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Forward Air Corporation Reports Second Quarter 2020 Results

Forward Air Corporation (NASDAQ:FWRD) today reported financial results for the three and six months ended June 30, 2020 as presented in the tables below on a continuing operations basis (Pool Distribution is being reported as a discontinued operation).

Tom Schmitt, Chairman, President and CEO, commenting on the Company's second quarter results said, "I could not be more proud of our teams for stepping up in a huge way for our customers, bringing them back up from April lows in the toughest circumstances with record service levels. By June our top and bottom lines were ahead of last year on a continuing operations basis and were comparable to last year when adjusted for one-time items."

Continuing Operations

Three months ended

(in thousands, except per share data)

June 30, 2020 1

June 30, 2019

Change

Percent Change

Operating revenue

$

281,678

$

302,887

$

(21,209

)

(7.0

)%

Income from operations

$

13,914

$

29,070

$

(15,156

)

(52.1

)%

Operating margin

4.9

%

9.6

%

(470

) bps

Net income

$

9,225

$

21,244

$

(12,019

)

(56.6

)%

Net income per diluted share

$

0.33

$

0.74

$

(0.41

)

(55.4

)%

Cash provided by operating activities

$

29,101

$

25,715

$

3,386

13.2

%

Non-GAAP Financial Measures: 2

EBITDA

$

23,327

$

38,296

$

(14,969

)

(39.1

)%

Free cash flow

$

17,806

$

14,436

$

3,370

23.3

%

 

1 Results for the three months ended June 30, 2020 include several non-recurring items including a $2.1 million gain from changes in fair value on an earn-out due to the timing of expected new business wins, partially offset by $1.0 million of severance and $0.7 million in reserves for customers negatively impacted by COVID-19.

2 EBITDA and free cash flow are non-GAAP financial measures and reconciliations of these non-GAAP financial measures are provided in the below financial tables.

Michael J. Morris, CFO, commenting on the Company’s third quarter 2020 guidance for continuing operations said “We expect third quarter year-on-year revenue growth to be 1% to 5% and net income per diluted share to be between $0.40 and $0.44.”

On July 21, 2020, our Board of Directors declared a quarterly cash dividend of $0.18 per share of common stock. The dividend is payable to shareholders of record at the close of business on August 20, 2020 and is expected to be paid on September 9, 2020. This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.72 for the full year 2020, payable in quarterly increments of $0.18 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 and position.

On April 23, 2020, the Board approved a strategy to divest the Pool Distribution business (“Pool”). Accordingly, the results of operations and cash flows for Pool have been presented as discontinued operations and have been excluded from continuing operations in this release for all periods presented. In addition, Pool assets and liabilities are reflected as “held-for-sale” on the Consolidated Balance Sheets in this release. For more information regarding Pool discontinued operations, please see the Company’s Form 10-Q for the quarter ended June 30, 2020 expected to be filed with the Securities and Exchange Commission (the “SEC”) on July 31, 2020.

Review of Financial Results
Forward Air will hold a conference call to discuss second quarter 2020 results on Friday, July 31, 2020 at 9:00 a.m. EDT. The Company’s conference call will be available online on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, where investors can easily find or navigate to pertinent information about us, or by dialing (844) 767-5679, Access Code: 147112. A replay of the conference call will be available on the Investor Relations portion of the Company’s website at www.forwardaircorp.com beginning shortly after completion of the live call.

About Forward Air Corporation
Forward Air keeps your business moving forward by providing services within three business segments: Expedited Freight (provides expedited regional, inter-regional and national LTL services, including local pick-up and delivery, final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling); Intermodal (provides first-and last-mile high-value drayage services both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services); and Pool Distribution (provides high frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region). For more information, visit our website at www.forwardaircorp.com.

