Forward Air Corporation (NASDAQ:FWRD) today reported results for the fourth quarter and year ended December 31, 2008.
Operating revenue for the quarter ended December 31, 2008 increased 7.8% to $123.4 million from $114.5 million for the same quarter in 2007. Income from operations was $14.0 million, compared with $20.0 million for the fourth quarter of 2007, a decrease of 30.0%. As a percent of operating revenue, income from operations decreased to 11.3% from 17.5% for the same quarter last year. Net income during the period decreased by $4.1 million, or 32.8%, to $8.3 million from $12.4 million in the fourth quarter of 2007. Net income per diluted share for the fourth quarter of 2008 was $0.29 compared with $0.43 in the same quarter in 2007, a decrease of 32.6%.
Operating revenue for the year ended December 31, 2008 increased 20.8% to $474.4 million from $392.7 million for the same period in 2007. Income from operations was $70.3 million, compared with $71.0 million in the prior-year period, a decrease of 1.0%. As a percent of operating revenue, income from operations decreased to 14.8% for the year ended 2008 from 18.1% in 2007. Net income during the period decreased 5.3% to $42.5 million from $44.9 million in the prior-year period. Net income per diluted share from operations for the year ended 2008 was $1.47 compared with $1.50 for the year ended December 31, 2007, a decrease of 2.0%.
Bruce A. Campbell, Chairman, President, and CEO, said, “As noted in last month's update we experienced an unprecedented decline in demand for our core airport-to-airport freight services during the fourth quarter 2008. This negative trend accelerated throughout the quarter with December volumes declining in excess of 20% from December of 2007. Thus far this year, volumes appear to have stabilized around negative 20% in our core business.”
Commenting further, Mr. Campbell said, “In response to this dramatic decline in volume we have made further reductions in our work force, initiated an across the board salary and wage freeze, curtailed 2009 planned capital spending and continued to attack every expense line item in order to drive meaningful cost reductions. It is important to note that we have taken all of these measures without sacrificing the superior level of service that has differentiated Forward Air from our competitors. This is truly a testament to the dedication of our employees and independent owner operators and they have our sincerest appreciation.”
In commenting on the fourth quarter, Rodney L. Bell, Senior Vice President and CFO, said “In the fourth quarter cash flow from operations was $21.1 million as compared to $18.6 million in the same quarter of 2007 further illustrating the strength of our non-asset model even in the most challenging of economic environments. As mentioned in our update, we ended the year with just over $22 million in cash and $42.2 million available on our $100 million line of credit.”
Commenting further, Mr. Bell said, “We anticipate first quarter year-over-year revenue in our Forward Air, Inc segment to decline between 10 and 15% while we expect revenue in our Forward Air Solutions segment to approximately double primarily on the strength of our two 2008 acquisitions. We anticipate income per diluted share to be between $0.10 and $0.15 per share.”
