UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended September 30, 2007
Commission
File No. 000-22490
FORWARD
AIR CORPORATION
(Exact
name of registrant as specified in its charter)
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Tennessee
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62-1120025
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(State
or other jurisdiction of incorporation)
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(I.R.S.
Employer Identification No.)
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430
Airport Road
Greeneville,
Tennessee
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37745
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (423)
636-7000
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 is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer x
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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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 October 29, 2007 was 29,008,593.
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Table
of Contents
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Forward
Air Corporation
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Page
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Number
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Part
I.
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Financial
Information
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Item
1.
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Financial
Statements (Unaudited)
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Condensed
Consolidated Balance Sheets - September 30, 2007 and December 31,
2006
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3
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Condensed
Consolidated Statements of Income - Three and nine months ended
September
30, 2007 and 2006
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4
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Condensed
Consolidated Statements of Cash Flows - Nine months ended September
30,
2007 and 2006
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5
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Notes
to Condensed Consolidated Financial Statements - September 30,
2007
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6
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Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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14
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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30
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Item
4.
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Controls
and Procedures
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30
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Part
II.
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Other
Information
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Item
1.
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Legal
Proceedings
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30
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Item
1A.
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Risk
Factors
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30
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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30
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Item
3.
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Defaults
Upon Senior Securities
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30
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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30
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Item
5.
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Other
Information
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30
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Item
6.
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Exhibits
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31
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Signatures
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32
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2
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Part
I.
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Financial
Information
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Item
1.
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Financial
Statements
(Unaudited)
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Forward
Air Corporation
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||||||||
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Condensed
Consolidated Balance Sheets
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||||||||
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(In
thousands, except share and per share data)
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||||||||
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(Unaudited)
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||||||||
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September
30,
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December
31,
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|||||||
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2007
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2006
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|||||||
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Assets
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||||||||
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Current
assets:
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||||||||
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Cash
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$ |
8,306
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$ |
8,231
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||||
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Short-term
investments
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10,600
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61,650
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||||||
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Accounts
receivable, less allowance of $1,094 in 2007 and $860 in
2006
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55,665
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48,486
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||||||
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Other
current assets
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6,073
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9,196
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||||||
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Total
current assets
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80,644
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127,563
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||||||
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Property
and equipment
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152,044
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101,190
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||||||
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Less
accumulated depreciation and amortization
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52,675
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47,875
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||||||
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Total
property and equipment, net
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99,369
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53,315
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Goodwill
and other acquired intangibles:
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Goodwill
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15,588
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15,588
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Other
acquired intangibles, net of accumulated amortization of $3,211
in 2007
and $2,019 in 2006
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18,925
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10,731
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||||||
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Total
goodwill and other acquired intangibles
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34,513
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26,319
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||||||
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Other
assets
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1,438
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5,817
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||||||
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Total
assets
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$ |
215,964
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$ |
213,014
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||||
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Liabilities
and Shareholders' Equity
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||||||||
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Current
liabilities:
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||||||||
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Accounts
payable
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$ |
9,689
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$ |
7,949
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||||
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Accrued
expenses
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10,780
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11,144
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||||||
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Current
portion of debt and capital lease obligations
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859
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40
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||||||
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Total
current liabilities
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21,328
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19,133
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Debt
and capital lease obligations, less current portion
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983
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796
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||||||
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Other
long-term liabilities
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3,370
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1,271
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Deferred
income taxes
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7,457
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6,587
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Shareholders'
equity:
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Preferred
stock
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--
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--
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||||||
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Common
stock, $0.01 par value:
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||||||||
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Authorized
shares - 50,000,000
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||||||||
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Issued
and outstanding shares - 29,483,257 in 2007 and 30,372,082 in
2006
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295
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304
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||||||
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Additional
paid-in capital
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1,896
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--
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||||||
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Retained
earnings
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180,635
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184,923
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||||||
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Total
shareholders' equity
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182,826
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185,227
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||||||
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Total
liabilities and shareholders' equity
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$ |
215,964
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$ |
213,014
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The
accompanying notes are an integral part of the financial
statements.
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||||||||
3
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Forward
Air Corporation
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||||||||||||||||
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Condensed
Consolidated Statements of Income
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(In
thousands, except per share data)
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||||||||||||||||
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(Unaudited)
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||||||||||||||||
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Three
Months Ended
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Nine
Months Ended
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September
30,
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September
30,
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September
30,
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September
30,
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|||||||||||||
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2007
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2006
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2007
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2006
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Operating
revenue:
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Forward
Air
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||||||||||||||||
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Airport-to-airport
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$ |
75,671
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$ |
77,220
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$ |
227,128
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$ |
223,118
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Logistics
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11,785
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8,236
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30,650
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21,964
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||||||||||||
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Other
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5,220
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4,985
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15,399
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14,468
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Forward
Air Solutions
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Pool
distribution
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5,070
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--
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5,070
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--
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||||||||||||
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Total
operating revenue
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97,746
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90,441
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278,247
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259,550
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||||||||||||
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Operating
expenses:
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||||||||||||||||
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Purchased
transportation
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||||||||||||||||
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Forward
Air
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||||||||||||||||
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Airport-to-airport
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29,779
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30,794
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90,049
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86,214
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Logistics
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9,255
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5,949
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23,551
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15,726
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Other
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1,530
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1,196
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4,303
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3,568
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||||||||||||
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Forward
Air Solutions
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Pool
distribution
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720
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--
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720
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--
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||||||||||||
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Total
purchased transportation
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41,284
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37,939
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118,623
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105,508
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||||||||||||
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Salaries,
wages and employee benefits
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22,026
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18,385
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61,004
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55,508
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||||||||||||
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Operating
leases
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4,474
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3,750
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12,091
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10,619
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||||||||||||
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Depreciation
and amortization
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2,855
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2,083
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7,729
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6,534
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||||||||||||
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Insurance
and claims
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1,649
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1,556
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5,251
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4,747
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||||||||||||
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Other
operating expenses
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8,554
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6,940
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22,492
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20,123
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||||||||||||
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Total
operating expenses
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80,842
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70,653
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227,190
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203,039
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||||||||||||
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Income
from operations
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16,904
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19,788
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51,057
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56,511
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||||||||||||
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Other
income (expense):
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||||||||||||||||
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Interest
expense
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(55 | ) | (17 | ) | (136 | ) | (58 | ) | ||||||||
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Other,
net
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304
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793
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1,525
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2,314
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||||||||||||
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Total
other income
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249
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776
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1,389
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2,256
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||||||||||||
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Income
before income taxes
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17,153
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20,564
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52,446
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58,767
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||||||||||||
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Income
taxes
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6,400
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7,839
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19,925
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22,013
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||||||||||||
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Net
income
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$ |
10,753
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$ |
12,725
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$ |
32,521
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$ |
36,754
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||||||||
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Net
income per share:
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||||||||||||||||
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Basic
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$ |
0.36
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$ |
0.41
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$ |
1.09
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$ |
1.18
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||||||||
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Diluted
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$ |
0.36
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$ |
0.41
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$ |
1.08
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$ |
1.16
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||||||||
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Dividends
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$ |
0.07
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$ |
0.07
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$ |
0.21
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$ |
0.21
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||||||||
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Weighted
average shares outstanding:
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||||||||||||||||
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Basic
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29,472
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30,863
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29,868
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31,247
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||||||||||||
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Diluted
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29,866
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31,235
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30,229
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31,704
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||||||||||||
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The
accompanying notes are an integral part of the financial
statements.
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||||||||||||||||
4
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Forward
Air Corporation
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||||||||
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Condensed
Consolidated Statements of Cash Flows
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||||||||
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(Unaudited,
in thousands)
|
||||||||
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Nine
Months Ended
|
||||||||
|
September
30,
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September
30,
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|||||||
|
2007
|
2006
|
|||||||
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Operating
activities:
|
||||||||
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Net
income
|
$ |
32,521
|
$ |
36,754
|
||||
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Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
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Depreciation
and amortization
|
7,729
|
6,534
|
||||||
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Share-based
compensation
|
2,429
|
923
|
||||||
|
Gain
on sale of property and equipment
|
(215 | ) | (143 | ) | ||||
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Provision
for (recovery) loss on receivables
|
(23 | ) |
134
|
|||||
|
Provision
for revenue adjustments
|
1,801
|
1,571
|
||||||
|
Deferred
income taxes
|
1,212
|
66
|
||||||
|
Tax
benefit of stock options exercised
|
(362 | ) | (1,549 | ) | ||||
|
Changes
in operating assets and liabilities, net of acquired assets and
liabilities:
|
||||||||
|
Accounts
receivable
|
(6,727 | ) | (9,153 | ) | ||||
|
Prepaid
expenses and other current assets
|
3,913
|
51
|
||||||
|
Accounts
payable and accrued expenses
|
1,478
|
2,985
|
||||||
|
Net
cash provided by operating activities
|
43,756
|
38,173
|
||||||
|
|
||||||||
|
Investing
activities:
|
||||||||
|
Proceeds
from disposal of property and equipment
|
327
|
3,275
|
||||||
|
Purchases
of property and equipment
|
(44,613 | ) | (9,914 | ) | ||||
|
Deposits
in escrow for construction of facilities
|
--
|
(4,793 | ) | |||||
|
Acquisition
of business, net of cash acquired
|
(12,983 | ) |
--
|
|||||
|
Proceeds
from sales or maturities of available-for-sale securities
|
133,310
|
193,905
|
||||||
|
Purchases
of available-for-sale securities
|
(82,260 | ) | (175,705 | ) | ||||
|
Other
|
(881 | ) |
42
|
|||||
|
Net
cash (used in) provided by investing activities
|
(7,100 | ) |
6,810
|
|||||
|
|
||||||||
|
Financing
activities:
|
||||||||
|
Payments
of debt and capital lease obligations
|
(207 | ) | (28 | ) | ||||
|
Payments
on line of credit
|
--
|
(1,504 | ) | |||||
|
Proceeds
from exercise of stock options
|
881
|
4,231
|
||||||
|
Payments
of cash dividends
|
(6,293 | ) | (6,548 | ) | ||||
|
Common
stock issued under employee stock purchase plan
|
138
|
115
|
||||||
|
Repurchase
of common stock
|
(31,220 | ) | (38,774 | ) | ||||
|
Cash
settlement of share-based awards for minimum tax
withholdings
|
(242 | ) |
--
|
|||||
|
Tax
benefit of stock options exercised
|
362
|
1,549
|
||||||
|
Net
cash used in financing activities
|
(36,581 | ) | (40,959 | ) | ||||
|
Net
increase in cash
|
75
|
4,024
|
||||||
|
Cash
at beginning of period
|
8,231
|
332
|
||||||
|
Cash
at end of period
|
$ |
8,306
|
$ |
4,356
|
||||
|
The
accompanying notes are an integral part of the financial
statements.
|
||||||||
5
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
(Unaudited,
in thousands, except share and per share data)
September
30, 2007
|
1.
|
Basis
of Presentation
|
The
Company’s services can be broadly classified into two principal
businesses: Forward Air, Inc. (Forward Air) and Forward Air
Solutions, Inc. (FASL). Through the Forward Air business the Company
is a leading provider of time-definite transportation and related logistic
services to the North American deferred air freight market and its activities
can be broadly classified into three categories of services. Forward
Air’s airport-to-airport service operates a comprehensive national network for
the time-definite surface transportation of deferred air freight. The
airport-to-airport service offers customers local pick-up and delivery and
scheduled surface transportation of cargo as a cost effective, reliable
alternative to air transportation. The Company’s logistics service
provides expedited truckload brokerage and dedicated fleet
services. The Company’s other services include shipment consolidation
and deconsolidation, warehousing, customs brokerage, and other
handling. Forward Air primarily provides its transportation services
through a network of terminals located at or near airports in the United
States
and Canada.
