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Forward Air Corporation Reports First Quarter 2023 Results

Net income per diluted share of $1.37 exceeds guidance range

Record level quality of freight positions Forward well

Forward Air Corporation (NASDAQ:FWRD) (the “Company”, “we”, “our”, or “us”) today reported financial results for the three months ended March 31, 2023 as presented in the tables below.

Tom Schmitt, Chairman, President and CEO, commenting on first quarter results said, “Our reported net income per diluted share of $1.37 exceeded the high end of our $1.30 to $1.34 guidance range. Having said that, we would not have made guidance if not for a one-time benefit of approximately $0.24 from the substantial reversal of an accrual for an incentive plan established for employees in 2021. The reversal was driven by the headwinds we continue to experience from the weaker-than-expected freight environment. The softer than anticipated demand throughout the first quarter resulted in a 9% decline in revenue, below the low end of our guidance range of minus 4% to plus 2%.”

Mr. Schmitt continued, “Looking ahead, we believe our revenue growth strategies position the company to perform extremely well as the freight recession abates. Our revenue quality continues to improve notwithstanding a decline in revenue. Compared to our performance in a robust freight environment in March 2022, our revenue per ton mile excluding fuel increased 2.5% for airport-to-airport and 4% for door-to-door. Similarly, our freight quality remains at top levels. Our weight per shipment in March of 786 pounds is comparable to March of last year and roughly 140 pounds higher than it was in March 2021. Our linehaul network continues to operate efficiently with our outside miles at 5% - in record low territory. Still, we are not there yet. On a year over year basis, we saw pounds per day down 12% in the first quarter and that softness persisted in the first few weeks of April. However, we may be seeing the beginnings of an improving freight environment, as our tonnage per day edged up to minus 5% in the most recent weeks. Even with some early signs of a recovery, we believe the current freight environment will be more challenging than anticipated leading to a revised target net income per diluted share for 2023 that we now expect will be less than 2022. In light of this, at this point, we are targeting net income per diluted share of $6.20 to $6.60 for the full year 2023, which assumes that the freight environment will significantly improve in the second half of the year. These updated targets align with the updated revenue growth and cost savings bridge that we reviewed on our previous earnings call.”

In closing, Mr. Schmitt said, “In the first quarter, our teammates and independent contractors went above and beyond to keep our commitments to our customers. We are proud to be the best in the LTL industry in damage-free, intact, on-time shipments - making us the most compelling choice for customers with shipments of consequence.”

Regarding the Company’s second quarter 2023 guidance, Rebecca J. Garbrick, CFO, said, “We expect our year-over-year revenue to decline 7% to 17% and net income per diluted share in the range of $1.28 to $1.32, compared to reported net income per diluted share of $2.04 in the second quarter of 2022.”

 

 

Three Months Ended

(in thousands, except per share data)

 

March 31, 2023

 

March 31, 2022

 

Change

 

Percent Change

Operating revenue

 

$

427,066

 

 

$

466,961

 

 

$

(39,895

)

 

(8.5

)%

Income from operations

 

$

50,509

 

 

$

57,351

 

 

$

(6,842

)

 

(11.9

)%

Operating margin

 

 

11.8

%

 

 

12.3

%

 

(50) bps

Net income

 

$

36,368

 

 

$

42,686

 

 

$

(6,318

)

 

(14.8

)%

Net income per diluted share

 

$

1.37

 

 

$

1.57

 

 

$

(0.20

)

 

(12.7

)%

Cash provided by operating activities

 

$

65,993

 

 

 

62,486

 

 

$

3,507

 

 

5.6

%

 

 

 

 

 

 

 

 

 

Non-GAAP Financial Measures: 1

 

 

 

 

 

 

 

 

EBITDA

 

$

64,144

 

 

$

68,481

 

 

$

(4,337

)

 

(6.3

)%

Free cash flow

 

$

61,019

 

 

$

53,089

 

 

$

7,930

 

 

14.9

%

 

 

 

 

 

 

 

 

 

1 Reconciliation of these non-GAAP financial measures are provided below the financial tables.

On April 28, 2023, our Board of Directors declared a quarterly cash dividend of $0.24 per share of common stock. The dividend is payable to shareholders of record at the close of business on May 25, 2023 and is expected to be paid on June 13, 2023. This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.96 for the full year 2023, payable in quarterly increments of $0.24 per share of common stock. The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the Company’s financial performance and position.

