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Forward Air Corporation Reports Fourth Quarter and Fiscal 2014 Results and Quarterly Cash Dividend

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Forward Air Corporation (NASDAQ:FWRD) today reported results for the fourth quarter and year ended December 31, 2014.

Operating revenue for the quarter ended December 31, 2014 increased 18.2% to $214.1 million from $181.1 million for the same quarter in 2013. Income from operations was $25.6 million, compared with $23.2 million for the fourth quarter of 2013, an increase of 10.3%. Net income per diluted share for the fourth quarter of 2014 was $0.55 compared with $0.50 in the same quarter of 2013.

Operating revenue for the year ended December 31, 2014 increased 19.7% to $781.0 million from $652.5 million for the year ended December 31, 2013. Income from operations was $96.4 million, compared with $84.4 million in 2013. Net income per diluted share for the year ended December 31, 2014 was $1.96 compared with $1.77 in 2013.

On February 10, 2015, our Board of Directors declared a quarterly cash dividend of $0.12 per share of common stock. The dividend is payable to shareholders of record at the close of business on March 12, 2015, and is expected to be paid on March 27, 2015.

This quarterly dividend is pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.48 per share of common stock, payable in quarterly increments of $0.12 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.

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 29 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 Income
(In thousands, except per share data)
(Unaudited)
Three months ended Year ended
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
Operating revenue $ 214,062 $ 181,085 $ 780,959 $ 652,481
Operating expenses:
Purchased transportation 92,317 79,228 334,576 285,690
Salaries, wages and employee benefits 50,641 41,949 182,105 151,097
Operating leases 8,975 8,387 33,994 29,310
Depreciation and amortization 8,254 6,202 31,133 23,579
Insurance and claims 4,758 3,455 15,736 12,619
Fuel expense 5,158 4,610 20,148 15,145
Other operating expenses 18,324 14,051 66,861 50,686
Total operating expenses 188,427 157,882 684,553 568,126
Income from operations 25,635 23,203 96,406 84,355
Other income (expense):
Interest expense (255 ) (131 ) (610 ) (532 )
Other, net 145 27 289 99
Total other expense (110 ) (104 ) (321 ) (433 )
Income before income taxes 25,525 23,099 96,085 83,922
Income taxes 8,479 7,514 34,916 29,455
Net income $ 17,046 $ 15,585 $ 61,169 $ 54,467
Net income per share:
Basic $ 0.56 $ 0.51 $ 1.99 $ 1.81
Diluted $ 0.55 $ 0.50 $ 1.96 $ 1.77
Weighted average shares outstanding:
Basic 30,248 30,490 30,599 30,135
Diluted 30,804 31,129 31,132 30,762
Dividends per share: $ 0.12 $ 0.10 $ 0.48 $ 0.40
Forward Air Corporation
Components of Consolidated Revenue and Purchased Transportation
(In thousands)
(Unaudited)
Three months ended
December 31, Percent of December 31, Percent of Percent
2014 Revenue 2013 Revenue Change Change
Operating Revenue
Forward Air
Airport-to-airport $ 112,251 68.5 % $ 104,073 78.8 % $ 8,178 7.9 %
Logistics services
Expedited full truckload – TLX 21,097 12.9 19,179 14.5 1,918 10.0
