Annual report pursuant to Section 13 and 15(d)

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

v3.20.4
Shareholder's Equity, Stock Incentive Plan and Net Income per Share (Notes)
 12 Months Ended
Dec. 31, 2020
Shareholders’ Equity, Stock Options and Net Income per Share [Abstract]  
Shareholders' Equity, Stock Incentive Plan and Net Income per Share Shareholders’ Equity, Stock Incentive Plan and Net Income per Share
 
Preferred Stock

There are 5,000 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 2020, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.21 per common share. During the first, second and third quarters of 2020, each quarter of 2019 and the
fourth quarter of 2018, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.18 per common share. During the first, second and third quarters of 2018, the Company's Board of Directors declared and the Company has paid a quarterly cash dividend of $0.15 per common share.

On February 2, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per common share that will be paid in the first quarter of 2021.

Share Repurchase Program
    
On July 21, 2016, the Company’s Board of Directors approved a stock repurchase program for up to 3,000 shares of the Company’s common stock (the “2016 Repurchase Plan”). On February 5, 2019, the Board of Directors canceled the Company’s 2016 Repurchase Plan and approved a revised stock repurchase plan authorizing up to 5,000 shares of the Company’s common stock (the “2019 Repurchase Plan”). The 2019 Repurchase Plan expires when the shares authorized for repurchase are exhausted or the 2019 Repurchase Plan is canceled.

During the year ended December 31, 2020, the Company repurchased through open market transactions 787 shares of common stock for $45,248, or $57.53 per share, and during the year ended December 31, 2019, the Company repurchased through open market transactions 913 shares of common stock for $56,204, or $61.59 per share. All shares received were retired upon receipt, and the excess of the purchase price over the par value per share was recorded to "Retained Earnings" in the Consolidated Balance Sheets.

As of December 31, 2020, the remaining shares to be repurchased under the 2019 Repurchase Plan were approximately 3,368 shares.

Stock Incentive Plan

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. As of December 31, 2020, approximately 965 shares remain available for grant under the Omnibus Plan.

Employee Activity - Stock Options

Certain executives are eligible to receive grants of stock options. Employees may exercise the stock options at anytime after the grant is vested but no later than seven years after the date of grant. Stock options vest over a three-year period from the date of grant. The shared-based compensation expense associated with these options is amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option-pricing model.     

The weighted-average assumptions under the Black-Scholes option-pricing model were as follows for the years ended December 31, 2020 and 2018.  The Company did not grant stock options during the year ended December 31, 2019.
December 31,
2020		 December 31,
2018
Expected dividend yield 1.1  % 1.1  %
Expected stock price volatility 24.1  % 24.4  %
Risk-free interest rate 1.5  % 2.7  %
Expected life of options (years) 5.9 6.1

    
The following table sets forth the exercise price range, number of shares, weighted-average exercise price and remaining contractual lives by groups of similar price on a continuing basis as of December 31, 2020:
Weighted- Outstanding Exercisable
Average Weighted- Weighted-
Range of Number of Shares Outstanding Remaining Average Number of Shares Exercisable Average
Exercise Contractual Life Exercise Exercise
Price (in years) Price Price
$ 43.67  - $ 44.90  59  2.1 $ 43.70  59  $ 43.70 
47.82  - 48.32  68  3.1 47.86  68  47.86 
50.71  - 53.73  26  1.6 51.31  26  51.31 
57.18  - 60.42  70  4.1 58.73  45  58.64 
64.26  - 65.96  136  5.0 64.71  67  64.26 
$ 43.67  - $ 65.96  359  3.7 $ 55.88  265  $ 53.23 

Stock option activity and related information on a continuing basis was as follows:

Year ended
December 31, 2020 December 31, 2019 December 31, 2018
Weighted- Weighted- Weighted-
Average Average Average
Stock Exercise Stock Exercise Stock Exercise
Options Price Options Price Options Price
Outstanding at beginning of year 417  $ 53.37  512  $ 51.49  417  $ 44.55 
Granted 36  65.96  —  —  190  61.72 
Exercised (89) 47.72  (87) 42.24  (95) 41.42 
Forfeited (5) 59.73  (8) 53.76  —  — 
Outstanding at end of year 359  $ 55.79  417  $ 53.37  512  $ 51.49 
Exercisable at end of year 265  $ 53.20  262  $ 50.03  213  $ 44.66 
Weighted-average fair value of stock options granted during the year $ 14.79  $ —  $ 15.82 
Aggregate intrinsic value for stock options exercised $ 1,568  $ 2,196  $ 1,992 
Average aggregate intrinsic value for stock options outstanding $ 970 
Average aggregate intrinsic value for exercisable stock options $ 1,435 
    
Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for stock options $ 1,163  $ 1,556  $ 1,521 
Tax benefit for stock options exercised $ 287  $ 392  $ 384 
Unrecognized compensation expense for stock options $ 784 
Weighted average period over which unrecognized compensation expense will be recognized (years) 1.3
The following table sets forth the exercise price range, number of shares, weighted-average exercise price and remaining contractual lives by groups of similar price on a discontinued basis as of December 31, 2020:

Weighted- Outstanding Exercisable
Average Weighted- Weighted-
Range of Number of Shares Outstanding Remaining Average Number of Shares Exercisable Average
Exercise Contractual Life Exercise Exercise
Price (in years) Price Price
$ 47.82  - $ 58.40  14  3.5 $ 52.22  14  $ 52.22 

Stock option activity and related information on a discontinued basis was as follows:

Year ended
2020 2019 2018
Weighted- Weighted- Weighted-
Average Average Average
Stock Exercise Stock Exercise Stock Exercise
Options Price Options Price Options Price
Outstanding at beginning of year 14  $ 52.15  26  $ 49.00  22  $ 47.49 
Granted —  —  —  —  4  58.40 
Exercised —  —  (12) 45.46  —  — 
Forfeited —  —  —  —  —  — 
Outstanding at end of year 14  $ 52.15  14  $ 52.15  26  $ 49.00 
Exercisable at end of year 14  $ 52.15  9  $ 51.35  17  $ 47.74 
Weighted-average fair value of stock options granted during the year $ —  $ —  $ 16 
Aggregate intrinsic value for stock options exercised $ —  $ 193  $ — 
Average aggregate intrinsic value for stock options outstanding $ 54 
Average aggregate intrinsic value for exercisable stock options $ 54 

Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for stock options $ 22  $ 41  $ 57 
Tax benefit for stock options exercised $ 6  $ 11  $ 14 
Unrecognized compensation expense for stock options $ — 
Weighted average period over which unrecognized compensation expense will be recognized (years) — 
Employee Activity – Restricted Shares
 
The Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive a share 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 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. The compensation expense associated with these awards is amortized ratably over the requisite service period. All forfeitures are recognized as incurred.

Restricted share activity and related information on a continuing basis was as follows:
Year ended
December 31, 2020 December 31, 2019 December 31, 2018
Weighted- Weighted- Weighted-
Average Average Average
Restricted Grant Date Restricted Grant Date Restricted Grant Date
Shares Fair Value Shares Fair Value Shares Fair Value
Outstanding at beginning of year 264  $ 58.34  302  $ 54.92  216  $ 46.73 
Granted 116  65.88  112  59.49  192  59.88 
Vested (150) 57.40  (126) 51.50  (102) 47.04 
Forfeited (17) 62.39  (24) 56.69  (4) 52.01 
Outstanding at end of year 213  $ 62.78  264  $ 58.34  302  $ 54.92 
Total fair value of shares vested during the year $ 9,180  $ 7,684  $ 5,758 

Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for restricted shares $ 7,310  $ 7,936  $ 6,633 
Tax benefit for the vesting of restricted shares $ 1,747  $ 1,951  $ 1,660 
Unrecognized compensation expense for restricted shares $ 7,767 
Weighted average period over which unrecognized compensation expense will be recognized (years) 1.7
Restricted share activity and related information on a discontinued basis was as follows:
Year ended
2020 2019 2018
Weighted- Weighted- Weighted-
Average Average Average
Restricted Grant Date Restricted Grant Date Restricted Grant Date
Shares Fair Value Shares Fair Value Shares Fair Value
Outstanding at beginning of year 13  $ 54.93  13  $ 55.16  11  $ 46.71 
Granted 6  63.24  5  59.07  10  59.46 
Vested (10) 58.43  (5) 48.85  (5) 47.00 
Forfeited (1) 63.49  —  —  (3) 51.68 
Outstanding at end of year 8  $ 60.83  13  $ 54.93  13  $ 55.16 
Total fair value of shares vested during the year $ 625  $ 270  $ 282 

Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for restricted shares $ 71  $ 65  $ 241 
Tax benefit for the vesting of restricted shares $ 71  $ 66  $ 72 
Unrecognized compensation expense for restricted shares $ 270 
Weighted average period over which unrecognized compensation expense will be recognized (years) 1.8

Employee Activity – Performance Shares

Certain executives and key employees are eligible to receive grants of performance awards. The performance share agreement provides for awards of shares of the Company’s common stock 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 Company’s Board of Directors. Performance targets are set at the beginning of each three-year measurement period. The share awards are earned over the vesting period, and the number of shares earned is determined based on the cumulative results for the measurement period. The performance agreement provides for employees to earn —% to 200% of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Performance shares do not receive dividends until the shares are vested. Awards earned are paid in shares of common stock of the Company at the end of the vesting period. The compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, the compensation expense is based on the projected assessment of the level of performance that will be achieved. All forfeitures are recognized as incurred.

The grant-date fair value of performance shares granted with a financial target based on the Company’s total shareholder return was estimated using a Monte Carlo simulation. The weighted average assumptions under the Monte Carlo simulation model were as follows for the years ended December 31, 2020, 2019 and 2018:
Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Expected stock price volatility 23.5  % 23.4  % 24.3  %
Weighted average risk-free interest rate 1.4  % 2.5  % 2.2  %
    
Performance share activity was as follows and is presented as if the Company were to achieve its target level of performance, on a continuing basis:
Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Weighted- Weighted- Weighted-
Average Average Average
Performance Grant Date Performance Grant Date Performance Grant Date
Shares Fair Value Shares Fair Value Shares Fair Value
Outstanding at beginning of year 58  $ 62.44  62  $ 58.40  66  $ 57.63 
Granted 38  69.15  28  61.42  17  72.30 
Additional shares awarded based on actual performance level achieved 13  51.13  —  —  —  — 
Vested (33) 51.13  (22) 63.57  —  — 
Forfeited (11) 66.37  (10) 62.77  (21) 67.28 
Outstanding at end of year 65  $ 67.62  58  $ 62.44  62  $ 58.40 
Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for performance shares $ 1,242  $ 1,103  $ 1,208 
Tax benefit for vesting of performance shares $ 306  $ 278  $ 304 
Unrecognized compensation expense for performance shares $ 2,095 
Weighted average period over which unrecognized compensation expense will be recognized (years) 1.9
Performance share activity was as follows and is presented as if the Company were to achieve its target level of performance, on a discontinued basis:
Year ended
2020 2019 2018
Weighted- Weighted- Weighted-
Average Average Average
Performance Grant Date Performance Grant Date Performance Grant Date
Shares Fair Value Shares Fair Value Shares Fair Value
Outstanding at beginning of year 4  $ 62.05  3  $ 57.90  3  $ 57.03 
Granted 1  69.15  2  61.03  1  72.30 
Additional shares awarded based on actual performance level achieved 1  51.13  —  —  —  — 
Vested (2) 51.13  (1) 63.57  —  — 
Forfeited (4) 65.69  —  —  (1) 67.28 
Outstanding at end of year —  $ —  4  $ 62.05  3  $ 57.90 
Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for performance shares $ (8) $ 73  $ 55 
Tax benefit for the vesting of performance shares $ (2) $ 18  $ 14 
Unrecognized compensation expense for performance shares $ — 
Weighted average period over which unrecognized compensation expense will be recognized (years) — 

Employee Activity – Employee Stock Purchase Plan

Under the 2005 Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to a remaining 335 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 lump sum contributions.
Employee stock purchase plan activity and related information was as follows on a continuing basis:
Year ended
December 31, December 31, December 31,
2020 2019 2018
Shares purchased by employees 14  11  8 
Average purchase price $ 44.24  $ 51.50  $ 50.62 
Weighted-average fair value of each purchase under the ESPP granted 1
$ 20.99  $ 13.68  $ 6.26 
Share-based compensation expense for ESPP shares $ 292  $ 150  $ 54 
1 Equal to the discount from the market value of the common stock at the end of each six month purchase period

