Forward Air Corporation Reports Second Quarter 2018 Results and Quarterly Cash Dividend

Download as PDF

Related Documents

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 six months ended June 30, 2018.

Operating revenue for the quarter ended June 30, 2018 increased 16.4% to $330.3 million from $283.9 million for the same quarter in 2017. Income from operations was $32.9 million, compared to $30.0 million in the prior year quarter. Net income during the period was $24.3 million compared to $19.7 million in the second quarter of 2017. Net income per diluted share for the second quarter of 2018 was $0.82 compared to $0.65 in the prior year quarter.

Bruce A. Campbell, President, and CEO, commenting on second quarter results said, “Our second quarter results were ahead of our guidance. Expedited LTL drove strong volume growth amid a tight Truckload market to deliver solid performance despite a higher use of brokered transportation. Truckload Premium Services overcame its higher use of brokered transportation to restore its profitability. Our Intermodal group delivered broad-based growth that extended beyond its recently completed acquisitions. Pool Distribution drove strong revenue growth that is expected to increase profitability in the second half of the year.”

Commenting on the Company’s third quarter 2018 guidance, Michael J. Morris, Senior Vice President and CFO, said, “We expect third quarter year-on-year revenue growth to be 16% to 20%. This revenue outlook contemplates our 2018 implementation of ASC 606, Revenue from Contracts with Customers, which now requires that we report fuel surcharge revenue on a gross basis. As such, our growth outlook reflects a comparison to our third quarter 2017 revenue which reported fuel surcharge on a net basis. After adjusting this prior year period to reflect fuel surcharge revenue on a gross basis, we expect our year-on-year revenue growth to be 9% to 13%. We expect net income per diluted share to be between $0.77 and $0.81 in the third quarter of 2018, compared to $0.61 in the prior year quarter. The prior year earnings per share for the third quarter of 2017 increased $0.01 per diluted share from the originally reported $0.60 per diluted share following the implementation of ASC 606.”

On July 24, 2018, 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 August 23, 2018, and is expected to be paid on September 7, 2018.

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 second quarter 2018 results on Thursday, July 26, 2018 at 9:00 a.m. EDT. The Company’s conference call will be available online at www.forwardaircorp.com or by dialing (800) 230-1059. A replay of the conference call will be available at 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 www.forwardaircorp.com.

Financial Statement Presentation

Our results reflect the impact of the new revenue recognition standard, adopted under ASC 606, on a full retrospective basis, which required us to adjust each prior reporting period presented.

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

June 30,

2018

June 30,

2017

June 30,

2018

June 30,

2017

  (As Adjusted)   (As Adjusted)
Operating revenue:
Expedited LTL $ 192,891 $ 160,472 $ 362,835 $ 309,237
Truckload Premium Services 48,947 50,451 95,040 97,538
Pool Distribution 43,305 37,756 85,976 76,558
Intermodal 49,162 37,240 97,731 66,147
Eliminations and other operations (3,962 ) (2,043 ) (8,631 ) (3,559 )
Operating revenue 330,343 283,876 632,951 545,921
 
Operating expenses:
Purchased transportation 155,716 131,102 295,382 248,796
Salaries, wages and employee benefits 72,073 65,018 141,655 126,946
Operating leases 18,006 14,796 35,970 30,397
Depreciation and amortization 10,362 10,219 21,052 20,252
Insurance and claims 10,086 7,730 17,238 13,536
Fuel expense 5,598 3,671 11,152 7,351
Other operating expenses 25,632   21,344   53,397   44,905  
Total operating expenses 297,473   253,880   575,846   492,183  
Operating (loss) income:
Expedited LTL 26,526 23,047 47,298 41,975
Truckload Premium Services 1,717 1,855 1,674 3,610
Pool Distribution 1,589 1,625 2,960 2,991
Intermodal 5,543 3,209 9,012 5,763
Other operations (2,505 ) 260   (3,839 ) (601 )
Income from operations 32,870   29,996   57,105   53,738  
 
Other income (expense):
Interest expense (483 ) (236 ) (854 ) (518 )
Other, net (1 ) 18   (1 ) (8 )
Total other income (expense) (484 ) (218 ) (855 ) (526 )
Income before income taxes 32,386 29,778 56,250 53,212
Income tax expense 8,088   10,112   14,212   18,966  
Net income and comprehensive income $ 24,298   $ 19,666   $ 42,038   $ 34,246  
 
