Docoh
Loading...

FWRD Forward Air

Filed: 9 Aug 21, 8:00pm

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 June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-22490
fwrd-20210630_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 August 5, 2021 was 27,100,389.




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)
 June 30,
2021
December 31,
2020
Assets
Current assets:  
Cash and cash equivalents$50,844 $40,254 
Accounts receivable, less allowance of $2,187 in 2021 and $2,273 in 2020209,187 156,490 
Other receivables16,999 
Other current assets19,982 28,150 
Current assets held for sale21,002 
Total current assets297,012 245,896 
Property and equipment383,155 380,519 
Less accumulated depreciation and amortization196,168 190,652 
Total property and equipment, net186,987 189,867 
Operating lease right-of-use assets148,651 123,338 
Goodwill254,993 244,982 
Other acquired intangibles, net of accumulated amortization of $100,018 in 2021 and $93,009 in 2020145,813 145,032 
Other assets48,385 45,181 
Noncurrent assets held for sale53,097 
Total assets$1,081,841 $1,047,393 
Liabilities and Shareholders’ Equity 
Current liabilities:  
Accounts payable$43,655 $38,371 
Accrued expenses70,894 51,264 
Other current liabilities6,813 10,580 
Current portion of debt and finance lease obligations1,867 1,801 
Current portion of operating lease liabilities46,042 43,680 
Current liabilities held for sale25,924 
Total current liabilities169,271 171,620 
Long-term debt and finance lease obligations, less current portion and debt issuance costs161,729 117,408 
Operating lease liabilities, less current portion103,280 80,346 
Other long-term liabilities55,741 54,129 
Deferred income taxes41,471 41,986 
Noncurrent liabilities held for sale34,575 
Shareholders’ equity:  
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; 0 shares issued or outstanding in 2021 and 2020
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 27,120,389 in 2021 and 27,316,434 in 2020271 273 
Additional paid-in capital252,466 242,916 
Retained earnings297,612 304,140 
Total shareholders’ equity550,349 547,329 
Total liabilities and shareholders’ equity$1,081,841 $1,047,393 
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
 June 30,
2021
June 30,
2020
Operating revenues$420,671 $281,678 
Operating expenses: 
Purchased transportation215,217 142,069 
Salaries, wages and employee benefits84,641 63,772 
Operating leases20,370 17,387 
Depreciation and amortization9,414 9,413 
Insurance and claims10,891 7,722 
Fuel expense4,059 2,519 
Other operating expenses33,955 24,882 
Total operating expenses378,547 267,764 
Income from continuing operations42,124 13,914 
Other expense: 
Interest expense(1,323)(1,198)
Total other expense(1,323)(1,198)
Income before income taxes40,801 12,716 
Income tax expense10,124 3,491 
Net income from continuing operations30,677 9,225 
Loss from discontinued operation, net of tax(6,071)
Net income and comprehensive income$30,677 $3,154 
Basic net income (loss) per share
Continuing operations$1.12 $0.33 
Discontinued operation(0.22)
Net income per basic share$1.12 $0.11 
Diluted net income (loss) per share
Continuing operations$1.11 $0.33 
Discontinued operation(0.22)
Net income per diluted share$1.11 $0.11 
Dividends per share$0.21 $0.18 


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)
 Six Months Ended
 June 30,
2021
June 30,
2020
Operating revenues$782,873 $587,235 
Operating expenses:
Purchased transportation399,825 292,667 
Salaries, wages and employee benefits159,538 133,331 
Operating leases39,537 35,271 
Depreciation and amortization18,651 18,747 
Insurance and claims20,632 17,766 
Fuel expense7,761 6,532 
Other operating expenses72,081 53,234 
Total operating expenses718,025 557,548 
Income from continuing operations64,848 29,687 
Other expense:
Interest expense(2,488)(2,051)
Total other expense(2,488)(2,051)
Income before income taxes62,360 27,636 
Income tax expense14,969 6,995 
Net income from continuing operations47,391 20,641 
Loss from discontinued operation, net of tax(5,533)(9,112)
Net income and comprehensive income$41,858 $11,529 
Basic net income (loss) per share
Continuing operations$1.72 $0.72 
Discontinued operation(0.20)(0.31)
Net income per basic share$1.52 $0.41 
Diluted net income (loss) per share
Continuing operations$1.71 $0.72 
Discontinued operation(0.20)(0.32)
Net income per diluted share$1.51 $0.40 
Dividends per share$0.42 $0.36 

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)
 Six Months Ended
 June 30,
2021
June 30,
2020
 
Operating activities:
Net income from continuing operations$47,391 $20,641 
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization18,651 18,747 
Change in fair value of earn-out liability(385)(2,702)
Share-based compensation expense5,578 5,507 
Provision for revenue adjustments3,525 1,787 
Deferred income tax (benefit) expense(572)4,668 
Other189 697 
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable(51,018)2,979 
Other receivables(13,491)
Other current and noncurrent assets6,746 (29)
Accounts payable and accrued expenses23,047 7,634 
Net cash provided by operating activities of continuing operations39,661 59,929 
Investing activities:
Proceeds from sale of property and equipment1,314 988 
Purchases of property and equipment(8,575)(14,214)
Purchase of a business, net of cash acquired(22,543)(55,931)
Net cash used in investing activities of continuing operations(29,804)(69,157)
Financing activities:
Repayments of finance lease obligations(954)(676)
Proceeds from revolving credit facility45,000 65,000 
Payment of earn-out liability(5,284)
Proceeds from issuance of common stock upon stock option exercises3,570 
Payments of dividends to stockholders(11,565)(10,087)
Repurchases and retirement of common stock(33,992)(15,259)
Proceeds from common stock issued under employee stock purchase plan388 294 
Payment of minimum tax withholdings on share-based awards(2,832)(3,286)
Contributions from (distributions to) subsidiary held for sale1,118 (5,307)
Net cash provided by financing activities from continuing operations733 25,395 
Net increase in cash and cash equivalents of continuing operations10,590 16,167 
Cash from discontinued operation:
Net cash used in operating activities of discontinued operation(6,902)(4,672)
Net cash provided by (used in) investing activities of discontinued operation8,020 (635)
Net cash (used in) provided by financing activities of discontinued operation(1,118)5,307 
Net increase in cash and cash equivalents10,590 16,167 
Cash and cash equivalents at beginning of period of continuing operations40,254 64,749 
Cash at beginning of period of discontinued operation
Net increase in cash and cash equivalents10,590 16,167 
Less: cash at end of period of discontinued operation
Cash and cash equivalents at end of period of continuing operations$50,844 $80,916 

 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 EarningsTotal 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— — (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)— 
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 plan— 388 — 388 
Share-based compensation expense— — 2,981 — 2,981 
Payment of dividends to shareholders— — (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 

 Common StockAdditional Paid-in
Capital
Retained EarningsTotal Shareholders’ Equity
 SharesAmount
Balance at December 31, 201927,850 $279 $226,869 $350,034 $577,182 
Net income— — — 8,375 8,375 
Share-based compensation expense— — 3,266 — 3,266 
Payment of dividends to shareholders— — (5,052)(5,050)
Payment of minimum tax withholdings on share-based awards(42)— — (2,672)(2,672)
Repurchases and retirement of common stock(268)(3)— (15,256)(15,259)
Issuance of share-based awards139 (2)— (1)
Balance at March 31, 202027,679 $277 $230,135 $335,429 $565,841 
Net income— — — 3,155 3,155 
Common stock issued under employee stock purchase plan— 295 — 295 
Share-based compensation expense— — 2,654 — 2,654 
Payment of dividends to shareholders— — (5,042)(5,039)
Payment of minimum tax withholdings on share-based awards(13)— — (613)(613)
Issuance of share-based awards56 — (1)— (1)
Balance at June 30, 202027,729 $277 $233,086 $332,929 $566,292 

The accompanying notes are an integral part of the condensed consolidated financial statements.
7

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

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 2 reportable segments: Expedited Freight and Intermodal. The Company conducts business in the United States and Canada.
The Expedited Freight segment operates a comprehensive national network to provide expedited regional, inter-regional and national less-than-truckload (“LTL) services. Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, 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 condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. 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 at the dates and 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, 2020. Results for interim periods are not necessarily indicative of the results for the year.

The Board approved a strategy to divest the Pool Distribution business (“Pool) on April 23, 2020, 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. Pool offered this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States. Accordingly, the results of operations for Pool have been presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for all period presented. In addition, the assets and liabilities were presented as held for sale in the Condensed Consolidated Balance Sheets for the prior period. Unless otherwise noted, amounts, percentages and discussion for all periods reflect the results of operations, financial condition and cash flows from our continuing operations.

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 time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is
8

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
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 this 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 and Held for Sale

As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool. The Pool business met the criteria for held for sale classification. As a result, the assets and liabilities of Pool were presented separately under the captions “Current assets held for sale”, “Noncurrent assets held for sale”, “Current liabilities held for sale” and “Noncurrent liabilities held for sale” in the Condensed Consolidated Balance Sheets as of December 31, 2020. The results of Pool were reclassified to “Loss from discontinued operation, net of tax” in the Condensed Consolidated Statements of Comprehensive Income for three and six months ended June 30, 2021 and 2020. Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and have been reallocated to continuing operations. These costs were reclassified to the eliminations and other column in the segment reconciliation in Note 13, Segment Reporting.
Sale of Pool
On February 12, 2021, the Company completed the sale of the Pool business for $8,000 in cash and up to a $12,000 earn-out based on earnings before interest, taxes, depreciation and amortization. The sale agreement for Pool included an earn-out based on the achievement of certain earnings before interest, taxes, depreciation and amortization attainment over an eleven-month period, beginning February 1, 2021. The Company will receive payment for the amount earned in the first quarter of 2022, and if elected, the buyer may defer the payment of up to half of the amount earned to first quarter of 2023. The estimated fair value of the earn-out asset on the date of sale was $6,967. The fair value was based on the estimated eleven-month period of the earnings before interest, taxes, depreciation and amortization and was calculated using a Monte Carlo simulation model.