Employee stock purchase plan activity and related information was as follows on a discontinued basis:
Year ended
December 31, December 31, December 31,
2020 2019 2018
Shares purchased by employees 1  1  1 
Average purchase price $ 44.35  $ 51.39  $ 50.64 
Weighted-average fair value of each purchase under the ESPP granted 1
$ 18.11  $ 13.48  $ 6.27 
Share-based compensation expense for ESPP shares $ 20  $ 13  $ 5 
1 Equal to the discount from the market value of the common stock at the end of each six month purchase period
    
Non-employee Director Activity – 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 common shares may be issued. As of December 31, 2020, approximately 92 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 earlier 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. Each director may elect to defer receipt of the common shares until the director departs from the Company’s Board of Directors. If a director elects to defer receipt, the Company will issue deferred stock units in which the director does not have voting rights or other incidents of ownership until the shares are issued.  Each deferred stock unit is eligible for a dividend equivalent in the form of additional restricted stock units for each cash dividend payment paid by the Company.
    
Non-employee director restricted share activity and related information was as follows on a continuing basis:
Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Restricted Weighted- Restricted Weighted- Restricted Weighted-
Shares and Average Shares and Average Shares and Average
Deferred Grant Date Deferred Grant Date Deferred Grant Date
Stock Units Fair Value Stock Units Fair Value Stock Units Fair Value
Outstanding at beginning of year 16  $ 62.17  15  $ 58.50  11  $ 52.00 
Granted 24  42.88  16  62.17  16  58.58 
Vested (16) 62.00  (15) 64.05  (12) 52.09 
Forfeited —  —  —  —  —  — 
Outstanding at end of year 24  $ 42.88  16  $ 62.17  15  $ 58.50 
Total fair value of shares vested during the year $ 771  $ 970  $ 615 

Year ended
December 31,
2020		 December 31,
2019		 December 31,
2018
Share-based compensation expense for restricted shares $ 1,026  $ 970  $ 775 
Tax benefit for the vesting of restricted shares $ 253  $ 244  $ 195 
Unrecognized compensation expense for restricted shares $ 376 
Weighted average period over which unrecognized compensation expense will be recognized (years) 0.4
Net Income (Loss) per Share

A reconciliation of net income attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income per share during the years ended December 31, 2020, 2019 and 2018 is as follows:
 
2020 2019 2018
Numerator:
Net income and comprehensive income from continuing operations $ 52,767  $ 82,322  $ 88,563 
Net (loss) income and comprehensive (loss) income from discontinued operation (29,034) 4,777  3,488 
Net income attributable to Forward Air $ 23,733  $ 87,099  $ 92,051 
Income allocated to participating securities (385) (945) (881)
Numerator for basic and diluted net income per share for continuing operations $ 52,382  $ 81,377  $ 87,682 
Numerator for basic and diluted net (loss) income per share for discontinued operation $ (29,034) $ 4,777  $ 3,488 
Denominator:
Denominator for basic net income per share - weighted-average number of common shares outstanding 27,631  28,195  29,076 
Dilutive stock options and performance share awards 66  113  114 
Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding 27,697  28,308  29,190 
Basic net income (loss) per share:
    Continuing operations $ 1.90  $ 2.89  $ 3.02 
    Discontinued operation (1.05) 0.17  0.12 
Net income per share1
$ 0.84  $ 3.06  $ 3.14 
Diluted net income (loss) per share:
    Continuing operations $ 1.89  $ 2.87  $ 3.00 
    Discontinued operation (1.05) 0.17  0.12 
Net income per share $ 0.84  $ 3.04  $ 3.12 
1 Rounding may impact summation of amounts.

The number of shares that were not included in the calculation of net income per diluted share because to do so would have been anti-dilutive for the years ended December 31, 2020, 2019 and 2018 are as follows:
2020 2019 2018
Anti-dilutive stock options 206  183  126 
Anti-dilutive performance shares 15  —  16 
Anti-dilutive restricted shares and deferred stock units 3  —  9 
Total anti-dilutive shares 224  183  151