10-Q 1 fwrd-20220331.htm 10-Q fwrd-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-22490
fwrd-20220331_g1.jpg
FORWARD AIR CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee62-1120025
(State or other jurisdiction of incorporation)(I.R.S. Employer Identification No.)
1915 Snapps Ferry RoadBuilding NGreenevilleTN37745
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code: (423) 636-7000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueFWRDThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x  No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer¨Non-accelerated filer¨Smaller reporting companyEmerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  
Yes ¨  No x

 The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of May 6, 2022 was 26,861,667.



Table of Contents
Forward Air Corporation
   
  Page
  Number
Part I: Financial Information 
   
Item 1.Financial Statements (Unaudited) 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
Part II: Other Information
   
Item 1.
   
Item 2.
   
Item 3.
   
Item 4.
Item 5.
Item 6.
   

2

Part I.Financial Information
  
Item 1.Financial Statements (Unaudited).
Forward Air Corporation
Condensed Consolidated Balance Sheets
(unaudited and in thousands, except share and per share amounts)
 March 31,
2022
December 31,
2021
Assets
Current assets:  
Cash and cash equivalents$61,630 $37,316 
Accounts receivable, less allowance of $3,298 in 2022 and $3,260 in 2021
236,666 208,085 
Other receivables4,488 8,097 
Other current assets22,468 29,309 
Total current assets325,252 282,807 
Property and equipment, net of accumulated depreciation and amortization of $206,980 in 2022 and $200,867 in 2021
224,060 219,095 
Operating lease right-of-use assets153,337 148,198 
Goodwill265,639 266,752 
Other acquired intangibles, net of accumulated amortization of $111,415 in 2022 and $107,337 in 2021
150,638 154,717 
Other assets47,880 46,254 
Total assets$1,166,806 $1,117,823 
Liabilities and Shareholders’ Equity 
Current liabilities:  
Accounts payable$54,430 $44,837 
Accrued expenses66,467 61,621 
Other current liabilities12,479 4,614 
Current portion of debt and finance lease obligations6,069 6,088 
Current portion of operating lease liabilities48,499 47,532 
Total current liabilities187,944 164,692 
Finance lease obligations, less current portion8,767 9,571 
Long-term debt, less current portion and debt issuance costs155,125 155,466 
Operating lease liabilities, less current portion105,773 101,409 
Other long-term liabilities52,376 49,624 
Deferred income taxes45,050 43,407 
Shareholders’ equity:  
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2022 and 2021
  
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 26,861,667 in 2022 and 26,968,788 in 2021
269 270 
Additional paid-in capital261,444 258,474 
Retained earnings350,058 334,910 
Total shareholders’ equity611,771 593,654 
Total liabilities and shareholders’ equity$1,166,806 $1,117,823 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3

    
Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited and in thousands, except per share amounts)
 Three Months Ended
 March 31,
2022
March 31,
2021
Operating revenues$466,961 $362,202 
Operating expenses: 
Purchased transportation224,832 184,608 
Salaries, wages and employee benefits86,081 74,897 
Operating leases22,673 19,167 
Depreciation and amortization11,130 9,237 
Insurance and claims11,968 9,741 
Fuel expense5,865 3,702 
Other operating expenses47,061 38,126 
Total operating expenses409,610 339,478 
Income from continuing operations57,351 22,724 
Other expense: 
Interest expense(784)(1,165)
Total other expense(784)(1,165)
Income before income taxes56,567 21,559 
Income tax expense13,881 4,845 
Net income from continuing operations42,686 16,714 
Loss from discontinued operation, net of tax (5,533)
Net income and comprehensive income $42,686 $11,181 
Basic net income (loss) per share
Continuing operations$1.57 $0.61 
Discontinued operation (0.20)
Net income per basic share$1.57 $0.40 
Diluted net income (loss) per share
Continuing operations$1.57 $0.60 
Discontinued operation (0.20)
Net income per diluted share$1.57 $0.40 
Dividends per share$0.24 $0.21 


The accompanying notes are an integral part of the condensed consolidated financial statements.