FASL
was
formed in July 2007 in conjunction with the Company’s acquisition of certain
asset and liabilities of USA Carriers, Inc (USAC). FASL provides pool
distribution services throughout the Southeast, Midwest and Southwest of
the
continental United States. 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
consolidated loads are then deconsolidated and delivered to their unique
destinations.
In
connection with the USAC acquisition, the Company reorganized its management
reporting structure along these lines of business. In accordance with Statement
of Financial Accounting Standards (“SFAS”) No. 131, Disclosures
about Segments of an Enterprise and Related Information (“SFAS 131”), the
Company has evaluated the segment reporting requirements and determined that
it
now has two reporting segments.
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles for interim financial information and with the instructions to
Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of
the information and notes required by United States generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the
three and nine months ended September 30, 2007 are not necessarily indicative
of
the results that may be expected for the year ending December 31, 2007. For
further information, refer to the consolidated financial statements and notes
thereto included in the Forward Air Corporation Annual Report on Form 10-K
for
the year ended December 31, 2006.
Further,
revenues and associated purchased transportation by service line have been
disclosed on the face of the Condensed Consolidated Statements of Income
and
reclassifications have been made to prior year revenue and purchased
transportation to conform with the 2007 presentation.
|
2.
|
Recent
Accounting
Pronouncements
|
During June
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (an
interpretation of FASB Statement No. 109) (“FIN 48”), which is
effective for fiscal years beginning after December 15, 2006. This
interpretation was issued to clarify the accounting for uncertainty in income
taxes recognized in the financial statements by prescribing a recognition
threshold and measurement attribute for the financial statement recognition
and
measurement of a tax position taken or expected to be taken in a tax return.
The
guidance prescribed in FIN 48 establishes a recognition threshold of more
likely
than not that a tax position will be sustained upon examination. The measurement
attribute of FIN 48 requires that a tax position be measured at the largest
amount of benefit that is greater than 50% likely of being realized upon
ultimate settlement. The Company adopted the provisions of FIN 48 on January
1,
2007. As a result of the implementation of FIN 48, the Company recognized
a
$1,397 increase in the liability for income tax contingencies, including
related
interest and penalties, which net of federal benefit of $420 was accounted
for
as a reduction to the January 1, 2007 balance of retained earnings. The
liability for income tax contingencies at January 1, 2007, net of federal
benefit, is $977 which represents tax positions where the realization of
the
ultimate benefit is uncertain and the disallowance of which would affect
the
Company’s annual effective income tax rate.
During
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements (“SFAS 157”), which is effective for fiscal years beginning
after November 15, 2007 with earlier adoption encouraged. SFAS 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. This Statement applies under other accounting pronouncements
that
require or permit fair value measurements, the FASB having previously concluded
in those accounting pronouncements that fair value is the relevant measurement
attribute. Accordingly,
6
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
2.
|
Recent
Accounting Pronouncements
(continued):
|
SFAS
157
does not require any new fair value measurements. However, the application
of
SFAS 157 could change current practice. The Company plans to adopt SFAS 157
on
January 1, 2008, but the implementation of SFAS 157 is not expected to have
a
significant impact on the Company's financial position or results of
operations.
During
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115 (“SFAS 159”), which permits entities to choose to measure
many financial instruments
and certain other items at fair value. The objective of SFAS 159 is to improve
financial reporting by providing entities with
the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex
hedge
accounting provisions. SFAS 159 is effective as of the beginning of an entity’s
first fiscal year that begins after November 15, 2007. The implementation
of
SFAS 159 is not expected to have a significant impact on the Company’s financial
position or results of operations.
|
3.
|
Comprehensive
Income
|
Comprehensive
income includes any changes in the equity of the Company from transactions
and
other events and circumstances from non-owner sources. Comprehensive income
for
the three and nine months ended September 30, 2007 was $10,753 and $32,521
respectively. Comprehensive income for the three and nine months ended September
30, 2006 was $12,725 and $36,754, respectively. In each case, comprehensive
income approximated net income.
|
4.
|
Share-Based
Payments
|
The
Company accounts for share-based payments using SFAS No. 123 (Revised 2004),
Share-Based Payment (“SFAS 123R”), and elected the modified prospective
transition method on January 1, 2006. SFAS 123R requires share-based payments
to
employees, including grants of stock options, non-vested shares of common
stock
and purchases under employee stock purchase plans, to be recognized in the
Company’s statements of income based on their fair values. On December 31,
2005, the Company’s Board of Directors accelerated the vesting of
all outstanding and unvested stock options awarded to employees, officers
and non-employee directors under the Company’s stock option award plans. The
primary purpose of the accelerated vesting of these options was to eliminate
future compensation expense that the Company would otherwise have recognized
in
its statement of income with respect to these unvested options upon the adoption
of SFAS 123R. As a result of the acceleration of the vesting of the Company’s
outstanding and unvested options in 2005, there was no additional compensation
expense recognized during the three and nine months ended September 30, 2007
and
2006 related to options granted prior to January 1, 2006.
Employee
Activity
The
Company’s general practice has been to make a single annual grant to key
employees and to generally make other grants only in connection with new
employment or promotions. During 2006, the Company issued non-vested
shares of common stock (“non-vested shares”) to key employees as the form of
share-based awards. However, in 2007 the Company elected to issue stock options
to key employees, as the Company believes stock options more closely link
long-term compensation with the long-term goals of the Company. Stock options
issued during the three and nine months ended September 30, 2007 expire seven
years from the grant date and vest ratably over a three-year period. The
share-based compensation for these stock options will be recognized, net
of
estimated forfeitures, ratably over the requisite service period, or vesting
period. Based on the Company’s historical experience, forfeitures have been
estimated. The Company used the Black-Scholes option-pricing model to estimate
the grant-date fair value of options granted during the three and nine months
ended September 30, 2007. The weighted-average fair values of options
granted during the three and nine months ended September 30, 2007 were $11.53
and $11.20, respectively, and were estimated using the following
weighted-average assumptions:
|
|
September
30, 2007
|
|||||||
|
Three
Months
Ended
|
Nine
Months Ended
|
|||||||
|
Expected
dividend yield
|
0.8 | % | 0.8 | % | ||||
|
Expected
stock price volatility
|
37.0 | % | 37.0 | % | ||||
|
Weighted
average risk-free interest rate
|
4.3 | % | 4.7 | % | ||||
|
Expected
life of options (years)
|
4.5
|
4.5
|
||||||
7
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
4.
|
Share-Based
Payments
(continued):
|
Share-based
compensation expense for options granted during the three and nine months
ended
September 30, 2007 was $448 and $1,170, respectively, and was recognized
in
salaries, wages and employee benefits. The total tax benefit related to the
share-based expense for these options was $170 and $445 for the three and
nine
months ended September 30, 2007, respectively. Total compensation cost, net
of
estimated forfeitures, related to the options not yet recognized in earnings
was
$4,326 at September 30, 2007. Total unrecognized compensation cost will be
adjusted for future changes in estimated forfeitures. The following tables
summarize the Company’s employee stock option activity and related information
for the three and nine months ended September 30, 2007:
|
|
Three
months ended September 30, 2007
|
|||||||||||||
|
Options
(000)
|
Weighted-Average
Exercise Price
|
Aggregate
Intrinsic Value (000)
|
Weighted-Average
Remaining Contractual Term
|
|||||||||||
|
Outstanding
at June 30, 2007
|
1,999
|
$ |
26
|
|
|
|||||||||
|
Granted
|
22
|
35
|
|
|
||||||||||
|
Exercised
|
(44 | ) |
20
|
|
|
|||||||||
|
Forfeited
|
--
|
--
|
|
|
||||||||||
|
Outstanding
at September 30, 2007
|
1,977
|
$ |
26
|
$ |
14,139
|
6.3
|
||||||||
|
Exercisable
at September 30, 2007
|
1,414
|
$ |
23
|
$ |
13,533
|
6.2
|
||||||||
|
|
Nine
months ended September 30, 2007
|
|||||||||||||
|
|
Options
(000)
|
Weighted-Average
Exercise Price
|
Aggregate
Intrinsic Value (000)
|
Weighted-Average
Remaining Contractual Term
|
||||||||||
|
Outstanding
at December 31, 2006
|
1,475
|
$ |
23
|
|
|
|||||||||
|
Granted
|
572
|
32
|
|
|
||||||||||
|
Exercised
|
(59 | ) |
20
|
|
|
|||||||||
|
Forfeited
|
(11 | ) |
30
|
|
|
|||||||||
|
Outstanding
at September 30, 2007
|
1,977
|
$ |
26
|
$ |
14,139
|
6.3
|
||||||||
|
Exercisable
at September 30, 2007
|
1,414
|
$ |
23
|
$ |
13,533
|
6.2
|
||||||||
Share-based
compensation expense of $321 and $918 for non-vested shares granted to employees
during 2006 was recognized in salaries, wages and employee benefits during
the
three and nine months ended September 30, 2007, respectively. The total tax
benefit related to this share-based expense was $122 and $349 for the three
and
nine months ended September 30, 2007, respectively. Share-based compensation
expense of $306 and $843 for non-vested shares granted to employees during
2006
was recognized in salaries, wages and employee benefits during the three
and
nine months ended September 30, 2006, respectively. The total tax benefit
related to this share-based expense was $117 and $316 for the three and nine
months ended September 30, 2006, respectively. Total compensation
cost, net of estimated forfeitures, related to the non-vested shares not
yet
recognized in earnings was $1,762 at September 30, 2007. Total unrecognized
compensation cost will be adjusted for future changes in estimated
forfeitures.
8
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
4.
|
Share-Based
Payments
(continued):
|
Under
the
2005 Employee Stock Purchase Plan (the “ESPP”), which has been approved by
shareholders, the Company is authorized to issue up to a remaining 474,030
shares of common stock to employees of the Company. These shares may be issued
at a price equal to 90% of the lesser of the market value on the first day
or
the last day of each six-month purchase period. Common stock purchases are
paid
for through periodic payroll deductions and/or up to two large lump sum
contributions. For the nine months ended September 30, 2007, participants
under
the plan purchased 5,049 shares at an average price of $27.32 per share.
For the
nine months ended September 30, 2006, participants under the plan purchased
3,529 shares at an average price of $32.58 per share. The weighted-average
fair
value of each purchase right under the ESPP granted for the nine months ended
September 30, 2007, which is equal to the discount from the market value
of the
common stock at the end of each six month purchase period, was $6.78 per
share. The weighted-average fair value of each purchase right under
the ESPP granted for the nine months ended September 30, 2006, was $8.15
per
share. Share-based compensation expense of $34 and $29 was recognized in
salaries, wages and employee benefits, during the nine months ended September
30, 2007 and 2006, respectively. The total tax benefit related to the
share-based expense was $13 and $11 for the nine months ended September 30,
2007
and 2006, respectively.
Non-Employee
Director Activity
On
May
22, 2007, the Company’s shareholders approved the Company’s Amended and Restated
Non-Employee Director Stock Plan (the “Amended Plan”). The Amended
Plan is designed to better enable the Company to attract and retain
well-qualified persons for service as directors of the Company. Under
the Amended Plan, on the first business day after each Annual Meeting of
Shareholders,
each non-employee director will automatically be granted an award (the “Annual
Grant”), in such form and size as the Board determines from year to
year. Unless otherwise determined by the Board, Annual Grants will
become vested and nonforfeitable one year after the date of grant so long
as the
non-employee director’s service with the Company does not earlier
terminate. Each director may elect to defer receipt of the shares
under a non-vested share award until the director terminates service on the
Board of Directors. If a director elects to defer receipt, the
Company will issue deferred stock units to the director, which do not represent
actual ownership in shares and the director will not have voting rights or
other
incidents of ownership until the shares are issued. However, the
Company will credit the director with dividend equivalent payments in the
form
of additional deferred stock units for each cash dividend payment made by
the
Company. After approval of the Amended Plan, 14,268 non-vested shares
and 4,756 deferred stock units were issued to the Company’s non-employee
directors with a weighted-average fair value of $33.64. The
share-based compensation for these awards are recognized, net of estimated
forfeitures, ratably over the requisite service period, or vesting period,
of
one year. Share-based compensation expense related to the Amended
Plan of $137 and $183 was recognized in salaries, wages and employee benefits
during the three and nine months ended September 30, 2007,
respectively. The total tax benefit related to the share-based
expense was $52 and $70 for the three and nine months ended September 30,
2007.
