Forward Air Corporation Reports Second Quarter 2013 Results

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Forward Air Corporation Reports Second Quarter 2013 Results

GREENEVILLE, Tenn.--(BUSINESS WIRE)-- Forward Air Corporation (NAS: FWRD) today reported revenue, operating income, net income and diluted earnings per share for the second quarter and six months ended June 30, 2013.

Operating revenue for the quarter ended June 30, 2013 increased 7.8% to $159.8 million from $148.3 million for the same quarter in 2012. Income from operations was $22.5 million, compared with $23.1 million in the prior-year quarter. As a percent of operating revenue, income from operations was 14.1%, compared with 15.6% in the same quarter last year. Net income during the period was $13.8 million compared to $14.2 million in the prior-year quarter. Income per diluted share for the second quarter of 2013 was $0.45 compared with $0.48 in the prior-year quarter.

Operating revenue for the six months ended June 30, 2013 increased 5.6% to $301.4 million from $285.4 million for the same period in 2012. Income from operations was $38.3 million, compared with $39.9 million in the prior-year period. As a percent of operating revenue, income from operations was 12.7% for the first six months of 2013 compared to 14.0% for the same period in 2012. Net income during the period was $24.7 million compared to $24.4 million in the prior-year period. Income per diluted share from operations for the first six months of 2013 was $0.81 compared with $0.83 in the prior-year period.

Bruce A. Campbell, Chairman, President, and CEO, commenting on the second quarter said, "Within our Forward Air, Inc. business segment, the overall tepid macroeconomic environment, the loss of a large customer which created a tough prior year comparison and our continued pricing challenges all conspired to make for a difficult second quarter. Fortunately, we believe that each of these headwinds will be short-lived. With respect to the macroeconomic environment, we have been experiencing increased network volumes. While a few weeks don't equate to a trend, we are hopeful that it is a positive sign for an improved freight environment. As for the customer loss creating a difficult year-over-year comparison, the third quarter will mark the last full quarter where this is an issue as the former customer exited our services during the fourth quarter of last year. Lastly, we believe the irrational pricing behavior of some of our competitors is not financially sustainable. Those who maintained pricing discipline will ultimately be rewarded."

Turning to the Forward Air Solutions business segment, Mr. Campbell said, "We mentioned on our first quarter call that Solutions was bringing on our second large customer for 2013. While this did in fact happen, and while most of our effected locations handled this well, three of our terminals struggled with the integration. This resulted in a small loss for the quarter and we are in the process of addressing those challenged locations."

Commenting on the first full quarter of our newly acquired Total Quality, Inc. (TQI) business segment, Mr. Campbell said, "Our team continued to make substantial progress integrating TQI. We improved our operating margins each month and ended the quarter with a 92.7% operating ratio for June. We believe that our continued integration initiatives, including, most notably, a new operating system due to be online in early fourth quarter, along with a robust new business pipeline should get us to a sub-90 operating ratio in fairly short order."

In closing, Mr. Campbell said, "As always, I would like to thank the Forward Air team of employees and independent contractors for their dedication and hard work. Their superlative efforts differentiate us from others in the industry."

Commenting on the Company's guidance for the third quarter, Rodney L. Bell, Senior Vice President and CFO said, "We anticipate that our third quarter 2013 revenues will increase in the range of 10% to 15% over the comparable 2012 period. We estimate that approximately 8% of that growth will result from the TQI acquisition. We expect income per diluted share to be between $0.43 and $0.48 per share. This compares to $0.41 per share in the third quarter of 2012."

Review of Financial Results

Forward Air will hold a conference call to discuss second quarter 2013 results on Friday, July 19, 2013 at 9:00 a.m. EDT. The Company's conference call will be available online at or by dialing 800-230-1059. A replay of the conference call will be available at beginning shortly after the completion of the live call.

