Forward Air Corporation (NASDAQ:FWRD) today reported record revenue, operating income, net income and diluted earnings per share for the third quarter and nine months ended September 30, 2008.
Operating revenue for the quarter ended September 30, 2008 increased 24.2% to $121.5 million from $97.8 million for the same quarter in 2007. Income from operations was $19.3 million, compared with $16.9 million for the third quarter of 2007, an increase of 14.2%. As a percent of operating revenue, income from operations decreased to 15.9% from 17.3% for the same quarter last year. Net income during the period increased by $1.3 million, or 12.5%, to $12.1 million from $10.8 million in the third quarter of 2007. Income per diluted share from operations for the third quarter of 2008 was $0.42 compared with $0.36 in the same quarter in 2007, an increase of 16.7%.
Operating revenue for the nine months ended September 30, 2008 increased 26.1% to $351.0 million from $278.3 million for the same period in 2007. Income from operations was $56.2 million, compared with $51.1 million in the prior-year period, an increase of 10.2%. As a percent of operating revenue, income from operations decreased to 16.0% for the first nine months of 2008 from 18.4% in 2007. Net income during the period increased 5.2% to $34.2 million from $32.5 million in the prior-year period. Income per diluted share from operations for the first nine months of 2008 was $1.18 compared with $1.08 in the prior-year period, an increase of 9.3%.
Bruce Campbell, Chairman, President and CEO, commented, “We are very pleased to announce record revenues, income and earnings for the third quarter. Our people’s ability to react to the mid-quarter industry-wide decline in freight makes this performance truly extraordinary. Outside of the slowing in our core airport-to-airport business we continued to see impressive results from our TLX truckload brokerage and our Forward Air Complete door-to-door delivery groups.”
Commenting further, Mr. Campbell said, “On September 8th our Forward Air Solutions segment completed the acquisition of Spartanburg, South Carolina based pool transportation provider Service Express. This acquisition adds 5 new terminals in cities that compliment our geographic footprint in the Southeast and Mid-Atlantic. In our existing pool business, the quarter saw several organic sales wins and we were able to make great progress toward completing the integration of our late first quarter acquisition of Pinch Transportation. Our people are working hard to position Solutions for success in 2009, regardless of the economic environment.”
In commenting on the third quarter, Rodney L. Bell, Senior Vice President and CFO, said, “We posted a record $20.9 million cash flow from operations for the quarter which is a 13% increase over the third quarter of 2007. It was satisfying to see the strong cash flow characteristics of our model validated, even in this challenging environment.”
Commenting further, Mr. Bell said, “We anticipate fourth quarter year-over-year revenue growth in the 14-19% range and expect income per diluted share to be between $0.40 and $0.44 per share.”
Review of Financial Results
Forward Air will hold a conference call to discuss third quarter 2008 results on Tuesday, October 21, 2008 at 9:00 a.m. EDT. The Company’s conference call will be available online at www.forwardair.com or by dialing 800.841.9385. 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 two business segments, Forward Air, Inc. and Forward Air Solutions, 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 83 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 20 terminals within the Mid-Atlantic, Southeast, Midwest and Southwestern United States.
