10-Q 1 fwrd-20220930.htm 10-Q fwrd-20220930
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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 September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-22490
fwrd-20220930_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 November 3, 2022 was 26,589,697.



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)
 September 30,
2022
December 31,
2021
Assets
Current assets:  
Cash and cash equivalents$46,846 $37,316 
Accounts receivable, less allowance of $3,477 in 2022 and $3,260 in 2021
247,730 208,085 
Other receivables, less allowance of $235 in 2022 and $ in 2021
 8,097 
Other current assets18,391 29,309 
Total current assets312,967 282,807 
Property and equipment, net of accumulated depreciation and amortization of $214,039 in 2022 and $200,867 in 2021
230,924 219,095 
Operating lease right-of-use assets147,283 148,198 
Goodwill288,496 266,752 
Other acquired intangibles, net of accumulated amortization of $119,453 in 2022 and $107,336 in 2021
155,161 154,717 
Other assets51,228 46,254 
Total assets$1,186,059 $1,117,823 
Liabilities and Shareholders’ Equity 
Current liabilities:  
Accounts payable$50,666 $44,837 
Accrued expenses67,980 61,621 
Other current liabilities4,411 4,614 
Current portion of debt and finance lease obligations7,891 6,088 
Current portion of operating lease liabilities48,611 47,532 
Total current liabilities179,559 164,692 
Finance lease obligations, less current portion11,134 9,571 
Long-term debt, less current portion and debt issuance costs106,934 155,466 
Operating lease liabilities, less current portion102,889 101,409 
Other long-term liabilities57,476 49,624 
Deferred income taxes45,369 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 - 26,589,697 in 2022 and 26,968,788 in 2021
266 270 
Additional paid-in capital267,809 258,474 
Retained earnings414,623 334,910 
Total shareholders’ equity682,698 593,654 
Total liabilities and shareholders’ equity$1,186,059 $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
 September 30,
2022
September 30,
2021
Operating revenues$510,023 $419,625 
Operating expenses: 
Purchased transportation229,326 205,474 
Salaries, wages and employee benefits90,755 84,410 
Operating leases24,965 20,536 
Depreciation and amortization12,269 9,416 
Insurance and claims12,093 9,984 
Fuel expense6,772 4,457 
Other operating expenses62,178 42,872 
Total operating expenses438,358 377,149 
Income from continuing operations71,665 42,476 
Other expense: 
Interest expense(1,544)(973)
Total other expense(1,544)(973)
Income before income taxes70,121 41,503 
Income tax expense17,988 11,000 
Net income from continuing operations52,133 30,503 
Loss from discontinued operation, net of tax (6,967)
Net income and comprehensive income $52,133 $23,536 
Basic net income (loss) per share
Continuing operations$1.94 $1.12 
Discontinued operation (0.26)
Net income per basic share$1.94 $0.86 
Diluted net income (loss) per share
Continuing operations$1.93 $1.12 
Discontinued operation (0.26)
Net income per diluted share$1.93 $0.86 
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 Comprehensive Income
(unaudited and in thousands, except per share amounts)
 Nine Months Ended
 September 30,
2022
September 30,
2021
Operating revenues$1,492,203 $1,202,498 
Operating expenses:
Purchased transportation693,648 605,299 
Salaries, wages and employee benefits263,194 243,948 
Operating leases71,097 60,073 
Depreciation and amortization34,994 28,067 
Insurance and claims37,257 30,616 
Fuel expense20,951 12,218 
Other operating expenses166,501 114,953 
Total operating expenses1,287,642 1,095,174 
Income from continuing operations204,561 107,324 
Other expense:
Interest expense(3,521)(3,461)
Total other expense(3,521)(3,461)
Income before income taxes201,040 103,863 
Income tax expense50,791 25,969 
Net income from continuing operations150,249 77,894 
Loss from discontinued operation, net of tax (12,500)
Net income and comprehensive income $150,249 $65,394 
Basic net income (loss) per share
Continuing operations$5.56 $2.84 
Discontinued operation (0.46)
Net income per basic share1
$5.56 $2.39 
Diluted net income (loss) per share
Continuing operations$5.53 $2.83 
Discontinued operation (0.46)
Net income per diluted share$5.53 $2.37 
Dividends per share$0.72 $0.63 
1 Rounding may impact summation of amounts.