Review of Financial Results

Forward Air will hold a conference call to discuss first quarter 2023 results on Tuesday, May 2, 2023 at 9:00 a.m. EDT. The Company’s conference call will be available online on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, or by dialing (877) 336-4435, Access Code: 2402511.

A replay of the conference call will be available on the Investor Relations portion of the Company’s website at www.forwardaircorp.com, which we use as a primary mechanism to communicate with our investors. Investors are urged to monitor the Investor Relations portion of the Company’s website to easily find or navigate to current and pertinent information about us.

About Forward Air Corporation

Forward Air is a leading asset-light provider of transportation services across the United States, Canada and Mexico. We provide expedited less-than-truckload (“LTL”) services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals. In addition, we offer final mile services, including delivery of heavy-bulky freight, truckload brokerage services, including dedicated fleet services; and intermodal, first-and last-mile, high-value drayage services, both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services. We are more than a transportation company. Forward is a single resource for your shipping needs. For more information, visit our website at www.forwardaircorp.com.

Forward Air Corporation

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, in thousands, except per share data)

 

 

 

 

 

Three Months Ended

 

March 31,

2023

 

March 31,

2022

Operating revenue:

 

 

 

Expedited Freight

$

338,934

 

 

$

376,591

 

Intermodal

 

88,169

 

 

 

90,440

 

Eliminations and other operations

 

(37

)

 

 

(70

)

Operating revenues

 

427,066

 

 

 

466,961

 

Operating expenses:

 

 

 

Purchased transportation

 

185,217

 

 

 

224,832

 

Salaries, wages and employee benefits

 

79,520

 

 

 

86,081

 

Operating leases

 

27,248

 

 

 

22,673

 

Depreciation and amortization

 

13,635

 

 

 

11,130

 

Insurance and claims

 

13,782

 

 

 

11,968

 

Fuel expense

 

5,784

 

 

 

5,865

 

Other operating expenses

 

51,371

 

 

 

47,061

 

Total operating expenses

 

376,557

 

 

 

409,610

 

Income (loss) from operations:

 

 

 

Expedited Freight

 

32,998

 

 

 

47,680

 

Intermodal

 

11,203

 

 

 

11,146

 

Other Operations

 

6,308

 

 

 

(1,475

)

Income from operations

 

50,509

 

 

 

57,351

 

Other expense:

 

 

 

Interest expense

 

(2,355

)

 

 

(784

)

Total other expense

 

(2,355

)

 

 

(784

)

Income before income taxes

 

48,154

 

 

 

56,567

 

Income tax expense

 

11,786

 

 

 

13,881

 

Net income and comprehensive income

$

36,368

 

 

$

42,686

 

 

 

 

 

Net income per share:

 

 

 

Basic

$

1.37

 

 

$

1.57

 

Diluted

$

1.37

 

 

$

1.57

 

 

 

 

 

Dividends per share:

$

0.24

 

 

$

0.24

 

 

 

 

 

 

 

 

 

Expedited Freight Segment Information

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

2023

 

Percent of

Revenue

 

March 31,

2022

 

Percent of

Revenue

 

Change

 

Percent Change

Operating revenue:

 

 

 

 

 

 

 

 

 

 

 

Network 1

$

205,931

 

60.8

%

 

$

233,700

 

62.1

%

 

$

(27,769

)

 

(11.9

)%

Truckload

 

41,744

 

12.3

 

 

 

55,908

 

14.8

 

 

$

(14,164

)

 

(25.3

)

Final Mile

 

69,357

 

20.5

 

 

 

65,758

 

17.5

 

