SEC Form 424B3 filed by Forward Air Corporation

 

Filed Pursuant to Rule 424(b)(3)

Registration Statement No. 333-280102

November 8, 2024

PROSPECTUS SUPPLEMENT NO. 2

FORWARD AIR CORPORATION

UP TO 14,015,018 SHARES OF COMMON STOCK

 

 

This prospectus supplement amends the prospectus dated July 19, 2024 (as supplemented to date, the “Prospectus”) of Forward Air Corporation, a Tennessee corporation (the “Company”), which forms a part of the Company’s Registration Statement on Form S-1, as amended (No. 333-280102). This prospectus supplement is being filed to update and supplement the information included or incorporated by reference in the Prospectus with the information contained in (i) our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”) on November 8, 2024, (ii) our Current Report on Form 8-K filed with the SEC on November 8, 2024 and (iii) our Current Report on Form 8-K filed with the SEC on October 3, 2024, and Amendment No. 1 to the Current Report on Form 8-K/A filed with the SEC on October 28, 2024, as set forth below. This prospectus supplement should be read in conjunction with the Prospectus, which is to be delivered with this prospectus supplement.

Shares of our Common Stock are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “FWRD”. On November 7, 2024, the closing price of our Common Stock was $36.85.

 

 

Investing in the Company’s Common Stock involves risks. See “Risk Factors” beginning on page 6 of the Prospectus and under similar headings in any amendments or supplements to the Prospectus.

Neither the SEC nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

The date of this Prospectus Supplement No. 2 is November 8, 2024.

 

 

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, 2024

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-22490

 

 

 

FORWARD AIR CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Tennessee		62-1120025
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)
1915 Snapps Ferry Road Building N Greeneville TN		37745
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (423) 636-7000

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value		FWRD		The Nasdaq Stock Market LLC

 

 

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐		Smaller reporting company		☐
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of November 1, 2024 was 28,954,411.

 

 

 

Table of Contents

Forward Air Corporation

 

				Page Number
		Part I: Financial Information
Item 1.		Financial Statements
		Condensed Consolidated Financial Statements			3
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			57
Item 4.		Controls and Procedures			57
		Part II: Other Information
Item 1.		Legal Proceedings			58
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			58
Item 3.		Defaults Upon Senior Securities			58
Item 4.		Mine Safety Disclosures			58
Item 5.		Other Information			58
Item 6.		Exhibits			60
Signatures					61

 

2

Part I. Financial Information

Item 1. Financial Statements (Unaudited).

Forward Air Corporation

Condensed Consolidated Balance Sheets

(unaudited and in thousands, except share and per share amounts)

 

		September 30, 2024				December 31, 2023
Assets
Current assets:
Cash and cash equivalents		$	136,616			$	121,969
Restricted cash and restricted cash equivalents			1,540				39,604
Accounts receivable, less allowance of $2,782 in 2024 and $2,206 in 2023			361,003				153,267
Other receivables			1,695				5,408
Prepaid expenses			31,174				25,682
Other current assets			13,053				1,098
Total current assets			545,081				347,028
Noncurrent restricted cash equivalents			—				1,790,500
Property and equipment, net of accumulated depreciation and amortization of $281,636 in 2024 and $250,185 in 2023			324,782				258,095
Operating lease right-of-use assets			355,139				111,552
Goodwill			716,071				278,706
Other acquired intangibles, net of accumulated amortization of $190,369 in 2024 and $127,032 in 2023			1,033,352				134,789
Other assets			81,415				58,863
Total assets		$	3,055,840			$	2,979,533
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	157,230			$	45,430
Accrued expenses			135,590				62,948
Other current liabilities			49,571				71,727
Current portion of debt and finance lease obligations			16,741				12,645
Current portion of operating lease liabilities			89,566				44,344
Total current liabilities			448,698				237,094
Finance lease obligations, less current portion			32,731				26,736
Long-term debt, less current portion			1,673,292				—
Long-term debt held in escrow			—				1,790,500
Operating lease liabilities, less current portion			275,843				71,598
Liabilities under tax receivable agreement			36,797				—
Other long-term liabilities			42,423				47,144
Deferred income taxes			209,522				42,200
Shareholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2024 and 2023			—				—
Preferred stock, Class B, $0.01 par value: Authorized shares - 15,000; issued and outstanding shares - 11,130 in 2024 and none in 2023			—				—
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 28,689,172 in 2024 and 25,670,663 in 2023			287				257
Additional paid-in capital			528,255				283,684
Retained (deficit) earnings			(301,634	)			480,320
Accumulated other comprehensive loss			(824	)			—
Total Forward Air shareholders’ equity			226,084				764,261
Noncontrolling interest			110,450				—
Total shareholders’ equity			336,534				764,261
Total liabilities and shareholders’ equity		$	3,055,840			$	2,979,533

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3

Forward Air Corporation

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(unaudited and in thousands, except per share amounts)

 

		Three Months Ended
		September 30, 2024				September 30, 2023
Operating revenue		$	655,937			$	340,976
Operating expenses:
Purchased transportation			332,469				148,706
Salaries, wages and employee benefits			133,516				75,373
Operating leases			48,810				19,536
Depreciation and amortization			25,893				14,209
Insurance and claims			17,382				12,969
Fuel expense			4,855				5,845
Other operating expenses			55,564				52,649
Impairment of goodwill			14,751				—
Total operating expenses			633,240				329,287
Income from continuing operations			22,697				11,689
Other income and expenses:
Interest expense, net			(52,770	)			(2,655	)
Foreign exchange (loss) gain			(2,812	)			—
Other income (expense), net			(11	)			—
Total other expense			(55,593	)			(2,655	)
(Loss) income before income taxes			(32,896	)			9,034
Income tax (benefit) expense			1,302				2,541
Net (loss) income from continuing operations			(34,198	)			6,493
(Loss) income from discontinued operation, net of tax			(1,137	)			2,795
Net (loss) income			(35,335	)			9,288
Net income (loss) attributable to noncontrolling interest			38,073				—
Net (loss) income attributable to Forward Air		$	(73,408	)		$	9,288
Basic net (loss) income per share attributable to Forward Air:
Continuing operations		$	(2.62	)		$	0.25
Discontinued operations			(0.04	)			0.11
Net (loss) income per basic share		$	(2.66)			$	0.36
Diluted net (loss) income per share attributable to Forward Air:
Continuing operations		$	(2.62	)		$	0.25
Discontinued operations			(0.04	)			0.11
Net (loss) income per diluted share		$	(2.66	)		$	0.36
Dividends per share		$	—			$	0.24
Net (loss) income		$	(35,335	)		$	9,288
Other comprehensive (loss) income:
Foreign currency translation adjustments			176				—
Comprehensive (loss) income			(35,159	)			9,288
Comprehensive loss attributable to noncontrolling interest			38,073				—
Comprehensive income attributable to Forward Air		$	(73,232	)		$	9,288

