Forward Air Corporation Reports Third Quarter 2013 Results

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GREENEVILLE, Tenn.--(BUSINESS WIRE)-- Forward Air Corporation (NASDAQ:FWRD) today reported revenue, operating income, net income and diluted earnings per share for the third quarter and nine months ended September 30, 2013.

Operating revenue for the quarter ended September 30, 2013 increased 18.5% to $170.0 million from $143.5 million for the same quarter in 2012. Income from operations was $22.9 million, compared with $19.6 million in the prior-year quarter. As a percent of operating revenue, income from operations was 13.5%, compared with 13.7% in the same quarter last year. Net income during the period was $14.2 million compared to $12.3 million in the prior-year quarter. Income per diluted share for the third quarter of 2013 was $0.46 compared with $0.41 in the prior-year quarter.

Operating revenue for the nine months ended September 30, 2013 increased 9.9% to $471.4 million from $428.9 million for the same period in 2012. Income from operations was $61.1 million, compared with $59.5 million in the prior-year period. As a percent of operating revenue, income from operations was 13.0% for the first nine months of 2013 compared to 13.9% for the same period in 2012. Net income during the period was $38.9 million compared to $36.7 million in the prior-year period. Income per diluted share from operations for the first nine months of 2013 was $1.27 compared with $1.24 in the prior-year period.

Bruce A. Campbell, Chairman, President, and CEO, commenting on the third quarter said, “After a tough second quarter, we saw a very encouraging trend in our airport-to-airport network volumes that improved throughout the third quarter. Our sense is the improved tonnage is driven by a slightly better macro environment as well as share gains resulting from our superior service offering. We are pleased to report that thus far into the fourth quarter this trend has continued.”

Turning to the Forward Air Solutions (FASI) business segment, Mr. Campbell said, “With the integration of new business wins behind us, FASI had a solid performance in the third quarter improving its operating ratio 320 basis points for its best third quarter ever.”

Commenting on Total Quality, Inc. (TQI) business segment, Mr. Campbell said, “While we are pleased with the positive strides made in the integration of TQI, we are anxious to get our new operating system on line. This new system will enable us to glean additional operating efficiencies as well as make the most of new business wins. We anticipate that this new system will be fully operational before the end of 2013.”

In closing, Mr. Campbell said, “As always, I would like to thank the Forward Air team of employees and independent contractors for their dedication and hard work.”

Commenting on the Company's guidance for the fourth quarter, Rodney L. Bell, Senior Vice President and CFO said, “We anticipate that our fourth quarter 2013 revenues will increase in the range of 17% to 21% over the comparable 2012 period. We estimate that approximately 9% of that growth will result from the TQI acquisition. We expect income per diluted share to be between $0.53 and $0.57 per share. This compares to $0.54 per share in the fourth quarter of 2012.”

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2013 results on Tuesday, October 22, 2013 at 9:00 a.m. EDT. The Company's conference call will be available online at www.forwardair.com or by dialing 800-230-1059. 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 Corporation

Forward Air Corporation operates three business segments, Forward Air, Inc., Forward Air Solutions, Inc. and Total Quality, Inc.

Forward Air, Inc. is a high-service-level contractor to the air cargo industry providing time-definite ground transportation services through a network of 88 terminals located on or near major airports in the United States and Canada. It 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 Solutions, Inc. is a provider of pool distribution services. Pool distribution involves the consolidation and shipment of several smaller less-than-truckload shipments to a common area or region. Once at the regional destination, the loads are deconsolidated, then grouped with other shipments with common delivery points, and delivered in a very precise, time-sensitive manner. Our pool distribution network consists of 24 terminals within the mid-Atlantic, Southeast, Midwest and Southwestern United States.

Total Quality, Inc. utilizes industry-leading temperature-controlled equipment, 24-hour monitoring and tracking technology and layered security features to provide our customers with the highest level of service. In addition to our core pharmaceutical services, we provide truckload and less-than-truckload brokerage transportation services. Headquartered in central Michigan, we service the United States, Canada and Mexico.

