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Forward Air Corporation Reports First Quarter 2013 Results

GREENEVILLE, Tenn.--(BUSINESS WIRE)--Apr. 18, 2013-- Forward Air Corporation (NASDAQ:FWRD) today reported revenue, operating income, net income and diluted earnings per share for the three months ended March 31, 2013.

Operating revenue for the three months ended March 31, 2013 increased 3.3% to $141.6 million from $137.1 million for the same quarter in 2012. Income from operations was $15.8 million, compared with $16.8 million in the prior-year quarter. As a percent of operating revenue, income from operations was 11.2%, compared with 12.3% in the same quarter last year. Net income during the period increased to $10.9 million from $10.3 million in the prior-year quarter. Income per diluted share for the first quarter of 2013 was $0.36 compared with $0.35 in the prior-year quarter.

Bruce A. Campbell, Chairman, President, and CEO, commenting on the first quarter said, “The first quarter proved to be a more challenging operating environment than we originally expected. Airport-to-airport volumes, which were up slightly at the beginning of the period, did not show their typical end-of-quarter strength. Beyond a continued weakness in the overall macroeconomic environment, we were challenged by consistently harsh weather throughout the quarter as well as increased irrational pricing from our competition.”

Turning to the Forward Air Solutions business segment, Mr. Campbell said, “We had another good quarter of new business wins. With the associated early quarter start-up costs behind us, Solutions made money in March. We will have additional new business come on line in the second quarter. Overall, we anticipate Solutions to be profitable in the second quarter and for the balance of the year.”

Commenting on the March 4, 2013 acquisition of Total Quality, Inc. (TQI), Mr. Campbell said, “Since the successful close of TQI in early March, our team has been busy with its integration. While we will be quick to take advantage of obvious cost reduction opportunities, the real benefit will come once we have completed implementation of a new operating system. Without regard to the approximately $0.02 per share in transaction costs included in Forward Air, Inc.'s operating results, we were pleased to see TQI post a small profit for the abbreviated March period.”

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. Without them, these results would have not been possible.”

Commenting on the Company's guidance for the second quarter, Rodney L. Bell, Senior Vice President and CFO said, “We anticipate that our second quarter 2013 revenues will increase in the range of 12% to 18% over the comparable 2012 period. We estimate that approximately 9% of that growth will result from the TQI acquisition. We expect income per diluted share to be between $0.51 and $0.55 per share. This compares to $0.48 per share in the second quarter of 2012.”

Review of Financial Results

Forward Air will hold a conference call to discuss first quarter 2013 results on Friday, April 19, 2013 at 9:00 a.m. EDT. The Company's conference call will be available online at www.forwardair.com or by dialing 800-553-5275. 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 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)
(Unaudited)
   
Three months ended
March 31,
2013
    March 31,
2012
Operating revenue:
Airport-to-airport $ 90,376 $ 90,627
Logistics 22,972 21,313
Other 6,142 6,202
Pool distribution 22,070   18,939  
Total operating revenue 141,560 137,081
 
Operating expenses:
Purchased transportation
Airport-to-airport 36,559 36,758
Logistics 16,309 15,716
Other 1,735 1,598
Pool distribution 6,396   5,126  
Total purchased transportation 60,999 59,198
Salaries, wages and employee benefits 33,952 33,174
Operating leases 7,044 7,106
Depreciation and amortization 5,186 5,121
Insurance and claims 2,660 2,798
Fuel expense 3,008 2,541
Other operating expenses 12,921   10,354  
Total operating expenses 125,770   120,292  
Income from operations 15,790 16,789
 
Other income (expense):
Interest expense (128 ) (51 )
Other, net 32   17  
Total other expense (96 ) (34 )
Income before income taxes 15,694 16,755
Income taxes 4,839   6,482  
Net income and comprehensive income $ 10,855   $ 10,273  
 