4

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited and in thousands)
 Three Months Ended
 March 31,
2022
March 31,
2021
 
Operating activities:
Net income from continuing operations$42,686 $16,714 
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization11,130 9,237 
Change in fair value of earn-out liability(294)(48)
Share-based compensation expense2,761 2,597 
Provision for revenue adjustments1,304 1,777 
Deferred income tax expense (benefit)1,643 (505)
Other132 92 
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable(30,278)(28,023)
Other receivables3,609 (13,339)
Other current and noncurrent assets13,818 7,085 
Accounts payable and accrued expenses15,975 21,326 
Net cash provided by operating activities of continuing operations62,486 16,913 
Investing activities:
Proceeds from sale of property and equipment511 665 
Purchases of property and equipment(9,908)(2,695)
Purchases of a business, net of cash acquired (15,000)
Net cash used in investing activities of continuing operations(9,397)(17,030)
Financing activities:
Repayments of finance lease obligations(1,070)(467)
Payments on credit facility(375) 
Proceeds from issuance of common stock upon stock option exercises206 2,147 
Payments of dividends to shareholders(6,502)(5,797)
Repurchases and retirement of common stock(17,780)(9,998)
Payment of minimum tax withholdings on share-based awards(3,254)(2,744)
Contributions from subsidiary held for sale 1,118 
Net cash used in financing activities from continuing operations(28,775)(15,741)
Net increase (decrease) in cash and cash equivalents of continuing operations24,314 (15,858)
Cash from discontinued operation:
Net cash used in operating activities of discontinued operation (6,902)
Net cash provided by investing activities of discontinued operation 8,020 
Net cash used in financing activities of discontinued operation (1,118)
Net increase (decrease) in cash and cash equivalents24,314 (15,858)
Cash and cash equivalents at beginning of period of continuing operations37,316 40,254 
Cash at beginning of period of discontinued operation   
Net increase (decrease) in cash and cash equivalents24,314 (15,858)
Less: cash at end of period of discontinued operation  
Cash and cash equivalents at end of period of continuing operations$61,630 $24,396 

 The accompanying notes are an integral part of the condensed consolidated financial statements.
5



Forward Air Corporation
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited and in thousands)
 Common StockAdditional Paid-in
Capital
Retained Earnings
Total Shareholders’ Equity
 SharesAmount
Balance at December 31, 202126,969 $270 $258,474 $334,910 $593,654 
Net income— — — 42,686 42,686 
Stock options exercised3 — 206 — 206 
Share-based compensation expense— — 2,761 — 2,761 
Payment of dividends to shareholders— — 4 (6,506)(6,502)
Payment of minimum tax withholdings on share-based awards(30) — (3,254)(3,254)
Repurchases and retirement of common stock(176)(2)— (17,778)(17,780)
Issuance of share-based awards96 1 (1)—  
Balance at March 31, 202226,862 $269 $261,444 $350,058 $611,771 

 Common StockAdditional Paid-in
Capital
Retained Earnings
Total Shareholders’ Equity
 SharesAmount
Balance at December 31, 202027,316 $273 $242,916 $304,140 $547,329 
Net income— — — 11,181 11,181 
Stock options exercised40 — 2,147 — 2,147 
Share-based compensation expense— — 2,613 — 2,613 
Payment of dividends to shareholders— — 3 (5,800)(5,797)
Payment of minimum tax withholdings on share-based awards(35)— — (2,744)(2,744)
Repurchases and retirement of common stock(114)(1)— (9,997)(9,998)
Issuance of share-based awards111 1 (1)—  
Balance at March 31, 202127,318 $273 $247,678 $296,780 $544,731 

The accompanying notes are an integral part of the condensed consolidated financial statements.
6

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022

1.    Description of Business and Basis of Presentation

Basis of Presentation and Principles of Consolidation

Forward Air Corporation and its subsidiaries (“Forward Air” or the “Company) is a leading asset-light freight and logistics company. The Company has two reportable segments: Expedited Freight and Intermodal. The Company conducts business in the United States and Canada.

The Expedited Freight segment provides expedited regional, inter-regional and national less-than-truckload (“LTL), truckload and final mile services. Expedited Freight also offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

The Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. Intermodal also offers dedicated contract and container freight station (“CFS) warehouse and handling services.

The Company’s condensed consolidated financial statements include Forward Air Corporation and it's wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Results for interim periods are not necessarily indicative of the results for the year.

