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Forward Air Corporation Reports First Quarter 2014 Results

GREENEVILLE, Tenn.--(BUSINESS WIRE)--Apr. 21, 2014-- Forward Air Corporation (NASDAQ:FWRD) today reported operating revenue, operating income, net income and diluted earnings per share for the three months ended March 31, 2014.

Operating revenue for the quarter ended March 31, 2014 increased 21.2% to $171.6 million from $141.6 million for the same quarter in 2013. Income from operations was $16.3 million, compared with $15.8 million in the prior-year quarter. As a percent of operating revenue, income from operations was 9.5%, compared with 11.2% in the same quarter last year. Net income during the period was $10.2 million compared to $10.9 million in the prior-year quarter. Income per diluted share for the first quarter of 2014 was $0.33 compared with $0.36 in the prior-year quarter.

Bruce A. Campbell, Chairman, President, and CEO, commenting on the first quarter said, “In spite of the higher operating costs that resulted from the unprecedented winter weather we experienced most of the first quarter, we performed relatively well. With winter now behind us, we feel very positive about how we have positioned each of our operating segments for the balance of the year.”

Starting with our Forward Air, Inc. (FAI) business segment, Mr. Campbell said, “Our core airport-to-airport business has continued to see good volume growth and, with the impact of our March general rate increase, our improved yield should be a positive contributor going forward. Our FAI results also include the results of Central States Trucking Company (CST) which we acquired in early February. CST had approximately $0.9 million of operating income for the quarter which was essentially offset by deal related costs resulting in a neutral impact on its profitability for the quarter.”

Commenting on the Forward Air Solutions (“Solutions”) segment, Mr. Campbell said, “On the strength of a first quarter general rate increase, higher year-over-year volumes and better overall operating discipline, Solutions turned a $0.8 million loss in first quarter of 2013 into a break-even this year. We anticipate that Solutions will be profitable for the second quarter as well as balance of the year.”

Moving to the Total Quality, Inc. (TQI) business segment, Mr. Campbell said, “The benefits from the recently implemented new operating system were partially muted by weather-related difficulties. We were encouraged by the 90% operating ratio that TQI delivered in March and believe that it is more indicative of our expected results for the balance of 2014.”

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. Given the adversities presented by inclement weather, they all did a fantastic job providing safe and reliable service.”

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 2014 revenues will increase in the range of 22% to 27% over the comparable 2013 period. Included in that range of revenue growth is the approximately 12% growth that is a result of the purchase of CST. We expect income per diluted share to be between $0.53 and $0.57 per share. This compares to $0.45 per share in the second quarter of 2013.”

Review of Financial Results

Forward Air will hold a conference call to discuss first quarter 2014 results on Tuesday, April 22, 2014 at 9:00 a.m. EDT. The Company's conference call will be available online at www.forwardair.com or by dialing (800) 230-1085. 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 leading provider of time-definite surface transportation and related logistics services to the North American expedited ground freight market. We offer our customers local pick-up and delivery (Forward Air Complete™) and scheduled surface transportation of cargo as a cost-effective, reliable alternative to air transportation. We transport 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. We also offer our customers an array of logistics and other services including: expedited full truckload (“TLX”); intermodal/drayage (Central States Trucking, Inc.); dedicated fleets; warehousing; customs brokerage; and shipment consolidation, deconsolidation and handling.

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 Comprehensive Income
(In thousands, except per share data)
(Unaudited)
   
Three months ended
March 31,
2014
  March 31,
2013

Operating revenue

$ 171,569 $ 141,560
 
Operating expenses:

Purchased transportation

73,551 60,999
Salaries, wages and employee benefits 41,422 33,952
Operating leases 8,351 7,044
Depreciation and amortization 7,013 5,186
Insurance and claims 4,127 2,660
Fuel expense 4,806 3,008
Other operating expenses 16,028   12,921  
Total operating expenses 155,298   125,770  
Income from operations 16,271 15,790
 
Other income (expense):
Interest expense (82 ) (128 )
Other, net 86   32  
Total other expense 4   (96 )
Income before income taxes 16,275 15,694
Income taxes 6,073   4,839  
Net income and comprehensive income $ 10,202   $ 10,855  
 
Net income per share:
Basic $ 0.33   $ 0.37  
Diluted $ 0.33   $ 0.36  
Weighted average shares outstanding:
Basic 30,732 29,511
Diluted 31,314 30,264
 
Dividends per share: $ 0.12   $ 0.10  
 
 
 
 
 
 
Forward Air Corporation
Components of Consolidated Revenue and Purchased Transportation
(In thousands)
(Unaudited)
             

Three Months Ended

March 31,

Percent of

March 31,

Percent of Percent
2014   Revenue   2013   Revenue   Change   Change

Operating revenue

Forward Air
Airport-to-airport $ 97,735 72.8 % $ 90,588 78.0 % $ 7,147 7.9 %

Logistics services

Expedited full truckload - TLX

17,461 13.0 17,500 15.1 (39 ) (0.2 )

