Forward Air Corporation Reports Third Quarter 2017 Results and Quarterly Cash Dividend

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GREENEVILLE, Tenn.--(BUSINESS WIRE)-- Forward Air Corporation (NASDAQ:FWRD) today reported operating revenue, income from operations, net income and diluted earnings per share for the three and nine months ended September 30, 2017.

Operating revenue for the quarter ended September 30, 2017 increased 12.3% to $280.2 million from $249.6 million for the same quarter in 2016. Income from operations was $26.9 million, compared to $24.7 million in the prior year quarter. Net income during the period was $18.2 million compared to $11.9 million in the third quarter of 2016. Net income per diluted share for the third quarter of 2017 was $0.60 compared to $0.39 in the prior year quarter. Adjusted to exclude the impact of the second quarter 2016 TQI impairment on income taxes, prior year quarter adjusted earnings per share was $0.51.

Bruce A. Campbell, Chairman, President, and CEO, commenting on the third quarter results said, “During the third quarter, our business units delivered solid revenue and earnings growth on one less operating day. Our Expedited LTL group drove strong volumes despite weather-related slowdowns and a tightening Truckload market. Truckload Premium Services also grew its revenues but faced a greater reliance on brokered miles amid a challenging driver recruitment environment. Our Intermodal group showed good growth as it continued to integrate the Atlantic acquisition. Pool Distribution also overcame weather-related impacts to deliver another great quarter.”

Commenting on the Company’s third quarter results, Michael J. Morris, Senior Vice President and CFO, said, “Our third quarter net income per diluted share reflects a $0.02 benefit related to a discrete tax item. When excluding this impact, we would have been at the middle of our $0.56-$0.60 guidance range.” Regarding the Company’s fourth quarter 2017 guidance, Mr. Morris said, “We expect fourth quarter year-on-year revenue growth to be 12% to 16%. We expect net income per diluted share to be between $0.60 and $0.64, compared to $0.42 in the prior year quarter.” The fourth quarter of 2016 includes tax ramifications related to the impairment of TQI’s intangible assets. When excluded, adjusted net income per diluted share was $0.58 for the fourth quarter of 2016.

A tabular reconciliation of non-GAAP financial measures to reported results prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) is contained in the financial summary statements attached to this press release.

On October 24, 2017, our Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock. The dividend is payable to shareholders of record at the close of business on November 23, 2017, and is expected to be paid on December 8, 2017.

This quarterly dividend is pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.60 per share of common stock, payable in quarterly increments of $0.15 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.

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2017 results on Thursday, October 26, 2017 at 9:00 a.m. EDT. The Company’s conference call will be available online at https://www.forwardaircorp.com or by dialing (800) 230-1092. A replay of the conference call will be available at https://www.forwardaircorp.com beginning shortly after the completion of the live call.

About Forward Air Corporation

Forward Air keeps your business moving forward by providing services within four business segments: Expedited LTL (provides expedited regional, inter-regional and national LTL services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals); Truckload Premium Services (provides expedited truckload brokerage, dedicated fleet services, as well as high-security and temperature-controlled logistics services); 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 https://www.forwardaircorp.com.

 
Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)
           
Three months ended Nine months ended

September 30,
2017

   

September 30,
2016

September 30,
2017

September 30,
2016

Operating revenue:
Expedited LTL $ 155,703 $ 144,337 $ 448,571 $ 423,410
Truckload Premium Services 45,941 42,210 132,912 120,270
Pool Distribution 39,180 36,437 113,838 101,153
Intermodal 42,292 27,579 105,853 76,391
Eliminations and other operations (2,915 ) (1,011 ) (6,474 ) (3,487 )
Operating revenue 280,201 249,552 794,700 717,737
 
Operating expenses:
Purchased transportation 123,326 105,039 342,017 300,783
Salaries, wages and employee benefits 64,882 60,161 191,282 175,857
Operating leases 16,809 16,215 47,205 44,684
Depreciation and amortization 10,326 9,399 30,578 28,409
Insurance and claims 7,844 7,170 21,379 19,213
Fuel expense 4,096 3,416 11,448 9,375
Other operating expenses 26,020 23,452 70,895 65,218
Impairment of goodwill, intangibles and other assets —   —   —   42,442  
Total operating expenses 253,303   224,852   714,804   685,981  
Operating (loss) income:
Expedited LTL 23,204 21,014 64,596 63,026
Truckload Premium Services 136 2,038 3,699 (36,679 )
Pool Distribution 681 66 3,672 (191 )
Intermodal 3,480 3,041 9,133 8,170
Other operations (603 ) (1,459 ) (1,204 ) (2,570 )
Income from operations 26,898   24,700   79,896   31,756  
 
