Forward Air Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Shareholder's Equity, Stock Options and Net Income per Share (Notes)

Shareholder's Equity, Stock Options and Net Income per Share (Notes)

12 Months Ended

Dec. 31, 2018

Shareholders’ Equity, Stock Options and Net Income per Share [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Shareholders' Equity, Stock Options and Net Income per Share

Preferred Stock

There are 5,000,000 shares of preferred stock with a par value of $0.01 authorized, but no shares have been issued to date.

Cash Dividends

During the fourth quarter of 2018, the Company’s Board of Directors declared a cash dividend of $0.18 per share of Common Stock. During the first, second and third quarters of 2018, each quarter of 2017 and the fourth quarter of 2016, the Company's Board of Directors declared a cash dividend of $0.15 per share of Common Stock. During the first, second and third quarters of 2016, the Company's Board of Directors declared a cash dividend of $0.12 per share of Common Stock. On February 5, 2019, the Company’s Board of Directors declared a $0.18 per share dividend that will be paid in the first quarter of 2019. The Company expects to continue to pay regular quarterly cash dividends, though each subsequent quarterly dividend is subject to review and approval by the Board of Directors.

Repurchase of Common Stock

On July 21, 2016, our Board of Directors approved a stock repurchase plan that authorized the repurchase of up to 3,000,000 shares of the Company's Common Stock. Under the 2016 repurchase plan, during the year ended December 31, 2018, we repurchased 1,109,270 shares of Common Stock for $66,126, or $59.61 per share. As of December 31, 2018, 709,395 shares remain that may be repurchased.

On February 5, 2019, our Board of Directors canceled the Company’s remaining 2016 share repurchase authorization and approved a stock repurchase authorization for up to 5,000,000 shares of the Company’s common stock. The amount and timing of any repurchases under the Company’s new repurchase authorization will be at such prices as determined by management of the Company. Repurchases of common stock may also be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. Stock repurchases may be commenced or suspended from time to time for any reason.

Share-Based Compensation

In May 2016, with the approval of shareholders, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) to reserve for issuance 2,000,000 common shares. Options issued under these plans have seven year terms and vest over a two to three-year period. With the adoption of the Omnibus Plan, no further awards will be issued under the 1999 Amended Plan. As of December 31, 2018, there were approximately 1,266,219 shares remaining available for grant under the Omnibus Plan.

Employee Activity - Options

The following table summarizes the Company’s employee stock options outstanding as of December 31, 2018:



						Outstanding			Exercisable
					Weighted-	Weighted-			Weighted-
Range of				Number	Average	Average		Number	Average
Exercise				Outstanding	Remaining	Exercise		Exercisable	Exercise
Price				(000)	Contractual Life	Price		(000)	Price
$	36.90	-	37.14	36	1.0	$	37.11	36	$	37.11
41.32		-	44.90	135	3.5	43.39		101	43.33
45.34		-	48.32	116	5.0	47.76		42	47.61
50.71		-	53.73	53	3.4	51.13		49	50.95
57.18		-	60.42	98	6.1	58.78		2	57.18
64.26		-	64.26	100	6.7	64.26		—	—
$	36.90	-	64.26	538	4.7	$	51.37	230	$	44.89

The following tables summarize the Company’s employee stock option activity and related information for the years ended December 31, 2018, 2017 and 2016:



	Year ended
	December 31, 2018					December 31, 2017					December 31, 2016
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Options			Exercise		Options			Exercise		Options			Exercise
	(000)			Price		(000)			Price		(000)			Price
Outstanding at beginning of year	440			$	45	564			$	41	786			$	32
Granted	193			62		128			48		137			44
Exercised	(95		)	41		(206		)	35		(346		)	24
Forfeited	—			—		(46		)	46		(13		)	35
Outstanding at end of year	538			$	51	440			$	45	564			$	41
Exercisable at end of year	230			$	45	226			$	42	331			$	37
Weighted-average fair value of options granted during the year	$	16				$	13				$	12
Aggregate intrinsic value for options exercised	$	1,992				$	3,569				$	7,803
Average aggregate intrinsic value for options outstanding	$	4,550
Average aggregate intrinsic value for exercisable options	$	3,439



