Forward Air Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock Incentive Plans

Stock Incentive Plans

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock Incentive Plan

The Company recorded share-based compensation expense as follows for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022


Share-based compensation expense	$	2,736	$	2,355	$	8,349	$	7,661

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, 2023, approximately 568 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.

Stock option transactions during the nine months ended September 30, 2023 were as follows:


	Stock Options	Weighted-Average Exercise Price
Outstanding as of January 1	376	$	66.13
Granted	55	115.42
Exercised	—	—
Forfeited	(61)	44.97
Outstanding as of September 30	370	$	76.91

As of September 30, 2023, the total share-based compensation expense related to unvested stock options not yet recognized was $2,554, 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, 2023 were as follows:


	Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	151	$	87.82
Granted	78	114.92
Vested	(75)	81.11
Forfeited	(9)	104.39
Outstanding as of September 30	145	$	104.82

As of September 30, 2023, the total share-based compensation expense related to restricted shares not yet recognized was $10,624, 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 of Directors (“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.

Performance award transactions during the nine months ended September 30, 2023 were as follows assuming target levels of performance:


	Performance Awards	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	70	$	87.74
Granted	18	120.27
Additional shares awarded based on performance	4	68.75
Earned	(31)	69.10
Forfeited or unearned	—	—
Outstanding as of September 30	61	$	105.95

As of September 30, 2023, 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 $3,089, 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 310 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:


	Nine Months Ended
	September 30, 2023		September 30, 2022
Shares purchased by participants under the ESPP	4		5
Average purchase price	$	94.23	$	82.76
Weighted-average fair value of each purchase right under the ESPP granted¹	$	10.47	$	9.20
Share-based compensation expense for ESPP	$	42	$	42

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, 2023, approximately 47 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.

Director restricted share transactions during the nine months ended September 30, 2023 were as follows:


	Director Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	15	$	93.70
Granted	15	96.10
Vested	(15)	93.70
Forfeited	(1)	96.10
Outstanding as of September 30	14	$	96.10

For the three and nine months ended September 30, 2023, the Company recorded $307 and $1,003, respectively, of share-based compensation expense associated with these grants. 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. As of September 30, 2023, the total share-based compensation expense related to the restricted shares not yet recognized was $790, and the weighted-average period over which it is expected to be recognized is approximately less than one year.