Net income per share:
Basic $ 0.37   $ 0.36  
Diluted $ 0.36   $ 0.35  
Weighted average shares outstanding:
Basic 29,511 28,692
Diluted 30,264 29,363
 
Dividends per share: $ 0.10   $ 0.07  
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
    March 31,
2013
   

December 31,
2012 (a)

Assets
Current assets:
Cash and cash equivalents $ 71,630 $ 112,182
Accounts receivable, net 78,092 75,262
Other current assets 14,796   10,952
Total current assets 164,518 198,396
 
Property and equipment 254,066 239,138
Less accumulated depreciation and amortization 107,439   105,581
Net property and equipment 146,627 133,557
Goodwill and other acquired intangibles:
Goodwill 87,860 43,332
Other acquired intangibles, net of accumulated amortization 44,651   22,102
Total net goodwill and other acquired intangibles 132,511 65,434
Other assets 2,550   1,800
Total assets $ 446,206   $ 399,187
 
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 14,285 $ 11,168
Accrued expenses 18,131 16,476
Current portion of debt and capital lease obligations 182   276
Total current liabilities 32,598 27,920
 
Debt and capital lease obligations, less current portion 37 58
Other long-term liabilities 9,138 7,098
Deferred income taxes 23,986 12,440
 
Shareholders’ equity:
Common stock 300 292
Additional paid-in capital 86,393 64,644
Retained earnings 293,754   286,735
Total shareholders’ equity 380,447   351,671
Total liabilities and shareholders’ equity $ 446,206   $ 399,187
 
(a) Taken from audited financial statements, which are not presented in their entirety.
 
Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
       
Three months ended
March 31,
2013
March 31,
2012
Operating activities:
Net income $ 10,855 $ 10,273
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 5,186 5,121
Share-based compensation 1,557 1,606
Loss on disposal of property and equipment 85 196
Provision for loss on receivables 301 110
Provision for revenue adjustments 499 427
Deferred income tax (benefit) 850 (804 )
Tax benefit for stock options exercised (2,238 ) (204 )
Changes in operating assets and liabilities
Accounts receivable 2,011 (2,491 )
Prepaid expenses and other current assets (730 ) (925 )
Accounts payable and accrued expenses 2,228   4,646  
Net cash provided by operating activities 20,604 17,955
 
Investing activities:
Proceeds from disposal of property and equipment 164 205
Purchases of property and equipment (12,182 ) (13,098 )
Acquisition of business, net of cash acquired (45,219 )
Other (56 ) (306 )
Net cash used in investing activities (57,293 ) (13,199 )
 
Financing activities:
Payments of debt and capital lease obligations (20,228 ) (136 )
Proceeds from exercise of stock options 17,960 8,192
Payments of cash dividends (2,967 ) (2,034 )
Cash settlement of share-based awards for minimum tax withholdings (866 ) (386 )
Tax benefit for stock options exercised 2,238   204  
Net cash (used in) provided by financing activities (3,863 ) 5,840  
Net (decrease) increase in cash (40,552 ) 10,596
Cash at beginning of period 112,182   58,801  
Cash at end of period $ 71,630   $ 69,397  
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
    Three months ended
March 31,     Percent of     March 31,     Percent of         Percent
2013 Revenue 2012 Revenue Change Change
Operating revenue
Forward Air $ 116.1 82.0 % $ 118.4 86.4 % $ (2.3 ) (1.9 )%
FASI 22.3 15.7 19.2 14.0

 

3.1 16.1
TQI 3.9 2.8 3.9 100.0
Intercompany eliminations (0.7 ) (0.5 ) (0.5 ) (0.4 ) (0.2 ) 40.0  
Total 141.6   100.0   137.1   100.0   4.5   3.3  
 
Purchased transportation
Forward Air 52.6 45.3 54.3 45.9 (1.7 ) (3.1 )
FASI 6.8 30.5 5.3 27.6 1.5 28.3
TQI 2.2 56.4 2.2 100.0
Intercompany eliminations (0.6 ) 85.7   (0.4 ) 80.0   (0.2 ) 50.0  
Total 61.0   43.1   59.2   43.2   1.8   3.0  
 
