corplogoa17.jpg
NEWS RELEASE

FORWARD AIR CORPORATION REPORTS THIRD QUARTER 2018 RESULTS
Reports record quarterly revenue and cash flow from operations
Reports record year-to-date financial results, including revenue, operating income,
net income, EPS, EBITDA, cash flow from operations and free cash flow
Announces 20% dividend increase
GREENEVILLE, Tenn.- (BUSINESS WIRE) - October 24, 2018 - Forward Air Corporation (NASDAQ:FWRD) today reported financial results for the three and nine months ended September 30, 2018.
Revenue for the quarter ended September 30, 2018 increased 11.1% to $331.4 million from $298.3 million for the same quarter in 2017. Income from operations was $29.9 million compared to $27.2 million in the prior year quarter. Net income during the quarter was $22.3 million compared to $18.3 million in the third quarter of 2017. Net income per diluted share for the third quarter of 2018 was $0.76 compared to $0.61 in the prior year quarter.
Revenue for the nine months ended September 30, 2018 increased 14.2% to $964.3 million from $844.2 million for the same period in 2017. Income from operations was $87.0 million compared to $80.9 million in the prior year. Net income during the period was $64.4 million compared to $52.6 million in the same period of 2017. Net income per diluted share was $2.18 for the nine months ended September 30, 2018 compared to $1.73 in the same period of 2017.
For the three and nine months ended September 30, 2018, the Company generated $46.9 million and $113.8 million of cash flow from operations, respectively, compared to $25.7 million and $77.7 million for the same periods in 2017.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $40.2 million in the third quarter of 2018 compared to $37.5 million in the same period of 2017. EBITDA increased to $118.3 million for the nine months ended September 30, 2018 from $111.5 million for the same period in 2017. Free cash flow was $31.3 million in the third quarter of 2018 compared to $16.9 million in the prior year quarter. Free cash flow was $85.5 million in the nine months ended September 30, 2018 compared to $65.6 million in the same period of 2017. EBITDA and free cash flow are non-GAAP financial measures and reconciliations of these non-GAAP financial measures are provided in the attached financial tables.
Tom Schmitt, President and CEO, commenting on third quarter results said, “Our strong third quarter growth fueled our year-to-date record results. Consolidated revenues grew 11.1% driven by solid revenue management across the portfolio.  Consolidated operating income grew 9.9% amid a tight truckload market that drove higher purchased transportation costs for all of our business units.  Intermodal generated record quarterly results, as the team capitalized on the benefits of increased volumes and recent acquisitions.”
Commenting on Intermodal’s continued growth, Mr. Schmitt said, “We are pleased to announce the signing of a definitive agreement to acquire substantially all of the assets of Southwest Freight Distributors (“Southwest”) for $16.25 million.  Southwest is a Dallas, Texas based premium drayage provider.  We expect the transaction will close within a month, and we anticipate Southwest will contribute $20.0 million of revenue and $3.0 million of EBITDA on an annualized basis.”
In closing, Mr. Schmitt said, “I would like to thank Bruce Campbell for the fantastic transition and for developing such an outstanding group of teammates. Together we will make profitable growth a remarkable reality.”