Net income per share:
Basic $ 0.83   $ 0.65   $ 1.42   $ 1.13  
Diluted $ 0.82   $ 0.65   $ 1.42   $ 1.13  
 
Dividends per share: $ 0.15   $ 0.15   $ 0.30   $ 0.30  
 
 
 
 
 
 
Expedited LTL Segment Information
(In millions)
(Unaudited)
                           
Three months ended
June 30, Percent of June 30, Percent of Percent
2018 Revenue 2017 Revenue Change Change
    (As Adjusted)        
Operating revenue $ 192.9 100.0 % $ 160.5 100.0 % $ 32.4 20.2 %
 
Operating expenses:
Purchased transportation 90.5 46.9 69.0 43.0 21.5 31.2
Salaries, wages and employee benefits 41.2 21.4 37.0 23.1 4.2 11.4
Operating leases 10.2 5.3 9.0 5.6 1.2 13.3
Depreciation and amortization 5.6 2.9 5.5 3.4 0.1 1.8
Insurance and claims 3.6 1.9 4.2 2.6 (0.6 ) (14.3 )
Fuel expense 1.6 0.8 0.9 0.6 0.7 77.8
Other operating expenses 13.7   7.1   11.8   7.3   1.9   16.1  
Total operating expenses 166.4   86.3   137.4   85.6   29.0   21.1  
Income from operations $ 26.5   13.7 % $ 23.1   14.4 % $ 3.4   14.7 %
 
 
Expedited LTL Operating Statistics
               
Three months ended
June 30, June 30, Percent
2018 2017 Change
  (As Adjusted)  
 
Business days 64 64 — %
 
Tonnage

Total pounds 1

668,129 615,315 8.6

Pounds per day 1

10,440 9,614 8.6
 
Shipments
Total shipments 1,094,886 1,011,934 8.2
Shipments per day 17,108 15,811 8.2
Total shipments with pickup and/or delivery 266,628 243,969 9.3
 
Revenue per hundredweight $ 25.83 $ 23.69 9.0
Revenue per hundredweight, ex fuel 21.83 21.22 2.9
 
Revenue per shipment 158 144 9.7
Revenue per shipment, ex fuel 133 129 3.1
 
Weight per shipment 610 608 0.3 %
 

1 - In thousands

 
 
 
 
 
 
Truckload Premium Services Segment Information
(In millions)
(Unaudited)
                           
Three months ended
June 30, Percent of June 30, Percent of Percent
2018 Revenue 2017 Revenue Change Change
    (As Adjusted)      
Operating revenue $ 48.9 100.0 % $ 50.4 100.0 % $ (1.5 ) (3.0 )%
 
Operating expenses:
Purchased transportation 37.0 75.7 37.9 75.2 (0.9 ) (2.4 )
Salaries, wages and employee benefits 4.6 9.4 5.0 9.9 (0.4 ) (8.0 )
Operating leases 0.1 0.2 0.1 0.2 — —
Depreciation and amortization 1.6 3.3 1.6 3.2 — —
Insurance and claims 0.9 1.8 1.3 2.6 (0.4 ) (30.8 )
Fuel expense 0.8 1.6 0.7 1.4 0.1 14.3
Other operating expenses 2.2   4.5   2.0   3.9     0.2   10.0  
Total operating expenses 47.2   96.5   48.6   96.4     (1.4 ) (2.9 )
Income from operations $ 1.7   3.5 % $ 1.8   3.6 % $ (0.1 ) (5.6 )%
 
 
Truckload Premium Services Operating Statistics
         
Three months ended
June 30,     June 30,     Percent
2018 2017 Change
  (As Adjusted)  
 

Total Miles 1

20,136 24,450 (17.6 )%
Empty Miles Percentage 9.3 %

10.0

% (7.0 )
Tractors (avg) 321 409 (21.5 )
Miles per tractor per week 2 2,284 2,740 (16.6 )
 
Revenue per mile $ 2.32 $ 2.00 16.0
Cost per mile $ 1.86 $ 1.61 15.5 %
 

1 - In thousands

2 - Calculated using Company driver and owner operator miles
 
 
 
