Forward Air's Q3 earnings rise 15.4% to US$14.2M as operating revenue climbs 18.5% to US$170M; CEO says encouraging trends in airport-to-airport network volumes have carried into Q4

GREENEVILLE, Tennessee , October 22, 2013 (press release) – Forward Air Corporation (FWRD) today reported revenue, operating income, net income and diluted earnings per share for the third quarter and nine months ended September 30, 2013.

Operating revenue for the quarter ended September 30, 2013 increased 18.5% to $170.0 million from $143.5 million for the same quarter in 2012. Income from operations was $22.9 million, compared with $19.6 million in the prior-year quarter. As a percent of operating revenue, income from operations was 13.5%, compared with 13.7% in the same quarter last year. Net income during the period was $14.2 million compared to $12.3 million in the prior-year quarter. Income per diluted share for the third quarter of 2013 was $0.46 compared with $0.41 in the prior-year quarter.

Operating revenue for the nine months ended September 30, 2013 increased 9.9% to $471.4 million from $428.9 million for the same period in 2012. Income from operations was $61.1 million, compared with $59.5 million in the prior-year period. As a percent of operating revenue, income from operations was 13.0% for the first nine months of 2013 compared to 13.9% for the same period in 2012. Net income during the period was $38.9 million compared to $36.7 million in the prior-year period. Income per diluted share from operations for the first nine months of 2013 was $1.27 compared with $1.24 in the prior-year period.

Bruce A. Campbell, Chairman, President, and CEO, commenting on the third quarter said, “After a tough second quarter, we saw a very encouraging trend in our airport-to-airport network volumes that improved throughout the third quarter. Our sense is the improved tonnage is driven by a slightly better macro environment as well as share gains resulting from our superior service offering. We are pleased to report that thus far into the fourth quarter this trend has continued.”

Turning to the Forward Air Solutions (FASI) business segment, Mr. Campbell said, “With the integration of new business wins behind us, FASI had a solid performance in the third quarter improving its operating ratio 320 basis points for its best third quarter ever.”

Commenting on Total Quality, Inc. (TQI) business segment, Mr. Campbell said, “While we are pleased with the positive strides made in the integration of TQI, we are anxious to get our new operating system on line. This new system will enable us to glean additional operating efficiencies as well as make the most of new business wins. We anticipate that this new system will be fully operational before the end of 2013.”

In closing, Mr. Campbell said, “As always, I would like to thank the Forward Air team of employees and independent contractors for their dedication and hard work.”

Commenting on the Company's guidance for the fourth quarter, Rodney L. Bell, Senior Vice President and CFO said, “We anticipate that our fourth quarter 2013 revenues will increase in the range of 17% to 21% over the comparable 2012 period. We estimate that approximately 9% of that growth will result from the TQI acquisition. We expect income per diluted share to be between $0.53 and $0.57 per share. This compares to $0.54 per share in the fourth quarter of 2012.”

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2013 results on Tuesday, October 22, 2013 at 9:00 a.m. EDT. The Company's conference call will be available online at www.forwardair.com or by dialing 800-230-1059. A replay of the conference call will be available at www.forwardair.com beginning shortly after the completion of the live call.

About Forward Air Corporation

Forward Air Corporation operates three business segments, Forward Air, Inc., Forward Air Solutions, Inc. and Total Quality, Inc.

Forward Air, Inc. is a high-service-level contractor to the air cargo industry providing time-definite ground transportation services through a network of 88 terminals located on or near major airports in the United States and Canada. It provides these services as a cost-effective alternative to air transportation of cargo that must be delivered at a specific time but is relatively less time-sensitive than traditional air freight or when air transportation is not economical.

Forward Air Solutions, Inc. is a provider of pool distribution services. Pool distribution involves the consolidation and shipment of several smaller less-than-truckload shipments to a common area or region. Once at the regional destination, the loads are deconsolidated, then grouped with other shipments with common delivery points, and delivered in a very precise, time-sensitive manner. Our pool distribution network consists of 24 terminals within the mid-Atlantic, Southeast, Midwest and Southwestern United States.

Total Quality, Inc. utilizes industry-leading temperature-controlled equipment, 24-hour monitoring and tracking technology and layered security features to provide our customers with the highest level of service. In addition to our core pharmaceutical services, we provide truckload and less-than-truckload brokerage transportation services. Headquartered in central Michigan, we service the United States, Canada and Mexico.