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

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited and in thousands)
 Nine Months Ended
 September 30,
2022
September 30,
2021
 
Operating activities:
Net income from continuing operations$150,249 $77,894 
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization34,994 28,067 
Change in fair value of earn-out liability(294)(385)
Share-based compensation expense8,743 8,179 
Provision for revenue adjustments7,302 5,504 
Deferred income tax expense (benefit)1,962 (1,384)
Other417 406 
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable(43,172)(49,086)
Other receivables8,097 (14,218)
Other current and noncurrent assets6,743 8,198 
Accounts payable, accrued expenses and other long-term liabilities21,773 19,577 
Net cash provided by operating activities of continuing operations196,814 82,752 
Investing activities:
Proceeds from sale of property and equipment1,423 2,339 
Purchases of property and equipment(25,401)(23,015)
Purchases of a business, net of cash acquired(40,433)(23,053)
Net cash used in investing activities of continuing operations(64,411)(43,729)
Financing activities:
Repayments of finance lease obligations(4,209)(1,445)
Proceeds from credit facility 45,000 
Payments on credit facility(48,625) 
Payment of debt issuance costs (119)
Payment of earn-out liability(91)(6,519)
Proceeds from issuance of common stock upon stock option exercises206 3,563 
Payments of dividends to shareholders(19,461)(17,270)
Repurchases and retirement of common stock(47,774)(48,989)
Proceeds from common stock issued under employee stock purchase plan374 388 
Payment of minimum tax withholdings on share-based awards(3,293)(3,074)
Contributions from subsidiary held for sale 1,118 
Net cash used in financing activities from continuing operations(122,873)(27,347)
Net increase in cash and cash equivalents of continuing operations9,530 11,676 
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 in cash and cash equivalents9,530 11,676 
Cash and cash equivalents at beginning of period of continuing operations37,316 40,254 
Cash at beginning of period of discontinued operation   
Net increase in cash and cash equivalents9,530 11,676 
Less: cash at end of period of discontinued operation  
Cash and cash equivalents at end of period of continuing operations$46,846 $51,930 

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

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 
Net income— — — 55,430 55,430 
Common stock issued under employee stock purchase plan5 — 374 — 374 
Share-based compensation expense— — 3,306 — 3,306 
Payment of dividends to shareholders— — 5 (6,497)(6,492)
Payment of minimum tax withholdings on share-based awards(1)— — (39)(39)
Issuance of share-based awards14 — — — — 
Balance at June 30, 202226,880 $269 $265,129 $398,952 $664,350 
Net income— — — 52,133 52,133 
Share-based compensation expense— — 2,676 — 2,676 
Payment of dividends to shareholders— — 4 (6,471)(6,467)
Repurchases and retirement of common stock(290)(3)— (29,991)(29,994)
Balance at September 30, 202226,590 $266 $267,809 $414,623 $682,698 
7

 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 
Net income— — — 30,677 30,677 
Stock options exercised26 — 1,416 — 1,416 
Common stock issued under employee stock purchase plan5 — 388 — 388 
Share-based compensation expense— — 2,981 — 2,981 
Payment of dividends to shareholders— — 3 (5,771)(5,768)
Payment of minimum tax withholdings on share-based awards(1)— — (82)(82)
Repurchases and retirement of common stock(252)(2)— (23,992)(23,994)
Issuance of share-based awards24 — — — — 
Balance at June 30, 202127,120 $271 $252,466 $297,612 $550,349 
Net income— — — 23,536 23,536 
Share-based compensation expense— — 2,601 — 2,601 
Payment of dividends to shareholders— — 4 (5,709)(5,705)
Payment of minimum tax withholdings on share-based awards(3)— — (248)(248)
Repurchases and retirement of common stock(169)(1)— (14,996)(14,997)
Issuance of share-based awards10 — — — — 
Balance at September 30, 202126,958 $270 $255,071 $300,195 $555,536 
The accompanying notes are an integral part of the condensed consolidated financial statements.
8

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 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 its 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 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
9

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 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 the three and nine months ended September 30, 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 and nine months ended September 30, 2021, the Company recognized $229 and $641, respectively, 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 which the payment was remitted. As of September 30, 2022 and December 31, 2021, the Company recorded a net receivable in the amount of zero 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 receivable 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. As of September 30, 2022, the Company recorded a specific reserve in the amount of $235 in order to reduce the receivable to an amount the Company reasonably believes will be collected.

10

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 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 and nine months ended September 30, 2021 is as follows:

 Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Operating revenue$ $17,087 
Operating expenses:
Purchased transportation 4,290 
Salaries, wages and employee benefits 9,674 
Operating leases 2,907 
Depreciation and amortization  
Insurance and claims 929 
Fuel expense 644 
Other operating expenses 2,087 
   Impairment charge6,967 6,967 
Total operating expenses6,967 27,498 
Loss from discontinued operation(6,967)(10,411)
Loss on sale of business  (2,860)
Loss from discontinued operation before income taxes(6,967)(13,271)
Income tax benefit (771)
Loss from discontinued operation, net of tax$(6,967)$(12,500)

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 and nine months ended September 30, 2022, the fair value of the earn-out changed by zero and ($294) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. During the three and nine months ended September 30, 2021, the fair value of the earn-out changed by zero and ($333) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. The one-year period ended in the first quarter of 2022 and the Company paid $91 in the second quarter of 2022 based on the terms of the purchase agreement. As of December 31, 2021, the fair value of the earn-out liability was $385, which was reflected in “Other current liabilities” in the Condensed Consolidated Balance Sheets.

11

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 2022
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.

