Forward Air Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 1, 2023. The filing provides annual comparisons, not a separate Q4 financial-results table. Unless noted, dollar amounts below are in millions.
Business context
Forward Air is an asset-light freight and logistics provider operating in the U.S., Canada and Mexico. Its two reportable segments are Expedited Freight, including LTL, truckload and final mile (78.7% of 2022 revenue), and Intermodal drayage and related services (21.3%). The company emphasizes premium, time-sensitive freight services and growth through pricing, network expansion and acquisitions.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $1,973.4 | $1,662.4 | +18.7% |
| Operating income, continuing operations | $266.0 | $159.3 | +67.0% |
| Operating margin, continuing operations | 13.5% | 9.6% | +3.9 percentage points |
| Net income | $193.2 | $105.9 | +82.5% |
| Diluted EPS | $7.14 | $3.85 | +85.5% |
| Operating cash flow, continuing operations | $259.1 | $124.9 | +107.4% |
| Capital expenditures | $40.7 | $39.1 | +$1.6 |
Net cash from operations less capital expenditures was approximately $218.4 million in 2022, a derived measure. Cash and equivalents were $45.8 million at year-end. Credit-facility borrowings were $108.5 million, down from $157.5 million; finance lease obligations were $23.8 million. The company reported $280.0 million of available borrowing capacity and compliance with credit-facility covenants. Current assets were $304.3 million versus current liabilities of $169.4 million (approximately 1.8x current ratio).
Expedited Freight revenue rose 13.1% to $1,553.9 million; segment operating income increased 51.4% to $211.0 million, with margin improving to 13.6% from 10.1%. Intermodal revenue rose 45.1% to $419.7 million; segment operating income increased 88.8% to $56.9 million, with margin improving to 13.6% from 10.4%.
Material changes versus FY2021
- Revenue growth reflected higher pricing and fuel surcharges, accessorial revenue, acquisitions and Final Mile expansion. Fuel-surcharge revenue rose to 17.1% of operating revenue from 11.5%.
- Underlying activity softened: Expedited Freight tonnage declined 0.7% and shipments fell 5.2%; Intermodal drayage shipments declined 6.1%. Higher yield and revenue per shipment more than offset the volume declines.
- Operating expenses grew 13.6%, slower than revenue growth of 18.7%. Purchased transportation increased 8.8%; other operating expenses rose 41.0%, including contract labor, professional fees, software, recruiting and accessorial storage costs.
- 2022 net income had no discontinued-operation loss; FY2021 included a $10.2 million after-tax loss from the Pool business sold in February 2021.
- Cash used in investing activities was $104.5 million, including $40.7 million of capital expenditures and acquisitions. The company acquired Edgmon and Chickasaw Container Services in 2022 for approximately $66.7 million combined, funded with operating cash.
Outlook, risks and unusual items
- No specific numerical earnings or revenue guidance is provided. Management said freight-demand weakness and elevated customer inventories continued into early 2023 after an atypically soft peak season in 2022.
- Key exposures include economic slowdown and freight-volume declines, inflation and wage costs, fuel-price and surcharge mismatches, competition and pricing pressure, and difficulty retaining leased capacity providers and freight handlers.
- Customer concentration, short cancellation periods for many customer contracts, port or rail disruption affecting Intermodal, and potential reclassification of independent contractors are material business risks.
- Self-insurance loss reserves were $68.7 million at year-end, including estimates for vehicle liability and workers’ compensation claims. The auditor identified these reserves as a critical audit matter because of actuarial assumptions and estimation uncertainty. Management said pending claims and litigation were not expected to materially affect the financial statements, but noted reserves could change materially.
- The 2020 ransomware incident caused service delays; related expenses were zero in 2022 versus $0.4 million in 2021. Cybersecurity remains a stated risk.
- A new ERP system was implemented during 2022. Management and the auditor reported effective internal controls over financial reporting; related controls will continue to be evaluated. The financial-statement audit opinion was unqualified.
- The company paid $0.96 per share in dividends for 2022 and repurchased $62.8 million of stock. A $0.24-per-share dividend declared after year-end was scheduled for payment in Q1 2023.
Investor verification priorities
- Check whether freight volumes, shipment counts and pricing/yield trends improved or weakened after year-end, particularly given management’s early-2023 demand commentary.
- Separate base-rate and mix-driven yield gains from fuel-surcharge revenue when assessing the durability of revenue and margins.
- Review integration, purchase-price allocations and returns from the Edgmon and Chickasaw acquisitions, including Edgmon’s potential earn-out.
- Monitor self-insurance reserve development, claim severity and insurance renewal terms, as well as any material litigation developments.
- Track leverage, variable-rate borrowing costs, cash conversion and capital allocation, including dividends and share repurchases.
- Assess execution and control risks from the ERP implementation and ongoing cybersecurity safeguards.