Forward Air's fiscal Q4 earnings fell 2.3% year-over-year to US$15.6M as operating revenue increased 16.5% to US$181.1M; for full year, earnings climbed 3.4% to US$54.5M, operating revenue rose 11.7% to US$652.5M
Cindy Allen
GREENEVILLE, Tennessee
,
February 11, 2014
(press release)
–
Forward Air Corporation (FWRD) today reported results for the fourth quarter and year ended December 31, 2013. Operating revenue for the quarter ended December 31, 2013 increased 16.5% to $181.1 million from $155.5 million for the same quarter in 2012. Income from operations was $23.2 million, compared with $24.0 million for the fourth quarter of 2012, a decrease of 3.3%. Net income per diluted share for the fourth quarter of 2013 was $0.50 compared with $0.54 in the same quarter of 2012. Operating revenue for the year ended December 31, 2013 increased 11.7% to $652.5 million from $584.4 million for the year ended December 31, 2012. Income from operations was $84.4 million, compared with $83.5 million in 2012. Net income per diluted share for the year ended December 31, 2013 was $1.77 compared with $1.78 in 2012. Bruce A. Campbell, Chairman, President and CEO, said, “Without a doubt, the fourth quarter of 2013 proved to be more challenging than we anticipated. Like all of the transports, we have continuously fought weather related issues. From the middle of November up until this past week, weather has been an issue in one or more of our operating regions. While there is only so much we can do to mitigate the impact of weather, we do have plans in place to address the opportunities that are specific to our Company.” Starting with the Forward Air, Inc. business segment, Mr. Campbell said, “Airport-to airport volumes were up a respectable 5.9% and Complete, without the major customer loss in the prior year comparison, has returned to growth mode. The issue simply put was pricing. We made the strategic decision not to push through a general rate increase (GRI) this past fall. We have subsequently seen a tightening of capacity and a continued decline in our competitors’ service levels which will allow us to implement a GRI effective the first week of March. With year-over-year weekly tonnage growth consistently in the mid-single digits and an estimated 2.75% net benefit from our 2014 GRI, we feel our airport-to-airport network is well positioned for the balance of the year.” Turning to our TQI business segment, Mr. Campbell said, “With our new operating system now in place, additional new equipment coming online and the ongoing success in recruiting owner-operators we are excited at what will be our first full year of our TQI service offering. We feel confident of substantial topline growth producing double digit operating margins for 2014.” In closing Mr. Campbell said, “This past week we closed on the previously announced purchase of drayage and intermodal transportation provider Central States Trucking (CST). Our team is very excited about the potential of this new service offering. With a solid group of talented transportation professionals and a scalable platform, for organic as well as acquisition related growth, we look forward to taking advantage of ample opportunities in 2014. We’re delighted to welcome CST to the Forward Air family.” In commenting on the Company's guidance for the first quarter, Rodney L. Bell, Senior Vice President and CFO said, “We anticipate our first quarter 2014 revenues will increase in the range of 19% to 23% over the comparable 2013 period, and we expect income per diluted share to be between $0.36 and $0.40 per share. This compares to $0.36 per share in the first quarter of 2013.” On February 7, 2014, our Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock. The dividend is payable to shareholders of record at the close of business on March 10, 2014, and is expected to be paid on March 24, 2014. This represents a 20% increase in our dividend as compared to the prior year quarter. This quarterly dividend is pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.48 per share of common stock, payable in quarterly increments of $0.12 per share of common stock. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the Company's financial performance. Also, on February 7, 2014, our Board of Directors approved a stock repurchase authorization for up to two million shares of the Company’s common stock. In connection with this action, the board cancelled the Company’s 2007 share repurchase authorization. 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. Share repurchases may be commenced or suspended from time to time for any reason. The Company currently has approximately 30,522,079 shares outstanding. Review of Financial Results Forward Air will hold a conference call to discuss fourth quarter and year end 2013 results on Tuesday, February 11, 2014 at 9:00 a.m. EST. The Company's conference call will be available online at www.forwardair.com or by dialing 877-209-9922. 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 brokerage transportation services. Headquartered in central Michigan, we service the United States, Canada and Mexico. 2012 (a) December 31, December 31, 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.
