Forward Air Corporation Reports Third Quarter 2009 Results

Forward Air Corporation (NASDAQ:FWRD) today reported revenue, operating income, net income and diluted earnings per share for the third quarter and nine months ended September 30, 2009.

Operating revenue for the quarter ended September 30, 2009 decreased 15.1% to $103.1 million from $121.5 million for the same quarter in 2008. Income from operations was $6.7 million, compared with $19.3 million in the prior-year quarter. As a percent of operating revenue, income from operations decreased to 6.5% from 15.9% for the same quarter last year. Net income during the period was $3.8 million compared to $12.1 million in the prior-year quarter. Income per diluted share from operations for the third quarter of 2009 was $0.13 compared with $0.42 in the prior-year quarter.

Operating revenue for the nine months ended September 30, 2009 decreased 14.7% to $299.4 million from $351.0 million for the same period in 2008. Income from operations, which includes a first quarter non-cash, pre-tax charge of $7.2 million primarily for goodwill impairment related to the Company’s Forward Air Solutions segment, was $6.5 million, compared with $56.2 million in the prior-year period. Including the impact of the goodwill impairment, the Company’s net income for the nine months ended September 30, 2009, was $3.5 million, compared with $34.2 million in the prior-year period. Net income per diluted share for the first nine months of 2009 was $0.12 compared with $1.18 in the prior-year period.

“It came as no surprise that our results continued to be negatively impacted in the third quarter as a result of the global economic recession,” said Bruce A. Campbell, Chairman, President and CEO. “The pricing environment, which began to deteriorate late in the first quarter, has remained extremely challenging but has shown signs of stabilization. In key areas of our Forward Air, Inc. business segment we did have cause for some guarded optimism. The final weeks of the quarter saw a sequential firming up of our airport-to-airport network tonnage that has continued thus far into October. Within airport-to-airport our Forward Air Complete pick-up and delivery offering continued to gain traction. During the quarter an average of 14.4% of our linehaul shipments had a pick-up and or delivery attached compared to 9.4% in the third quarter of 2008. Lastly, our TLX truckload brokerage group which saw revenue declines in the second quarter appears to have curtailed that slide with September revenues coming in flat compared to last year.”

Commenting further, Mr. Campbell said, “The third quarter proved to be more challenging than originally anticipated for our Solutions business segment. After a tremendous amount of work getting the right cost structure as well as achieving new business wins, the peak retail season did not occur in September as forecasted by our customers. However, in the first weeks of October volumes would indicate the beginning of a somewhat normalized fourth quarter. Again we will monitor this trend with cautious optimism.”

Continuing, Mr. Campbell said, “Every day it seems some expert declares the recovery has begun. We see signs that are encouraging and we do feel the worst is over, but now is not the time to let down our guard. Our people will continue to vigilantly control costs ensuring our rapid return to the margins and returns that our shareholders have historically come to expect of Forward Air.”

In closing, Mr. Campbell said, “We are pleased to report that for a second consecutive year and for 10 of the past 11 years Forward Air has been named by Forbes magazine as one of the “200 Best Small Companies” in America. Congratulations and thank you to all of the Forward Air employees and independent contractors who made this honor possible.”

Commenting further on the quarter, Rodney L. Bell, Senior Vice President and CFO, said, “Cash flow from operations was $9.3 million for the quarter and $30.7 million year-to-date compared to $20.9 and $38.0 respectively for last year. We ended the period with just over $27 million in cash and $39.5 million available on our line of credit. With the completion of our Dallas facility in July we have no meaningful capital expenditure needs for the balance of 2009 and anticipate 2010 capital expenditures to be approximately $10 million providing ample free cash flow and flexibility.”

Commenting further, Mr. Bell said, “Assuming current trends remain stable, for the fourth quarter of 2009, we anticipate a year-over-year decline in revenue in the range of 10 to 15% and expect income per diluted share to be between $0.15 and $0.21 per share.”

Review of Financial Results

Forward Air will hold a conference call to discuss third quarter 2009 results on Thursday, October 22, 2009 at 10:00 a.m. EDT. The Company’s conference call will be available online at www.forwardair.com or by dialing 800-841-9385. A replay of the conference call will be available at www.forwardair.com beginning shortly after completion of the live call.

