fwrd-20210630

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 June 30, 2021

☐ 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 August 5, 2021 was 27,100,389.


Table of Contents

Forward Air Corporation

		Page
		Number
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets – June 3 0 , 2021 and December 31, 2020	3

	Condensed Consolidated Statements of Comprehensive Income - Three M onths E nded June 3 0 , 2021 and 2020	4

	Condensed Consolidated Statements of Comprehensive Income - Six Months Ended June 30, 2021 and 2020	5

	Condensed Consolidated Statements of Cash Flows – Six M onths E nded June 3 0 , 2021 and 2020	6

	Condensed Consolidated Statements of Shareholders' Equity – Three and Six M onths E nded June 3 0, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements – June 3 0 , 2021	8

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	48

Part II.	Other Information

Item 1.	Legal Proceedings	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 3.	Defaults Upon Senior Securities	49

Item 4.	Mine Safety Disclosures	49

Item 5.	Other	49

Item 6.	Exhibits	50

Signatures		51

Table of Contents


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)

	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	50,844	$	40,254
Accounts receivable, less allowance of $2,187 in 2021 and $2,273 in 2020	209,187		156,490
Other receivables	16,999		—
Other current assets	19,982		28,150
Current assets held for sale	—		21,002
Total current assets	297,012		245,896

Property and equipment	383,155		380,519
Less accumulated depreciation and amortization	196,168		190,652
Total property and equipment, net	186,987		189,867
Operating lease right-of-use assets	148,651		123,338

Goodwill	254,993		244,982
Other acquired intangibles, net of accumulated amortization of $100,018 in 2021 and $93,009 in 2020	145,813		145,032

Other assets	48,385		45,181
Noncurrent assets held for sale	—		53,097
Total assets	$	1,081,841	$	1,047,393

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	43,655	$	38,371
Accrued expenses	70,894		51,264
Other current liabilities	6,813		10,580
Current portion of debt and finance lease obligations	1,867		1,801
Current portion of operating lease liabilities	46,042		43,680
Current liabilities held for sale	—		25,924
Total current liabilities	169,271		171,620

Long-term debt and finance lease obligations, less current portion and debt issuance costs	161,729		117,408
Operating lease liabilities, less current portion	103,280		80,346
Other long-term liabilities	55,741		54,129
Deferred income taxes	41,471		41,986
Noncurrent liabilities held for sale	—		34,575

Shareholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2021 and 2020	—		—
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 27,120,389 in 2021 and 27,316,434 in 2020	271		273
Additional paid-in capital	252,466		242,916
Retained earnings	297,612		304,140
Total shareholders’ equity	550,349		547,329
Total liabilities and shareholders’ equity	$	1,081,841	$	1,047,393

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

Table of Contents


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

	Three Months Ended
	June 30, 2021		June 30, 2020
Operating revenues	$	420,671	$	281,678

Operating expenses:
Purchased transportation	215,217		142,069
Salaries, wages and employee benefits	84,641		63,772
Operating leases	20,370		17,387
Depreciation and amortization	9,414		9,413
Insurance and claims	10,891		7,722
Fuel expense	4,059		2,519
Other operating expenses	33,955		24,882

Total operating expenses	378,547		267,764
Income from continuing operations	42,124		13,914

Other expense:
Interest expense	(1,323)		(1,198)

Total other expense	(1,323)		(1,198)
Income before income taxes	40,801		12,716
Income tax expense	10,124		3,491
Net income from continuing operations	30,677		9,225
Loss from discontinued operation, net of tax	—		(6,071)
Net income and comprehensive income	$	30,677	$	3,154

Basic net income (loss) per share
Continuing operations	$	1.12	$	0.33
Discontinued operation	—		(0.22)
Net income per basic share	$	1.12	$	0.11

Diluted net income (loss) per share
Continuing operations	$	1.11	$	0.33
Discontinued operation	—		(0.22)
Net income per diluted share	$	1.11	$	0.11

Dividends per share	$	0.21	$	0.18

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

Table of Contents


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

	Six Months Ended
	June 30, 2021		June 30, 2020
Operating revenues	$	782,873	$	587,235