Forward Air Corporation
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three months ended
Year ended
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Operating revenue:
Airport-to-airport
$
103,866
$
100,691
$
392,323
$
390,697
Logistics
33,347
20,473
120,822
83,787
Other
6,947
6,639
26,570
26,137
Pool distribution
36,925
27,722
112,766
83,825
Total operating revenue
181,085
155,525
652,481
584,446
Operating expenses:
Purchased transportation
Airport-to-airport
44,241
40,519
162,847
160,065
Logistics
22,643
15,447
82,339
63,203
Other
2,204
1,989
7,911
7,241
Pool distribution
10,140
7,221
32,593
22,211
Total purchased transportation
79,228
65,176
285,690
252,720
Salaries, wages and employee benefits
41,949
37,597
151,097
135,006
Operating leases
8,387
7,164
29,310
27,989
Depreciation and amortization
6,202
5,081
23,579
21,021
Insurance and claims
3,455
3,177
12,619
11,309
Fuel expense
4,610
2,767
15,145
10,038
Other operating expenses
14,051
10,529
50,686
42,831
Total operating expenses
157,882
131,491
568,126
500,914
Income from operations
23,203
24,034
84,355
83,532
Other income (expense):
Interest expense
(131
)
(150
)
(532
)
(391
)
Other, net
27
20
99
14
Total other expense
(104
)
(130
)
(433
)
(377
)
Income before income taxes
23,099
23,904
83,922
83,155
Income taxes
7,514
7,944
29,455
30,487
Net income
$
15,585
$
15,960
$
54,467
$
52,668
Net income per share:
Basic
$
0.51
$
0.55
$
1.81
$
1.82
Diluted
$
0.50
$
0.54
$
1.77
$
1.78
Weighted average shares outstanding:
Basic
30,490
29,190
30,135
28,967
Diluted
31,129
29,716
30,762
29,536
Dividends per share:
$
0.10
$
0.10
$
0.40
$
0.34
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31,
2013
December 31,
Assets
Current assets:
Cash and cash equivalents
$
127,367
$
112,182
Accounts receivable, net
76,500
75,262
Other current assets
16,493
10,952
Total current assets
220,360
198,396
Property and equipment
271,050
239,138
Less accumulated depreciation and amortization
116,287
105,581
Net property and equipment
154,763
133,557
Goodwill and other acquired intangibles:
Goodwill
88,496
43,332
Other acquired intangibles, net of accumulated amortization
40,110
22,102
Total net goodwill and other acquired intangibles
128,606
65,434
Other assets
2,540
1,800
Total assets
$
506,269
$
399,187
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
16,267
$
11,168
Accrued expenses
18,275
16,476
Current portion of debt and capital lease obligations
69
276
Total current liabilities
34,611
27,920
Debt and capital lease obligations, less current portion
3
58
Other long-term liabilities
8,940
7,098
Deferred income taxes
26,850
12,440
Commitments and contingencies
Shareholders’ equity:
Common stock
305
292
Additional paid-in capital
107,726
64,644
Retained earnings
327,834
286,735
Total shareholders’ equity
435,865
351,671
Total liabilities and shareholders’ equity
$
506,269
$
399,187
(a) Taken from audited financial statements, which are not presented in their entirety.