	Year ended
	December 31, 2018		December 31, 2017		December 31, 2016
Shared-based compensation for options	$	1,578	$	1,313	$	1,473
Tax benefit for option compensation	$	398	$	466	$	546
Unrecognized compensation cost for options	$	3,128
Weighted average period over which unrecognized compensation will be recognized (years)	2.2

Employee Activity – Non-vested shares

Non-vested share grants to employees vest ratably over a three-year period. The following tables summarize the Company's employee non-vested share activity and related information:



	Year ended
	December 31, 2018					December 31, 2017					December 31, 2016
				Weighted-					Weighted-					Weighted-
	Non-vested			Average		Non-vested			Average		Non-vested			Average
	Shares			Grant Date		Shares			Grant Date		Shares			Grant Date
	(000)			Fair Value		(000)			Fair Value		(000)			Fair Value

Outstanding and non-vested at beginning of year	227			$	47	222			$	45	191			$	46
Granted	202			60		126			48		134			44
Vested	(107		)	56		(105		)	45		(94		)	44
Forfeited	(7		)	52		(16		)	47		(9		)	45
Outstanding and non-vested at end of year	315			$	55	227			$	47	222			$	45
Aggregate grant date fair value	$	17,295				$	10,618				$	10,108
Total fair value of shares vested during the year	$	6,040				$	5,040				$	4,064



	Year ended
	December 31, 2018		December 31, 2017		December 31, 2016
Shared-based compensation for non-vested shares	$	6,874	$	5,045	$	4,614
Tax benefit for non-vested share compensation	$	1,732	$	1,791	$	1,712
Unrecognized compensation cost for non-vested shares	$	11,003
Weighted average period over which unrecognized compensation will be recognized (years)	1.8

Employee Activity – Performance shares

In 2018, 2017 and 2016, the Company granted performance shares to key employees. Under the terms of the performance share agreements, on the third anniversary of the grant date, the Company will issue to the employees a calculated number of common stock shares based on the three year performance of the Company's total shareholder return as compared to the total shareholder return of a selected peer group. No shares may be issued if the Company total shareholder return outperforms 25% or less of the peer group, but the number of shares issued may be doubled if the Company total shareholder return performs better than 90% of the peer group.

The following tables summarize the Company's employee performance share activity, assuming median share awards, and related information:



	Year ended
	December 31, 2018					December 31, 2017					December 31, 2016
				Weighted-					Weighted-					Weighted-
	Non-vested			Average		Non-vested			Average		Non-vested			Average
	Shares			Grant Date		Shares			Grant Date		Shares			Grant Date
	(000)			Fair Value		(000)			Fair Value		(000)			Fair Value

Outstanding and non-vested at beginning of year	69			$	58	80			$	55	77			$	52
Granted	18			72		27			56		29			49
Additional shares awarded based on performance	—			—		—			—		7			40
Vested	—			—		—			—		(33		)	40
Forfeited	(22		)	67		(38		)	51		—			—
Outstanding and non-vested at end of year	65			$	58	69			$	58	80			$	55
Aggregate grant date fair value	$	3,795				$	3,980				$	4,373



	Year ended
	December 31, 2018		December 31, 2017		December 31, 2016
Shared-based compensation for performance shares	$	1,263	$	1,045	$	1,447
Tax benefit for performance share compensation	$	318	$	371	$	537
Unrecognized compensation cost for performance shares	$	1,415
Weighted average period over which unrecognized compensation will be recognized (years)	1.7

Employee Activity – Employee Stock Purchase Plan

Under the ESPP, at December 31, 2018, the Company is authorized to issue up to a remaining 362,404 shares of Common Stock to employees of the Company. For the years ended December 31, 2018, 2017 and 2016, participants under the ESPP purchased 9,455, 9,954, and 11,174 shares, respectively, at an average price of $50.63, $46.01, and $39.50 per share, respectively. The weighted-average fair value of each purchase right under the ESPP granted for the years ended December 31, 2018, 2017 and 2016, which is equal to the discount from the market value of the Common Stock at the end of each six month purchase period, was $6.26, $9.26, and $6.46 per share, respectively. Share-based compensation expense of $59, $92, and $72 was recognized in salaries, wages and employee benefits, during the years ended December 31, 2018, 2017 and 2016, respectively.