 

$

3,599

 

 

5.5

 

Other

 

21,902

 

6.5

 

 

 

21,225

 

5.6

 

 

$

677

 

 

3.2

 

Total operating revenue

 

338,934

 

100.0

 

 

 

376,591

 

100.0

 

 

$

(37,657

)

 

(10.0

)

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation

 

165,240

 

48.8

 

 

 

200,034

 

53.1

 

 

$

(34,794

)

 

(17.4

)

Salaries, wages and employee benefits

 

68,791

 

20.3

 

 

 

68,220

 

18.1

 

 

$

571

 

 

0.8

 

Operating leases

 

18,913

 

5.6

 

 

 

15,731

 

4.2

 

 

$

3,182

 

 

20.2

 

Depreciation and amortization

 

8,889

 

2.6

 

 

 

7,481

 

2.0

 

 

$

1,408

 

 

18.8

 

Insurance and claims

 

9,743

 

2.9

 

 

 

8,751

 

2.3

 

 

$

992

 

 

11.3

 

Fuel expense

 

2,611

 

0.8

 

 

 

2,650

 

0.7

 

 

$

(39

)

 

(1.5

)

Other operating expenses

 

31,749

 

9.4

 

 

 

26,044

 

6.9

 

 

$

5,705

 

 

21.9

 

Total operating expenses

 

305,936

 

90.3

 

 

 

328,911

 

87.3

 

 

$

(22,975

)

 

(7.0

)

Income from operations

$

32,998

 

9.7

%

 

$

47,680

 

12.7

%

 

$

(14,682

)

 

(30.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

1Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

Expedited Freight Operating Statistics

 

 

 

Three Months Ended

 

March 31,

2023

 

March 31,

2022

 

Percent Change

 

 

 

 

 

 

Business days

 

64

 

 

64

 

%

 

 

 

 

 

 

Tonnage 1,2

 

 

 

 

 

Total pounds

 

629,080

 

 

717,611

 

(12.3

)

Pounds per day

 

9,829

 

 

11,213

 

(12.3

)

 

 

 

 

 

 

Shipments 1,2

 

 

 

 

 

Total shipments

 

817

 

 

892

 

(8.4

)

Shipments per day

 

12.8

 

 

13.9

 

(7.9

)

 

 

 

 

 

 

Weight per shipment

 

770

 

 

804

 

(4.2

)

 

 

 

 

 

 

Revenue per hundredweight 3

$

33.36

 

$

32.84

 

1.6

 

Revenue per hundredweight, ex fuel 3

$

25.75

 

$

25.92

 

(0.7

)

 

 

 

 

 

 

Revenue per shipment 3

$

256.89

 

$

264.17

 

(2.8

)

Revenue per shipment, ex fuel 3

$

198.30

 

$

208.55

 

(4.9

)

 

 

 

 

 

 

1 In thousands

2 Excludes accessorial, Truckload and Final Mile products

3 Includes intercompany revenue between the Network and Truckload revenue streams

Intermodal Segment Information

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31,

2023

 

Percent of

Revenue

 

March 31,

2022

 

Percent of

Revenue

 

Change

 

Percent Change

Operating revenue

$

88,169

 

100.0

%

 

90,440

 

100.0

%

 

(2,271

)

 

(2.5

) %

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased transportation

 

20,014

 

22.7

 

 

24,868

 

27.5

 

 

(4,854

)

 

(19.5

)

Salaries, wages and employee benefits

 

18,914

 

21.5

 

 

17,935

 

19.8

 

 

979

 

 

5.5

 

Operating leases

 

8,335

 

9.5

 

 

6,941

 

7.7

 

 

1,394

 

 

20.1

 

Depreciation and amortization

 

4,746

 

5.4

 

 

3,610

 

4.0

 

 

1,136

 

 

31.5

 

Insurance and claims

 

2,349

 

2.7

 

 

2,060

 

2.3

 

 

289

 

 

14.0

 

Fuel expense

 

3,173

 

3.6

 