 
 
 
 
 
Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)
             
    Three months ended   Nine months ended
    September 30,
2013
  September 30,
2012
  September 30,
2013
  September 30,
2012
Operating revenue:                
Airport-to-airport   $ 100,960     $ 96,914     $ 288,457     $ 290,006  
Logistics   32,562     20,878     87,474     63,315  
Other   6,862     6,528     19,624     19,498  
Pool distribution   29,649     19,194     75,841     56,102  
Total operating revenue   170,033     143,514     471,396     428,921  
                 
Operating expenses:                
Purchased transportation                
Airport-to-airport   42,407     40,150     118,605     119,546  
Logistics   22,152     15,954     59,696     47,756  
Other   2,039     1,822     5,707     5,252  
Pool distribution   8,613     5,176     22,454     14,989  
Total purchased transportation   75,211     63,102     206,462     187,543  
Salaries, wages and employee benefits   39,165     31,698     109,149     97,408  
Operating leases   6,991     6,895     20,923     20,826  
Depreciation and amortization   6,220     5,425     17,377     15,940  
Insurance and claims   3,290     3,098     9,164     8,132  
Fuel expense   3,871     2,318     10,535     7,271  
Other operating expenses   12,428     11,352     36,634     32,303  
Total operating expenses   147,176     123,888     410,244     369,423  
Income from operations   22,857     19,626     61,152     59,498  
                 
Other income (expense):                
Interest expense   (145 )   (111 )   (401 )   (241 )
Other, net   27     (21 )   72     (6 )
Total other expense   (118 )   (132 )   (329 )   (247 )
Income before income taxes   22,739     19,494     60,823     59,251  
Income taxes   8,542     7,227     21,941     22,544  
Net income and comprehensive income   $ 14,197     $ 12,267     $ 38,882     $ 36,707  
                 
Net income per share:                
Basic   $ 0.47     $ 0.42     $ 1.30     $ 1.27  
Diluted   $ 0.46     $ 0.41     $ 1.27     $ 1.24  
Weighted average shares outstanding:                
Basic   30,374     29,088     30,017     28,895  
Diluted   30,986     29,660     30,677     29,484  
                 
Dividends per share:   $ 0.10     $ 0.10     $ 0.30     $ 0.24  
 
 
 
 
 
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
    September 30,
2013
 

December 31,

2012

Assets        
Current assets:        
Cash and cash equivalents   $ 98,551     $ 112,182
Accounts receivable, net   83,224     75,262
Other current assets   18,849     10,952
Total current assets   200,624     198,396
         
Property and equipment   270,113     239,138
Less accumulated depreciation and amortization   112,514     105,581
Net property and equipment   157,599     133,557
Goodwill and other acquired intangibles:        
Goodwill   88,404     43,332
Other acquired intangibles, net of accumulated amortization   41,624     22,102
Total net goodwill and other acquired intangibles   130,028     65,434
Other assets   2,551     1,800
Total assets   $ 490,802     $ 399,187
         
Liabilities and Shareholders’ Equity        
Current liabilities:        
Accounts payable   $ 17,067     $ 11,168
Accrued expenses   19,490     16,476
Current portion of debt and capital lease obligations   92     276
Total current liabilities   36,649     27,920
         
Debt and capital lease obligations, less current portion   4     58
Other long-term liabilities   9,129     7,098
Deferred income taxes   26,576     12,440
         
Shareholders’ equity:        
Common stock   304     292
Additional paid-in capital   102,465     64,644
Retained earnings   315,675     286,735
Total shareholders’ equity   418,444     351,671
Total liabilities and shareholders’ equity   $ 490,802     $ 399,187
         
(a) Taken from audited financial statements, which are not presented in their entirety.
 
 
 
 
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
     
    Three months ended
    September 30,
2013
 

September 30,

2012

Operating activities:        
Net income  

$

14,197

   

$

12,267

 
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization     6,220       5,425  
Share-based compensation     1,525       1,427  
Gain on disposal of property and equipment     (185 )     92  
Provision for (recovery) loss on receivables     (56 )     115  
Provision for revenue adjustments     579       490  
Deferred income tax     1,722       1,023  
Excess tax benefit for stock options exercised     (337 )     (148 )
Changes in operating assets and liabilities        
Accounts receivable     (7,458 )     (426 )
Prepaid expenses and other current assets     515       1,499  
Accounts payable and accrued expenses     6,515       (5 )
Net cash provided by operating activities     23,237       21,759  
         