Other income (expense):
Interest expense (288 ) (216 ) (806 ) (1,230 )
Other, net (2 ) (4 ) (11 ) (149 )
Total other income (expense) (290 ) (220 ) (817 ) (1,379 )
Income before income taxes 26,608 24,480 79,079 30,377
Income tax expense 8,453   12,549   27,131   15,413  
Net income and comprehensive income $ 18,155   $ 11,931   $ 51,948   $ 14,964  
 
Net income per share:
Basic $ 0.60   $ 0.39   $ 1.72   $ 0.49  
Diluted $ 0.60   $ 0.39   $ 1.71   $ 0.49  
 
Dividends per share: $ 0.15   $ 0.12   $ 0.45   $ 0.36  
 
 
Expedited LTL Segment Information
(In millions)
(Unaudited)
                       
Three months ended
September 30, Percent of September 30, Percent of Percent
2017 Revenue 2016 Revenue Change Change
Operating revenue $ 155.7 100.0 % $ 144.3 100.0 % $ 11.4 7.9 %
 
Operating expenses:
Purchased transportation 64.0 41.1 56.3 39.0 7.7 13.7
Salaries, wages and employee benefits 35.2 22.6 33.8 23.4 1.4 4.1
Operating leases 9.4 6.0 9.0 6.2 0.4 4.4
Depreciation and amortization 5.4 3.5 5.5 3.8 (0.1 ) (1.8 )
Insurance and claims 3.3 2.1 3.9 2.7 (0.6 ) (15.4 )
Fuel expense 0.9 0.6 0.8 0.6 0.1 12.5
Other operating expenses 14.3   9.2   14.0   9.7   0.3   2.1  
Total operating expenses 132.5   85.1   123.3   85.4   9.2   7.5  
Income from operations $ 23.2   14.9 % $ 21.0   14.6 % $ 2.2   10.5 %
 
 
Expedited LTL Operating Statistics
           
Three months ended
September 30, September 30, Percent
2017 2016 Change
 
Operating ratio 85.1 % 85.4 % (0.4 )%
 
Business days 63.0 64.0 (1.6 )
Business weeks 12.6 12.8 (1.6 )
 
Expedited LTL:
Tonnage

Total pounds 1

636,009 588,929 8.0

Average weekly pounds 1

50,477 46,010 9.7
 
Linehaul shipments
Total linehaul 986,632 909,787 8.4
Average weekly 78,304 71,077 10.2
 
Forward Air Complete shipments 242,902 195,594 24.2
As a percentage of linehaul shipments 24.6 % 21.5 % 14.4
 
Average linehaul shipment size 645 647 (0.3 )
 
Revenue per pound 2
Linehaul yield $ 16.89 $ 17.71 (3.7 )
Fuel surcharge 1.11 1.06 0.2
Forward Air Complete 3.94   3.49   2.1  
Total Expedited LTL yield $ 21.94   $ 22.26   (1.4 )%
 

1 - In thousands

2 - In dollars per hundred pound; percentage change is expressed as a percent of total yield.
 
 
Truckload Premium Services Segment Information
(In millions)
(Unaudited)
                       
Three months ended
September 30, Percent of September 30, Percent of Percent
2017 Revenue 2016 Revenue Change Change
Operating revenue $ 45.9 100.0 % $ 42.2 100.0 % $ 3.7 8.8 %
 
Operating expenses:
Purchased transportation 33.9 73.9 29.7 70.4 4.2 14.1
Salaries, wages and employee benefits 5.0 10.9 4.9 11.6 0.1 2.0
Operating leases 0.3 0.6 0.1 0.2 0.2 200.0
Depreciation and amortization 1.6 3.5 1.5 3.6 0.1 6.7
Insurance and claims 2.0 4.4 1.1 2.6 0.9 81.8
Fuel expense 0.8 1.7 0.7 1.7 0.1 14.3
Other operating expenses 2.2   4.8   2.2   5.2     —   —  
Total operating expenses 45.8   99.8   40.2   95.3     5.6   13.9  
Income from operations $ 0.1   0.2 % $ 2.0   4.7 % $ (1.9 ) (95.0 )%
 
 
Truckload Premium Services Operating Statistics
     
Three months ended
September 30,     September 30,     Percent
2017 2016 Change
 
Company driver 1 1,990 1,761 13.0 %
Owner operator 1 11,454 13,125 (12.7 )
Third party 1 11,263   8,339   35.1  
Total Miles 24,707 23,225 6.4
 
Revenue per mile $ 1.79 $ 1.78 0.6
 
Cost per mile $ 1.44 $ 1.37 5.1 %
 

1 - In thousands

 
 
Pool Distribution Segment Information
(In millions)
(Unaudited)
                       