 

3,215

 

3.6

 

 

(42

)

 

(1.3

)

Other operating expenses

 

19,435

 

22.0

 

 

20,665

 

22.8

 

 

(1,230

)

 

(6.0

)

Total operating expenses

 

76,966

 

87.3

 

 

79,294

 

87.7

 

 

(2,328

)

 

(2.9

)

Income from operations

 

11,203

 

12.7

%

 

11,146

 

12.3

%

 

57

 

 

0.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Intermodal Operating Statistics

 

 

 

Three Months Ended

 

March 31,

2023

 

March 31,

2022

 

Percent Change

Drayage shipments

72,465

 

88,312

 

(17.9)%

Drayage revenue per shipment

1,100

 

890

 

23.6%

Forward Air Corporation

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

March 31,

2023

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

32,028

 

$

45,822

Accounts receivable, net

 

201,385

 

 

221,028

Other receivables, net

 

 

 

Other current assets

 

24,381

 

 

37,465

Total current assets

 

257,794

 

 

304,315

 

 

 

 

Property and equipment, net

 

252,932

 

 

249,080

Operating lease right-of-use assets

 

150,282

 

 

141,865

Goodwill

 

356,627

 

 

306,184

Other acquired intangibles, net

 

155,726

 

 

154,801

Other assets

 

53,205

 

 

51,831

Total assets

$

1,226,566

 

$

1,208,076

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

42,994

 

$

54,601

Accrued expenses

 

52,807

 

 

54,291

Other current liabilities

 

6,207

 

 

3,956

Current portion of debt and finance lease obligations

 

11,619

 

 

9,444

Current portion of operating lease liabilities

 

52,143

 

 

47,106

Total current liabilities

 

165,770

 

 

169,398

 

 

 

 

Finance lease obligations, less current portion

 

18,328

 

 

15,844

Long-term debt, less current portion and debt issuance costs

 

150,681

 

 

106,588

Operating lease liabilities, less current portion

 

102,697

 

 

98,865

Other long-term liabilities

 

50,507

 

 

59,044

Deferred income taxes

 

52,950

 

 

51,093

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Preferred stock

 

 

 

Common stock

 

261

 

 

265

Additional paid-in capital

 

274,007

 

 

270,855

Retained earnings

 

411,365

 

 

436,124

Total shareholders’ equity

 

685,633

 

 

707,244

Total liabilities and shareholders’ equity

$

1,226,566

 

$

1,208,076

Forward Air Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Three Months Ended

 

March 31,

2023

 

March 31,

2022

Operating activities:

 

 

 

Net income from operations

$

36,368

 

 

$

42,686

 

Adjustments to reconcile net income of operations to net cash provided by operating activities of operations

 

 

 

Depreciation and amortization

 

13,635

 

 

 

11,130

 

Change in fair value of earn-out liability

 

 

 

 

(294

)

Share-based compensation expense

 

3,149

 

 

 

2,761

 

Provision for revenue adjustments

 

2,157

 

 

 

1,304

 

Deferred income tax expense

 

1,857

 

 

 

1,643

 

Other

 

(300

)

 

 

132

 

Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:

 

 

 

Accounts receivable

 

16,669

 

 

 

(30,278

)

Other receivables

 

 

 

 

3,609

 

Other current and noncurrent assets

 

11,422

 

 

 

13,818

 

Accounts payable and accrued expenses

 

(18,964

)

 

 

15,975

 

Net cash provided by operating activities

 

65,993

 

 

 

62,486

 

 

 

 

 

Investing activities:

 

 

 

Proceeds from sale of property and equipment

 

1,815

 

 

 

511

 

Purchases of property and equipment

 

(6,789

)

 

 

(9,908

)

Purchases of a business, net of cash acquired

 

(56,567

)

 

 

 

Net cash used in investing activities

 

(61,541

)

 

 

(9,397

)

 

 

 

 

Financing activities:

 

 

 

Repayments of finance lease obligations

 

(2,118

)

 

 

(1,070

)