 
 
 
Pool Distribution Segment Information
(In millions)
(Unaudited)
                           
Three months ended
June 30, Percent of June 30, Percent of Percent
2018 Revenue 2017 Revenue Change Change
    (As Adjusted)      
Operating revenue $ 43.3 100.0 % $ 37.8 100.0 % $ 5.5 14.6 %
 
Operating expenses:
Purchased transportation 12.4 28.6 10.6 28.0 1.8 17.0
Salaries, wages and employee benefits 15.9 36.7 14.0 37.1 1.9 13.6
Operating leases 3.8 8.8 3.1 8.2 0.7 22.6
Depreciation and amortization 1.7 3.9 1.6 4.2 0.1 6.3
Insurance and claims 1.0 2.3 1.1 2.9 (0.1 ) (9.1 )
Fuel expense 1.6 3.7 1.2 3.2 0.4 33.3
Other operating expenses 5.3     12.3   4.6     12.2   0.7   15.2  
Total operating expenses 41.7     96.3   36.2     95.8   5.5   15.2  
Income from operations $ 1.6   3.7 % $ 1.6   4.2 % $ —   — %
 
 
Pool Operating Statistics
         
Three months ended
June 30,     June 30,     Percent
2018 2017 Change
  (As Adjusted)  
 

Cartons 1

20,101 18,078 11.2 %
Revenue per Carton $ 2.15 $ 2.09 2.9 %
Terminals 28 28 — %
 

1 In thousands

 
 
 
 
 
 
Intermodal Segment Information
(In millions)
(Unaudited)
                           
Three months ended
June 30, Percent of June 30, Percent of Percent
2018 Revenue 2017 Revenue Change Change
    (As Adjusted)      
Operating revenue $ 49.2 100.0 % $ 37.2 100.0 % $ 12.0 32.3 %
 
Operating expenses:
Purchased transportation 19.4 39.4 15.3 41.1 4.1 26.8
Salaries, wages and employee benefits 10.5 21.3 8.6 23.1 1.9 22.1
Operating leases 3.9 7.9 3.1 8.4 0.8 25.8
Depreciation and amortization 1.5 3.1 1.5 4.0 — —
Insurance and claims 1.4 2.8 1.3 3.5 0.1 7.7
Fuel expense 1.7 3.5 0.9 2.4 0.8 88.9
Other operating expenses 5.2   10.6   3.3   8.9   1.9   57.6  
Total operating expenses 43.6   88.6   34.0   91.4   9.6   28.2  
Income from operations $ 5.6   11.4 % $ 3.2   8.6 % $ 2.4   75.0 %
 
 
Intermodal Operating Statistics
         
Three months ended
June 30,   June 30,   Percent
2018 2017 Change
  (As Adjusted)  
 
Drayage shipments 74,021 57,591 28.5 %
Drayage revenue per Shipment $ 565 $ 535 5.6 %
Number of Locations 19 19 — %
 
 
 
 
 
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
       

June 30,

2018

   

December 31,

2017

  (As Adjusted)
Assets
Current assets:
Cash and cash equivalents $ 20,102 $ 3,893
Accounts receivable, net 152,393 147,948
Other current assets 21,010   15,807
Total current assets 193,505 167,648
 
Property and equipment 401,507 399,235
Less accumulated depreciation and amortization 197,264   193,123
Net property and equipment 204,243 206,112
Goodwill and other acquired intangibles:
Goodwill 191,671 191,671
Other acquired intangibles, net of accumulated amortization 106,741   111,247
Total goodwill and other acquired intangibles, net 298,412 302,918
Other assets 15,132   15,944
Total assets $ 711,292   $ 692,622
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 32,036 $ 30,723
Accrued expenses 37,337 35,069
Current portion of debt and capital lease obligations 344   359
Total current liabilities 69,717 66,151
 
Debt and capital lease obligations, less current portion 40,453 40,588
Other long-term liabilities 25,678 24,104
Deferred income taxes 33,574 29,080
 
Shareholders’ equity:
Common stock 291 295
Additional paid-in capital 201,373 195,346
Retained earnings 340,206   337,058
Total shareholders’ equity 541,870   532,699
Total liabilities and shareholders’ equity $ 711,292   $ 692,622
 
 
 
