fwrd-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-22490

FORWARD AIR CORPORATION

(Exact name of registrant as specified in its charter)

Tennessee

62-1120025

(State or other jurisdiction of incorporation)

(I.R.S. Employer Identification No.)

1915 Snapps Ferry Road

Building N

Greeneville

37745

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (423) 636-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

FWRD

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of November 3, 2022 was 26,589,697.


Table of Contents
Forward Air Corporation

		Page
		Number
	Part I: Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Comprehensive Income - Three Months Ended September 30, 2022 and 2021	4

	Condensed Consolidated Statements of Comprehensive Income - Nine Months Ended September 30, 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021	6

	Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended September 30, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements – September 30, 2022	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52

Item 4.	Controls and Procedures	52

	Part II: Other Information

Item 1.	Legal Proceedings	52

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3.	Defaults Upon Senior Securities	53

Item 4.	Mine Safety Disclosures	53

Item 5.	Other Information	53

Item 6.	Exhibits	54

Signatures		55

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Part I.			Financial Information

Item 1.			Financial Statements (Unaudited).


Forward Air Corporation
Condensed Consolidated Balance Sheets
(unaudited and in thousands, except share and per share amounts)

	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	46,846	$	37,316
Accounts receivable, less allowance of $3,477 in 2022 and $3,260 in 2021	247,730		208,085
Other receivables, less allowance of $235 in 2022 and $— in 2021	—		8,097
Other current assets	18,391		29,309

Total current assets	312,967		282,807

Property and equipment, net of accumulated depreciation and amortization of $214,039 in 2022 and $200,867 in 2021	230,924		219,095
Operating lease right-of-use assets	147,283		148,198

Goodwill	288,496		266,752
Other acquired intangibles, net of accumulated amortization of $119,453 in 2022 and $107,336 in 2021	155,161		154,717

Other assets	51,228		46,254

Total assets	$	1,186,059	$	1,117,823

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	50,666	$	44,837
Accrued expenses	67,980		61,621
Other current liabilities	4,411		4,614
Current portion of debt and finance lease obligations	7,891		6,088
Current portion of operating lease liabilities	48,611		47,532

Total current liabilities	179,559		164,692

Finance lease obligations, less current portion	11,134		9,571
Long-term debt, less current portion and debt issuance costs	106,934		155,466
Operating lease liabilities, less current portion	102,889		101,409
Other long-term liabilities	57,476		49,624
Deferred income taxes	45,369		43,407


Shareholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2022 and 2021	—		—
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 26,589,697 in 2022 and 26,968,788 in 2021	266		270
Additional paid-in capital	267,809		258,474
Retained earnings	414,623		334,910
Total shareholders’ equity	682,698		593,654
Total liabilities and shareholders’ equity	$	1,186,059	$	1,117,823

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited and in thousands, except per share amounts)

	Three Months Ended
	September 30, 2022		September 30, 2021
Operating revenues	$	510,023	$	419,625

Operating expenses:
Purchased transportation	229,326		205,474
Salaries, wages and employee benefits	90,755		84,410
Operating leases	24,965		20,536
Depreciation and amortization	12,269		9,416
Insurance and claims	12,093		9,984
Fuel expense	6,772		4,457
Other operating expenses	62,178		42,872

Total operating expenses	438,358		377,149
Income from continuing operations	71,665		42,476

Other expense:
Interest expense	(1,544)		(973)

Total other expense	(1,544)		(973)
Income before income taxes	70,121		41,503
Income tax expense	17,988		11,000
Net income from continuing operations	52,133		30,503
Loss from discontinued operation, net of tax	—		(6,967)
Net income and comprehensive income	$	52,133	$	23,536

Basic net income (loss) per share
Continuing operations	$	1.94	$	1.12
Discontinued operation	—		(0.26)
Net income per basic share	$	1.94	$	0.86

Diluted net income (loss) per share
Continuing operations	$	1.93	$	1.12
Discontinued operation	—		(0.26)
Net income per diluted share	$	1.93	$	0.86

Dividends per share	$	0.24	$	0.21

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited and in thousands, except per share amounts)

	Nine Months Ended
	September 30, 2022		September 30, 2021
Operating revenues	$	1,492,203	$	1,202,498