The accompanying notes are an integral part of the condensed consolidated financial statement

 

4

Forward Air Corporation

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

(unaudited and in thousands, except per share amounts)

 

		Nine Months Ended
		September 30, 2024				September 30, 2023
Operating revenues		$	1,841,416			$	1,032,307
Operating expenses:
Purchased transportation			931,072				435,844
Salaries, wages and employee benefits			406,382				215,983
Operating leases			133,871				66,505
Depreciation and amortization			106,321				39,826
Insurance and claims			44,961				38,988
Fuel expense			15,960				16,733
Other operating expenses			234,175				133,218
Impairment of goodwill			1,107,465				—
Total operating expenses			2,980,207				947,097
(Loss) income from continuing operations			(1,138,791	)			85,210
Other income and expenses:
Interest expense, net			(140,788	)			(7,595	)
Foreign exchange (loss) gain			(1,912	)			—
Other income (expense), net			38				—
Total other expense			(142,662	)			(7,595	)
(Loss) income before income taxes			(1,281,453	)			77,615
Income tax (benefit) expense			(191,990	)			20,091
Net (loss) income from continuing operations			(1,089,463	)			57,524
(Loss) income from discontinued operation, net of tax			(6,013	)			8,083
Net (loss) income			(1,095,476	)			65,607
Net income (loss) attributable to noncontrolling interest			(314,923	)			—
Net (loss) income attributable to Forward Air		$	(780,553	)		$	65,607
Basic net (loss) income per share attributable to Forward Air:
Continuing operations		$	(28.73	)		$	2.20
Discontinued operations			(0.22	)			0.31
Net (loss) income per basic share		$	(28.95	)		$	2.51
Diluted net (loss) income per share attributable to Forward Air:
Continuing operations		$	(28.73	)		$	2.19
Discontinued operations			(0.22	)			0.31
Net (loss) income per diluted share		$	(28.95	)		$	2.50
Dividends per share		$	—			$	0.72
Net (loss) income		$	(1,095,476)			$	65,607
Other comprehensive (loss) income:
Foreign currency translation adjustments			(824	)			—
Comprehensive (loss) income			(1,096,300	)			65,607
Comprehensive loss attributable to noncontrolling interest			(314,923	)			—
Comprehensive (loss) income attributable to Forward Air		$	(781,377	)		$	65,607

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

5

Forward Air Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited and in thousands)

 

		Nine Months Ended
		September 30, 2024				September 30, 2023
Operating activities:
Net (loss) income from continuing operations		$	(1,089,463)			$	57,524
Adjustments to reconcile net (loss) income of continuing operations to net cash (used in) provided by operating activities of continuing operations
Depreciation and amortization			106,321				39,826
Impairment of goodwill			1,107,465				—
Share-based compensation expense			8,088				8,570
Provision for revenue adjustments			2,761				4,026
Deferred income tax (benefit) expense			(197,156	)			2,199
Other			4,296				(1,045	)
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable			(34,050	)			20,967
Other receivables			6,159				—
Other current and noncurrent assets			(18,215	)			3,609
Accounts payable and accrued expenses			58,024				6,444
Net cash (used in) provided by operating activities of continuing operations			(45,770	)			142,120
Investing activities:
Proceeds from sale of property and equipment			2,493				3,275
Purchases of property and equipment			(29,810	)			(22,080	)
Purchase of a business, net of cash acquired			(1,565,242	)			(56,703	)
Other			(319	)			—
Net cash used in investing activities of continuing operations			(1,592,878	)			(75,508	)
Financing activities:
Repayments of finance lease obligations			(15,339	)			(6,840	)
Proceeds from credit facility			—				45,000
Payments on credit facility			(80,000	)			(31,125	)
Payment of debt issuance costs			(60,591	)			—
Payment of earn-out liability			(12,247	)			—
Payments of dividends to shareholders			—				(18,798	)
Repurchases and retirement of common stock			—				(93,811	)
Proceeds from common stock issued under employee stock purchase plan			355				421
Payment of minimum tax withholdings on share-based awards			(1,572	)			(4,315	)
Contributions from subsidiary held for sale			—				15,877
Net cash used in financing activities of continuing operations			(169,394	)			(93,591	)
Effect of exchange rate changes on cash			138				—
Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents from continuing operations			(1,807,904	)			(26,979	)
Cash from discontinued operation:
Net cash (used in) provided by operating activities of discontinued operation			(6,013	)			17,311
Net cash used in investing activities of discontinued operation			—				(1,338	)
Net cash used in financing activities of discontinued operation			—				(15,973	)
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents			(1,813,917	)			(26,979	)
Cash, cash equivalents and restricted cash equivalents at beginning of period of continuing operations			1,952,073				45,822
Cash at beginning of period of discontinued operation			—				—
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents			(1,813,917	)			(26,979	)
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period of continuing operations		$	138,156			$	18,843

 

6

Forward Air Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

		Nine Months Ended
		September 30, 2024				September 30, 2023
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents:
Cash and cash equivalents		$	136,616			$	18,843
Restricted cash and restricted cash equivalents			1,540				—
Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the statement of cash flow:		$	138,156			$	18,843
Non-Cash Transactions:
Equipment acquired under finance leases		$	10,976			$	18,394