The weighted-average assumptions under the Monte Carlo simulation model were as follows:

February 12, 2021
Counterparty credit spread1.2%
Earnings before interest, taxes, depreciation and amortization discount rate15.0%
Asset volatility55.0%

Subsequent to the date of sale, the Company will recognize any increases in the carrying value of the earn-out asset when the change is realized and will evaluate the earn-out asset for impairment at each reporting period. The Company concluded there were no indicators of impairment during the three months ended June 30, 2021. As of June 30, 2021, the Company recorded $3,508 in “Other receivables and $3,459 in “Other assets in the Condensed Consolidated Balance Sheets.

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 performs 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 will remain in effect until the date all services have been completed, but no more than six months following effective date. The TSA provides 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 receives a monthly service charge. For the three and six
9

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
months ended June 30, 2021, the Company recognized $241 and $412, respectively, in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income, for the services performed under the TSA.

Additionally, under the TSA, the Company remits 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 is reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment is remitted. As of June 30, 2021, the Company recorded a receivable in the amount of $13,491 in “Other receivables in the Condensed Consolidated Balance Sheets for the reimbursement due to the Company.

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 six months ended June 30, 2021 and 2020 is as follows:

 Three Months EndedSix Months Ended
 June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Operating revenues$$13,974 $17,087 $50,926 
Operating expenses:  
Purchased transportation3,147 4,290 12,683 
Salaries, wages and employee benefits8,394 9,674 25,507 
Operating leases4,966 2,907 10,646 
Depreciation and amortization362 1,657 
Insurance and claims1,287 929 3,013 
Fuel expense413 644 1,740 
Other operating expenses3,495 2,087 7,841 
Total operating expenses22,064 20,531 63,087 
Loss from discontinued operation(8,090)(3,444)(12,161)
Loss on sale of business(2,860)
Loss from discontinued operation before income taxes(8,090)(6,304)(12,161)
Income tax benefit(2,019)(771)(3,049)
Loss from discontinued operation, net of tax$$(6,071)$(5,533)$(9,112)
10

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

4.    Acquisitions

Expedited Freight Acquisition

As part of the Company’s strategy to expand final mile pickup and delivery operations, in April 2019, the Company acquired certain assets and liabilities of FSA Network, Inc., doing business as FSA Logistix (“FSA”), for $27,000 and a potential earn-out of up to $15,000. The purchase agreement for FSA included an earn-out up to $15,000 based on the achievement of certain revenue milestones over 2 one-year periods, beginning May 1, 2019. The estimated fair value of the earn-out liability on the date of acquisition was $11,803. The fair value was based on the estimated two-year performance of the acquired customer revenue and was calculated using a Monte Carlo simulation model. 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 Monte Carlo simulation model. During the three and six months ended June 30, 2021, the fair value of the earn-out changed by ($4) and ($52), 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 six months ended June 30, 2020, the fair value of the earn-out changed by ($2,108) and ($2,702), respectively, and the change in fair value was recorded in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income. The first one-year period ended in the second quarter of 2020 and the Company paid $5,284 based on the terms of the purchase agreement. The second one-year period ended in the second quarter of 2021 and the Company will remit payment in the third quarter of 2021 based on the terms of purchase agreement. As of June 30, 2021 and December 31, 2020, the fair value of the earn-out liability was $6,813 and $6,865, respectively, which was reflected in “Other current liabilities in the Condensed Consolidated Balance Sheets.

In May 2021, the Company acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,543. J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia. The acquisition of J&P supports the Company’s strategic growth plan by expanding pickup and delivery, less than truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States. The acquisition was financed by cash flow from operations. The results of J&P 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 Expedited Freight reportable segment.

Intermodal Acquisition

In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport) for $15,510 and a potential earn-out up to $2,000. Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois. The acquisition of Proficient Transport supports the Company’s strategic growth plan by expanding the intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and introduces a new location in Ohio. The acquisition was financed by cash flows from operations. The results of Proficient Transport 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.

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 weighted-average assumptions used to calculate the estimated fair value of the earn-out under the option pricing method were as follows:
February 28, 2021June 30, 2021
Risk-free rate0.1%0.1%
Revenue discount rate8.3%8.3%
Revenue volatility27.3%19.7%


11

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
During both the three and six months ended June 30, 2021, the fair value of the earn-out changed by ($333) and the change in the fair value was recorded in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income. As of June 30, 2021, the fair value of the earn-out liability was $496, which was reflected in “Other current liabilities in the Condensed Consolidated Balance Sheets.

Fair Value of Assets Acquired and Liabilities Assumed

Assets acquired and liabilities assumed as of the acquisition date are presented in the following table:
Proficient TransportJ&P
February 28, 2021May 30, 2021
Tangible assets:
Accounts receivable$4,171 $1,686 
Prepaid expenses and other current assets32 
Property and equipment140 934 
Other assets24 
Total tangible assets4,335 2,655 
Intangible assets:
Customer relationships6,060 1,580 
Non-compete agreements18 132 
Goodwill6,249 3,762 
Total intangible assets12,327 5,474 
Total assets acquired16,662 8,129 
Liabilities assumed:
Current liabilities323 586 
Total liabilities assumed323 586 
Net assets acquired$16,339 $7,543 

The fair value of the assets acquired and liabilities assumed are preliminary based on the information available as of the acquisition date through the date of this filing.


The weighted-average useful life of acquired intangible assets as of the acquisition date are summarized in the following table:
Weighted-Average Useful Lives
Proficient TransportJ&P
Customer relationships8 years12 years
Non-compete agreements1 year5 years
12

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021


5.    Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the six months ended June 30, 2021 are summarized as follows:
Expedited FreightIntermodalConsolidated
Balance as of December 31, 2020$165,268 $79,714 $244,982 
Acquisitions3,762 6,249 10,011 
Balance as of June 30, 2021$169,030 $85,963 $254,993 

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. Based on the current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of June 30, 2021. The Company concluded there were no indicators of impairment during the six months ended June 30, 2021.

Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the six months ended June 30, 2021 are summarized as follows:

Gross Carrying Amount
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2020$228,416 $8,125 $1,500 $238,041 
Acquisitions7,640 150 7,790 
Balance as of June 30, 2021$236,056 $8,275 $1,500 $245,831 

Accumulated Amortization
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2020$85,930 $5,579 $1,500 $93,009 
Amortization expense6,344 665 7,009 
Balance as of June 30, 2021$92,274 $6,244 $1,500 $100,018 

1 Carrying value as of June 30, 2021 and December 31, 2020 is inclusive of $16,501 of accumulated impairment.
13

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021




6.    Stock Incentive Plans

Stock Incentive Plan

The Company recorded shared-based compensation expense as follows for the three and six months ended June 30, 2021 and 2020:
Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Salaries, wages and employee benefits - continuing operations$2,463 $2,154 $4,732 $4,971 
Salaries, wages and employee benefits - discontinued operation22216410
Total share-based compensation expense$2,463 $2,376 $4,748 $5,381 

In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 of common shares to employees. As of June 30, 2021, approximately 797 shares remain available for grant under the Omnibus Plan.

Stock Options
     
Share-based compensation expense associated with stock options 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 six months ended June 30, 2021 on a continuing operations basis were as follows:

Stock OptionsWeighted-Average Exercise Price
Outstanding as of January 1, 2021359 $55.79 
Granted39 75.05 
Exercised(52)54.57 
Forfeited
Outstanding as of June 30, 2021346 $58.30 

As of June 30, 2021, the total share-based compensation expense related to unvested stock options net yet recognized was $1,002, and the weighted-average period over which it is expected to be recognized is approximately two years.


14

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
Stock option transactions during the six months ended June 30, 2021 on a discontinued operation basis were as follows:
Stock OptionsWeighted-Average Exercise Price
Outstanding as of January 1, 202114 $52.15 
Granted
Exercised(14)52.15 
Forfeited
Outstanding as of June 30, 2021$

Restricted Shares

Restricted shares are restricted from sale or transfer until vesting, and restrictions lapse in three equal installments beginning one year after the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period. Restricted share transactions during the six months ended June 30, 2021 on a continuing operations basis were as follows:
Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 2021210 $62.78 
Granted108 75.28 
Vested(98)61.49 
Forfeited(15)69.91 
Outstanding as of June 30, 2021205 $69.31 

As of June 30, 2021, the total share-based compensation expense related to restricted shares not yet recognized was $11,227, and the weighted-average period over which it is expected to be recognized is approximately two years.

Restricted share transactions during the six months ended June 30, 2021 on a discontinued operation basis were as follows:
Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 202110 $61.25 
Granted
Vested(5)60.49 
Forfeited(5)61.92 
Outstanding as of June 30, 2021$

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 Company’s Board of Directors. 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 based on the projected assessment of the level of performance that will be achieved.

15

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

Performance award transactions during the six months ended June 30, 2021 on a continuing operations basis were as follows assuming target levels of performance:
Performance AwardsWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 202165 $67.62 
Granted36 87.33 
Earned(11)72.30 
Forfeited or unearned(11)70.22 
Outstanding as June 30, 202179 $75.61 

As of June 30, 2021, 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 $4,621, and the weighted-average period over which it is expected to be recognized is approximately three years.


Employee Stock Purchase Plan

As of June 30, 2021, the Company is authorized to issue up to a remaining 330 shares of common stock to employees under the 2005 Employee Stock Purchase Plan (the “ESPP”). 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 2 large lump sum contributions.

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

Six Months Ended
June 30,
2021
June 30,
2020
Shares purchased by participants under the ESPP
Average purchase price$68.76 $44.84 
Weighted-average fair value of each purchase right under the ESPP granted ¹$20.99 $4.98 
Share-based compensation for ESPP shares$118 $30 
¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period.
Employee stock purchase plan activity and related information was as follows on a discontinued operation basis:
Six Months Ended
June 30,
2021
June 30,
2020
Shares purchased by participants under the ESPP
Average purchase price$$44.84 
Weighted-average fair value of each purchase right under the ESPP granted ¹$$4.98 
Share-based compensation for ESPP shares$$
¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period.