 
 
 
 
 
Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)
     
Three months ended Nine months ended
September 30,
2013 		  September 30,
2012 		September 30,
2013 		September 30,
2012
Operating revenue:
Airport-to-airport $ 100,960 $ 96,914 $ 288,457 $ 290,006
Logistics 32,562 20,878 87,474 63,315
Other 6,862 6,528 19,624 19,498
Pool distribution 29,649   19,194   75,841   56,102  
Total operating revenue 170,033 143,514 471,396 428,921
 
Operating expenses:
Purchased transportation
Airport-to-airport 42,407 40,150 118,605 119,546
Logistics 22,152 15,954 59,696 47,756
Other 2,039 1,822 5,707 5,252
Pool distribution 8,613   5,176   22,454   14,989  
Total purchased transportation 75,211 63,102 206,462 187,543
Salaries, wages and employee benefits 39,165 31,698 109,149 97,408
Operating leases 6,991 6,895 20,923 20,826
Depreciation and amortization 6,220 5,425 17,377 15,940
Insurance and claims 3,290 3,098 9,164 8,132
Fuel expense 3,871 2,318 10,535 7,271
Other operating expenses 12,428   11,352   36,634   32,303  
Total operating expenses 147,176   123,888   410,244   369,423  
Income from operations 22,857 19,626 61,152 59,498
 
Other income (expense):
Interest expense (145 ) (111 ) (401 ) (241 )
Other, net 27   (21 ) 72   (6 )
Total other expense (118 ) (132 ) (329 ) (247 )
Income before income taxes 22,739 19,494 60,823 59,251
Income taxes 8,542   7,227   21,941   22,544  
Net income and comprehensive income $ 14,197   $ 12,267   $ 38,882   $ 36,707  
 
Net income per share:
Basic $ 0.47   $ 0.42   $ 1.30   $ 1.27  
Diluted $ 0.46   $ 0.41   $ 1.27   $ 1.24  
Weighted average shares outstanding:
Basic 30,374 29,088 30,017 28,895
Diluted 30,986 29,660 30,677 29,484
 
Dividends per share: $ 0.10   $ 0.10   $ 0.30   $ 0.24  
 
 
 
 
 
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
  September 30,
2013 		 

December 31,

2012

Assets
Current assets:
Cash and cash equivalents $ 98,551 $ 112,182
Accounts receivable, net 83,224 75,262
Other current assets 18,849   10,952
Total current assets 200,624 198,396
 
Property and equipment 270,113 239,138
Less accumulated depreciation and amortization 112,514   105,581
Net property and equipment 157,599 133,557
Goodwill and other acquired intangibles:
Goodwill 88,404 43,332
Other acquired intangibles, net of accumulated amortization 41,624   22,102
Total net goodwill and other acquired intangibles 130,028 65,434
Other assets 2,551   1,800
Total assets $ 490,802   $ 399,187
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 17,067 $ 11,168
Accrued expenses 19,490 16,476
Current portion of debt and capital lease obligations 92   276
Total current liabilities 36,649 27,920
 
Debt and capital lease obligations, less current portion 4 58
Other long-term liabilities 9,129 7,098
Deferred income taxes 26,576 12,440
 
Shareholders’ equity:
Common stock 304 292
Additional paid-in capital 102,465 64,644
Retained earnings 315,675   286,735
Total shareholders’ equity 418,444   351,671
Total liabilities and shareholders’ equity $ 490,802   $ 399,187
 
(a) Taken from audited financial statements, which are not presented in their entirety.
 
 
 
 
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Three months ended
September 30,
2013 		 

September 30,

2012

Operating activities:
Net income

$

14,197

$

12,267

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 6,220 5,425
Share-based compensation 1,525 1,427
Gain on disposal of property and equipment (185 ) 92
Provision for (recovery) loss on receivables (56 ) 115
Provision for revenue adjustments 579 490
Deferred income tax 1,722 1,023
Excess tax benefit for stock options exercised (337 ) (148 )
Changes in operating assets and liabilities
Accounts receivable (7,458 ) (426 )
Prepaid expenses and other current assets 515 1,499
Accounts payable and accrued expenses   6,515     (5 )
Net cash provided by operating activities 23,237 21,759
 
