Forward Air Corporation Reports Fourth Quarter 2017 Results and Quarterly Cash Dividend
Forward Air Corporation (NASDAQ:FWRD) today reported operating revenue,
income from operations, net income and diluted earnings per share for
the fourth quarter and year ended December 31, 2017.
A tabular reconciliation of non-GAAP financial measures to reported
results prepared in accordance with accounting principles generally
accepted in the United States ("GAAP") is contained in the financial
summary statements attached to this press release.
On February 6, 2018, our Board of Directors declared a quarterly cash
dividend of $0.15 per share of common stock. The dividend is payable to
shareholders of record at the close of business on March 8, 2018, and is
expected to be paid on March 23, 2018.
Review of Financial Results
About Forward Air Corporation
Forward Air Corporation Reconciliation of U.S. GAAP and Non-GAAP
Financial Measures
The following table summarizes supplemental full year 2018 guidance
information that management believes to be useful.
Operating revenue for the quarter ended December 31, 2017 increased
15.6% to $306.1 million from $264.8 million for the same quarter in
2016. Income from operations was $28.8 million, compared to $28.2
million in the prior year quarter. Net income during the period was
$35.4 million compared to $12.7 million in the fourth quarter of 2016.
Net income per diluted share for the fourth quarter of 2017 was $1.18
compared to $0.42 in the prior year quarter. Adjusted to exclude the
$0.16 per share impact of the second quarter 2016 TQI impairment on
income taxes, prior year quarter adjusted earnings per share was $0.58.
Bruce A. Campbell, Chairman, President, and CEO, commenting on fourth
quarter results said, "Our business units had mixed results during an
operationally challenging fourth quarter. Expedited LTL managed its
seasonally busy quarter amid a tight Truckload market to deliver strong
performance despite a higher use of brokered transportation. Truckload
Premium Services also faced a higher use of brokered transportation as
it began adjusting to market rates while honoring its committed customer
contracts. Our Intermodal group showed good growth while completing the
integration of Atlantic and Kansas City Logistics. Pool Distribution
managed its peak quarter to generate revenue growth but faced higher
variable costs in accommodating this volume, along with an equipment
disposal charge."
In closing Mr. Campbell said, "During 2017, our revenues exceeded $1
billion for the first time in Forward Air's history. As we end the year,
I would like to thank all of our employees and independent contractors
for their hard work in helping us achieve this milestone. As we enter
2018 we are well positioned to continue Forward Air's growth by
providing our customers with value added freight and logistics
solutions."
Commenting on the Company's fourth quarter results, Michael J. Morris,
Senior Vice President and CFO, said, "Our fourth quarter net income per
diluted share reflects a $0.53 benefit related to the fourth quarter
enactment of the Tax Cuts and Jobs Act ("TCJA"). When excluding this
TCJA impact, our net income per diluted share would have been $0.65,
exceeding our $0.60-$0.64 guidance range." Regarding the Company's first
quarter 2018 guidance, Mr. Morris said, "We expect first quarter
year-on-year revenue growth to be 19% to 23%. This revenue outlook
contemplates our 2018 implementation of ASC 606, Revenue from Contracts
with Customers, which now requires that we report fuel surcharge revenue
on a gross basis. As such, our growth outlook reflects a comparison to
our first quarter 2017 revenue which reported fuel surcharge revenue on
a net basis. If this prior year period was adjusted to reflect fuel
surcharge revenue on a gross basis, we expect our year-on-year revenue
growth to be 12% to 16%. We expect net income per diluted share to be
between $0.55 and $0.59 in the first quarter of 2018, compared to $0.47
in the prior year quarter."
This quarterly dividend is pursuant to a cash dividend policy
approved by the Board of Directors, which anticipates a total annual
dividend of $0.60 per share of common stock, payable in quarterly
increments of $0.15 per share of common stock. The actual declaration of
future cash dividends, and the establishment of record and payment
dates, is subject to final determination by the Board of Directors each
quarter after its review of the Company's financial performance.
Forward Air will hold a conference call to discuss fourth quarter 2017
results on Thursday, February 8, 2018 at 10:00 a.m. EST. The Company's
conference call will be available online at www.forwardaircorp.com
or by dialing (800) 230-1074. A replay of the conference call will be
available at www.forwardaircorp.com
beginning shortly after the completion of the live call.