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

7

Forward Air Corporation

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited and in thousands)

 

		Common Stock								Preferred Stock - Class B Amount								Preferred Stock - Class C Amount								Additional Paid-in Capital				Accumulated Other Comprehensive Loss				Retained (Deficit) Earnings				Noncontrolling Interest				Total Shareholders’ Equity
		Shares				Amount				Shares				Amount				Shares				Amount
Balance at December 31, 2023			25,671			$	257				—			$	—				—			$	—			$	283,684			$	—			$	480,320			$	—			$	764,261
Net loss			—				—				—				—				—				—				—				—				(61,712	)			(27,082	)			(88,794	)
Foreign currency translation adjustments			—				—				—				—				—				—				—				(151	)			—				—				(151	)
Shares issued - acquisition			700				7				4				—				1				—				223,425				—				—				433,449				656,881
Share-based compensation expense			—				—				—				—				—				—				1,567				—				—				—				1,567
Payment of minimum tax withholdings on share-based awards			(33	)			—				—				—				—				—				—				—				(1,326	)			—				(1,326	)
Issuance of share-based awards			100				1				—				—				—				—				(1	)			—				—				—				—
Balance at March 31, 2024			26,438			$	265				4			$	—				1			$	—			$	508,675			$	(151	)		$	417,282			$	406,367			$	1,332,438
Net loss			—				—				—				—				—				—				—				—				(645,433	)			(325,914	)			(971,347	)
Foreign currency translation adjustments			—				—				—				—				—				—				—				(849	)			—				—				(849	)
Common stock issued under employee stock purchase plan			21				—				—				—				—				—				355				—				—				—				355
Conversion of preferred C series			1,210				12				8				—				(1	)			—				(12	)			—				—				—				—
Share-based compensation expense			—				—				—				—				—				—				3,620				—				—				—				3,620
Issuance of share-based awards			30				—				—				—				—				—				—				—				—				—				—
Balance at June 30, 2024			27,699			$	277				12			$	—				—			$	—			$	512,638			$	(1,000	)		$	(228,151	)		$	80,453				364,217
Net loss			—				—				—				—				—				—				—				—				(73,408	)			38,073				(35,335	)
Foreign currency translation adjustment			—				—				—				—				—				—				—				176				—				—				176
Common stock issued under employee stock purchase plan			—				—				—				—				—				—				—				—				—				—				—
Series B - Share Conversions			967				10				(1	)			—				—				—				8,066				—				—				(8,076	)			—
Share-based compensation expense			—				—				—				—				—				—				2,901				—				—				—				2,901
Payment of minimum tax withholdings on share-based awards			(1	)			—				—				—				—				—				—				—				(75	)			—				(75	)
Tax receivable agreement liability			—				—				—				—				—				—				4,650				—				—				—				4,650
Issuance of share-based awards			24								—				—				—				—				—				—				—				—				—
Balance at September 30, 2024			28,689			$	287				11			$	—				—			$	—			$	528,255			$	(824	)		$	(301,634	)		$	110,450				336,534

 

8

		Common Stock								Additional Paid-in Capital				Retained Earnings				Total Shareholders’ Equity
		Shares				Amount
Balance at December 31, 2022			26,462			$	265			$	270,855			$	436,124			$	707,244
Net income			—				—				—				36,368				36,368
Share-based compensation expense			—				—				3,149				—				3,149
Payment of dividends to shareholders			—				—				4				(6,349	)			(6,345	)
Payment of minimum tax withholdings on share-based awards			(40	)			—				—				(4,292	)			(4,292	)
Repurchases and retirement of common stock			(474	)			(5	)			—				(50,486	)			(50,491	)
Issuance of share-based awards			105				1				(1	)			—				—
Balance at March 31, 2023			26,053			$	261			$	274,007			$	411,365			$	685,633
Net income			—				—				—				19,951				19,951
Common stock issued under employee stock purchase plan			4				—				421				—				421
Share-based compensation expense			—				—				3,160				—				3,160
Payment of dividends to shareholders			—				—				5				(6,260	)			(6,255	)
Repurchases and retirement of common stock			(285	)			(3	)			—				(29,298	)			(29,301	)
Issuance of share-based awards			14				—				—				—				—
Balance at June 30, 2023			25,786			$	258			$	277,593			$	395,758			$	673,609
Net income			—				—				—				9,288				9,288
Stock options exercised			—				—				—				—				—
Common stock issued under employee stock purchase plan			—				—				—				—				—
Share-based compensation expense			—				—				3,043				—				3,043
Payment of dividends to shareholders			—				—				4				(6,202	)			(6,198	)
Payment of minimum tax withholdings on share-based awards			—				—				—				(23	)			(23	)
Repurchases and retirement of common stock			(124	)			(1	)			—				(14,018	)			(14,019	)
Issuance of share-based awards			—				—				—				—				—
Balance at September 30, 2023			25,662			$	257			$	280,640			$	384,803			$	665,700

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

9

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

1.	Description of Business and Basis of Presentation

Basis of Presentation and Principles of Consolidation

Forward Air Corporation and its subsidiaries (“Forward Air” or the “Company”) is a leading asset-light freight and logistics company. The Company has three reportable segments: Expedited Freight, Intermodal and Omni Logistics. The Company conducts business in North and South America, Europe, and Asia.

The Expedited Freight segment provides expedited regional, inter-regional and national less-than-truckload (“LTL”) and truckload services. Expedited Freight also offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling services.

The Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. Intermodal also offers dedicated contract and container freight station (“CFS”) warehouse and handling services.

The Omni Logistics segment provides a full suite of global logistics services. Services include air and ocean freight consolidation and forwarding, custom brokerage, warehousing and distribution, time-definite transportation services and other supply chain solutions.

The Company’s condensed consolidated financial statements include Forward Air Corporation and its wholly-owned and majority owned domestic and foreign subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. A noncontrolling interest in a consolidated subsidiary represents the portion of equity (net assets) in a subsidiary, attributable, directly or indirectly, to the Company. Noncontrolling interests are presented as a separate component of equity in the consolidated balance sheet and the presentation of net loss presents losses attributable to controlling and noncontrolling interests.