16

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
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 June 30, 2021, approximately 75 shares remain available for grant under the Amended Plan.

Director restricted share transactions during the six months ended June 30, 2021 were as follows:
Director Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 202124 $42.88 
Granted17 93.39 
Vested(26)47.12 
Forfeited
Outstanding as of June 30, 202115 $93.46 

For the three and six months ended June 30, 2021, the Company recorded $400 and $728, respectively, of share-based compensation expense associated with these grants. For the three and six months ended June 30, 2020, the Company recorded $245 and $506, respectively, of share-based compensation expense associated with these grants. As of June 30, 2021, the total share-based compensation expense related to the restricted shares net yet recognized was $1,221, and the weighted-average period over which it is expected to be recognized is approximately less than one year.
17

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

7.    Indebtedness

As of June 30, 2021, the Company had $157,500 in borrowings outstanding under the revolving credit facility, $18,326 utilized for outstanding letters of credit and $49,174 of available borrowing capacity under the revolving credit facility. As of December 31, 2020, the Company had $112,500 in borrowings outstanding under the revolving credit facility, $18,326 utilized for outstanding letters of credit and $94,174 of available borrowing capacity under the revolving credit facility. The interest rate on the outstanding borrowings under the revolving credit facility was 3.25% as of both June 30, 2021 and June 30, 2020.

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 is 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 may be 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. 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.

Under the amended Facility, interest accrues 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 is the highest of (i) the federal funds rate, not less than 0, 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 is payable in arrears for each loan that is based on the LIBOR 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 LIBOR rate on the last day of each quarter.

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 June 30, 2021, the Company was in compliance with the aforementioned covenants.

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. 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 0, 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 0, plus 0.50%, (ii) the administrative agent’s prime rate and (iii) the BSBY Rate, which cannot be less than 0, plus 1.00%, plus a margin ranging from 0.00% to 0.50% based on the Company’s leverage ratio. In addition, under the second amendment, the Facility may be increased by up to $75,000 to a maximum aggregate principal amount of $300,000 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.
18

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021


8.    Net Income (Loss) Per Share

A reconciliation of net income attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income per share during the three and six months ended June 30, 2021 and 2020 is as follows:
 Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Numerator:  
Net income and comprehensive income from continuing operations$30,677 $9,225 $47,391 $20,641 
Net loss and comprehensive loss from discontinued operation(6,071)(5,533)(9,112)
Net income attributable to Forward Air$30,677 $3,154 $41,858 $11,529 
Income allocated to participating securities(256)(13)(363)(83)
Numerator for basic and diluted net income per share for continuing operations$30,421 $9,212 $47,028 $20,558 
Numerator for basic and diluted net loss per share for discontinued operation$$(6,071)$(5,533)$(9,112)
Denominator:  
Denominator for basic net income per share - weighted-average number of common shares outstanding27,261 27,695 27,309 28,424 
Dilutive stock options and performance share awards154 31 145 67 
Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding27,415 27,726 27,454 28,491 
Basic net income (loss) per share:
     Continuing operations$1.12 $0.33 $1.72 $0.72 
     Discontinued operation(0.22)(0.20)(0.31)
Net income per basic share$1.12 $0.11 $1.52 $0.41 
Diluted net income (loss) per share:
     Continuing operations$1.11 $0.33 $1.71 $0.72 
     Discontinued operation(0.22)(0.20)(0.32)
Net income per diluted share$1.11 $0.11 $1.51 $0.40 



19

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
The number of shares that were not included in the calculation of net income per diluted share because to do so would have been anti-dilutive for the three and six months ended June 30, 2021 and 2020 are as follows:
Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Anti-dilutive stock options268 39 218 
Anti-dilutive performance shares18 29 
Anti-dilutive restricted shares and deferred stock units177 15 95 
Total anti-dilutive shares463 54 342 


9.    Income Taxes

For the six months ended June 30, 2021 and 2020, the Company recorded income tax expense of $14,969 and $6,995, respectively, for continuing operations. The effective tax rate of 24.0% for the six months ended June 30, 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 effective tax rate of 25.3% for the six months ended June 30, 2020 varied from the statutory United States federal income tax rate of 21% 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 and a refund for Tennessee tax credits.

As of both June 30, 2021 and December 31, 2020, the Company had $544 of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. As of both June 30, 2021 and December 31, 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of $168. 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 2013.

The sale of Pool resulted in a capital loss in the amount of $2,426. The capital loss 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 $2,426 to reserve against its capital loss carryforward. The Company also maintains a valuation allowance to reserve against its state net operating loss carryforwards. 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.

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.
20

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

As previously discussed in Note 4, Acquisitions, the estimated fair value of the earn-out liability was determined using either the Monte-Carlo simulation model or 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 either the Monte Carlo simulation model or 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 June 30, 2021 and December 31, 2020 are summarized below:
As of June 30, 2021
Level 1Level 2Level 3Total
Earn-out liability$$$7,309 $7,309 
As of December 31, 2020
Level 1Level 2Level 3Total
Earn-out liability$$$6,865 $6,865 

Cash and cash equivalents, accounts receivable, 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 June 30, 2021, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $6,192, compared to its carrying value of $6,168. As of December 31, 2020, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $7,009, compared to its carrying value of $6,811.



11.    Shareholders’ Equity

Cash Dividends

During the second quarter of 2021, first quarter of 2021 and the fourth quarter of 2020, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.21 per share of common stock.

On July 27, 2021, the Company's Board of Directors declared a quarterly cash dividend of $0.21 per common share that will be paid in third quarter of 2021.

Share Repurchase Program

On July 21, 2016, the Company’s Board of Directors approved a stock repurchase program for up to 3,000 shares of the Company’s common stock (the “2016 Repurchase Plan). On February 5, 2019, the Board of Directors canceled the Company’s 2016 Repurchase Plan and approved a revised stock repurchase plan authorizing 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.
21

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021


During the six months ended June 30, 2021, the Company repurchased through open market transactions 366 shares of common stock for $33,992, or $92.76 per share, and during the six months ended June 30, 2020, the Company repurchased 268 shares of common stock for $15,259, or $56.93 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 June 30, 2021, the remaining shares to be repurchased under the 2019 Repurchase Plan were approximately 3,002 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. We accrue 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, management believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our 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.

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 $3,00010/1/2020 to 10/1/2021
Truckload business$2,000 Occurrence/Accident²$0 to $2,00010/1/2020 to 10/1/2021
LTL and Truckload businesses$6,000 Policy Term Aggregate³$3,000 to $5,00010/1/2020 to 10/1/2021
LTL and Truckload businesses$5,000 Policy Term Aggregate³$5,000 to $10,00010/1/2020 to 10/1/2021
Intermodal$250 Occurrence/Accident²$0 to $2504/1/2020 to 10/1/2021
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 believes the recorded reserves are sufficient for all incurred claims up to the self-insured retention
22

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
limits, including an estimate for claims incurred but not reported. 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. However, an estimate cannot be made of the range of additional loss that is at least reasonably possible.


13.    Segment Reporting

The Company has 2 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, 2020, 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.      

Segment results from operations for the three and six months ended June 30, 2021 and 2020 are as follows:
 Three Months Ended June 30, 2021
 Expedited FreightIntermodalCorporateEliminationsConsolidated - Continuing Operations
External revenues$351,551 $69,120 $$— $420,671 
Intersegment revenues184 13 (197)
Depreciation4,989 835 23 5,847 
Amortization1,790 1,777 3,567 
Income (loss) from continuing operations34,688 8,386 (950)42,124 
Purchases of property and equipment5,724 156 5,880 
 Three Months Ended June 30, 2020
 Expedited FreightIntermodalCorporateEliminationsConsolidated - Continuing Operations
External revenues$235,417 $46,420 $$— $281,837 
Intersegment revenues241 (408)(159)
Depreciation5,009 1,081 25 6,115 
Amortization1,731 1,567 3,298 
Income (loss) from continuing operations11,753 4,413 (2,252)13,914 
Purchases of property and equipment11,545 18 11,563 
                    

23

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
 Six Months Ended June 30, 2021
 Expedited FreightIntermodalCorporateEliminationsConsolidated - Continuing Operations
External revenues$655,308 $127,622 $$— $782,930 
Intersegment revenues613 25 (695)(57)
Depreciation9,982 1,634 26 11,642 
Amortization3,595 3,414 7,009 
Income (loss) from continuing operations59,218 12,895 (7,265)64,848 
Purchases of property and equipment8,136 439 8,575 
 Six Months Ended June 30, 2020
 Expedited FreightIntermodalCorporateEliminationsConsolidated - Continuing Operations
External revenues$488,560 $98,875 $$— $587,435 
Intersegment revenues727 13 (940)(200)
Depreciation9,916 2,134 43 12,093 
Amortization3,519 3,135 6,654 
Income (loss) from continuing operations26,933 8,126 (5,372)29,687 
Purchases of property and equipment13,950 264 14,214 
Total Assets
As of June 30, 2021$767,222 $209,266 $105,459 $(106)$1,081,841 
As of December 31, 2020905,081 221,963 47,641 (201,391)973,294 


A reconciliation from the segment information to the consolidated balances for revenues and total assets is set forth below:

Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Intersegment revenues - continuing operations$$(159)$(57)$(200)
Intersegment revenues - discontinued operation159 57 200 
Consolidated intersegment revenues$— $— $— $— 

June 30, 2021December 31, 2020
Segment assets - continuing operations$1,081,841 $973,294 
Current assets held for sale21,002 
Noncurrent assets held for sale53,097 
Consolidated total assets$1,081,841 $1,047,393 
24

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
Revenue from the individual services within the Expedited Freight segment for the three and six months ended June 30, 2021 and 2020 are as follows:

 Three Months EndedSix Months Ended
 June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Expedited Freight revenues:  
Network$210,088 $134,173 $388,715 $286,182 
Truckload56,968 41,857 109,348 89,384 
Final Mile69,883 53,427 132,139 101,229 
Other14,796 6,201 25,719 12,492 
Total$351,735 $235,658 $655,921 $489,287 


25


Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview
 
We are a leading asset-light freight and logistics company providing less-than-truckload (“LTL), final mile truckload and intermodal drayage services across the United States and in Canada. We offer premium services that typically require precision execution, such as expedited transit, delivery during tight time windows and special handling. We utilize an asset-light strategy to minimize our investments in equipment and facilities and to reduce our capital expenditures.