Investing activities:        
Proceeds from disposal of property and equipment     617       131  
Purchases of property and equipment     (5,272 )     (2,181 )
Other     (51 )     80  
Net cash used in investing activities     (4,706 )     (1,970 )
         
Financing activities:        
Payments of debt and capital lease obligations     (48 )     (139 )
Proceeds from exercise of stock options     1,687       7,295  
Payments of cash dividends     (3,057 )     (2,937 )
Excess tax benefit for stock options exercised     337       148  
Net cash (used in) provided by financing activities     (1,081 )     4,367  
Net increase in cash     17,450       24,156  
Cash at beginning of period    

81,101

     

68,832

 
Cash at end of period   $ 98,551     $ 92,988  
 
 
 
 
 
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
         
    Nine months ended
    September 30,
2013
  September 30,
2012
Operating activities:        
Net income   $ 38,882     $ 36,707  
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation and amortization   17,377     15,940  
Share-based compensation   4,619     4,550  
(Gain) loss on disposal of property and equipment   (468 )   259  
Provision for loss on receivables   234     226  
Provision for revenue adjustments   1,705     1,417  
Deferred income tax   4,658     2,460  
Excess tax benefit for stock options exercised   (3,207 )   (354 )
Changes in operating assets and liabilities        
Accounts receivable   (4,262 )   (5,599 )
Prepaid expenses and other current assets   (1,575 )   (1,629 )
Accounts payable and accrued expenses   2,525     (8,298 )
Net cash provided by operating activities   60,488     45,679  
         
Investing activities:        
Proceeds from disposal of property and equipment   1,665     867  
Purchases of property and equipment   (33,266 )   (20,499 )
Acquisition of businesses, net of cash acquired   (45,329 )    
Other   (111 )   (267 )
Net cash used in investing activities   (77,041 )   (19,899 )
         
Financing activities:        
Payments of debt and capital lease obligations   (20,351 )   (411 )
Proceeds from exercise of stock options   29,866     15,740  
Payments of cash dividends   (9,071 )   (7,009 )
Common stock issued under employee stock purchase plan   137     119  
Cash settlement of share-based awards for minimum tax withholdings   (866 )   (386 )
Excess tax benefit for stock options exercised   3,207     354  
Net cash provided by financing activities   2,922     8,407  
Net (decrease) increase in cash   (13,631 )   34,187  
Cash at beginning of period   112,182     58,801  
Cash at end of period   $ 98,551     $ 92,988  
 
 
 
 
 
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
 
    Three months ended
    September 30,   Percent of   September 30,   Percent of       Percent
    2013   Revenue   2012   Revenue   Change   Change
Operating revenue                        
Forward Air   $ 128.8     75.8 %   $ 124.5     86.8 %   $ 4.3     3.5 %
FASI   29.8     17.5     19.5     13.6     10.3     52.8  
TQI   12.4     7.3             12.4     100.0  
Intercompany eliminations   (1.0 )   (0.6 )   (0.5 )   (0.4 )   (0.5 )   100.0  
Total   170.0     100.0     143.5     100.0     26.5     18.5  
                         
Purchased transportation                        
Forward Air   59.9     46.5     58.1     46.7     1.8     3.1  
FASI   9.1     30.5     5.4     27.7     3.7     68.5  
TQI   6.9     55.6             6.9     100.0  
Intercompany eliminations   (0.7 )   70.0     (0.4 )   80.0     (0.3 )   75.0  
Total   75.2     44.2     63.1     44.0     12.1     19.2  
                         
Salaries, wages and employee benefits                        
Forward Air   27.3     21.2     24.3     19.5     3.0     12.3  
FASI   10.0     33.6     7.4     37.9     2.6     35.1  
TQI   1.8     14.5             1.8     100.0  
Total   39.1     23.0     31.7     22.1     7.4     23.3  
                         
Operating leases                        
Forward Air   4.9     3.8     5.2     4.2     (0.3 )   (5.8 )
FASI   2.1     7.0     1.7     8.7     0.4     23.5  
TQI                        
Total   7.0     4.1     6.9     4.8     0.1     1.4  
                         
Depreciation and amortization                        
Forward Air   4.2     3.3     4.3     3.4     (0.1 )   (2.3 )
FASI   1.3     4.4     1.2     6.2     0.1     8.3  
TQI   0.7     5.7             0.7     100.0  
Total   6.2     3.7     5.5     3.8     0.7     12.7  
                         