Operating expenses:
Purchased transportation	693,648		605,299
Salaries, wages and employee benefits	263,194		243,948
Operating leases	71,097		60,073
Depreciation and amortization	34,994		28,067
Insurance and claims	37,257		30,616
Fuel expense	20,951		12,218
Other operating expenses	166,501		114,953

Total operating expenses	1,287,642		1,095,174
Income from continuing operations	204,561		107,324

Other expense:
Interest expense	(3,521)		(3,461)

Total other expense	(3,521)		(3,461)
Income before income taxes	201,040		103,863
Income tax expense	50,791		25,969
Net income from continuing operations	150,249		77,894
Loss from discontinued operation, net of tax	—		(12,500)
Net income and comprehensive income	$	150,249	$	65,394

Basic net income (loss) per share
Continuing operations	$	5.56	$	2.84
Discontinued operation	—		(0.46)
Net income per basic share1	$	5.56	$	2.39

Diluted net income (loss) per share
Continuing operations	$	5.53	$	2.83
Discontinued operation	—		(0.46)
Net income per diluted share	$	5.53	$	2.37

Dividends per share	$	0.72	$	0.63

1 Rounding may impact summation of amounts.

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited and in thousands)

	Nine Months Ended
	September 30, 2022		September 30, 2021

Operating activities:
Net income from continuing operations	$	150,249	$	77,894
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization	34,994		28,067

Change in fair value of earn-out liability	(294)		(385)
Share-based compensation expense	8,743		8,179
Provision for revenue adjustments	7,302		5,504
Deferred income tax expense (benefit)	1,962		(1,384)
Other	417		406
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	(43,172)		(49,086)
Other receivables	8,097		(14,218)
Other current and noncurrent assets	6,743		8,198
Accounts payable, accrued expenses and other long-term liabilities	21,773		19,577
Net cash provided by operating activities of continuing operations	196,814		82,752

Investing activities:
Proceeds from sale of property and equipment	1,423		2,339
Purchases of property and equipment	(25,401)		(23,015)
Purchases of a business, net of cash acquired	(40,433)		(23,053)
Net cash used in investing activities of continuing operations	(64,411)		(43,729)

Financing activities:
Repayments of finance lease obligations	(4,209)		(1,445)
Proceeds from credit facility	—		45,000
Payments on credit facility	(48,625)		—
Payment of debt issuance costs	—		(119)
Payment of earn-out liability	(91)		(6,519)
Proceeds from issuance of common stock upon stock option exercises	206		3,563
Payments of dividends to shareholders	(19,461)		(17,270)
Repurchases and retirement of common stock	(47,774)		(48,989)
Proceeds from common stock issued under employee stock purchase plan	374		388
Payment of minimum tax withholdings on share-based awards	(3,293)		(3,074)
Contributions from subsidiary held for sale	—		1,118
Net cash used in financing activities from continuing operations	(122,873)		(27,347)
Net increase in cash and cash equivalents of continuing operations	9,530		11,676

Cash from discontinued operation:
Net cash used in operating activities of discontinued operation	—		(6,902)
Net cash provided by investing activities of discontinued operation	—		8,020
Net cash used in financing activities of discontinued operation	—		(1,118)
Net increase in cash and cash equivalents	9,530		11,676
Cash and cash equivalents at beginning of period of continuing operations	37,316		40,254
Cash at beginning of period of discontinued operation	—		—
Net increase in cash and cash equivalents	9,530		11,676
Less: cash at end of period of discontinued operation	—		—
Cash and cash equivalents at end of period of continuing operations	$	46,846	$	51,930

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Forward Air Corporation
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited and in thousands)

	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2021	26,969	$	270	$	258,474	$	334,910	$	593,654
Net income	—	—		—		42,686		42,686
Stock options exercised	3	—		206		—		206

Share-based compensation expense	—	—		2,761		—		2,761
Payment of dividends to shareholders	—	—		4		(6,506)		(6,502)
Payment of minimum tax withholdings on share-based awards	(30)	—		—		(3,254)		(3,254)
Repurchases and retirement of common stock	(176)	(2)		—		(17,778)		(17,780)
Issuance of share-based awards	96	1		(1)		—		—
Balance at March 31, 2022	26,862	$	269	$	261,444	$	350,058	$	611,771
Net income	—	—		—		55,430		55,430

Common stock issued under employee stock purchase plan	5	—		374		—		374
Share-based compensation expense	—	—		3,306		—		3,306
Payment of dividends to shareholders	—	—		5		(6,497)		(6,492)
Payment of minimum tax withholdings on share-based awards	(1)	—		—		(39)		(39)