Our services are classified into two reportable segments: Expedited Freight and Intermodal.

Through the Expedited Freight segment, we operate a comprehensive national network to provide expedited regional, inter-regional and national LTL services. Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling. We plan to grow our LTL and final mile geographic footprints through greenfield start-ups as well as acquisitions.

Our 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. Intermodal operates primarily in the Midwest and Southeast, with smaller operational presence in Southwest and Mid-Atlantic United States. We plan to grow Intermodal’s geographic footprint through acquisitions as well as greenfield start-ups where we do not have an acceptable acquisition target.

Our operations, particularly our network of hubs and terminals, represent substantial fixed costs. Consequently, our ability to increase our earnings depends in significant part on our ability to increase the amount of freight and the revenue per pound for the freight shipped through our networks and to grow other services, such as LTL pickup and delivery, final mile solutions and intermodal services, which will allow us to maintain revenue growth in challenging shipping environments. In addition, we are continuing to execute synergies across our services, particularly with service offerings in the Expedited Freight segment. Synergistic opportunities include the ability to share resources, particularly our fleet resources.

The Board approved a strategy to divest the Pool Distribution business (“Pool) on April 23, 2020, 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. Pool offered this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States. Accordingly, the results of operations for Pool have been presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for all period presented. In addition, the assets and liabilities were presented as held for sale in the Condensed Consolidated Balance Sheets for the prior period. Unless otherwise noted, amounts, percentages and discussion for all periods reflect the results of operations, financial condition and cash flows from our continuing operations. Refer to Note 4, Discontinued Operation and Held for Sale, to the our Condensed Consolidated Financial Statements for additional information on our discontinued operation.

Trends and Developments

COVID-19

Our business is highly susceptible to changes in the economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy. The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to the financial markets. Efforts to control the spread of COVID-19 led governments and other authorities to impose restrictions which resulted in business closures and disrupted supply chains worldwide. As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services.

Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 and its variants remains fluid and may be further impacted by the policies of President Biden’s administration, the availability and success of a vaccine and vaccination rates. The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition in 2021 will depend on future developments, which are highly uncertain and cannot be predicted by, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, including the new variants, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume.

26


In addition, although we believe we have sufficient capital and liquidity to manage our business over the short- and long-term, our liquidity may be materially affected if conditions in the credit and financial markets deteriorate as a result of COVID-19 including failure by us or our customers to secure any necessary financing in a timely manner.

Intermodal Acquisition

As part of the inorganic growth strategy, in February 2021, we acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport) for $15,510 and a potential earn-out up to $2,000. 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. Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois. The acquisition of Proficient Transport will expand our intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and will introduce a new location in Ohio. The acquisition was funded using cash flows from operations. The results of Proficient Transport have been included in our Condensed Consolidated Financial Statements as of and from the date of acquisition.

Expedited Freight Acquisition

In May 2021, we acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,543. J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia. The acquisition of J&P supports our strategic growth plan by expanding pickup and delivery, less than truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States. The acquisition was funded using cash flow from operations. The results of J&P have been included in our Condensed Consolidated Financial Statements as of and from the date of acquisition.

Sale of Pool

On February 12, 2021, we sold Pool for an $8,000 cash payment and up to a $12,000 earn-out based on 2021 earnings before interest, taxes, depreciation and amortization attainment, beginning February 1, 2021. The estimated fair value of the earn-out on the date of sale was $6,967, and was calculated based on the estimated performance of Pool using a Monte Carlo simulation model. A loss on the sale of Pool in the amount of $2,860 was recorded in discontinued operation.

Environmental Protection and Community Support

We embrace a comprehensive definition of sustainability that addresses Environmental, Social, and Governance factors (“ESG”). In 2019, our Board amended the Corporate Governance and Nominating (“CG&N”) Committee Charter to ensure Board oversight of our efforts related to environmental, social, and governance matters, and management of sustainability-related risks and opportunities. At least twice a year, the CG&N Committee is updated on each of these topics and provides feedback and recommendations that it deems appropriate.

In 2020, we created and staffed the Head of Corporate ESG role to provide oversight of our ESG vision, strategic planning, performance management and improvement activities. Shortly after, we initiated an ESG market analysis and benchmarking exercise that explored the ESG issues that most impact transportation and logistics industries and marketplaces.

We began in 2020 to conduct an ESG assessment, starting with a third-party stakeholder assessment that served as a basis for identifying and prioritizing ESG topics most relevant to our industry, our business, and our stakeholders. The assessment’s findings yielded initial topics that we recognized as important. We followed with a more in-depth assessment of risks and opportunities, utilizing Sustainable Accounting Standards Board (“SASB”) standards as a guide, in order to further refine our disclosure topics and gain stakeholder alignment. This more detailed assessment yielded clarity of our ESG topics and prioritization based on the degree of both qualitative and quantitative impact to our business.

We identified ten ESG topic priority areas relevant to our business and mapped each to widely adopted ESG reporting standards as identified by SASB. Within these ten topic areas, we identified specific related risks and opportunities, and aligned on improvement activities. In first quarter of 2021, we published our first ESG report that describes our sustainability focus and plan. We are committed to making our results count across the country and will continue to update our future disclosures accordingly.



27

Results from Operations
The following table sets forth our consolidated financial data from operations for the three months ended June 30, 2021 and 2020 (unaudited and in thousands):
Three Months Ended
June 30, 2021June 30, 2020ChangePercent Change
Operating revenues:
Expedited Freight$351,735 $235,658 $116,077 49.3 %
Intermodal69,133 46,428 22,705 48.9 
Eliminations and other operations(197)(408)211 (51.7)
Operating revenues420,671 281,678 138,993 49.3 
Operating expenses:
Purchased transportation215,217 142,069 73,148 51.5 
Salaries, wages, and employee benefits84,641 63,772 20,869 32.7 
Operating leases20,370 17,387 2,983 17.2 
Depreciation and amortization9,414 9,413 — 
Insurance and claims10,891 7,722 3,169 41.0 
Fuel expense4,059 2,519 1,540 61.1 
Other operating expenses33,955 24,882 9,073 36.5 
Total operating expenses378,547 267,764 110,783 41.4 
Income (loss) from continuing operations:
Expedited Freight34,688 11,753 22,935 195.1 
Intermodal8,386 4,413 3,973 90.0 
Other Operations(950)(2,252)1,302 (57.8)
Income from continuing operations42,124 13,914 28,210 202.7 
Other expense:
Interest expense(1,323)(1,198)(125)10.4 
Total other expense(1,323)(1,198)(125)10.4 
Income from continuing operations before income taxes40,801 12,716 28,085 220.9 
Income tax expense10,124 3,491 6,633 190.0 
Net income from continuing operations30,677 9,225 21,452 232.5 
Loss from discontinued operations, net of tax— (6,071)6,071 (100.0)
Net income and comprehensive income$30,677 $3,154 $27,523 872.6 %



28

Revenues

Operating revenues increased $138,993, or 49.3%, to $420,671 for the three months ended June 30, 2021 compared to $281,678 for the three months ended June 30, 2020. The increase was primarily driven by an increase in our Expedited Freight segment of $116,077 due to increased Network, Truckload and Final Mile revenue.

Operating Expenses
Operating expenses increased $110,783, or 41.4%, to $378,547 for the three months ended June 30, 2021 compared to $267,764 for the three months ended June 30, 2020. The increase was primarily driven by an increase in purchased transportation expense of $73,148 in both our Expedited Freight and Intermodal segments. Purchased transportation expense includes our independent contractor fleet owners and owner-operators, who lease their equipment to our motor carrier, (“Leased Capacity Providers”) and third party carriers.
Income from Continuing Operations and Segment Operations
Income from continuing operations increased $28,210, or 202.7%, to $42,124 for the three months ended June 30, 2021 compared to $13,914 for the three months ended June 30, 2020. The increase was primarily driven by an increase in income from continuing operations at our Expedited Freight segment and Intermodal segment of $22,935 and $3,973, respectively. The results for our two reportable segments are discussed in detail in the following sections.

Interest Expense

Interest expense was $1,323 for the three months ended June 30, 2021 compared to $1,198 for the three months ended June 30, 2020. The increase in interest expense was attributable to additional outstanding borrowings under our revolving credit facility during the second quarter of 2021. The interest rate on the outstanding borrowings under the revolving credit facility was 3.25% as of both June 30, 2021 and June 30, 2020.

Income Taxes on a Continuing Basis

The combined federal and state effective tax rate on a continuing basis for the three months ended June 30, 2021 was 24.8% compared to a rate of 27.5% for the three months ended June 30, 2020. The lower effective tax rate for the three months ended June 30, 2021 was primarily due to increased vesting of restricted shares as well as exercises of stock options in the second quarter of 2021 when compared to the same period in 2020.

Loss from Discontinued Operation, net of tax

Loss from discontinued operation, net of tax was $6,071 for the three months ended June 30, 2020. Loss from discontinued operation includes our Pool business and, as discussed above, the Pool business was sold on February 12, 2021. For the three months ended June 30, 2020, our Pool business was adversely impacted by COVID-19 as many of our customers were affected by retail mall closure in response to stay-at-home orders beginning in March 2020.