1



Commenting on the Company’s third quarter results, Michael J. Morris, Senior Vice President and CFO, said, “While our business units continued to generate good growth, our third quarter earnings per share fell short of our $0.77-$0.81 guidance range, driven by $1.4 million of unexpected non-cash charges related to existing vehicular claims.”
Regarding the Company’s fourth quarter guidance, Mr. Morris said, “We expect fourth quarter year-on-year revenue growth to be 11% to 15%. This revenue outlook contemplates our 2018 implementation of ASC 606, Revenue from Contracts with Customers, which now requires that we report fuel surcharge revenue on a gross basis.  As such, our growth outlook reflects a comparison to our fourth quarter 2017 revenue which reported fuel surcharge on a net basis.  After adjusting the prior year period to reflect fuel surcharge revenue on a gross basis, we expect our year-on-year revenue growth to be 4% to 8%.”
Continuing, Mr. Morris said, “We expect net income per diluted share to be between $0.81 and $0.85 in the fourth quarter of 2018 compared to $1.16 in the fourth quarter of 2017 as adjusted following the implementation of ASC 606.  Prior period earnings per share would have been $0.63 when excluding a $0.53 benefit related to the fourth quarter 2017 enactment of the Tax Cuts and Jobs Act (“TCJA”).”
On October 22, 2018, our Board of Directors approved a 20% increase to the Company’s quarterly dividend, raising it from $0.15 to $0.18 per share of common stock.  The dividend is payable to shareholders of record at the close of business on November 23, 2018 and is expected to be paid on December 7, 2018.
This quarterly dividend is made pursuant to a cash dividend policy approved by the Board of Directors, which anticipates a total annual dividend of $0.63 per share of common stock for 2018 and $0.72 for the full year 2019, payable in quarterly increments of $0.18 per share of common stock.  The actual declaration of future cash dividends, and the establishment of record and payment dates, is subject to final determination by the Board of Directors each quarter after its review of the Company’s financial performance.
Commenting on the increased dividend payment, Mr. Morris said, “This increase reflects our confidence in the growth potential of our businesses, and the Company’s continued focus on returning a portion of its free cash flow back to shareholders. In the past five years, we have returned approximately $274 million to shareholders in the form of dividends and share repurchases.”
Review of Financial Results
Forward Air will hold a conference call to discuss third quarter 2018 results on Thursday, October 25, 2018 at 9:00 a.m. EDT. The Company’s conference call will be available online at www.forwardaircorp.com or by dialing (800) 230-1092. A replay of the conference call will be available at www.forwardaircorp.com beginning shortly after the completion of the live call.
About Forward Air Corporation
Forward Air keeps your business moving forward by providing services within four business segments: Expedited LTL (provides expedited regional, inter-regional and national LTL services, including local pick-up and delivery, shipment consolidation/deconsolidation, warehousing, and customs brokerage by utilizing a comprehensive national network of terminals); Truckload Premium Services (provides expedited truckload brokerage, dedicated fleet services, as well as high-security and temperature-controlled logistics services); Intermodal (provides first-and last-mile high-value drayage services both to and from seaports and railheads, dedicated contract and Container Freight Station warehouse and handling services); and Pool Distribution (provides high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region). For more information, visit our website at www.forwardaircorp.com.
Financial Statement Presentation
Our results reflect the impact of the new revenue recognition standard, adopted under ASC 606, on a full retrospective basis, which required us to adjust each prior reporting period presented.

2


Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
September 30,
2018
 
September 30,
2017
 
September 30,
2018
 
September 30,
2017
 
 
 
(As Adjusted)
 
 
 
(As Adjusted)
Operating revenue:
 
 
 
 

 
 
Expedited LTL
$
188,507

 
$
165,399

 
$
551,342

 
$
474,636

Truckload Premium Services
47,942

 
51,461

 
142,982

 
148,999

Pool Distribution
47,280

 
40,183

 
133,256

 
116,741

Intermodal
50,545

 
44,161

 
148,275

 
110,307

Eliminations and other operations
(2,899
)
 
(2,915
)
 
(11,530
)
 
(6,474
)
Operating revenue
331,375

 
298,289

 
964,325

 
844,209

 
 
 
 
 
 
 
 
Operating expenses:
 

 
 

 
 

 
 

Purchased transportation
155,451

 
140,330

 
450,833

 
389,127

Salaries, wages and employee benefits
76,028

 
65,334

 
217,682

 
192,279

Operating leases
18,671

 
16,809

 
54,640

 
47,205

Depreciation and amortization
10,295

 
10,326

 
31,346

 
30,578

Insurance and claims
9,203

 
7,844

 
26,442

 
21,379

Fuel expense
5,634

 
4,096

 
16,786

 
11,448

Other operating expenses
26,214

 
26,374

 
79,612

 
71,279

Total operating expenses
301,496

 
271,113

 
877,341

 
763,295

Income (loss) from operations:
 