Forward Air Corporation

Consolidated Statements of Comprehensive Income

(Unaudited, in thousands, except per share data)

Three months ended

Six months ended

June 30,
2020

June 30,
2019

June 30,
2020

June 30,
2019

(As Adjusted)

(As Adjusted)

Operating revenue:

Expedited Freight

$

235,658

$

253,286

$

489,287

$

478,944

Intermodal

46,428

50,539

98,888

104,654

Eliminations and other operations

(408

)

(938

)

(940

)

(1,750

)

Operating revenue

281,678

302,887

587,235

581,848

Operating expenses:

Purchased transportation

142,069

143,436

292,667

275,987

Salaries, wages and employee benefits

63,772

63,841

133,331

123,798

Operating leases

17,387

16,124

35,271

31,001

Depreciation and amortization

9,413

9,227

18,747

18,515

Insurance and claims

7,722

11,757

17,766

19,745

Fuel expense

2,519

4,467

6,532

8,582

Other operating expenses

24,882

24,965

53,234

51,448

Total operating expenses

267,764

273,817

557,548

529,076

Income (loss) from continuing operations:

Expedited Freight

11,753

28,187

26,933

49,093

Intermodal

4,413

5,245

8,126

11,426

Other operations

(2,252

)

(4,362

)

(5,372

)

(7,747

)

Income from continuing operations

13,914

29,070

29,687

52,772

Other expense:

Interest expense

(1,198

)

(581

)

(2,051

)

(1,156

)

Other, net

(1

)

(2

)

Total other expense

(1,198

)

(582

)

(2,051

)

(1,158

)

Income before income taxes

12,716

28,488

27,636

51,614

Income tax expense

3,491

7,244

6,995

12,683

Net income from continuing operations

9,225

21,244

20,641

38,931

(Loss) income from discontinued operations, net of tax

(6,071

)

1,086

(9,112

)

1,806

Net income and comprehensive income

$

3,154

$

22,330

$

11,529

$

40,737

Net income per share:

Basic net income (loss) per share:

Continuing operations

$

0.33

$

0.74

$

0.72

$

1.35

Discontinued operations

(0.22

)

0.04

(0.31

)

0.07

Net income per share

$

0.11

$

0.78

$

0.41

$

1.42

Diluted net income (loss) per share:

Continuing operations

$

0.33

$

0.74

$

0.72

$

1.35

Discontinued operations

(0.22

)

0.04

(0.32

)

0.06

Net income per share

$

0.11

$

0.78

$

0.40

$

1.41

Dividends per share:

$

0.18

$

0.18

$

0.36

$

0.36

Expedited Freight Segment Information

(In millions)

(Unaudited)

Three months ended

June 30,

Percent of

June 30,

Percent of

Percent

2020 1

Revenue

2019

Revenue

Change

Change

(As Adjusted)

Operating revenue:

Network 2

$

134.2

56.9

%

$

172.5

68.1

%

$

(38.3

)

(22.2

)%

Truckload

41.9

17.8

48.6

19.2

(6.7

)

(13.8

)

Final Mile

53.4

22.7

25.0

9.9

28.4

113.6

Other

6.2

2.6

7.2

2.8

(1.0

)

(13.9

)

Total operating revenue

235.7

100.0

253.3

100.0

(17.6

)

(6.9

)

Operating expenses:

Purchased transportation

127.5

54.1

125.8

49.7

1.7

1.4

Salaries, wages and employee benefits

50.5

21.4

50.9

20.1

(0.4

)

(0.8

)

Operating leases

13.3

5.6

12.1

4.8

1.2

9.9

Depreciation and amortization

6.7

2.8

7.5

3.0

(0.8

)

(10.7

)

Insurance and claims

5.7

2.4

6.6

2.6

(0.9

)

(13.6

)

Fuel expense

1.4

0.6

2.7

1.1

(1.3

)

(48.1

)

Other operating expenses

18.8

8.0

19.5

7.7

(0.7

)

(3.6

)

Total operating expenses

223.9

95.0

225.1

88.9

(1.2

)

(0.5

)

Income from operations

$

11.8

5.0

%

$

28.2

11.1

%

$

(16.4

)

(58.2

)%

1 Includes revenues and operating expenses from the acquisition of FSA and Linn Star, which were acquired in April 2019 and January 2020, respectively. FSA results are partially included in the prior period. Linn Star results are not included in the prior period.

