Forward Air Corporation Reports Third Quarter Results

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 peoples 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 Companys 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 endedNine months ended
September 30,September 30,September 30,September 30,
2008200720082007
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,
20082007 (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,
20082007
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 ofSeptember 30,Percent of
2008Revenue2007Revenue

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 ofSeptember 30,Percent of
2008Revenue2007Revenue

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:

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

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