In the fourth quarter of 2023, the Company held interests in two wholly-owned subsidiaries of Omni Newco, LLC (“Omni”), GN Bondco, LLC and GN Loanco, LLC, that were considered Variable Interest Entities (“VIEs”). VIEs are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is required if a reporting entity is the primary beneficiary of the VIE.

Interests in these VIEs are evaluated to determine if the Company is the primary beneficiary. This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to create and pass along, the relative power of each party, and to the Company’s obligation to absorb losses or receive residual returns of the entity. The Company concluded that the VIEs should be consolidated as of December 31, 2023 because the Company had (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, which could potentially be significant. On January 25, 2024 (“the Closing”), the Company completed the acquisition of Omni (“the Omni Acquisition”) pursuant to the Agreement and Plan of Merger, dated as of August 10, 2023 (the “Merger Agreement”) and amended by Amendment No. 1, dated as of January 22, 2024 (the “Amended Merger Agreement”). The VIEs were acquired as part of the Omni Acquisition and assumed into the Company’s consolidated subsidiaries as of January 25, 2024. Refer to Note 4, Acquisitions, for additional disclosures regarding the Company’s previously held VIEs.

 

10

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

The condensed consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Results for interim periods are not necessarily indicative of the results for the year.

Foreign Currency

Foreign currency amounts attributable to foreign operations have been translated into United States dollars. Assets and liabilities are translated to United States dollars at period-end exchange rates and income and expense items are translated at average rates of exchange prevailing during the period. Translation adjustments are included in “Accumulated other comprehensive loss” in stockholders’ equity within the Condensed Consolidated Balance Sheets and gains and losses, which result from foreign currency transactions, are included in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Restricted Cash

As of September 30, 2024, the Company had restricted cash in the amount of $1,540 related to a letter of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage.

Immaterial Correction of Previously Issued Consolidated Financial Statements

Subsequent to the issuance of the Company’s fiscal year 2023 consolidated financial statements, the Company identified errors in the application of Accounting Standards Codification (“ASC”) 835, “Debt Issuance Costs” and in the cut-off of certain payables. In connection with debt issued in the prior year for the Omni Acquisition, approximately $8,200 of debt issuance costs were expensed and not capitalized. The correction of this error resulted in an out of period adjustment to reduce Other operating expense by $8,200, with an offset of $7,400 to debt issuance costs (a reduction of Long-term debt) and approximately $800 of Interest expense, net in the three and nine months ended September 30, 2024. Additionally, the nine months ended September 30, 2024 also includes $3,200 of out-of-period adjustments to increase Other operating expense related to incremental payables for services incurred prior to December 31, 2023 that were not accrued at December 31, 2023

Also, approximately $47,400 of year-to-date incurred losses were allocated to the noncontrolling interest associated with the goodwill impairment recorded in the previous three-month period ended June 30, 2024. A correction resulted in approximately net $38,000 of income to noncontrolling interest during the three-month period ended September 30, 2024. Refer to the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company has evaluated the effects of the corrections described above, in accordance with guidance in ASC 250, “Accounting Change and Error Correction”. The Company concluded such corrections to be immaterial to previously issued financial statements and for the three months ended September 30, 2024.

 

2.	Revenue Recognition

Revenue is recognized when the Company satisfies the performance obligation by the delivery of a shipment in accordance with contractual agreements, bills of lading (“BOLs”) and general tariff provisions. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those services pursuant to a contract with a customer. A contract exists once the Company enters into a contractual agreement with a customer. The Company does not recognize revenue in cases where collectability is not probable, and defers recognition until collection is probable or payment is received.

 

11

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

The Company generates revenue from the delivery of a shipment and the completion of related services. Revenue for the delivery of a shipment is recorded over time to coincide with when customers simultaneously receive and consume the benefits of the delivery services. Accordingly, revenue billed to a customer for the transportation of freight are recognized over the transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a shipment based on the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of a reporting period. The determination of the transit period and how much of it has been completed as of a given reporting date may require the Company to make judgments that impact the timing of revenue recognized. For delivery of shipments with a pick-up date in one reporting period and a delivery date in another reporting period, the Company recognizes revenue based on relative transit time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Upon delivery of a shipment or related service, customers are billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage.

Revenue is classified based on the line of business as the Company believes that best depicts the nature, timing and amount of revenue and cash flows. For all lines of business, the Company records revenue on a gross basis as it is the principal in the transaction as the Company has discretion to determine the amount of consideration. Additionally, the Company has the discretion to select drivers and other vendors for the services provided to customers. These factors, discretion in the amount of consideration and the selection of drivers and other vendors, support revenue recognized on a gross basis.

 

3.	Discontinued Operation

As previously disclosed, in December 2023, the Company made a decision to divest of the Final Mile business and the sale was completed on December 20, 2023. As a result, the results of operations of Final Mile, have been presented under the caption “(Loss) income from discontinued operations, net of tax” in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2023. Settlement payment of $6,013 have been incurred in the nine months ended September 30, 2024 in relation to this disposal.

Summarized Discontinued Operation Financial Information

A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2023 is as follows:

 

		Three Months Ended				Nine Months Ended
		September 30, 2023				September 30, 2023
Operating revenue		$	72,471			$	210,388
Operating expenses:
Purchased transportation			42,060				121,782
Salaries, wages and employee benefits			12,786				38,382
Operating leases			3,126				9,589
Depreciation and amortization			1,297				3,828
Insurance and claims			657				1,780
Fuel expense			72				242
Other operating expenses			8,669				23,782
Total operating expenses			68,667				199,385
Income from discontinued operation before income taxes			3,804				11,003
Income tax expense			1,009				2,920
Income from discontinued operation, net of tax		$	2,795			$	8,083

 

12

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

4.	Acquisitions

Expedited Freight Acquisition

In January 2023, the Company acquired certain assets of Land Air Express, Inc. (“Land Air”) for $56,567. Land Air, headquartered in Bowling Green, Kentucky, offers a variety of less-than-truckload services including guaranteed, standard, exclusive, same day, hot shot and pickup and delivery, and operates in over 25 terminals across the United States. The acquisition of Land Air is expected to accelerate the expansion of the Company’s national terminal footprint, particularly in the middle part of the United States, and strategically position the Company to better meet the current and future needs of customers. The acquisition was funded using cash flow from operations and proceeds from the Company’s credit facility. The results of Land Air have been included in the Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment.