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
December 31,
2013
December 31,
2012
Operating activities:
Net income
$
15,585
$
15,960
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
6,202
5,081
Gain on change in fair value of earn-out liability
(615
)
—
Share-based compensation
1,559
1,500
Loss on disposal of property and equipment
14
59
Provision for loss (recovery) on receivables
189
(27
)
Provision for revenue adjustments
826
586
Deferred income taxes
198
(417
)
Tax benefit for stock options exercised
(500
)
(31
)
Changes in operating assets and liabilities
Accounts receivable
5,709
(943
)
Prepaid expenses and other current assets
1,360
298
Accounts payable and accrued expenses
(175
)
841
Net cash provided by operating activities
30,352
22,907
Investing activities:
Proceeds from disposal of property and equipment
308
44
Purchases of property and equipment
(2,173
)
(854
)
Other
(18
)
4
Net cash used in investing activities
(1,883
)
(806
)
Financing activities:
Payments of debt and capital lease obligations
(24
)
(140
)
Proceeds from exercise of stock options
3,136
—
Payments of cash dividends
(3,070
)
(2,938
)
Repurchase of common stock (repurchase program)
(354
)
—
Common stock issued under employee stock purchase plan
159
140
Tax benefit for stock options exercised
500
31
Net cash provided by (used in) financing activities
347
(2,907
)
Net increase in cash
28,816
19,194
Cash at beginning of period
98,551
92,988
Cash at end of period
$
127,367
$
112,182
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Year ended
December 31,
2013
December 31,
2012
Operating activities:
Net income
$
54,467
$
52,668
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
23,579
21,021
Gain on change in fair value of earn-out liability
(615
)
—
Share-based compensation
6,178
6,050
(Gain) loss on disposal of property and equipment
(454
)
318
Provision for loss on receivables
423
199
Provision for revenue adjustments
2,531
2,003
Deferred income taxes
4,856
2,043
Tax benefit for stock options exercised
(3,707
)
(385
)
Changes in operating assets and liabilities
Accounts receivable
1,447
(6,542
)
Prepaid expenses and other current assets
(215
)
(1,331
)
Accounts payable and accrued expenses
2,349
(7,458
)
Net cash provided by operating activities
90,839
68,586
Investing activities:
Proceeds from disposal of property and equipment
1,973
911
Purchases of property and equipment
(35,439
)
(21,353
)
Acquisition of business, net of cash acquired
(45,328
)
—
Other
(129
)
(263
)
Net cash used in investing activities
(78,923
)
(20,705
)
Financing activities:
Payments of debt and capital lease obligations
(20,375
)
(551
)
Proceeds from exercise of stock options
33,002
15,740
Payments of cash dividends
(12,141
)
(9,947
)
Repurchase of common stock (repurchase program)
(354
)
—
Common stock issued under employee stock purchase plan
296
259
Cash settlement of share-based awards for minimum tax withholdings