About Forward Air Corporation

Forward Air Corporation operates two business segments, Forward Air, Inc. and Forward Air Solutions, Inc.

Forward Air, Inc. is a high-service-level contractor to the air cargo industry providing time-definite ground transportation services through a network of 84 terminals located on or near major airports in the United States and Canada. It provides these services as a cost-effective alternative to air transportation of cargo that must be delivered at a specific time but is relatively less time-sensitive than traditional air freight or when air transportation is not economical.

Forward Air Solutions, Inc. is a provider of pool distribution services. Pool distribution involves the consolidation and shipment of several smaller less-than-truckload shipments to a common area or region. Once at the regional destination, the loads are deconsolidated, then grouped with other shipments with common delivery points, and delivered in a very precise, time-sensitive manner. Our pool distribution network consists of 19 terminals within the mid-Atlantic, Southeast, Midwest and Southwestern United States.

Forward Air Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
			Three months ended								Nine months ended
			September 30,				September 30,				September 30,				September 30,
			2009				2008				2009				2008
Operating revenue:
Forward Air
	Airport-to-airport		$	66,667			$	85,901			$	194,908			$	257,147
	Logistics			13,172				15,597				38,645				42,688
	Other			5,596				6,487				16,975				18,464
Forward Air Solutions
	Pool distribution			17,644				13,499				48,864				32,685
Total operating revenue				103,079				121,484				299,392				350,984
Operating expenses:
Purchased transportation
Forward Air
	Airport-to-airport			28,025				33,388				82,008				98,432
	Logistics			10,329				11,227				30,127				31,224
	Other			1,387				1,764				3,681				4,941
Forward Air Solutions
	Pool distribution			3,747				2,505				9,774				5,743
Total purchased transportation				43,488				48,884				125,590				140,340
Salaries, wages and employee benefits				28,591				28,504				86,834				84,355
Operating leases				6,631				6,183				20,440				16,918
Depreciation and amortization				5,006				4,134				14,687				11,830
Insurance and claims				2,045				1,816				6,984				5,690
Fuel expense				1,880				3,052				5,199				8,466
Other operating expenses				8,767				9,583				25,983				27,146
Impairment of goodwill and other intangible assets				--				--				7,157				--
Total operating expenses				96,408				102,156				292,874				294,745
Income from operations				6,671				19,328				6,518				56,239
Other (expense) income:
	Interest expense			(177	)			(210	)			(469	)			(839	)
	Other, net			51				115				50				325
Total other expense				(126	)			(95	)			(419	)			(514	)
Income before income taxes				6,545				19,233				6,099				55,725
Income taxes				2,766				7,136				2,581				21,519
Net income			$	3,779			$	12,097			$	3,518			$	34,206
Net income per share:
Basic			$	0.13			$	0.42			$	0.12			$	1.19
Diluted			$	0.13			$	0.42			$	0.12			$	1.18
Weighted average shares outstanding:
Basic				28,942				28,871				28,924				28,782
Diluted				29,026				29,139				28,978				29,067
Dividends per share:			$	0.07			$	0.07			$	0.21			$	0.21

Forward Air Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
			September 30,			December 31,
			2009			2008 (a)
Assets
Current assets:
	Cash		$	27,230		$	22,093
	Accounts receivable, net			52,993			57,206
	Other current assets			14,145			12,290
Total current assets				94,368			91,589
Property and equipment				203,383			186,377
Less accumulated depreciation and amortization				72,976			63,401
Total property and equipment, net				130,407			122,976
Goodwill and other acquired intangibles:
	Goodwill			43,332			50,230
	Other acquired intangibles, net			36,997			40,708
Total goodwill and other acquired intangibles				80,329			90,938
Other assets				1,582			2,024
Total assets			$	306,686		$	307,527
Liabilities and Shareholders’ Equity
Current liabilities:
	Accounts payable		$	8,509		$	11,633
	Accrued expenses			16,057			12,927
	Current portion of debt and capital lease obligations			1,072			1,602
Total current liabilities				25,638			26,162
Long-term debt and capital lease obligations, less current portion				52,404			53,035
Other long-term liabilities				3,749			3,055
Deferred income taxes				6,136			8,841
Shareholders’ equity:
	Common stock			289			289
	Additional paid-in capital			15,139			10,249
	Retained earnings			203,331			205,896
Total shareholders’ equity				218,759			216,434
Total liabilities and shareholders’ equity			$	306,686		$	307,527
(a) Taken from audited financial statements, which are not presented in their entirety.