 
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Three months ended
June 30, 2018     June 30, 2017
  (As Adjusted)
Operating activities:
Net income $ 24,298 $ 19,666
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 10,362 10,219
Share-based compensation 2,417 2,064
(Gain) loss on disposal of property and equipment (216 ) 19
Provision for loss on receivables 323 235
Provision for revenue adjustments 1,012 750
Deferred income tax expense 781 950
Changes in operating assets and liabilities
Accounts receivable (7,537 ) (9,014 )
Prepaid expenses and other current assets (6,354 ) (6,131 )
Income taxes (3,196 ) (6,697 )
Accounts payable and accrued expenses 4,288   2,859  
Net cash provided by operating activities 26,178 14,920
 
Investing activities:
Proceeds from disposal of property and equipment 4,195 549
Purchases of property and equipment (11,385 ) (2,010 )
Acquisition of business, net of cash acquired — (22,500 )
Other (257 ) 384  
Net cash used in investing activities (7,447 ) (23,577 )
 
Financing activities:
Payments of debt and capital lease obligations (77 ) (76 )
Proceeds from senior credit facility — 22,000
Payments on line of credit — (14,500 )
Proceeds from exercise of stock options 1,112 3,368
Payments of cash dividends (4,415 ) (4,543 )
Repurchase of common stock (repurchase program) (8,172 ) (1,999 )
Common stock issued under employee stock purchase plan 237 226
Cash settlement of share-based awards for tax withholdings (49 ) (64 )
Net cash (used in) provided by financing activities (11,364 ) 4,412  
Net increase (decrease) in cash 7,367 (4,245 )
Cash at beginning of period 12,735   14,335  
Cash at end of period $ 20,102   $ 10,090  
 
 
 
 
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Six months ended
June 30, 2018     June 30, 2017
Operating activities:
Net income $ 42,038 $ 34,246
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 21,052 20,252
Share-based compensation 4,678 4,026
(Gain) loss on disposal of property and equipment (134 ) 507
Provision for loss on receivables 457 257
Provision for revenue adjustments 1,829 1,468
Deferred income tax 4,494 1,081
Changes in operating assets and liabilities
Accounts receivable (6,732 ) (10,484 )
Prepaid expenses and other current assets (3,639 ) (3,978 )
Income taxes (1,428 ) 1,737
Accounts payable and accrued expenses 4,375   2,868  
Net cash provided by operating activities 66,990 51,980
 
Investing activities:
Proceeds from disposal of property and equipment 4,839 1,339
Purchases of property and equipment (17,606 ) (4,662 )
Acquisition of business, net of cash acquired — (22,500 )
Other (347 ) 513  
Net cash used in investing activities (13,114 ) (25,310 )
 
Financing activities:
Payments of debt and capital lease obligations (151 ) (27,933 )
Proceeds from senior credit facility — 35,000
Payments on line of credit — (14,500 )
Proceeds from exercise of stock options 1,112 4,892
Payments of cash dividends (8,828 ) (9,082 )
Repurchase of common stock (repurchase program) (28,165 ) (11,995 )
Common stock issued under employee stock purchase plan 237 226
Cash settlement of share-based awards for tax withholdings (1,872 ) (1,699 )
Net cash used in financing activities (37,667 ) (25,091 )
Net increase in cash 16,209 1,579
Cash at beginning of period 3,893   8,511  
Cash at end of period $ 20,102   $ 10,090  
 
 
 
 
 

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         June 30, 2018
Net income $ 24,298
Income allocated to participating securities (209 )
Numerator for diluted income per share - net income $ 24,089  
 
Fully diluted share count 29,272
Diluted earnings per share $ 0.82
 
 
Projected         Full year 2018
Projected tax rate 25.7 %
 
Projected capital expenditures, net $ 40,500
 
 
Projected        

Three months ended

December 31, 2018

Projected period end fully diluted share count 28,800
 
 
 
 
 
 

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 projected profitability of our Pool distribution business in the second half of the year and expected third quarter 2018 revenue growth and net income per diluted shares as well as full year 2018 projected tax rate, fully diluted share count (before consideration of future share repurchase) and projected capital expenditures.

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: 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, 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, 2017 and quarterly reports on Form 10-Q filed thereafter.

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 July 25, 2018