Forward Air Corporation Reports Fourth Quarter and Fiscal 2013 Results, New Two Million Share Stock Buyback Authorization and Increased Quarterly Cash Dividend

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GREENEVILLE, Tenn.--(BUSINESS WIRE)-- Forward Air Corporation (NASDAQ:FWRD) today reported results for the fourth quarter and year ended December 31, 2013.

Operating revenue for the quarter ended December 31, 2013 increased 16.5% to $181.1 million from $155.5 million for the same quarter in 2012. Income from operations was $23.2 million, compared with $24.0 million for the fourth quarter of 2012, a decrease of 3.3%. Net income per diluted share for the fourth quarter of 2013 was $0.50 compared with $0.54 in the same quarter of 2012.

Operating revenue for the year ended December 31, 2013 increased 11.7% to $652.5 million from $584.4 million for the year ended December 31, 2012. Income from operations was $84.4 million, compared with $83.5 million in 2012. Net income per diluted share for the year ended December 31, 2013 was $1.77 compared with $1.78 in 2012.

Bruce A. Campbell, Chairman, President and CEO, said, “Without a doubt, the fourth quarter of 2013 proved to be more challenging than we anticipated. Like all of the transports, we have continuously fought weather related issues. From the middle of November up until this past week, weather has been an issue in one or more of our operating regions. While there is only so much we can do to mitigate the impact of weather, we do have plans in place to address the opportunities that are specific to our Company.”

Starting with the Forward Air, Inc. business segment, Mr. Campbell said, “Airport-to airport volumes were up a respectable 5.9% and Complete, without the major customer loss in the prior year comparison, has returned to growth mode. The issue simply put was pricing. We made the strategic decision not to push through a general rate increase (GRI) this past fall. We have subsequently seen a tightening of capacity and a continued decline in our competitors’ service levels which will allow us to implement a GRI effective the first week of March. With year-over-year weekly tonnage growth consistently in the mid-single digits and an estimated 2.75% net benefit from our 2014 GRI, we feel our airport-to-airport network is well positioned for the balance of the year.”

Moving to the Forward Air Solutions segment, Mr. Campbell said, “With substantial year-over-year revenue growth but a decline in operating income, we were clearly disappointed with Solutions fourth quarter results. We have developed a comprehensive plan with the sole focus on improving operating margins. We believe this plan, which includes an across the board GRI, to be very actionable with immediate and quantifiable results expected within the first half of 2014.”

Turning to our TQI business segment, Mr. Campbell said, “With our new operating system now in place, additional new equipment coming online and the ongoing success in recruiting owner-operators we are excited at what will be our first full year of our TQI service offering. We feel confident of substantial topline growth producing double digit operating margins for 2014.”

In closing Mr. Campbell said, “This past week we closed on the previously announced purchase of drayage and intermodal transportation provider Central States Trucking (CST). Our team is very excited about the potential of this new service offering. With a solid group of talented transportation professionals and a scalable platform, for organic as well as acquisition related growth, we look forward to taking advantage of ample opportunities in 2014. We’re delighted to welcome CST to the Forward Air family.”

In commenting on the Company's guidance for the first quarter, Rodney L. Bell, Senior Vice President and CFO said, “We anticipate our first quarter 2014 revenues will increase in the range of 19% to 23% over the comparable 2013 period, and we expect income per diluted share to be between $0.36 and $0.40 per share. This compares to $0.36 per share in the first quarter of 2013.”

On February 7, 2014, our Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock. The dividend is payable to shareholders of record at the close of business on March 10, 2014, and is expected to be paid on March 24, 2014. This represents a 20% increase in our dividend as compared to the prior year quarter.

This quarterly dividend is pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.48 per share of common stock, payable in quarterly increments of $0.12 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.

Also, on February 7, 2014, our Board of Directors approved a stock repurchase authorization for up to two million shares of the Company’s common stock. In connection with this action, the board cancelled the Company’s 2007 share repurchase authorization. The amount and timing of any repurchases under the Company’s new repurchase authorization will be at such prices as determined by management of the Company. Share repurchases may be commenced or suspended from time to time for any reason. The Company currently has approximately 30,522,079 shares outstanding.