Intermodal/drayage 16,160 9.9 1,322 1.0 14,838 1,122.4
Total Logistics services 37,257 22.8 20,501 15.5 16,756 81.7
Other Forward Air services 14,290 8.7 7,514 5.7 6,776 90.2
Forward Air – Total revenue 163,798 76.5 132,088 72.9 31,710 24.0
TQI – Pharmaceutical services 12,053 5.6 13,297 7.3 (1,244 ) (9.4 )
Forward Air Solutions – Pool distribution 40,341 18.9 37,031 20.5 3,310 8.9
Intersegment eliminations (2,130 ) (1.0 ) (1,331 ) (0.7 ) (799 ) 60.0
Consolidated operating revenue $ 214,062 100.0 % $ 181,085 100.0 % $ 32,977 18.2 %
Three months ended
December 31, Percent of December 31, Percent of Percent
2014 Revenue 2013 Revenue Change Change
Purchased Transportation
Forward Air
Airport-to-airport $ 50,007 44.5 % $ 44,277 42.5 % $ 5,730 12.9 %
Logistics services
Expedited full truckload – TLX 16,348 77.5 14,640 76.3 1,708 11.7
Intermodal/drayage 5,866 36.3 794 60.1 5,072 638.8
Total Logistics services 22,214 59.6 15,434 75.3 6,780 43.9
Other Forward Air services 3,743 26.2 2,273 30.3 1,470 64.7
Forward Air – Total purchased transportation 75,964 46.4 61,984 46.9 13,980 22.6
TQI – Pharmaceutical services 6,024 50.0 7,383 55.5 (1,359 ) (18.4 )
Forward Air Solutions – Pool distribution 11,920 29.5 10,871 29.4 1,049 9.6
Intersegment eliminations (1,591 ) 74.7 (1,010 ) 75.9 (581 ) 57.5
Consolidated purchased transportation $ 92,317 43.1 % $ 79,228 43.8 % $ 13,089 16.5 %
Forward Air Corporation
Components of Consolidated Revenue and Purchased Transportation
(In thousands)
(Unaudited)
Year ended
December 31, Percent of December 31, Percent of Percent
2014 Revenue 2013 Revenue Change Change
Operating Revenue
Forward Air
Airport-to-airport $ 429,399 70.1 % $ 393,236 78.5 % $ 36,163 9.2 %
Logistics services
Expedited full truckload – TLX 77,679 12.7 74,398 14.8 3,281 4.4
Intermodal/drayage 55,306 9.0 5,123 1.0 50,183 979.6
Total Logistics services 132,985 21.7 79,521 15.8 53,464 67.2
Other Forward Air services 49,953 8.2 28,311 5.7 21,642 76.4
Forward Air – Total revenue 612,337 78.4 501,068 76.8 111,269 22.2
TQI – Pharmaceutical services 48,824 6.3 41,842 6.4 6,982 16.7
Forward Air Solutions – Pool distribution 125,213 16.0 113,412 17.4 11,801 10.4
Intersegment eliminations (5,415 ) (0.7 ) (3,841 ) (0.6 ) (1,574 ) 41.0
Consolidated operating revenue $ 780,959 100.0 % $ 652,481 100.0 % $ 128,478 19.7 %
Year ended
December 31, Percent of December 31, Percent of Percent
2014 Revenue 2013 Revenue Change Change
Purchased Transportation
Forward Air
Airport-to-airport $ 183,252 42.7 % $ 163,284 41.5 % $ 19,968 12.2 %
Logistics services
Expedited full truckload – TLX 59,766 76.9 56,218 75.6 3,548 6.3
Intermodal/drayage 21,726 39.3 3,122 60.9 18,604 595.9
Total Logistics services 81,492 61.3 59,340 74.6 22,152 37.3
Other Forward Air services 12,517 25.1 8,279 29.2 4,238 51.2
Forward Air – Total purchased transportation 277,261 45.3 230,903 46.1 46,358 20.1
TQI – Pharmaceutical services 24,722 50.6 23,218 55.5 1,504 6.5
Forward Air Solutions – Pool distribution 36,601 29.2 34,492 30.4 2,109 6.1
Intersegment eliminations (4,008 ) 74.0 (2,923 ) 76.1 (1,085 ) 37.1
Consolidated purchased transportation $ 334,576 42.8 % $ 285,690 43.8 % $ 48,886 17.1 %
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, December 31,