Total compensation cost, net of estimated forfeitures, related to the non-vested
shares and deferred stock units not yet recognized in earnings was $366 at
September 30, 2007. Total unrecognized compensation cost will be
adjusted for future changes in estimated forfeitures.
During
the three and nine months ended September 30, 2007 share-based compensation
expense of $39 and $121, respectively, was recognized in salaries, wages
and
employee benefits for non-vested shares granted to non-employees directors
since
May 2006 under the Company’s 2006 Non-Employee Director Stock Plan (the “2006
Plan”). The total tax benefit related to this share-based expense was $15 and
$46 for the three and nine months ended September 30, 2007, respectively.
During
the three and nine months ended September 30, 2006 share-based compensation
expense of $35 and $47, respectively, was recognized in salaries, wages and
employee benefits for non-vested shares granted to non-employee directors
under
the 2006 Plan. The total tax benefit related to this share-based expense
was $13
and $18 for the three and nine months ended September 30, 2006, respectively.
Total compensation cost, net of estimated forfeitures, related to these
non-vested shares granted to non-employee directors not yet recognized in
earnings was $261 at September 30, 2007. Total unrecognized compensation
cost
will be adjusted for future changes in estimated forfeitures.
In
addition to the above activity, each May from 1995 to 2005 options were granted
to the non-employee directors of the Company. The options have terms of
ten years and are fully exercisable. At September 30, 2007, 111,875 options
were
outstanding and will expire between July 2010 and May 2015. At September
30, 2007, the total aggregate intrinsic value of these options was $1,206
and
the weighted-average exercise price and remaining contractual term were $22
and
5.9 years, respectively.
9
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
4.
|
Share-Based
Payments (continued)
|
Dividends
Dividends
paid on non-vested shares that are subsequently forfeited prior to vesting
are
required by SFAS 123R to be recorded to expense instead of as a direct reduction
to retained earnings. SFAS 123R requires dividend forfeitures to be estimated.
Estimated dividend forfeitures recorded to share-based compensation during
the
three and nine months ended September 30, 2007 were $1 and $3, respectively.
Estimated dividend forfeitures recorded to share-based compensation during
the
three and nine months ended September 30, 2006 were $2 and $4.
|
5.
|
Net
Income Per Share
|
The
following table sets forth the computation of basic and diluted income per
share
(in thousands, except per share data):
|
|
Three
months ended
|
Nine
months ended
|
||||||||||||
|
|
September
30,
2007
|
September
30,
2006
|
September 30,
2007
|
September
30,
2006
|
||||||||||
|
Numerator:
|
|
|
|
|
||||||||||
|
Numerator
for basic and diluted net income per share - net income
|
$ |
10,753
|
$ |
12,725
|
$ |
32,521
|
$ |
36,754
|
||||||
|
Denominator:
|
||||||||||||||
|
Denominator
for basic net income per share - weighted- average shares
|
29,472
|
30,863
|
29,868
|
31,247
|
||||||||||
|
Effect
of dilutive stock options and non-vested shares
|
394
|
372
|
361
|
457
|
||||||||||
|
Denominator
for diluted net income per share - adjusted weighted-average
shares
|
29,866
|
31,235
|
30,229
|
31,704
|
||||||||||
|
Basic
net income per share
|
$ |
0.36
|
$ |
0.41
|
$ |
1.09
|
$ |
1.18
|
||||||
|
Diluted
net income per share
|
$ |
0.36
|
$ |
0.41
|
$ |
1.08
|
$ |
1.16
|
||||||
For
the
three months ended September 30, 2007 and 2006, the number of options and
non-vested shares that could potentially dilute net income per share in the
future, but that were not included in the computation of net income per diluted
share because to do so would have been anti-dilutive for the periods presented,
were approximately 134,697 and 129,100, respectively. For the nine
months ended September 30, 2007 and 2006 the number of options and non-vested
shares that could potentially dilute net income per share in the future,
but
that were not included in the computation of net income per diluted share
because to do so would have been anti-dilutive for the periods presented,
were
approximately 147,441 and 6,994, respectively.
|
6.
|
Property
|
In
June
2007 the Company completed the purchase of a new regional hub near Atlanta,
Georgia for $14,870. The deposit of $1,478 paid in September 2006, previously
included in noncurrent other assets, was applied to this purchase
price.
In
March
2007 the Company completed the purchase of a new terminal near Chicago, Illinois
for $22,312. The deposit of $3,316 paid in July 2006, previously included
in
noncurrent other assets, was applied to this purchase price.
In
addition, in February 2007, the Company acquired land near Dallas/Fort Worth,
Texas for $3,043 on which the Company plans to build a new regional hub
facility. The Company anticipates completion of this facility during
2008.
10
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
7.
|
Income
Taxes
|
The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, various states and Canada. 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 2003.
The
Company adopted the provisions of FIN 48 on January 1, 2007. As a result
of the
implementation of FIN 48, the Company recognized a $1,397 increase in the
liability for income tax contingencies, including related interest and
penalties, which net of federal benefit of $420 was accounted for as a reduction
to the January 1, 2007 balance of retained earnings. The liability for income
tax contingencies at January 1, 2007, net of federal benefit is $977, which
represents tax positions where the realization of the ultimate benefit is
uncertain and the disallowance of which would affect the Company’s annual
effective income tax rate.
The
Company recognizes interest accrued related to unrecognized tax benefits
in
interest expense and penalties in operating expenses. At January 1, 2007,
the
Company had accrued $181 and $196 for the potential payment of interest and
penalties, respectively. During the three and nine months ended
September 30, 2007, the company accrued an additional $25 and $73, respectively,
for potential interest and penalties. Also, the Company accrued $42 and $118
of
income tax expense for uncertain tax positions taken during the three and
nine
months ended September 30, 2007, respectively.
For
the
three and nine months ended September 30, 2007 and 2006, the effective income
tax rates varied from the statutory federal income tax rate of 35.0%, primarily
as a result of the effect of state income taxes, net of the federal benefit
and
permanent differences between book and tax net income.
|
8.
|
Shareholders'
Equity
|
During
the nine months ended September 30, 2007, three regular quarterly dividend
payments of $0.07 per share were declared on common stock outstanding on
August 30, 2007, May 25, 2007 and March 15, 2007. The quarterly dividends
were
paid on September 14, 2007, June 8, 2007 and March 30, 2007. During the nine
months ended September 30, 2006, three regular quarterly dividend payments
of
$0.07 per share were declared on common stock outstanding on August 25,
2006, May 26, 2006 and March 17, 2006. The quarterly dividends were paid
on
September 8, 2006, June 9, 2006 and March 31, 2006. The Company expects to
continue to pay regular quarterly cash dividends, though each subsequent
quarterly dividend is subject to review and approval by the Board of
Directors.
On
November 17, 2005, the Company announced that its Board of Directors approved
a
stock repurchase program for up to three million shares of common stock (the
“2005 Repurchase Plan”). In addition, on July 31, 2007, the Company’s Board of
Directors approved an additional stock repurchase program for up to two million
shares of the Company’s common stock. For the nine months ended September 30,
2007, the Company repurchased 979,500 shares of common stock under the 2005
Repurchase Plan for $31,220 or $31.87 per share. For the three and
nine months ended September 30, 2006, the Company repurchased 1,041,649 and
1,202,695 shares of common stock, respectively, under the 2005 Repurchase
Plan
for $33,003 or $31.68 per share and $38,774 or $32.24 per share, respectively.
As of September 30, 2007, 2,633,827 shares remain that may be repurchased
under
the Board of Director approved repurchase plans.
|
9.
|
Commitments
and Contingencies
|
The
primary claims in the Company’s business are workers’ compensation, property
damage, vehicle liability and medical benefits. Most of the Company’s insurance
coverage provides for self-insurance levels with primary and excess coverage
which management believes is sufficient to adequately protect the Company
from
catastrophic claims. In the opinion of management, adequate provision has
been
made for all incurred claims up to the self-insured limits, including provision
for estimated claims incurred but not reported.
The
Company estimates its self-insurance loss exposure by evaluating the merits
and
circumstances surrounding individual known claims, by performing hindsight
analysis to determine an estimate of probable losses on claims incurred but
not
reported, and through the use of actuarial calculations. Such losses could
be
realized immediately as the events underlying the claims have already occurred
as of the balance sheet dates.
11
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
9.
|
Commitments
and Contingencies
(continued)
|
Because
of the uncertainty of the ultimate resolution of outstanding claims, as well
as
uncertainty regarding claims incurred but not
reported, it is possible that management’s provision for these losses could
change materially in the near term. However, no estimate can currently be
made
of the range of additional loss that is at least reasonably
possible.
|
10.
|
Acquisition
|
On
July
30, 2007, the Company acquired certain assets and liabilities of USAC. The
purchased assets and liabilities and the results of operations of USAC have
been
included in the consolidated financial statements since July 30,
2007. USAC was a well-established transportation service provider
with 11 facilities that specialized in pool distribution services throughout
the
Southeast, Midwest and Southwest of the continental United
States. 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 consolidated loads are
then deconsolidated and delivered to their unique destinations. The
acquisition provides the opportunity for the Company to introduce new services
to new and existing customers and to drive efficiencies in existing
businesses.
|
At
|
||
|
July
30,
|
||
|
2007
|
||
|
Current
assets
|
$ |
2,260
|
|
Property
and equipment
|
3,425
|
|
|
Intangible
assets
|
8,705
|
|
|
Other
noncurrent assets
|
215
|
|
|
Total
assets acquired
|
14,605
|
|
|
Current
liabilities
|
408
|
|
|
Debt
|
1,214
|
|
|
Total
liabilities assumed
|
1,622
|
|
|
Net
assets acquired
|
$ |
12,983
|
Of
the
$8,705 in acquired intangible assets, $8,505 and $200 were preliminarily
assigned to customer lists and non-compete agreements, respectively. The
customer lists and non-compete agreements are being amortized on a straight-line
basis over 10 years. No pro forma disclosures have been included in
these financial statements as USAC was immaterial to the consolidated financial
statements taken as a whole.
|
11.
|
Segment
Reporting
|
The
Company’s services can be broadly classified into two principal
businesses: Forward Air and FASL. Through Forward Air, the
Company is a leading provider of time-definite transportation and related
logistic services to the North American deferred air freight
market. FASL was created in July 2007 in conjunction with the
Company’s USAC acquisition. FASL provides pool distribution services
throughout the Southeast, Midwest and Southwest of the continental United
States.
In
connection with the third quarter acquisition of certain assets and liabilities
of USAC, the Company reorganized its management reporting structure along
these
lines of business. In accordance with SFAS 131, the Company has evaluated
the
segment reporting requirements and determined that it now has two reporting
segments.