Review of Financial Results

Forward Air will hold a conference call to discuss fourth quarter and year end 2013 results on Tuesday, February 11, 2014 at 9:00 a.m. EST. The Company's conference call will be available online at www.forwardair.com or by dialing 877-209-9922. 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 brokerage transportation services. Headquartered in central Michigan, we service the United States, Canada and Mexico.

 
Forward Air Corporation
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
       
Three months ended Year ended
December 31,
2013 		    December 31,
2012 		December 31,
2013 		    December 31,
2012
Operating revenue:
Airport-to-airport $ 103,866 $ 100,691 $ 392,323 $ 390,697
Logistics 33,347 20,473 120,822 83,787
Other 6,947 6,639 26,570 26,137
Pool distribution 36,925   27,722   112,766   83,825  
Total operating revenue 181,085 155,525 652,481 584,446
 
Operating expenses:
Purchased transportation
Airport-to-airport 44,241 40,519 162,847 160,065
Logistics 22,643 15,447 82,339 63,203
Other 2,204 1,989 7,911 7,241
Pool distribution 10,140   7,221   32,593   22,211  
Total purchased transportation 79,228 65,176 285,690 252,720
Salaries, wages and employee benefits 41,949 37,597 151,097 135,006
Operating leases 8,387 7,164 29,310 27,989
Depreciation and amortization 6,202 5,081 23,579 21,021
Insurance and claims 3,455 3,177 12,619 11,309
Fuel expense 4,610 2,767 15,145 10,038
Other operating expenses 14,051   10,529   50,686   42,831  
Total operating expenses 157,882   131,491   568,126   500,914  
Income from operations 23,203 24,034 84,355 83,532
 
Other income (expense):
Interest expense (131 ) (150 ) (532 ) (391 )
Other, net 27   20   99   14  
Total other expense (104 ) (130 ) (433 ) (377 )
Income before income taxes 23,099 23,904 83,922 83,155
Income taxes 7,514   7,944   29,455   30,487  
Net income $ 15,585   $ 15,960   $ 54,467   $ 52,668  
 
Net income per share:
Basic $ 0.51   $ 0.55   $ 1.81   $ 1.82  
Diluted $ 0.50   $ 0.54   $ 1.77   $ 1.78  
Weighted average shares outstanding:
Basic 30,490 29,190 30,135 28,967
Diluted 31,129 29,716 30,762 29,536
 
Dividends per share: $ 0.10   $ 0.10   $ 0.40   $ 0.34  
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
    December 31,
2013 		    December 31,

2012 (a)

Assets
Current assets:
Cash and cash equivalents $ 127,367 $ 112,182
Accounts receivable, net 76,500 75,262
Other current assets 16,493   10,952
Total current assets 220,360 198,396
 
Property and equipment 271,050 239,138
Less accumulated depreciation and amortization 116,287   105,581
Net property and equipment 154,763 133,557
Goodwill and other acquired intangibles:
Goodwill 88,496 43,332
Other acquired intangibles, net of accumulated amortization 40,110   22,102
Total net goodwill and other acquired intangibles 128,606 65,434
Other assets 2,540   1,800
Total assets $ 506,269   $ 399,187
 
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 16,267 $ 11,168
Accrued expenses 18,275 16,476
Current portion of debt and capital lease obligations 69   276
Total current liabilities 34,611 27,920
 
Debt and capital lease obligations, less current portion 3 58
Other long-term liabilities 8,940 7,098
Deferred income taxes 26,850 12,440
Commitments and contingencies
Shareholders’ equity:
Common stock 305 292
Additional paid-in capital 107,726 64,644
Retained earnings 327,834   286,735
Total shareholders’ equity 435,865   351,671
Total liabilities and shareholders’ equity $ 506,269   $ 399,187
 
(a) Taken from audited financial statements, which are not presented in their entirety.
 