Acquisition of Omni

On January 25, 2024, the Company completed the Omni Acquisition pursuant to the Merger Agreement, as amended by the Amended Merger Agreement. Omni, headquartered in Dallas, Texas, is an asset-light, high-touch logistics and supply chain management company with customer relationships in high-growth end markets. Omni delivers domestic and international freight forwarding, fulfillment services, customs brokerage, distribution, and value-added services for time-sensitive freight to U.S.-based customers operating both domestically and internationally. Pursuant to the Amended Merger Agreement, through a series of transactions involving the Company’s direct and indirect subsidiaries (collectively, with the other transactions contemplated by the Amended Merger Agreement and the other Transaction Agreements referred to therein, the “Transactions”), the Company acquired Omni for a combination of (a) $100,499 in cash (which includes pre-acquisition Omni costs of approximately $80 million) and (b) 14,015 shares of the Company’s outstanding common stock, on an as-converted and as-exchanged basis (the “Equity Consideration”) consisting of: (i) 1,910 shares of common stock (of which 1,210 were issued upon conversion of the Series C Preferred Units upon approval of the Company’s shareholders at the 2024 Annual Shareholders Meeting held on June 3, 2024 (the “Conversion Approval”)) and (ii) 12,105 Opco Class B Units (as defined below) and corresponding Series B Preferred Units (as defined below), which are exchangeable into shares of Common Stock (of which 7,670 units were issued upon conversion of the units of Opco (defined below) designated as “Opco Series C-2 Preferred Units” upon the Conversion Approval. The Equity Consideration represents, as of September 30, 2024, 34% of the Company’s outstanding common stock on a fully-diluted and as-exchanged basis.

Prior to the consummation of the Transactions, the Company completed a restructuring, pursuant to which, among other things, the Company contributed all of its operating assets to Clue Opco LLC, a newly formed subsidiary of the Company (“Opco”). Opco has been structured as an umbrella partnership C corporation through which the existing direct and certain indirect equity holders of Omni (“Omni Holders”) hold a portion of the Equity Consideration in the form of units of Opco designated as “Class B Units” (“Opco Class B Units”) and corresponding Series B Preferred Units. Effective as of the Closing, the Company operates its business through Opco, which indirectly holds all of the assets and operations of the Company and Omni. Opco is governed by an amended and restated limited liability company agreement of Opco that became effective at the Closing (“Opco LLCA”).

At the Closing, the Company, Opco, Omni Holders and certain other parties entered into a tax receivable agreement (the “Tax Receivable Agreement”), which sets forth the agreement among the parties regarding the sharing of certain tax benefits realized by the Company as a result of the Transactions. Pursuant to the Tax Receivable Agreement, the Company is generally obligated to pay certain Omni Holders 83.5% of (a) the total tax benefit that the Company realizes as a result of increases in tax basis in Opco’s assets resulting from certain actual or deemed distributions and the future exchange of units of Opco for shares of securities of the Company (or cash) pursuant to the Opco LLCA, (b) certain pre-existing tax attributes of certain Omni Holders that are corporate entities for tax purposes, (c) the tax benefits that the Company realizes from certain tax allocations that correspond to items of income or gain required to be recognized by certain Omni Holders, and (d) other tax benefits attributable to payments under the Tax Receivable Agreement.

 

13

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

As of December 31, 2023, the Company consolidated the activities of GN Bondco, LLC (VIE) and GN Loanco, LLC (VIE) with the proceeds from the Notes (as defined below) and New Term Loan (as defined below) recorded in “Noncurrent restricted cash equivalents” and the corresponding long-term debt recorded in “Long-term debt held in escrow” on the Condensed Consolidated Balance Sheets. Pursuant to the Merger Agreement, the Company deposited the appropriate funds into escrow on behalf of GN Bondco, LLC and GN Loanco, LLC in connection with the interest accrued through the Closing. For the interest funded but unpaid as of December 31, 2023, the corresponding amounts were recorded in “Restricted cash equivalents” and “Accrued expenses” on the Condensed Consolidated Balance Sheets. Additionally, while held in escrow, the proceeds from the Notes and New Term Loan were invested in a liquid, short-term instrument. The receivable for the interest earned through December 31, 2023 was recorded in “Restricted cash equivalents” and “Other receivables” on the Condensed Consolidated Balance Sheets.

At the Closing, the funds held in escrow were released, the aforementioned VIEs were dissolved, and the proceeds were distributed to the Company to affect the Transactions. The Notes and New Term Loans are discussed in Note 6, Indebtedness.

The Omni Acquisition enables the Company to provide a differentiated service offering and expanded geographic footprint to customers. In addition, the combination of these complementary businesses positions the Company to deliver integrated global supply chain solutions for customers’ most service-sensitive logistics needs. Goodwill recognized related to the preliminary purchase price represents planned operational synergies, expanded geographic reach of our services, and strategic market positioning. The results of Omni have been included in the Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Omni reportable segment and is not expected to be deductible for tax purposes.

