forwardlogoa04.jpg
NEWS RELEASE

FORWARD AIR CORPORATION REPORTS FIRST QUARTER 2020 RESULTS

Reports record first quarter revenue

Enhances liquidity and cost-control measures in response to COVID-19


GREENEVILLE, Tenn.- (BUSINESS WIRE) - April 30, 2020 - Forward Air Corporation (NASDAQ:FWRD) today reported financial results for the three months ended March 31, 2020.
Revenue for the three months ended March 31, 2020 increased 6.5% to $342.5 million from $321.5 million for the same period in 2019. Income from operations was $11.7 million compared to $24.7 million in the prior year period. Net income during the three months ended March 31, 2020 was $8.4 million compared to $18.4 million for the same period in 2019. Net income per diluted share for the three months ended March 31, 2020 was $0.30 compared to $0.64 in the prior year period.
For the three months ended March 31, 2020, the Company generated $29.2 million of cash flow from operations compared to $41.5 million for the same period in 2019.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $22.3 million for the three months ended March 31, 2020 compared to $35.6 million for the same period in 2019. Free cash flow was $26.7 million for the three months ended March 31, 2020 compared to $37.8 million in the prior year period.
EBITDA and free cash flow are non-GAAP financial measures and reconciliations of these non-GAAP financial measures are provided in the attached financial tables.
Tom Schmitt, Chairman, President and CEO, commenting on first quarter results said, "Our record first quarter revenue was driven by our recent Final Mile and Intermodal acquisitions, which are reflected in our first quarter results. However, COVID-19 has been a perfect storm - globalization at its darkest - that has impacted all of our modes given our networks’ exposure to non-essential freight with heavy ties to air and ocean freight from Asia and the retail mall business. Volumes fell sharply in March and April. The signs of a slow recovery are emerging as we enter May, but visibility is limited. We are responding by flexing our asset-light model, and greatly enhancing cost reduction programs that were already in force. We are also executing key strategic initiatives that we believe will enable us to emerge from this episode as a stronger competitor, including evaluating our strategic options for Pool Distribution, which we will discuss during our earnings call."
In closing, Mr. Schmitt said, "I want to thank our employees and independent contractors for their remarkable efforts during this difficult time. Their commitment to Forward Air and its customers has been incredible."
Commenting on the Company’s first quarter results, Michael J. Morris, CFO, said, "Our cost reduction measures include significant workforce actions. Given the late quarter timing of the revenue decline which drove these actions, and our employees’ right to use accrued personal time, these cost reduction impacts will be more fully realized in the second quarter. In light of the uncertainty created by COVID-19, we are suspending quarterly guidance. While we expect to remain free cash flow positive throughout 2020, we have taken significant steps to enhance our financial flexibility. Our increased cash balance of $104 million as of April 29th, coupled with $75 million of new availability

1


on our committed credit line, gives us a total liquidity position of $179 million, which is almost nine times our historic target cash level."
On April 29, 2020, our Board of Directors declared a quarterly cash dividend of $0.18 per share of common stock.  The dividend is payable to shareholders of record at the close of business on May 25, 2020 and is expected to be paid on June 10, 2020. This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.72 for the full year 2020, payable in quarterly increments of $0.18 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 and position.
Review of Financial Results

Forward Air will hold a conference call to discuss first quarter 2020 results on Friday, May 1, 2020 at 9:00 a.m. EDT. The Company’s conference call will be available online on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, where investors can easily find or navigate to pertinent information about us, or by dialing (844) 767-5679, Access Code: 4369143. A replay of the conference call will be available on the Investor Relations portion of the Company’s website at www.forwardaircorp.com beginning shortly after completion of the live call.

About Forward Air Corporation
Forward Air keeps your business moving forward by providing services within three business segments: Expedited Freight (provides expedited regional, inter-regional and national LTL services, including local pick-up and delivery, final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling); 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.