Intermodal/drayage

9,397 7.0 1,457 1.3 7,940 545.0

Other logistics

110     0.1     282     0.2     (172 )   (61.0 )

Total Logistics services

26,968 20.1 19,239 16.6 7,729 40.2

Other Forward Air services

9,483     7.1     6,281     5.4     3,202     51.0  

Forward Air - Total revenue

134,186     78.2     116,108     82.0     18,078     15.6  

TQI - Pharmaceutical services

11,061 6.5 3,918 2.8 7,143 182.3

Forward Air Solutions - Pool distribution

27,322 15.9 22,254 15.7 5,068 22.8

Intersegment eliminations

(1,000 )   (0.6 )   (720 )   (0.5 )   (280 )   38.9  

Consolidated operating revenue

$ 171,569     100.0 %   $ 141,560     100.0 %   $ 30,009     21.2 %
 
 

Three Months Ended

March 31,

Percent of

March 31,

Percent of Percent
2014   Revenue   2013   Revenue   Change   Change

Purchased transportation

Forward Air
Airport-to-airport $ 40,749 41.7 % $ 36,685 40.5 % $ 4,064 11.1 %

Logistics services

Expedited full truckload - TLX

13,675 78.3 13,218 75.5 457 3.5

Intermodal/drayage

3,820 40.7 841 57.7 2,979 354.2

Other logistics

44     40.0     76     27.0     (32 )   (42.1 )

Total Logistics services

17,539

65.0

14,135

73.5

3,404 24.1

Other Forward Air services

2,495     26.3     1,740     27.7     755     43.4  

Forward Air - Total purchased transportation

60,783     45.3     52,560     45.3     8,223     15.6  

TQI - Pharmaceutical services

5,450 49.3 2,225 56.8 3,225 144.9

Forward Air Solutions - Pool distribution

8,124 29.7 6,787 30.5 1,337 19.7

Intersegment eliminations

(806 )   80.6     (573 )   79.6     (233 )   40.7  

Consolidated purchased transportation

$ 73,551     42.9 %   $ 60,999     43.1 %   $ 12,552     20.6 %
 
 
 
 
 
 
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
   

March 31,

2014

   

December 31,

2013(a)

Assets
Current assets:
Cash and cash equivalents $ 41,044 $ 127,367
Accounts receivable, net 93,651 76,500
Other current assets 10,430 16,493
Total current assets 145,125 220,360
 
Property and equipment 292,364 271,050
Less accumulated depreciation and amortization 121,135 116,287
Net property and equipment 171,229 154,763
Goodwill and other acquired intangibles:
Goodwill 131,217 88,496
Other acquired intangibles, net of accumulated amortization 84,456 40,110
Total net goodwill and other acquired intangibles 215,673 128,606
Other assets 2,540 2,540
Total assets $ 534,567 $ 506,269
 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 22,164 $ 16,267
Accrued expenses 21,529 18,275
Current portion of debt and capital lease obligations 318 69
Total current liabilities 44,011 34,611
 
Debt and capital lease obligations, less current portion 1,477 3
Other long-term liabilities 8,292 8,940
Deferred income taxes 27,405 26,850
 
Shareholders’ equity:
Common stock 310 305
Additional paid-in capital 119,852 107,726
Retained earnings 333,220 327,834
Total shareholders’ equity 453,382 435,865
Total liabilities and shareholders’ equity $ 534,567 $ 506,269
 
(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,

2014

 

March 31,

2013

Operating activities:
Net income $ 10,202 $ 10,855
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 7,013 5,186
Share-based compensation 1,652 1,557
Gain on disposal of property and equipment 16 85
Provision for loss on receivables 42 301
Provision for revenue adjustments 641 499
Deferred income tax 132 850
Excess tax benefit for stock options exercised (637 ) (2,238 )
Changes in operating assets and liabilities
Accounts receivable (8,493 ) 2,011
Prepaid expenses and other current assets 7,048 (730 )
Accounts payable and accrued expenses 2,416   2,228  
Net cash provided by operating activities 20,032 20,604
 
Investing activities:
Proceeds from disposal of property and equipment 79 164
Purchases of property and equipment (19,548 ) (12,182 )
Acquisition of business, net of cash acquired (82,998 ) (45,219 )
Other (60 ) (56 )
Net cash used in investing activities (102,527 ) (57,293 )
 
Financing activities:
Payments of debt and capital lease obligations (9,491 ) (20,228 )
Proceeds from exercise of stock options 9,840 17,960
Payments of cash dividends (3,733 ) (2,967 )
Cash settlement of share-based awards for minimum tax withholdings (1,081 ) (866 )
Excess tax benefit for stock options exercised 637   2,238  
Net cash used in financing activities (3,828 ) (3,863 )
Net decrease in cash (86,323 ) (40,552 )
Cash at beginning of period 127,367   112,182  
Cash at end of period $ 41,044   $ 71,630  
 