Net Income

As a result of the foregoing factors, net income increased $27,523, or 872.6%, to $30,677 for the three months ended June 30, 2021 compared to $3,154 for the three months ended June 30, 2020.

29


Expedited Freight - Three Months Ended June 30, 2021 compared to Three Months Ended June 30, 2020

The following table sets forth the financial data of our Expedited Freight segment for the three months ended June 30, 2021 and 2020:
Expedited Freight Segment Information
(unaudited and in thousands)
Three Months Ended
 June 30, 2021Percent of RevenueJune 30, 2020Percent of RevenueChangePercent Change
Operating revenues:
Network1
$210,088 59.7 %$134,173 56.9 %$75,915 56.6 %
Truckload56,968 16.2 41,857 17.8 15,111 36.1 
Final Mile69,883 19.9 53,427 22.7 16,456 30.8 
Other14,796 4.2 6,201 2.6 8,595 138.6 
Total operating revenues351,735 100.0 235,658 100.0 116,077 49.3 
Operating expenses:
Purchased transportation191,648 54.5 127,478 54.1 64,170 50.3 
Salaries, wages and employee benefits67,560 19.2 50,508 21.4 17,052 33.8 
Operating leases14,868 4.2 13,338 5.7 1,530 11.5 
Depreciation and amortization6,779 1.9 6,740 2.9 39 0.6 
Insurance and claims8,385 2.4 5,715 2.4 2,670 46.7 
Fuel expense2,147 0.6 1,406 0.6 741 52.7 
Other operating expenses25,660 7.3 18,720 7.9 6,940 37.1 
Total operating expenses317,047 90.1 223,905 95.0 93,142 41.6 
Income from operations$34,688 9.9 %$11,753 5.0 %$22,935 195.1 %
1Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.



30

Expedited Freight Operating Statistics
Three Months Ended
June 30, 2021June 30, 2020Percent Change
Business days64 64 — %
Tonnage 1,2
    Total pounds728,191 522,031 39.5 
    Pounds per day11,378 8,157 39.5 
Shipments 1,2
    Total shipments1,096 963 13.8 
    Shipments per day17.1 15.0 14.0 
Weight per shipment664 542 22.5 
Revenue per hundredweight 3
$28.63 $26.32 8.8 
Revenue per hundredweight, ex fuel 3
$24.68 $23.09 6.9 
Revenue per shipment 3
$191.89 $139.30 37.8 
Revenue per shipment, ex fuel 3
$165.62 $121.77 36.0 
Network revenue from door-to-door shipments as a percentage of network revenue 3,4
51.3 %49.9 %2.8 
1 In thousands
2 Excludes accessorial, Truckload and Final Mile products
3 Includes intercompany revenue between the Network and Truckload revenue streams
4 Door-to-door shipments include all shipments with a pickup and/or delivery


31

Operating Revenues
Expedited Freight operating revenues increased $116,077, or 49.3%, to $351,735 for the three months ended June 30, 2021 from $235,658 for the three months ended June 30, 2020. The increase was attributable to increased Network, Truckload and Final Mile revenue. Network revenue increased due to a 39.5% increase in tonnage, a 13.8% increase in shipments and a 8.8% increase in revenue per hundredweight as compared to the prior year. The increase in tonnage and shipments was primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations for the second quarter of 2020. Strategic pricing initiatives and freight rationalization actions contributed to the increase in the revenue per hundredweight. Fuel surcharge revenue increased $11,925, or 70.6% as a result of the rise in fuel prices and increased tonnage. Truckload revenue increased $15,111 primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations for the second quarter of 2020. Final Mile revenue increased $16,456 due to the combination of organic growth and the acquisition of CLW Delivery, Inc. (“CLW”) in October 2020. Other revenue, which includes warehousing and terminal handling, increased $8,595 due to the higher linehaul tonnage and shipment counts.
Purchased Transportation
Expedited Freight purchased transportation increased $64,170, or 50.3%, to $191,648 for the three months ended June 30, 2021 from $127,478 for the three months ended June 30, 2020. Purchased transportation was 54.5% of Expedited Freight operating revenues for the three months ended June 30, 2021 compared to 54.1% for the same period in 2020. Expedited Freight purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation as a percentage of revenues was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services. In the second quarter of 2021, we purchased 63.0%, 33.7% and 3.3% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively. This compares to 68.4%, 27.3% and 4.3% in the same period in 2020.
Salaries, Wages and Employee Benefits
Expedited Freight salaries, wages and employee benefits increased $17,052, or 33.8%, to $67,560 for the three months ended June 30, 2021 from $50,508 for the three months ended June 30, 2020. Salaries, wages and employee benefits were 19.2% of Expedited Freight operating revenues for the three months ended June 30, 2021 compared to 21.4% for the same period in 2020. The increase in salaries, wages and employee benefits expense was due to the additional employees hired in response to the increase in tonnage and shipments in the second quarter of 2021, higher group health insurance premiums and an increased reserve for incentive compensation. Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.
Operating Leases
Expedited Freight operating leases increased $1,530, or 11.5%, to $14,868 for the three months ended June 30, 2021 from $13,338 for the three months ended June 30, 2020.  Operating leases were 4.2% of Expedited Freight operating revenues for the three months ended June 30, 2021 compared to 5.7% for the same period in 2020. The increase in operating leases expense was primarily due to higher facility and equipment lease expense in 2021, which is partially attributable to facility leases assumed in connection with the CLW and J&P acquisitions.
Depreciation and Amortization
Expedited Freight depreciation and amortization increased $39, or 0.6%, to $6,779 for the three months ended June 30, 2021 from $6,740 for the three months ended June 30, 2020.  Depreciation and amortization was 1.9% of Expedited Freight operating revenues for the three months ended June 30, 2021 compared to 2.9% for the same period in 2020. The increase in depreciation and amortization expense is primarily due to the additional amortization expense resulting from the acquisitions of CLW and J&P.
Insurance and Claims
Expedited Freight insurance and claims increased $2,670, or 46.7%, to $8,385 for the three months ended June 30, 2021 from $5,715 for the three months ended June 30, 2020.  Insurance and claims were 2.4% of Expedited Freight operating revenues for both the three months ended June 30, 2021 and 2020. The increase in insurance and claims expense was primarily attributable to an increase in vehicle insurance premiums as well as additional vehicle liability and cargo claims. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations section below.
32


Fuel Expense

Expedited Freight fuel expense increased $741, or 52.7%, to $2,147 for the three months ended June 30, 2021 from $1,406 for the three months ended June 30, 2020.  Fuel expense was 0.6% of Expedited Freight operating revenues for both the three months ended June 30, 2021 and 2020.  Expedited Freight fuel expense increased due to increased mileage and the rise in the average price of fuel in the second quarter of 2021.
Other Operating Expenses
Expedited Freight other operating expenses increased $6,940, or 37.1%, to $25,660 for the three months ended June 30, 2021 from $18,720 for the three months ended June 30, 2020.  Other operating expenses were 7.3% of Expedited Freight operating revenues for the three months ended June 30, 2021 compared to 7.9% for the same period in 2020. The increase in other operating expenses was driven by an increase in equipment maintenance costs, terminal and office expenses, legal and professional fees, other over-the-road costs and parts for final mile installations. In the second quarter of 2020, other operating expenses included a $2,108 gain from changes in the fair value of an earn-out liability due to the timing of expected new business wins. A similar gain was not recorded in the second quarter of 2021.
Income from Operations
Expedited Freight income from operations increased $22,935, or 195.1%, to $34,688 for the three months ended June 30, 2021 compared to $11,753 for the three months ended June 30, 2020.  Income from operations was 9.9% of Expedited Freight operating revenues for the three months ended June 30, 2021 compared to 5.0% for the same period in 2020. The increase in income from operations as a percentage of operating revenues was driven by increased revenue per hundredweight and higher number of shipments combine with cost-control measures and operational efficiencies, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.


33

Intermodal - Three Months Ended June 30, 2021 compared to Three Months Ended June 30, 2020

The following table sets forth the financial data of our Intermodal segment for the three months ended June 30, 2021 and 2020:
Intermodal Segment Information
(unaudited and in thousands)
Three Months Ended
 June 30, 2021Percent of RevenueJune 30, 2020Percent of RevenueChangePercent Change
Operating revenues$69,133 100.0 %$46,428 100.0 %$22,705 48.9 %
Operating expenses:
Purchased transportation23,767 34.4 14,904 32.1 8,863 59.5 
Salaries, wages and employee benefits16,230 23.5 11,728 25.3 4,502 38.4 
Operating leases5,500 8.0 4,045 8.7 1,455 36.0 
Depreciation and amortization2,612 3.8 2,648 5.7 (36)(1.4)
Insurance and claims2,355 3.4 1,789 3.9 566 31.6 
Fuel expense1,912 2.8 1,113 2.4 799 71.8 
Other operating expenses8,371 12.1 5,788 12.5 2,583 44.6 
Total operating expenses60,747 87.9 42,015 90.5 18,732 44.6 
Income from operations$8,386 12.1 %$4,413 9.5 %$3,973 90.0 %

Intermodal Operating Statistics
Three Months Ended
June 30, 2021June 30, 2020Percent Change
Drayage shipments96,805 68,974 40.3 %
Drayage revenue per shipment$618 $556 11.2 %
Number of locations29 24 20.8 %


34

Revenues

Intermodal operating revenues increased $22,705, or 48.9%, to $69,133 for the three months ended June 30, 2021 from $46,428 for the three months ended June 30, 2020. The increase in operating revenues was primarily attributable to a 40.3% increase in drayage shipments over the same period in 2020 and an increase in accessorial revenues. The increase in drayage shipments was driven by the combination of the economic recovery from COVID-19, which adversely impacted the results of operations for the second quarter of 2020, and the Proficient Transport acquisition in February 2021.