On April 23, 2020, the Board of Directors (the “Board”) of the Company approved a strategy to divest of the Pool Distribution business (“Pool), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. As a result of the strategy to divest of Pool, the results of operations for Pool were presented as a discontinued operation in the Condensed Consolidated Statements of Comprehensive Income for the prior period. Unless otherwise noted, amounts, percentages and discussion for the prior period reflect the results of operations, financial condition and cash flows from the Company’s continuing operations. Refer to Note 3, Discontinued Operation, for further discussion.

2.     Revenue Recognition

Revenue is recognized when the Company satisfies the performance obligation by the delivery of a shipment in accordance with contractual agreements, bills of lading (“BOLs”) and general tariff provisions. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those services pursuant to a contract with a customer. A contract exists once the Company enters into a contractual agreement with a customer. The Company does not recognize revenue in cases where collectibility is not probable, and defers recognition until collection is probable or payment is received.

The Company generates revenue from the delivery of a shipment and the completion of related services. Revenue for the delivery of a shipment is recorded over time to coincide with when customers simultaneously receive and consume the benefits of the delivery services. Accordingly, revenue billed to a customer for the transportation of freight are recognized over the transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a shipment based on the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of a reporting period. The determination of the transit period and how much of it has been completed as of a given reporting date may require the Company to make judgments that impact the timing of revenue recognized. For delivery of shipments with a pick-up date in one reporting period and a delivery date in another reporting period, the Company recognizes revenue based on relative transit
7

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Upon delivery of a shipment or related service, customers are billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage.

Revenue is classified based on the line of business as the Company believes that best depicts the nature, timing and amount of revenue and cash flows. For all lines of business, the Company records revenue on a gross basis as it is the principal in the transaction as the Company has discretion to determine the amount of consideration. Additionally, the Company has the discretion to select drivers and other vendors for the services provided to customers. These factors, discretion in the amount of consideration and the selection of drivers and other vendors, support revenue recognized on a gross basis.

3.    Discontinued Operation

As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool and the sale was completed on February 12, 2021. As a result, the results of Pool were classified to “Loss from discontinued operation, net of tax” in the Condensed Consolidated Statements of Comprehensive Income for three months ended March 31, 2021. Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and were allocated to continuing operations. These costs were classified to the eliminations column in the segment reconciliation in Note 13, Segment Reporting.
Transition Services Agreement
On February 12, 2021, the Company entered into a Transition Services Agreement (“TSA) with TOG FAS Holdings LLC, the buyer of the Pool business. Under the TSA, the Company performed certain services on an interim basis in order to facilitate the orderly transition of the Pool business. The effective date of the TSA was February 12, 2021 and remained in effect until the date all services were completed, but no more than six months following the effective date. The TSA provided the right to extend the term of the TSA with no limit on the number of the mutually agreed upon extensions. In exchange for the services performed by the Company under the TSA, the Company received a monthly service charge. For the three months ended March 31, 2021, the Company recognized $171 in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income, for the services performed under the TSA. The TSA ended in October 2021 when all services were completed.

Additionally, under the TSA, the Company remitted payments to outside vendors on behalf of TOG FAS Holdings LLC for expenses incurred by the Pool business up to a limit of $18,000. The Company was reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in the payment was remitted. As of March 31, 2022 and December 31, 2021, the Company recorded a receivable in the amount of $4,488 and $8,097 respectively, in “Other receivables in the Condensed Consolidated Balance Sheets for the reimbursement due to the Company. The Company evaluates the collectability of the receivables at least quarterly and if the Company is aware of the inability of TOG FAS Holdings LLC to meet its financial obligations to the Company, the Company will record a specific reserve in order to reduce the receivable to the amount the Company reasonably believes will be collected. The Company believes collectibility of the receivable is probable as of March 31, 2022.

8

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
Summarized Discontinued Operation Financial Information

A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 is as follows:
 March 31,
2021
Operating revenue$17,087 
Operating expenses:
Purchased transportation4,290 
Salaries, wages and employee benefits9,674 
Operating leases2,907 
Depreciation and amortization 
Insurance and claims929 
Fuel expense644 
Other operating expenses2,087 
Total operating expenses20,531 
Loss from discontinued operation(3,444)
Loss on sale of business (2,860)
Loss from discontinued operation before income taxes(6,304)
Income tax benefit(771)
Loss from discontinued operation, net of tax$(5,533)

4.    Acquisitions

Intermodal Acquisitions

In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport) for $16,339 and a potential earn-out of up to $2,000.