Review of Financial Results
Forward Air will hold a conference call to discuss fourth quarter 2008 results on Tuesday, February 10, 2009 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 82 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 | ||||||||||||||||
Consolidated Condensed Statements of Income | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three months ended | Year ended | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Operating revenue: | ||||||||||||||||
Forward Air | ||||||||||||||||
Airport-to-airport | $ | 77,713 | $ | 86,034 | $ | 334,860 | $ | 313,162 | ||||||||
Logistics | 16,602 | 11,976 | 59,290 | 42,626 | ||||||||||||
Other | 6,669 | 5,524 | 25,133 | 20,923 | ||||||||||||
Forward Air Solutions | ||||||||||||||||
Pool distribution | 22,468 | 10,956 | 55,153 | 16,026 | ||||||||||||
Total operating revenue | 123,452 | 114,490 | 474,436 | 392,737 | ||||||||||||
Operating expenses: | ||||||||||||||||
Purchased transportation | ||||||||||||||||
Forward Air | ||||||||||||||||
Airport-to-airport | 30,358 | 33,608 | 128,785 | 123,658 | ||||||||||||
Logistics | 13,336 | 9,176 | 44,560 | 32,727 | ||||||||||||
Other | 1,500 | 1,737 | 6,425 | 6,049 | ||||||||||||
Forward Air Solutions | ||||||||||||||||
Pool distribution | 3,551 | 1,292 | 9,315 | 2,003 | ||||||||||||
Total purchased transportation | 48,745 | 45,813 | 189,085 | 164,437 | ||||||||||||
Salaries, wages and employee benefits | 32,149 | 27,800 | 116,504 | 88,803 | ||||||||||||
Operating leases | 7,485 | 4,670 | 24,403 | 16,761 | ||||||||||||
Depreciation and amortization | 4,785 | 3,095 | 16,615 | 10,824 | ||||||||||||
Insurance and claims | 2,409 | 2,434 | 8,099 | 7,685 | ||||||||||||
Fuel expense | 2,999 | 1,334 | 11,465 | 2,421 | ||||||||||||
Other operating expenses | 10,834 | 9,353 | 37,980 | 30,758 | ||||||||||||
Total operating expenses | 109,406 | 94,499 | 404,151 | 321,689 | ||||||||||||
Income from operations | 14,046 | 19,991 | 70,285 | 71,048 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (396 | ) | (355 | ) | (1,236 | ) | (491 | ) | ||||||||
Other, net | 37 | 231 | 362 | 1,756 | ||||||||||||
Total other income (expense) | (359 | ) | (124 | ) | (874 | ) | 1,265 | |||||||||
Income before income taxes | 13,687 | 19,867 | 69,411 | 72,313 | ||||||||||||
Income taxes | 5,350 | 7,463 | 26,869 | 27,388 | ||||||||||||
Net income | $ | 8,337 | $ | 12,404 | $ | 42,542 | $ | 44,925 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 0.29 | $ | 0.43 | $ | 1.48 | $ | 1.52 | ||||||||
Diluted | $ | 0.29 | $ | 0.43 | $ | 1.47 | $ | 1.50 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 28,889 | 28,832 | 28,808 | 29,609 | ||||||||||||
Diluted | 28,987 | 29,154 | 29,025 | 29,962 | ||||||||||||
Dividends per share: | $ | 0.07 | $ | 0.07 | $ | 0.28 | $ | 0.28 |
Forward Air Corporation | ||||||
Condensed Consolidated Balance Sheets | ||||||
(In thousands) | ||||||
(Unaudited) | ||||||
December 31, | December 31, | |||||
2008 | 2007(a) | |||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 22,093 | $ | 4,909 | ||
Accounts receivable, net | 57,206 | 59,734 | ||||