12
Forward
Air Corporation
Notes
to Condensed Consolidated Financial Statements
|
11.
|
Segment
Reporting
(continued):
|
The
following table summarizes information about net income and segment assets
used by the chief operating decision maker of the Company in making decisions
regarding allocation of assets and resources as of and for the three and
nine
months ended September
30, 2007. No segment information has been presented for the
three and nine months ended September 30, 2006 as FASL did not exist until
July
30, 2007 and all 2006 data would have been solely related to Forward
Air.
|
Three
months ending September 30, 2007
|
||||||||||||||
|
Forward
Air
|
FASL
|
Eliminations
|
Consolidated
|
|||||||||||
|
External
revenues
|
$ |
92,676
|
$ |
5,070
|
$ |
--
|
$ |
97,746
|
||||||
|
Intersegment
revenues
|
9
|
--
|
(9 | ) |
--
|
|||||||||
|
Depreciation
and amortization
|
2,594
|
261
|
--
|
2,855
|
||||||||||
|
Stock-based
compensation expense
|
943
|
3
|
--
|
946
|
||||||||||
|
Interest
expense
|
40
|
15
|
--
|
55
|
||||||||||
|
Interest
income
|
299
|
2
|
--
|
301
|
||||||||||
|
Income
tax expense
|
6,220
|
180
|
--
|
6,400
|
||||||||||
|
Net
income
|
10,475
|
278
|
--
|
10,753
|
||||||||||
|
Total
assets
|
213,342
|
15,615
|
(12,993 | ) |
215,964
|
|||||||||
|
Capital
expenditures
|
5,705
|
373
|
--
|
6,078
|
||||||||||
|
Nine
months ending September 30, 2007
|
||||||||||||||
|
Forward
Air
|
FASL
|
Eliminations
|
Consolidated
|
|||||||||||
|
External
revenues
|
$ |
273,177
|
$ |
5,070
|
$ |
--
|
$ |
278,247
|
||||||
|
Intersegment
revenues
|
9
|
--
|
(9 | ) |
--
|
|||||||||
|
Depreciation
and amortization
|
7,468
|
261
|
--
|
7,729
|
||||||||||
|
Stock-based
compensation expense
|
2,426
|
3
|
--
|
2,429
|
||||||||||
|
Interest
expense
|
121
|
15
|
--
|
136
|
||||||||||
|
Interest
income
|
1,523
|
2
|
--
|
1,525
|
||||||||||
|
Income
tax expense
|
19,745
|
180
|
--
|
19,925
|
||||||||||
|
Net
income
|
32,243
|
278
|
--
|
32,521
|
||||||||||
|
Total
assets
|
213,342
|
15,615
|
(12,993 | ) |
215,964
|
|||||||||
|
Capital
expenditures
|
44,240
|
373
|
--
|
44,613
|
||||||||||
|
12.
|
Subsequent
Event
|
On
October 10, 2007, the Company entered into a $100 million senior credit
facility. This new facility has a term of five years and includes an accordion
feature, which allows for an additional $50 million in borrowings on such
terms
and conditions as set forth in the Credit Agreement. The facility will replace
the Company's existing $20 million line of credit. The Company entered into
this
new, larger credit facility in order to fund potential acquisitions, the
repurchase of its common stock, and for financing other general business
purposes.
On
October 30, 2007 the Company’s Board of Directors declared a dividend payment
for $0.07 per share on common stock outstanding on November 30,
2007. The dividend will be paid on December 14, 2007.
On
October 30, 2007 the Company entered into a new employment agreement with
the
Chief Executive Officer and Chairman of the Board. The agreement
expires on December 31, 2010, but will automatically extend for additional
one
year terms unless either party provides written notice of non-renewal no
less
than six months prior to the expiration of the then-pending term.
In
addition, during October 2007, the Company repurchased 845,000 shares of
common
stock under Board of Director approved repurchase plans for $23,914 or $28.30
per share.
13
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Overview
and Executive Summary
Through
our Forward Air segment, we are a leading provider of time-definite surface
transportation and related logistics services to the North American deferred
air
freight market. We offer our customers local pick-up and delivery (Forward
Air
Complete™) and scheduled surface transportation of cargo as a cost-effective,
reliable alternative to air transportation. We transport cargo that must
be
delivered at a specific time, but is less time-sensitive than traditional
air
freight. This type of cargo is frequently referred to in the transportation
industry as deferred air freight. We operate through a network of 81 terminals
located on or near airports in the United States and Canada, including a
central
sorting facility in Columbus, Ohio and nine regional hubs serving key
markets. We
also
offer our customers an array of logistic and other services including:
expedited truckload brokerage (TLX); dedicated fleets; warehousing; customs
brokerage; and shipment consolidation, deconsolidation and
handling.
On
July
30, 2007, we acquired certain assets and liabilities of USAC for approximately
$13.0 million. The purchased assets and liabilities and the results
of operation of USAC have been included in our consolidated financial statements
since July 30, 2007. USAC was a well-established transportation
service provider with 11 facilities that specialized in pool distribution
services throughout the Southeast, Midwest and Southwest of the continental
United States. 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 consolidated loads are
then deconsolidated and delivered to their unique destinations. The
acquisition provides the opportunity for us to introduce new services to
new and
existing customers and to drive efficiencies in existing
businesses.
Our
operations, particularly our network of hubs and terminals, represent
substantial fixed costs. Consequently, our continued growth depends in
significant part on our ability to increase the amount and revenue per pound
of
the freight shipped through our network and to grow complimentary lines of
businesses, such as pool distribution and TLX, that will allow us to maintain
revenue growth in challenging shipping environments. In addition, a key factor
to success is our ability to efficiently manage our purchased transportation
costs through efficient use of our owner-operator fleet and more expensive
third-party transportation providers.
Trends
and Developments
During
the three months ended September 30, 2007 our logistics business continued
to
experience significant growth while revenues for our airport-to-airport service
decreased for the third quarter over prior year due to the continued challenging
market conditions. We are continuing our efforts to grow our business through
additional products so as to ensure revenue growth in any market conditions.
Through our strategic initiative “Completing the Model” we continue to develop
and implement complementary services to the airport-to-airport network, such
as
pick-up and delivery, truckload brokerage, value-added handling and airline
road
feeder services. Most significantly on July 30, 2007 through our
newly formed subsidiary, Forward Air Solutions Inc. (FASL), we acquired certain
asset and liabilities of USAC. Through this acquisition we now
provide pool distribution services throughout the Southeast, Midwest and
Southwest of the continental United States. Pool distribution
involves the consolidation and shipment of several smaller less than truckload
shipments to a common area or region. Once at a regional destination,
the consolidated loads are then deconsolidated and delivered to their unique
destinations. The acquisition provides us the opportunity to provide
an additional service to existing and new customers and an important operating
platform that will enable further expansion of the Forward Air Complete™ pick-up
and delivery product, TLX truckload brokerage and value-added handling
components of the “Completing the Model” strategic initiative.
Also,
during the three months ended September 30, 2007, we continued to experience
decreases in our operating income in total dollars and as a percentage of
operating revenue mainly driven by increased purchased transportation costs.
The
increased purchased transportation costs were primarily the product of changes
in our business mix due to the implementation of the “Completing the Model”
strategic initiatives and the weakness in our airport-to-airport
business.
In
February 2007, we purchased land in Dallas/Fort Worth, Texas for the
construction of a new regional hub. We also completed our purchase of a new
terminal near Chicago, Illinois and a new regional hub in Atlanta, Georgia
during March and June 2007, respectively. With these facilities we believe
we
will have room to grow our business in key gateway cities and to offer
additional services such as value-added handling.
14
Segments
Effective
July 30, 2007 in conjunction with FASL’s acquisition of certain assets and
liabilities of USAC, we restructured our organization into two segments:
Forward
Air and FASL. As the creation of the second segment was the result of
our July 2007 acquisition, no reclassification of prior year financial
information was necessary.
Our
Forward Air segment includes our pre-existing airport-to-airport and TLX
services as well as our other accessorial related services such as warehousing;
customs brokerage; and shipment consolidation, deconsolidation and handling
services.
Our
FASL
segment includes our pool distribution business and the related assets and
liabilities purchased from USAC.
Reclassifications
Effective
January 1, 2007 we reclassified certain 2006 revenue components of the Forward
Air segment between our three product lines to be consistent with current
year
classifications. Primarily, we reclassified Forward Air Complete
revenue from other revenue to airport-to-airport revenue as management views
Forward Air Complete as an extension of our airport-to-airport network. Also,
portions of the 2006 fuel surcharge were reclassified between airport-to-airport
and logistics revenue to be consistent with current year
presentation.
15
Results
of Operations
The
following table sets forth our historical financial data for operating revenue;
purchased transportation; salaries, wages and employee benefits; operating
leases; depreciation and amortization; insurance and claims; other operating
expenses; and income from operations for the three months ended September
30,
2007 and 2006 (in millions):
|
Percent
of
|
Percent
of
|
|||||||||||||||
|
2007
|
Revenue
|
2006
|
Revenue
|
|||||||||||||
|
Operating
Revenue
|
||||||||||||||||
|
Forward
Air
|
$ |
92.7
|
94.8 | % | $ |
90.4
|
100.0 | % | ||||||||
|
FASL
|
5.1
|
5.2
|
--
|
--
|
||||||||||||
|
Total
|
97.8
|
100.0
|
90.4
|
100.0
|
||||||||||||
|
Purchased
transportation
|
||||||||||||||||
|
Forward
Air
|
40.6
|
43.8
|
37.9
|
41.9
|
||||||||||||
|
FASL
|
0.7
|
13.7
|
--
|
--
|
||||||||||||
|
Total
|
41.3
|
42.2
|
37.9
|
41.9
|
||||||||||||
|
Salaries,
wages and employee benefits
|
||||||||||||||||
|
Forward
air
|
19.7
|
21.3
|
18.4
|
20.4
|
||||||||||||
|
FASL
|
2.3
|
45.1
|
--
|
--
|
||||||||||||
|
Total
|
22.0
|
22.5
|
18.4
|
20.4
|
||||||||||||
|
Operating
leases
|
||||||||||||||||
|
Forward
air
|
4.1
|
4.4
|
3.8
|
4.2
|
||||||||||||
|
FASL
|
0.4
|
7.8
|
--
|
--
|
||||||||||||
|
Total
|
4.5
|
4.6
|
3.8
|
4.2
|
||||||||||||
|
Depreciation
and amortization
|
||||||||||||||||
|
Forward
air
|
2.6
|
2.8
|
2.1
|
2.3
|
||||||||||||
|
FASL
|
0.3
|
5.9
|
--
|
--
|
||||||||||||
|
Total
|
2.9
|
3.0
|
2.1
|
2.3
|
||||||||||||
|
Insurance
and claims
|
||||||||||||||||
|
Forward
air
|
1.5
|
1.6
|
1.6
|
1.8
|
||||||||||||
|
FASL
|
0.1
|
2.0
|
--
|
--
|
||||||||||||
|
Total
|
1.6
|
1.6
|
1.6
|
1.8
|
||||||||||||
|
Other
operating expenses
|
||||||||||||||||
|
Forward
air
|
7.7
|
8.3
|
6.9
|
7.6
|
||||||||||||
|
FASL
|
0.9
|
17.6
|
--
|
--
|
||||||||||||
|
Total
|
8.6
|
8.8
|
6.9
|
7.6
|
||||||||||||
|
Income
from operations
|
||||||||||||||||
|
Forward
air
|
16.5
|
17.8
|
19.7
|
21.8
|
||||||||||||
|
FASL
|
0.4
|
7.8
|
--
|
--
|
||||||||||||
|
Total
|
$ |
16.9
|
17.3 | % | $ |
19.7
|
21.8 | % | ||||||||
16
The
following table shows the components of the Forward Air segment’s revenue and
purchased transportation for the three months ended September 30, 2007 and
2006:
|
Percent
of
|
Percent
of
|
|||||||||||||||
|
Forward
Air revenue
|
2007
|
Revenue
|
2006
|
Revenue
|
||||||||||||
|
Airport-to-airport
|
$ |
75.7
|
81.7 | % | $ |
77.2
|
85.4 | % | ||||||||
|
Logistics
|
11.8
|
12.7
|
8.2
|
9.1
|
||||||||||||
|
Other
|
5.2
|
5.6
|
5.0
|
5.5
|
||||||||||||
|
Total
|
92.7
|
100.0
|
90.4
|
100.0
|
||||||||||||
|
Forward Air purchased transportation
|
||||||||||||||||
|
Airport-to-airport
|
29.8
|
39.4
|
30.8
|
39.9
|
||||||||||||
|
Logistics
|
9.3
|
78.8
|
5.9
|
72.0
|
||||||||||||
|
Other
|
1.5
|
28.8
|
1.2
|
24.0
|
||||||||||||
|
Total
|
$ |
40.6
|
43.8 | % | $ |
37.9
|
41.9 | % | ||||||||
17
Three
Months Ended September 30, 2007 compared to Three Months Ended September
30,
2006:
Revenues
Operating
revenue increased by $7.4 million, or 8.2%, to $97.8 million in the third
quarter of 2007 from $90.4 million in the same period of 2006.