The purchase agreement for Proficient Transport included an earn-out up to $2,000 based on the achievement of certain revenue milestones over a one-year period, beginning March 1, 2021. The estimated fair value of the earn-out liability on the date of acquisition was $829. The fair value was based on the estimated one-year performance of the acquired customer revenue and was calculated using the option pricing method.

The fair value of the earn-out liability was adjusted at each reporting period based on changes in the expected cash flows and related assumptions used in the option pricing method. During the three months ended March 31, 2022 and 2021, the fair value of the earn-out changed by ($294) and ($) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. As of March 31, 2022 and December 31, 2021, the fair value of the earn-out liability was $91 and $385 respectively, which was reflected in “Other current liabilities” in the Condensed Consolidated Balance Sheets.

In November 2021, the Company acquired certain assets and liabilities of BarOle Trucking, Inc. (“BarOle”) for $35,436. BarOle is an intermodal drayage company headquartered in Roseville, Minnesota. The acquisition of BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area. In addition, BarOle has a larger terminal location, which allows for further expansion in the future. The acquisition was financed by cash flows from operations. The results of BarOle have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.

9

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
Fair Value of Assets Acquired and Liabilities Assumed

Assets acquired and liabilities assumed as of the acquisition date for BarOle are summarized in the following table:

November 30, 2021
Tangible assets:
Accounts receivable$2,481 
Property and equipment6,464 
Total tangible assets8,945 
Intangible assets:
Customer relationships16,282 
Non-compete agreements913 
Goodwill9,564 
Total intangible assets26,759 
Total assets acquired35,704 
Liabilities assumed:
Current liabilities268 
Total liabilities assumed268 
Net assets acquired$35,436 

The preliminary purchase price for BarOle has been allocated to assets acquired and liabilities assumed based on the the Company’s best estimates and assumptions using the information available as of the acquisition date through the date of this filing. The provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to these acquisitions are subject to adjustments in subsequent periods as the Company finalizes its purchase price allocation, including the third-party valuations. The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date.

The estimated useful life of acquired intangible assets as of the acquisition date for BarOle are summarized in the following table:
Estimated Useful Lives
Customer relationships8 years
Non-compete agreements5 years
    


10

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022

5.    Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the three months ended March 31, 2022 are summarized as follows:
Expedited FreightIntermodalConsolidated
Balance as of December 31, 2021$169,288 $97,464 $266,752 
Acquisition adjustment (1,113)(1,113)
Balance as of March 31, 2022$169,288 $96,351 $265,639 

The Companys accumulated goodwill impairment is $25,686 related to impairment charges the Company recorded during 2016 pertaining to its TLS reporting unit. The TLS reporting unit operates within the Expedited Freight reportable segment. As of March 31, 2022, approximately $186,495 of goodwill is deductible for tax purposes.

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of June 30 each year. There have been no indicators of impairment during the three months ended March 31, 2022.

Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the three months ended March 31, 2022 are summarized as follows:

Gross Carrying Amount
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2021$251,377 $9,176 $1,500 $262,053 
Acquisition    
Balance as of March 31, 2022$251,377 $9,176 $1,500 $262,053 

Accumulated Amortization
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2021$99,094 $6,743 $1,500 $107,337 
Amortization expense3,782 296  4,078 
Balance as of March 31, 2022$102,876 $7,039 $1,500 $111,415 

1 Carrying value as of March 31, 2022 and December 31, 2021 is inclusive of $16,501 of accumulated impairment.



11

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
6.    Stock Incentive Plans

Stock Incentive Plan

The Company recorded share-based compensation expense as follows for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
2022
March 31,
2021
Salaries, wages and employee benefits - continuing operations$2,422 $2,269 
Salaries, wages and employee benefits - discontinued operation 16 
Total share-based compensation expense$2,422 $2,285 

In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 common shares to employees. As of March 31, 2022, approximately 649 shares remain available for grant under the Omnibus Plan.

Stock Options
     
Certain executives are eligible to receive grants of stock options. Stock options vest over a three-year period from the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. The Company estimates the fair value of the grants using the Black-Scholes option-pricing model.