Three months ended
September 30, Percent of September 30, Percent of Percent
2017 Revenue 2016 Revenue Change Change
Operating revenue $ 39.2 100.0 % $ 36.4 100.0 % $ 2.8 7.7 %
 
Operating expenses:
Purchased transportation 10.4 26.5 10.1 27.7 0.3 3.0
Salaries, wages and employee benefits 15.3 39.0 14.4 39.6 0.9 6.3
Operating leases 3.3 8.4 3.3 9.1 — —
Depreciation and amortization 1.7 4.4 1.4 3.8 0.3 21.4
Insurance and claims 1.1 2.8 1.0 2.7 0.1 10.0
Fuel expense 1.3 3.3 1.2 3.3 0.1 8.3
Other operating expenses 5.4     13.8   4.9     13.5   0.5   10.2  
Total operating expenses 38.5     98.2   36.3     99.7   2.2   6.1  
Income from operations $ 0.7   1.8 % $ 0.1   0.3 % $ 0.6   600.0 %
 
 
Intermodal Segment Information
(In millions)
(Unaudited)
                       
Three months ended
September 30, Percent of September 30, Percent of Percent
2017 Revenue 2016 Revenue Change Change
Operating revenue $ 42.3 100.0 % $ 27.6 100.0 % $ 14.7 53.3 %
 
Operating expenses:
Purchased transportation 17.5 41.4 9.7 35.1 7.8 80.4
Salaries, wages and employee benefits 9.0 21.3 6.6 23.9 2.4 36.4
Operating leases 3.8 9.0 3.3 12.0 0.5 15.2
Depreciation and amortization 1.7 4.0 1.0 3.6 0.7 70.0
Insurance and claims 1.2 2.8 0.8 2.9 0.4 50.0
Fuel expense 1.1 2.6 0.7 2.5 0.4 57.1
Other operating expenses 4.5   10.6   2.5   9.1   2.0   80.0  
Total operating expenses 38.8   91.7   24.6   89.1   14.2   57.7  
Income from operations $ 3.5   8.3 % $ 3.0   10.9 % $ 0.5   16.7 %
 
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
   

September 30,
2017

   

December 31,
2016 (a)

Assets
Current assets:
Cash and cash equivalents $ 12,423 $ 8,511
Accounts receivable, net 132,100 116,602
Other current assets   13,319   11,157
Total current assets 157,842 136,270
 
Property and equipment 383,890 379,021
Less accumulated depreciation and amortization   192,109   178,816
Net property and equipment 191,781 200,205
Goodwill and other acquired intangibles:
Goodwill 191,535 184,675
Other acquired intangibles, net of accumulated amortization   113,562   106,650
Total net goodwill and other acquired intangibles 305,097 291,325
Other assets   14,448   13,491
Total assets $ 669,168 $ 641,291
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 22,377 $ 18,012
Accrued expenses 35,354 31,903
Current portion of debt and capital lease obligations   466   28,012
Total current liabilities 58,197 77,927
 
Debt and capital lease obligations, less current portion 40,696 725
Other long-term liabilities 22,681 21,699
Deferred income taxes 42,004 41,871
 
Shareholders’ equity:
Common stock 295 301
Additional paid-in capital 191,352 179,512
Retained earnings   313,943   319,256
Total shareholders’ equity   505,590   499,069
Total liabilities and shareholders’ equity $ 669,168 $ 641,291
 
(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,
2017

   

September 30,
2016

Operating activities:
Net income $ 18,155 $ 11,931
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 10,326 9,399
Share-based compensation 1,939 2,093
Loss on disposal of property and equipment 194 111
Provision for loss on receivables 1,531 280
Provision for revenue adjustments 663 365
Deferred income tax expense (662 ) (220 )
Excess tax benefit for stock options exercised — (50 )
Changes in operating assets and liabilities
Accounts receivable (10,759 ) (6,716 )
Prepaid expenses and other current assets 2,567 2,182
Accounts payable and accrued expenses 1,776   14,026  
Net cash provided by operating activities 25,730 33,401
 
Investing activities:
Proceeds from disposal of property and equipment 158 695
Purchases of property and equipment (8,948 ) (12,684 )
Acquisition of business, net of cash acquired — (10,100 )
Other (585 ) (71 )
Net cash used in investing activities (9,375 ) (22,160 )
 
Financing activities:
Payments of debt and capital lease obligations (282 ) (13,942 )
Proceeds from senior credit facility 20,000 —
Proceeds from exercise of stock options 750 5,947
Payments of cash dividends (4,502 ) (3,653 )
Repurchase of common stock (repurchase program) (29,988 ) (9,995 )
Excess tax benefit for stock options exercised — 50
Cash settlement of share-based awards for tax withholdings —   (14 )
Net cash used in financing activities (14,022 ) (21,607 )
Net increase (decrease) in cash 2,333 (10,366 )
Cash at beginning of period 10,090   21,679  
Cash at end of period $ 12,423   $ 11,313  
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
Nine months ended