Operating expenses:
Purchased transportation	399,825		292,667
Salaries, wages and employee benefits	159,538		133,331
Operating leases	39,537		35,271
Depreciation and amortization	18,651		18,747
Insurance and claims	20,632		17,766
Fuel expense	7,761		6,532
Other operating expenses	72,081		53,234

Total operating expenses	718,025		557,548
Income from continuing operations	64,848		29,687

Other expense:
Interest expense	(2,488)		(2,051)

Total other expense	(2,488)		(2,051)
Income before income taxes	62,360		27,636
Income tax expense	14,969		6,995
Net income from continuing operations	47,391		20,641
Loss from discontinued operation, net of tax	(5,533)		(9,112)
Net income and comprehensive income	$	41,858	$	11,529

Basic net income (loss) per share
Continuing operations	$	1.72	$	0.72
Discontinued operation	(0.20)		(0.31)
Net income per basic share	$	1.52	$	0.41

Diluted net income (loss) per share
Continuing operations	$	1.71	$	0.72
Discontinued operation	(0.20)		(0.32)
Net income per diluted share	$	1.51	$	0.40

Dividends per share	$	0.42	$	0.36

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

Table of Contents


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


	Six Months Ended
	June 30, 2021		June 30, 2020

Operating activities:
Net income from continuing operations	$	47,391	$	20,641
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization	18,651		18,747

Change in fair value of earn-out liability	(385)		(2,702)
Share-based compensation expense	5,578		5,507
Provision for revenue adjustments	3,525		1,787
Deferred income tax (benefit) expense	(572)		4,668
Other	189		697
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	(51,018)		2,979
Other receivables	(13,491)		—
Other current and noncurrent assets	6,746		(29)
Accounts payable and accrued expenses	23,047		7,634
Net cash provided by operating activities of continuing operations	39,661		59,929

Investing activities:
Proceeds from sale of property and equipment	1,314		988
Purchases of property and equipment	(8,575)		(14,214)
Purchase of a business, net of cash acquired	(22,543)		(55,931)
Net cash used in investing activities of continuing operations	(29,804)		(69,157)

Financing activities:
Repayments of finance lease obligations	(954)		(676)
Proceeds from revolving credit facility	45,000		65,000
Payment of earn-out liability	—		(5,284)
Proceeds from issuance of common stock upon stock option exercises	3,570		—
Payments of dividends to stockholders	(11,565)		(10,087)
Repurchases and retirement of common stock	(33,992)		(15,259)
Proceeds from common stock issued under employee stock purchase plan	388		294
Payment of minimum tax withholdings on share-based awards	(2,832)		(3,286)
Contributions from (distributions to) subsidiary held for sale	1,118		(5,307)
Net cash provided by financing activities from continuing operations	733		25,395
Net increase in cash and cash equivalents of continuing operations	10,590		16,167

Cash from discontinued operation:
Net cash used in operating activities of discontinued operation	(6,902)		(4,672)
Net cash provided by (used in) investing activities of discontinued operation	8,020		(635)
Net cash (used in) provided by financing activities of discontinued operation	(1,118)		5,307
Net increase in cash and cash equivalents	10,590		16,167
Cash and cash equivalents at beginning of period of continuing operations	40,254		64,749
Cash at beginning of period of discontinued operation	—		—
Net increase in cash and cash equivalents	10,590		16,167
Less: cash at end of period of discontinued operation	—		—
Cash and cash equivalents at end of period of continuing operations	$	50,844	$	80,916

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

Table of Contents


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, 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


	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2019	27,850	$	279	$	226,869	$	350,034	$	577,182
Net income	—	—		—		8,375		8,375
Share-based compensation expense	—	—		3,266		—		3,266
Payment of dividends to shareholders	—	—		2		(5,052)		(5,050)
Payment of minimum tax withholdings on share-based awards	(42)	—		—		(2,672)		(2,672)
Repurchases and retirement of common stock	(268)	(3)		—		(15,256)		(15,259)
Issuance of share-based awards	139	1		(2)		—		(1)
Balance at March 31, 2020	27,679	$	277	$	230,135	$	335,429	$	565,841
Net income	—	—		—		3,155		3,155
Common stock issued under employee stock purchase plan	7	—		295		—		295
Share-based compensation expense	—	—		2,654		—		2,654
Payment of dividends to shareholders	—	—		3		(5,042)		(5,039)
Payment of minimum tax withholdings on share-based awards	(13)	—		—		(613)		(613)
Issuance of share-based awards	56	—		(1)		—		(1)
Balance at June 30, 2020	27,729	$	277	$	233,086	$	332,929	$	566,292

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

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

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 operates a comprehensive national network to provide expedited regional, inter-regional and national less-than-truckload (“LTL”) services. Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, 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 condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. 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 at the dates and 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, 2020. Results for interim periods are not necessarily indicative of the results for the year.