Stock option transactions during the three months ended March 31, 2022 on a continuing operations basis were as follows:

Stock OptionsWeighted-Average Exercise Price
Outstanding as of January 1342 $58.44 
Granted64 106.13 
Exercised(3)60.42 
Forfeited  
Outstanding as of March 31403 $65.95 

As of March 31, 2022, the total share-based compensation expense related to unvested stock options not yet recognized was $2,343, and the weighted-average period over which it is expected to be recognized is approximately three years.

Restricted Shares

The Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive a share of the Company’s common stock subject to vesting requirements based on continued employment. Shares granted under the restricted share award plan are restricted from sale or transfer until vesting, and the restrictions lapse in three equal installments beginning one year after the date of grant. Dividends are paid in cash on a current basis throughout the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period.
12

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
Restricted share transactions on a continuing operations basis during the three months ended March 31, 2022 were as follows:
Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1191 $69.84 
Granted77 106.24 
Vested(89)67.39 
Forfeited(3)87.11 
Outstanding as of March 31176 $86.70 

As of March 31, 2022, the total share-based compensation expense related to restricted shares not yet recognized was $14,051, and the weighted-average period over which it is expected to be recognized is approximately two years.

Performance Awards

Performance awards are based on achieving certain financial targets, such as targets for earnings before interest, taxes, depreciation and amortization, and the Company’s total shareholder return as compared to the total shareholder return of a selected peer group, as determined by the Board. Performance targets are set at the beginning of each three-year measurement period. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, the compensation expense is determined based on the projected assessment of the level of performance that will be achieved. The Company estimates the fair value of the grants with a financial target based on the Company’s total shareholder return using a Monte Carlo simulation model.

Performance award transactions during the three months ended March 31, 2022 on a continuing operations basis were as follows assuming target levels of performance:
Performance AwardsWeighted-Average Grant Date Fair Value
Outstanding as of January 179 $75.61 
Granted14 127.29 
Earned(7)63.40 
Forfeited or unearned(7)59.41 
Outstanding as of March 3179 $87.69 

As of March 31, 2022, the total share-based compensation expense related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was $4,949, and the weighted-average period over which it is expected to be recognized is approximately two years.

Employee Stock Purchase Plan

Under the 2005 Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to a remaining 323 shares of common stock to employees. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six-month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions. No shares were issued during the three months ended March 31, 2022.
13

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
Director Restricted Shares

Under the Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”), approved in May 2007 and further amended in February 2013 and January 2016, up to 360 of common shares may be issued. As of March 31, 2022, approximately 75 shares remain available for grant under the Amended Plan. Under the Amended Plan, each non-employee director receives an annual grant of restricted shares of the Company’s common stock. The restricted shares vest on the either of (a) the day immediately prior to the first annual shareholder meeting that occurs after the grant date or (b) one year after the grant date.

Director restricted share transactions during the three months ended March 31, 2022 were as follows:
Director Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 115 $93.46 
Granted  
Vested  
Forfeited  
Outstanding as of March 3115 $93.46 

For the three months ended March 31, 2022 and 2021, the Company recorded $339 and $328, respectively, of share-based compensation expense associated with these grants. As of March 31, 2022, the total share-based compensation expense related to the restricted shares not yet recognized was $188, and the weighted-average period over which it is expected to be recognized is approximately less than one year.

7.    Indebtedness

Long-term debt consisted of the following as of March 31, 2022 and December 31, 2021:

March 31, 2022December 31, 2021
Credit facility, expires 2026$157,125 $157,500 
Debt issuance costs(505)(534)
156,620 156,966 
Less: Current portion of long-term debt(1,495)(1,500)
Total long-term debt, less current portion$155,125 $155,466 
14

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
In September 2017, the Company entered into a five-year senior unsecured revolving credit facility (the “Facility”) with a maximum aggregate principal amount of $150,000, with a sublimit of $30,000 for letters of credit and a sublimit of $30,000 for swing line loans. The maturity date of the Facility was September 29, 2022. In April 2020, the Company entered into the first amendment to the Facility, which increased the maximum aggregate principal amount to $225,000. The Facility could have been increased by up to $25,000 to a maximum aggregate principal amount of $250,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. In July 2021, the Company entered into the second amendment to the Facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available under the Facility. In December 2021, the Company entered into the third amendment to the Facility, which increased the amount available for borrowing under the Facility to $450,000, consisting of a $300,000 revolving line of credit and a term loan of $150,000. In connection with the third amendment, the Company borrowed $150,000 under the term loan and simultaneously repaid $150,000 on the revolving line of credit from the borrowings received. Under the third amendment, the Facility may be increased by up to $75,000 to a maximum aggregate principal amount of $525,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. Such increases to the Facility may be in the form of additional revolving credit loans, term loans or a combination thereof, and are contingent upon there being no events of default under the Facility. As of both March 31, 2022 and December 31, 2021, the Company had $272,466 of available borrowing capacity under the Facility.

