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

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.”

Moving to the Forward Air Solutions segment, Mr. Campbell said, “With substantial year-over-year revenue growth but a decline in operating income, we were clearly disappointed with Solutions fourth quarter results. We have developed a comprehensive plan with the sole focus on improving operating margins. We believe this plan, which includes an across the board GRI, to be very actionable with immediate and quantifiable results expected within the first half of 2014.”

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.

 
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,

2012 (a)

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
     

December 31,
2013

    Percent of    

December 31,
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.  
   

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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