2 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

Expedited Freight Operating Statistics

Three months ended

June 30,

June 30,

Percent

2020

2019

Change

(As Adjusted)

Business days

64

64

%

Tonnage 1,2

Total pounds

522,031

626,748

(16.7

)

Pounds per day

8,157

9,793

(16.7

)

Shipments 1,2

Total shipments

963

1,014

(5.0

)

Shipments per day

15.0

15.8

(5.0

)

Weight per shipment

542

618

(12.3

)

Revenue per hundredweight 3

$

26.32

$

27.39

(3.9

)

Revenue per hundredweight, ex fuel 3

$

23.09

$

22.91

0.8

Revenue per shipment 3

$

139

$

171

(18.7

)

Revenue per shipment, ex fuel 3

$

122

$

144

(15.3

)

Network revenue from door-to-door shipments as a percentage of network revenue 3,4

49.9

%

39.9

%

25.1

Network gross margin 5

50.6

%

55.8

%

(9.3

)%

1 In thousands

2 Excludes accessorial, full Truckload and Final Mile products

3 Includes intercompany revenue between the Network and Truckload revenue streams

4 Door-to-door shipments include all shipments with a pickup and/or delivery

5 Network revenue less Network purchased transportation as a percentage of Network revenue

Intermodal Segment Information

(In millions)

(Unaudited)

Three months ended

June 30,

Percent of

June 30,

Percent of

Percent

2020 1

Revenue

2019

Revenue

Change

Change

Operating revenue

$

46.4

100.0

%

$

50.5

100.0

%

$

(4.1

)

(8.1

)%

Operating expenses:

Purchased transportation

14.9

32.1

18.2

36.0

(3.3

)

(18.1

)

Salaries, wages and employee benefits

11.7

25.2

12.4

24.6

(0.7

)

(5.6

)

Operating leases

4.0

8.6

4.0

7.9

Depreciation and amortization

2.6

5.6

1.8

3.6

0.8

44.4

Insurance and claims

1.8

3.9

1.7

3.4

0.1

5.9

Fuel expense

1.1

2.4

1.7

3.4

(0.6

)

(35.3

)

Other operating expenses

5.9

12.7

5.5

10.9

0.4

7.3

Total operating expenses

42.0

90.5

45.3

89.7

(3.3

)

(7.3

)

Income from operations

$

4.4

9.5

%

$

5.2

10.3

%

$

(0.8

)

(15.4

)%

1 Includes revenues and operating expenses from the acquisition of OST, which was acquired in July 2019 (and is not included in the prior period).

Intermodal Operating Statistics

Three months ended

June 30,

June 30,

Percent

2020

2019

Change

Drayage shipments

68,974

76,074

(9.3

)%

Drayage revenue per shipment

$

556

$

571

(2.6

)

Number of locations

24

21

14.3

%

 

Forward Air Corporation

Consolidated Balance Sheets

(In thousands)

(Unaudited)

June 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

80,916

$

64,749

Accounts receivable, net

130,759

136,214

Other current assets

23,745

20,403

Current assets held for sale

11,871

14,952

Total current assets

247,291

236,318

Property and equipment

381,834

373,571

Less accumulated depreciation and amortization

187,239

180,815

Total property and equipment, net

194,595

192,756

Operating lease right-of-use assets

123,925

105,170

Goodwill and other acquired intangibles:

Goodwill

240,933

215,699

Other acquired intangibles, net of accumulated amortization

148,452

124,857

Total goodwill and other acquired intangibles, net

389,385

340,556

Other assets

42,710

39,374

Noncurrent assets held for sale

74,593

76,704

Total assets

$

1,072,499

$

990,878

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

27,682

$

25,411

Accrued expenses

48,041

44,154

Other current liabilities

3,784

5,318

Current portion of debt and finance lease obligations

1,445

1,421

Current portion of operating lease obligations

42,108

35,886

Current liabilities held for sale

23,792

24,974

Total current liabilities

146,852

137,164

Debt and finance lease obligations, less current portion

136,549

72,249

Operating lease obligations, less current portion

82,404

69,678

Other long-term liabilities

58,194

56,448

Deferred income taxes

45,883

41,214

Noncurrent liabilities held for sale

36,325

36,943

Shareholders’ equity:

Common stock

277

279

Additional paid-in capital

233,086

226,869

Retained earnings

332,929

350,034

Total shareholders’ equity

566,292

577,182

Total liabilities and shareholders’ equity

$

1,072,499

$

990,878

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three months ended

June 30, 2020

June 30, 2019

Operating activities:

Net income from continuing operations

$

9,225

$

21,244

Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations

Depreciation and amortization

9,413

9,227

Change in fair value of earn-out liability

(2,108

)

Share-based compensation

2,429

3,045

Loss (gain) on disposal of property and equipment, net

75

(137

)

Provision for loss on receivables

887

2

Provision for revenue adjustments

745

738

Deferred income tax expense

3,443

2,367

Changes in operating assets and liabilities

Accounts receivable

(61

)

(6,566

)

Prepaid expenses and other current assets

(493

)

(7,371

)

Income taxes

(1,962

)

(6,599

)

Accounts payable and accrued expenses

7,508

9,765

Net cash provided by operating activities of continuing operations

29,101

25,715

Investing activities:

Proceeds from disposal of property and equipment

268

624

Purchases of property and equipment

(11,563

)

(11,903

)

Acquisition of business, net of cash acquired

(27,000

)

Other

6

Net cash used in investing activities of continuing operations

(11,295

)

(38,273

)

Financing activities:

Payments of finance lease obligations

(340

)

(69

)

Proceeds from senior credit facility

10,000

Payments on earn-out liability

(5,284

)

Proceeds from exercise of stock options

448

Payments of cash dividends

(5,037

)

(5,144

)

Repurchase of common stock (repurchase program)

(24,436

)

Proceeds from common stock issued under employee stock purchase plan

294

261

Cash settlement of share-based awards for tax withholdings

(614

)

(49

)

(Distributions to) contributions from subsidiary

(3,154

)

4,159

Net cash used in financing activities from continuing operations

(14,135

)

(14,830

)

Net increase (decrease) in cash of continuing operations

3,671

(27,388

)

Cash from discontinued operations:

Cash (used in) provided by operating activities of discontinued operations, net

(3,010

)

4,523

Cash used in investing activities of discontinued operations, net

(144

)

(364

)

Cash provided by (used in) financing activities of discontinued operations, net

3,154

(4,159

)

Net increase (decrease) in cash

3,671

(27,388

)

Cash at beginning of period of continuing operations

77,245

42,165

Cash at beginning of period of discontinued operations/held for sale

Net increase (decrease) in cash

3,671

(27,388

)

Less: cash at end of period of discontinued operations/held for sale

Cash at end of period of continuing operations

$

80,916

$

14,777

Forward Air Corporation

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six months ended

June 30, 2020

June 30, 2019

Operating activities:

Net income from continuing operations

$

20,641

$

38,931

Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations

Depreciation and amortization

18,747

18,515

Change in fair value of earn-out liability

(2,702

)

Share-based compensation

5,507

5,910

Loss (gain) on disposal of property and equipment, net

9

(218

)

Provision for loss on receivables

688

635

Provision for revenue adjustments

1,787

1,277

Deferred income tax expense

4,668

3,290

Changes in operating assets and liabilities

Accounts receivable

2,979

(3,922

)

Prepaid expenses and other current assets

312

(4,842

)

Income taxes

(341

)

(2,182

)

Accounts payable and accrued expenses

7,634

6,876

Net cash provided by operating activities of continuing operations

59,929

64,270

Investing activities:

Proceeds from disposal of property and equipment

988

1,008

Purchases of property and equipment

(14,214

)

(14,214

)

Acquisition of business, net of cash acquired

(55,931

)

(27,000

)

Net cash used in investing activities of continuing operations

(69,157

)

(40,206

)

Financing activities:

Payments of finance lease obligations

(676

)

(137

)

Proceeds from senior credit facility

65,000

10,000

Payments on earn-out liability

(5,284

)

Proceeds from exercise of stock options

1,278

Payments of cash dividends

(10,087

)

(10,333

)