The Facility contains covenants that, among other things, restrict the ability of the Company, without the approval of the required lenders, to engage in certain mergers, consolidations, asset sales, dividends and stock repurchases, investments, and other transactions or to incur liens or indebtedness in excess of agreed thresholds, as set forth in the credit agreement. The Company also has to fulfill financial covenants with respect to a leverage ratio and an interest coverage ratio. As of March 31, 2022, the Company was in compliance with the aforementioned covenants.

Under the amended Facility, interest accrues on the amounts outstanding under the Facility at the Company’s option, at either (1) Bloomberg Short-Term Bank Yield Index rate (the “BSBY Rate”), which cannot be less than zero, plus a margin ranging from 1.25% to 1.75% based on the Company’s leverage ratio, or (2) the base rate, which cannot be less than 2.00%. The base rate is the highest of (i) the federal funds rate, which cannot be less than zero, plus 0.50%, (ii) the administrative agent’s prime rate and (iii) the BSBY Rate, which cannot be less than zero, plus 1.00%, plus a margin ranging from 0.00% to 0.50% based on the Company’s leverage ratio. Interest is payable in arrears for each loan that is based on the BSBY rate on the last day of the interest period applicable to each loan, and interest is payable in arrears on loans not based on the BSBY rate on the last day of each quarter. The weighted average interest rate on the outstanding borrowings under the revolving credit facility was 1.44% and 3.25% for the three months ended March 31, 2022, and 2021, respectively.

Previously, under the Facility, interest accrued on the amounts outstanding under the Facility, at the Company’s option, at either (1) London Interbank Offered Rate (“LIBOR) rate, not less than 1.00%, plus a margin ranging from 2.25% to 2.75% based on the Company’s leverage ratio, or (2) base rate, which cannot be less than 3.00%. The base rate was the highest of (i) the federal funds rate, not less than zero, plus 0.50%, (ii) the administrative agent’s prime rate and (iii) the LIBOR rate, not less than 1.00%, plus 1.00%, plus a margin ranging from 0.25% to 0.75% based on the Company’s leverage ratio. Interest was payable in arrears for each loan that was based on the LIBOR rate on the last day of the interest period applicable to each loan, and interest was payable in arrears on loans not based on the LIBOR rate on the last day of each quarter.

Letters of Credit

The Company has an arrangement under the Facility to issue letters of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. As of both March 31, 2022 and December 31, 2021, outstanding letters of credit totaled $20,034.
15

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022

8.    Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each period. Restricted shares have non-forfeitable rights to dividends and as a result, are considered participating securities for purposes of computing net income (loss) per common share pursuant to the two-class method. Diluted net income (loss) per common share assumes the exercise of outstanding stock options and the vesting of performance share awards using the treasury stock method when the effects of such assumptions are dilutive.

A reconciliation of net income (loss) attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income (loss) per share during the three months ended March 31, 2022 and 2021 is as follows:
 Three Months Ended
March 31,
2022
March 31,
2021
Numerator:  
Net income and comprehensive income from continuing operations$42,686 $16,714 
Net loss and comprehensive loss from discontinued operation (5,533)
Net income attributable to Forward Air$42,686 $11,181 
Income allocated to participating securities from continuing operations(248)(101)
Loss allocated to participating securities from discontinued operation  
Income allocated to participating securities(248)(101)
Numerator for basic and diluted net income per share for continuing operations$42,438 $16,613 
Numerator for basic and diluted net loss per share for discontinued operation$ $(5,533)
Denominator:  
Denominator for basic net income per share - weighted-average number of common shares outstanding26,947 27,361 
Dilutive stock options and performance share awards153 136 
Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding27,100 27,497 
Basic net income (loss) per share:
     Continuing operations$1.57 $0.61 
     Discontinued operation (0.20)
Net income per basic share1
$1.57 $0.40 
Diluted net income (loss) per share:
     Continuing operations$1.57 $0.60 
     Discontinued operation (0.20)
Net income per diluted share$1.57 $0.40 
1 Rounding may impact summation of amounts.
16