2014 2013 (a)
Assets
Current assets:
Cash and cash equivalents $ 41,429 $ 127,367
Accounts receivable, net 95,326 76,500
Other current assets 13,200 16,493
Total current assets 149,955 220,360
Property and equipment 305,188 271,050
Less accumulated depreciation and amortization 132,699 116,287
Net property and equipment 172,489 154,763
Goodwill and other acquired intangibles:
Goodwill 144,412 88,496
Other acquired intangibles, net of accumulated amortization 72,705 40,110
Total net goodwill and other acquired intangibles 217,117 128,606
Other assets 2,244 2,540
Total assets $ 541,805 $ 506,269
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 20,572 $ 16,267
Accrued expenses 22,583 18,275
Current portion of debt and capital lease obligations 276 69
Total current liabilities 43,431 34,611
Debt and capital lease obligations, less current portion 1,275 3
Other long-term liabilities 8,356 8,940
Deferred income taxes 25,180 26,850
Commitments and contingencies
Shareholders’ equity:
Common stock 303 305
Additional paid-in capital 130,107 107,726
Retained earnings 333,153 327,834
Total shareholders’ equity 463,563 435,865
Total liabilities and shareholders’ equity $ 541,805 $ 506,269
(a) Taken from audited financial statements, which are not presented in their entirety.
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
December 31, December 31,
2014 2013
Operating activities:
Net income $ 17,046 $ 15,585
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 8,254 6,202
Gain on change in fair value of earn-out liability (615 )
Share-based compensation 1,676 1,559
Loss on disposal of property and equipment 58 14
Provision for (recovery) loss on receivables (202 ) 189
Provision for revenue adjustments 569 826
Deferred income taxes (4,750 ) 198
Tax benefit for stock options exercised (1,555 ) (500 )
Changes in operating assets and liabilities
Accounts receivable 4,164 5,709
Prepaid expenses and other current assets 1,117 1,360
Accounts payable and accrued expenses 190 (175 )
Net cash provided by operating activities 26,567 30,352
Investing activities:
Proceeds from disposal of property and equipment 365 308
Purchases of property and equipment (2,386 ) (2,173 )
Acquisition of business (5,824 )
Other (51 ) (18 )
Net cash used in investing activities (7,896 ) (1,883 )
Financing activities:
Payments of debt and capital lease obligations (74 ) (24 )
Proceeds from exercise of stock options 152 3,136
Payments of cash dividends (3,654 ) (3,070 )
Repurchase of common stock (repurchase program) (354 )
Common stock issued under employee stock purchase plan 206 159
Tax benefit for stock options exercised 1,555 500
Net cash (used in) provided by financing activities (1,815 ) 347
Net increase in cash 16,856 28,816
Cash at beginning of period 24,573 98,551
Cash at end of period $ 41,429 $ 127,367
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Year ended
December 31, December 31,
2014 2013
Operating activities:
Net income $ 61,169 $ 54,467
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 31,133 23,579
Gain on change in fair value of earn-out liability (615 )
Share-based compensation 6,681 6,178
Gain on disposal of property and equipment (383 ) (454 )