Forward Air keeps your business moving forward by providing services
within four business segments: Expedited LTL (provides expedited
regional, inter-regional and national LTL services, including local
pick-up and delivery, shipment consolidation/deconsolidation,
warehousing, and customs brokerage by utilizing a comprehensive national
network of terminals); Truckload Premium Services (provides expedited
truckload brokerage, dedicated fleet services, as well as high-security
and temperature-controlled logistics services); Intermodal (provides
first-and last-mile high-value drayage services both to and from
seaports and railheads, dedicated contract and Container Freight
Station warehouse and handling services); and Pool Distribution
(provides high-frequency handling and distribution of time sensitive
product to numerous destinations within a specific geographic region).
For more information, visit our website at www.forwardaircorp.com.
Forward Air Corporation
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three months ended
Year ended
December 31, 2017
December 31, 2016
December 31, 2017
December 31, 2016
Operating revenue:
Expedited LTL
$
171,208
$
147,368
$
619,779
$
570,778
Truckload Premium Services
46,408
44,003
179,320
164,272
Pool Distribution
50,383
47,507
164,221
148,661
Intermodal
43,054
27,279
148,907
103,671
Eliminations and other operations
(4,937
)
(1,364
)
(11,411
)
(4,852
)
Operating revenue
306,116
264,793
1,100,816
982,530
Operating expenses:
Purchased transportation
136,150
112,572
478,167
413,355
Salaries, wages and employee benefits
73,457
66,145
264,739
242,002
Operating leases
16,594
15,808
63,799
60,492
Depreciation and amortization
10,477
9,801
41,055
38,210
Insurance and claims
8,199
6,180
29,578
25,392
Fuel expense
5,094
3,857
16,542
13,233
Other operating expenses
27,369
22,207
98,264
87,425
Impairment of goodwill, intangibles and other assets
—
—
—
42,442
Total operating expenses
277,340
236,570
992,144
922,551
Operating income (loss):
Expedited LTL
23,546
20,492
88,142
83,518
Truckload Premium Services
(451
)
1,273
3,248
(35,405
)
Pool Distribution
2,706
3,824
6,378
3,633
Intermodal
3,540
2,786
12,673
10,956
Other operations
(565
)
(152
)
(1,769
)
(2,723
)
Income from operations
28,776
28,223
108,672
59,979
Other income (expense):
Interest expense
(403
)
(366
)
(1,209
)
(1,597
)
Other, net
—
152
(11
)
4
Total other income (expense)
(403
)
(214
)
(1,220
)
(1,593
)
Income before income taxes
28,373
28,009
107,452
58,386
Income tax (benefit) expense
(7,000
)
15,303
20,131
30,716
Net income and comprehensive income
$
35,373
$
12,706
$
87,321
$
27,670
Net income per share:
Basic
$
1.19
$
0.42
$
2.90
$
0.91
Diluted
$
1.18
$
0.42
$
2.89
$
0.90
Dividends per share:
$
0.15
$
0.15
$
0.60
$
0.51
Expedited LTL Segment Information
(In millions)
(Unaudited)
Three months ended
December 31,
Percent of
December 31,
Percent of
Percent
2017
Revenue
2016
Revenue
Change
Change
Operating revenue
$
171.2
100.0
%
$
147.4
100.0
%
$
23.8
16.1
%
Operating expenses:
Purchased transportation
74.4
43.4
59.6
40.4
14.8
24.8
Salaries, wages and employee benefits
38.9
22.7
36.4
24.7
2.5
6.9
Operating leases
9.1
5.3
8.9
6.1
0.2
2.2
Depreciation and amortization
5.6
3.3
5.6
3.8
—
—
Insurance and claims
5.1
3.0
3.1
2.1
2.0
64.5
Fuel expense
1.0
0.6
0.9
0.6
0.1
11.1
Other operating expenses
13.5
7.9
12.4
8.4
1.1
8.9
Total operating expenses
147.6
86.2
126.9
86.1
20.7
16.3
Income from operations
$
23.6
13.8
%
$
20.5
13.9
%
$
3.1
15.1
%
Expedited LTL Operating Statistics
Three months ended
December 31,
December 31,
Percent
2017
2016
Change
Operating ratio
86.2
%
86.1
%
0.1
%
Business days
63.0
63.0
—
Business weeks
12.6
12.6
—
Expedited LTL:
Tonnage
Total pounds 1
684,828
612,098
11.9
Average weekly pounds 1
54,351
48,579
11.9
Linehaul shipments
Total linehaul
1,143,328
1,006,256
13.6
Average weekly
90,740
79,862
13.6
Forward Air Complete shipments
246,523
202,452
21.8
As a percentage of linehaul shipments
21.6
%
20.1
%
7.5
Average linehaul shipment size
599
608
(1.5
)
Revenue per pound 2
Linehaul yield
$
17.07
$
17.40
(1.5
)
Fuel surcharge
1.30
1.02
1.3
Forward Air Complete
3.76
3.45
1.4
Total Expedited LTL yield
$
22.13
$
21.87
1.2
%
1 - In thousands
2 - In dollars per hundred pound; percentage change is
expressed as a percent of total yield.