Insurance and claims                        
Forward Air   2.3     1.8     2.6     2.1     (0.3 )   (11.5 )
FASI   0.8     2.7     0.5     2.6     0.3     60.0  
TQI   0.2     1.6             0.2     100.0  
Total   3.3     1.9     3.1     2.1     0.2     6.5  
                         
Fuel expense                        
Forward Air   0.9     0.7     1.0     0.8     (0.1 )   (10.0 )
FASI   1.7     5.7     1.3     6.7     0.4     30.8  
TQI   1.3     10.5             1.3     100.0  
Total   3.9     2.3     2.3     1.6     1.6     69.6  
                         
Other operating expenses                        
Forward Air   8.7     6.7     9.7     7.8     (1.0 )   (10.3 )
FASI   3.4     11.4     1.7     8.7     1.7     100.0  
TQI   0.6     4.8             0.6     100.0  
Intercompany eliminations   (0.3 )   30.0     (0.1 )   20.0     (0.2 )   200.0  
Total   12.4     7.3     11.3     7.9     1.1     9.7  
                         
Income from operations                        
Forward Air   20.6     16.0     19.3     15.5     1.3     6.7  
FASI   1.4     4.7     0.3     1.5     1.1     366.7  
TQI   0.9     7.3             0.9     100.0  
Total   $ 22.9     13.5 %   $ 19.6     13.7 %   $ 3.3     16.8 %
 
 
 
 
 
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
 
    Nine months ended
    September 30,   Percent of   September 30,   Percent of       Percent
    2013   Revenue   2012   Revenue   Change   Change
Operating revenue                        
Forward Air   $ 369.0     78.3 %   $ 373.4     87.1 %   $ (4.4 )   (1.2 )%
FASI   76.4     16.2     57.0     13.3     19.4     34.0  
TQI   28.5     6.0             28.5     100.0  
Intercompany eliminations   (2.5 )   (0.5 )   (1.5 )   (0.4 )   (1.0 )   66.7  
Total   471.4     100.0     428.9     100.0     42.5     9.9  
                         
Purchased transportation                        
Forward Air   168.9     45.8     173.3     46.4     (4.4 )   (2.5 )
FASI   23.6     30.9     15.5     27.2     8.1     52.3  
TQI   15.9     55.8             15.9     100.0  
Intercompany eliminations   (1.9 )   76.0     (1.3 )   86.7     (0.6 )   46.2  
Total   206.5     43.8     187.5     43.7     19.0     10.1  
                         
Salaries, wages and employee benefits                        
Forward Air   78.0     21.1     75.4     20.2     2.6     3.4  
FASI   26.8     35.1     22.0     38.6     4.8     21.8  
TQI   4.4     15.4             4.4     100.0  
Total   109.2     23.2     97.4     22.7     11.8     12.1  
                         
Operating leases                        
Forward Air   14.9     4.0     15.3     4.1     (0.4 )   (2.6 )
FASI   5.9     7.7     5.5     9.7     0.4     7.3  
TQI   0.1     0.4             0.1     100.0  
Total   20.9     4.4     20.8     4.9     0.1     0.5  
                         
Depreciation and amortization                        
Forward Air   12.1     3.3     12.5     3.4     (0.4 )   (3.2 )
FASI   3.6     4.7     3.5     6.1     0.1     2.9  
TQI   1.7     6.0             1.7     100.0  
Total   17.4     3.7     16.0     3.7     1.4     8.8  
                         
Insurance and claims                        
Forward Air   6.5     1.8     6.4     1.7     0.1     1.6  
FASI   2.3     3.0     1.7     3.0     0.6     35.3  
TQI   0.4     1.4             0.4     100.0  
Total   9.2     1.9     8.1     1.9     1.1     13.6  
                         
Fuel expense                        
Forward Air   2.9     0.8     3.2     0.9     (0.3 )   (9.4 )
FASI   4.8     6.3     4.1     7.2     0.7     17.1  
TQI   2.8     9.8             2.8     100.0  
Total   10.5     2.2     7.3     1.7     3.2     43.8  
                         
Other operating expenses                        
Forward Air   26.9     7.3     27.4     7.3     (0.5 )   (1.8 )
FASI   9.0     11.8     5.1     8.9     3.9     76.5  
TQI   1.3     4.5             1.3     100.0  
Intercompany eliminations   (0.6 )   24.0     (0.2 )   13.3     (0.4 )   200.0  
Total   36.6     7.8     32.3     7.5     4.3     13.3  
                         