Consideration transferred of Omni

The acquisition-date fair value sources of the consideration transferred consists of the followings:

 

		Omni
Cash		$	100,499
Liabilities under tax receivable agreement			13,270
Common shares			32,795
Series B preferred shares (each issued with a corresponding Opco class B unit)			207,880
Series C preferred shares			56,713
Opco C-2 preferred units			359,493
Extinguishment of Omni’s indebtedness			1,543,003
Preliminary consideration transferred		$	2,313,653

 

14

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

Fair Value of Assets Acquired and Liabilities Assumed

Assets acquired and liabilities assumed as of the acquisition date are presented in the following table:

 

		Land Air				Omni
		January 31, 2023				January 25, 2024
Tangible assets:
Cash		$	—			$	78,260
Accounts receivable			—				181,570
Property and equipment			738				75,292
Other assets			—				35,639
Operating lease right-of-use assets			—				234,025
Total tangible assets			738				604,786
Intangible assets:
Customer relationships			35,200				915,400
Non-compete agreements			—				23,400
Trademarks and other			—				23,100
Goodwill			20,629				1,544,830
Total intangible assets			55,829				2,506,730
Total assets acquired			56,567				3,111,516
Liabilities assumed:
Current liabilities			—				156,002
Finance lease obligations			—				14,606
Operating lease liabilities			—				234,025
Other liabilities			—				643
Deferred income taxes			—				392,587
Total liabilities assumed			—				797,863
Net assets acquired		$	56,567			$	2,313,653

The estimated fair values of the assets acquired and liabilities assumed including the consideration transferred are based on the Company’s best estimates and assumptions using the information available as of the acquisition date through the date of this filing. As a part of the Omni Acquisition, the interest in Opco not owned by Company was valued to be $433,449 on January 25, 2024 and is disclosed in the Condensed Consolidated Statements of Shareholders’ Equity. The Company continues to evaluate the impact of this acquisition on its Condensed Consolidated Financial Statements. The primary areas of the acquisition accounting that are not yet finalized include, but are not limited to, the following: (1) finalizing the review and valuation of the acquired tangible and intangible assets and liabilities (including the key assumptions, inputs, and estimates) and (2) finalizing the identification of the tangible and intangible assets acquired and liabilities assumed and identified. Actual values may differ (possibly materially) when final information becomes available that differs from our current estimates. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date.

 

15

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

During the three months ended September 30, 2024, the Company recorded measurement period adjustments to decrease Customer Relationships by $147.3 million, decrease Non-compete Agreements by $19.1 million, and decrease Trademarks and other by $19.4 million. As a result of the adjusted acquisition-date fair value of assets acquired, the Company recorded an increase of $185.8 million to the Goodwill recognized. The measurement period adjustments were recorded in the condensed consolidated financial statements as of and for the three months ended September 30, 2024 and were made to reflect facts and circumstances that existed as of the acquisition date. The Company initially recorded the purchase price allocation on initial estimates, and in the three months ended September 30, 2024 an updated valuation was performed. The effects of the remeasuring the intangible assets resulted in a reduction of $11.8 million in amortization expense for the three and nine month period ended September 30, 2024, recognized in Depreciation and amortization on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) income.

The fair value estimates of assets acquired and liabilities assumed is pending the completion of various items and is anticipated to be completed in the last three months of the fiscal year.

For the three and nine months ended September 30, 2024, the Company recorded $(549) and $71,393 of transactions and integration costs incurred in connection with the Omni Acquisition. The transaction and integration costs were recorded in “Other operating expenses” in the Condensed Consolidated Statements of Operations.

The preliminary estimated useful life of acquired intangible assets as of the acquisition date are summarized in the following table:

 

		Estimated Useful Lives
		Land Air				Omni
Customer relationships			15 years				14 years
Non-compete agreements			—				4 years
Trademarks and other			—				5 years

Supplemental Pro Forma Information

The following table represents the pro forma financial information as if Omni had been included in the consolidated results of the Company since January 1, 2023 (unaudited and in thousands):

 

		Nine Months Ended
		September 30, 2024				September 30, 2023
Pro forma revenue		$	1,923,416			$	2,002,935
Pro forma net loss from continuing operations			(1,155,014	)			(133,216	)

The pro forma financial information adjusts the net loss for amortization of the intangible assets and the fair value adjustments of the assets acquired in connection with the Omni Acquisition as if the Closing had occurred on January 1, 2023.

 

16

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

5.	Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the nine months ended September 30, 2024 are summarized as follows:

 

		Expedited Freight				Intermodal				Omni Logistics				Consolidated
Balance as of December 31, 2023		$	141,720			$	136,986			$	—			$	278,706
Acquisition			—				—				1,544,830				1,544,830
Impairment			—				—				(1,107,465	)			(1,107,465	)
Balance as of September 30, 2024		$	141,720			$	136,986			$	437,365			$	716,071

The Company’s accumulated impairment loss for the Omni Logistics segment is $1,107,465 as of September 30, 2024. The Company’s accumulated goodwill impairment also includes $25,686 related to impairment charges the Company recorded during 2016 pertaining to its Truckload Services reporting unit. The Truckload Services reporting unit operates within the Expedited Freight reportable segment.

The Company tests goodwill for impairment, at the reporting unit level, annually as of June 30 and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. If the fair value of the reporting unit is below its carrying value, the difference between the total fair value of the reporting unit and the carrying value is recognized as an impairment to the reporting unit’s goodwill.

The Company’s annual impairment analyses were performed as of June 30, 2024 for all reporting units. For the reporting units in the Expedited Freight and Intermodal reportable segments, we performed a discounted cash flow (DCF) analysis and these reporting units continue to result in an excess of fair value over carrying value.

The Omni reporting unit’s fair value was calculated using a DCF model and a guideline public company method, with each method weighted equally. Under the DCF model, the fair value of a reporting unit is the present value of estimated future cash flows and is based on all known or knowable information at the measurement date. Under the guideline public company method, the fair value is based upon market multiples derived from publicly-traded companies with similar operating and investment characteristics of the reporting unit. The inputs to both the DCF and the guideline public company method are Level 3 valuation inputs. Primarily due to a decrease in the market value of the Company’s common stock during the second quarter of 2024, as a result of many factors including, but not limited to, general market factors, credit rating downgrades, and changes in executive leadership, and the inherent uncertainty associated with the combined enterprise, the Omni Logistics reporting unit’s fair value was determined to be less than its carrying value. As a result, the Company recorded a non-cash impairment charge of $1,092,714 during the six months ended June 30, 2024. Due to measurement period adjustments in the three months ended September 30, 2024, an additional $14,751 of goodwill impairment was recorded. The cumulative goodwill impairment through the nine months ended September 30, 2024 is $1,107,465. The goodwill impairment expense was recorded in the Impairment of goodwill caption on the Condensed Consolidated Statement of Operations.

