Business context and reporting period
Forward Air Corporation filed this Form 10-K for the fiscal year ended December 31, 2021. It is an annual report, not a standalone fourth-quarter report; the filing text does not provide a clear set of Q4-only financial results. Forward Air is an asset-light freight and logistics provider operating in the United States and Canada through Expedited Freight and Intermodal. The former Pool Distribution business is reported as a discontinued operation.
Financial performance and liquidity
Unless stated otherwise, amounts below are in U.S. dollars. Financial figures are in millions; the filing’s underlying tables generally report thousands.
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Continuing operating revenue | $1,662.4 | $1,269.6 | Up 30.9% |
| Income from continuing operations | $159.3 | $73.9 | Up 115.5% |
| Net income from continuing operations | $116.1 | $52.8 | Up 120.0% |
| Net income, including discontinued operation | $105.9 | $23.7 | Up 346.0% |
| Diluted earnings per share | $3.85 | $0.84 | — |
| Cash from continuing operating activities | $124.9 | $96.1 | Up $28.8 |
- Continuing operating margin was approximately 9.6%, compared with 5.8% in 2020. Segment operating margins increased to 10.1% for Expedited Freight from 6.6%, and to 10.4% for Intermodal from 8.2%.
- Expedited Freight revenue rose 28.2% to $1,374.3 million; Intermodal revenue rose 44.9% to $289.2 million. The segments represented 82.6% and 17.4% of consolidated revenue, respectively.
- Expedited Freight’s network growth reflected 18.7% higher tonnage and 8.0% higher revenue per hundredweight; Intermodal drayage shipments increased 22.6% and revenue per shipment increased 18.5%.
- Continuing investing cash outflow was $96.3 million, including $39.1 million of capital expenditures and $59.9 million for acquired businesses, net of cash acquired. Continuing financing cash outflow was $31.5 million.
- At year-end, cash and cash equivalents were $37.3 million; total assets were $1,117.8 million; and current liabilities were $164.7 million. Accounts receivable was $208.1 million, up from $156.5 million in 2020.
- Credit-facility borrowings were $157.5 million, compared with $112.5 million a year earlier. Finance lease obligations were $14.2 million. The facility provided $272.5 million of available borrowing capacity, and the company reported compliance with its financial covenants.
- The amended credit facility has a $450 million total commitment, including a $300 million revolver and a $150 million term loan, and matures July 20, 2026. Borrowings are variable-rate; management disclosed that a 150-basis-point rate increase would raise annual interest expense by approximately $1.7 million.
Material changes versus the prior comparable period
- Revenue and operating income improved substantially from 2020, which the company attributed primarily to economic recovery, higher volumes and yields, pricing initiatives, freight rationalization, and operating efficiencies.
- Operating expenses increased 25.7%, slower than revenue growth. However, purchased transportation, wages and benefits, fuel, and other operating expenses all increased, reflecting higher volumes, greater use of third-party carriers, labor pressure, fuel prices, and operating costs.
- Pool was sold on February 12, 2021 for $8 million cash plus a potential earn-out of up to $12 million. Deteriorating Pool performance led to a full $7.0 million non-cash impairment of the earn-out asset and a $2.9 million loss on sale in discontinued operations. FY2021 discontinued-operation loss was $10.2 million, versus $29.0 million in 2020.
- Acquisitions included Proficient Transport, J&P Hall Express Delivery, and BarOle Trucking. The company said these transactions expanded or added capacity and geographic coverage in its Intermodal and Expedited Freight businesses.
- Quarterly dividends paid during 2021 were $0.21 per share, versus $0.18 in the first three quarters of 2020. The board declared a $0.24 per-share dividend for payment in the first quarter of 2022, subject to the usual board approval for future dividends.
Outlook, risks, contingencies and unusual items
- Management said business and operations had returned to pre-COVID levels and believed available cash, operating cash flow, and credit-facility borrowings would support working capital, capital expenditures, and debt service for the foreseeable future. The filing provides no quantified earnings or revenue guidance.
- Management reported labor shortages and intense competition for independent fleet providers, which increased labor and purchased-transportation costs. The company used sign-on bonuses and enhanced wages in some markets and expected to continue addressing labor and inflationary pressures.
- Key risks include freight-market cyclicality, pricing pressure, fuel volatility and the possibility that fuel surcharges do not fully offset cost increases; capacity and labor availability; customer concentration and short contract cancellation periods; acquisition integration and goodwill impairment; and changing worker-classification rules.
- Cybersecurity remains a material risk following a December 2020 ransomware incident that disrupted operations and delayed customer service. Incident-related expenses were $0.4 million in 2021 and $1.6 million in 2020; additional remediation or related costs remain possible.
- Insurance and claims are significant exposures. Self-insurance reserves were $65.6 million at year-end. Management stated that estimates are judgmental and actual claims could differ materially; the auditor identified self-insurance loss reserves as a critical audit matter. The company also disclosed substantial vehicle-liability retention layers and a $0.5 million workers’ compensation retention per occurrence.
- The company recorded an $8.1 million receivable from the Pool buyer for vendor payments under the transition-services arrangement and stated collection was probable. It reported no pending litigation expected to have a material adverse effect, while noting that legal outcomes and insurance reserves remain uncertain.
- Ernst & Young issued an unqualified opinion on the financial statements and internal controls. Management also concluded disclosure controls and internal control over financial reporting were effective at year-end.
Important facts for investors to verify
- Whether 2021’s volume and yield improvements can persist, and whether wage, purchased-capacity, fuel, insurance, and other cost inflation can be passed through to customers.
- How much of earnings growth reflects continuing operations versus the discontinued Pool business, and whether the Pool sale, earn-out impairment, and buyer receivable are fully resolved.
- Acquisition performance and integration, including the final purchase-price allocation for BarOle and the realization of expected growth or operating benefits.
- Debt capacity, variable-rate exposure, covenant headroom, and the company’s ability to fund capital spending, dividends, repurchases, and further acquisitions.
- Changes in self-insurance reserves, large claims, cybersecurity remediation, and any employment-classification or wage-and-hour litigation developments.