In May 2022, the Company acquired certain assets and liabilities of Edgmon Trucking, LLC (“Edgmon”) for $40,433 and a potential earn-out of up to $5,000, based on the achievement of certain profit contribution milestones over a nineteen month period, beginning May 30, 2022. Edgmon, headquartered in Kent, Washington, operates a terminal in Kent and a yard in Seattle, servicing both the Port of Seattle and the Port of Tacoma. The acquisition of Edgmon marks the Company’s first Intermodal location on the West Coast, a key area of expansion in the Intermodal strategic growth plan. The acquisition was financed by cash flows from operations. The results of Edgmon 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.

Fair Value of Assets Acquired and Liabilities Assumed

Assets acquired and liabilities assumed as of the acquisition date are presented in the following table:
BarOleEdgmon
November 30, 2021May 30, 2022
Tangible assets:
Accounts receivable$2,481 $4,831 
Property and equipment6,464 613 
Total tangible assets8,945 5,444 
Intangible assets:
Customer relationships11,120 17,950 
Non-compete agreements221 465 
Goodwill15,418 17,003 
Total intangible assets26,759 35,418 
Total assets acquired35,704 40,862 
Liabilities assumed:
Current liabilities268 429 
Total liabilities assumed268 429 
Net assets acquired$35,436 $40,433 

The preliminary purchase price for BarOle and Edgmon has been allocated to assets acquired and liabilities assumed based on 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 allocations, including the third-party valuations. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments to the provisional amounts initially recorded for acquired property and equipment and acquired customer relationships and non-compete agreements related to the BarOle acquisition. The measurement period adjustments resulted in a $1,113 increase to acquired property and equipment and a combined $5,854 decrease to acquired customer relationships and non-compete agreements, with a corresponding net increase to goodwill. The Company expects to finalize the valuations as soon as practicable, but no later than one year from the respective acquisition dates.
12

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 2022

The estimated useful lives of acquired intangible assets as of the acquisition date are summarized in the following table:
Estimated Useful Lives
BarOleEdgmon
Customer relationships8 years7 years
Non-compete agreements5 years5 years

5.    Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the nine months ended September 30, 2022 are summarized as follows:

Expedited FreightIntermodalConsolidated
Balance as of December 31, 2021$169,288 $97,464 $266,752 
Acquisition 17,003 17,003 
Acquisition adjustment 4,741 4,741 
Balance as of September 30, 2022$169,288 $119,208 $288,496 

The Company’s accumulated goodwill impairment is $25,686 related to impairment charges the Company recorded during 2016 pertaining to its Truckload Services reporting unit. The Truckload Services reporting unit operates within the Expedited Freight reportable segment. As of September 30, 2022, approximately $209,353 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 September 30, 2022.

13

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 2022
Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 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 
Acquisition17,950 465  18,415 
Acquisition adjustment(5,162)(692) (5,854)
Balance as of September 30, 2022$264,165 $8,949 $1,500 $274,614 

Accumulated Amortization
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2021$99,093 $6,743 $1,500 $107,336 
Amortization expense11,507 610  12,117 
Balance as of September 30, 2022$110,600 $7,353 $1,500 $119,453 
1 Carrying value as of September 30, 2022 and December 31, 2021 is inclusive of $16,501 of accumulated impairment.


6.    Stock Incentive Plans

Stock Incentive Plan

The Company recorded share-based compensation expense as follows for the three and nine months ended September 30, 2022 and 2021:

Three Months EndedNine Months Ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Salaries, wages and employee benefits - continuing operations$2,355 $2,283 $7,661 $7,015 
Salaries, wages and employee benefits - discontinued operation   16 
Total share-based compensation expense$2,355 $2,283 $7,661 $7,031 

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 September 30, 2022, approximately 693 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.

14

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 2022
Stock option transactions during the nine months ended September 30, 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(6)106.29 
Outstanding as of September 30397 $65.32 

As of September 30, 2022, the total share-based compensation expense related to unvested stock options not yet recognized was $1,687, and the weighted-average period over which it is expected to be recognized is approximately two years.

Restricted Shares

The Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive shares 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.

Restricted share transactions during the nine months ended September 30, 2022 on a continuing operations basis were as follows:
Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1191 $69.84 
Granted80 105.66 
Vested(91)67.36 
Forfeited(25)84.20 
Outstanding as of September 30155 $87.42 

As of September 30, 2022, the total share-based compensation expense related to restricted shares not yet recognized was $9,402, 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.

15

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
September 30, 2022
Performance award transactions during the nine months ended September 30, 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(16)74.79 
Outstanding as of September 3070 $87.74 

As of September 30, 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 $3,448, 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 318 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.

Employee stock purchase plan activity and related information was as follows on a continuing operations basis:

Nine Months Ended
September 30,
2022
September 30,
2021
Shares purchased by participants under the ESPP5 5 
Average purchase price$82.76 $68.76 
Weighted-average fair value of each purchase right under the ESPP granted¹$9.20 $20.99 
Share-based compensation expense for ESPP$42 $118 
¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period.

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 September 30, 2022, approximately