Truckload Premium Services Segment Information
(In millions)
(Unaudited)
Three months ended
December 31,
Percent of
December 31,
Percent of
Percent
2017
Revenue
2016
Revenue
Change
Change
Operating revenue
$
46.4
100.0
%
$
44.0
100.0
%
$
2.4
5.5
%
Operating expenses:
Purchased transportation
35.4
76.3
31.7
72.1
3.7
11.7
Salaries, wages and employee benefits
5.2
11.2
4.9
11.1
0.3
6.1
Operating leases
0.4
0.9
0.1
0.2
0.3
300.0
Depreciation and amortization
1.6
3.4
1.5
3.4
0.1
6.7
Insurance and claims
1.2
2.6
1.9
4.3
(0.7
)
(36.8
)
Fuel expense
1.0
2.2
0.7
1.6
0.3
42.9
Other operating expenses
2.1
4.5
1.9
4.3
0.2
10.5
Total operating expenses
46.9
101.1
42.7
97.0
4.2
9.8
Results from operations
$
(0.5
)
(1.1
)%
$
1.3
3.0
%
$
(1.8
)
(138.5
)%
Truckload Premium Services Operating Statistics
Three months ended
December 31,
December 31,
Percent
2017
2016
Change
Company driver 1
2,115
1,665
27.0
%
Owner operator 1
9,405
12,702
(26.0
)
Third party 1
13,193
9,455
39.5
Total Miles
24,713
23,822
3.7
Revenue per mile
$
1.81
$
1.80
0.6
Cost per mile
$
1.51
$
1.42
6.3
%
1 - In thousands
Pool Distribution Segment Information
(In millions)
(Unaudited)
Three months ended
December 31,
Percent of
December 31,
Percent of
Percent
2017
Revenue
2016
Revenue
Change
Change
Operating revenue
$
50.4
100.0
%
$
47.5
100.0
%
$
2.9
6.1
%
Operating expenses:
Purchased transportation
13.3
26.4
12.5
26.3
0.8
6.4
Salaries, wages and employee benefits
18.9
37.4
17.8
37.5
1.1
6.2
Operating leases
3.8
7.5
3.5
7.4
0.3
8.6
Depreciation and amortization
1.7
3.4
1.5
3.1
0.2
13.3
Insurance and claims
1.5
3.0
1.2
2.5
0.3
25.0
Fuel expense
1.8
3.6
1.6
3.4
0.2
12.5
Other operating expenses
6.7
13.3
5.6
11.8
1.1
19.6
Total operating expenses
47.7
94.6
43.7
92.0
4.0
9.2
Income from operations
$
2.7
5.4
%
$
3.8
8.0
%
$
(1.1
)
(28.9
)%
Intermodal Segment Information
(In millions)
(Unaudited)
Three months ended
December 31,
Percent of
December 31,
Percent of
Percent
2017
Revenue
2016
Revenue
Change
Change
Operating revenue
$
43.1
100.0
%
$
27.3
100.0
%
$
15.8
57.9
%
Operating expenses:
Purchased transportation
17.4
40.4
9.7
35.5
7.7
79.4
Salaries, wages and employee benefits
9.7
22.5
6.6
24.2
3.1
47.0
Operating leases
3.5
8.1
2.8
10.2
0.7
25.0
Depreciation and amortization
1.6
3.7
1.1
4.0
0.5
45.5
Insurance and claims
0.9
2.1
0.8
2.9
0.1
12.5
Fuel expense
1.2
2.8
0.7
2.6
0.5
71.4
Other operating expenses
5.3
12.3
2.8
10.3
2.5
89.3
Total operating expenses
39.6
91.9
24.5
89.7
15.1
61.6
Income from operations
$
3.5
8.1
%
$
2.8
10.3
%
$
0.7
25.0
%
Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
December 31, 2017
December 31,
2016 (a)
Assets
Current assets:
Cash and cash equivalents
$
3,893
$
8,511
Accounts receivable, net
143,041
116,602
Other current assets
15,808
11,157
Total current assets
162,742
136,270
Property and equipment
399,235
379,021
Less accumulated depreciation and amortization
193,123
178,816
Net property and equipment
206,112
200,205
Goodwill and other acquired intangibles:
Goodwill
191,671
184,675
Other acquired intangibles, net of accumulated amortization
111,247
106,650
Total net goodwill and other acquired intangibles
302,918
291,325
Other assets
15,944
13,491
Total assets
$
687,716
$
641,291
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
$
24,704
$
18,012
Accrued expenses
35,069
31,903
Current portion of debt and capital lease obligations
359
28,012
Total current liabilities
60,132
77,927
Debt and capital lease obligations, less current portion
40,588
725
Other long-term liabilities
24,104
21,699
Deferred income taxes
29,403
41,871
Shareholders' equity:
Common stock
295
301
Additional paid-in capital
195,346
179,512
Retained earnings
337,848
319,256
Total shareholders' equity
533,489
499,069
Total liabilities and shareholders' equity
$
687,716
$
641,291
(a) Taken from audited financial statements, which are not presented
in their entirety.
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended
December 31, 2017
December 31, 2016
Operating activities:
Net income
$
35,373
$
12,706
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization
10,477
9,801
Share-based compensation
2,138
2,130
Loss on disposal of property and equipment
580
90
Provision for loss (recovery) on receivables
26
(10
)
Provision for revenue adjustments
924
450
Deferred income taxes
(12,600
)
2,864
Tax benefit for stock options exercised
—
(1,595
)
Changes in operating assets and liabilities
Accounts receivable
(11,891
)
(1,715
)
Prepaid expenses and other assets
(2,599
)
7,377
Accounts payable and accrued expenses
3,225
3,644
Net cash provided by operating activities
25,653
35,742
Investing activities:
Proceeds from disposal of property and equipment
943
134
Purchases of property and equipment
(24,655
)
(13,461
)
Acquisition of business
(640
)
—
Other
(150
)
337
Net cash used in investing activities
(24,502
)
(12,990
)
Financing activities:
Payments of debt and capital lease obligations
(75
)
(13,943
)
Proceeds from exercise of stock options
1,630
1,107
Payments of cash dividends
(4,468
)
(4,542
)
Repurchase of common stock (repurchase program)
(7,000
)
(9,997
)
Common stock issued under employee stock purchase plan
232
227
Tax benefit for stock options exercised
—
1,595
Net cash used in by financing activities
(9,681
)
(25,553
)
Net decrease in cash
(8,530
)
(2,801
)
Cash at beginning of period
12,423
11,312
Cash at end of period
$
3,893
$
8,511
Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Year ended
December 31, 2017
December 31, 2016
Operating activities:
Net income
$
87,321
$
27,670
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization
41,055
38,210
Impairment of goodwill, intangible and other assets
—
42,442
Share-based compensation
8,103
8,334
Loss on disposal of property and equipment
1,281
291
Provision for loss on receivables
1,814
258
Provision for revenue adjustments
3,055
2,020
Deferred income taxes
(12,468
)
3,525
Tax benefit for stock options exercised
—
(1,732
)
Changes in operating assets and liabilities, net of acquisition of
business
Accounts receivable
(31,308
)
(9,715
)
Prepaid expenses and other assets
(4,434
)
283
Accounts payable and accrued expenses
8,945
18,764
Net cash provided by operating activities
103,364
130,350
Investing activities:
Proceeds from disposal of property and equipment
2,440
1,929
Purchases of property and equipment
(38,265
)
(42,186
)
Acquisition of business, net of cash acquired
(23,140
)
(11,800
)
Other
(223
)
(336
)
Net cash used in investing activities
(59,188
)
(52,393
)
Financing activities:
Payments of debt and capital lease obligations
(42,790
)
(55,768
)
Proceeds from senior credit facility
55,000
—
Proceeds from exercise of stock options
7,272
8,148
Payments of cash dividends
(18,052
)
(15,529
)
Purchase of common stock under repurchase program
(48,983
)
(39,983
)
Common stock issued under employee stock purchase plan
458
442
Cash settlement of share-based awards for minimum tax withholdings
(1,699
)
(1,800
)
Tax benefit for stock options exercised
—
1,732
Net cash (used in) provided by financing activities
(48,794
)
(102,758
)
Net decrease in cash
(4,618
)
(24,801
)
Cash at beginning of year
8,511
33,312
Cash at end of year
$
3,893
$
8,511
The Company reports its financial results in accordance with GAAP (also
referred to herein as "reported"). However, the Company also uses
"non-GAAP financial measures" that are derived on the basis of
methodologies other than in accordance with GAAP. Specifically, the
Company believes that meaningful analysis of its financial performance
in 2017 and 2016 requires an understanding of the factors underlying
that performance, including an understanding of items that are
non-operational. Management uses these non-GAAP financial measures in
making financial, operating, compensation and planning decisions and in
evaluating the Company's performance.