Investing activities:
Proceeds from disposal of property and equipment 617 131
Purchases of property and equipment (5,272 ) (2,181 )
Other   (51 )   80  
Net cash used in investing activities (4,706 ) (1,970 )
 
Financing activities:
Payments of debt and capital lease obligations (48 ) (139 )
Proceeds from exercise of stock options 1,687 7,295
Payments of cash dividends (3,057 ) (2,937 )
Excess tax benefit for stock options exercised   337     148  
Net cash (used in) provided by financing activities   (1,081 )   4,367  
Net increase in cash 17,450 24,156
Cash at beginning of period  

81,101

   

68,832

 
Cash at end of period $ 98,551   $ 92,988  
 
 
 
 
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
Nine months ended
September 30,
2013 		September 30,
2012
Operating activities:
Net income $ 38,882 $ 36,707
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 17,377 15,940
Share-based compensation 4,619 4,550
(Gain) loss on disposal of property and equipment (468 ) 259
Provision for loss on receivables 234 226
Provision for revenue adjustments 1,705 1,417
Deferred income tax 4,658 2,460
Excess tax benefit for stock options exercised (3,207 ) (354 )
Changes in operating assets and liabilities
Accounts receivable (4,262 ) (5,599 )
Prepaid expenses and other current assets (1,575 ) (1,629 )
Accounts payable and accrued expenses 2,525   (8,298 )
Net cash provided by operating activities 60,488 45,679
 
Investing activities:
Proceeds from disposal of property and equipment 1,665 867
Purchases of property and equipment (33,266 ) (20,499 )
Acquisition of businesses, net of cash acquired (45,329 ) —
Other (111 ) (267 )
Net cash used in investing activities (77,041 ) (19,899 )
 
Financing activities:
Payments of debt and capital lease obligations (20,351 ) (411 )
Proceeds from exercise of stock options 29,866 15,740
Payments of cash dividends (9,071 ) (7,009 )
Common stock issued under employee stock purchase plan 137 119
Cash settlement of share-based awards for minimum tax withholdings (866 ) (386 )
Excess tax benefit for stock options exercised 3,207   354  
Net cash provided by financing activities 2,922   8,407  
Net (decrease) increase in cash (13,631 ) 34,187
Cash at beginning of period 112,182   58,801  
Cash at end of period $ 98,551   $ 92,988  
 
 
 
 
 
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
 
  Three months ended
September 30,   Percent of   September 30,   Percent of     Percent
2013 Revenue 2012 Revenue Change Change
Operating revenue
Forward Air $ 128.8 75.8 % $ 124.5 86.8 % $ 4.3 3.5 %
FASI 29.8 17.5 19.5 13.6 10.3 52.8
TQI 12.4 7.3 — — 12.4 100.0
Intercompany eliminations (1.0 ) (0.6 ) (0.5 ) (0.4 ) (0.5 ) 100.0  
Total 170.0   100.0   143.5   100.0   26.5   18.5  
 
Purchased transportation
Forward Air 59.9 46.5 58.1 46.7 1.8 3.1
FASI 9.1 30.5 5.4 27.7 3.7 68.5
TQI 6.9 55.6 — — 6.9 100.0
Intercompany eliminations (0.7 ) 70.0   (0.4 ) 80.0   (0.3 ) 75.0  
Total 75.2   44.2   63.1   44.0   12.1   19.2  
 
Salaries, wages and employee benefits
Forward Air 27.3 21.2 24.3 19.5 3.0 12.3
FASI 10.0 33.6 7.4 37.9 2.6 35.1
TQI 1.8   14.5   —   —   1.8   100.0  
Total 39.1   23.0   31.7   22.1   7.4   23.3  
 
Operating leases
Forward Air 4.9 3.8 5.2 4.2 (0.3 ) (5.8 )
FASI 2.1 7.0 1.7 8.7 0.4 23.5
TQI —   —   —   —   —   —  
Total 7.0   4.1   6.9   4.8   0.1   1.4  
 