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Three months ended
December 31,
2013 		December 31,
2012
Operating activities:
Net income $ 15,585 $ 15,960
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 6,202 5,081
Gain on change in fair value of earn-out liability (615 ) —
Share-based compensation 1,559 1,500
Loss on disposal of property and equipment 14 59
Provision for loss (recovery) on receivables 189 (27 )
Provision for revenue adjustments 826 586
Deferred income taxes 198 (417 )
Tax benefit for stock options exercised (500 ) (31 )
Changes in operating assets and liabilities
Accounts receivable 5,709 (943 )
Prepaid expenses and other current assets 1,360 298
Accounts payable and accrued expenses (175 ) 841  
Net cash provided by operating activities 30,352 22,907
 
Investing activities:
Proceeds from disposal of property and equipment 308 44
Purchases of property and equipment (2,173 ) (854 )
Other (18 ) 4  
Net cash used in investing activities (1,883 ) (806 )
 
Financing activities:
Payments of debt and capital lease obligations (24 ) (140 )
Proceeds from exercise of stock options 3,136 —
Payments of cash dividends (3,070 ) (2,938 )
Repurchase of common stock (repurchase program) (354 ) —
Common stock issued under employee stock purchase plan 159 140
Tax benefit for stock options exercised 500   31  
Net cash provided by (used in) financing activities 347   (2,907 )
Net increase in cash 28,816 19,194
Cash at beginning of period 98,551   92,988  
Cash at end of period $ 127,367   $ 112,182  
 
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
    Year ended
December 31,
2013 		    December 31,
2012
Operating activities:
Net income $ 54,467 $ 52,668
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 23,579 21,021
Gain on change in fair value of earn-out liability (615 ) —
Share-based compensation 6,178 6,050
(Gain) loss on disposal of property and equipment (454 ) 318
Provision for loss on receivables 423 199
Provision for revenue adjustments 2,531 2,003
Deferred income taxes 4,856 2,043
Tax benefit for stock options exercised (3,707 ) (385 )
Changes in operating assets and liabilities
Accounts receivable 1,447 (6,542 )
Prepaid expenses and other current assets (215 ) (1,331 )
Accounts payable and accrued expenses 2,349   (7,458 )
Net cash provided by operating activities 90,839 68,586
 
Investing activities:
Proceeds from disposal of property and equipment 1,973 911
Purchases of property and equipment (35,439 ) (21,353 )
Acquisition of business, net of cash acquired (45,328 ) —
Other (129 ) (263 )
Net cash used in investing activities (78,923 ) (20,705 )
 
Financing activities:
Payments of debt and capital lease obligations (20,375 ) (551 )
Proceeds from exercise of stock options 33,002 15,740
Payments of cash dividends (12,141 ) (9,947 )
Repurchase of common stock (repurchase program) (354 ) —
Common stock issued under employee stock purchase plan 296 259
Cash settlement of share-based awards for minimum tax withholdings (866 ) (386 )
Tax benefit for stock options exercised 3,707   385  
Net cash provided by financing activities 3,269   5,500  
Net increase in cash 15,185 53,381
Cash at beginning of year 112,182   58,801  
Cash at end of year $ 127,367   $ 112,182  
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
   
Three months ended
December 31,
2013 		    Percent of     December 31,
2012 		    Percent of         Percent
Revenue Revenue Change Change
Operating revenue
Forward Air $ 132.1 72.9 % $ 128.4 82.6 % $ 3.7 2.9 %
FASI 37.0 20.4 27.9 17.9 9.1 32.6
TQI 13.3 7.4 — — 13.3 100.0
Intercompany eliminations (1.3 ) (0.7 ) (0.8 ) (0.5 ) (0.5 ) 62.5  
Total 181.1   100.0   155.5   100.0   25.6   16.5  
 
Purchased transportation
Forward Air 62.0 46.9 58.1 45.3 3.9 6.7
FASI 10.9 29.5 7.8 27.9 3.1 39.7
TQI 7.3 54.9 — — 7.3 100.0
Intercompany eliminations (1.0 ) 76.9   (0.7 ) 87.5   (0.3 ) 42.9  
Total 79.2   43.7   65.2   41.9   14.0   21.5  
 
Salaries, wages and employee benefits
Forward Air 27.4 20.7 27.7 21.6 (0.3 ) (1.1 )
FASI 12.6 34.1 9.9 35.5 2.7 27.3
TQI 1.9   14.3   —   —   1.9   100.0  
Total 41.9   23.2   37.6   24.2   4.3   11.4  
 
