Forward Air Corporation Reports Fourth Quarter 2019 Results

Forward Air Corporation (NASDAQ:FWRD) today reported financial results for the three and twelve months ended December 31, 2019.

Revenue for the three months ended December 31, 2019 increased 7.0% to $381.5 million from $356.6 million for the same period of 2018. Income from operations was $32.9 million compared to $35.0 million in the prior year period. Net income during the three months ended December 31, 2019 was $24.2 million compared to $27.7 million in the same period of 2018. Net income per diluted share for the three months ended December 31, 2019 was $0.85 compared to $0.95 in the same period of 2018.

Revenue for the year ended December 31, 2019 increased 6.8% to $1,410.4 million from $1,320.9 million for the same period in 2018. Income from operations was $118.8 million compared to $122.0 million in the prior year. Net income during the period was $87.1 million compared to $92.1 million in the same period of 2018. Net income per diluted share was $3.04 for the year ended December 31, 2019 compared to $3.12 in the same period of 2018.

For the three months ended December 31, 2019, the Company generated $43.7 million of cash flow from operations compared to $38.7 million for the same period of 2018. For the year ended December 31, 2019, the Company generated $161.5 million of cash flow from operations compared to $152.6 million for the same period of 2018.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $42.9 million for the three months ended December 31, 2019 compared to $45.9 million for the same period of 2018. Free cash flow was $41.4 million for the three months ended December 31, 2019 compared to $31.8 million for the same period of 2018.

EBITDA was $160.9 million for the year ended December 31, 2019 compared to $164.2 million for the same period of 2018. Free cash flow was $134.1 million for the year ended December 31, 2019 compared to $117.3 million in the same period of 2018.

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

Tom Schmitt, Chairman, President and CEO, commenting on fourth quarter results said, “Our growth strategies drove our record fourth quarter revenue. Macro headwinds amid a loose truckload market impacted our results. As we continue to on-board new revenue with precision execution we are well positioned for a pick-up in quality freight volumes.”

In closing, Mr. Schmitt said, “As we end 2019, I would like to thank all of our employees and independent contractors who are helping us grow and strengthen our businesses and core support processes. The results of our efforts will show for many years to come.”

Michael J. Morris, CFO, commenting on the new Expedited Freight segment said, “Our new Expedited Freight segment consolidates the previous Truckload Premium Services segment into the previous Expedited LTL segment, which included Final Mile. Since this consolidation results in a new segment with higher revenues and lower margins than the previous Expedited LTL segment, we have enhanced our Expedited Freight disclosures to provide revenue and gross margin data for the financial statement user.”

Regarding the Company’s fourth quarter 2019 results, Mr. Morris said, “While our business units generated good growth, our fourth quarter earnings per share fell short of our $0.90 to $0.94 guidance range, driven by a soft macro environment that impacted our entire portfolio.”

Regarding the Company’s first quarter 2020 guidance, Mr. Morris said, “We expect significant Final Mile revenue growth following the January 12th closing of our previously announced Linn Star acquisition, which we expect will drive consolidated first quarter year-on-year revenue growth of 13% to 17%. We expect net income per diluted share to be between $0.58 and $0.62 in the first quarter of 2020, reflecting continued headwinds from a soft macro environment as well as higher insurance-related costs. This compares to $0.64 in the first quarter of 2020.”

On February 4, 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 March 5, 2020 and is expected to be paid on March 20, 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.