Forward
Air
Forward
Air operating revenue increased $2.3 million, or 2.5%, to $92.7 million from
$90.4 million, accounting for 94.8% of consolidated operating
revenue. Airport-to-airport revenue, which is the largest component
of our consolidated operating revenue, decreased $1.5 million, or 1.9%, to
$75.7
million from $77.2 million, accounting for 81.7% of the segment’s operating
revenue during the three months ended September 30, 2007 compared to 85.4%
for
the three months ended September 30, 2006. The decrease in airport-to-airport
revenue was driven by a decline in tonnage and minor decline in revenue per
pound. Our airport-to-airport business is priced on a per pound basis and
the
average revenue per pound, including the impact of fuel surcharges, decreased
0.3% for the three months ended September 30, 2007 versus the three months
ended
September 30, 2006. Tonnage that transited our network decreased by
approximately 1.8% in the three months ended September 30, 2007 compared
with
the three months ended September 30, 2006. We believe the decrease in tonnage
is
primarily the result of the continuing slowdown in shipping demand resulting
from the weak shipping environment. Average revenue per pound decreased as
a
result of increased pricing pressure during third quarter of 2007 resulting
from
the weak shipping environment. Decreases in revenue per pound, resulting
from
the weak shipping environment, were mostly offset by rate increases implemented
in March 2007.
Logistics
revenue, which is primarily truckload brokerage and priced on a per mile
basis,
increased $3.6 million, or 43.9%, to $11.8 million in the third quarter of
2007
from $8.2 million in the same period of 2006. The increase in
logistics revenue is mainly the result of our increased efforts as part of
our
“Completing the Model” strategic initiative to grow this product. We are placing
emphasis on capturing a larger percentage of truckload opportunities and
correspondingly increasing our access to sufficient truckload capacity through
the use of third-party transportation providers. During the three months
ended
September 30, 2007, we increased the number of miles driven to support our
logistics revenue by 69.0%. The average revenue per mile of our
logistics product, including the impact of fuel surcharges, decreased 15.3%
for
the three months ended September 30, 2007 versus the three months ended
September 30, 2006. The decrease in our revenue per mile is largely due to
the
weak shipping environment and the change in our business mix resulting from
our
efforts to capture additional truckload opportunities as well as utilizing
truckload opportunities to cost effectively position our owner-operators
within
our airport-to-airport network.
Other
revenue, which includes warehousing services and terminal handling and accounts
for the final component of Forward Air operating revenue, increased $0.2
million
to $5.2 million, a 4.0% increase from $5.0 million for the same period in
2006. The increase was primarily due to increased handling and
storage revenue due to new services offered through our newly expanded
facilities.
FASL
FASL
operating revenue of $5.1 million represents revenue earned through our new
pool
distribution service acquired with the USAC acquisition on July 30,
2007.
Purchased
Transportation
Purchased
transportation increased by $3.4 million, or 9.0%, to $41.3 million in the
third
quarter of 2007 from $37.9 million in the same period of 2006. As a
percentage of total operating revenue, purchased transportation was 42.2%
during
the three months ended September 30, 2007 compared to 41.9% for the same
period
in 2006.
Forward
Air
Forward
Air purchased transportation increased by $2.7 million, or 7.1%, to $40.6
million for the three months ended September 30, 2007 from $37.9 million
for the
three months ended September 30, 2006. The increase in purchased transportation
is primarily attributable to an increase of approximately 6.5% in miles in
addition to a 0.4% increase in the total cost per mile for the third quarter
of
2007 versus the same period in 2006. As a percentage of segment operating
revenue, Forward Air purchased transportation was 43.8% during the three
months
ended September 30, 2007 compared to 41.9% for the same period in
2006.
Purchased
transportation costs for our airport-to-airport network decreased $1.0 million,
or 3.2%, to $29.8 million for the three months ended September 30, 2007 from
$30.8 million for the three months ended September 30, 2006. For the three
months ended September 30, 2007, purchased transportation costs for our
airport-to-airport network decreased to 39.4% of airport-to-airport revenue
from
39.9% for the same period in 2006. The improvement in airport-to-airport
purchased transportation costs is a result of efforts to consolidate the
number
of loads carried which in turn reduced the number of miles driven to support
the
airport-to-airport network by approximately 3.5%. The reduction in
miles was slightly offset by a 0.2% increase in our cost per mile for the
airport-to-airport network. The increase in cost per mile is
attributable to increased customer utilization of Forward Air Complete, offset
by savings obtained from increased utilization of our owner operator fleet
instead of third party transportation providers, whose rate per mile is
generally more costly than that of our network of owner operators.
18
Purchased
transportation costs related to our logistics revenue increased $3.4
million, or 57.6%, to $9.3 million for the three months ended September 30,
2007
from $5.9 million for the three months ended September 30, 2006. For the
three
months ended September 30, 2007, logistics’ purchased transportation costs
represented 78.8% of logistics revenue versus 72.0% for the three months
ended
September 30, 2006. The increase in logistics purchased transportation costs
as
a percentage of revenue resulted from lower revenue per mile as discussed
above
partially offset by a decrease in our cost per mile. Logistics cost per mile
decreased due to increased capacity resulting in improved purchasing power
from
third party transportation providers.
Purchased
transportation costs related to our other revenue increased $0.3 million,
or
25.0%, to $1.5 million for the three months ended September 30, 2007 from
$1.2
million for the three months ended September 30, 2006. Other purchased
transportation costs as a percentage of other revenue increased to 28.8%
of
other revenue for the three months ended September 30, 2007 from 24.0% for
the
same period in 2006. The increase in other purchased
transportation is attributable to increased third party transportation services
associated with new value added handling services.
FASL
FASL
purchased transportation of $0.7 million represents costs associated with
payment of drivers, both networked owner operators and third party
transportation providers, for the transportation services provided to FASL.
FASL
purchased transportation was 13.7% of the segment’s operating
revenue.
Salaries,
Wages, and Benefits
Salaries,
wages and employee benefits increased by $3.6 million, or 19.6%, to $22.0
million in the third quarter of 2007 from $18.4 million in the same period
of
2006. As a percentage of total operating revenue, salaries, wages and
employee benefits was 22.5% during the three months ended September 30, 2007
compared to 20.4% for the same period in 2006.
Forward
Air
Salaries,
wages and employee benefits were 21.3% of Forward Air operating revenue in
the
third quarter of 2007 compared to 20.4% for the same period of 2006. The
increase in salaries, wages and employee benefits as a percentage of revenue
was
attributable to increased costs for share-based compensation, group health
care,
and workers compensation claims offset by decreased employee incentives.
Group
health care costs and workers’ compensation claims costs increased $0.3 million,
or 15.1%, and increased 0.3% as a percentage of Forward Air operating revenue,
due to increased high dollar claims incurred during the third quarter of
2007
compared to the same period of 2006. Also, there was a $0.6 million, or 0.6%
as
a percentage of Forward Air operating revenue, increase in share-based
compensation due to the issuance of stock options and non-vested shares of
common stock to key members of management and non-employee directors during
2007. Additionally, salaries, wages and benefits increased 0.3% as a percentage
of revenue, due to increased staffing as a result of our “Complete the Model”
initiatives. These increases were offset by employee incentives,
which decreased by $0.3 million, or 68.1%, and declined 0.3% as a percentage
of
Forward Air revenue due to shortfalls from our quarterly performance goals
reducing bonuses earned from the same period in 2006.
FASL
FASL
salary, wages and employee benefits of $2.3 million represents costs associated
with payment of employees, mainly company drivers and employees located at
our
terminals since our USAC acquisition on July 30, 2007. FASL
salary, wages and employee benefits were 45.1% of the segment’s operating
revenue.
Operating
Leases
Operating
leases increased by $0.7 million, or 18.4%, to $4.5 million in the third
quarter
of 2007 from $3.8 million in the same period of 2006. Operating
leases, the largest component of which is facility rent, were 4.6% of
consolidated operating revenue for the three months ended September 30, 2007
compared with 4.2% in the same period of 2006.
Forward
Air
Operating
leases were 4.4% of Forward Air operating revenue for the three months ended
September 30, 2007 compared with 4.2% in the same period of 2006. The
increase in operating leases in total dollars and as a percentage of operating
revenue between periods was attributable to higher rent costs associated
with
the expansion of certain facilities, offset by decreases in leases due to
the
opening of company-owned facilities.
19
FASL
FASL
operating leases of $0.4 million represents facility rent for FASL’s 11
facilities since our USAC acquisition on July 30, 2007. FASL
does not currently own any of its facilities. FASL operating leases
were 7.8% of the segment’s operating revenue.
Depreciation
and Amortization
Depreciation
and amortization increased $0.8 million, or 38.1%, to $2.9 million in the
third
quarter of 2007 from $2.1 million in the same period of
2006. Depreciation and amortization was 3.0% of consolidated
operating revenue for the three months ended September 30, 2007 compared
with
2.3% in the same period of 2006.
Forward
Air
Depreciation
and amortization expense as a percentage of Forward Air operating revenue
was
2.8% in the third quarter of 2007 compared to 2.3% in the same period of
2006.
The increase in depreciation and amortization expense is due to increased
depreciation related to our expanded national hub in Columbus, Ohio, our
new
terminals and regional hubs in Chicago Illinois and Atlanta, Georgia, the
implementation of our Terminal Automation Program (“TAP”) during the fourth
quarter of 2006, and new tractors and trailers purchased during the third
quarter of 2007 and the latter portion of 2006.
FASL
FASL
depreciation and amortization of $0.3 million represents $0.1 million of
depreciation on acquired equipment and $0.2 million of amortization on acquired
intangible assets since our USAC acquisition on July 30, 2007. FASL
depreciation and amortization expenses as a percentage of the segment’s
operating revenue was 5.9%
Insurance
and Claims
Insurance
and claims expense was $1.6 million in the third quarter of 2007 and
2006. Insurance and claims were 1.6% of consolidated operating
revenue in the third quarter of 2007 compared with 1.8% in the same period
of
2006.
Forward
Air
Insurance
and claims were 1.6% of Forward Air operating revenue in the third quarter
of
2007 compared to 1.8% for the same period of 2006. The $0.1 million,
or 6.3% decrease in insurance and claims for the third quarter of 2007 compared
to third quarter of 2006 is attributable to decreased vehicle claims and
associated legal fees offset by increased insurance premiums.
FASL
FASL
insurance and claims of $0.1 million represents the cost of insurance premiums
and accrued cargo claims since our USAC acquisition on July 30,
2007. FASL insurance and claims were 2.0% of the segment’s operating
revenue.
Other
Operating Expenses
Other
operating expenses increased $1.7 million, or 24.6%, to $8.6 million in the
third quarter of 2007 from $6.9 million in the same period of
2006. Other operating expenses were 8.8% of consolidated operating
revenue for the three months ended September 30, 2007 compared with 7.6%
in the
same period of 2006.
Forward
Air
Other
operating expenses were 8.3% of Forward Air operating revenue in the third
quarter of 2007 compared to 7.6% in the same period of 2006. The 0.7% increase
in other operating expenses as a percentage of Forward Air operating revenue
was
primarily attributable to taxes, utilities and permits associated with new
or
expanded facilities, specialized training for key employees, and additional
sales and marketing efforts due to the weak freight environment.
FASL
FASL
other operating expenses of $0.9 million represent costs such as routine
vehicle
maintenance, utilities for our facilities, and miscellaneous office and
administrative expenses since our USAC acquisition on July 30,
2007. FASL other operating expenses were 17.6% of the segment’s
operating revenue.