Provision for loss on receivables 241 423
Provision for revenue adjustments 2,465 2,531
Deferred income taxes (3,021 ) 4,856
Tax benefit for stock options exercised (2,109 ) (3,707 )
Changes in operating assets and liabilities, net of acquisition of business
Accounts receivable (12,193 ) 1,447
Prepaid expenses and other current assets (280 ) (215 )
Accounts payable and accrued expenses 7,957 2,349
Net cash provided by operating activities 91,660 90,839
Investing activities:
Proceeds from disposal of property and equipment 1,947 1,973
Purchases of property and equipment (39,487 ) (35,439 )
Acquisition of business, net of cash acquired (90,172 ) (45,328 )
Other 2 (129 )
Net cash used in investing activities (127,710 ) (78,923 )
Financing activities:
Payments of debt and capital lease obligations (9,736 ) (20,375 )
Proceeds from exercise of stock options 13,235 33,002
Payments of cash dividends (14,795 ) (12,141 )
Repurchase of common stock (repurchase program) (39,972 ) (354 )
Common stock issued under employee stock purchase plan 354 296
Cash settlement of share-based awards for minimum tax withholdings (1,083 ) (866 )
Tax benefit for stock options exercised 2,109 3,707
Net cash (used in) provided by financing activities (49,888 ) 3,269
Net (decrease) increase in cash (85,938 ) 15,185
Cash at beginning of year 127,367 112,182
Cash at end of year $ 41,429 $ 127,367
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
Three months ended
December 31,
2014
Percent of December 31,
2013
Percent of Percent
Revenue Revenue Change Change
Operating revenue
Forward Air $ 163.8 76.5 % $ 132.1 72.9 % $ 31.7 24.0 %
FASI 40.3 18.8 37.0 20.4 3.3 8.9
TQI 12.1 5.7 13.3 7.4 (1.2 ) (9.0 )
Intercompany eliminations (2.1 ) (1.0 ) (1.3 ) (0.7 ) (0.8 ) 61.5
Total 214.1 100.0 181.1 100.0 33.0 18.2
Purchased transportation
Forward Air 76.0 46.4 62.0 46.9 14.0 22.6
FASI 11.9 29.5 10.9 29.5 1.0 9.2
TQI 6.0 49.6 7.3 54.9 (1.3 ) (17.8 )
Intercompany eliminations (1.6 ) 76.2 (1.0 ) 76.9 (0.6 ) 60.0
Total 92.3 43.1 79.2 43.7 13.1 16.5
Salaries, wages and employee benefits
Forward Air 35.5 21.7 27.4 20.7 8.1 29.6
FASI 13.0 32.2 12.6 34.1 0.4 3.2
TQI 2.1 17.3 1.9 14.3 0.2 10.5
Total 50.6 23.6 41.9 23.2 8.7 20.8
Operating leases
Forward Air 6.5 4.0 5.4 4.1 1.1 20.4
FASI 2.5 6.2 3.0 8.1 (0.5 ) (16.7 )
TQI
Total 9.0 4.2 8.4 4.6 0.6 7.1
Depreciation and amortization
Forward Air 5.8 3.5 4.1 3.1 1.7 41.5
FASI 1.6 4.0 1.3 3.5 0.3 23.1
TQI 0.9 7.4 0.8 6.0 0.1 12.5
Total 8.3 3.9 6.2 3.4 2.1 33.9
Insurance and claims
Forward Air 3.1 1.9 2.3 1.7 0.8 34.8
FASI 1.4 3.5 1.0 2.7 0.4 40.0
TQI 0.3 2.5 0.2 1.5 0.1 50.0
Total 4.8 2.2 3.5 1.9 1.3 37.1
Fuel expense
Forward Air 2.1 1.3 1.0 0.8 1.1 110.0
FASI 2.0 5.0 2.2 5.9 (0.2 ) (9.1 )
TQI 1.1 9.1 1.4 10.5 (0.3 ) (21.4 )
Total 5.2 2.4 4.6 2.6 0.6 13.0
Other operating expenses
Forward Air 13.5 8.2 10.1 7.7 3.4 33.7
FASI 4.7 11.7 4.3 11.6 0.4 9.3
TQI 0.6 5.0 0.6 100.0
Intercompany eliminations (0.5 ) 23.8 (0.3 ) 23.1 (0.2 ) 66.7
Total 18.3 8.6 14.1 7.8 4.2 29.8
Income from operations
Forward Air 21.3 13.0 19.8 15.0 1.5 7.6
FASI 3.2 7.9 1.7 4.6 1.5 88.2
TQI 1.1 9.1 1.7 12.8 (0.6 ) (35.3 )
Total $ 25.6 12.0 % $ 23.2 12.8 % $ 2.4 10.3 %
Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
Year ended