 
 
 
 
 
 
Expedited LTL
23,724

 
23,189

 
71,023

 
65,164

Truckload Premium Services
1,673

 
124

 
3,348

 
3,734

Pool Distribution
735

 
681

 
3,695

 
3,672

Intermodal
7,321

 
3,785

 
16,333

 
9,548

Other operations
(3,574
)
 
(603
)
 
(7,415
)
 
(1,204
)
Income from operations
29,879

 
27,176

 
86,984

 
80,914

 
 
 
 
 
 
 
 
Other expense:
 

 
 

 
 

 
 

Interest expense
(472
)
 
(288
)
 
(1,327
)
 
(806
)
Other, net
(1
)
 
(3
)
 
(2
)
 
(11
)
Total other expense
(473
)
 
(291
)
 
(1,329
)
 
(817
)
Income before income taxes
29,406

 
26,885

 
85,655

 
80,097

Income tax expense
7,077

 
8,557

 
21,289

 
27,522

Net income and comprehensive income
$
22,329

 
$
18,328

 
$
64,366

 
$
52,575

 
 
 
 
 
 
 
 
Net income per share:
 

 
 

 
 

 
 

Basic
$
0.76

 
$
0.61

 
$
2.18

 
$
1.74

Diluted
$
0.76

 
$
0.61

 
$
2.18

 
$
1.73

 
 
 
 
 
 
 
 
Dividends per share:
$
0.15

 
$
0.15

 
$
0.45

 
$
0.45



3


Expedited LTL Segment Information
(In millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
September 30,
 
Percent of
 
September 30,
 
Percent of
 
 
 
Percent
 
2018
 
Revenue
 
2017
 
Revenue
 
Change
 
Change
 
 
 
 
 
(As Adjusted)
 
 
 
 
 
 
Operating revenue
$
188.5

 
100.0
%
 
$
165.4

 
100.0
%
 
$
23.1

 
14.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Purchased transportation
88.6

 
47.0

 
72.9

 
44.1

 
15.7

 
21.5

Salaries, wages and employee benefits
41.6

 
22.1

 
35.7

 
21.6

 
5.9

 
16.5

Operating leases
10.3

 
5.5

 
9.4

 
5.7

 
0.9

 
9.6

Depreciation and amortization
5.6

 
3.0

 
5.4

 
3.3

 
0.2

 
3.7

Insurance and claims
3.9

 
2.1

 
3.3

 
2.0

 
0.6

 
18.2

Fuel expense
1.6

 
0.8

 
0.9

 
0.5

 
0.7

 
77.8

Other operating expenses
13.2

 
7.0

 
14.6

 
8.8

 
(1.4
)
 
(9.6
)
Total operating expenses
164.8

 
87.4

 
142.2

 
86.0

 
22.6

 
15.9

Income from operations
$
23.7

 
12.6
%
 
$
23.2

 
14.0
%
 
$
0.5

 
2.2
 %
Expedited LTL Operating Statistics
 
 
 
 
 
 
 
Three months ended
 
September 30,
 
September 30,
 
Percent
 
2018
 
2017
 
Change
 
 
 
(As Adjusted)
 
 
 
 
 
 
 
 
Business days
63

 
63

 
 %
 
 
 
 
 
 
Tonnage
 
 
 
 
 
    Total pounds ¹
636,831

 
630,753

 
1.0

    Pounds per day ¹
10,108

 
10,012

 
1.0

 
 
 
 
 
 
Shipments
 
 
 
 
 