Purchased Transportation

Intermodal purchased transportation increased $8,863, or 59.5%, to $23,767 for the three months ended June 30, 2021 from $14,904 for the three months ended June 30, 2020.   Purchased transportation was 34.4% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 32.1% for the same period in 2020.  Intermodal purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation as a percentage of revenues was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Salaries, Wages and Employee Benefits

Intermodal salaries, wages and employee benefits increased $4,502, or 38.4%, to $16,230 for the three months ended June 30, 2021 compared to $11,728 for the three months ended June 30, 2020.  Salaries, wages and employee benefits were 23.5% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 25.3% for the same period in 2020. The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in shipments in the second quarter of 2021 and an increased reserve for incentive compensation. Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.

Operating Leases

Intermodal operating leases increased $1,455, or 36.0%, to $5,500 for the three months ended June 30, 2021 compared to $4,045 for the three months ended June 30, 2020.  Operating leases were 8.0% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 8.7% for the same period in 2020. The increase in operating leases expense was primarily due to new trailer leases in 2021.

Depreciation and Amortization

Intermodal depreciation and amortization decreased $36, or 1.4%, to $2,612 for the three months ended June 30, 2021 from $2,648 for the three months ended June 30, 2020. Depreciation and amortization was 3.8% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 5.7% for the same period in 2020. The decrease in depreciation and amortization expense was primarily due to the full depreciation of equipment obtained through acquisitions in 2020, partially offset by the additional amortization expense resulting from the acquisition of Proficient Transport.

Insurance and Claims

Intermodal insurance and claims increased $566, or 31.6%, to $2,355 for the three months ended June 30, 2021 from $1,789 for the three months ended June 30, 2020.  Insurance and claims were 3.4% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 3.9% for the same period in 2020. The increase in insurance and claims expense was primarily due to an increase in vehicle insurance premiums. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations section below.

Fuel Expense

Intermodal fuel expense increased $799, or 71.8%, to $1,912 for the three months ended June 30, 2021 from $1,113 for the three months ended June 30, 2020.  Fuel expense was 2.8% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 2.4% for the same period in 2020.  Intermodal fuel expense increased due to increased mileage and the rise in the average price of fuel in the second quarter of 2021.

35

Other Operating Expenses

Intermodal other operating expenses increased $2,583, or 44.6%, to $8,371 for the three months ended June 30, 2021 from $5,788 for the three months ended June 30, 2020.  Other operating expenses were 12.1% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 12.5% for the same period in 2020.  The increase in Intermodal other operating expenses was primarily due to additional expenses to support the increased accessorial revenues noted above.
Income from Operations

Intermodal income from operations increased $3,973, or 90.0%, to $8,386 for the three months ended June 30, 2021 compared to $4,413 for the three months ended June 30, 2020.  Income from operations was 12.1% of Intermodal operating revenues for the three months ended June 30, 2021 compared to 9.5% for the same period in 2020.  The increase in income from operations as a percentage of operating revenues was driven by the operating leverage on fixed costs such as operating leases, depreciation and amortization.

Other Operations - Three Months Ended June 30, 2021 compared to Three Months Ended June 30, 2020

Other operations included an $950 operating loss during the three months ended June 30, 2021 compared to a $2,252 operating loss during the three months ended June 30, 2020. The change in the operating loss was driven by decreased self-insurance reserves for vehicle liability and workers’ compensation claims, partially offset by an accrual for an incentive program established in 2021 and increased reserves for group health insurance claims. The decrease in the self-insurance reserves for vehicle liability and workers’ compensation claims was due to the favorable loss development factor of historical claims attributable to the safety measures in place. In the second quarter of 2020, severance costs in the amount of $997 were recorded in accordance with severance agreements for former employees. Similar severance costs were not recorded in the second quarter of 2021.


Results from Operations
36

The following table sets forth our consolidated historical financial data from operations for the six months ended June 30, 2021 and 2020 (unaudited and in thousands):
Six Months Ended
June 30, 2021June 30, 2020ChangePercent Change
Operating revenues:
Expedited Freight$655,921 $489,287 $166,634 34.1 %
Intermodal127,647 98,888 28,759 29.1 
Eliminations and other operations(695)(940)245 (26.1)
Operating revenues782,873 587,235 195,638 33.3 
Operating expenses:
Purchased transportation399,825 292,667 107,158 36.6 
Salaries, wages, and employee benefits159,538 133,331 26,207 19.7 
Operating leases39,537 35,271 4,266 12.1 
Depreciation and amortization18,651 18,747 (96)(0.5)
Insurance and claims20,632 17,766 2,866 16.1 
Fuel expense7,761 6,532 1,229 18.8 
Other operating expenses72,081 53,234 18,847 35.4 
Total operating expenses718,025 557,548 160,477 28.8 
Income (loss) from continuing operations:
Expedited Freight59,218 26,933 32,285 119.9 
Intermodal12,895 8,126 4,769 58.7 
Other Operations(7,265)(5,372)(1,893)35.2 
Income from continuing operations64,848 29,687 35,161 118.4 
Other expense:
Interest expense(2,488)(2,051)(437)21.3 
Total other expense(2,488)(2,051)(437)21.3 
Income from continuing operations before income taxes62,360 27,636 34,724 125.6 
Income tax expense14,969 6,995 7,974 114.0 
Net income from continuing operations47,391 20,641 26,750 129.6 
Loss from discontinued operation, net of tax(5,533)(9,112)3,579 (39.3)
Net income and comprehensive income$41,858 $11,529 $30,329 263.1 %


37

Revenues

Operating revenues increased $195,638, or 33.3% to $782,873 for the six months ended June 30, 2021 compared to $587,235 for the six months ended June 30, 2020. The increase was primarily driven by our Expedited Freight segment of $166,634 due to increased Network, Truckload and Final Mile.


Operating Expenses
Operating expenses increased $160,477, or 28.8%, to $718,025 for the six months ended June 30, 2021 compared to $557,548 for the six months ended June 30, 2020. The increase was primarily driven by a purchased transportation increase of $107,158 in our Expedited Freight and Intermodal segments. Purchased transportation includes Leased Capacity Providers and third party carriers.
Income from Continuing Operations and Segment Operations

Income from continuing operations increased $35,161, or 118.4%, to $64,848 for the six months ended June 30, 2021 compared to $29,687 for the six months ended June 30, 2020. The increase was primarily driven by increases at our Expedited Freight segment and Intermodal segment of $32,285 and $4,769, respectively. The results for our two reportable segments are discussed in detail in the following sections.

Interest Expense

Interest expense was $2,488 for the six months ended June 30, 2021 compared to $2,051 for the six months ended June 30, 2020. The increase in interest expense was attributable to additional outstanding borrowings under our revolving credit facility during the six months ended June 30, 2021.

Income Taxes on a Continuing Basis

The combined federal and state effective tax rate on a continuing basis for the six months ended June 30, 2021 was 24.0% compared to a rate of 25.3% for the six months ended June 30, 2020. The lower effective tax rate for the six months ended June 30, 2021 was primarily due to increased vesting of restricted shares as well as exercises of stock options in for the six months ended June 30, 2021 when compared to the same period in 2020.

Loss from Discontinued Operation, net of tax

Loss from discontinued operations, net of tax decreased $3,579 to a $5,533 loss for the six months ended June 30, 2021 from a $9,112 loss for the six months ended June 30, 2020. Loss from discontinued operation includes our Pool business and, as discussed above, the Pool business was sold on February 12, 2021. For the six months ended June 30, 2020, our Pool business was adversely impacted by COVID-19 as many of our customers were affected by retail mall closure in response to stay-at-home orders beginning in March 2020.

Net Income

As a result of the foregoing factors, net income increased by $30,329, or 263.1%, to $41,858 for the six months ended June 30, 2021 compared to $11,529 for the six months ended June 30, 2020.

38

Expedited Freight - Six Months Ended June 30, 2021 compared to Six Months Ended June 30, 2020

The following table sets forth the historical financial data of our Expedited Freight segment for the six months ended June 30, 2021 and 2020:
Expedited Freight Segment Information
(unaudited and in thousands)
Six Months Ended
 June 30, 2021Percent of RevenueJune 30, 2020Percent of RevenueChangePercent Change
Operating revenues:
Network 1
$388,715 59.3 %$286,182 58.5 %$102,533 35.8 %
Truckload109,348 16.7 89,384 18.3 19,964 22.3 
Final Mile132,139 20.1 101,229 20.7 30,910 30.5 
Other25,719 3.9 12,492 2.6 13,227 105.9 
Total operating revenues655,921 100.0 489,287 100.0 166,634 34.1 
Operating expenses:
Purchased transportation356,012 54.3 260,268 53.2 95,744 36.8 
Salaries, wages and employee benefits129,247 19.7 105,943 21.7 23,304 22.0 
Operating leases29,086 4.4 26,940 5.5 2,146 8.0 
Depreciation and amortization13,577 2.1 13,435 2.7 142 1.1 
Insurance and claims15,996 2.4 12,328 2.5 3,668 29.8 
Fuel expense4,140 0.6 3,550 0.7 590 16.6 
Other operating expenses48,645 7.4 39,890 8.2 8,755 21.9 
Total operating expenses596,703 91.0 462,354 94.5 134,349 29.1 
Income from operations$59,218 9.0 %$26,933 5.5 %$32,285 119.9 %
1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

39

Expedited Freight Operating Statistics
Six Months Ended
June 30, 2021June 30, 2020Percent Change
Business days127 128 (0.8)%
Tonnage 1,2
    Total pounds1,379,530 1,091,987 26.3 
    Pounds per day10,862 8,531 27.3 
Shipments 1,2
    Total shipments2,122 1,849 14.8 
    Shipments per day16.7 14.4 15.7 
Weight per shipment650 591 10.0 
Revenue per hundredweight 3
$28.12 $26.76 5.1 
Revenue per hundredweight, ex fuel 3
$24.29 $23.09 5.2 
Revenue per shipment 3
$183.39 $154.81 18.5 
Revenue per shipment, ex fuel 3
$158.47 $133.11 19.1 
Network revenue from door-to-door shipments as a percentage of network revenue 3,4
50.0 %46.9 %6.6 
1 In thousands
2 Excludes accessorial, Truckload and Final Mile products
3 Includes intercompany revenue between the Network and Truckload revenue streams
4 Door-to-door shipments include all shipments with a pickup and/or delivery