Proceeds from revolving credit facility

 

45,000

 

 

 

 

Payments on credit facility

 

 

 

 

(375

)

Proceeds from issuance of common stock upon stock option exercises

 

 

 

 

206

 

Payments of dividends to shareholders

 

(6,345

)

 

 

(6,502

)

Repurchases and retirement of common stock

 

(50,491

)

 

 

(17,780

)

Payment of minimum tax withholdings on share-based awards

 

(4,292

)

 

 

(3,254

)

Net cash used in financing activities

 

(18,246

)

 

 

(28,775

)

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(13,794

)

 

 

24,314

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

45,822

 

 

 

37,316

 

Cash and cash equivalents at end of period

$

32,028

 

 

$

61,630

 

 

 

 

 

Forward Air Corporation Reconciliation of Non-GAAP Financial Measures

In this press release, the Company uses non-GAAP financial measures that are derived on the basis of methodologies other than in accordance with GAAP. The Company believes that meaningful analysis of its financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions as well as evaluating the Company’s performance.

For the three months ended March 31, 2023 and 2022, this press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”) and free cash flow.

The Company believes that EBITDA improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization) and tax impacts. The Company believes that free cash flow is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance shareholder value.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s financial results prepared in accordance with GAAP. Non-GAAP financial information does not represent a comprehensive basis of accounting. As required by the Securities and Exchange Act of 1933 and the rules and regulations promulgated thereunder, the Company has included, for the periods indicated, a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure.

The following is a reconciliation of net income to EBITDA for the three months ended March 31, 2023 and 2022 (in thousands):

 

 

Three Months Ended

 

 

March 31, 2023

 

March 31, 2022

Net income

 

$

36,368

 

$

42,686

Interest expense

 

 

2,355

 

 

784

Income tax expense

 

 

11,786

 

 

13,881

Depreciation and amortization

 

 

13,635

 

 

11,130

EBITDA

 

$

64,144

 

$

68,481

 

 

 

 

 

The following is a reconciliation of net cash provided by operating activities to free cash flow for the three months ended March 31, 2023 and 2022 (in thousands):

 

 

Three Months Ended

 

 

March 31, 2023

 

March 31, 2022

Net cash provided by operating activities

 

$

65,993

 

 

$

62,486

 

Proceeds from sale of property and equipment

 

 

1,815

 

 

 

511

 

Purchases of property and equipment

 

 

(6,789

)

 

 

(9,908

)

Free cash flow

 

$

61,019

 

 

$

53,089

 

The following information is provided to supplement this press release.

Actual

 

Three Months Ended

March 31, 2023

Net income

 

$

36,368

 

Income allocated to participating securities

 

 

(185

)

Numerator for diluted net income per share - net income

 

$

36,183

 

 

 

 

Weighted-average common shares and common share equivalent outstanding - diluted

 

 

26,479

 

Diluted net income per share

 

$

1.37

 

 

 

 

Projected

 

Full year 2023

Projected tax rate

 

 

25.7

%

 

 

 

Projected purchases of property and equipment, net of proceeds from sale of property and equipment

 

$

37,000

 

 

 

 

Projected

 

December 31, 2023

Projected weighted-average common shares and common share equivalent outstanding - diluted

 

 

26,000

 

Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements included in this press release relate to the expected performance of the Company as the freight recession recovers, freight environment, expectations regarding the Company's second quarter 2023 guidance, including with respect to revenue and net income per diluted share, the future declaration of dividends and, the quarterly and full year 2023 anticipated dividends per share.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. 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 COVID-19 pandemic, our ability to manage our growth and ability to grow, in part, through acquisitions, while being able to successfully integrate such acquisitions, our ability to secure terminal facilities in desirable locations at reasonable rates, more limited liquidity than expected which limits our ability to make key investments, the creditworthiness of our customers and their ability to pay for services rendered, 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, 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, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition, and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, seasonal trends, the occurrence of certain weather events, restrictions in our charter and bylaws and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

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