(866
)
(386
)
Tax benefit for stock options exercised
3,707
385
Net cash provided by financing activities
3,269
5,500
Net increase in cash
15,185
53,381
Cash at beginning of year
112,182
58,801
Cash at end of year
$
127,367
$
112,182
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
Three months ended
December 31,
2013
Percent of
December 31,
2012
Percent of
Percent
Revenue
Revenue
Change
Change
Operating revenue
Forward Air
$
132.1
72.9
%
$
128.4
82.6
%
$
3.7
2.9
%
FASI
37.0
20.4
27.9
17.9
9.1
32.6
TQI
13.3
7.4
—
—
13.3
100.0
Intercompany eliminations
(1.3
)
(0.7
)
(0.8
)
(0.5
)
(0.5
)
62.5
Total
181.1
100.0
155.5
100.0
25.6
16.5
Purchased transportation
Forward Air
62.0
46.9
58.1
45.3
3.9
6.7
FASI
10.9
29.5
7.8
27.9
3.1
39.7
TQI
7.3
54.9
—
—
7.3
100.0
Intercompany eliminations
(1.0
)
76.9
(0.7
)
87.5
(0.3
)
42.9
Total
79.2
43.7
65.2
41.9
14.0
21.5
Salaries, wages and employee benefits
Forward Air
27.4
20.7
27.7
21.6
(0.3
)
(1.1
)
FASI
12.6
34.1
9.9
35.5
2.7
27.3
TQI
1.9
14.3
—
—
1.9
100.0
Total
41.9
23.2
37.6
24.2
4.3
11.4
Operating leases
Forward Air
5.4
4.1
5.2
4.1
0.2
3.8
FASI
3.0
8.1
2.0
7.2
1.0
50.0
TQI
—
—
—
—
—
—
Total
8.4
4.6
7.2
4.6
1.2
16.7
Depreciation and amortization
Forward Air
4.1
3.1
3.9
3.0
0.2
5.1
FASI
1.3
3.5
1.2
4.3
0.1
8.3
TQI
0.8
6.0
—
—
0.8
100.0
Total
6.2
3.4
5.1
3.3
1.1
21.6
Insurance and claims
Forward Air
2.3
1.7
2.5
1.9
(0.2
)
(8.0
)
FASI
1.0
2.7
0.7
2.5
0.3
42.9
TQI
0.2
1.5
—
—
0.2
100.0
Total
3.5
1.9
3.2
2.1
0.3
9.4
Fuel expense
Forward Air
1.0
0.8
1.0
0.8
—
—
FASI
2.2
5.9
1.7
6.1
0.5
29.4
TQI
1.4
10.5
—
—
1.4
100.0
Total
4.6
2.6
2.7
1.7
1.9
70.4
Other operating expenses
Forward Air
10.1
7.7
8.4
6.5
1.7
20.2
FASI
4.3
11.6
2.2
7.9
2.1
95.5
TQI
—
—
—
—
—
—
Intercompany eliminations
(0.3
)
23.1
(0.1
)
12.5
(0.2
)
200.0
Total
14.1
7.8
10.5
6.8
3.6
34.3
Income from operations
Forward Air
19.8
15.0
21.6
16.8
(1.8
)
(8.3
)
FASI
1.7
4.6
2.4
8.6
(0.7
)
(29.2
)
TQI
1.7
12.8
—
—
1.7
100.0
Total
$
23.2
12.8
%
$
24.0
15.4
%
$
(0.8
)
(3.3
)%
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
Year ended
2013
Percent of
2012
Percent of
Percent
Revenue
Revenue
Change
Change
Operating revenue
Forward Air
$
501.1
76.8
%
$
501.7
85.9
%
$
(0.6
)
(0.1
)%
FASI
113.4
17.4
85.0
14.5
28.4
33.4
TQI
41.8
6.4
—
—
41.8
100.0
Intercompany eliminations
(3.8
)
(0.6
)
(2.3
)
(0.4
)
(1.5
)
65.2
Total
652.5
100.0
584.4
100.0
68.1
11.7
Purchased transportation
Forward Air
230.9
46.1
231.4
46.1
(0.5
)
(0.2
)
FASI
34.5
30.4
23.3
27.4
11.2
48.1
TQI
23.2
55.5
—
—
23.2
100.0
Intercompany eliminations
(2.9
)
76.3
(2.0
)
87.0
(0.9
)
45.0
Total
285.7
43.8
252.7
43.3
33.0
13.1
Salaries, wages and employee benefits
Forward Air
105.4
21.0
103.1
20.6
2.3
2.2
FASI
39.3
34.7
31.9
37.5
7.4
23.2
TQI
6.4
15.3
—
—
6.4
100.0
Total
151.1
23.2
135.0
23.1
16.1
11.9
Operating leases
Forward Air
20.2
4.0
20.4
4.1
(0.2
)
(1.0
)
FASI
9.0
7.9
7.6
9.0
1.4
18.4
TQI
0.1
0.2
—
—
0.1
100.0
Total
29.3
4.5