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
The number of shares that were not included in the calculation of net income (loss) per diluted share because to do so would have been anti-dilutive for the three months ended March 31, 2022 and 2021 are as follows:
Three Months Ended
March 31,
2022
March 31,
2021
Anti-dilutive stock options64 25 
Anti-dilutive performance shares14 3 
Anti-dilutive restricted shares and deferred stock units 1 
Total anti-dilutive shares78 29 


9.    Income Taxes

For the three months ended March 31, 2022 and 2021, the Company recorded income tax expense of $13,881 and $4,845, respectively, for continuing operations. The effective tax rate of 24.5% for the three months ended March 31, 2022 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards. The effective tax rate of 22.5% for the three months ended March 31, 2021 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards.

The Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain. As of both March 31, 2022 and December 31, 2021, the Company had $241 of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. As of both March 31, 2022 and December 31, 2021, the Company had accrued interest and penalties related to unrecognized tax benefits of $88. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian examinations by tax authorities for years before 2014.

The sale of Pool resulted in a capital loss in the amount of $4,230, which expires in 2026. The Company concluded that it was more likely than not the capital loss carryforward will not be realized and therefore, established a valuation allowance of $4,230 to reserve against its capital loss carryforward. The Company also maintains a valuation allowance to reserve against its state net operating loss carryforwards of $395. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies. In making this assessment, all available evidence was considered including economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the valuation allowance, in future years.
17

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022

10.    Fair Value of Financial Instruments

The Company categorizes its assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. Estimates of fair value financial assets and liabilities are based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Model-derived valuations in which one or more significant inputs are unobservable.

As previously discussed in Note 4, Acquisitions, the estimated fair value of the earn-out liability was determined using the option pricing method. The significant inputs used to calculate the estimated fair value are derived from a combination of observable and unobservable market data. Observable inputs used in the option pricing method include the risk-free rate and the revenue volatility while unobservable inputs include the revenue discount rate and the estimated revenue projections.
    
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 are summarized below:
As of March 31, 2022
Level 1Level 2Level 3Total
Earn-out liability$ $ $91 $91 
As of December 31, 2021
Level 1Level 2Level 3Total
Earn-out liability$ $ $385 $385 

Cash and cash equivalents, accounts receivable, other receivables, and accounts payable are valued at their carrying amounts in the Company’s Condensed Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments.

The carrying amount of long-term debt under the Company’s credit facility approximate fair value based on the borrowing rates currently available to the Company for a loan with similar terms and average maturity.

As of March 31, 2022, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $13,203, compared to its carrying value of $13,341. As of December 31, 2021, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $14,312, compared to its carrying value of $14,159.
18

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022

11.    Shareholders’ Equity

Cash Dividends

During the first quarter of 2022, the Board declared and the Company has paid a quarterly cash dividend of $0.24 per common share. During each quarter of 2021, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.21 per common share

On April 25, 2022, the Board declared a quarterly cash dividend of $0.24 per common share that will be paid in the second quarter of 2022.

Share Repurchase Program

On February 5, 2019, the Board approved a stock repurchase plan authorizing the repurchase of up to 5,000 shares of the Company’s common stock (the “2019 Repurchase Plan”). The 2019 Repurchase Plan expires when the shares authorized for repurchase are exhausted or the 2019 Repurchase Plan is canceled.

During the three months ended March 31, 2022, the Company repurchased through open market transactions 176 shares of common stock for $17,780, or an average of $100.86 per share, and during the three months ended March 31, 2021, the Company repurchased through open market transactions 114 shares of common stock for $9,997, or an average of $87.89 per share. All shares received were retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Retained Earnings in the Condensed Consolidated Balance Sheets.

As of March 31, 2022, the remaining shares permitted to be repurchased under the 2019 Repurchase Plan were approximately 2,657 shares.

12.    Commitments and Contingencies

Contingencies

The Company is party to various legal claims and actions incidental to its business, including claims related to vehicle liability, workers’ compensation, property damage and employee medical benefits. The Company accrues for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Based on the knowledge of the facts, the Company believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on its Condensed Consolidated Financial Statements. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and related events unfold.