Non-employee Directors – Non-vested shares

In May 2006, the Company’s shareholders approved the Company’s 2006 Non-Employee Director Stock Plan (the “2006 Plan”). The Company’s shareholders then approved the Company’s Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”) on May 22, 2007. The Amended Plan was then further amended and restated on December 17, 2008. Under the Amended Plan, on the first business day after each Annual Meeting of Shareholders, each non-employee director will automatically be granted an award (the “Annual Grant”), in such form and size as the Board determines from year to year. Unless otherwise determined by the Board, Annual Grants will become vested and nonforfeitable on the earlier of (a) the day immediately prior to the first Annual Meeting that occurs after the Grant Date or (b) the first anniversary of the Grant Date so long as the non-employee director’s service with the Company does not earlier terminate. Each director may elect to defer receipt of the shares under a non-vested share award until the director terminates service on the Board of Directors. If a director elects to defer receipt, the Company will issue deferred stock units to the director, which do not represent actual ownership in shares and the director will not have voting rights or other incidents of ownership until the shares are issued. However, the Company will credit the director with dividend equivalent payments in the form of additional deferred stock units for each cash dividend payment made by the Company.

In May 2016, with the approval of shareholders, the Company further amended the Amended Plan to reserve for issuance an additional 160,000 common shares, increasing the total number of reserved common shares under the Amended Plan to 360,000. As of December 31, 2018, there were approximately 132,313 shares remaining available for grant.

The following tables summarize the Company's non-employee non-vested share activity and related information:



	Year ended
	December 31, 2018					December 31, 2017					December 31, 2016
	Non-vested					Non-vested					Non-vested
	Shares and			Weighted-		Shares and			Weighted-		Shares and			Weighted-
	Deferred			Average		Deferred			Average		Deferred			Average
	Stock Units			Grant Date		Stock Units			Grant Date		Stock Units			Grant Date
	(000)			Fair Value		(000)			Fair Value		(000)			Fair Value

Outstanding and non-vested at beginning of year	11			$	52	16			$	44	15			$	51
Granted	16			59		14			52		16			44
Vested	(12		)	52		(16		)	44		(15		)	51
Forfeited	—			—		(3		)	49		—			—
Outstanding and non-vested at end of year	15			$	59	11			$	52	16			$	44
Aggregate grant date fair value	$	920				$	742				$	688
Total fair value of shares vested during the year	$	615				$	809				$	639



	Year ended
	December 31, 2018		December 31, 2017		December 31, 2016
Shared-based compensation for non-vested shares	$	775	$	608	$	728
Tax benefit for non-vested share compensation	$	195	$	216	$	263
Unrecognized compensation cost for non-vested shares	$	360
Weighted average period over which unrecognized compensation will be recognized (years)	0.4

Net Income per Share

The following table sets forth the computation of net income per basic and diluted share:



	2018			2017			2016
				(As Adjusted)			(As Adjusted)
Numerator:
Net income and comprehensive income	$	92,051		$	87,255		$	27,505
Income allocated to participating securities	(881		)	(700		)	(210		)
Numerator for basic and diluted income per share - net income	91,170			86,555			27,295

Denominator:
Denominator for basic net income per share - weighted-average shares (in thousands)	29,076			29,867			30,283
Effect of dilutive stock options (in thousands)	80			64			130
Effect of dilutive performance shares (in thousands)	34			33			31
Denominator for diluted net income per share - adjusted weighted-average shares (in thousands)	29,190			29,964			30,444
Basic net income per share	$	3.14		$	2.90		$	0.90
Diluted net income per share	$	3.12		$	2.89		$	0.90

The number of instruments that could potentially dilute net income per basic share in the future, but that were not included in the computation of net income per diluted share because to do so would have been anti-dilutive for the periods presented, are as follows:



	2018	2017	2016
Anti-dilutive stock options (in thousands)	126	172	310
Anti-dilutive performance shares (in thousands)	16	—	—
Anti-dilutive non-vested shares and deferred stock units (in thousands)	9	—	—
Total anti-dilutive shares (in thousands)	151	172	310