The Board approved a strategy to divest the Pool Distribution business (“Pool”) on April 23, 2020, 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. Pool offered this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States. Accordingly, the results of operations for Pool have been presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for all period presented. In addition, the assets and liabilities were presented as held for sale in the Condensed Consolidated Balance Sheets for the prior period. Unless otherwise noted, amounts, percentages and discussion for all periods reflect the results of operations, financial condition and cash flows from our continuing operations.

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 time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

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 this 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 and Held for Sale

As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool. The Pool business met the criteria for held for sale classification. As a result, the assets and liabilities of Pool were presented separately under the captions “Current assets held for sale”, “Noncurrent assets held for sale”, “Current liabilities held for sale” and “Noncurrent liabilities held for sale” in the Condensed Consolidated Balance Sheets as of December 31, 2020. The results of Pool were reclassified to “Loss from discontinued operation, net of tax” in the Condensed Consolidated Statements of Comprehensive Income for three and six months ended June 30, 2021 and 2020. Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and have been reallocated to continuing operations. These costs were reclassified to the eliminations and other column in the segment reconciliation in Note 13, Segment Reporting.

Sale of Pool

On February 12, 2021, the Company completed the sale of the Pool business for $8,000 in cash and up to a $12,000 earn-out based on earnings before interest, taxes, depreciation and amortization. The sale agreement for Pool included an earn-out based on the achievement of certain earnings before interest, taxes, depreciation and amortization attainment over an eleven-month period, beginning February 1, 2021. The Company will receive payment for the amount earned in the first quarter of 2022, and if elected, the buyer may defer the payment of up to half of the amount earned to first quarter of 2023. The estimated fair value of the earn-out asset on the date of sale was $6,967. The fair value was based on the estimated eleven-month period of the earnings before interest, taxes, depreciation and amortization and was calculated using a Monte Carlo simulation model.

The weighted-average assumptions under the Monte Carlo simulation model were as follows:


			February 12, 2021
Counterparty credit spread			1.2%
Earnings before interest, taxes, depreciation and amortization discount rate			15.0%
Asset volatility			55.0%

Subsequent to the date of sale, the Company will recognize any increases in the carrying value of the earn-out asset when the change is realized and will evaluate the earn-out asset for impairment at each reporting period. The Company concluded there were no indicators of impairment during the three months ended June 30, 2021. As of June 30, 2021, the Company recorded $3,508 in “Other receivables” and $3,459 in “Other assets” in the Condensed Consolidated Balance Sheets.

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 performs 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 will remain in effect until the date all services have been completed, but no more than six months following effective date. The TSA provides 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 receives a monthly service charge. For the three and six

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

months ended June 30, 2021, the Company recognized $241 and $412, respectively, in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income, for the services performed under the TSA.

Additionally, under the TSA, the Company remits 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 is reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment is remitted. As of June 30, 2021, the Company recorded a receivable in the amount of $13,491 in “Other receivables” in the Condensed Consolidated Balance Sheets for the reimbursement due to the Company.