| Forward Air Corporation | ||||||||||||||||
| Condensed Consolidated Statements of Income | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Operating revenue: | ||||||||||||||||
| Forward Air | ||||||||||||||||
| Airport-to-airport | $ | 85,901 | $ | 75,671 | $ | 257,147 | $ | 227,128 | ||||||||
| Logistics | 15,597 | 11,785 | 42,688 | 30,650 | ||||||||||||
| Other | 6,487 | 5,220 | 18,464 | 15,399 | ||||||||||||
| Forward Air Solutions | ||||||||||||||||
| Pool distribution | 13,499 | 5,070 | 32,685 | 5,070 | ||||||||||||
| Total operation revenue | 121,484 | 97,746 | 350,984 | 278,247 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Purchased transportation | ||||||||||||||||
| Forward Air | ||||||||||||||||
| Airport-to-airport | 33,388 | 29,779 | 98,432 | 90,049 | ||||||||||||
| Logistics | 11,227 | 9,255 | 31,224 | 23,551 | ||||||||||||
| Other | 1,764 | 1,530 | 4,941 | 4,303 | ||||||||||||
| Forward Air Solutions | ||||||||||||||||
| Pool distribution | 2,505 | 720 | 5,743 | 720 | ||||||||||||
| Total purchased transportation | 48,884 | 41,284 | 140,340 | 118,623 | ||||||||||||
| Salaries, wages and employee benefits | 28,504 | 22,026 | 84,355 | 61,004 | ||||||||||||
| Operating leases | 6,183 | 4,474 | 16,918 | 12,091 | ||||||||||||
| Depreciation and amortization | 4,134 | 2,855 | 11,830 | 7,729 | ||||||||||||
| Insurance and claims | 1,816 | 1,649 | 5,690 | 5,251 | ||||||||||||
| Fuel expense | 3,052 | 578 | 8,466 | 1,088 | ||||||||||||
| Other operating expenses | 9,583 | 7,976 | 27,146 | 21,404 | ||||||||||||
| Total operating expenses | 102,156 | 80,842 | 294,745 | 227,190 | ||||||||||||
| Income from operations | 19,328 | 16,904 | 56,239 | 51,057 | ||||||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | (210 | ) | (55 | ) | (839 | ) | (136 | ) | ||||||||
| Other, net | 115 | 304 | 325 | 1,525 | ||||||||||||
| Total other (expense) income | (95 | ) | 249 | (514 | ) | 1,389 | ||||||||||
| Income before income taxes | 19,233 | 17,153 | 55,725 | 52,446 | ||||||||||||
| Income taxes | 7,136 | 6,400 | 21,519 | 19,925 | ||||||||||||
| Net income | $ | 12,097 | $ | 10,753 | $ | 34,206 | $ | 32,521 | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.42 | $ | 0.36 | $ | 1.19 | $ | 1.09 | ||||||||
| Diluted | $ | 0.42 | $ | 0.36 | $ | 1.18 | $ | 1.08 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 28,871 | 29,472 | 28,782 | 29,868 | ||||||||||||
| Diluted | 29,139 | 29,866 | 29,067 | 30,229 | ||||||||||||
| Dividends | $ | 0.07 | $ | 0.07 | $ | 0.21 | $ | 0.21 | ||||||||
| Forward Air Corporation | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (In thousands, except per share data) | |||||||
| (Unaudited) | |||||||
| September 30, | December 31, | ||||||
| 2008 | 2007 (a) | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash | $ | 17,591 | $ | 4,909 | |||
| Accounts receivable, net | 72,263 | 59,734 | |||||
| Other current assets | 8,113 | 6,807 | |||||
| Total current assets | 97,967 | 71,450 | |||||
| Property and equipment | 174,263 | 158,354 | |||||
| Less accumulated depreciation and amortization | 60,247 | 55,322 | |||||
| Total property and equipment, net | 114,016 | 103,032 | |||||
| Goodwill and other acquired intangibles: | |||||||
| Goodwill | 54,957 | 36,053 | |||||
| Other acquired intangibles, net | 35,953 | 29,991 | |||||
| Total goodwill and other acquired intangibles | 90,910 | 66,044 | |||||
| Other assets | 2,029 | 1,358 | |||||
| Total assets | $ | 304,922 | $ | 241,884 | |||
| Liabilities and Shareholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 11,175 | $ | 11,714 | |||
| Accrued expenses | 17,220 | 14,274 | |||||
| Current portion of debt and capital lease obligations | 2,416 | 830 | |||||