2

Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)
 
 
 
 
 
Three months ended
 
March 31,
2020
 
March 31,
2019
 


 
(As Adjusted)
Operating revenue:
 
 
 
Expedited Freight
$
251,158

 
$
222,983

Intermodal
52,460

 
54,115

Pool Distribution
39,424

 
45,185

Eliminations and other operations
(533
)
 
(812
)
Operating revenue
342,509

 
321,471

 
 
 
 
Operating expenses:
 

 
 

Purchased transportation
160,134

 
144,014

Salaries, wages and employee benefits
86,672

 
76,362

Operating leases
23,564

 
19,173

Depreciation and amortization
10,629

 
10,827

Insurance and claims
11,770

 
9,371

Fuel expense
5,340

 
5,608

Other operating expenses
32,698

 
31,382

Total operating expenses
330,807

 
296,737

Income (loss) from operations:
 
 
 
Expedited Freight
14,698

 
20,388

Intermodal
3,713

 
6,181

Pool Distribution
(3,562
)
 
1,251

Other operations
(3,147
)
 
(3,086
)
Income from operations
11,702

 
24,734

 
 
 
 
Other expense:
 

 
 

Interest expense
853

 
575

Other, net
—

 
1

Total other expense
853

 
576

Income before income taxes
10,849

 
24,158

Income tax expense
2,474

 
5,751

Net income and comprehensive income
$
8,375

 
$
18,407

 
 
 
 
Net income per share:
 

 
 

Basic
$
0.30

 
$
0.64

Diluted
$
0.30

 
$
0.64

 
 
 
 
Dividends per share:
$
0.18

 
$
0.18


3

Expedited Freight Segment Information
(In millions)
(Unaudited)













Three months ended

March 31,

Percent of

March 31,

Percent of



Percent
 
2020 1

Revenue

2019

Revenue

Change

Change





(As Adjusted)






Operating revenue:















Network 2
$
152.0


60.5
%

$
161.4


72.4
%

$
(9.4
)

(5.8
)%
Truckload
45.1


18.0


45.0


20.2


0.1


0.2

Final Mile
47.8


19.0


9.8


4.4


38.0


387.8

Other
6.3


2.5


6.8


3.0


(0.5
)

(7.4
)
Total operating revenue
251.2


100.0


223.0


100.0


28.2


12.6













Operating expenses:











Purchased transportation
131.0


52.1


112.8


50.6


18.2


16.1

Salaries, wages and employee benefits
55.4


22.1


45.7


20.5


9.7


21.2

Operating leases
13.6


5.4


11.0


4.9


2.6


23.6

Depreciation and amortization
6.7


2.7


7.4


3.3


(0.7
)

(9.5
)
Insurance and claims
6.5


2.6


5.0


2.2


1.5


30.0

Fuel expense
2.1


0.8


2.5


1.1


(0.4
)

(16.0
)
Other operating expenses
21.2


8.4


18.2


8.2


3.0


16.5

Total operating expenses
236.5


94.1


202.6


90.9


33.9


16.7

Income from operations
$
14.7


5.9
%

$
20.4


9.1
%

$
(5.7
)

(27.9
)%












1 Includes revenues and operating expenses from the acquisition of FSA and Linn Star, which were acquired in April 2019 and January 2020, respectively (and are not included in the prior period)
2 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue



4

Expedited Freight Operating Statistics



Three months ended

March 31,

March 31,

Percent

2020

2019

Change



(As Adjusted)








Business days
64


63


1.6
 %






Tonnage 1,2





    Total pounds
569,956


596,640


(4.5
)
    Pounds per day
8,906


9,470


(6.0
)






Shipments 1,2





    Total shipments
885


930


(4.8
)
    Shipments per day
13.8


14.8


(6.3
)






Weight per shipment
644


642


0.3









Revenue per hundredweight 3
$
27.16


$
26.78


1.4

Revenue per hundredweight, ex fuel 3
$
23.09


$
22.74


1.5









Revenue per shipment 3
$
172


$
174


(1.1
)
Revenue per shipment, ex fuel 3
$
145


$
148


(2.0
)








Network revenue from door-to-door shipments as a percentage of network revenue 3,4
44.3
%

38.3
%

15.7

Network gross margin 5
53.4
%

54.3
%

(1.7
)%






1 In thousands
2 Excludes accessorial, full Truckload and Final Mile products
3 Includes intercompany revenue between the Network and Truckload revenue streams
4 Door-to-door shipments include all shipments with a pickup and/or delivery
5 Network revenue less Network purchased transportation as a percentage of Network revenue


5

Intermodal Segment Information
(In millions)
(Unaudited)













Three months ended

March 31,

Percent of

March 31,

Percent of



Percent
 
2020 1

Revenue

2019

Revenue

Change

Change
Operating revenue
$
52.4


100.0
%

$
54.1


100.0
%

$
(1.7
)