Repurchase of common stock (repurchase program)

(15,259

)

(38,617

)

Proceeds from common stock issued under employee stock purchase plan

294

261

Cash settlement of share-based awards for tax withholdings

(3,286

)

(2,770

)

(Distributions to) contributions from subsidiary

(5,307

)

5,374

Net cash provided by (used in) financing activities from continuing operations

25,395

(34,944

)

Net increase (decrease) in cash of continuing operations

16,167

(10,880

)

Cash from discontinued operations:

Cash (used in) provided by operating activities of discontinued operations, net

(4,672

)

7,494

Cash used in investing activities of discontinued operations, net

(635

)

(2,120

)

Cash provided by (used in) financing activities of discontinued operations, net

5,307

(5,374

)

Net increase (decrease) in cash

16,167

(10,880

)

Cash at beginning of period of continuing operations

64,749

25,657

Cash at beginning of period of discontinued operations/held for sale

Net increase (decrease) in cash

16,167

(10,880

)

Less: cash at end of period of discontinued operations/held for sale

Cash at end of period of continuing operations

$

80,916

$

14,777

 

Forward Air Corporation Reconciliation of U.S. GAAP and Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP (also referred to herein as “reported”). However, the Company also uses “Non-GAAP financial measures” that are derived on the basis of methodologies other than in accordance with GAAP. Specifically, the Company believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions and in evaluating the Company’s performance.

For the three and six months ended June 30, 2020 and 2019, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”) and free cash flow. All non-GAAP financial measures are presented on a continuing operations basis.

The Company believes that EBITDA from continuing operations improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization) and tax impacts as set out in the below tables. The Company believes that free cash flow from continuing operations is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance stockholder value.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the tables below present, for the periods indicated, a reconciliation of the Company's presented non-GAAP financial measures to the most directly comparable GAAP financial measures.

Forward Air Corporation

Reconciliation to U.S. GAAP

(In thousands)

(Unaudited)

Three months ended

Six months ended

Continuing Operations

June 30,
2020

June 30,
2019

June 30,
2020

June 30,
2019

Net income (GAAP)

$

9,225

$

21,244

$

20,641

$

38,931

Interest expense

1,198

581

2,051

1,156

Income tax expense

3,491

7,244

6,995

12,683

Depreciation and amortization

9,413

9,227

18,747

18,515

EBITDA (Non-GAAP)

$

23,327

$

38,296

$

48,434

$

71,285

Three months ended

Six months ended

Continuing Operations

June 30,
2020

June 30,
2019

June 30,
2020

June 30,
2019

Net cash provided by operating activities (GAAP)

$

29,101

$

25,715

$

59,929

$

64,270

Proceeds from disposal of property and equipment

268

624

988

1,008

Purchases of property and equipment

(11,563

)

(11,903

)

(14,214

)

(14,214

)

Free cash flow (Non-GAAP)

$

17,806

$

14,436

$

46,703

$

51,064

The following table summarizes supplemental guidance information that management believes to be useful.

Forward Air Corporation

Additional Guidance Data

(In thousands, except per share data)

(Unaudited)

Three months ended

Actual - Continuing Operations

June 30, 2020

Net income from continuing operations

$

9,225

Income allocated to participating securities

(13

)

Numerator for diluted income per share - net income

$

9,212

Fully diluted share count

27,726

Diluted earnings per share from continuing operations

$

0.33

Projected

Full year 2020

Projected continuing operations and consolidated tax rate

26.5

%

Projected capital expenditures, net

$

26,000

Projected

December 31, 2020

Projected year-end fully diluted share count

27,500

Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements included in this press release relate to expected impact of COVID-19, full year 2020 projected tax rate, share count, capital expenditures and the declaration of dividends.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these 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: prolonged impact of COVID-19 and actions taken to mitigate those impacts, economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the creditworthiness of our customers and their ability to pay for services rendered, more limited liquidity than expected which limits our ability to make key investments, the availability and compensation of qualified independent owner-operators and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2019.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Contacts:

Forward Air Corporation
Michael J. Morris, 404-362-8933
mmorris@forwardair.com

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