20
Income
from operations
Income
from operations decreased by $2.8 million, or 14.2%, to $16.9 million for
the
third quarter of 2007 compared with $19.7 million for the same period in
2006. Income from operations were 17.3% of consolidated operating
revenue for the three months ended September 30, 2007 compared with 21.8%
in the
same period of 2006.
Forward
Air
Income
from operations decreased by $3.2 million or 16.2%, to $16.5 million for
the
second quarter of 2007 compared with $19.7 million for the same period in
2006. Income from operations decreased as a percentage of Forward Air
operating revenue to 17.8% for the three months ended September 30, 2007
from
21.8% for the same period in 2006. The decrease in income from
operations was primarily a result of the change in our business mix resulting
from the decline in revenue from the airport-to-airport service and increase
in
revenue from less profitable services such as our truckload
service.
FASL
FASL
income from operations since our USAC acquisition on July 30, 2007 was $0.4
million, or 7.8% of FASL operating revenue.
Interest
Expense
Interest
expense for the three months ended September 30, 2007 and 2006 was less than
$0.1 million. For the third quarter of 2007, interest expense
included interest on our capital lease for the core hub facility in Columbus,
Ohio, plus interest on equipment notes assumed with the USAC
acquisition.
Other
Income, net
Other
income, net was $0.3 million, or 0.3% of consolidated operating revenue,
in the
third quarter of 2007 compared with $0.8 million, or 0.9%, for the same period
in 2006. The decrease in other income was attributable to lower interest
income
due to decreased average investment balances as a result of cash used for
stock
repurchases during the first half of 2007, the purchase of real property
for
regional hubs and terminals, and the USAC acquisition.
Provision
for Income Taxes
The
combined federal and state effective tax rate for the third quarter of 2007
was
37.3% compared to a rate of 38.1% for the same period in
2006. The decrease in the effective tax rate was the result of us determining
during the third quarter of 2007 that we were eligible to receive federal
tax
credits as an alternative fuel user.
Net
Income
As
a
result of the foregoing factors, net income decreased by $1.9 million, or
15.0%,
to $10.8 million for the third quarter of 2007 compared to $12.7 million
for the
same period in 2006.
21
The
following table sets forth our historical financial data for operating revenue;
purchased transportation; salaries, wages and employee benefits; operating
leases; depreciation and amortization; insurance and claims; other operating
expenses; and income from operations for the nine months ended September
30,
2007 and 2006 (in millions):
|
Percent
of
|
Percent
of
|
|||||||||||||||
|
2007
|
Revenue
|
2006
|
Revenue
|
|||||||||||||
|
Operating
Revenue
|
||||||||||||||||
|
Forward
Air
|
$ |
273.2
|
98.2 | % | $ |
259.5
|
100.0 | % | ||||||||
|
FASL
|
5.1
|
1.8
|
--
|
--
|
||||||||||||
|
Total
|
278.3
|
100.0
|
259.5
|
100.0
|
||||||||||||
|
Purchased
transportation
|
||||||||||||||||
|
Forward
Air
|
117.9
|
43.2
|
105.5
|
40.7
|
||||||||||||
|
FASL
|
0.7
|
13.7
|
--
|
--
|
||||||||||||
|
Total
|
118.6
|
42.6
|
105.5
|
40.7
|
||||||||||||
|
Salaries,
wages and employee benefits
|
||||||||||||||||
|
Forward
air
|
58.7
|
21.5
|
55.5
|
21.4
|
||||||||||||
|
FASL
|
2.3
|
45.1
|
--
|
--
|
||||||||||||
|
Total
|
61.0
|
21.9
|
55.5
|
21.4
|
||||||||||||
|
Operating
leases
|
||||||||||||||||
|
Forward
air
|
11.7
|
4.3
|
10.6
|
4.1
|
||||||||||||
|
FASL
|
0.4
|
7.8
|
--
|
--
|
||||||||||||
|
Total
|
12.1
|
4.3
|
10.6
|
4.1
|
||||||||||||
|
Depreciation
and amortization
|
||||||||||||||||
|
Forward
air
|
7.4
|
2.7
|
6.5
|
2.5
|
||||||||||||
|
FASL
|
0.3
|
5.9
|
--
|
--
|
||||||||||||
|
Total
|
7.7
|
2.8
|
6.5
|
2.5
|
||||||||||||
|
Insurance
and claims
|
||||||||||||||||
|
Forward
air
|
5.2
|
1.9
|
4.8
|
1.8
|
||||||||||||
|
FASL
|
0.1
|
2.0
|
--
|
--
|
||||||||||||
|
Total
|
5.3
|
1.9
|
4.8
|
1.8
|
||||||||||||
|
Other
operating expenses
|
||||||||||||||||
|
Forward
air
|
21.6
|
7.9
|
20.1
|
7.7
|
||||||||||||
|
FASL
|
0.9
|
17.6
|
--
|
--
|
||||||||||||
|
Total
|
22.5
|
8.1
|
20.1
|
7.7
|
||||||||||||
|
Income
from operations
|
||||||||||||||||
|
Forward
air
|
50.7
|
18.6
|
56.5
|
21.8
|
||||||||||||
|
FASL
|
0.4
|
7.8
|
--
|
--
|
||||||||||||
|
Total
|
$ |
51.1
|
18.4 | % | $ |
56.5
|
21.8 | % | ||||||||
22
The
following table shows the components of the Forward Air segment’s revenue and
purchased transportation for the three months ended September 30, 2007 and
2006:
|
Percent
of
|
Percent
of
|
|||||||||||||||
|
Forward
Air revenue
|
2007
|
Revenue
|
2006
|
Revenue
|
||||||||||||
|
Airport-to-airport
|
$ |
227.1
|
83.2 | % | $ |
223.1
|
86.0 | % | ||||||||
|
Logistics
|
30.7
|
11.2
|
21.9
|
8.4
|
||||||||||||
|
Other
|
15.4
|
5.6
|
14.5
|
5.6
|
||||||||||||
|
Total
|
273.2
|
100.0
|
259.5
|
100.0
|
||||||||||||
|
Forward
Air purchased transportation
|
||||||||||||||||
|
Airport-to-airport
|
90.0
|
39.6
|
86.2
|
38.6
|
||||||||||||
|
Logistics
|
23.6
|
76.9
|
15.7
|
71.7
|
||||||||||||
|
Other
|
4.3
|
27.9
|
3.6
|
24.8
|
||||||||||||
|
Total
|
$ |
117.9
|
43.2 | % | $ |
105.5
|
40.7 | % | ||||||||
23
Nine
Months Ended September 30, 2007 compared to Nine Months Ended September 30,
2006:
Revenues
Operating
revenue increased by $18.8 million, or 7.2%, to $278.3 million for the nine
months ended September 30, 2007 from $259.5 million in the same period of
2006.
Forward
Air
Forward
Air operating revenue increased $13.7 million, or 5.3%, to $273.2 million
from
$259.5 million, accounting for 98.2% of consolidated operating
revenue. Airport-to-airport revenue, which is the largest component
of our consolidated operating revenue, increased $4.0 million, or 1.8%, to
$227.1 million from $223.1 million, accounting for 83.2% of Forward Air’s
operating revenue during the nine months ended September 30, 2007 compared
to
86.0% for the nine months ended September 30, 2006. The increase in
airport-to-airport revenue was driven by an increase in tonnage and an increase
in our rate per pound. Our airport-to-airport business is priced on a per
pound
basis and the average revenue per pound, including the impact of fuel
surcharges, increased 1.5% for the nine months ended September 30, 2007 versus
the nine months ended September 30, 2006. Tonnage that transited our network
increased by approximately 0.3% in the nine months ended September 30, 2007
compared with the nine months ended September 30, 2006. The tonnage increase
was
driven by new airport-to-airport business generated by Forward Air Complete,
our
new pick-up and delivery product introduced during the second half of 2006
offset by a weak shipping environment. The weak environment is evidenced
by our
2.2% decline in average weight per shipment, despite a 2.6% increase in total
shipments. The increase in average revenue per pound substantially resulted
from
increased customer utilization of Forward Air Complete.
Logistics
revenue, which is primarily truckload brokerage and priced on a per mile
basis,
increased $8.8 million, or 40.2%, to $30.7 million for the nine months ended
September 30, 2007 from $21.9 million in the same period of 2006. The
increase in logistics revenue is mainly the result of our “Completing the Model”
strategic initiative to grow this product. We are placing emphasis on capturing
a larger percentage of truckload opportunities and correspondingly increasing
our access to sufficient truckload capacity through the use of third-party
transportation providers. During the nine months ended September 30, 2007,
we
increased the number of miles driven to support our logistics revenue by
66.2%. The average revenue per mile of our logistics product,
including the impact of fuel surcharges, decreased 16.0% for the nine months
ended September 30, 2007 versus the nine months ended September 30, 2006.
The
decrease in our revenue per mile is largely due to the weak shipping environment
and the change in our business mix resulting from our efforts to capture
additional truckload opportunities as well as utilizing truckload opportunities
to cost effectively position our owner-operators within our airport-to-airport
network.
Other
revenue, which includes warehousing services and terminal handling and accounts
for the final component of Forward Air operating revenue, increased $0.9
million
to $15.4 million, a 6.2% increase from $14.5 million for the same period
in
2006. The increase was primarily due to increased handling and
storage revenue due to new services offered through our newly expanded
facilities.
FASL
FASL
operating revenue of $5.1 million represents revenue earned through our new
pool
distribution service acquired with the USAC acquisition on July 30,
2007.
Purchased
Transportation
Purchased
transportation increased by $13.1 million, or 12.4%, to $118.6 million for
the
nine months ended September 30, 2007 from $105.5 million in the same period
of
2006. As a percentage of consolidated operating revenue, purchased
transportation was 42.6% during the nine months ended September 30, 2007
compared to 40.7% for the same period in 2006.
Forward
Air
Forward
Air purchased transportation increased by $12.4 million, or 11.8%, to $117.9
million for the nine months ended September 30, 2007 from $105.5 million
for the
nine months ended September 30, 2006. As a percentage of Forward
Air operating revenue, purchased transportation was 43.2% during the
nine months ended September 30, 2007 compared to 40.7% for the same period
in
2006.
24
Purchased
transportation costs for our airport-to-airport network increased $3.8 million,
or 4.4%, to $90.0 million for the nine months ended September 30, 2007 from
$86.2 million for the nine months ended September 30, 2006. For the nine
months
ended September 30, 2007, purchased transportation costs for our
airport-to-airport network increased to 39.6% of airport-to-airport revenue
from
38.6% for the same period in 2006. A 3.2% increase in miles driven for the
airport-to-airport network accounted for $2.8 million of this increase in
purchased transportation. The increase in airport-to-airport miles was due
to
changes in our shipping patterns during the first half of 2007 as a result
of
changes in our business mix, such as increased shipments from our west coast
terminals. In addition, the increasing number of shipments and decreasing
average weight per shipment, discussed above, resulted in airport-to-airport
inefficiencies which ultimately increased the number of miles driven.
Approximately $1.0 million of the increase in airport-to-airport purchased
transportation is attributable to a 1.2% increase in cost per
mile. The increase in the cost per mile is the result of increased
customer utilization of Forward Air Complete, which was introduced during
the
second half of 2006.
Purchased
transportation costs related to our logistics revenue increased $7.9
million, or 50.3%, to $23.6 million for the nine months ended September 30,
2007
from $15.7 million for the nine months ended September 30, 2006. For the
nine
months ended September 30, 2007, logistics’ purchased transportation costs
represented 76.9% of logistics revenue versus 71.7% for the nine months ended
September 30, 2006. The increase in logistics purchased transportation costs
as
a percentage of revenue resulted from lower revenue per mile as discussed
above
partially offset by a decrease in our cost per mile. Logistics cost per mile
decreased due to increased capacity resulting in improved purchasing power
from
third party transportation providers.