Additionally, as qualifying measurement-period adjustments are made to the Omni purchase price allocation, which is not yet finalized (See Note 4, Acquisitions), further adjustments to the goodwill impairment may be required.

 

17

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2024 are summarized as follows:

 

		Gross Carrying Amount
		Customer Relationships1				Non-Compete Agreements				Trade Names				Total
Balance as of December 31, 2023		$	253,914			$	6,407			$	1,500			$	261,821
Acquisition			915,400				23,400				23,100				961,900
Balance as of September 30, 2024		$	1,169,314			$	29,807			$	24,600			$	1,223,721

 

		Accumulated Amortization
		Customer Relationships1				Non-Compete Agreements				Trade Names				Total
Balance as of December 31, 2023		$	118,993			$	6,539			$	1,500			$	127,032
Amortization expense			55,373				4,884				3,080				63,337
Balance as of September 30, 2024		$	174,366			$	11,423			$	4,580			$	190,369

 

1	Carrying value as of September 30, 2024 and December 31, 2023 is inclusive of $16,501 of accumulated impairment.

 

6.	Indebtedness

Long-term debt consisted of the following as of September 30, 2024 and December 31, 2023:

 

		September 30, 2024				December 31, 2023
Term Loan, expiring 2030 1		$	1,045,000			$	—
Senior Secured Notes, maturing 2031 1			725,000				—
Debt issuance discount			(55,601	)			—
Debt issuance costs 2			(41,107	)			—
Total long-term debt		$	1,673,292			$	—

 

1	On December 31, 2023 the debt instruments and related proceeds were consolidated but were restricted under an escrow agreement contingent upon the Closing of the Omni Acquisition.

2	Debt issuance costs of $9,835 related to the Revolving Credit Facility are recorded in Other Assets.

 

18

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

Senior Secured Notes

In order to finance a portion of the cash consideration payable for the Omni Acquisition and the costs and expenses incurred in connection with the transaction, GN Bondco, LLC, a wholly owned subsidiary of Omni, (the “Escrow Issuer” and consolidated VIE) completed a private offering of $725,000 aggregate principal amount of its 9.5% senior secured notes due 2031 (the “Notes”) in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). As of December 31, 2023, the Notes were included in Long-term debt held in escrow on the Condensed Consolidated Balance Sheets. Upon the Closing, Opco assumed the Escrow Issuer’s obligations under the Notes. The Notes bear interest at a rate of 9.5% per annum, payable semiannually in cash in arrears on April 15 and October 15 of each year, commencing April 15, 2024. The Notes were issued at 98.0% of the face amount and will mature on October 15, 2031. Notes were issued pursuant to an indenture dated as of October 2, 2023, between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee and notes collateral agent.

The Notes are guaranteed on a senior secured basis in an aggregate principal amount in excess of $100,000. Prior to October 15, 2026, Opco may redeem some or all of the Notes at any time and from time to time at a redemption price equal to 100.000% of the principal amount thereof plus the applicable “make-whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. On or after October 15, 2026, Opco may redeem some or all of the Notes at the following prices (expressed as a percentage of principal), plus in each case accrued and unpaid interest, if any, to, but excluding, the redemption date: (a) in the case of a redemption occurring during the 12-month period commencing October 15, 2026, at a redemption price of 104.750%; (b) in the case of a redemption occurring during the 12-month period commencing on October 15, 2027, at a redemption price of 102.375%; and (c) in the case of a redemption occurring on or after October 15, 2028, at a redemption price of 100.000%. In addition, at any time prior to October 15, 2026, Opco may redeem up to 40.000% of the original aggregate principal amount of the Notes in an amount not to exceed the amount of net cash proceeds from one or more equity offerings at a redemption price equal to 109.5% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Upon the occurrence of a “change of control”, Opco will be required to offer to repurchase all of the outstanding principal amount of the Notes at a purchase price of 101.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

Senior Secured Term Loan Facility

In order to finance a portion of the cash consideration payable for the Omni Acquisition and the costs and expenses incurred in connection with the transaction, GN Loanco, LLC, a wholly owned subsidiary of Omni, (the “Escrow Loan Borrower” and consolidated VIE), entered into a credit agreement (the “Credit Agreement”) with Citibank, N.A., as administrative agent and collateral agent and as initial term loan lender on December 19, 2023. Pursuant to the Credit Agreement, the Escrow Loan Borrower obtained senior secured term B loans in an aggregate principal amount of $1,125,000 (the “New Term Loans”) and the ability to draw down up to $400,000 under a line of credit (the “Revolving Credit Facility”).

The New Term Loans bear interest based, at Opco’s election, on (a) SOFR plus an applicable margin or (b) the base rate plus an applicable margin. The base rate is equal to the highest of the following: (i) the prime rate; (ii) 0.50% above the overnight federal funds rate; and (iii) the one-month Term SOFR plus 1.00%. The applicable margin for Term SOFR loans is 4.50% and the applicable margin for base rate loans is 3.50%. The New Term Loans are subject to customary amortization of 1.00% per year. The New Term Loans were issued at 96.0% of the face amount and will mature on December 19, 2030.

No borrowings under the Revolving Credit Facility were made in connection with the Omni Acquisition. The Revolving Credit Facility will mature on January 25, 2029. Loans made under the Revolving Credit Facility bear interest based, at Opco’s election, on (a) SOFR plus an applicable margin or (b) the base rate plus an applicable margin. Until delivery of a compliance certificate in respect of the fiscal quarter ending September 30, 2024, the applicable margin for SOFR loans is 4.25% and the applicable margin for base rate loans is 3.25%. Thereafter, the applicable margin can range from 3.75% to 4.25% for SOFR loans and from 2.75% to 3.25% for base rate loans, in each case depending on Opco’s first lien net leverage ratio, as set forth in the Credit Agreement. Upon closing of the Omni Acquisition, Opco assumed the Escrow Loan Borrower’s obligations under the Credit Agreement, which were further secured by certain guarantors. Opco’s obligations under the Credit Agreement are guaranteed on a senior secured basis by the Company and each of Opco’s existing and future domestic subsidiaries (subject to customary exceptions).