December 31,
2014

Percent of

December 31,
2013

Percent of Percent
Revenue Revenue Change Change
Operating revenue
Forward Air $ 612.4 78.4 % $ 501.1 76.8 % $ 111.3 22.2 %
FASI 125.2 16.0 113.4 17.4 11.8 10.4
TQI 48.8 6.3 41.8 6.4 7.0 16.7
Intercompany eliminations (5.4 ) (0.7 ) (3.8 ) (0.6 ) (1.6 ) 42.1
Total 781.0 100.0 652.5 100.0 128.5 19.7
Purchased transportation
Forward Air 277.3 45.3 230.9 46.1 46.4 20.1
FASI 36.6 29.3 34.5 30.4 2.1 6.1
TQI 24.7 50.6 23.2 55.5 1.5 6.5
Intercompany eliminations (4.0 ) 74.1 (2.9 ) 76.3 (1.1 ) 37.9
Total 334.6 42.8 285.7 43.8 48.9 17.1
Salaries, wages and employee benefits
Forward Air 131.7 21.5 105.4 21.0 26.3 25.0
FASI 42.0 33.5 39.3 34.7 2.7 6.9
TQI 8.4 17.2 6.4 15.3 2.0 31.3
Total 182.1 23.3 151.1 23.2 31.0 20.5
Operating leases
Forward Air 24.9 4.1 20.2 4.0 4.7 23.3
FASI 9.0 7.2 9.0 7.9
TQI 0.1 0.2 0.1 0.2
Total 34.0 4.4 29.3 4.5 4.7 16.0
Depreciation and amortization
Forward Air 21.7 3.5 16.2 3.2 5.5 34.0
FASI 5.8 4.6 5.0 4.4 0.8 16.0
TQI 3.6 7.4 2.4 5.8 1.2 50.0
Total 31.1 4.0 23.6 3.6 7.5 31.8
Insurance and claims
Forward Air 11.8 1.9 8.7 1.8 3.1 35.6
FASI 3.1 2.5 3.3 2.9 (0.2 ) (6.1 )
TQI 0.8 1.7 0.5 1.2 0.3 60.0
Total 15.7 2.0 12.5 1.9 3.2 25.6
Fuel expense
Forward Air 8.4 1.4 4.0 0.8 4.4 110.0
FASI 7.3 5.8 7.0 6.2 0.3 4.3
TQI 4.5 9.2 4.2 10.1 0.3 7.1
Total 20.2 2.6 15.2 2.3 5.0 32.9
Other operating expenses
Forward Air 50.5 8.2 37.0 7.4 13.5 36.5
FASI 15.4 12.3 13.2 11.6 2.2 16.7
TQI 2.4 4.9 1.4 3.3 1.0 71.4
Intercompany eliminations (1.4 ) 25.9 (0.9 ) 23.7 (0.5 ) 55.6
Total 66.9 8.6 50.7 7.8 16.2 32.0
Income from operations
Forward Air 86.1 14.1 78.7 15.7 7.4 9.4
FASI 6.0 4.8 2.1 1.9 3.9 185.7
TQI 4.3 8.8 3.6 8.6 0.7 19.4
Total $ 96.4 12.3 % $ 84.4 12.9 % $ 12.0 14.2 %
Forward Air Corporation
Forward Air Inc. Operating Statistics
Three months ended
December 31, December 31, Percent
2014 2013 Change
Operating ratio 87.0 % 85.0 % 2.4 %
Business days 63.0 64.0 (1.6 )
Business weeks 12.6 12.8 (1.6 )
Airport-to-airport:
Tonnage
Total pounds ^1 502,531 482,861 4.1
Average weekly pounds ^1 39,883 37,724 5.7
Linehaul shipments
Total linehaul 797,612 716,672 11.3
Average weekly 63,303 55,990 13.1
Forward Air Complete shipments 135,252 122,735 10.2
As a percentage of linehaul shipments 17.0 % 17.1 % (0.6 )
Average linehaul shipment size 630 674 (6.5 )
Revenue per pound ^2
Linehaul yield $ 17.75 $ 17.00 3.5
Fuel surcharge impact 1.74 1.75
Forward Air Complete impact 2.85 2.80 0.2
Total airport-to-airport yield $ 22.34 $ 21.55 3.7
Expedited full truckload – TLX:
Miles
Owner operator ^1 5,919 8,001 (26.0 )
Third party ^1 5,471 4,253 28.6
Total Miles 11,390 12,254 (7.1 )
Revenue per mile $ 1.85 $ 1.57 17.8
Cost per mile $ 1.44 $ 1.19 21.0 %

^1 – In thousands

^2 – In dollars per hundred pound; percentage change is expressed as a percent of total yield.
Forward Air Corporation
Forward Air Inc. Operating Statistics
Year ended
December 31, December 31, Percent
2014 2013 Change
Operating ratio 85.9 % 84.3 % 1.9 %
Business days 254.0 255.0 (0.4 )
Business weeks 50.8 51.0 (0.4 )
Airport-to-airport:
Tonnage
Total pounds ^1 1,902,218 1,803,243 5.5
Average weekly pounds ^1 37,445 35,358 5.9
Linehaul shipments
Total linehaul 2,925,257 2,755,271 6.2
Average weekly 57,584 54,025 6.6
Forward Air Complete shipments 528,422 476,005 11.0
As a percentage of linehaul shipments 18.1 % 17.3 % 4.6
Average linehaul shipment size 650 654 (0.6 )
Revenue per pound ^2
Linehaul yield $ 17.61 $ 17.06 2.5
Fuel surcharge impact 1.93 1.87 0.3
Forward Air Complete impact 3.03 2.88 0.7
Total airport-to-airport yield $ 22.57 $ 21.81 3.5
Logistics:
Miles
Owner operator ^1 26,208 34,401 (23.8 )
Third party ^1 19,018 14,916 27.5
Total Miles 45,226 49,317 (8.3 )
Revenue per mile $ 1.72 $ 1.51 13.9
Cost per mile $ 1.32 $ 1.14 15.8 %
^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.

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