Insurance coverage provides the Company with primary and excess coverage for claims related to vehicle liability, workers’ compensation, property damage and employee medical benefits.
19

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
For vehicle liability, the Company retains a portion of the risk. Below is a summary of the Company’s risk retention on vehicle liability insurance coverage maintained by the Company through $10,000:

Company
Risk Retention
FrequencyLayerPolicy Term
Expedited Freight¹
LTL business$3,000 Occurrence/Accident²
$0 to $3,000
10/1/2021 to 10/1/2022
Truckload business$2,000 Occurrence/Accident²
$0 to $2,000
10/1/2021 to 10/1/2022
LTL business$6,000 Policy Term Aggregate³
$3,000 to $5,000
10/1/2021 to 10/1/2022
LTL, Truckload and Intermodal businesses$2,500 Policy Term Aggregate³
$5,000 to $10,000
10/1/2021 to 10/1/2022
Intermodal$1,000 Occurrence/Accident²
$0 to $1,000
10/1/2021 to 10/1/2022
¹ Excluding the Final Mile business, which is primarily a brokered service.
² For each and every accident, the Company is responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.
³ During the Policy Term, the Company is responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Company Risk Retention before insurance will respond.

Also, from time to time, when brokering freight, the Company may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and the Company maintains third-party liability insurance coverage with a $100 deductible per occurrence for most of its brokered services. Additionally, the Company maintains workers’ compensation insurance with a self-insured retention of $500 per occurrence.

Insurance coverage in excess of the self-insured retention limit is an important part of the Company’s risk management process. The Company accrues for the costs of the uninsured portion of pending claims within the self-insured retention based on the nature and severity of individual claims and historical claims development trends. The Company believes the recorded reserves are sufficient for all incurred claims up to the self-insured retention limits, including an estimate for claims incurred but not reported. However, estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult, and the Company may fail to establish sufficient insurance reserves and adequately estimate for future insurance claims. Since the ultimate resolution of outstanding claims as well as claims incurred but not reported is uncertain, it is possible that the reserves recorded for these losses could change materially in the near term. Although, an estimate cannot be made of the range of additional loss that is at least reasonably possible.

13.    Segment Reporting

The Company has two reportable segments: Expedited Freight and Intermodal. The Company evaluates segment performance based on income from operations. Segment results include intersegment revenues and shared costs.  Costs related to the corporate headquarters, shared services and shared assets, such as trailers, are allocated to each segment based on usage. Shared assets are not allocated to each segment, but rather the shared assets, such as trailers, are allocated to the Expedited Freight segment. Corporate includes revenues and expenses as well as assets that are not attributable to any of the Company’s reportable segments.

The accounting policies applied to each segment are the same as those described in the Summary of Significant Accounting Policies as disclosed in Note 1 to the Annual Report on Form 10-K for the year ended December 31, 2021, except for certain self-insurance loss reserves related to vehicle liability and workers’ compensation. Each segment is allocated an insurance premium and deductible that corresponds to the self-insured retention limit for that particular segment. Any self-insurance loss exposure beyond the deductible allocated to each segment is recorded in Corporate.
20

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
March 31, 2022
Segment results from operations for the three months ended March 31, 2022 and 2021 are as follows:
 Three Months Ended March 31, 2022
 Expedited FreightIntermodalCorporateEliminationsConsolidated - Continuing Operations
External revenues$376,526 $90,435 $ $— $466,961 
Intersegment revenues65 5  (70) 
Depreciation5,673 1,340 39  7,052 
Amortization1,808 2,270   4,078 
Income (loss) from continuing operations47,680 11,146 (1,475) 57,351 
Purchases of property and equipment8,956 952   9,908 
 Three Months Ended March 31, 2021
 Expedited FreightIntermodalCorporateEliminationsConsolidated - Continuing Operations
External revenues$303,531 $58,502 $ $— $362,033 
Intersegment revenues655 12  (498)169 
Depreciation4,993 799 3  5,795 
Amortization1,805 1,637   3,442 
Income (loss) from continuing operations24,530 4,509 (6,315) 22,724 
Purchases of property and equipment2,411 284   2,695 
Total Assets
As of March 31, 2022$802,613 $251,030 $