    Total shipments ¹
1,003

 
998

 
0.5

    Shipments per day ¹
15.9

 
15.8

 
0.5

    Total shipments with pickup and/or delivery ¹
245

 
246

 
(0.5
)
 
 
 
 
 
 
Revenue per hundredweight
$
26.47

 
$
23.67

 
11.8

Revenue per hundredweight, ex fuel
$
22.21

 
$
21.23

 
4.6

 
 
 
 
 
 
Revenue per shipment
$
168

 
$
150

 
12.0

Revenue per shipment, ex fuel
$
141

 
$
134

 
5.2

 
 
 
 
 
 
Weight per shipment
635

 
632

 
0.5
 %
 
 
 
 
 
 
¹ - In thousands
 
 
 
 
 


4


Truckload Premium Services Segment Information
(In millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
September 30,
 
Percent of
 
September 30,
 
Percent of
 
 
 
Percent
 
2018
 
Revenue
 
2017
 
Revenue
 
Change
 
Change
 
 
 
 
 
(As Adjusted)
 
 
 
 
 
 
Operating revenue
$
47.9

 
100.0
%
 
$
51.5

 
100.0
%
 
$
(3.6
)
 
(7.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:

 
 
 
 
 
 
 
 
 
 
Purchased transportation
35.8

 
74.7

 
39.5

 
76.7

 
(3.7
)
 
(9.4
)
Salaries, wages and employee benefits
4.7

 
9.8

 
5.0

 
9.7

 
(0.3
)
 
(6.0
)
Operating leases
0.1

 
0.2

 
0.3

 
0.6

 
(0.2
)
 
(66.7
)
Depreciation and amortization
1.5

 
3.1

 
1.6

 
3.1

 
(0.1
)
 
(6.3
)
Insurance and claims
1.2

 
2.5

 
2.0

 
3.9

 
(0.8
)
 
(40.0
)
Fuel expense
0.7

 
1.5

 
0.8

 
1.6

 
(0.1
)
 
(12.5
)
Other operating expenses
2.2

 
4.6

 
2.2

 
4.3

 

 

Total operating expenses
46.2

 
96.5

 
51.4

 
99.8

 
(5.2
)
 
(10.1
)
Income from operations
$
1.7

 
3.5
%
 
$
0.1

 
0.2
%
 
$
1.6

 
1,600.0
 %

Truckload Premium Services Operating Statistics
 
 
 
Three months ended
 
September 30,
 
September 30,
 
Percent
 
2018
 
2017
 
Change
 
 
 
(As Adjusted)
 
 






Total Miles ¹
19,197


24,714


(22.3
)%
Empty Miles Percentage
8.5
%

9.6
%

(11.5
)
Tractors (avg)
291


378


(23.0
)
Miles per tractor per week 2
2,317


2,823


(17.9
)






Revenue per mile
$
2.37


$
2.01


17.9

Cost per mile
$
1.88


$
1.66


13.3
 %






¹ - In thousands





2 - Calculated using Company driver and owner operator miles


5


Pool Distribution Segment Information
(In millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
September 30,
 
Percent of
 
September 30,
 
Percent of
 
 
 
Percent
 
2018
 
Revenue
 
2017
 
Revenue
 
Change
 
Change
 
 
 
 
 
(As Adjusted)
 
 
 
 
 
 
Operating revenue
$
47.3

 
100.0
%
 
$
40.2

 
100.0
%
 
$
7.1

 
17.7
%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 

 
 
 
 
 
 
Purchased transportation
14.3

 
30.2

 
11.4

 
28.4

 
2.9

 
25.4

Salaries, wages and employee benefits
17.5

 
37.0

 
15.3

 
38.1

 
2.2

 
14.4

Operating leases
4.2

 
8.9

 
3.3

 
8.2

 
0.9

 
27.3

Depreciation and amortization
1.7

 
3.6

 
1.7

 
4.2

 

 