Review of Financial Results

Forward Air will hold a conference call to discuss fourth quarter 2019 results on Friday, February 7, 2020 at 9:00 a.m. EST. 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 [phone], Access Code: 2062222. 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
(In thousands, except per share data)
(Unaudited)
		Three months ended								Year ended
		December 31, 2019				December 31, 2018				December 31, 2019				December 31, 2018
						(As Adjusted)								(As Adjusted)
Operating revenue:
Expedited Freight		$	262,292			$	244,515			$	988,757			$	931,124
Intermodal		54,710				52,730				217,711				201,006
Pool Distribution		65,436				60,861				207,389				194,117
Eliminations and other operations		(934		)		(1,545		)		(3,462		)		(5,361		)
Operating revenue		381,504				356,561				1,410,395				1,320,886
Operating expenses:
Purchased transportation		176,263				162,804				639,007				613,636
Salaries, wages and employee benefits		91,264				82,548				335,163				300,230
Operating leases		21,988				21,036				82,010				75,677
Depreciation and amortization		10,073				10,837				42,109				42,183
Insurance and claims		11,909				8,738				45,440				35,180
Fuel expense		6,579				6,335				24,221				23,121
Other operating expenses		30,576				29,216				123,622				108,828
Total operating expenses		348,652				321,514				1,291,572				1,198,855
Income (loss) from operations
Expedited Freight		26,597				27,069				101,065				101,440
Intermodal		5,354				6,933				23,679				23,266
Pool Distribution		2,591				2,175				7,275				5,870
Other operations		(1,690		)		(1,130		)		(13,196		)		(8,545		)
Income from operations		32,852				35,047				118,823				122,031
Other expense:
Interest expense		(795		)		(457		)		(2,711		)		(1,783		)
Other, net		(1		)		—				(1		)		(2		)
Total other expense		(796		)		(457		)		(2,712		)		(1,785		)
Income before income taxes		32,056				34,590				116,111				120,246
Income tax expense		7,888				6,906				29,012				28,195
Net income and comprehensive income		$	24,168			$	27,684			$	87,099			$	92,051
Net income per share:
Basic		$	0.86			$	0.95			$	3.06			$	3.14
Diluted		$	0.85			$	0.95			$	3.04			$	3.12
Dividends per share:		$	0.18			$	0.18			$	0.72			$	0.63

Expedited Freight Segment Information
(In millions)
(Unaudited)
		Three months ended
		December 31,				Percent of			December 31,				Percent of							Percent
		2019				Revenue			2018				Revenue			Change				Change
									(As Adjusted)
Operating revenue:
Network 1		$	172.8			65.9	%		$	175.7			71.9	%		$	(2.9	)		(1.7	)%
Truckload		48.9				18.7			48.9				20.0			—				—
Final Mile		34.2				13.0			12.5				5.1			21.7				173.6
Other		6.4				2.4			7.4				3.0			(1.0		)		(13.5	)
Total operating revenue		262.3				100.0			244.5				100.0			17.8				7.3
Operating expenses:
Purchased transportation		138.5				52.8			125.7				51.4			12.8				10.2
Salaries, wages and employee benefits		51.8				19.7			47.9				19.6			3.9				8.1
Operating leases		12.0				4.6			11.1				4.5			0.9				8.1
Depreciation and amortization		6.2				2.4			7.4				3.0			(1.2		)		(16.2	)
Insurance and claims		6.5				2.5			5.0				2.0			1.5				30.0
Fuel expense		2.5				1.0			2.5				1.0			—				—
Other operating expenses		18.2				6.9			17.8				7.3			0.4				2.2
Total operating expenses		235.7				89.9			217.4				88.9			18.3				8.4
Income from operations		$	26.6			10.1	%		$	27.1			11.1	%		$	(0.5	)		(1.8	)%
1 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: LTL Operating Statistics
		Three months ended
		December 31,				December 31,				Percent
		2019				2018				Change
						(As Adjusted)
Business days		64				64				—	%
Tonnage 1,2
Total pounds		642,092				648,423				(1.0	)
Pounds per day		10,033				10,132				(1.0	)
Shipments 1,2
Total shipments		1,069				1,104				(3.2	)
Shipments per day		16.7				17.3				(3.5	)
Weight per shipment		601				587				2.4
Revenue per hundredweight 3		$	27.02			$	26.81			0.8
Revenue per hundredweight, ex fuel 3		$	22.72			$	22.42			1.3
Revenue per shipment 3		$	164			$	160			2.5
Revenue per shipment, ex fuel 3		$	139			$	134			3.7
Network revenue from door-to-door shipments as a percentage of network revenue 3,4		41.1		%		35.6		%		15.4
Network gross margin 5		53.8		%		52.7		%		2.1	%
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
		December 31,				Percent of			December 31,				Percent of							Percent
		2019				Revenue			2018				Revenue			Change				Change
Operating revenue		$	54.7			100.0	%		$	52.7			100.0	%		$	2.0			3.8	%
Operating expenses:
Purchased transportation		19.3				35.3			19.7				37.4			(0.4		)		(2.0	)
Salaries, wages and employee benefits		13.6				24.9			12.2				23.1			1.4				11.5
Operating leases		4.2				7.7			4.0				7.6			0.2				5.0
Depreciation and amortization		2.7				4.9			1.7				3.2			1.0				58.8
Insurance and claims		1.7				3.1			1.5				2.8			0.2				13.3
Fuel expense		2.1				3.8			1.7				3.2			0.4				23.5
Other operating expenses		5.8				10.6			5.0				9.5			0.8				16.0
Total operating expenses		49.4				90.3			45.8				86.9			3.6				7.9
Income from operations		$	5.3			9.7	%		$	6.9			13.1	%		$	(1.6	)		(23.2	)%