28.0
4.8
1.3
4.6
Depreciation and amortization
Forward Air
16.2
3.2
16.4
3.3
(0.2
)
(1.2
)
FASI
5.0
4.4
4.7
5.5
0.3
6.4
TQI
2.4
5.8
—
—
2.4
100.0
Total
23.6
3.6
21.1
3.6
2.5
11.8
Insurance and claims
Forward Air
8.7
1.8
8.9
1.8
(0.2
)
(2.2
)
FASI
3.3
2.9
2.4
2.8
0.9
37.5
TQI
0.5
1.2
—
—
0.5
100.0
Total
12.5
1.9
11.3
1.9
1.2
10.6
Fuel expense
Forward Air
4.0
0.8
4.2
0.8
(0.2
)
(4.8
)
FASI
7.0
6.2
5.8
6.8
1.2
20.7
TQI
4.2
10.1
—
—
4.2
100.0
Total
15.2
2.3
10.0
1.7
5.2
52.0
Other operating expenses
Forward Air
37.0
7.4
35.8
7.1
1.2
3.4
FASI
13.2
11.6
7.3
8.6
5.9
80.8
TQI
1.4
3.3
—
—
1.4
100.0
Intercompany eliminations
(0.9
)
23.7
(0.3
)
13.0
(0.6
)
200.0
Total
50.7
7.8
42.8
7.3
7.9
18.5
Income from operations
Forward Air
78.7
15.7
81.5
16.2
(2.8
)
(3.4
)
FASI
2.1
1.9
2.0
2.4
0.1
5.0
TQI
3.6
8.6
—
—
3.6
100.0
Total
$
84.4
12.9
%
$
83.5
14.3
%
$
0.9
1.1
%
Forward Air Corporation
Forward Air Inc. Operating Statistics
Three months ended
December 31,
December 31,
Percent
2013
2012
Change
Operating ratio
85.0
%
83.2
%
2.2
%
Business days
64.0
64.0
—
Business weeks
12.8
12.8
—
Airport-to-airport:
Tonnage
Total pounds ¹
482,861
456,007
5.9
Average weekly pounds ¹
37,724
35,626
5.9
Linehaul shipments
Total linehaul
716,672
727,274
(1.5
)
Average weekly
55,990
56,818
(1.5
)
Forward Air Complete shipments
122,735
135,680
(9.5
)
As a percentage of linehaul shipments
17.1
%
18.7
%
(8.6
)
Average linehaul shipment size
674
627
7.5
Revenue per pound ²
Linehaul yield
$
17.00
$
17.41
(1.9
)
Fuel surcharge impact
1.75
1.95
(0.9
)
Forward Air Complete impact
2.80
2.74
0.3
Total airport-to-airport yield
$
21.55
$
22.10
(2.5
)
Logistics:
Miles
Owner operator ¹
8,001
8,501
(5.9
)
Third party ¹
4,253
4,152
2.4
Total Miles
12,254
12,653
(3.2
)
Revenue per mile
$
1.69
$
1.65
2.4
Cost per mile
$
1.27
$
1.22
4.1
%
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
Year ended
December 31,
December 31,
Percent
2013
2012
Change
Operating ratio
84.3
%
83.8
%
0.6
%
Business days
255.0
255.0
—
Business weeks
51.0
51.0
—
Airport-to-airport:
Tonnage
Total pounds ¹
1,803,243
1,778,397
1.4
Average weekly pounds ¹
35,358
34,871
1.4
Linehaul shipments
Total linehaul
2,755,271
2,791,597
(1.3
)
Average weekly
54,025
54,737
(1.3
)
Forward Air Complete shipments
476,005
645,207
(26.2
)
As a percentage of linehaul shipments
17.3
%
23.1
%
(25.1
)
Average linehaul shipment size
654
637
2.7
Revenue per pound ²
Linehaul yield
$
17.06
$
17.13
(0.3
)
Fuel surcharge impact
1.87
1.90
(0.2
)
Forward Air Complete impact
2.88
2.97
(0.4
)
Total airport-to-airport yield
$
21.81
$
22.00
(0.9
)
Logistics:
Miles
Owner operator ¹
34,401
35,091
(2.0
)
Third party ¹
14,916
16,162
(7.7
)
Total Miles
49,317
51,253
(3.8
)
Revenue per mile
$
1.63
$
1.64
(0.6
)
Cost per mile
$
1.21
$
1.24
(2.4
)%
¹ - In thousands
² - In cents per pound; percentage change is expressed as a percent of total yield.
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