%
   FASI              10,956      9.6       --      --   10,956  100.0
                   --------  -------  ------- -------  ------- ------
      Total         114,490    100.0   93,208   100.0   21,282   22.8
                   --------  -------  ------- -------  ------- ------

Purchased
 Transportation
   Forward Air       44,530     43.0   41,212    44.2    3,318    8.1
   FASI               1,283     11.7       --      --    1,283  100.0
                   --------  -------  ------- -------  ------- ------
      Total          45,813     40.0   41,212    44.2    4,601   11.2
                   --------  -------  ------- -------  ------- ------

Salaries, wages and
 employee benefits
   Forward Air       23,230     22.4   18,941    20.3    4,289   22.6
   FASI               4,570     41.7       --      --    4,570  100.0
                   --------  -------  ------- -------  ------- ------
      Total          27,800     24.3   18,941    20.3    8,859   46.8
                   --------  -------  ------- -------  ------- ------

Operating Leases
   Forward Air        4,055      3.9    3,839     4.1      216    5.6
   FASI                 615      5.6       --      --      615  100.0
                   --------  -------  ------- -------  ------- ------
      Total           4,670      4.1    3,839     4.1      831   21.6
                   --------  -------  ------- -------  ------- ------

Depreciation and
 Amortization
   Forward Air        2,903      2.8    2,400     2.6      503   21.0
   FASI                 192      1.8       --      --      192  100.0
                   --------  -------  ------- -------  ------- ------
      Total           3,095      2.7    2,400     2.6      695   29.0
                   --------  -------  ------- -------  ------- ------

Insurance and
 claims
   Forward Air        2,074      2.0    1,220     1.3      854   70.0
   FASI                 360      3.3       --      --      360  100.0
                   --------  -------  ------- -------  ------- ------
      Total           2,434      2.1    1,220     1.3    1,214   99.5
                   --------  -------  ------- -------  ------- ------

Other operating
 expenses
   Forward Air        8,700      8.4    6,711     7.2    1,989   29.6
   FASI               1,987     18.1       --      --    1,987  100.0
                   --------  -------  ------- -------  ------- ------
      Total          10,687      9.3    6,711     7.2    3,976   59.2
                   --------  -------  ------- -------  ------- ------

Income from
 operations
   Forward Air       18,042     17.5   18,885    20.3     (843)  (4.5)
   FASI               1,949     17.8       --      --    1,949  100.0
                   --------  -------  ------- -------  ------- ------
      Total        $ 19,991     17.5% $18,885    20.3% $ 1,106    5.9%
                   ========  =======  ======= =======  ======= ======
                       Forward Air Corporation
                         Segment Information
                           (In thousands)
                             (Unaudited)

                                Year Ended December 31,
                  ----------------------------------------------------

                           Percent           Percent
                              of                of              %
                    2007   Revenue    2006   Revenue   Change Change
                   ------- -------   ------- -------   ------ ------

Operating Revenue
   Forward Air    $376,711    95.9% $352,758   100.0% $23,953    6.8 %
   FASI             16,026     4.1        --      --   16,026  100.0
                  -------- -------  -------- -------  ------- ------
      Total        392,737   100.0   352,758   100.0   39,979   11.3
                  -------- -------  -------- -------  ------- ------

Purchased
 Transportation
   Forward Air     162,434    43.1   146,721    41.6   15,713   10.7
   FASI              2,003    12.5        --      --    2,003  100.0
                  -------- -------  -------- -------  ------- ------
      Total        164,437    41.9   146,721    41.6   17,716   12.1
                  -------- -------  -------- -------  ------- ------

Salaries, wages
 and employee
 benefits
   Forward Air      81,973    21.8    74,448    21.1    7,525   10.1
   FASI              6,830    42.6        --      --    6,830  100.0
                  -------- -------  -------- -------  ------- ------
      Total         88,803    22.6    74,448    21.1   14,355   19.3
                  -------- -------  -------- -------  ------- ------

Operating Leases
   Forward Air      15,791     4.2    14,458     4.1    1,333    9.2
   FASI                970     6.1        --      --      970  100.0
                  -------- -------  -------- -------  ------- ------
      Total         16,761     4.3    14,458     4.1    2,303   15.9
                  -------- -------  -------- -------  ------- ------

Depreciation and
 Amortization
   Forward Air      10,372     2.7     8,934     2.5    1,438   16.1
   FASI                452     2.8        --      --      452  100.0
                  -------- -------  -------- -------  ------- ------
      Total         10,824     2.8     8,934     2.5    1,890   21.2
                  -------- -------  -------- -------  ------- ------

Insurance and
 claims
   Forward Air       7,176     1.9     5,967     1.7    1,209   20.3
   FASI                509     3.2        --      --      509  100.0
                  -------- -------  -------- -------  ------- ------
      Total          7,685     1.9     5,967     1.7    1,718   28.8
                  -------- -------  -------- -------  ------- ------

Other operating
 expenses
   Forward Air      30,335     8.1    26,834     7.6    3,501   13.0
   FASI              2,844    17.7        --      --    2,844  100.0
                  -------- -------  -------- -------  ------- ------
      Total         33,179     8.4    26,834     7.6    6,345   23.6
                  -------- -------  -------- -------  ------- ------

Income from
 operations
   Forward Air      68,630    18.2    75,396    21.4   (6,766)  (9.0)
   FASI              2,418    15.1        --      --    2,418  100.0
                  -------- -------  -------- -------  ------- ------
      Total       $ 71,048    18.1% $ 75,396    21.4% $(4,348)  (5.8)%
                  ======== =======  ======== =======  ======= ======

Important Information

This press release contains "forward-looking statements," as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. Some forward-looking statements may be identified by use of such terms as "believes," "anticipates," "intends," "plans," "estimates," "projects" or "expects." Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such 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: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, our inability to maintain our historical growth rate because of a decreased volume of freight moving through our network or decreased average revenue per pound of freight moving through our network, increasing competition and pricing pressure, surplus inventories, loss of a major customer, the creditworthiness of our customers and their ability to pay for services rendered, our ability to secure terminal facilities in desirable locations at reasonable rates, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, claims for property damage, personal injuries or workers' compensation, employment matters including rising health care costs, enforcement of and changes in governmental regulations, environmental and tax matters, the handling of hazardous materials, the availability and compensation of qualified independent owner-operators and freight handlers needed to serve our transportation needs and our inability to successfully integrate acquisitions. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Source: Forward Air Corporation