 
 
 
 
 
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
 
    Three months ended
March 31,   Percent of   March 31,   Percent of     Percent
2014 Revenue 2013 Revenue Change Change
Operating revenue
Forward Air $ 134.2 78.2 % $ 116.1 82.0 % $ 18.1 15.6 %
FASI 27.3 15.9 22.3 15.7 5.0 22.4
TQI 11.1 6.5 3.9 2.8 7.2 184.6
Intercompany eliminations (1.0 ) (0.6 ) (0.7 ) (0.5 ) (0.3 ) 42.9  
Total 171.6   100.0   141.6   100.0   30.0   21.2  
 
Purchased transportation
Forward Air 60.8 45.3 52.6 45.3 8.2 15.6
FASI 8.1 29.7 6.8 30.5 1.3 19.1
TQI 5.5 49.6 2.2 56.4 3.3 150.0
Intercompany eliminations (0.8 ) 80.0   (0.6 ) 85.7   (0.2 ) 33.3  
Total 73.6   42.9   61.0   43.1   12.6   20.7  
 
Salaries, wages and employee benefits
Forward Air 30.2 22.5 25.1 21.6 5.1 20.3
FASI 9.3 34.1 8.2 36.8 1.1 13.4
TQI 1.9   17.1   0.6   15.4   1.3   216.7  
Total 41.4   24.1   33.9   23.9   7.5   22.1  
 
Operating leases
Forward Air 5.8 4.3 5.1 4.4 0.7 13.7
FASI 2.5 9.1 2.0 9.0 0.5 25.0
TQI            
Total 8.3   4.8   7.1   5.0   1.2   16.9  
 
Depreciation and amortization
Forward Air 4.9 3.7 3.8 3.3 1.1 28.9
FASI 1.3 4.8 1.2 5.4 0.1 8.3
TQI 0.8   7.2   0.2   5.1   0.6   300.0  
Total 7.0   4.1   5.2   3.7   1.8   34.6  
 
Insurance and claims
Forward Air 3.1 2.3 1.9 1.6 1.2 63.2
FASI 0.8 2.9 0.7 3.1 0.1 14.3
TQI 0.2   1.8   0.1   2.6   0.1   100.0  
Total 4.1   2.4   2.7   1.9   1.4   51.9  
 
Fuel expense
Forward Air 1.9 1.4 1.0 0.9 0.9 90.0
FASI 1.7 6.2 1.6 7.2 0.1 6.3
TQI 1.2   10.8   0.4   10.3   0.8   200.0  
Total 4.8   2.8   3.0   2.1   1.8   60.0  
 
Other operating expenses
Forward Air 12.1 9.0 10.2 8.8 1.9 18.6
FASI 3.6 13.2 2.6 11.6 1.0 38.5
TQI 0.6 5.4 0.2 5.1 0.4 200.0
Intercompany eliminations (0.2 ) 20.0   (0.1 ) 14.3   (0.1 ) 100.0  
Total 16.1   9.4   12.9   9.1   3.2   24.8  
 
Income from operations
Forward Air 15.4 11.5 16.4 14.1 (1.0 ) (6.1 )
FASI (0.8 ) (3.6 ) 0.8 (100.0 )
TQI 0.9   8.1   0.2   5.1   0.7   350.0  
Total $ 16.3   9.5 % $ 15.8   11.2 % $ 0.5   3.2 %
 
 
 
 
 
 
Forward Air Corporation
Forward Air Inc. Operating Statistics
       
Three months ended
March 31, March 31, Percent
2014 2013 Change
 
Operating ratio 88.5 % 85.9 % 3.0 %
 
Business days 63.0 63.0
Business weeks 12.6 12.6
 
 
Airport-to-airport:
Tonnage
Total pounds ¹ 441,715 405,914 8.8
Average weekly pounds ¹ 35,057 32,215 8.8
 
Linehaul shipments
Total linehaul 662,480 635,665 4.2
Average weekly 52,578 50,450 4.2
 
Forward Air Complete shipments 107,574 114,085 (5.7 )
As a percentage of linehaul shipments 16.2 % 17.9 % (9.5 )
 
Average linehaul shipment size 667 639 4.4
 
Revenue per pound ²
Linehaul yield $ 17.31 $ 17.33 (0.1 )
Fuel surcharge impact 2.03 2.05 (0.1 )
Forward Air Complete impact 2.79   2.94   (0.7 )
Total airport-to-airport yield $ 22.13 $ 22.32 (0.9 )
 
 

Expedited full truckload - TLX:

Miles
Owner operator ¹ 6,968 8,337 (16.4 )
Third party ¹ 4,082   3,520   16.0  
Total Miles 11,050 11,857 (6.8 )
 
Revenue per mile $ 1.58 $ 1.48 6.8
 
Cost per mile $ 1.24 $ 1.11 11.7 %
 
 
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