Issuance of share-based awards	14	—		—		—		—
Balance at June 30, 2022	26,880	$	269	$	265,129	$	398,952	$	664,350
Net income	—	—		—		52,133		52,133


Share-based compensation expense	—	—		2,676		—		2,676
Payment of dividends to shareholders	—	—		4		(6,471)		(6,467)

Repurchases and retirement of common stock	(290)	(3)		—		(29,991)		(29,994)

Balance at September 30, 2022	26,590	$	266	$	267,809	$	414,623	$	682,698

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	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2020	27,316	$	273	$	242,916	$	304,140	$	547,329
Net income	—	—		—		11,181		11,181
Stock options exercised	40	—		2,147		—		2,147
Share-based compensation expense	—	—		2,613		—		2,613
Payment of dividends to shareholders	—	—		3		(5,800)		(5,797)
Payment of minimum tax withholdings on share-based awards	(35)	—		—		(2,744)		(2,744)
Repurchases and retirement of common stock	(114)	(1)		—		(9,997)		(9,998)
Issuance of share-based awards	111	1		(1)		—		—
Balance at March 31, 2021	27,318	$	273	$	247,678	$	296,780	$	544,731
Net income	—	—		—		30,677		30,677
Stock options exercised	26	—		1,416		—		1,416
Common stock issued under employee stock purchase plan	5	—		388		—		388
Share-based compensation expense	—	—		2,981		—		2,981
Payment of dividends to shareholders	—	—		3		(5,771)		(5,768)
Payment of minimum tax withholdings on share-based awards	(1)	—		—		(82)		(82)
Repurchases and retirement of common stock	(252)	(2)		—		(23,992)		(23,994)
Issuance of share-based awards	24	—		—		—		—
Balance at June 30, 2021	27,120	$	271	$	252,466	$	297,612	$	550,349
Net income	—	—		—		23,536		23,536


Share-based compensation expense	—	—		2,601		—		2,601
Payment of dividends to shareholders	—	—		4		(5,709)		(5,705)
Payment of minimum tax withholdings on share-based awards	(3)	—		—		(248)		(248)
Repurchases and retirement of common stock	(169)	(1)		—		(14,996)		(14,997)
Issuance of share-based awards	10	—		—		—		—
Balance at September 30, 2021	26,958	$	270	$	255,071	$	300,195	$	555,536

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

1. Description of Business and Basis of Presentation

Basis of Presentation and Principles of Consolidation

Forward Air Corporation and its subsidiaries (“Forward Air” or the “Company”) is a leading asset-light freight and logistics company. The Company has two reportable segments: Expedited Freight and Intermodal. The Company conducts business in the United States and Canada.

The Expedited Freight segment provides expedited regional, inter-regional and national less-than-truckload (“LTL”), truckload and final mile services. Expedited Freight also offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

The Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. Intermodal also offers dedicated contract and container freight station (“CFS”) warehouse and handling services.

The Company’s condensed consolidated financial statements include Forward Air Corporation and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Results for interim periods are not necessarily indicative of the results for the year.

On April 23, 2020, the Board of Directors (the “Board”) of the Company approved a strategy to divest the Pool Distribution business (“Pool”), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. As a result of the strategy to divest of Pool, the results of operations for Pool were presented as a discontinued operation in the Condensed Consolidated Statements of Comprehensive Income for the prior period. Unless otherwise noted, amounts, percentages and discussion for the prior period reflect the results of operations, financial condition and cash flows from the Company’s continuing operations. Refer to Note 3, Discontinued Operation, for further discussion.

2. Revenue Recognition

Revenue is recognized when the Company satisfies the performance obligation by the delivery of a shipment in accordance with contractual agreements, bills of lading (“BOLs”) and general tariff provisions. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those services pursuant to a contract with a customer. A contract exists once the Company enters into a contractual agreement with a customer. The Company does not recognize revenue in cases where collectibility is not probable, and defers recognition until collection is probable or payment is received.

The Company generates revenue from the delivery of a shipment and the completion of related services. Revenue for the delivery of a shipment is recorded over time to coincide with when customers simultaneously receive and consume the benefits of the delivery services. Accordingly, revenue billed to a customer for the transportation of freight are recognized over the transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a shipment based on the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of a reporting period. The determination of the transit period and how much of it has been completed as of a given reporting date may require the Company to make judgments that impact the timing of revenue recognized. For delivery of shipments with a pick-up date in one reporting period and a delivery date in another reporting period, the Company recognizes revenue based on relative transit

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Upon delivery of a shipment or related service, customers are billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage.