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 six months ended June 30, 2021 and 2020 is as follows:







	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Operating revenues	$	—	$	13,974	$	17,087	$	50,926

Operating expenses:
Purchased transportation	—		3,147		4,290		12,683
Salaries, wages and employee benefits	—		8,394		9,674		25,507
Operating leases	—		4,966		2,907		10,646
Depreciation and amortization	—		362		—		1,657
Insurance and claims	—		1,287		929		3,013
Fuel expense	—		413		644		1,740
Other operating expenses	—		3,495		2,087		7,841
Total operating expenses	—		22,064		20,531		63,087
Loss from discontinued operation	—		(8,090)		(3,444)		(12,161)
Loss on sale of business	—		—		(2,860)		—
Loss from discontinued operation before income taxes	—		(8,090)		(6,304)		(12,161)
Income tax benefit	—		(2,019)		(771)		(3,049)
Loss from discontinued operation, net of tax	$	—	$	(6,071)	$	(5,533)	$	(9,112)

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

4. Acquisitions

Expedited Freight Acquisition

As part of the Company’s strategy to expand final mile pickup and delivery operations, in April 2019, the Company acquired certain assets and liabilities of FSA Network, Inc., doing business as FSA Logistix (“FSA”), for $27,000 and a potential earn-out of up to $15,000. The purchase agreement for FSA included an earn-out up to $15,000 based on the achievement of certain revenue milestones over two one-year periods, beginning May 1, 2019. The estimated fair value of the earn-out liability on the date of acquisition was $11,803. The fair value was based on the estimated two-year performance of the acquired customer revenue and was calculated using a Monte Carlo simulation model. 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 Monte Carlo simulation model. During the three and six months ended June 30, 2021, the fair value of the earn-out changed by ($4) and ($52), 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 six months ended June 30, 2020, the fair value of the earn-out changed by ($2,108) and ($2,702), respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. The first one-year period ended in the second quarter of 2020 and the Company paid $5,284 based on the terms of the purchase agreement. The second one-year period ended in the second quarter of 2021 and the Company will remit payment in the third quarter of 2021 based on the terms of purchase agreement. As of June 30, 2021 and December 31, 2020, the fair value of the earn-out liability was $6,813 and $6,865, respectively, which was reflected in “Other current liabilities” in the Condensed Consolidated Balance Sheets.

In May 2021, the Company acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,543. J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia. The acquisition of J&P supports the Company’s strategic growth plan by expanding pickup and delivery, less than truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States. The acquisition was financed by cash flow from operations. The results of J&P 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 Expedited Freight reportable segment.

Intermodal Acquisition

In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport”) for $15,510 and a potential earn-out up to $2,000. Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois. The acquisition of Proficient Transport supports the Company’s strategic growth plan by expanding the intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and introduces a new location in Ohio. The acquisition was financed by cash flows from operations. The results of Proficient Transport 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.

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 weighted-average assumptions used to calculate the estimated fair value of the earn-out under the option pricing method were as follows:


	February 28, 2021	June 30, 2021
Risk-free rate	0.1%	0.1%
Revenue discount rate	8.3%	8.3%
Revenue volatility	27.3%	19.7%

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

During both the three and six months ended June 30, 2021, the fair value of the earn-out changed by ($333) and the change in the fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. As of June 30, 2021, the fair value of the earn-out liability was $496, which was reflected in “Other current liabilities” in the Condensed Consolidated Balance Sheets.

Fair Value of Assets Acquired and Liabilities Assumed

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


	Proficient Transport		J&P
	February 28, 2021		May 30, 2021
Tangible assets:
Accounts receivable	$	4,171	$	1,686

Prepaid expenses and other current assets	—		32
Property and equipment	140		934
Other assets	24		3


Total tangible assets	4,335		2,655
Intangible assets:
Customer relationships	6,060		1,580
Non-compete agreements	18		132

Goodwill	6,249		3,762
Total intangible assets	12,327		5,474
Total assets acquired	16,662		8,129

Liabilities assumed:
Current liabilities	323		586




Total liabilities assumed	323		586
Net assets acquired	$	16,339	$	7,543

The fair value of the assets acquired and liabilities assumed are preliminary based on the information available as of the acquisition date through the date of this filing.

The weighted-average useful life of acquired intangible assets as of the acquisition date are summarized in the following table:


	Weighted-Average Useful Lives
	Proficient Transport	J&P
Customer relationships	8 years	12 years
Non-compete agreements	1 year	5 years

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

5. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the six months ended June 30, 2021 are summarized as follows:


	Expedited Freight		Intermodal		Consolidated




Balance as of December 31, 2020	$	165,268	$	79,714	$	244,982
Acquisitions	3,762		6,249		10,011
Balance as of June 30, 2021	$	169,030	$	85,963	$	254,993

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. Based on the current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of June 30, 2021. The Company concluded there were no indicators of impairment during the six months ended June 30, 2021.

Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the six months ended June 30, 2021 are summarized as follows:


	Gross Carrying Amount
	Customer Relationships1		Non-Compete Agreements		Trade Names		Total
Balance as of December 31, 2020	$	228,416	$	8,125	$	1,500	$	238,041
Acquisitions	7,640		150		—		7,790
Balance as of June 30, 2021	$	236,056	$	8,275	$	1,500	$	245,831


	Accumulated Amortization
	Customer Relationships1		Non-Compete Agreements		Trade Names		Total
Balance as of December 31, 2020	$	85,930	$	5,579	$	1,500	$	93,009
Amortization expense	6,344		665		—		7,009
Balance as of June 30, 2021	$	92,274	$	6,244	$	1,500	$	100,018

1 Carrying value as of June 30, 2021 and December 31, 2020 is inclusive of $16,501 of accumulated impairment.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

6. Stock Incentive Plans

Stock Incentive Plan

The Company recorded shared-based compensation expense as follows for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Salaries, wages and employee benefits - continuing operations	$	2,463	$	2,154	$	4,732	$	4,971
Salaries, wages and employee benefits - discontinued operation	—		222		16		410
Total share-based compensation expense	$	2,463	$	2,376	$	4,748	$	5,381

In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 of common shares to employees. As of June 30, 2021, approximately 797 shares remain available for grant under the Omnibus Plan.

Stock Options

Share-based compensation expense associated with stock options 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 six months ended June 30, 2021 on a continuing operations basis were as follows:


	Stock Options	Weighted-Average Exercise Price
Outstanding as of January 1, 2021	359	$	55.79
Granted	39	75.05
Exercised	(52)	54.57
Forfeited	—	—
Outstanding as of June 30, 2021	346	$	58.30

As of June 30, 2021, the total share-based compensation expense related to unvested stock options net yet recognized was $1,002, and the weighted-average period over which it is expected to be recognized is approximately two years.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

Stock option transactions during the six months ended June 30, 2021 on a discontinued operation basis were as follows:


	Stock Options	Weighted-Average Exercise Price
Outstanding as of January 1, 2021	14	$	52.15
Granted	—	—
Exercised	(14)	52.15
Forfeited	—	—
Outstanding as of June 30, 2021	—	$	—

Restricted Shares

Restricted shares are restricted from sale or transfer until vesting, and restrictions lapse in three equal installments beginning one year after the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period. Restricted share transactions during the six months ended June 30, 2021 on a continuing operations basis were as follows:


	Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1, 2021	210	$	62.78
Granted	108	75.28
Vested	(98)	61.49
Forfeited	(15)	69.91
Outstanding as of June 30, 2021	205	$	69.31

As of June 30, 2021, the total share-based compensation expense related to restricted shares not yet recognized was $11,227, and the weighted-average period over which it is expected to be recognized is approximately two years.

Restricted share transactions during the six months ended June 30, 2021 on a discontinued operation basis were as follows:


	Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1, 2021	10	$	61.25
Granted	—	—
Vested	(5)	60.49
Forfeited	(5)	61.92
Outstanding as of June 30, 2021	—	$	—

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 Company’s Board of Directors. 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 based on the projected assessment of the level of performance that will be achieved.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

June 30, 2021

Performance award transactions during the six months ended June 30, 2021 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, 2021	65	$	67.62
Granted	36	87.33

Earned	(11)	72.30
Forfeited or unearned	(11)	70.22
Outstanding as June 30, 2021	79	$	75.61

As of June 30, 2021, 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 $4,621, and the weighted-average period over which it is expected to be recognized is approximately three years.

Employee Stock Purchase Plan

As of June 30, 2021, the Company is authorized to issue up to a remaining 330 shares of common stock to employees under the 2005 Employee Stock Purchase Plan (the “ESPP”). 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:


	Six Months Ended
	June 30, 2021		June 30, 2020
Shares purchased by participants under the ESPP	5		6
Average purchase price	$	68.76	$	44.84
Weighted-average fair value of each purchase right under the ESPP granted ¹	$	20.99	$