Insurance and claims
1.3

 
2.7

 
1.1

 
2.8

 
0.2

 
18.2

Fuel expense
1.6

 
3.4

 
1.3

 
3.2

 
0.3

 
23.1

Other operating expenses
6.0

 
12.7

 
5.4

 
13.4

 
0.6

 
11.1

Total operating expenses
46.6

 
98.5

 
39.5

 
98.3

 
7.1

 
18.0

Income from operations
$
0.7

 
1.5
%
 
$
0.7

 
1.7
%
 
$

 
%

Pool Operating Statistics
 
 
 
Three months ended
 
September 30,
 
September 30,
 
Percent
 
2018
 
2017
 
Change
 
 
 
(As Adjusted)
 
 
 
 
 
 
 
 
Cartons¹
22,218

 
19,256

 
15.4
%
Revenue per Carton
$
2.13

 
$
2.09

 
1.9
%
Terminals
28

 
28

 
%
 
 
 
 
 
 
¹ In thousands
 
 
 
 
 


6


Intermodal Segment Information
(In millions)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
September 30,
 
Percent of
 
September 30,
 
Percent of
 
 
 
Percent
 
2018
 
Revenue
 
2017
 
Revenue
 
Change
 
Change
 
 
 
 
 
(As Adjusted)
 
 
 
 
 
 
Operating revenue
$
50.5

 
100.0
%
 
$
44.2

 
100.0
%
 
$
6.3

 
14.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:

 
 
 

 
 
 
 
 
 
Purchased transportation
19.3

 
38.2

 
19.1

 
43.2

 
0.2

 
1.0

Salaries, wages and employee benefits
10.9

 
21.6

 
9.0

 
20.4

 
1.9

 
21.1

Operating leases
4.0

 
7.9

 
3.8

 
8.6

 
0.2

 
5.3

Depreciation and amortization
1.5

 
3.0

 
1.7

 
3.8

 
(0.2
)
 
(11.8
)
Insurance and claims
1.4

 
2.8

 
1.2

 
2.7

 
0.2

 
16.7

Fuel expense
1.6

 
3.2

 
1.1

 
2.5

 
0.5

 
45.5

Other operating expenses
4.5

 
8.9

 
4.5

 
10.2

 

 

Total operating expenses
43.2

 
85.5

 
40.4

 
91.4

 
2.8

 
6.9

Income from operations
$
7.3

 
14.5
%
 
$
3.8

 
8.6
%
 
$
3.5

 
92.1
 %

Intermodal Operating Statistics
 
 
 
Three months ended
 
September 30,
 
September 30,
 
Percent
 
2018
 
2017
 
Change
 
 
 
(As Adjusted)
 
 
 
 
 
 
 
 
Drayage shipments
75,981

 
72,476

 
4.8
%
Drayage revenue per Shipment
$
574

 
$
535

 
7.3
%
Number of Locations
19

 
19

 
%


7


Forward Air Corporation
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
September 30,
2018
 
December 31, 2017
 
 
 
(As Adjusted)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
28,911

 
$
3,893

Accounts receivable, net
148,464

 
147,948

Other current assets
23,692

 
15,807

Total current assets
201,067

 
167,648

 
 
 
 
Property and equipment
409,465

 
399,235

Less accumulated depreciation and amortization
199,166

 
193,123

Net property and equipment
210,299

 
206,112

Goodwill and other acquired intangibles:
 

 
 

Goodwill
193,625

 
191,671

Other acquired intangibles, net of accumulated amortization
106,227

 
111,247

Total goodwill and other acquired intangibles, net
299,852

 
302,918

Other assets
31,923

 
15,944

Total assets
$
743,141

 
$
692,622

 
 
 
 
Liabilities and Shareholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
35,110

 
$
30,723

Accrued expenses
40,073

 
35,069

Current portion of debt and capital lease obligations
336

 
359

Total current liabilities
75,519

 
66,151

 
 
 
 