Revenue is classified based on the line of business as the Company believes that best depicts the nature, timing and amount of revenue and cash flows. For all lines of business, the Company records revenue on a gross basis as it is the principal in the transaction as the Company has discretion to determine the amount of consideration. Additionally, the Company has the discretion to select drivers and other vendors for the services provided to customers. These factors, discretion in the amount of consideration and the selection of drivers and other vendors, support revenue recognized on a gross basis.

3. Discontinued Operation

As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool and the sale was completed on February 12, 2021. As a result, the results of Pool were classified to “Loss from discontinued operation, net of tax” in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021. Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and were allocated to continuing operations. These costs were classified to the eliminations column in the segment reconciliation in Note 13, Segment Reporting.

Transition Services Agreement

On February 12, 2021, the Company entered into a Transition Services Agreement (“TSA”) with TOG FAS Holdings LLC, the buyer of the Pool business. Under the TSA, the Company performed certain services on an interim basis in order to facilitate the orderly transition of the Pool business. The effective date of the TSA was February 12, 2021 and remained in effect until the date all services were completed, but no more than six months following the effective date. The TSA provided the right to extend the term of the TSA with no limit on the number of the mutually agreed upon extensions. In exchange for the services performed by the Company under the TSA, the Company received a monthly service charge. For the three and nine months ended September 30, 2021, the Company recognized $229 and $641, respectively, in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income, for the services performed under the TSA. The TSA ended in October 2021 when all services were completed.

Additionally, under the TSA, the Company remitted payments to outside vendors on behalf of TOG FAS Holdings LLC for expenses incurred by the Pool business up to a limit of $18,000. The Company was reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment was remitted. As of September 30, 2022 and December 31, 2021, the Company recorded a net receivable in the amount of zero and $8,097 respectively, in “Other receivables” in the Condensed Consolidated Balance Sheets for the reimbursement due to the Company. The Company evaluates the collectability of the receivable at least quarterly and if the Company is aware of the inability of TOG FAS Holdings LLC to meet its financial obligations to the Company, the Company will record a specific reserve in order to reduce the receivable to the amount the Company reasonably believes will be collected. As of September 30, 2022, the Company recorded a specific reserve in the amount of $235 in order to reduce the receivable to an amount the Company reasonably believes will be collected.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

Summarized Discontinued Operation Financial Information

A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 is as follows:








	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Operating revenue	$	—	$	17,087

Operating expenses:
Purchased transportation	—		4,290
Salaries, wages and employee benefits	—		9,674
Operating leases	—		2,907
Depreciation and amortization	—		—
Insurance and claims	—		929
Fuel expense	—		644
Other operating expenses	—		2,087
Impairment charge	6,967		6,967
Total operating expenses	6,967		27,498
Loss from discontinued operation	(6,967)		(10,411)
Loss on sale of business	—		(2,860)
Loss from discontinued operation before income taxes	(6,967)		(13,271)
Income tax benefit	—		(771)
Loss from discontinued operation, net of tax	$	(6,967)	$	(12,500)

4. Acquisitions

Intermodal Acquisitions

In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport”) for $16,339 and a potential earn-out of up to $2,000.

The purchase agreement for Proficient Transport included an earn-out up to $2,000 based on the achievement of certain revenue milestones over a one-year period, beginning March 1, 2021. The estimated fair value of the earn-out liability on the date of acquisition was $829. The fair value was based on the estimated one-year performance of the acquired customer revenue and was calculated using the option pricing method.

The fair value of the earn-out liability was adjusted at each reporting period based on changes in the expected cash flows and related assumptions used in the option pricing method. During the three and nine months ended September 30, 2022, the fair value of the earn-out changed by zero and ($294) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. During the three and nine months ended September 30, 2021, the fair value of the earn-out changed by zero and ($333) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. The one-year period ended in the first quarter of 2022 and the Company paid $91 in the second quarter of 2022 based on the terms of the purchase agreement. As of December 31, 2021, the fair value of the earn-out liability was $385, which was reflected in “Other current liabilities” in the Condensed Consolidated Balance Sheets.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

In November 2021, the Company acquired certain assets and liabilities of BarOle Trucking, Inc. (“BarOle”) for $35,436. BarOle is an intermodal drayage company headquartered in Roseville, Minnesota. The acquisition of BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area. In addition, BarOle has a larger terminal location, which allows for further expansion in the future. The acquisition was financed by cash flows from operations. The results of BarOle have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.