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
				Three months ended
				September 30,				September 30,
				2009				2008
Operating activities:
Net income				$	3,779			$	12,097
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization				5,006				4,134
	Share-based compensation				1,607				1,451
	(Gain) loss on sale or disposal of property and equipment				(1	)			15
	Provision for loss on receivables				217				131
	Provision for revenue adjustments				548				1,369
	Deferred income taxes				(466	)			(793	)
	Tax benefit for stock options exercised				(1	)			(69	)
	Changes in operating assets and liabilities:
		Accounts receivable			(3,721	)			2,209
		Prepaid expenses and other current assets			382				439
		Accounts payable and accrued expenses			1,962				(116	)
Net cash provided by operating activities					9,312				20,867
Investing activities:
Proceeds from disposal of property and equipment					14				13
Purchases of property and equipment					(3,803	)			(7,325	)
Acquisition of businesses					--				(10,653	)
Other					49				(74	)
Net cash used in investing activities					(3,740	)			(18,039	)
Financing activities:
Payments of debt and capital lease obligations					(390	)			(302	)
Borrowings on line of credit					--				15,000
Payments on line of credit					--				--
Proceeds from exercise of stock options					8				947
Payments of cash dividends					(2,028	)			(2,026	)
Common stock issued under employee stock purchase plan					--				--
Cash settlement of share-based awards for minimum tax withholdings					(5	)			(7	)
Tax benefit for stock options exercised					1				69
Net cash (used in) provided by financing activities					(2,414	)			13,681
Net increase in cash					3,158				16,509
Cash at beginning of period					24,072				1,082
Cash at end of period				$	27,230			$	17,591

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
				Nine months ended
				September 30,				September 30,
				2009				2008
Operating activities:
Net income				$	3,518			$	34,206
Adjustments to reconcile net income to net cash provided by operating activities
	Depreciation and amortization				14,687				11,830
	Impairment of goodwill and other intangible assets				7,157				--
	Share-based compensation				5,022				4,571
	(Gain) loss on sale or disposal of property and equipment				(13	)			36
	Provision for (recovery) loss on receivables				(74	)			245
	Provision for revenue adjustments				1,916				3,273
	Deferred income taxes				(3,009	)			635
	Tax benefit for stock options exercised				(1	)			(1,148	)
	Changes in operating assets and liabilities:
		Accounts receivable			2,370				(16,092	)
		Prepaid expenses and other current assets			(1,567	)			(1,932	)
		Accounts payable and accrued expenses			701				2,398
Net cash provided by operating activities					30,707				38,022
Investing activities:
Proceeds from disposal of property and equipment					231				46
Purchases of property and equipment					(18,828	)			(12,680	)
Acquisition of businesses					--				(29,299	)
Other					405				(167	)
Net cash used in investing activities					(18,192	)			(42,100	)
Financing activities:
Payments of debt and capital lease obligations					(1,163	)			(1,172	)
Borrowings on line of credit					--				45,000
Payments on line of credit					--				(25,000	)
Proceeds from exercise of stock options					8				3,085
Payments of cash dividends					(6,081	)			(6,062	)
Common stock issued under employee stock purchase plan					99				145
Repurchase of common stock					(242	)			--
Cash settlement of share-based awards for minimum tax withholdings					--				(384	)
Tax benefit for stock options exercised					1				1,148
Net cash (used in) provided by financing activities					(7,378	)			16,760
Net increase in cash					5,137				12,682
Cash at beginning of period					22,093				4,909
Cash at end of period				$	27,230			$	17,591

Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
		Three months ended
		September 30,				Percent of			September 30,				Percent of							Percent
		2009				Revenue			2008				Revenue			Change				Change
Operating revenue
Forward Air		$	85.7			83.1	%		$	108.6			89.4	%		$	(22.9	)		(21.1	)	%
FASI			17.8			17.3				13.6			11.2				4.2			30.9
Intercompany Eliminations			(0.4	)		(0.4	)			(0.7	)		(0.6	)			0.3			(42.9	)
Total			103.1			100.0				121.5			100.0				(18.4	)		(15.1	)
Purchased transportation
Forward Air			39.8			46.4				46.5			42.8				(6.7	)		(14.4	)
FASI			4.0			22.5				3.1			22.8				0.9			29.0
Intercompany Eliminations			(0.3	)		75.0				(0.7	)		100.0				0.4			(57.1	)
Total			43.5			42.2				48.9			40.2				(5.4	)		(11.0	)
Salaries, wages and employee benefits
Forward Air			20.6			24.0				23.0			21.2				(2.4	)		(10.4	)
FASI			8.0			44.9				5.5			40.5				2.5			45.5
Total			28.6			27.7				28.5			23.5				0.1			0.4
Operating leases
Forward Air			4.6			5.4				4.7			4.3				(0.1	)		(2.1	)
FASI			2.0			11.2				1.5			11.0				0.5			33.3
Total			6.6			6.4				6.2			5.1				0.4			6.5
Depreciation and amortization
Forward Air			4.1			4.8				3.6			3.3				0.5			13.9
FASI			0.9			5.1				0.5			3.7				0.4			80.0
Total			5.0			4.9				4.1			3.4				0.9			22.0
Insurance and claims
Forward Air			1.6			1.9				1.7			1.6				(0.1	)		(5.9	)
FASI			0.4			2.2				0.1			0.7				0.3			300.0
Total			2.0			1.9				1.8			1.5				0.2			11.1
Fuel expense
Forward Air			0.8			0.9				1.6			1.5				(0.8	)		(50.0	)
FASI			1.1			6.2				1.5			11.0				(0.4	)		(26.7	)
Total			1.9			1.8				3.1			2.5				(1.2	)		(38.7	)
Other operating expenses
Forward Air			7.0			8.2				8.2			7.5				(1.2	)		(14.6	)
FASI			1.9			10.7				1.4			10.3				0.5			35.7
Intercompany Eliminations			(0.1	)		25.0				--			--				(0.1	)		(100.0	)
Total			8.8			8.6				9.6			7.9				(0.8	)		(8.3	)
Income (loss) from operations
Forward Air			7.2			8.4				19.3			17.8				(12.1	)		(62.7	)
FASI			(0.5	)		(2.8	)			--			--				(0.5	)		(100.0	)
Total		$	6.7			6.5	%		$	19.3			15.9	%		$	(12.6	)		(65.3	)	%

Forward Air Corporation
Segment Information
(In millions)
(Unaudited)
		Nine months ended
		September 30,				Percent of			September 30,				Percent of							Percent
		2009				Revenue			2008				Revenue			Change				Change
Operating revenue
Forward Air		$	251.2			83.9	%		$	319.8			91.1	%		$	(68.6	)		(21.5	)	%
FASI			49.2			16.4				32.8			9.4				16.4			50.0
Intercompany Eliminations			(1.0	)		(0.3	)			(1.6	)		(0.5	)			0.6			(37.5	)
Total			299.4			100.0				351.0			100.0				(51.6	)		(14.7	)
Purchased transportation
Forward Air			116.1			46.2				134.6			42.1				(18.5	)		(13.7	)
FASI			10.4			21.1				7.3			22.3				3.1			42.5
Intercompany Eliminations			(0.9	)		90.0				(1.6	)		100.0				0.7			(43.8	)
Total			125.6			42.0				140.3			40.0				(14.7	)		(10.5	)
Salaries, wages and employee benefits
Forward Air			63.1			25.1				70.3			22.0				(7.2	)		(10.2	)
FASI			23.7			48.2				14.1			43.0				9.6			68.1
Total			86.8			29.0				84.4			24.1				2.4			2.8
Operating leases
Forward Air			14.1			5.6				13.6			4.2				0.5			3.7
FASI			6.3			12.8				3.3			10.0				3.0			90.9
Total			20.4			6.8				16.9			4.8				3.5			20.7
Depreciation and amortization
Forward Air			12.0			4.8				10.6			3.3				1.4			13.2
FASI			2.7			5.5				1.2			3.6				1.5			125.0
Total			14.7			4.9				11.8			3.4				2.9			24.6
Insurance and claims
Forward Air			5.6			2.2				5.1			1.6				0.5			9.8
FASI			1.4			2.8				0.6			1.8				0.8			133.3
Total			7.0			2.3				5.7			1.6				1.3			22.8
Fuel expense
Forward Air			2.3			0.9				4.8			1.5				(2.5	)		(52.1	)
FASI			2.9			5.9				3.7			11.3				(0.8	)		(21.6	)
Total			5.2			1.7				8.5			2.4				(3.3	)		(38.8	)
Other operating expenses
Forward Air			21.0			8.4				23.7			7.4				(2.7	)		(11.4	)
FASI			5.1			10.4				3.5			10.7				1.6			45.7
Intercompany Eliminations			(0.1	)		10.0				--			--				(0.1	)		(100.0	)
Total			26.0			8.7				27.2			7.7				(1.2	)		(4.4	)
Impairment of goodwill and other intangible assets
Forward Air			0.2			0.1				--			--				0.2			100.0
FASI			7.0			14.2				--			--				7.0			100.0
Total			7.2			2.4				--			--				7.2			100.0
Income (loss) from operations
Forward Air			16.8			6.7				57.1			17.9				(40.3	)		(70.6	)
FASI			(10.3	)		(20.9	)			(0.9	)		(2.7	)			(9.4	)		1,044.4
Total		$	6.5			2.2	%		$	56.2			16.0	%		$	(49.7	)		(88.4	)	%