Debt and capital lease obligations, less current portion
40,383

 
40,588

Other long-term liabilities
43,073

 
24,104

Deferred income taxes
35,756

 
29,080

 
 

 
 

Shareholders’ equity:
 

 
 

Common stock
288

 
295

Additional paid-in capital
206,790

 
195,346

Retained earnings
341,332

 
337,058

Total shareholders’ equity
548,410

 
532,699

Total liabilities and shareholders’ equity
$
743,141

 
$
692,622



8


Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
 
Three months ended

September 30, 2018

September 30, 2017
 
 
 
(As Adjusted)
Operating activities:



Net income
$
22,329


$
18,328

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



Depreciation and amortization
10,295


10,326

Change in fair value of earn-out liability
(455
)
 

Share-based compensation
2,847


1,939

Loss on disposal of property and equipment
120


194

Provision for (recovery) loss on receivables
(509
)

1,531

Provision for revenue adjustments
1,092


663

Deferred income tax expense
2,182


(558
)
Changes in operating assets and liabilities





Accounts receivable
3,345


(12,409
)
Prepaid expenses and other current assets
(1,241
)

2,567

Income taxes
(1,765
)
 
(2,161
)
Accounts payable and accrued expenses
8,615


5,311

Net cash provided by operating activities
46,855


25,731







Investing activities:





Proceeds from disposal of property and equipment
1,150


158

Purchases of property and equipment
(16,738
)

(8,948
)
Acquisition of business, net of cash acquired
(3,737
)


Other
(9
)

(586
)
Net cash used in investing activities
(19,334
)

(9,376
)






Financing activities:





Payments of debt and capital lease obligations
(77
)
 
(282
)
Proceeds from senior credit facility

 
20,000

Proceeds from exercise of stock options
2,570

 
750

Payments of cash dividends
(4,385
)
 
(4,502
)
Repurchase of common stock (repurchase program)
(16,820
)
 
(29,988
)
Net cash used in financing activities
(18,712
)

(14,022
)
Net increase in cash
8,809


2,333

Cash at beginning of period
20,102


10,090

Cash at end of period
$
28,911


$
12,423



9


Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 
 
Nine months ended
 
September 30, 2018
 
September 30, 2017
 
 
 
(As Adjusted)
Operating activities:
 
 
 
Net income
$
64,366

 
$
52,575

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Depreciation and amortization
31,346

 
30,578

Change in fair value of earn-out liability
(455
)
 

Share-based compensation
7,525

 
5,965

(Gain) loss on disposal of property and equipment
(14
)
 
701

Provision for (recovery) loss on receivables
(52
)
 
1,788

Provision for revenue adjustments
2,921

 
2,131

Deferred income tax
6,676

 
523

Changes in operating assets and liabilities
 
 
 
Accounts receivable
(3,386
)
 
(22,894
)
Prepaid expenses and other current assets
(4,880
)
 
(1,411
)
Income taxes
(3,193
)
 
(424
)
Accounts payable and accrued expenses
12,991

 
8,179

Net cash provided by operating activities
113,845

 
77,711

 
 
 
 
Investing activities:
 
 
 
Proceeds from disposal of property and equipment
5,989

 
1,497

Purchases of property and equipment
(34,344
)
 
(13,610
)
Acquisition of business, net of cash acquired
(3,737
)
 
(22,500
)
Other
(356
)
 
(73
)
Net cash used in investing activities
(32,448
)
 
(34,686
)
 
 
 
 
Financing activities:
 
 
 
Payments of debt and capital lease obligations
(228
)
 
(28,215
)
Proceeds from senior credit facility

 
55,000

Payments on line of credit

 
(14,500
)
Proceeds from exercise of stock options
3,682

 
5,642

Payments of cash dividends
(13,213
)
 
(13,584
)
Repurchase of common stock (repurchase program)
(44,985
)
 
(41,983
)
Proceeds from common stock issued under employee stock purchase plan
237