Salaries, wages and employee benefits
Forward Air 25.1 21.6 25.7 21.7 (0.6 ) (2.3 )
FASI 8.2 36.8 7.5 39.1 0.7 9.3
TQI 0.6   15.4       0.6   100.0  
Total 33.9   23.9   33.2   24.2   0.7   2.1  
 
Operating leases
Forward Air 5.1 4.4 5.1 4.3
FASI 2.0 9.0 2.0 10.4
TQI            
Total 7.1   5.0   7.1   5.2      
 

Depreciation and amortization

Forward Air 3.8 3.3 4.0 3.4 (0.2 ) (5.0 )
FASI 1.2 5.4 1.1 5.7 0.1 9.1
TQI 0.2   5.1       0.2   100.0  
Total 5.2   3.7   5.1   3.7   0.1   2.0  
 
Insurance and claims
Forward Air 1.9 1.6 2.1 1.8 (0.2 ) (9.5 )
FASI 0.7 3.1 0.7 3.6
TQI 0.1   2.6       0.1   100.0  
Total 2.7   1.9   2.8   2.0   (0.1 ) (3.6 )
 
Fuel expense
Forward Air 1.0 0.9 1.1 0.9 (0.1 ) (9.1 )
FASI 1.6 7.2 1.4 7.3 0.2 14.3
TQI 0.4   10.3       0.4   100.0  
Total 3.0   2.1   2.5   1.8   0.5   20.0  
 
Other operating expenses
Forward Air 10.2 8.8 8.7 7.3 1.5 17.2
FASI 2.6 11.6 1.8 9.4 0.8 44.4
TQI 0.2 5.1 0.2 100.0
Intercompany eliminations (0.1 ) 14.3   (0.1 ) 20.0      
Total 12.9   9.1   10.4   7.6   2.5   24.0  
 
Income (loss) from operations
Forward Air 16.4 14.1 17.4 14.7 (1.0 ) (5.7 )
FASI (0.8 ) (3.6 ) (0.6 ) (3.1 ) (0.2 ) 33.3
TQI 0.2   5.1       0.2   100.0  
Total $ 15.8   11.2 % $ 16.8   12.3 % $ (1.0 ) (6.0 )%
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
           
Three months ended
March 31, March 31, Percent
2013 2012 Change
 
Operating ratio 85.9 % 85.3 % 0.7 %
 
Business days 63.0 64.0 (1.6 )
Business weeks 12.6 12.8 (1.6 )
 
 
Airport-to-airport:
Tonnage

Total pounds ¹

405,914 422,139 (3.8 )
Average weekly pounds ¹ 32,215 32,980 (2.3 )
 
Linehaul shipments
Total linehaul 635,665 637,438 (0.3 )
Average weekly 50,450 49,800 1.3
 
Forward Air Complete shipments 114,085 123,366 (7.5 )
As a percentage of linehaul shipments 17.9 % 19.4 % (7.7 )
 
Average linehaul shipment size 639 662 (3.5 )
 
Revenue per pound ²
Linehaul yield $ 17.33 $ 16.89 2.0
Fuel surcharge impact 2.05 1.91 0.7
Forward Air Complete impact 2.94   2.70   1.1  
Total airport-to-airport yield $ 22.32 $ 21.50 3.8
 
 
Logistics:
Miles
Owner operator ¹ 8,337 8,920 (6.5 )
Third party ¹ 3,520   3,687   (4.5 )
Total Miles 11,857 12,607 (5.9 )
 
Revenue per mile $ 1.62 $ 1.69 (4.1 )
 
Cost per mile $ 1.19 $ 1.25 (4.8 )%
 
 

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.

Source: Forward Air Corporation

Forward Air Corporation
Rodney L. Bell, 423-636-7000
rbell@forwardair.com