Depreciation and amortization
Forward Air 4.2 3.3 4.3 3.4 (0.1 ) (2.3 )
FASI 1.3 4.4 1.2 6.2 0.1 8.3
TQI 0.7   5.7   —   —   0.7   100.0  
Total 6.2   3.7   5.5   3.8   0.7   12.7  
 
Insurance and claims
Forward Air 2.3 1.8 2.6 2.1 (0.3 ) (11.5 )
FASI 0.8 2.7 0.5 2.6 0.3 60.0
TQI 0.2   1.6   —   —   0.2   100.0  
Total 3.3   1.9   3.1   2.1   0.2   6.5  
 
Fuel expense
Forward Air 0.9 0.7 1.0 0.8 (0.1 ) (10.0 )
FASI 1.7 5.7 1.3 6.7 0.4 30.8
TQI 1.3   10.5   —   —   1.3   100.0  
Total 3.9   2.3   2.3   1.6   1.6   69.6  
 
Other operating expenses
Forward Air 8.7 6.7 9.7 7.8 (1.0 ) (10.3 )
FASI 3.4 11.4 1.7 8.7 1.7 100.0
TQI 0.6 4.8 — — 0.6 100.0
Intercompany eliminations (0.3 ) 30.0   (0.1 ) 20.0   (0.2 ) 200.0  
Total 12.4   7.3   11.3   7.9   1.1   9.7  
 
Income from operations
Forward Air 20.6 16.0 19.3 15.5 1.3 6.7
FASI 1.4 4.7 0.3 1.5 1.1 366.7
TQI 0.9   7.3   —   —   0.9   100.0  
Total $ 22.9   13.5 % $ 19.6   13.7 % $ 3.3   16.8 %
 
 
 
 
 
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
 
  Nine months ended
September 30,   Percent of   September 30,   Percent of     Percent
2013 Revenue 2012 Revenue Change Change
Operating revenue
Forward Air $ 369.0 78.3 % $ 373.4 87.1 % $ (4.4 ) (1.2 )%
FASI 76.4 16.2 57.0 13.3 19.4 34.0
TQI 28.5 6.0 — — 28.5 100.0
Intercompany eliminations (2.5 ) (0.5 ) (1.5 ) (0.4 ) (1.0 ) 66.7  
Total 471.4   100.0   428.9   100.0   42.5   9.9  
 
Purchased transportation
Forward Air 168.9 45.8 173.3 46.4 (4.4 ) (2.5 )
FASI 23.6 30.9 15.5 27.2 8.1 52.3
TQI 15.9 55.8 — — 15.9 100.0
Intercompany eliminations (1.9 ) 76.0   (1.3 ) 86.7   (0.6 ) 46.2  
Total 206.5   43.8   187.5   43.7   19.0   10.1  
 
Salaries, wages and employee benefits
Forward Air 78.0 21.1 75.4 20.2 2.6 3.4
FASI 26.8 35.1 22.0 38.6 4.8 21.8
TQI 4.4   15.4   —   —   4.4   100.0  
Total 109.2   23.2   97.4   22.7   11.8   12.1  
 
Operating leases
Forward Air 14.9 4.0 15.3 4.1 (0.4 ) (2.6 )
FASI 5.9 7.7 5.5 9.7 0.4 7.3
TQI 0.1   0.4   —   —   0.1   100.0  
Total 20.9   4.4   20.8   4.9   0.1   0.5  
 
Depreciation and amortization
Forward Air 12.1 3.3 12.5 3.4 (0.4 ) (3.2 )
FASI 3.6 4.7 3.5 6.1 0.1 2.9
TQI 1.7   6.0   —   —   1.7   100.0  
Total 17.4   3.7   16.0   3.7   1.4   8.8  
 
Insurance and claims
Forward Air 6.5 1.8 6.4 1.7 0.1 1.6
FASI 2.3 3.0 1.7 3.0 0.6 35.3
TQI 0.4   1.4   —   —   0.4   100.0  
Total 9.2   1.9   8.1   1.9   1.1   13.6  
 
Fuel expense
Forward Air 2.9 0.8 3.2 0.9 (0.3 ) (9.4 )
FASI 4.8 6.3 4.1 7.2 0.7 17.1
TQI 2.8   9.8   —   —   2.8   100.0  
Total 10.5   2.2   7.3   1.7   3.2   43.8  
 