Operating leases
Forward Air 5.4 4.1 5.2 4.1 0.2 3.8
FASI 3.0 8.1 2.0 7.2 1.0 50.0
TQI —   —   —   —   —   —  
Total 8.4   4.6   7.2   4.6   1.2   16.7  
 
Depreciation and amortization
Forward Air 4.1 3.1 3.9 3.0 0.2 5.1
FASI 1.3 3.5 1.2 4.3 0.1 8.3
TQI 0.8   6.0   —   —   0.8   100.0  
Total 6.2   3.4   5.1   3.3   1.1   21.6  
 
Insurance and claims
Forward Air 2.3 1.7 2.5 1.9 (0.2 ) (8.0 )
FASI 1.0 2.7 0.7 2.5 0.3 42.9
TQI 0.2   1.5   —   —   0.2   100.0  
Total 3.5   1.9   3.2   2.1   0.3   9.4  
 
Fuel expense
Forward Air 1.0 0.8 1.0 0.8 — —
FASI 2.2 5.9 1.7 6.1 0.5 29.4
TQI 1.4   10.5   —   —   1.4   100.0  
Total 4.6   2.6   2.7   1.7   1.9   70.4  
 
Other operating expenses
Forward Air 10.1 7.7 8.4 6.5 1.7 20.2
FASI 4.3 11.6 2.2 7.9 2.1 95.5
TQI — — — — — —
Intercompany eliminations (0.3 ) 23.1   (0.1 ) 12.5   (0.2 ) 200.0  
Total 14.1   7.8   10.5   6.8   3.6   34.3  
 
Income from operations
Forward Air 19.8 15.0 21.6 16.8 (1.8 ) (8.3 )
FASI 1.7 4.6 2.4 8.6 (0.7 ) (29.2 )
TQI 1.7   12.8   —   —   1.7   100.0  
Total $ 23.2   12.8 % $ 24.0   15.4 % $ (0.8 ) (3.3 )%
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
   
Year ended

December 31,
2013

    Percent of    

December 31,
2012

    Percent of         Percent
Revenue Revenue Change Change
Operating revenue
Forward Air $ 501.1 76.8 % $ 501.7 85.9 % $ (0.6 ) (0.1 )%
FASI 113.4 17.4 85.0 14.5 28.4 33.4
TQI 41.8 6.4 — — 41.8 100.0
Intercompany eliminations (3.8 ) (0.6 ) (2.3 ) (0.4 ) (1.5 ) 65.2  
Total 652.5   100.0   584.4   100.0   68.1   11.7  
 
Purchased transportation
Forward Air 230.9 46.1 231.4 46.1 (0.5 ) (0.2 )
FASI 34.5 30.4 23.3 27.4 11.2 48.1
TQI 23.2 55.5 — — 23.2 100.0
Intercompany eliminations (2.9 ) 76.3   (2.0 ) 87.0   (0.9 ) 45.0  
Total 285.7   43.8   252.7   43.3   33.0   13.1  
 
Salaries, wages and employee benefits
Forward Air 105.4 21.0 103.1 20.6 2.3 2.2
FASI 39.3 34.7 31.9 37.5 7.4 23.2
TQI 6.4   15.3   —   —   6.4   100.0  
Total 151.1   23.2   135.0   23.1   16.1   11.9  
 
Operating leases
Forward Air 20.2 4.0 20.4 4.1 (0.2 ) (1.0 )
FASI 9.0 7.9 7.6 9.0 1.4 18.4
TQI 0.1   0.2   —   —   0.1   100.0  
Total 29.3   4.5   28.0   4.8   1.3   4.6  
 
Depreciation and amortization
Forward Air 16.2 3.2 16.4 3.3 (0.2 ) (1.2 )
FASI 5.0 4.4 4.7 5.5 0.3 6.4
TQI 2.4   5.8   —   —   2.4   100.0  
Total 23.6   3.6   21.1   3.6   2.5   11.8  
 