Forward Air Corporation
Forward Air Inc. Operating Statistics
		Three months ended												Nine months ended
		September 30,				September 30,				Percent				September 30,				September 30,				Percent
		2009				2008				Change				2009				2008				Change
Operating ratio			91.6	%			82.2	%		(11.4	)	%			93.3	%			82.1	%		(13.6	)	%
Business days			64.0				64.0			--					191.0				192.0			(0.5	)
Business weeks			12.8				12.8			--					38.2				38.4			(0.5	)
Airport-to-airport:
Tonnage
Total pounds¹			357,768				441,269			(18.9	)				1,054,048				1,336,801			(21.2	)
Average weekly pounds¹			27,951				34,474			(18.9	)				27,593				34,813			(20.7	)
Linehaul shipments
Total linehaul			511,959				568,031			(9.9	)				1,529,233				1,746,828			(12.5	)
Average weekly			39,997				44,377			(9.9	)				40,032				45,490			(12.0	)
Forward Air Complete shipments			73,696				53,161			38.6					194,694				145,452			33.9
As a percentage of linehaul shipments			14.4	%			9.4	%		53.8					12.7	%			8.3	%		53.0
Average linehaul shipment size			699				777			(10.0	)				689				765			(9.9	)
Revenue per pound²
Linehaul yield			15.91				16.39			(2.4	)				16.14				16.56			(2.2	)
Fuel surcharge impact			0.93				2.15			(6.2	)				0.79				1.81			(5.3	)
Forward Air Complete impact			1.83				1.17			3.3					1.60				0.95			3.4
Total airport-to-airport yield			18.67				19.71			(5.3	)				18.53				19.32			(4.1	)
Logistics:
Miles
Owner operator¹			6,111				4,812			27.0					17,916				13,432			33.4
Third party¹			2,288				3,618			(36.8	)				6,709				11,055			(39.3	)
Total Miles			8,399				8,430			(0.4	)				24,625				24,487			0.6
Revenue per mile		$	1.58			$	1.80			(12.2	)			$	1.58			$	1.74			(9.2	)
Cost per mile		$	1.23			$	1.33			(7.5	)	%		$	1.22			$	1.25			(2.4	)	%
¹ - In thousands
² - In cents per pound; percentage change is expressed as a percent of total yield.

Important Information

This press release contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, our inability to maintain our historical growth rate because of a decreased volume of freight moving through our network or decreased average revenue per pound of freight moving through our network, increasing competition and pricing pressure, surplus inventories, loss of a major customer, the creditworthiness of our customers and their ability to pay for services rendered, our ability to secure terminal facilities in desirable locations at reasonable rates, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, claims for property damage, personal injuries or workers’ compensation, employment matters including rising health care costs, enforcement of and changes in governmental regulations, environmental and tax matters, the handling of hazardous materials, the availability and compensation of qualified independent owner-operators and freight handlers needed to serve our transportation needs and our inability to successfully integrate acquisitions. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.