Other operating expenses
Forward Air 26.9 7.3 27.4 7.3 (0.5 ) (1.8 )
FASI 9.0 11.8 5.1 8.9 3.9 76.5
TQI 1.3 4.5 — — 1.3 100.0
Intercompany eliminations (0.6 ) 24.0   (0.2 ) 13.3   (0.4 ) 200.0  
Total 36.6   7.8   32.3   7.5   4.3   13.3  
 
Income (loss) from operations
Forward Air 58.8 15.9 59.9 16.0 (1.1 ) (1.8 )
FASI 0.4 0.5 (0.4 ) (0.7 ) 0.8 (200.0 )
TQI 1.9   6.7   —   —   1.9   100.0  
Total $ 61.1   13.0 % $ 59.5   13.9 % $ 1.6   2.7 %
 
 
 
 
 
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
     
Three months ended
September 30, September 30, Percent
2013 2012 Change
 
Operating ratio 84.0 % 84.5 % (0.6 )%
 
Business days 64.0 63.0 1.6
Business weeks 12.8 12.6 1.6
 
 
Airport-to-airport:
Tonnage

Total pounds 1

462,297 438,265 5.5

Average weekly pounds 1

36,117 34,783 3.8
 
Linehaul shipments
Total linehaul 688,257 691,228 (0.4 )
Average weekly 53,770 54,859 (2.0 )
 
Forward Air Complete shipments 124,184 177,216 (29.9 )
As a percentage of linehaul shipments 18.0 % 25.6 % (29.7 )
 
Average linehaul shipment size 672 634 6.0
 

Revenue per pound 2

Linehaul yield $ 16.97 $ 17.14 (0.8 )
Fuel surcharge impact 1.85 1.80 0.2
Forward Air Complete impact 3.08   3.20   (0.5 )
Total airport-to-airport yield $ 21.90 $ 22.14 (1.1 )
 
 
Logistics:
Miles

Owner operator 1

8,915 8,485 5.1

Third party 1

3,815   4,500   (15.2 )
Total Miles 12,730 12,985 (2.0 )
 
Revenue per mile $ 1.60 $ 1.61 (0.6 )
 
Cost per mile $ 1.20 $ 1.23 (2.4 )%
 
 

1 - In thousands

2 - In cents per pound; percentage change is expressed as a percent of total yield.

 
 
 
 
 
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
     
Nine months ended
September 30, September 30, Percent
2013 2012 Change
 
Operating ratio 84.1 % 84.0 % 0.1 %
 
Business days 191.0 191.0 —
Business weeks 38.2 38.2 —
 
 
Airport-to-airport:
Tonnage

Total pounds 1

1,320,382 1,322,390 (0.2 )

Average weekly pounds 1

34,565 34,618 (0.2 )
 
Linehaul shipments
Total linehaul 2,038,599 2,064,323 (1.2 )
Average weekly 53,366 54,040 (1.2 )
 
Forward Air Complete shipments 353,270 509,527 (30.7 )
As a percentage of linehaul shipments 17.3 % 24.7 % (30.0 )
 
Average linehaul shipment size 648 641 1.1
 

Revenue per pound 2

Linehaul yield $ 17.08 $ 17.04 0.2
Fuel surcharge impact 1.92 1.88 0.2
Forward Air Complete impact 2.90   3.04   (0.7 )
Total airport-to-airport yield $ 21.90 $ 21.96 (0.3 )
 
 
Logistics:
Miles

Owner operator 1

26,399 26,590 (0.7 )

Third party 1

10,663   12,010   (11.2 )
Total Miles 37,062 38,600 (4.0 )
 
Revenue per mile $ 1.61 $ 1.64 (1.8 )
 
Cost per mile $ 1.19 $ 1.24 (4.0 )%
 
 

1 - In thousands

2 - In cents per pound; percentage change is expressed as a percent of total yield.

 
 
 
 

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.

Forward Air Corporation
Rodney L. Bell, 423-636-7000
rbell@forwardair.com

Source: Forward Air Corporation

Released October 21, 2013