Other current assets | 12,290 | 6,807 | ||||
Total current assets | 91,589 | 71,450 | ||||
Property and equipment | 186,377 | 158,354 | ||||
Less accumulated depreciation and amortization | 63,401 | 55,322 | ||||
Total property and equipment, net | 122,976 | 103,032 | ||||
Goodwill and other acquired intangibles: | ||||||
Goodwill | 50,230 | 36,053 | ||||
Other acquired intangibles, net | 40,708 | 29,991 | ||||
Total goodwill and other acquired intangibles | 90,938 | 66,044 | ||||
Other assets | 2,024 | 1,358 | ||||
Total assets | $ | 307,527 | $ | 241,884 | ||
Liabilities and Shareholders’ Equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 11,633 | $ | 11,714 | ||
Accrued expenses | 12,927 | 14,274 | ||||
Current portion of debt and capital lease obligations | 1,602 | 830 | ||||
Total current liabilities | 26,162 | 26,818 | ||||
Debt and capital lease obligations, less current portion | 53,035 | 31,486 | ||||
Other long-term liabilities | 3,055 | 4,476 | ||||
Deferred income taxes | 8,841 | 7,371 | ||||
Shareholders’ equity: | ||||||
Common stock | 289 | 286 | ||||
Additional paid-in capital | 10,249 | -- | ||||
Retained earnings | 205,896 | 171,447 | ||||
Total shareholders’ equity | 216,434 | 171,733 | ||||
Total liabilities and shareholders’ equity | $ | 307,527 | $ | 241,884 | ||
(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) | ||||||||
Year ended | ||||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
Operating activities: | ||||||||
Net income | $ | 42,542 | $ | 44,925 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 16,615 | 10,824 | ||||||
Share-based compensation | 6,267 | 3,710 | ||||||
Loss (gain) on disposal of property and equipment | 171 | (172 | ) | |||||
Provision for loss (recovery) on receivables | 903 | (33 | ) | |||||
Provision for revenue adjustments | 4,259 | 2,312 | ||||||
Deferred income taxes | 1,151 | 596 | ||||||
Tax benefit for stock options exercised | (1,030 | ) | (1,261 | ) | ||||
Changes in operating assets and liabilities, net of acquisitions | ||||||||
Accounts receivable | (2,376 | ) | (11,474 | ) | ||||
Prepaid expenses and other current assets | (2,102 | ) | 291 | |||||
Accounts payable and accrued expenses | (2,665 | ) | 6,606 | |||||
Income taxes | (4,652 | ) | 6,069 | |||||
Net cash provided by operating activities | 59,083 | 62,393 | ||||||
Investing activities: | ||||||||
Proceeds from disposal of property and equipment | 87 | 574 | ||||||
Purchases of property and equipment | (26,699 | ) | (47,026 | ) | ||||
Proceeds from sales or maturities of available-for-sale securities | -- | 143,410 | ||||||
Purchases of available-for-sale securities | -- | (82,282 | ) | |||||
Acquisition of businesses | (29,329 | ) | (48,627 | ) | ||||
Other | (247 | ) | (119 | ) | ||||
Net cash used in investing activities | (56,188 | ) | (34,070 | ) | ||||
Financing activities: | ||||||||
Payments of debt and capital lease obligations | (1,603 | ) | (493 | ) | ||||
Borrowings on line of credit | 45,000 | 40,000 | ||||||
Payments on line of credit | (25,000 | ) | (10,000 | ) | ||||
Proceeds from exercise of stock options | 3,085 | 1,017 | ||||||