| Total current liabilities | 30,811 | 26,818 | |||||
| Debt and capital lease obligations, less current portion | 54,565 | 31,486 | |||||
| Other long-term liabilities | 3,319 | 4,476 | |||||
| Deferred income taxes | 7,785 | 7,371 | |||||
| Shareholders’ equity: | |||||||
| Common stock | 289 | 286 | |||||
| Additional paid-in capital | 8,565 | -- | |||||
| Retained earnings | 199,588 | 171,447 | |||||
| Total shareholders’ equity | 208,442 | 171,733 | |||||
| Total liabilities and shareholders’ equity | $ | 304,922 | $ | 241,884 | |||
(a) Taken from audited financial statements, which are not presented in their entirety | |||||||
| Forward Air Corporation | ||||||||
| Condensed Consolidated Statement of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Nine months ended | ||||||||
| September 30, | September 30, | |||||||
| 2008 | 2007 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 34,206 | $ | 32,521 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 11,830 | 7,729 | ||||||
| Share-based compensation | 4,571 | 2,429 | ||||||
| Loss (gain) on sale of property and equipment | 36 | (215 | ) | |||||
| Provision for loss (recovery) on receivables | 245 | (23 | ) | |||||
| Provision for revenue adjustments | 3,273 | 1,801 | ||||||
| Deferred income taxes | 635 | 1,212 | ||||||
| Increase in income taxes payable to stock options exercised | (1,148 | ) | (362 | ) | ||||
| Changes in operating assets and liabilities, net of acquisitions | ||||||||
| Accounts receivable | (16,092 | ) | (6,727 | ) | ||||
| Prepaid expenses and other current assets | (1,932 | ) | 3,913 | |||||
| Accounts payable and accrued expenses | 2,398 | 1,478 | ||||||
| Net cash provided by operating activities | 38,022 | 43,756 | ||||||
| Investing activities: | ||||||||
| Proceeds from disposal of property and equipment | 46 | 327 | ||||||
| Purchases of property and equipment | (12,680 | ) | (44,613 | ) | ||||
| Proceeds from sales or maturities of available-for-sale securities | -- | 133,310 | ||||||
| Purchases of available-for-sale securities | -- | (82,260 | ) | |||||
Acquisition of businesses | (29,299 | ) | (12,983 | ) | ||||
| Other | (167 | ) | (881 | ) | ||||
Net cash used in investing activities | (42,100 | ) | (7,100 | ) | ||||
| Financing activities | ||||||||
| Payments of debt and capital lease obligations | (1,172 | ) | (207 | ) | ||||
| Borrowing on line of credit | 45,000 | -- | ||||||
| Payments on line of credit | (25,000 | ) | -- | |||||
| Proceeds from exercise of stock options | 3,085 | 881 | ||||||
| Payments of cash dividends | (6,062 | ) | (6,293 | ) | ||||
| Common stock issued under employee stock purchase plan | 145 | 138 | ||||||
| Repurchase of common stock | -- | (31,220 | ) | |||||
| Cash settlement of share-based awards for minimum tax withholdings | (384 | ) | (242 | ) | ||||
| Tax benefit for stock options exercised | 1,148 | 362 | ||||||
| Net cash provided by (used in) financing activities | 16,760 | (36,581 | ) | |||||
| Net increase in cash | 12,682 | 75 | ||||||
| Cash at beginning of period | 4,909 | 8,231 | ||||||
| Cash at end of period | $ | 17,591 | $ | 8,306 | ||||
| Forward Air Corporation | |||||||||||||
| Segment Information | |||||||||||||
| (In millions) | |||||||||||||
| (Unaudited) | |||||||||||||
| Three months ended | |||||||||||||
| September 30, | Percent of | September 30, | Percent of | ||||||||||
| 2008 | Revenue | 2007 | Revenue | ||||||||||
Operating revenue | |||||||||||||
Forward Air | $ | 108.6 | 89.4 | % | $ | 92.7 | 94.8 | % | |||||
| FASI | 13.6 | 11.2 | 5.1 | 5.2 | |||||||||
| Intercompany Eliminations | (0.7 | ) | (0.6 | ) | -- | -- | |||||||
| Total | 121.5 | 100.0 | 97.8 | 100.0 | |||||||||
Purchased transportation | |||||||||||||