 

19

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

On February 12, 2024, Opco and the parties to the Credit Agreement entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement, which (a) modifies the financial performance covenant in the Credit Agreement by temporarily increasing the 4.50:1.00 maximum consolidated first lien net leverage ratio permitted by the covenant to (i) 6.00:1.00 (for the second and third quarters of 2024), (ii) 5.50:1.00 (for the fourth quarter of 2024), (iii) 5.25:1.00 (for the first quarter of 2025), (iv) 5.00:1.00 (for the second quarter of 2025) and (v) 4.75:1.00 (for the third quarter of 2025) and (b) reduces the revolving credit commitments available under the Credit Agreement from an aggregate principal amount of $400,000 to an aggregate principal amount of $340,000. If the financial performance covenant is not met, the Company will lose access to the Revolving Credit Facility. Amendment No. 2 also amends certain other terms of the Credit Agreement.

Prior to the effectiveness of Amendment No. 2, on February 12, 2024, Opco repaid $80,000 aggregate principal amount of the New Term Loans outstanding under the Credit Agreement, together with all accrued and unpaid interest thereon.

Both the Notes and Revolving Credit Facility contain covenants that, among other things, restrict the ability of the Company, without the approval of the required lenders, to engage in certain mergers, consolidations, asset sales, dividends and stock repurchases, investments, and other transactions or to incur liens or indebtedness in excess of agreed thresholds, as set forth in the Credit Agreement. As of the date of this report, the Company was in compliance with these aforementioned covenants.

As of September 30, 2024 the Company had no outstanding borrowings under this revolving credit facility.

Former Credit Facility

In September 2017, the Company entered into a five-year senior unsecured revolving credit facility (the “Facility”) with a maximum aggregate principal amount of $150,000, with a sublimit of $30,000 for letters of credit and a sublimit of $30,000 for swing line loans. The maturity date of the Facility was September 29, 2022. In April 2020, the Company entered into the first amendment to the Facility, which increased the maximum aggregate principal amount to $225,000. The Facility could have been increased by up to $25,000 to a maximum aggregate principal amount of $250,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. In July 2021, the Company entered into the second amendment to the Facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available under the Facility. In December 2021, the Company entered into the third amendment to the Facility, which increased the amount available for borrowing under the Facility to $450,000, consisting of a $300,000 revolving line of credit and a term loan of $150,000. In connection with the third amendment, the Company borrowed $150,000 under the term loan and simultaneously repaid $150,000 on the revolving line of credit from the borrowings received. Under the third amendment, the Facility could have been increased by up to $75,000 to a maximum aggregate principal amount of $525,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. Such increases to the Facility could have been in the form of additional revolving credit loans, term loans or a combination thereof, and were contingent upon there being no events of default under the Facility.

As of December 31, 2023 the Company had no outstanding borrowings under the Facility. No borrowings were made under the Facility prior to the extinguishment upon the Closing.

Letters of Credit

The Company had an arrangement to issue a letter of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. As of December 31, 2023 and September 30, 2024, the outstanding letter of credit totaled $19,834 and $1,540, respectively. Under the Revolving Credit Facility, the outstanding letter of credit totaled $17,688 as of September 30, 2024.

 

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2024

 

7.	Net (Loss) Income Per Share

Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding during each period. Restricted shares have non-forfeitable rights to dividends and as a result, are considered participating securities for purposes of computing net income per common share pursuant to the two-class method. Diluted net income per common share assumes the exercise of outstanding stock options and the vesting of performance share awards using the treasury stock method when the effects of such assumptions are dilutive.

A reconciliation of net income attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income per share during the three and nine months ended September 30, 2024 and 2023 is as follows:

 

		Three Months Ended								Nine Months Ended
		September 30, 2024				September 30, 2023				September 30, 2024				September 30, 2023
Numerator:
Net (loss) income from continuing operations		$	(72,271	)		$	6,493			$	(774,540	)		$	57,524
Net (loss) income from discontinued operation			(1,137	)			2,795				(6,013	)			8,083
Net (loss) income attributable to Forward Air			(73,408	)			9,288				(780,553	)			65,607
Income allocated to participating securities from continuing operations			—				(40	)			—				(313	)
Income allocated to participating securities from discontinued operation			—				(17	)			—				(44	)
Income allocated to participating securities			—				(57	)			—				(357	)
Numerator for basic and diluted net (loss) income per share for continuing operations		$	(73,101	)		$	6,453			$	(775,347	)		$	57,211
Numerator for basic and diluted net income per share for discontinued operation		$	(1,137	)		$	2,778			$	(6,013	)		$	8,039
Denominator:
Denominator for basic net (loss) income per share - weighted-average number of common shares outstanding			27,941				25,697				26,983				25,995
Dilutive stock options and performance share awards			—				74				—				101
Denominator for diluted net (loss) income per share - weighted-average number of common shares and common share equivalents outstanding			27,941				25,771				26,983				26,096
Basic net (loss) income per share attributable to Forward Air:
Continuing operations		$	(2.62	)		$	0.25			$	(28.73	)		$	2.20
Discontinued operation			(0.04	)			0.11				(0.22	)			0.31
Net (loss) income per basic share		$	(2.66)			$	0.36			$	(28.95	)		$	2.51
Diluted net (loss) income per share attributable to Forward Air:
Continuing operations		$	(2.62	)		$	0.25			$	(28.73	)		$	2.19
Discontinued operation			(0.04	)			0.11				(0.22	)			0.31
Net (loss) income per diluted share1		$	(2.66	)		$	0.36			$	(28.95	)		$	2.50

 

 

1	Rounding may impact summation of amounts.

 

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