(3.1
)%












Operating expenses:











Purchased transportation
18.2


34.7


18.4


34.0


(0.2
)

(1.1
)
Salaries, wages and employee benefits
12.9


24.6


12.7


23.5


0.2


1.6

Operating leases
4.4


8.4


3.8


7.0


0.6


15.8

Depreciation and amortization
2.6


5.0


1.9


3.5


0.7


36.8

Insurance and claims
2.0


3.8


1.4


2.6


0.6


42.9

Fuel expense
1.9


3.6


1.6


3.0


0.3


18.8

Other operating expenses
6.7


12.8


8.1


15.0


(1.4
)

(17.3
)
Total operating expenses
48.7


92.9


47.9


88.5


0.8


1.7

Income from operations
$
3.7


7.1
%

$
6.2


11.5
%

$
(2.5
)

(40.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
1 Includes revenues and operating expenses from the acquisition of OST, which was acquired in July 2019 (and is not included in the prior period)


Intermodal Operating Statistics



Three months ended

March 31,

March 31,

Percent

2020

2019

Change






Drayage shipments
82,474


75,607


9.1
%
Drayage revenue per shipment
$
636


$
625


1.8

Number of locations
24


21


14.3
%


6

Pool Distribution Segment Information
(In millions)
(Unaudited)













Three months ended

March 31,

Percent of

March 31,

Percent of



Percent
 
2020

Revenue

2019

Revenue

Change

Change
Operating revenue
$
39.4


100.0
 %

$
45.2


100.0
%

$
(5.8
)

(12.8
)%












Operating expenses:











Purchased transportation
11.3


28.7


13.4


29.6


(2.1
)

(15.7
)
Salaries, wages and employee benefits
17.3


43.9


16.7


36.9


0.6


3.6

Operating leases
5.7


14.5


4.3


9.5


1.4


32.6

Depreciation and amortization
1.4


3.6


1.6


3.5


(0.2
)

(12.5
)
Insurance and claims
1.4


3.6


1.2


2.7


0.2


16.7

Fuel expense
1.3


3.3


1.5


3.3


(0.2
)

(13.3
)
Other operating expenses
4.6


11.7


5.2


11.5


(0.6
)

(11.5
)
Total operating expenses
43.0


109.1


43.9


97.1


(0.9
)

(2.1
)
Income from operations
$
(3.6
)

(9.1
)%

$
1.3


2.9
%

$
(4.9
)

(376.9
)%


Pool Distribution Operating Statistics
 
 
 
Three months ended
 
March 31,
 
March 31,
 
Percent
 
2020
 
2019
 
Change
 
 
 
 
 
 
Cartons ¹
18,701

 
22,316

 
(16.2
)%
Revenue per carton
$
2.11

 
$
2.02

 
4.5

Terminals
30

 
28

 
7.1
 %
 
 
 
 
 
 
¹ In thousands
 
 
 
 
 


7

Forward Air Corporation
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
March 31,
2020
 
December 31, 2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
77,245

 
$
64,749

Accounts receivable, net
143,234

 
150,197

Other current assets
20,710

 
21,372

Total current assets
241,189

 
236,318

 
 
 
 
Property and equipment
426,375

 
426,737

Less accumulated depreciation and amortization
216,621

 
213,706

Total property and equipment, net
209,754

 
213,031

Operating lease right-of-use assets
171,242

 
151,657

Goodwill and other acquired intangibles:
 

 
 

Goodwill
242,639

 
221,105

Other acquired intangibles, net of accumulated amortization
158,135

 
127,798

Total goodwill and other acquired intangibles, net
400,774

 
348,903

Other assets
43,277

 
40,969

Total assets
$
1,066,236

 
$
990,878

 
 
 
 
Liabilities and Shareholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
26,565

 
$
29,986

Accrued expenses
52,168

 
49,822

Other current liabilities
5,661

 
5,320

Current portion of debt and finance lease obligations
1,433

 
1,421

Current portion of operating lease obligations
57,501

 
50,615

Total current liabilities
143,328

 
137,164

 
 
 
 
Debt and finance lease obligations, less current portion
136,900

 
72,249

Operating lease obligations, less current portion
114,380

 
101,525

Other long-term liabilities
60,299

 
58,816

Deferred income taxes
45,488

 
43,942

 
 

 
 

Shareholders’ equity:
 

 
 