September 30,
2017

   

September 30,
2016

Operating activities:
Net income $ 51,948 $ 14,964
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 30,578 28,409
Impairment of goodwill, intangible and other assets — 42,442
Share-based compensation 5,965 6,204
Loss on disposal of property and equipment 701 201
Provision for loss on receivables 1,788 268
Provision for revenue adjustments 2,131 1,570
Deferred income tax 132 661
Excess tax benefit for stock options exercised — (137 )
Changes in operating assets and liabilities
Accounts receivable (19,417 ) (8,000 )
Other current assets (1,411 ) (1,354 )
Accounts payable and accrued expenses 5,296   9,380  
Net cash provided by operating activities 77,711 94,608
 
Investing activities:
Proceeds from disposal of property and equipment 1,497 1,795
Purchases of property and equipment (13,610 ) (28,725 )
Acquisition of business, net of cash acquired (22,500 ) (11,800 )
Other (73 ) (673 )
Net cash used in investing activities (34,686 ) (39,403 )
 
Financing activities:
Payments of debt and capital lease obligations (42,715 ) (41,825 )
Proceeds from senior credit facility 55,000 —
Proceeds from exercise of stock options 5,642 7,041
Payments of cash dividends (13,584 ) (10,987 )
Repurchase of common stock (repurchase program) (41,983 ) (29,986 )
Common stock issued under employee stock purchase plan 226 215
Excess tax benefit for stock options exercised — 137
Cash settlement of share-based awards for tax withholdings (1,699 ) (1,800 )
Net cash used in financing activities (39,113 ) (77,205 )
Net increase (decrease) in cash 3,912 (22,000 )
Cash at beginning of period 8,511   33,312  
Cash at end of period $ 12,423   $ 11,312  
 

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 in 2017 and 2016 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.

This press release contains the following non-GAAP financial measures: adjusted income from operations, adjusted net income, adjusted earnings per diluted share, adjusted effective income tax rate and guidance with respect to adjusted net income per diluted share. These measures exclude intangible asset impairments costs and intangible asset impairment tax ramifications related to TQI for the three months ended September 30, 2016 and December 31, 2016. The Company believes that excluding these items will assist investors in understanding our core operating performance and allow for more accurate comparisons of results.

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. Our 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 our presented non-GAAP financial measures to the most directly comparable GAAP financial measures.

 
Forward Air Corporation
Reconciliation to U.S. GAAP
(In millions, except per share data)
(Unaudited)
     
Three months ended September 30, 2016

Operating
Income

   

Other,
Net

   

Income
before
taxes

   

Income
taxes

   

Effective
tax rate

   

Net
Income

   

Diluted
earnings
per share

Reported (GAAP) $ 24.7     $ (0.2 )     $ 24.5     $ 12.6     51.3 %     $ 11.9     $ 0.39
Items impacting comparability:
Impact of TQI impairment on income taxes   —       —         —       (3.6 )     14.3 %       3.6       0.12
After considering items (Non-GAAP) $ 24.7 $ (0.2 ) $ 24.5 $ 9.0 37.0 % $ 15.5 $ 0.51
 
     
Three months ended December 31, 2016

Operating
Income

   

Other,
Net

   

Income
before
taxes

   

Income
taxes

   

Effective
tax rate

   

Net
Income

   

Diluted
earnings
per share

Reported (GAAP) $ 28.2     $ (0.2 )     $ 28.0     $ 15.3     54.6 %     $ 12.7     $ 0.42
Items impacting comparability:
Impact of TQI impairment on income taxes   —       —         —       (5.0 )     17.8 %       5.0       0.16
After considering items (Non-GAAP) $ 28.2 $ (0.2 ) $ 28.0 $ 10.3 36.8 % $ 17.7 $ 0.58
 

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     September 30, 2017
Net income $ 18,155
Income allocated to participating securities (145 )
Numerator for diluted income per share - net income $ 18,010  
 
Fully diluted share count 29,940
Diluted earnings per share $ 0.60
 
 
 
Projected     Full year 2017
Projected tax rate 35.8 %
 
Projected year end fully diluted share count (before consideration of future share repurchases) 30,000
 
Projected capital expenditures, net $ 39,700
 

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. Examples of forward-looking statements include, among others, statements we make regarding expected operating results, such as revenue growth and earnings, and guidance relating to income per diluted share, adjusted income per diluted share and adjusted effective tax rate for the second quarter.

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. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: 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, tax matters, the availability and compensation of qualified independent owner-operators and freight handlers needed to serve our transportation needs, our inability to successfully integrate acquisitions and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2016.

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.

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

Source: Forward Air Corporation

Released October 25, 2017