In May 2022, the Company acquired certain assets and liabilities of Edgmon Trucking, LLC (“Edgmon”) for $40,433 and a potential earn-out of up to $5,000, based on the achievement of certain profit contribution milestones over a nineteen month period, beginning May 30, 2022. Edgmon, headquartered in Kent, Washington, operates a terminal in Kent and a yard in Seattle, servicing both the Port of Seattle and the Port of Tacoma. The acquisition of Edgmon marks the Company’s first Intermodal location on the West Coast, a key area of expansion in the Intermodal strategic growth plan. The acquisition was financed by cash flows from operations. The results of Edgmon have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.

Fair Value of Assets Acquired and Liabilities Assumed

Assets acquired and liabilities assumed as of the acquisition date are presented in the following table:


	BarOle		Edgmon
	November 30, 2021		May 30, 2022
Tangible assets:

Accounts receivable	$	2,481	$	4,831


Property and equipment	6,464		613


Total tangible assets	8,945		5,444
Intangible assets:
Customer relationships	11,120		17,950
Non-compete agreements	221		465
Goodwill	15,418		17,003
Total intangible assets	26,759		35,418
Total assets acquired	35,704		40,862

Liabilities assumed:
Current liabilities	268		429



Total liabilities assumed	268		429
Net assets acquired	$	35,436	$	40,433

The preliminary purchase price for BarOle and Edgmon has been allocated to assets acquired and liabilities assumed based on the Company’s best estimates and assumptions using the information available as of the acquisition date through the date of this filing. The provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to these acquisitions, are subject to adjustments in subsequent periods as the Company finalizes its purchase price allocations, including the third-party valuations. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments to the provisional amounts initially recorded for acquired property and equipment and acquired customer relationships and non-compete agreements related to the BarOle acquisition. The measurement period adjustments resulted in a $1,113 increase to acquired property and equipment and a combined $5,854 decrease to acquired customer relationships and non-compete agreements, with a corresponding net increase to goodwill. The Company expects to finalize the valuations as soon as practicable, but no later than one year from the respective acquisition dates.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

The estimated useful lives of acquired intangible assets as of the acquisition date are summarized in the following table:

Estimated Useful Lives

BarOle

Edgmon

Customer relationships

8 years

7 years

Non-compete agreements

5 years

5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the nine months ended September 30, 2022 are summarized as follows:


	Expedited Freight		Intermodal		Consolidated




Balance as of December 31, 2021	$	169,288	$	97,464	$	266,752
Acquisition	—		17,003		17,003
Acquisition adjustment	—		4,741		4,741
Balance as of September 30, 2022	$	169,288	$	119,208	$	288,496

The Company’s accumulated goodwill impairment is $25,686 related to impairment charges the Company recorded during 2016 pertaining to its Truckload Services reporting unit. The Truckload Services reporting unit operates within the Expedited Freight reportable segment. As of September 30, 2022, approximately $209,353 of goodwill is deductible for tax purposes.

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of June 30 each year. There have been no indicators of impairment during the three months ended September 30, 2022.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2022 are summarized as follows:


	Gross Carrying Amount
	Customer Relationships1		Non-Compete Agreements		Trade Names		Total
Balance as of December 31, 2021	$	251,377	$	9,176	$	1,500	$	262,053
Acquisition	17,950		465		—		18,415
Acquisition adjustment	(5,162)		(692)		—		(5,854)
Balance as of September 30, 2022	$	264,165	$	8,949	$	1,500	$	274,614


	Accumulated Amortization
	Customer Relationships1		Non-Compete Agreements		Trade Names		Total
Balance as of December 31, 2021	$	99,093	$	6,743	$	1,500	$	107,336
Amortization expense	11,507		610		—		12,117
Balance as of September 30, 2022	$	110,600	$	7,353	$	1,500	$	119,453

1 Carrying value as of September 30, 2022 and December 31, 2021 is inclusive of $16,501 of accumulated impairment.

6. Stock Incentive Plans

Stock Incentive Plan

The Company recorded share-based compensation expense as follows for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Salaries, wages and employee benefits - continuing operations	$	2,355	$	2,283	$	7,661	$	7,015
Salaries, wages and employee benefits - discontinued operation	—		—		—		16
Total share-based compensation expense	$	2,355	$	2,283	$	7,661	$	7,031

In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 common shares to employees. As of September 30, 2022, approximately 693 shares remain available for grant under the Omnibus Plan.