Insurance and claims
Forward Air 8.7 1.8 8.9 1.8 (0.2 ) (2.2 )
FASI 3.3 2.9 2.4 2.8 0.9 37.5
TQI 0.5   1.2   —   —   0.5   100.0  
Total 12.5   1.9   11.3   1.9   1.2   10.6  
 
Fuel expense
Forward Air 4.0 0.8 4.2 0.8 (0.2 ) (4.8 )
FASI 7.0 6.2 5.8 6.8 1.2 20.7
TQI 4.2   10.1   —   —   4.2   100.0  
Total 15.2   2.3   10.0   1.7   5.2   52.0  
 
Other operating expenses
Forward Air 37.0 7.4 35.8 7.1 1.2 3.4
FASI 13.2 11.6 7.3 8.6 5.9 80.8
TQI 1.4 3.3 — — 1.4 100.0
Intercompany eliminations (0.9 ) 23.7   (0.3 ) 13.0   (0.6 ) 200.0  
Total 50.7   7.8   42.8   7.3   7.9   18.5  
 
Income from operations
Forward Air 78.7 15.7 81.5 16.2 (2.8 ) (3.4 )
FASI 2.1 1.9 2.0 2.4 0.1 5.0
TQI 3.6   8.6   —   —   3.6   100.0  
Total $ 84.4   12.9 % $ 83.5   14.3 % $ 0.9   1.1 %
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
           
Three months ended
December 31, December 31, Percent
2013 2012 Change
 
Operating ratio 85.0 % 83.2 % 2.2 %
 
Business days 64.0 64.0 —
Business weeks 12.8 12.8 —
 
 
Airport-to-airport:
Tonnage
Total pounds ¹ 482,861 456,007 5.9
Average weekly pounds ¹ 37,724 35,626 5.9
 
Linehaul shipments
Total linehaul 716,672 727,274 (1.5 )
Average weekly 55,990 56,818 (1.5 )
 
Forward Air Complete shipments 122,735 135,680 (9.5 )
As a percentage of linehaul shipments 17.1 % 18.7 % (8.6 )
 
Average linehaul shipment size 674 627 7.5
 
Revenue per pound ²
Linehaul yield $ 17.00 $ 17.41 (1.9 )
Fuel surcharge impact 1.75 1.95 (0.9 )
Forward Air Complete impact 2.80   2.74   0.3  
Total airport-to-airport yield $ 21.55   $ 22.10   (2.5 )
 
 
Logistics:
Miles
Owner operator ¹ 8,001 8,501 (5.9 )
Third party ¹ 4,253   4,152   2.4  
Total Miles 12,254   12,653   (3.2 )
 
Revenue per mile $ 1.69 $ 1.65 2.4
 
Cost per mile $ 1.27 $ 1.22 4.1 %
 
 
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
           
Year ended
December 31, December 31, Percent
2013 2012 Change
 
Operating ratio 84.3 % 83.8 % 0.6 %
 
Business days 255.0 255.0 —
Business weeks 51.0 51.0 —
 
 
Airport-to-airport:
Tonnage
Total pounds ¹ 1,803,243 1,778,397 1.4
Average weekly pounds ¹ 35,358 34,871 1.4
 
Linehaul shipments
Total linehaul 2,755,271 2,791,597 (1.3 )
Average weekly 54,025 54,737 (1.3 )
 
Forward Air Complete shipments 476,005 645,207 (26.2 )
As a percentage of linehaul shipments 17.3 % 23.1 % (25.1 )
 
Average linehaul shipment size 654 637 2.7
 
Revenue per pound ²
Linehaul yield $ 17.06 $ 17.13 (0.3 )
Fuel surcharge impact 1.87 1.90 (0.2 )
Forward Air Complete impact 2.88   2.97   (0.4 )
Total airport-to-airport yield $ 21.81   $ 22.00   (0.9 )
 
 
Logistics:
Miles
Owner operator ¹ 34,401 35,091 (2.0 )
Third party ¹ 14,916   16,162   (7.7 )
Total Miles 49,317   51,253   (3.8 )
 
Revenue per mile $ 1.63 $ 1.64 (0.6 )
 
Cost per mile $ 1.21 $ 1.24 (2.4 )%
 
 
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 February 10, 2014