Income (loss) from operations                        
Forward Air   58.8     15.9     59.9     16.0     (1.1 )   (1.8 )
FASI   0.4     0.5     (0.4 )   (0.7 )   0.8     (200.0 )
TQI   1.9     6.7             1.9     100.0  
Total   $ 61.1     13.0 %   $ 59.5     13.9 %   $ 1.6     2.7 %
 
 
 
 
 
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
             
    Three months ended
    September 30,   September 30,   Percent
    2013   2012   Change
             
Operating ratio   84.0 %   84.5 %   (0.6 )%
             
Business days   64.0     63.0     1.6  
Business weeks   12.8     12.6     1.6  
             
             
Airport-to-airport:            
Tonnage            

Total pounds 1

  462,297     438,265     5.5  

Average weekly pounds 1

  36,117     34,783     3.8  
             
Linehaul shipments            
Total linehaul   688,257     691,228     (0.4 )
Average weekly   53,770     54,859     (2.0 )
             
Forward Air Complete shipments   124,184     177,216     (29.9 )
As a percentage of linehaul shipments   18.0 %   25.6 %   (29.7 )
             
Average linehaul shipment size   672     634     6.0  
             

Revenue per pound 2

           
Linehaul yield   $ 16.97     $ 17.14     (0.8 )
Fuel surcharge impact   1.85     1.80     0.2  
Forward Air Complete impact   3.08     3.20     (0.5 )
Total airport-to-airport yield   $ 21.90     $ 22.14     (1.1 )
             
             
Logistics:            
Miles            

Owner operator 1

  8,915     8,485     5.1  

Third party 1

  3,815     4,500     (15.2 )
Total Miles   12,730     12,985     (2.0 )
             
Revenue per mile   $ 1.60     $ 1.61     (0.6 )
             
Cost per mile   $ 1.20     $ 1.23     (2.4 )%
             
             

1 - In thousands

2 - In cents per pound; percentage change is expressed as a percent of total yield.

 
 
 
 
 
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
             
    Nine months ended
    September 30,   September 30,   Percent
    2013   2012   Change
             
Operating ratio   84.1 %   84.0 %   0.1 %
             
Business days   191.0     191.0      
Business weeks   38.2     38.2      
             
             
Airport-to-airport:            
Tonnage            

Total pounds 1

  1,320,382     1,322,390     (0.2 )

Average weekly pounds 1

  34,565     34,618     (0.2 )
             
Linehaul shipments            
Total linehaul   2,038,599     2,064,323     (1.2 )
Average weekly   53,366     54,040     (1.2 )
             
Forward Air Complete shipments   353,270     509,527     (30.7 )
As a percentage of linehaul shipments   17.3 %   24.7 %   (30.0 )
             
Average linehaul shipment size   648     641     1.1  
             

Revenue per pound 2

           
Linehaul yield   $ 17.08     $ 17.04     0.2  
Fuel surcharge impact   1.92     1.88     0.2  
Forward Air Complete impact   2.90     3.04     (0.7 )
Total airport-to-airport yield   $ 21.90     $ 21.96     (0.3 )
             
             
Logistics:            
Miles            

Owner operator 1

  26,399     26,590     (0.7 )

Third party 1

  10,663     12,010     (11.2 )
Total Miles   37,062     38,600     (4.0 )
             
Revenue per mile   $ 1.61     $ 1.64     (1.8 )
             
Cost per mile   $ 1.19     $ 1.24     (4.0 )%
             
             

1 - In thousands

2 - In cents per pound; percentage change is expressed as a percent of total yield.

 
 
 
 

Important Information

This press release contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, our inability to maintain our historical growth rate because of a decreased volume of freight moving through our network or decreased average revenue per pound of freight moving through our network, increasing competition and pricing pressure, surplus inventories, loss of a major customer, the creditworthiness of our customers and their ability to pay for services rendered, our ability to secure terminal facilities in desirable locations at reasonable rates, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, claims for property damage, personal injuries or workers' compensation, employment matters including rising health care costs, enforcement of and changes in governmental regulations, environmental and tax matters, the handling of hazardous materials, the availability and compensation of qualified independent owner-operators and freight handlers needed to serve our transportation needs and our inability to successfully integrate acquisitions. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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