Payments of cash dividends | (8,089 | ) | (8,305 | ) | ||||
Proceeds from common stock issued under employee stock purchase plan | 255 | 259 | ||||||
Cash settlement of share-based awards for minimum tax withholdings | (389 | ) | (250 | ) | ||||
Repurchase of common stock | -- | (55,134 | ) | |||||
Tax benefit for stock options exercised | 1,030 | 1,261 | ||||||
Net cash provided by (used in) financing activities | 14,289 | (31,645 | ) | |||||
Net increase (decrease) in cash | 17,184 | (3,322 | ) | |||||
Cash at beginning of period | 4,909 | 8,231 | ||||||
Cash at end of period | $ | 22,093 | $ | 4,909 |
Forward Air Corporation | ||||||||||||||||||||||
Segment Information | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Three months ended | ||||||||||||||||||||||
December 31, | Percent of | December 31, | Percent of | % | ||||||||||||||||||
2008 | Revenue | 2007 | Revenue | Change | Change | |||||||||||||||||
Operating revenue | ||||||||||||||||||||||
Forward Air | $ | 101.4 | 82.2 | % | $ | 103.6 | 90.5 | % | $ | (2.2 | ) | (2.1 | ) | % | ||||||||
FASI | 22.5 | 18.2 | 11.0 | 9.6 | 11.5 | 104.5 | ||||||||||||||||
Intercompany Eliminations | (0.5 | ) | (0.4 | ) | (0.1 | ) | (0.1 | ) | (0.4 | ) | 400.0 | |||||||||||
Total | 123.4 | 100.0 | 114.5 | 100.0 | 8.9 | 7.8 | ||||||||||||||||
Purchased transportation | ||||||||||||||||||||||
Forward Air | 45.3 | 44.7 | 44.5 | 43.0 | 0.8 | 1.8 | ||||||||||||||||
FASI | 3.9 | 17.3 | 1.4 | 12.7 | 2.5 | 178.6 | ||||||||||||||||
Intercompany Eliminations | (0.5 | ) | 100.0 | (0.1 | ) | 100.0 | (0.4 | ) | 400.0 | |||||||||||||
Total | 48.7 | 39.5 | 45.8 | 40.0 | 2.9 | 6.3 | ||||||||||||||||
Salaries, wages and employee benefits | ||||||||||||||||||||||
Forward Air | 22.2 | 21.9 | 23.2 | 22.4 | (1.0 | ) | (4.3 | ) | ||||||||||||||
FASI | 9.9 | 44.0 | 4.6 | 41.8 | 5.3 | 115.2 | ||||||||||||||||
Total | 32.1 | 26.0 | 27.8 | 24.3 | 4.3 | 15.5 | ||||||||||||||||
Operating leases | ||||||||||||||||||||||
Forward Air | 4.9 | 4.8 | 4.1 | 3.9 | 0.8 | 19.5 | ||||||||||||||||
FASI | 2.6 | 11.6 | 0.6 | 5.5 | 2.0 | 333.3 | ||||||||||||||||
Total | 7.5 | 6.1 | 4.7 | 4.1 | 2.8 | 59.6 | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||||
Forward Air | 3.8 | 3.7 | 2.9 | 2.8 | 0.9 | 31.0 | ||||||||||||||||
FASI | 1.0 | 4.4 | 0.2 | 1.8 | 0.8 | 400.0 | ||||||||||||||||
Total | 4.8 | 3.9 | 3.1 | 2.7 | 1.7 | 54.8 | ||||||||||||||||
Insurance and claims | ||||||||||||||||||||||
Forward Air | 2.2 | 2.2 | 2.0 | 1.9 | 0.2 | 10.0 | ||||||||||||||||
FASI | 0.2 | 0.9 | 0.4 | 3.6 | (0.2 | ) | (50.0 | ) | ||||||||||||||
Total | 2.4 | 2.0 | 2.4 | 2.1 | -- | -- | ||||||||||||||||
Fuel expense | ||||||||||||||||||||||
Forward Air | 1.0 | 1.0 | 0.5 | 0.5 | 0.5 | 100.0 | ||||||||||||||||
FASI | 2.0 | 8.9 | 0.8 | 7.3 | 1.2 | 150.0 | ||||||||||||||||
Total | 3.0 | 2.4 | 1.3 | 1.1 | 1.7 | 130.8 | ||||||||||||||||
Other operating expenses | ||||||||||||||||||||||
Forward Air | 8.5 | 8.4 | 8.2 | 7.9 | 0.3 | 3.7 | ||||||||||||||||
FASI | 2.4 | 10.7 | 1.2 | 10.9 | 1.2 | 100.0 | ||||||||||||||||
Total | 10.9 | 8.8 | 9.4 | 8.2 | 1.5 | 16.0 | ||||||||||||||||