Common stock
277

 
279

Additional paid-in capital
230,135

 
226,869

Retained earnings
335,429

 
350,034

Total shareholders’ equity
565,841

 
577,182

Total liabilities and shareholders’ equity
$
1,066,236

 
$
990,878



8

Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
 
Three months ended

March 31, 2020
 
March 31, 2019
Operating activities:

 

Net income
$
8,375

 
$
18,407

Adjustments to reconcile net income to net cash provided by operating activities
 
 


Depreciation and amortization
10,629

 
10,827

Change in fair value of earn-out liability
(594
)
 
—

Share-based compensation
3,266

 
3,047

Gain on disposal of property and equipment
(38
)
 
(61
)
(Recovery of) provision for loss on receivables
(180
)
 
629

Provision for revenue adjustments
1,041

 
540

Deferred income tax
1,545

 
836

Changes in operating assets and liabilities


 


Accounts receivable
6,102

 
4,567

Prepaid expenses and other current assets
907

 
2,699

Income taxes
1,519

 
4,631

Accounts payable and accrued expenses
(3,406
)
 
(4,596
)
Net cash provided by operating activities
29,166

 
41,526




 


Investing activities:


 


Proceeds from disposal of property and equipment
750

 
407

Purchases of property and equipment
(3,172
)
 
(4,090
)
Acquisition of business, net of cash acquired
(55,931
)
 
—

Other
—

 
(6
)
Net cash used in investing activities
(58,353
)
 
(3,689
)



 


Financing activities:


 


Payments of finance lease obligations
(336
)
 
(68
)
Proceeds from senior credit facility
65,000

 
—

Proceeds from exercise of stock options
—

 
830

Payments of cash dividends
(5,050
)
 
(5,189
)
Repurchase of common stock (repurchase program)
(15,259
)
 
(14,181
)
Cash settlement of share-based awards for tax withholdings
(2,672
)
 
(2,721
)
Net cash provided by (used in) financing activities
41,683

 
(21,329
)
Net increase in cash
12,496

 
16,508

Cash at beginning of period
64,749

 
25,657

Cash at end of period
$
77,245

 
$
42,165



9

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 2020 and 2019 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 on a consolidated basis: earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the three months ended March 31, 2020 and 2019; and free cash flow for the three months ended March 31, 2020 and 2019. The Company believes that including these items will assist investors in understanding its core operating performance and allow for more accurate comparisons of results, as they eliminate the impact of investing activities.

The Company believes that EBITDA improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables. The Company believes that excluding the increased vehicle reserve is useful to investors because it provides a view of the Company's operating income excluding the effects of a significant non-operation cost. The Company believes that free cash flow is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance stockholder value.

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. 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 the Company's presented non-GAAP financial measures to the most directly comparable GAAP financial measures.

Forward Air Corporation
Reconciliation to U.S. GAAP
(In thousands)
(Unaudited)





Three months ended

March 31,
2020

March 31,
2019
Net income
$
8,375


$
18,407

Interest expense
853


575

Income tax expense
2,474


5,751

Depreciation and amortization
10,629


10,827

EBITDA
$
22,331


$
35,560










Three months ended

March 31,
2020

March 31,
2019
Net cash provided by operating activities
$
29,166


$
41,526

Proceeds from disposal of property and equipment
750


407

Purchases of property and equipment
(3,172
)

(4,090
)
Free cash flow
$
26,744


$
37,843


10

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
March 31, 2020
Net income
$
8,375

Income allocated to participating securities
(67
)
Numerator for diluted income per share - net income
$
8,308

 
 
Fully diluted share count
27,948

Diluted earnings per share
$
0.30

 
 
 
 
Projected
Full year 2020
Projected tax rate
26.5
%
 
 
Projected capital expenditures, net
$
26,000

 
 
Projected
December 31, 2020
Projected year-end fully diluted share count
28,000

 
 


11

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 expected impact of COVID-19 on revenue for each of our segments, timing of re-opening of the economy and loosening of stay-at-home orders, expected earnings/losses and free cash flow for the second quarter and full year 2020, full year 2020 projected tax rate, share count, capital expenditures and the declaration of dividends.

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: prolonged impact of COVID-19 and actions taken to mitigate those impacts, 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, more limited liquidity than expected which limits our ability to make key investments, 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, 2019.

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.

SOURCE: Forward Air Corporation

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


12