This press release contains the following non-GAAP financial measures:
adjusted income from operations, adjusted net income, adjusted earnings
per diluted share, adjusted effective income tax rate and guidance with
respect to adjusted net income per diluted share. These measures exclude
intangible asset impairment costs and intangible asset impairment tax
ramifications related to TQI for the three months ended December 31,
2016. The Company believes that excluding these items will assist
investors in understanding our core operating performance and allow for
more accurate comparisons of results.
Non-GAAP financial measures should be viewed in addition to, and not as
an alternative for, the Company's reported results prepared in
accordance with GAAP. Our non-GAAP financial information does not
represent a comprehensive basis of accounting. As required by the
Securities and Exchange Act of 1933 and the rules and regulations
promulgated thereunder, the tables below present, for the periods
indicated, a reconciliation of our presented non-GAAP financial measures
to the most directly comparable GAAP financial measures.
Forward Air Corporation
Reconciliation to U.S. GAAP
(In millions, except per share data)
(Unaudited)
Three months ended December 31, 2016
Income before taxes
Income taxes
Effective tax rate
Net Income
Diluted earnings per share
Reported (GAAP)
$
28.0
$
15.3
54.6
%
$
12.7
$
0.42
Items impacting comparability:
Impact of TQI impairment on income taxes
—
(5.0
)
17.8
%
5.0
0.16
After considering items (Non-GAAP)
$
28.0
$
10.3
36.8
%
$
17.7
$
0.58
Forward Air Corporation
Additional Guidance Data
(In thousands, except per share data)
(Unaudited)
Three months ended
Actual
December 31, 2017
Net income
$
35,373
Income allocated to participating securities
(284
)
Numerator for diluted income per share - net income
$
35,089
Fully diluted share count
29,635
Diluted earnings per share
$
1.18
Projected
Full year 2018
Projected tax rate
25.0
%
Projected year end fully diluted share count (before consideration
of future share repurchases)
28,800
Projected capital expenditures, net
$
46,000
This press release contains "forward-looking statements" within the
meaning of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements can be
identified by words such as:"anticipate," "intend," "plan,"
"goal," "seek," "believe," "project," "estimate," "expect," "strategy,"
"future," "likely," "may," "should," "will" and similar references to
future periods.Forward-looking statements included in this press
release relate to expected first quarter 2018 operating results, such as
revenue growth and earnings, and guidance relating to income per diluted
share, adjusted income per diluted share and adjusted effective tax rate
for the second quarter.
Forward-looking statements are neither historical facts nor
assurances of future performance.Instead, they are based only on
our current beliefs, expectations and assumptions regarding the future
of our business, future plans and strategies, projections, anticipated
events and trends, the economy and other future conditions.Because
forward-looking statements relate to the future, they are subject to
inherent uncertainties, risks and changes in circumstances that are
difficult to predict and many of which are outside of our control.Our
actual results and financial condition may differ materially from those
indicated in the forward-looking statements.Therefore, you
should not rely on any of these forward-looking statements. Important
factors that could cause our actual results and financial condition to
differ materially from those indicated in the forward-looking statements
include, among others, the following: 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, tax matters, the availability and
compensation of qualified independent owner-operators and freight
handlers needed to serve our transportation needs, our inability to
successfully integrate acquisitions and the risks described in our
Annual Report on Form 10-K for the year ended December 31, 2016.
Any forward-looking statement made by us in this press release is
based only on information currently available to us and speaks only as
of the date on which it is made.We undertake no obligation to
publicly update any forward-looking statement, whether written or oral,
that may be made from time to time, whether as a result of new
information, future developments or otherwise.