Intermodal Operating Statistics
		Three months ended
		December 31,				December 31,				Percent
		2019				2018				Change
Drayage shipments		77,906				81,566				(4.5	)%
Drayage revenue per shipment		$	603			$	560			7.7
Number of locations		21				20				5.0	%

Pool Distribution Segment Information
(In millions)
(Unaudited)
		Three months ended
		December 31,				Percent of			December 31,				Percent of							Percent
		2019				Revenue			2018				Revenue			Change				Change
Operating revenue		$	65.4			100.0	%		$	60.9			100.0	%		$	4.5			7.4	%
Operating expenses:
Purchased transportation		19.0				29.1			18.5				30.4			0.5				2.7
Salaries, wages and employee benefits		26.2				40.1			22.2				36.5			4.0				18.0
Operating leases		5.8				8.9			6.0				9.9			(0.2		)		(3.3	)
Depreciation and amortization		1.3				2.0			1.7				2.8			(0.4		)		(23.5	)
Insurance and claims		2.2				3.4			1.4				2.3			0.8				57.1
Fuel expense		2.0				3.1			2.1				3.4			(0.1		)		(4.8	)
Other operating expenses		6.3				9.6			6.8				11.2			(0.5		)		(7.4	)
Total operating expenses		62.8				96.0			58.7				96.4			4.1				7.0
Income from operations		$	2.6			4.0	%		$	2.2			3.6	%		$	0.4			18.2	%

Pool Operating Statistics
		Three months ended
		December 31,				December 31,				Percent
		2019				2018				Change
Cartons ¹		33,563				30,435				10.3	%
Revenue per carton		$	1.95			$	2.00			(2.5	)
Terminals		30				28				7.1	%
¹ In thousands

Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
		December 31, 2019				December 31, 2018
Assets
Current assets:
Cash and cash equivalents		$	64,749			$	25,657
Accounts receivable, net		150,197				156,359
Other current assets		21,372				19,066
Total current assets		236,318				201,082
Property and equipment		426,737				413,900
Less accumulated depreciation and amortization		213,706				204,005
Net property and equipment		213,031				209,895
Operating lease right-of-use assets		151,657				—
Goodwill and other acquired intangibles:
Goodwill		221,105				199,092
Other acquired intangibles, net of accumulated amortization		127,798				113,661
Total goodwill and other acquired intangibles, net		348,903				312,753
Other assets		40,969				36,485
Total assets		$	990,878			$	760,215
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	29,986			$	34,630
Accrued expenses		49,822				39,784
Other current liabilities		5,320				—
Current portion of debt and finance lease obligations		1,421				309
Current portion of operating lease obligations		50,615				—
Total current liabilities		137,164				74,723
Debt and finance lease obligations, less current portion		72,249				47,335
Operating lease obligations, less current portion		101,525				—
Other long-term liabilities		58,816				47,739
Deferred income taxes		43,942				37,174
Shareholders’ equity:
Common stock		279				285
Additional paid-in capital		226,869				210,296
Retained earnings		350,034				342,663
Total shareholders’ equity		577,182				553,244
Total liabilities and shareholders’ equity		$	990,878			$	760,215

Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Three months ended
		December 31, 2019				December 31, 2018
Operating activities:
Net income		$	24,168			$	27,684
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		10,073				10,837
Change in fair value of earn-out liability		(923		)		—
Share-based compensation		2,901				3,024
Loss (gain) on disposal of property and equipment		111				(157		)
Provision for (recovery) loss on receivables		(67		)		191
Provision for revenue adjustments		1,099				707
Deferred income tax		837				1,418
Changes in operating assets and liabilities
Accounts receivable		6,264				(8,792		)
Prepaid expenses and other assets		832				2,315
Income taxes		3,840				1,937
Accounts payable and accrued expenses		(5,390		)		(456		)
Net cash provided by operating activities		43,745				38,708
Investing activities:
Proceeds from disposal of property and equipment		1,193				1,070
Purchases of property and equipment		(3,564		)		(7,949		)
Acquisition of business		—				(16,250		)
Other		—				115
Net cash used in investing activities		(2,371		)		(23,014		)
Financing activities:
Payments of finance lease obligations		(418		)		(74		)
Proceeds from senior credit facility		—				7,000
Proceeds from exercise of stock options		1,987				239
Payments of cash dividends		(5,073		)		(5,214		)
Repurchase of common stock (repurchase program)		(8,298		)		(21,141		)
Common stock issued under employee stock purchase plan		353				242
Net cash used in by financing activities		(11,449		)		(18,948		)
Net increase (decrease) in cash		29,925				(3,254		)
Cash at beginning of period		34,824				28,911
Cash at end of period		$	64,749			$	25,657

Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Year ended
		December 31, 2019				December 31, 2018
Operating activities:
Net income		$	87,099			$	92,051
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		42,109				42,183
Change in fair value of earn-out liability		(33		)		(455		)
Share-based compensation		11,907				10,549
Loss (gain) on disposal of property and equipment		1,121				(171		)
Provision for loss on receivables		761				139
Provision for revenue adjustments		3,342				3,628
Deferred income taxes		6,768				8,094
Changes in operating assets and liabilities
Accounts receivable		2,059				(12,178		)
Prepaid expenses and other assets		(3,641		)		(2,565		)
Income taxes		1,284				(1,256		)
Accounts payable and accrued expenses		8,700				12,535
Net cash provided by operating activities		161,476				152,554
Investing activities:
Proceeds from disposal of property and equipment		3,294				7,059
Purchases of property and equipment		(30,666		)		(42,293		)
Acquisition of business, net of cash acquired		(39,000		)		(19,987		)
Other		—				(242		)
Net cash used in investing activities		(66,372		)		(55,463		)
Financing activities:
Payments of finance lease obligations		(946		)		(302		)
Proceeds from senior credit facility		20,000				7,000
Proceeds from exercise of stock options		4,050				3,921
Payments of cash dividends		(20,494		)		(18,427		)
Repurchase of common stock (repurchase program)		(56,204		)		(66,126		)
Common stock issued under employee stock purchase plan		614				479
Cash settlement of share-based awards for tax withholdings		(3,032		)		(1,872		)
Net cash used in financing activities		(56,012		)		(75,327		)
Net increase in cash		39,092				21,764
Cash at beginning of year		25,657				3,893
Cash at end of year		$	64,749			$	25,657

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 in 2019 and 2018 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.

This press release contains the following non-GAAP financial measures on a consolidated basis: earnings before interest, taxes, depreciation and amortization (“EBITDA”) and free cash flow for the three months and year ended December 31, 2019 and 2018. The Company believes that including these items will assist investors in understanding its core operating performance and allow for more accurate comparisons of results, as they eliminate the impact of investing activities.

The Company believes that EBITDA improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables. The Company believes that free cash flow 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								Year ended
		December 31, 2019				December 31, 2018				December 31, 2019				December 31, 2018
Net income		$	24,168			$	27,684			$	87,099			$	92,051
Interest expense		795				457				2,711				1,783
Income tax expense		7,888				6,906				29,012				28,195
Depreciation and amortization		10,073				10,837				42,109				42,183
EBITDA		$	42,924			$	45,884			$	160,931			$	164,212
		Three months ended								Year ended
		December 31, 2019				December 31, 2018				December 31, 2019				December 31, 2018
Net cash provided by operating activities		$	43,745			$	38,708			$	161,476			$	152,553
Proceeds from disposal of property and equipment		1,193				1,070				3,294				7,059
Purchases of property and equipment		(3,564		)		(7,949		)		(30,666		)		(42,293		)
Free cash flow		$	41,374			$	31,829			$	134,104			$	117,319

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		December 31, 2019
Net income		$	24,168
Income allocated to participating securities		(254		)
Numerator for diluted income per share - net income		$	23,914
Fully diluted share count		28,005
Diluted earnings per share		$	0.85
Projected		Full year 2020
Projected tax rate		25.0		%
Projected capital expenditures, net		$	36,500
		Three months ended
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 the effects of our business efforts, expected 2020 guidance, including first quarter 2020 revenue growth, first quarter 2020 net income per diluted shares, full year 2020 projected tax rate, fully diluted share count (before consideration of future share repurchase), projected capital expenditures, the future declaration of dividends and the quarterly and full year 2020 anticipated dividends per share.

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: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, our ability to manage our growth and ability to grow, in part, through acquisitions, while being able to successfully integrate such acquisitions, our inability to maintain our historical growth rate because of decreased volume of freight or decreased average revenue per pound of freight moving through our network, 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, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, season trends, the occurrence of certain weather events, restrictions in our charter and bylaws, and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2018 and quarterly reports on Form 10-Q filed thereafter.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200206005898/en/