Purchased
transportation costs related to our other revenue increased $0.7 million,
or
19.4%, to $4.3 million for the nine months ended September 30, 2007 from
$3.6
million for the nine months ended September 30, 2006. Other purchased
transportation costs as a percentage of other revenue increased to 27.9%
of
other revenue for the nine months ended September 30, 2007 from 24.8% for
the
same period in 2006. The increase in other purchased
transportation is attributable to increased third party transportation services
associated with new value added handling services.
FASL
FASL
purchased transportation of $0.7 million represents costs associated with
payment of drivers, both networked owner operators and third party
transportation providers, for the transportation services provided to
FASL. FASL purchased transportation was 13.7% of the segment’s
operating revenue.
Salaries,
Wages, and Benefits
Salaries,
wages and employee benefits increased by $5.5 million, or 9.9%, to $61.0
million
for the nine months ended September 30, 2007 from $55.5 million in the same
period of 2006. As a percentage of total operating revenue, salaries,
wages and employee benefits was 21.9% during the nine months ended September
30,
2007 compared to 21.4% for the same period in 2006.
Forward
Air
Salaries,
wages and employee benefits were 21.5% of Forward Air operating revenue for
the
nine months ended September 30, 2007 compared to 21.4% for the same period
of
2006. The increase in salaries, wages and employee benefits as a percentage
of
revenue was attributable to increased costs for share-based compensation
and
workers compensation claims offset by decreased employee
incentives. Share-based compensation increased $1.5 million, or 0.5%
as a percentage of Forward Air operating revenue, due to the issuance of
stock
options and non-vested shares of common stock to key members of management
and
non-employee directors during 2007. In addition, workers’
compensation expense increased $0.5 million, or 0.2% as a percentage of Forward
Air operating revenue, primarily due to a $0.7 million adjustment recorded
during the nine months ended September 30, 2007 that resulted from an actuarial
analysis of our reserves for workers’ compensation claims. The workers’
compensation actuarial adjustment was offset by lower current claims in 2007
compared to 2006. These increases were offset by a $1.5 million, or 0.6%
as a
percentage of Forward Air operating revenue, decrease in employee incentives
due
to shortfalls from our quarterly performance goals reducing bonuses earned
from
the same period in 2006.
FASL
FASL
salary, wages and employee benefits of $2.3 million represents costs associated
with payment of employees, mainly company drivers and employees located at
our
terminals since our USAC acquisition on July 30, 2007. FASL
salary, wages and employee benefits were 45.1% of the segment’s operating
revenue.
Operating
Leases
Operating
leases increased by $1.5 million, or 14.2%, to $12.1 million for the nine
months
ended September 30, 2007 from $10.6 million in the same period of
2006. Operating leases, the largest component of which is facility
rent, were 4.3% of consolidated operating revenue for the nine months ended
September 30, 2007 compared with 4.1% in the same period of 2006.
Forward
Air
Operating
leases were 4.3% of Forward Air operating revenue for the nine months ended
September 30, 2007 compared with 4.1% in the same period of 2006. The
increase in operating leases in total dollars and as a percentage of operating
revenue between periods was attributable to higher rent costs associated
with
the expansion of certain facilities, offset by decreases in facility rent
due to
the opening of company-owned facilities.
0
25
FASL
FASL
operating leases of $0.4 million represents facility rent for FASL’s 11
facilities since our USAC acquisition on July 30, 2007. FASL
does not currently own any of its facilities. FASL operating leases
were 7.8% of the segment’s operating revenue.
Depreciation
and Amortization
Depreciation
and amortization increased $1.2 million, or 18.5%, to $7.7 million for the
nine
months ended September 30, 2007 from $6.5 million in the same period of
2006. Depreciation and amortization was 2.8% of consolidated
operating revenue for the nine months ended September 30, 2007 compared with
2.5% in the same period of 2006.
Forward
Air
Depreciation
and amortization expense as a percentage of Forward Air operating revenue
was
2.7% for the nine months ended September 30, 2007 compared to 2.5% in the
same
period of 2006. The increase in depreciation and amortization expense is
due to
increased depreciation related to our expanded national hub in Columbus,
Ohio,
our new terminals and regional hubs in Chicago Illinois and Atlanta, Georgia,
the implementation of TAP during the fourth quarter of 2006, and new tractors
and trailers purchased during 2007 and the latter portion of 2006.
FASL
FASL
depreciation and amortization of $0.3 million represents $0.1 million of
depreciation on acquired equipment and $0.2 million of amortization on acquired
intangible assets since our USAC acquisition on July 30,
2007. FASL depreciation and amortization expense as a percentage of
the segment’s operating revenue was 5.9%.
Insurance
and Claims
Insurance
and claims expense increased $0.5 million, or 10.4%, to $5.3 million for
the
nine months ended September 30, 2007 from $4.8 million for the same period
in
2006. Insurance and claims were 1.9% of consolidated operating
revenue during the nine months ended September 30, 2007 compared with 1.8%
in
the same period of 2006.
Forward
Air
Insurance
and claims were 1.9% of Forward Air operating revenue during the nine months
ended September 30, 2007 compared to 1.8% for the same period of
2006. The $0.4 million, or 8.3% increase in insurance and claims is
primarily the result of increased claims and the associated legal
fees.
FASL
FASL
insurance and claims of $0.1 million represents the cost of insurance premiums
and accrued cargo claims since our USAC acquisition on July 30,
2007. FASL insurance and claims were 2.0% of the segment’s operating
revenue.
Other
Operating Expenses
Other
operating expenses increased $2.4 million, or 11.9%, to $22.5 million during
the
nine months ended September 30, 2007 from $20.1 million in the same period
of
2006. Other operating expenses were 8.1% of consolidated operating
revenue for the nine months ended September 30, 2007 compared with 7.7% in
the
same period of 2006.
Forward
Air
Other
operating expenses were 7.9% of Forward Air operating revenue for the nine
months end September 30, 2007 compared to 7.7% in the same period of 2006.
The
0.2% increase in other operating expenses as a percentage of operating revenue
was primarily attributable to taxes, utilities and permits associated with
new
or expanded facilities, specialized training for key employees, and additional
sales and marketing efforts due to the weak freight environment.
FASL
FASL
other operating expenses of $0.9 million represent costs such as routine
vehicle
maintenance, utilities for our facilities, and miscellaneous office and
administrative expenses since our USAC acquisition on July 30,
2007. FASL other operating expenses were 17.6% of the segment’s
operating revenue.
26
Income
from operations
Income
from operations decreased by $5.4 million, or 9.6%, to $51.1 million for
the
nine months ended September 30, 2007 compared with $56.5 million for the
same
period in 2006. Income from operations were 18.4% of consolidated
operating revenue for the nine months ended September 30, 2007 compared with
21.8% in the same period of 2006.
Forward
Air
Income
from operations decreased by $5.8 million, or 10.3%, to $50.7 million for
the
nine months ended September 30, 2007 compared with $56.5 million for the
same
period in 2006. Income from operations decreased as a percentage of
Forward Air operating revenue to 18.6% for the nine months ended September
30,
2007 from 21.8% for the same period in 2006. The decrease in income
from operations was primarily a result of the change in our business mix
resulting from declining revenue from the airport-to-airport service as a
percentage of total revenue and increased revenue from less profitable services
such as our truckload service.
FASL
FASL
income from operations since our USAC acquisition on July 30, 2007 was $0.4
million, or 7.8% of FASL revenue.
Interest
Expense
Interest
expense for the nine months ended September 30, 2007 and 2006 was approximately
$0.1 million. For the nine months ended September 30, 2007 interest
expense included interest on our capital lease for the core hub facility
in
Columbus, Ohio, plus interest on equipment notes assumed with the USAC
acquisition.
Other
Income, net
Other
income, net was $1.5 million, or 0.5% of operating revenue, for the nine
months
ended September 30, 2007 compared with $2.3 million, or 0.9% as a percentage
of
operating revenue, for the same period in 2006. The decrease in other income
was
attributable to lower interest income due to decreased average investment
balances as a result of cash used for stock repurchases, purchases of real
property for regional hubs and terminals, and the USAC acquisition during
the nine months ended September 30, 2007.
Provision
for Income Taxes
The
combined federal and state effective tax rate for the nine months ended
September 30, 2007 was 38.0% compared to a rate of
37.5% for the same period in 2006. Our effective federal
and state rate increased to provide for uncertain tax positions as required
by
Financial Accounting Standards Board (“FASB”) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (an interpretation of FASB
Statement No. 109), (“FIN 48”) and for the decrease in tax-exempt interest
income during 2007 due to increased capital expenditures and stock
repurchases.
Net
Income
As
a
result of the foregoing factors, net income decreased by $4.3 million, or
11.7%,
to $32.5 million for the nine months ended September 30, 2007 compared to
$36.8
million for the same period in 2006.
Liquidity
and Capital Resources
We
have
historically financed our working capital needs, including capital purchases,
with cash flows from operations and borrowings under our bank lines of credit.
Net cash provided by operating activities totaled approximately $43.8 million
for the nine months ended September 30, 2007 compared to approximately $38.2
million in the same period of 2006. Cash provided by operating
activities increased $5.6 million despite a year over year decrease in net
income. For cash provided by operating activities, the $4.3 million
decrease in net income was partially offset by a $2.7 million increase in
non-cash expenses such as depreciation and amortization and share-based
compensation. Further offsetting the decrease in net income were
reduced federal and state estimated tax payments and increased collection
on our
accounts receivable.
27
Net
cash
used in investing activities was $7.1 million for the nine months ended
September 30, 2007 compared with $6.8 million provided by investing activities
in the same period of 2006. Investing activities during the nine months ended
September 30, 2007 consisted primarily of the purchases of our new Chicago,
Illinois and Atlanta, Georgia facilities, the acquisition of certain assets
and
liabilities of USAC and the purchase of land near Dallas/Fort Worth, Texas.
Offsetting the investing cash used for these real property purchases were
sales
or maturities of our available-for-sale securities. Proceeds from the sales
or
maturities of our available-for-sale securities during the nine months ended
September 30, 2007 were also used to fund stock repurchases as further outlined
below in our discussion of cash used for financing
activities.
Net
cash used in financing activities
totaled approximately $36.6 million for the nine months ended September 30,
2007
compared with approximately $41.0 million used in financing activities for
the
same period of 2006. The decrease in cash used in financing activities was
primarily attributable to a $7.6 million decrease in cash used for the
repurchase of our common stock net of a $3.4 million decrease in proceeds
from
the exercise of stock options.
For
the
remainder of 2007, we expect net capital expenditures for operating equipment
and management information systems to be approximately $1.0 to $2.0 million.
Separate from these capital expenditures, we continue to execute our plan
to
purchase or build new terminals and regional hubs in key gateway cities.
During
the nine months ended September 30, 2007, we completed our purchase of new
facilities near Chicago, Illinois and Atlanta, Georgia for $22.3 million
and
$14.9 million, respectively. Deposits of $3.3 million and $1.5 million paid
during 2006 were applied to the purchase price of the Chicago and Atlanta
facilities, respectively. In addition, during February 2007, we paid
approximately $3.0 million for land near Dallas/Fort Worth, Texas on which
we
are planning to build a new regional hub, which we estimate will be completed
in
2008. We intend to fund the expenditures for the Dallas/Fort Worth
regional hub through cash and short-term investments currently on our balance
sheet, cash provided by operating activities, the sale of existing equipment
and/or borrowings under our credit facility, if necessary.
On
October 10, 2007 we entered into a $100.0 million senior credit
facility. The new facility has a term of five years and includes an
accordion feature, which allows for an additional $50.0 million in borrowings
on
such terms and conditions as set forth in the credit agreement. The
facility will replace our existing $20.0 million line of credit. We
entered into this new, larger credit facility in order to fund potential
acquisitions, repurchases of our common stock, and for financing other general
business purposes.