Income from operations | ||||||||||||||||||||||
Forward Air | 13.5 | 13.3 | 18.2 | 17.6 | (4.7 | ) | (25.8 | ) | ||||||||||||||
FASI | 0.5 | 2.2 | 1.8 | 16.4 | (1.3 | ) | (72.2 | ) | ||||||||||||||
Total | $ | 14.0 | 11.3 | % | $ | 20.0 | 17.5 | % | $ | (6.0 | ) | (30.0 | ) | % |
Forward Air Corporation | ||||||||||||||||||||||
Segment Information | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Year ended | ||||||||||||||||||||||
December 31, | Percent of | December 31, | Percent of | % | ||||||||||||||||||
2008 | Revenue | 2007 | Revenue | Change | Change | |||||||||||||||||
Operating revenue | ||||||||||||||||||||||
Forward Air | $ | 421.2 | 88.8 | % | $ | 376.8 | 95.9 | % | $ | 44.4 | 11.8 | % | ||||||||||
FASI | 55.3 | 11.6 | 16.0 | 4.1 | 39.3 | 245.6 | ||||||||||||||||
Intercompany Eliminations | (2.1 | ) | (0.4 | ) | (0.1 | ) | -- | (2.0 | ) | (2,000.0 | ) | |||||||||||
Total | 474.4 | 100.0 | 392.7 | 100.0 | 81.7 | 20.8 | ||||||||||||||||
Purchased transportation | ||||||||||||||||||||||
Forward Air | 179.9 | 42.7 | 162.4 | 43.1 | 17.5 | 10.8 | ||||||||||||||||
FASI | 11.2 | 20.2 | 2.1 | 13.1 | 9.1 | 433.3 | ||||||||||||||||
Intercompany Eliminations | (2.1 | ) | 100.0 | (0.1 | ) | 100.0 | (2.0 | ) | (2,000.0 | ) | ||||||||||||
Total | 189.0 | 39.9 | 164.4 | 41.9 | 24.6 | 15.0 | ||||||||||||||||
Salaries, wages and employee benefits | ||||||||||||||||||||||
Forward Air | 92.5 | 22.0 | 82.0 | 21.8 | 10.5 | 12.8 | ||||||||||||||||
FASI | 24.0 | 43.4 | 6.8 | 42.5 | 17.2 | 252.9 | ||||||||||||||||
Total | 116.5 | 24.6 | 88.8 | 22.6 | 27.7 | 31.2 | ||||||||||||||||
Operating leases | ||||||||||||||||||||||
Forward Air | 18.5 | 4.4 | 15.8 | 4.2 | 2.7 | 17.1 | ||||||||||||||||
FASI | 5.9 | 10.7 | 1.0 | 6.3 | 4.9 | 490.0 | ||||||||||||||||
Total | 24.4 | 5.1 | 16.8 | 4.3 | 7.6 | 45.2 | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||||
Forward Air | 14.4 | 3.4 | 10.4 | 2.8 | 4.0 | 38.5 | ||||||||||||||||
FASI | 2.2 | 4.0 | 0.5 | 3.1 | 1.7 | 340.0 | ||||||||||||||||
Total | 16.6 | 3.5 | 10.9 | 2.8 | 5.7 | 52.3 | ||||||||||||||||
Insurance and claims | ||||||||||||||||||||||
Forward Air | 7.3 | 1.7 | 7.2 | 1.9 | 0.1 | 1.4 | ||||||||||||||||
FASI | 0.8 | 1.4 | 0.5 | 3.1 | 0.3 | 60.0 | ||||||||||||||||
Total | 8.1 | 1.7 | 7.7 | 1.9 | 0.4 | 5.2 | ||||||||||||||||
Fuel expense | ||||||||||||||||||||||
Forward Air | 5.8 | 1.4 | 1.3 | 0.3 | 4.5 | 346.2 | ||||||||||||||||
FASI | 5.7 | 10.3 | 1.1 | 6.9 | 4.6 | 418.2 | ||||||||||||||||
Total | 11.5 | 2.4 | 2.4 | 0.6 | 9.1 | 379.2 | ||||||||||||||||
Other operating expenses | ||||||||||||||||||||||
Forward Air | 32.1 | 7.6 | 29.0 | 7.7 | 3.1 | 10.7 | ||||||||||||||||
FASI | 5.9 | 10.7 | 1.7 | 10.6 | 4.2 | 247.1 | ||||||||||||||||
Total | 38.0 | 8.0 | 30.7 | 7.8 | 7.3 | 23.8 | ||||||||||||||||
Income (loss) from operations | ||||||||||||||||||||||
Forward Air | 70.7 | 16.8 | 68.7 | 18.2 | 2.0 | 2.9 | ||||||||||||||||
FASI | (0.4 | ) | (0.7 | ) | 2.3 | 14.4 | (2.7 | ) | (117.4 | ) | ||||||||||||
Total | $ | 70.3 | 14.8 | % | $ | 71.0 | 18.1 | % | $ | (0.7 | ) | (1.0 | ) | % |
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