About Forward Air Corporation

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

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

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

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

Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
Three months ended Six months ended

June 30,


June 30,

June 30,

June 30,

Operating revenue:
Airport-to-airport $ 97,120 $ 102,464 $ 187,497 $ 193,092
Logistics 31,941 21,124 54,912 42,437
Other 6,620 6,769 12,762 12,970
Pool distribution 24,123   17,969   46,193   36,908  
Total operating revenue 159,804 148,326 301,364 285,407
Operating expenses:
Purchased transportation
Airport-to-airport 39,639 42,639 76,198 79,396
Logistics 21,235 16,086 37,544 31,802
Other 1,937 1,832 3,672 3,430
Pool distribution 7,442   4,686   13,838   9,813  
Total purchased transportation 70,253 65,243 131,252 124,441
Salaries, wages and employee benefits 36,031 32,536 69,983 65,710
Operating leases 6,888 6,824 13,932 13,931
Depreciation and amortization 5,971 5,394 11,157 10,515
Insurance and claims 3,215 2,236 5,874 5,034
Fuel expense 3,656 2,412 6,664 4,953
Other operating expenses 11,285   10,598   24,207   20,951  
Total operating expenses 137,299   125,243   263,069   245,535  
Income from operations 22,505 23,083 38,295 39,872
Other income (expense):
Interest expense (128 ) (79 ) (256 ) (130 )
Other, net 14   (2 ) 45   15  
Total other expense (114 ) (81 ) (211 ) (115 )
Income before income taxes 22,391 23,002 38,084 39,757
Income taxes 8,560   8,835   13,399   15,317  
Net income and comprehensive income $ 13,831   $ 14,167   $ 24,685   $ 24,440  
Net income per share:
Basic $ 0.46   $ 0.49   $ 0.83   $ 0.85  
Diluted $ 0.45   $ 0.48   $ 0.81   $ 0.83  
Weighted average shares outstanding:
Basic 30,161 28,908 29,838 28,800
Diluted 30,736 29,445 30,477 29,402
Dividends per share: $ 0.10   $ 0.07   $ 0.20   $ 0.14  
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)

June 30,


December 31,
2012 (a)

Current assets:
Cash and cash equivalents $ 81,101 $ 112,182
Accounts receivable, net 76,280 75,262
Other current assets 19,900   10,952
Total current assets 177,281 198,396
Property and equipment 266,811 239,138
Less accumulated depreciation and amortization 109,346   105,581
Net property and equipment 157,465 133,557
Goodwill and other acquired intangibles:
Goodwill 87,771 43,332
Other acquired intangibles, net of accumulated amortization 43,138   22,102
Total net goodwill and other acquired intangibles 130,909 65,434
Other assets 2,537   1,800
Total assets $ 468,192   $ 399,187
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 12,189 $ 11,168
Accrued expenses 17,220 16,476
Current portion of debt and capital lease obligations 121   276
Total current liabilities 29,530 27,920
Debt and capital lease obligations, less current portion 23 58
Other long-term liabilities 8,985 7,098
Deferred income taxes 25,899 12,440
Shareholders' equity:
Common stock 303 292
Additional paid-in capital 98,915 64,644
Retained earnings 304,537   286,735
Total shareholders' equity 403,755   351,671
Total liabilities and shareholders' equity $ 468,192   $ 399,187
(a) Taken from audited financial statements, which are not presented in their entirety.
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Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
Three months ended

June 30,

June 30,

Operating activities:
Net income $ 13,831 $ 14,167
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 5,971 5,394
Share-based compensation 1,536 1,517
Gain on disposal of property and equipment (368 ) (29 )
Provision for (recovery) loss on receivables (11 ) 1
Provision for revenue adjustments 627 500
Deferred income tax 2,086 2,241
Excess tax benefit for stock options exercised (632 ) (2 )
Changes in operating assets and liabilities
Accounts receivable 1,185 (2,682 )
Prepaid expenses and other current assets (1,360 ) (2,203 )
Accounts payable and accrued expenses (6,219 ) (12,939 )
Net cash provided by operating activities 16,646 5,965
Investing activities:
Proceeds from disposal of property and equipment 884 531
Purchases of property and equipment