| Forward Air | 46.5 | 42.8 | 40.6 | 43.8 | |||||||||
| FASI | 3.1 | 22.8 | 0.7 | 13.7 | |||||||||
| Intercompany Eliminations | (0.7 | ) | 100.0 | -- | -- | ||||||||
| Total | 48.9 | 40.2 | 41.3 | 42.2 | |||||||||
| Salaries, wages and employee benefits | |||||||||||||
| Forward Air | 23.0 | 21.2 | 19.7 | 21.3 | |||||||||
| FASI | 5.5 | 40.5 | 2.3 | 45.1 | |||||||||
| Total | 28.5 | 23.5 | 22.0 | 22.5 | |||||||||
Operating leases | |||||||||||||
| Forward Air | 4.7 | 4.3 | 4.1 | 4.4 | |||||||||
| FASI | 1.5 | 11.0 | 0.4 | 7.8 | |||||||||
| Total | 6.2 | 5.1 | 4.5 | 4.6 | |||||||||
Depreciation and amortization | |||||||||||||
| Forward Air | 3.6 | 3.3 | 2.6 | 2.8 | |||||||||
| FASI | 0.5 | 3.7 | 0.3 | 5.9 | |||||||||
| Total | 4.1 | 3.4 | 2.9 | 3.0 | |||||||||
| Insurance and claims | |||||||||||||
| Forward Air | 1.7 | 1.6 | 1.5 | 1.6 | |||||||||
| FASI | 0.1 | 0.7 | 0.1 | 2.0 | |||||||||
| Total | 1.8 | 1.5 | 1.6 | 1.6 | |||||||||
Fuel expense | |||||||||||||
| Forward Air | 1.6 | 1.5 | 0.3 | 0.3 | |||||||||
| FASI | 1.5 | 11.0 | 0.3 | 5.9 | |||||||||
| Total | 3.1 | 2.5 | 0.6 | 0.6 | |||||||||
| Other operating expenses | |||||||||||||
| Forward Air | 8.2 | 7.5 | 7.4 | 8.0 | |||||||||
| FASI | 1.4 | 10.3 | 0.6 | 11.8 | |||||||||
| Total | 9.6 | 7.9 | 8.0 | 8.2 | |||||||||
| Income from operations | |||||||||||||
| Forward Air | 19.3 | 17.8 | 16.5 | 17.8 | |||||||||
| FASI | 0.0 | 0.0 | 0.4 | 7.8 | |||||||||
| Total | $ | 19.3 | 15.9 | % | $ | 16.9 | 17.3 | % | |||||
| Forward Air Corporation | |||||||||||||
| Segment Information | |||||||||||||
| (In millions) | |||||||||||||
| (Unaudited) | |||||||||||||
| Nine months ended | |||||||||||||
| September 30, | Percent of | September 30, | Percent of | ||||||||||
| 2008 | Revenue | 2007 | Revenue | ||||||||||
Operating revenue | |||||||||||||
| Forward Air | $ | 319.8 | 91.1 | % | $ | 273.2 | 98.2 | % | |||||
| FASI | 32.8 | 9.4 | 5.1 | 1.8 | |||||||||
| Intercompany Eliminations | (1.6 | ) | (0.5 | ) | -- | -- | |||||||
| Total | 351.0 | 100.0 | 278.3 | 100.0 | |||||||||
Purchased transportation | |||||||||||||
| Forward Air | 134.6 | 42.1 | 117.9 | 43.2 | |||||||||
| FASI | 7.3 | 22.3 | 0.7 | 13.7 | |||||||||
| Intercompany Eliminations | (1.6 | ) | 100.0 | -- | -- | ||||||||
| Total | 140.3 | 40.0 | 118.6 | 42.6 | |||||||||
| Salaries, wages and employee benefits | |||||||||||||
| Forward Air | 70.3 | 22.0 | 58.7 | 21.5 | |||||||||
| FASI | 14.1 | 43.0 | 2.3 | 45.1 | |||||||||
| Total | 84.4 | 24.1 | 61.0 | 21.9 | |||||||||
Operating leases | |||||||||||||
| Forward Air | 13.6 | 4.2 | 11.7 | 4.3 | |||||||||
| FASI | 3.3 | 10.0 | 0.4 | 7.8 | |||||||||
| Total | 16.9 | 4.8 | 12.1 | 4.3 | |||||||||
Depreciation and amortization | |||||||||||||
| Forward Air | 10.6 | 3.3 | 7.4 | 2.7 | |||||||||
| FASI | 1.2 | 3.6 | 0.3 | 5.9 | |||||||||
| Total | 11.8 | 3.4 | 7.7 | 2.8 | |||||||||
| Insurance and claims | |||||||||||||
| Forward Air | 5.1 | 1.6 | 5.2 | 1.9 | |||||||||
| FASI | 0.6 | 1.8 | 0.1 | 2.0 | |||||||||
| Total | 5.7 | 1.6 | 5.3 | 1.9 | |||||||||
Fuel expense | |||||||||||||
| Forward Air | 4.8 | 1.5 | 0.8 | 0.3 | |||||||||
| FASI | 3.7 | 11.3 | 0.3 | 5.9 | |||||||||
| Total | 8.5 | 2.4 | 1.1 | 0.4 | |||||||||
| Other operating expenses | |||||||||||||
| Forward Air | 23.7 | 7.4 | 20.8 | 7.6 | |||||||||
| FASI | 3.5 | 10.7 | 0.6 | 11.8 | |||||||||
| Total | 27.2 | 7.7 | 21.4 | 7.7 | |||||||||
| Income (loss) from operations | |||||||||||||
| Forward Air | 57.1 | 17.9 | 50.7 | 18.5 | |||||||||
| FASI | (0.9 | ) | (2.7 | ) | 0.4 | 7.8 | |||||||
| Total | $ | 56.2 | 16.0 | % | $ | 51.1 | 18.4 | % | |||||
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.
Contacts:
Rodney L. Bell, 423-636-7000
rbell@forwardair.com