40

Operating Revenues
Expedited Freight operating revenues increased $166,634, or 34.1%, to $655,921 for the six months ended June 30, 2021 from $489,287 for the six months ended June 30, 2020. The increase was attributable to increased Network, Truckload and Final Mile revenue. Network revenue increased due to a 26.3% increase in tonnage, a 14.8% increase in shipments and a 10.0% increase in revenue per hundredweight as compared to the prior year. The increase in tonnage and shipments was primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations for the six months ended June 30, 2020. Strategic pricing initiatives and freight rationalization actions contributed to the increase in the revenue per hundredweight. Fuel surcharge revenue increased $12,788, or 31.9% as a result of the rise in fuel prices and increased tonnage. Truckload revenue increased $19,964 primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations for the six months ended June 30, 2020. Final Mile revenue increased $30,910 due to the combination of organic growth and the acquisition of CLW Delivery, Inc. (“CLW”) in October 2020. Other revenue, which includes warehousing and terminal handling, increased $13,227 due to the higher linehaul tonnage and shipment counts.

Purchased Transportation
Expedited Freight purchased transportation increased $95,744, or 36.8%, to $356,012 for the six months ended June 30, 2021 from $260,268 for the six months ended June 30, 2020. Purchased transportation was 54.3% of Expedited Freight operating revenue for the six months ended June 30, 2021 compared to 53.2% for the same period in 2020. Expedited Freight purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation as a percentage of revenues was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services. For the six months ended June 30, 2021, we purchased 63.8%, 32.6% and 3.6% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively. This compares to 70.4%, 24.8% and 4.8% in the same period in 2020.
Salaries, Wages, and Employee Benefits
Expedited Freight salaries, wages and employee benefits increased by $23,304, or 22.0%, to $129,247 for the six months ended June 30, 2021 from $105,943 for the six months ended June 30, 2020.  Salaries, wages and employee benefits were 19.7% of Expedited Freight operating revenues for the six months ended June 30, 2021 compared to 21.7% for the same period in 2020.  The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in tonnage and shipments in 2021, higher group health insurance premiums and an increased reserve for incentive compensation. Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.
Operating Leases
Expedited Freight operating leases increased $2,146, or 8.0%, to $29,086 for the six months ended June 30, 2021 from $26,940 for the six months ended June 30, 2020.  Operating leases were 4.4% of Expedited Freight operating revenues for the six months ended June 30, 2021 compared to 5.5% for the same period in 2020. The increase in operating leases expense was primarily due to higher facility and equipment lease expense in 2021, which is partially attributable to facility leases assumed in connection with the CLW and J&P acquisitions.
Depreciation and Amortization
Expedited Freight depreciation and amortization increased $142, or 1.1%, to $13,577 for the six months ended June 30, 2021 from $13,435 for the six months ended June 30, 2020.  Depreciation and amortization was 2.1% of Expedited Freight operating revenues for the six months ended June 30, 2021 compared to 2.7% for the same period in 2020. The increase in depreciation and amortization expense is primarily due to the additional amortization expense resulting from the acquisitions of CLW and J&P.


41

Insurance and Claims
Expedited Freight insurance and claims increased $3,668, or 29.8%, to $15,996 for the six months ended June 30, 2021 from $12,328 for the six months ended June 30, 2020.  Insurance and claims were 2.4% of Expedited Freight operating revenues for the six months ended June 30, 2021 compared to 2.5% for the same period in 2020. The increase in insurance and claims expense was primarily attributable to an increase in vehicle insurance premiums as well as additional vehicle liability and cargo claims. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations section below.
Fuel Expense
Expedited Freight fuel expense increased $590, or 16.6%, to $4,140 for the six months ended June 30, 2021 from $3,550 for the six months ended June 30, 2020.  Fuel expense was 0.6% of Expedited Freight operating revenues for the six months ended June 30, 2021 compared to 0.7% for the same period in 2020.  Expedited Freight fuel expense increased due to increased mileage and the rise in the average price of fuel for the six months ended June 30, 2021.
Other Operating Expenses
Expedited Freight other operating expenses increased $8,755, or 21.9%, to $48,645 for the six months ended June 30, 2021 from $39,890 for the six months ended June 30, 2020.  Other operating expenses were 7.4% of Expedited Freight operating revenues for the six months ended June 30, 2021 compared to 8.2% for the same period in 2020. The increase in other operating expenses was driven by an increase in equipment maintenance costs, terminal and office expenses, legal and professional fees, other over-the-road costs and parts for final mile installations. For the six months ended June 30, 2020, other operating expenses included a $2,702 gain from changes in the fair value of an earn-out liability due to the timing of expected new business wins. A similar gain was not recorded for the six months ended June 30, 2021.
Income from Operations
Expedited Freight income from operations increased $32,285, or 119.9%, to $59,218 for the six months ended June 30, 2021 compared to $26,933 for the six months ended June 30, 2020.  Income from operations was 9.0% of Expedited Freight operating revenues for six months ended June 30, 2021 compared to 5.5% for the same period in 2020. The increase in income from operations as a percentage of operating revenues was driven by increased revenue per hundredweight and higher number of shipments combine with cost-control measures and operational efficiencies, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.
Intermodal - Six Months Ended June 30, 2021 compared to Six Months Ended June 30, 2020

The following table sets forth the historical financial data of our Intermodal segment for the six months ended June 30, 2021 and 2020:

42

Intermodal Segment Information
(unaudited and in thousands)
Six Months Ended
 June 30, 2021Percent of RevenueJune 30, 2020Percent of RevenueChangePercent Change
Operating revenue$127,647 100.0 %$98,888 100.0 %$28,759 29.1 %
Operating expenses:
Purchased transportation44,370 34.8 33,070 33.4 11,300 34.2 
Salaries, wages and employee benefits30,293 23.7 24,658 24.9 5,635 22.9 
Operating leases10,337 8.1 8,473 8.6 1,864 22.0 
Depreciation and amortization5,048 4.0 5,269 5.3 (221)(4.2)
Insurance and claims4,757 3.7 3,762 3.8 995 26.4 
Fuel expense3,622 2.8 2,982 3.0 640 21.5 
Other operating expenses16,325 12.8 12,548 12.7 3,777 30.1 
Total operating expenses114,752 89.9 90,762 91.8 23,990 26.4 
Income from operations12,895 10.1 %$8,126 8.2 %$4,769 58.7 %

Intermodal Operating Statistics
Six Months Ended
June 30, 2021June 30, 2020Percent Change
Drayage shipments186,714 151,448 23.3 %
Drayage revenue per shipment$587 $553 6.1 %
Number of locations29 24 20.8 %

43

Operating Revenues

Intermodal operating revenues increased $28,759, or 29.1%, to $127,647 for the six months ended June 30, 2021 from $98,888 for the six months ended June 30, 2020. The increase in operating revenues was primarily attributable to a 23.3% increase in drayage shipments over the same period in 2020 and an increase in accessorial revenues. The increase in drayage shipments was driven by the combination of the economic recovery from COVID-19, which adversely impacted the results of operations for the six months ended June 30, 2020, and the Proficient Transport acquisition in February 2021.


Purchased Transportation

Intermodal purchased transportation increased $11,300, or 34.2%, to $44,370 for the six months ended June 30, 2021 from $33,070 for the six months ended June 30, 2020.  Purchased transportation was 34.8% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 33.4% for the same period in 2020.  Intermodal purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation as a percentage of revenues was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.


Salaries, Wages, and Employee Benefits

Intermodal salaries, wages and employee benefits increased $5,635, or 22.9%, to $30,293 for the six months ended June 30, 2021 compared to $24,658 for the six months ended June 30, 2020.  Salaries, wages and employee benefits were 23.7% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 24.9% for the same period in 2020.  The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in shipments for the six months ended June 30, 2021 and an increased reserve for incentive compensation. Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.

Operating Leases

Intermodal operating leases increased $1,864, or 22.0%, to $10,337 for the six months ended June 30, 2021 from $8,473 for the six months ended June 30, 2020.  Operating leases were 8.1% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 8.6% for the same period in 2020. The increase in operating leases expense was primarily due to new trailer leases in 2021.

Depreciation and Amortization

Intermodal depreciation and amortization decreased $221, or 4.2%, to $5,048 for the six months ended June 30, 2021 from $5,269 for the six months ended June 30, 2020.  Depreciation and amortization was 4.0% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 5.3% for the same period in 2020. The decrease in depreciation and amortization expense was primarily due to the full depreciation of equipment obtained through acquisitions in 2020, partially offset by additional amortization expense resulting from the acquisition of Proficient Transport.

Insurance and Claims

Intermodal insurance and claims increased $995, or 26.4%, to $4,757 for the six months ended June 30, 2021 from $3,762 for the six months ended June 30, 2020.   Insurance and claims were 3.7% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 3.8% for the same period in 2020. The increase in insurance and claims expense was primarily due to an increase in vehicle insurance premiums. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations section below.


44

Fuel Expense

Intermodal fuel expense increased $640, or 21.5%, to $3,622 for the six months ended June 30, 2021 from $2,982 for the six months ended June 30, 2020. Fuel expense was 2.8% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 3.0% for the same period in 2020.  Intermodal fuel expense increased due to increased mileage and the rise in the average price of fuel for the six months ended June 30, 2021.