Stock Options

Certain executives are eligible to receive grants of stock options. Stock options vest over a three-year period from the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. The Company estimates the fair value of the grants using the Black-Scholes option-pricing model.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

Stock option transactions during the nine months ended September 30, 2022 on a continuing operations basis were as follows:


	Stock Options	Weighted-Average Exercise Price
Outstanding as of January 1	342	$	58.44
Granted	64	106.13
Exercised	(3)	60.42
Forfeited	(6)	106.29
Outstanding as of September 30	397	$	65.32

As of September 30, 2022, the total share-based compensation expense related to unvested stock options not yet recognized was $1,687, and the weighted-average period over which it is expected to be recognized is approximately two years.

Restricted Shares

The Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive shares of the Company’s common stock subject to vesting requirements based on continued employment. Shares granted under the restricted share award plan are restricted from sale or transfer until vesting, and the restrictions lapse in three equal installments beginning one year after the date of grant. Dividends are paid in cash on a current basis throughout the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period.

Restricted share transactions during the nine months ended September 30, 2022 on a continuing operations basis were as follows:


	Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	191	$	69.84
Granted	80	105.66
Vested	(91)	67.36
Forfeited	(25)	84.20
Outstanding as of September 30	155	$	87.42

As of September 30, 2022, the total share-based compensation expense related to restricted shares not yet recognized was $9,402, and the weighted-average period over which it is expected to be recognized is approximately two years.

Performance Awards

Performance awards are based on achieving certain financial targets, such as targets for earnings before interest, taxes, depreciation and amortization, and the Company’s total shareholder return as compared to the total shareholder return of a selected peer group, as determined by the Board. Performance targets are set at the beginning of each three-year measurement period. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, the compensation expense is determined based on the projected assessment of the level of performance that will be achieved. The Company estimates the fair value of the grants with a financial target based on the Company’s total shareholder return using a Monte Carlo simulation model.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

Performance award transactions during the nine months ended September 30, 2022 on a continuing operations basis were as follows assuming target levels of performance:


	Performance Awards	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	79	$	75.61
Granted	14	127.29

Earned	(7)	63.40
Forfeited or unearned	(16)	74.79
Outstanding as of September 30	70	$	87.74

As of September 30, 2022, the total share-based compensation expense related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was $3,448, and the weighted-average period over which it is expected to be recognized is approximately two years.

Employee Stock Purchase Plan

Under the 2005 Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to a remaining 318 shares of common stock to employees. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six-month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions.

Employee stock purchase plan activity and related information was as follows on a continuing operations basis:


	Nine Months Ended
	September 30, 2022		September 30, 2021
Shares purchased by participants under the ESPP	5		5
Average purchase price	$	82.76	$	68.76
Weighted-average fair value of each purchase right under the ESPP granted¹	$	9.20	$	20.99
Share-based compensation expense for ESPP	$	42	$	118

¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period.

Director Restricted Shares

Under the Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”), approved in May 2007 and further amended in February 2013 and January 2016, up to 360 of common shares may be issued. As of September 30, 2022, approximately 60 shares remain available for grant under the Amended Plan. Under the Amended Plan, each non-employee director receives an annual grant of restricted shares of the Company’s common stock. The restricted shares vest on the either of (a) the day immediately prior to the first annual shareholder meeting that occurs after the grant date or (b) one year after the grant date.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

Director restricted share transactions during the nine months ended September 30, 2022 were as follows:


	Director Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	15	$	93.46
Granted	15	93.70
Vested	(15)	93.46
Forfeited	—	—
Outstanding as of September 30	15	$	93.70

For the three and nine months ended September 30, 2022, the Company recorded $321 and $1,040, respectively, of share-based compensation expense associated with these grants. For the three and nine months ended September 30, 2021, the Company recorded $318 and $1,046, respectively, of share-based compensation expense associated with these grants. As of September 30, 2022, the total share-based compensation expense related to the restricted shares not yet recognized was $841, and the weighted-average period over which it is expected to be recognized is approximately less than