Our
current credit facility consists of a working capital line of credit. As
long as
we comply with the financial covenants and ratios, the credit facility permits
us to borrow up to $20.0 million less the amount of any outstanding letters
of
credit. Interest rates for advances under the facility vary based on how
our
performance measures against covenants related to total indebtedness, cash
flows, results of operations and other ratios. The facility bears interest
at
LIBOR plus 1.0% to 1.9% and is unsecured. The facility’s expiration is April
2008. At September 30, 2007, we had no balance outstanding under the line
of
credit facility and had utilized approximately $5.5 million of availability
for
outstanding letters of credit. We were in compliance with the financial
covenants and ratios under the credit facility at September 30,
2007.
On
November 17, 2005, we announced that
our Board of Directors approved a stock repurchase program for up to three
million shares of common stock (the “2005 Repurchase Plan”). In
addition, on July 31, 2007 our Board of Directors approved an additional
stock
repurchase program for up to two million shares of our common
stock. During the nine months ended September 30, 2007, we
repurchased 979,500 shares of common stock under the 2005 Repurchase Plan
for $31.2 million, or $31.87 per share. During the three months ended
September 30, 2006, we repurchased 1,041,649 shares of common stock under
the
2005 Repurchase Plan for $33.0 million, or $31.68 per share. During the nine
months ended September 30, 2006, we repurchased 1,202,695 shares of common
stock
under the 2005 Repurchase Plan for $38.8 million, or $32.24 per
share. As of September 30, 2007, 2,633,827 shares remain that may be
repurchased under Board of Director approved repurchase
plans.
During
each of the nine months ended September 30, 2007 and September 30, 2006,
dividends of $0.21 per share were declared on common stock outstanding. The
Company expects to continue to pay regular quarterly cash dividends, though
each
subsequent quarterly dividend is subject to review and approval by the Board
of
Directors.
Management
believes that our available cash, investments, expected cash generated from
future operations and borrowings under our new credit facilities will be
sufficient to satisfy our anticipated cash needs for at least the next twelve
months.
Critical
Accounting Policies
Our
unaudited condensed consolidated financial statements have been prepared
in
accordance with United States generally accepted accounting principles (“GAAP”).
The preparation of financial statements in accordance with GAAP requires
our
management to make estimates and assumptions that affect the amounts reported
in
the unaudited condensed consolidated financial statements and accompanying
footnotes. Our estimates and assumptions are based on historical experience
and
changes in the business environment. However, actual results may differ from
estimates under different conditions, sometimes materially. Critical accounting
policies and estimates are defined as those that are both most important
to the
portrayal of our financial condition and results and require management’s most
subjective judgments. A summary of significant accounting policies is disclosed
in Note 1 to the Consolidated Financial Statements included in our 2006 Annual
Report on Form 10-K. Our critical accounting policies are further described
under the caption “Discussion of Critical Accounting Policies” in Management’s
Discussion and Analysis of Financial Condition and Results of Operations
in our
2006 Annual Report on Form 10-K. In addition, following the adoption of FIN
48,
the Company considers its policies related to income tax contingencies to
be a
critical accounting policy (see discussion of income tax contingency policies
in
the Impact of Recent Accounting Pronouncements section).
28
Impact
of Recent Accounting Pronouncements
During
June 2006, the FASB issued FIN 48, which is effective for fiscal years beginning
after December 15, 2006. This interpretation was issued to clarify the
accounting for uncertainty in income taxes recognized in the financial
statements by prescribing a recognition threshold and measurement attribute
for
the financial statement recognition and measurement of a tax position taken
or
expected to be taken in a tax return. The guidance prescribed in FIN 48
establishes a recognition threshold of more likely than not that a tax position
will be sustained upon examination. The measurement attribute of FIN 48 requires
that a tax position be measured at the largest amount of benefit that is
greater
than 50% likely of being realized upon ultimate settlement. We adopted the
provisions of FIN 48 on January 1, 2007. As a result of the implementation
of
FIN 48, we recognized a $1.4 million increase in the liability for income
tax
contingencies, including related interest and penalties, which net of federal
benefit of $0.4 million was accounted for as a reduction to the January 1,
2007
balance of retained earnings. The liability for income tax contingencies
at
January 1, 2007 net of federal benefit is $1.0 million, which represents
tax
positions where the realization of the ultimate benefit is uncertain and
the
disallowance of which would affect our annual effective income tax
rate.
We
file
income tax returns in the U.S. federal jurisdiction, various states, and
Canada.
With a few exceptions, we are no longer subject to U.S. federal, state and
local, or Canadian examinations by tax authorities for years before 2003.
The
total liability balance at June 30, 2007 consists of state tax positions
for
which the realization of the ultimate benefit is uncertain and the disallowance
of which would affect our annual effective income tax rate. These positions
mainly consist of deductions taken on state tax returns for which the ultimate
deductibility is highly uncertain and the position that certain subsidiaries
are
not subject to income taxes by certain states.
As
permitted by FIN 48, we recognize interest accrued related to unrecognized
tax
benefits in interest expense and penalties in operating
expenses.
During
September 2006, the FASB issued Statement of Financial Accounting Standard
(“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”), which is
effective for fiscal years beginning after November 15, 2007 with earlier
adoption encouraged. SFAS 157 defines fair value, establishes a framework
for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements,
the
FASB having previously concluded in those accounting pronouncements that
fair
value is the relevant measurement attribute. Accordingly, SFAS 157 does not
require any new fair value measurements. However, the application of SFAS
157
could change current practice. We currently plan to adopt SFAS 157 on January
1,
2008, but the implementation of SFAS 157 is not expected to have a significant
impact on our financial position or results of operations.
During
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities—Including an amendment of FASB
Statement No. 115 (“SFAS 159”), which permits entities to choose to measure
many financial instruments and certain other items at fair value. The objective
of SFAS 159 is to improve financial reporting by providing entities with
the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex
hedge
accounting provisions. SFAS 159 is effective as of the beginning of an entity’s
first fiscal year that begins after November 15, 2007. We currently plan
to
adopt SFAS No. 159 on January 1, 2008, but the implementation of SFAS 159
is not
expected to have a significant impact on our financial position or results
of
operations.
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. 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.
29
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Our
exposure to market risk related to our remaining outstanding debt and
available-for-sale securities is not significant and has not changed materially
since December 31, 2006.
|
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 during the
third quarter of 2007 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, property damage related to the transportation and handling
of
freight, or workers’ compensation. We do not believe that any of these pending
actions, individually or in the aggregate, will have a material adverse effect
on our business, financial condition or results of operations.
|
Item
1A.
|
Risk
Factors
|
A
summary
of factors which could affect results and cause results to differ materially
from those expressed in any forward-looking statements made by us, or on
our
behalf, are further described under the caption “Risk Factors” in the Business
portion of our 2006 Annual Report on Form 10-K. There have been no changes
in
the nature of these factors since December 31, 2006.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
We
did
not repurchase any of our common stock during the three months ended September
30, 2007. As of September 30, 2007, 2,633,827 shares remain that may
be repurchased under Board of Director approved repurchase plans.
|
Item
3.
|
Defaults
Upon Senior
Securities
|
Not
Applicable.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
Not
Applicable.
|
Item
5.
|
Other
Information
|
Not
Applicable.
30
|
Item
6.
|
Exhibits
|
In
accordance with SEC Release No. 33-8212, Exhibits 32.1 and 32.2 are to be
treated as “accompanying” this report rather than “filed” as part of the
report.
|
No.
|
Exhibit
|
|
3.1
|
Restated
Charter of the registrant (incorporated herein by reference to
Exhibit 3
to the registrant’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on May 28, 1999)
|
|
3.2
|
Amended
and Restated Bylaws of the registrant (incorporated herein by
reference to
Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q
for the
quarterly period ended June 30, 2007, filed with the Securities
and
Exchange Commission on August 2, 2007)
|
|
4.1
|
Form
of Landair Services, Inc. Common Stock Certificate (incorporated
herein by
reference to Exhibit 4.1 to the registrant’s Registration Statement on
Form S-1, filed with the Securities and Exchange Commission on
September
27, 1993)
|
|
4.2
|
Form
of Forward Air Corporation Common Stock Certificate (incorporated
herein
by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1998, filed
with the
Securities and Exchange Commission on November 16,
1998)
|
|
4.3
|
Rights
Agreement, dated May 18, 1999, between the registrant and SunTrust
Bank,
Atlanta, N.A., including the Form of Rights Certificate (Exhibit
A) and
the Form of Summary of Rights (Exhibit B) (incorporated herein
by
reference to Exhibit 4 to the registrant’s Current Report on Form 8-K
filed with the Commission on May 28, 1999)
|
|
10.1
|
Amended
and Restated Non-Employee Director Stock Plan (incorporated herein
by
reference to Appendix B of the registrant’s Proxy Statement, filed with
the Securities and Exchange Commission on April 19, 2007 (File
No.
22490))
|
|
10.2
|
Five-year
senior, unsecured revolving credit facility (incorporated by
reference to
Exhibit 2.1 to the registrant's Current Report on Form 8-K filed
with the
Securities and Exchange Commission on October 11, 2007)
|
|
10.3
|
Employment
Agreement dated October 30, 2007, between Forward Air Corporation
and
Bruce A. Campbell, including Attachment B, Restrictive Covenants
Agreement
entered into contemporaneously with and as part of the Employment
Agreement (incorporated by reference to Exhibit 99.1 to the registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 31, 2007)
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)
(17 CFR
240.13a-14(a))
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)
(17 CFR
240.13a-14(a))
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
31
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:
November 1, 2007
|
|
By:
|
/s/
Rodney L. Bell
|
|
|
|
|
Rodney
L. Bell
Chief
Financial Officer, Senior Vice President and Treasurer
(Principal
Financial and Accounting Officer)
|
32
EXHIBIT
INDEX
|
No.
|
Exhibit
|
|
3.1
|
Restated
Charter of the registrant (incorporated herein by reference to
Exhibit 3
to the registrant’s Current Report on Form 8-K filed with the Securities
and Exchange Commission on May 28, 1999)
|
|
3.2
|
Amended
and Restated Bylaws of the registrant (incorporated herein
by reference to
Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q
for the
quarterly period ended June 30, 2007, filed with the Securities
and
Exchange Commission on August 2, 2007)
|
|
4.1
|
Form
of Landair Services, Inc. Common Stock Certificate (incorporated
herein by
reference to Exhibit 4.1 to the registrant’s Registration Statement on
Form S-1, filed with the Securities and Exchange Commission on
September
27, 1993)
|
|
4.2
|
Form
of Forward Air Corporation Common Stock Certificate (incorporated
herein
by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1998, filed
with the
Securities and Exchange Commission on November 16,
1998)
|
|
4.3
|
Rights
Agreement, dated May 18, 1999, between the registrant and SunTrust
Bank,
Atlanta, N.A., including the Form of Rights Certificate (Exhibit
A) and
the Form of Summary of Rights (Exhibit B) (incorporated herein
by
reference to Exhibit 4 to the registrant’s Current Report on Form 8-K
filed with the Commission on May 28, 1999)
|
|
10.1
|
Amended
and Restated Non-Employee Director Stock Plan (incorporated herein
by
reference to Appendix B of the registrant’s Proxy Statement, filed with
the Securities and Exchange Commission on April 19, 2007 (File
No.
22490))
|
|
10.2
|
Five-year
senior, unsecured revolving credit facility (incorporated by
reference to
Exhibit 2.1 to the registrant's Current Report on Form 8-K filed
with the
Securities and Exchange Commission on October 11, 2007)
|
|
10.3
|
Employment
Agreement dated October 30, 2007, between Forward Air Corporation
and
Bruce A. Campbell, including Attachment B, Restrictive Covenants
Agreement
entered into contemporaneously with and as part of the Employment
Agreement (incorporated by reference to Exhibit 99.1 to the registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 31, 2007)
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)
(17 CFR
240.13a-14(a))
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)
(17 CFR
240.13a-14(a))
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|