Other Operating Expenses

Intermodal other operating expenses increased $3,777, or 30.1%, to $16,325 for the six months ended June 30, 2021 compared to $12,548 for the six months ended June 30, 2020.  Other operating expenses were 12.8% of Intermodal operating revenues for the six months ended June 30, 2021 compared to 12.7% from the same period in 2020. The increase in Intermodal other operating expenses was primarily due to additional expenses to support the increased accessorial revenues noted above.

Income from Operations

Intermodal income from operations increased by $4,769, or 58.7%, to $12,895 for the six months ended June 30, 2021 compared to $8,126 for the six months ended June 30, 2020.  Income from operations was 10.1% of Intermodal operating revenue for the six months ended June 30, 2021 compared to 8.2% for the same period in 2020. The increase in income from operations as a percentage of operating revenues was driven by the operating leverage on fixed costs such as operating leases, depreciation and amortization.

Other Operations - Six Months Ended June 30, 2021 compared to Nine Months Ended June 30, 2020

Other operating activity was a $7,265 operating loss during the six months ended June 30, 2021 and a $5,372 operating loss during the six months ended June 30, 2020. The change in the operating loss was driven by increased professional fees related to cybersecurity and shareholder engagement activities and accrual for an incentive program established in 2021, partially offset by decreased self-insurance reserves for vehicle liability, workers’ compensation and group health insurance claims. The decrease in the self-insurance reserves for vehicle liability and workers’ compensation claims was due to the favorable loss development factor of historical claims attributable to the safety measures in place. For the six months ended June 30, 2020, severance costs in the amount of $997 were recorded in accordance with severance agreements for former employees. Similar severance costs were not recorded for the six months ended June 30, 2021.


Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates estimates, including those related to allowance for doubtful accounts and revenue adjustments, deferred income taxes and uncertain tax positions, goodwill, other intangible and long-lived assets, and self-insurance loss reserves. Management bases these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions. A description of critical accounting policies and related judgments and estimates that affect the preparation of our Condensed Consolidated Financial Statements is set forth in our Annual Report on Form 10-K for the year-ended December 31, 2020.

Liquidity and Capital Resources
 
We have historically financed our working capital needs, including capital expenditures, with cash flows from operations and borrowings under our revolving credit facility. We believe that borrowings under our revolving credit facility, together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. In July 2021, we entered into the second amendment to our revolving credit facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available. In connection with the second amendment, we have replaced the London Interbank Offered Rate with the Bloomberg Short-Term Bank Yield Index rate as the reference rate in our revolving credit facility to calculate interest due to our lender. Additionally, under the second amendment, the credit facility may be increased by up to $75,000 to a maximum aggregate principal amount of $300,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to
45

increase their commitments or the addition of new lenders extending such commitments. As of June 30, 2021, we are in compliance with our financial convents contained in the revolving credit facility and expect to maintain such compliance. In the event that we encounter difficulties, our historical relationships with our lenders has been strong and we anticipate their continued long-term support of our business. Refer to Note 7, Indebtedness, to our Condensed Consolidated Financial Statements for additional information regarding our revolving credit facility.

Cash Flows

Continuing Operations

Net cash provided by continuing operating activities was $39,661 for the six months ended June 30, 2021 compared to $59,929 for the six months ended June 30, 2020. The decrease in the net cash provided by continuing operating activities was primarily due to the increase in the accounts receivable and other receivable balances. The accounts receivable balance changed due to the increase in operating revenues for the six months ended June 30, 2021. The other receivables balance changed as a result of the Transition Services Agreement entered into with the buyer of the Pool business. Under the Transition Services Agreement, we remit payments to outside vendors on behalf of the buyer for expenses incurred by the Pool business, up to a limit of $18,000, and we are reimbursed by the buyer within 60 days from the end of the month in which the payment is remitted.

Net cash used in continuing investing activities was $29,804 for the six months ended June 30, 2021 compared to $69,157 for the six months ended June 30, 2020. Capital expenditures for the first six months of 2021 were $8,575, which primarily related to an organic investment to expand the capacity of our national hub in Columbus, Ohio. Capital expenditures for the first six months of 2020 were $14,214, which primarily related to the organic investment to expand the capacity of our national hub in Columbus, Ohio. Continuing investing activities for the first six months of 2021 included the acquisition of Proficient Transport for $15,000 and J&P Hall Express Delivery for $7,543 while continuing investing activities for the first six months of 2020 included the acquisition of Linn Star Holdings, Inc., Linn Star Transfer, Inc. and Linn Star Logistics, LLC for $55,931.

Net cash provided by continuing financing activities was $733 for the six months ended June 30, 2021 compared to $25,395 for the six months ended June 30, 2020. The change in the net cash provided by continuing financing activities was primarily due to decreased proceeds from the revolving credit facility for the first six months of 2021, increased repurchases and retirement of common stock for the first six months of 2021, partially offset by the payment of the earn-out liability for the six months of 2020.

Discontinued Operation

Net cash used in discontinued operating activities was $6,902 for the six months ended June 30, 2021 compared to $4,672 for the six months ended June 30, 2020. The change in net cash used in discontinued operating activities was primarily related to a decrease in discontinued net income after consideration of non-cash items.

Net cash provided by discontinued investing activities was $8,020 for the six months ended June 30, 2021 compared to net cash used in discontinued investing activities was $635 for the six months ended June 30, 2020. The change in the net cash provided by discontinued investing activities was due to the proceeds of $8,000 received from the sale of the Pool business for the first six months of 2021.

Net cash used in discontinued financing activities was $1,118 for the six months ended June 30, 2021 compared to net cash provided by discontinued financing activities was $5,307 for the six months ended June 30, 2020. The change in the net cash used in discontinued financing activities was due to decreased contributions from the parent.

Share Repurchase Program

During the six months ended June 30, 2021 and 2020, we repurchased 366 and 268 shares of our common stock, respectively, for approximately $33,992 and $15,259, respectively, through open market transactions. 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 our Condensed Consolidated Balance Sheets.


46

Forward-Looking Statements

This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. In this Form 10-Q, forward-looking statements include, but are not limited to, any statements regarding the impact of the COVID-19 pandemic on our business, results of operations and financial condition, our pursuit of new revenue opportunities and steps to bolster our liquidity; any projections of earnings, revenues, dividends, or other financial items or methods of interpretation or measurement; any statements of plans, strategies, and objectives of management for future operations; any statements regarding the estimated earn-out from the sale of our Pool business; any statements regarding future performance; any statements regarding future insurance, claims and litigation and any associated estimates or projections; any statements concerning proposed or intended new services or developments and related integration costs; any statements regarding intended expansion through acquisition or greenfield start-ups; any statements regarding future economic conditions or performance based on our business strategy, including acquisitions; any statements related to the sufficiency of our credit facility; any statements related to our ESG and sustainability initiatives and operations; any statements regarding certain tax and accounting matters, including the impact on our financial statements; and any statements of belief and any statements of assumptions underlying any of the foregoing. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the impact of the COVID-19 pandemic on our business, results of operations and financial condition, the creditworthiness of our customers and their ability to pay for services rendered, more limited liquidity than expected which limits our ability to make key investments, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials, and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2020. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
47

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

For quantitative and qualitative disclosures about market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020. As of the second quarter 2021, there has been no material changes in our exposures to market risk.

Item 4.Controls and Procedures.

Disclosure Controls and Procedures

We maintain controls and procedures designed to ensure that we are able to collect the information required to be disclosed in the reports we file with the Securities and Exchange Commission (“SEC”), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report conducted by management, with the participation of the Chief Executive Officer and Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer believe that these controls and procedures are effective to ensure that we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II.Other Information
  
Item 1.Legal Proceedings.

From time to time, we are a party to ordinary, routine litigation incidental to and arising in the normal course of our business, most of which involve claims for personal injury and property damage related to the transportation and handling of freight, or workers’ compensation. We accrue 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, we believe the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our business, financial condition or results of operations. Moreover, the results of complex legal proceedings are difficult to predict, and our view of these matters may change in the future as the litigation and related events unfold.

48


Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The table below sets forth information with respect to purchases of our common stock made by or on behalf of us during the three months ended June 30, 2021:
PeriodTotal Number of Shares PurchasedAverage Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1
April 1, 2021 through
April 30, 2021
— $— — 3,254,695 
May 1, 2021 through
May 31, 2021
115,625 95.15 115,625 3,139,070 
June 1, 2021 through
June 30, 2021
137,064 94.79 137,064 3,002,006 
Total252,689 $94.96 252,689 3,002,006 
1On February 5, 2019, our Board of Directors approved the 2019 Repurchase Plan authorizing up to 5.0 million shares of our common stock. The 2019 Share Repurchase Plan expires when the shares authorized for repurchase are exhausted or the 2019 Repurchase Plan is canceled.

Item 3.Defaults Upon Senior Securities.

Not applicable.
Item 4.Mine Safety Disclosures.

Not applicable.



Item 5. Other Information.

Not applicable.





49

Item 6.Exhibits.

In accordance with SEC Release No. 33-8212, Exhibit 32.1 is to be treated as “accompanying” this report rather than “filed” as part of the report.
 
No. Exhibit
3.1 
3.2 
10.1
10.2
10.3
31.1 
31.2 
32.1 
32.2 
101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema 
101.CAL XBRL Taxonomy Extension Calculation Linkbase 
101.DEF XBRL Taxonomy Extension Definition Linkbase 
101.LAB XBRL Taxonomy Extension Label Linkbase 
101.PRE XBRL Taxonomy Extension Presentation Linkbase 
104Cover Page Interactive File (formatted in Inline XBRL and contained in Exhibit 101).


50

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  Forward Air Corporation
Date: August 9, 2021By: /s/ Thomas Schmitt
  Thomas Schmitt
President and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)

  Forward Air Corporation
Date: August 9, 2021By: /s/ Rebecca J. Garbrick
  Rebecca J. Garbrick
Chief Financial Officer and Treasurer
(Principal Financial Officer and Duly Authorized Officer)



51