 
226

Cash settlement of share-based awards for tax withholdings
(1,872
)
 
(1,699
)
Net cash used in financing activities
(56,379
)
 
(39,113
)
Net increase in cash
25,018

 
3,912

Cash at beginning of period
3,893

 
8,511

Cash at end of period
$
28,911

 
$
12,423



10


Forward Air Corporation Reconciliation of U.S. GAAP and Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP (also referred to herein as “reported”). However, the Company also uses “non-GAAP financial measures” that are derived on the basis of methodologies other than in accordance with GAAP. Specifically, the Company believes that meaningful analysis of its financial performance in 2018 and 2017 requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational. Management uses these non-GAAP financial measures in making financial, operating, compensation and planning decisions and in evaluating the Company’s performance.

This press release contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the three and nine months ended September 30, 2018 and 2017 on a consolidated basis; and free cash flow for the three and nine months ended September 30, 2018 and 2017. The Company believes that including these items will assist investors in understanding its core operating performance and allow for more accurate comparisons of results.

The Company believes that EBITDA improves comparability from period to period by removing the impact of its capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of normalized operating activities. The Company believes that free cash flow is an important measure of its ability to repay maturing debt or fund other uses of capital that it believes will enhance stockholder value.

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

Forward Air Corporation
Reconciliation to U.S. GAAP
(In thousands)
(Unaudited)
 
 
 
 
 
Three months ended
 
Nine months ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
 
 
 
(As Adjusted)
 
 
 
(As Adjusted)
Net income and comprehensive income
$
22,329

 
$
18,328

 
$
64,366

 
$
52,575

Interest expense and other, net
473

 
291

 
1,329

 
817

Taxes
7,077

 
8,557

 
21,289

 
27,522

Depreciation and amortization
10,295

 
10,326

 
31,346

 
30,578

EBITDA
$
40,174

 
$
37,502

 
$
118,330

 
$
111,492

 
 
 
 
 
 
 
 
 
Three months ended
 
Nine months ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
 
 
 
 
 
 
 
(As Adjusted)
Net cash provided by operating activities
$
46,855

 
$
25,731

 
$
113,845

 
$
77,711

Proceeds from disposal of property and equipment
1,150

 
158

 
5,989

 
1,497

Purchases of property and equipment
(16,738
)
 
(8,948
)
 
(34,344
)
 
(13,610
)
Free cash flow
$
31,267

 
$
16,941

 
$
85,490

 
$
65,598


11


The following table summarizes supplemental guidance information that management believes to be useful.

Forward Air Corporation
Additional Guidance Data
(In thousands, except per share data)
(Unaudited)
 
 
 
Three months ended
Actual
September 30, 2018
Net income
$
22,329

Income allocated to participating securities
(239
)
Numerator for diluted income per share - net income
$
22,090

 
 
Fully diluted share count
29,095

Diluted earnings per share
$
0.76

 
 
 
 
Projected
Full year 2018
Projected tax rate
25.0
%
 
 
Projected capital expenditures, net
$
34,500

 
 
Projected
Three months ended December 31, 2018
Projected period end fully diluted share count
28,800

 
 


12


Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as:“anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,”“likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements included in this press release relate to expected fourth quarter 2018 revenue growth (including the anticipated impact of ASC 606), net income per diluted shares, full year 2018 projected tax rate, fully diluted share count (before consideration of future share repurchase), projected capital expenditures as well as the potential acquisition and projected financial performance of Southwest Freight Distributors, the future declaration of dividends and the full year 2018 and 2019 anticipated dividends per share.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the creditworthiness of our customers and their ability to pay for services rendered, the availability and compensation of qualified independent owner-operators and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2017 and quarterly reports on Form 10-Q filed thereafter.

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

SOURCE: Forward Air Corporation

Forward Air Corporation
Michael J. Morris, 404-362-8933
mmorris@forwardair.com



13

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