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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
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 (I.R.S. Employer
incorporation or organization) Identification No.)
430 Airport Road
Greeneville, Tennessee 37745
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 636-7100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]/
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 2001 was approximately $578.8 million based on the
closing price of such stock on such date of $36.938.
The number of shares outstanding of the registrant's common stock, $.01 par
value, as of February 28, 2001 was 21,503,589.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 2001 Annual Meeting of
Shareholders are incorporated by reference into Part III of this report. Such
definitive proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days subsequent to December 31, 2000.
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TABLE OF CONTENTS
Page Number
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PART I
Item 1. Business 3
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Executive Officers of the Registrant 14
Part II
Item 5. Market for Registrant's Common Stock and 16
Related Shareholder Matters
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial 18
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 23
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes in and Disagreements with Accountants on 23
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant 24
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial 24
Owners and Management
Item 13. Certain Relationships and Related Transactions 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and 25
Reports on Form 8-K
Signatures 26
Index to Financial Statements and Financial Statement Schedule F-2
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PART I
ITEM 1. BUSINESS
Introduction
Forward Air Corporation, through its operating subsidiaries (the
"Company" or "Forward Air"), offers its customers scheduled ground
transportation of cargo as a cost effective, reliable alternative to air
transportation. The Company transports cargo that must be delivered at a
specific time but is less time-sensitive than traditional air freight. This type
of cargo is frequently referred to in the transportation industry as "deferred
air freight." Forward Air operates a network of 75 terminals located on or near
airports in the United States and Canada, including a central sorting facility
in Columbus, Ohio and regional hubs serving key markets. Rather than owning its
own trucks, the Company purchases most of its transportation requirements from
owner-operators and, to a lesser extent, from truckload carriers. A typical
shipment consists of a pallet load of freight, often computers,
telecommunications equipment, machine parts, trade show exhibit materials or
medical equipment. During 2000, an average shipment weighed over 700 pounds.
Forward Air has experienced rapid revenue growth from $63.6 million in 1995 to
$214.9 million in 2000, a 28% compound annual growth rate. The Company's
operating income grew from $6.4 million to $37.3 million over the same period, a
42% compound annual growth rate.
The Company focuses its services on: air freight forwarders, which are
businesses that arrange transportation of cargo for third parties; integrated
air cargo carriers; and airlines. The Company serves its customers by locating
terminals on or near airports and maintaining regularly scheduled transportation
service between major cities. Forward Air receives shipments at its terminals
and transports them by truck to its central sorting facility or one of its
regional hubs, where they are unloaded and sorted. After sorting, the shipments
are reloaded and delivered to the terminals nearest their destinations. The
Company ships freight directly between terminals when justified by the volume of
shipments. The Company typically does not provide local pickup and delivery
services and does not market its services directly to shippers. Since the
Company does not place significant size or weight restrictions on shipments, it
does not compete directly with small or overnight package delivery services such
as DHL Worldwide, UPS and Airborne. Approximately 20% of the shipments the
Company handles are for overnight delivery, with the rest for delivery within
two to four days.
Industry Overview
As businesses minimize inventory levels, perform manufacturing and
assembly operations in multiple locations and distribute their products through
many channels, they more frequently require expedited delivery services.
Expedited shipments are those shipments that the customer requires to be
delivered the next day or within two to three days, usually at a specified time
or within a specified time window.
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Shippers with expedited delivery requirements have four principal
alternatives to transport freight: they may use a fully integrated air cargo
carrier, an airline, a less-than-truckload carrier or an air freight forwarder.
Integrated air cargo carriers provide pick-up and delivery services primarily
using their own fleet of trucks and provide transportation services generally
using their own fleet of aircraft. Airlines provide airport to airport service,
but have limited cargo space and generally accept only shipments weighing less
than 150 pounds. Less-than-truckload carriers provide pick-up and delivery
services through their own fleet of trucks. The national less-than- truckload
carriers operate terminals where freight is unloaded, sorted and reloaded
multiple times in a single shipment. The additional handling increases transit
time, handling costs and the likelihood of cargo damage. An air freight
forwarder obtains shipments from customers, makes arrangements for
transportation of the cargo by a third party carrier and usually arranges for
both delivery from the shipper to the carrier and from the carrier to the
recipient.
Although expedited freight is primarily transported by aircraft,
transportation by truck often is a viable alternative, especially for shipments
requiring deferred delivery. Generally, the cost of shipping freight, especially
heavy freight, by truck is substantially less than shipping by aircraft. The
Company believes there are several trends that are increasing demand for
lower-cost truck transportation of expedited freight. These trends include:
Increased Outsourcing of Logistics Management to Third Parties. Air freight
forwarders are playing an increasingly important role in logistics
management. As the growing emphasis on just-in-time processes has added to
the complexity of logistics management, companies are finding it more
advantageous to outsource their logistics management functions to third
parties. In contrast to integrated air cargo carriers and
less-than-truckload carriers that are focused on utilizing their own
fixed-cost assets, air freight forwarders can select from various
transportation modes and suppliers to meet their customers' shipping
requirements, thereby serving their customers less expensively. Air freight
forwarders generally handle shipments of any size and offer customized
shipping options, unlike integrated air cargo carriers and less-
than-truckload carriers.
Integrated Air Cargo Carriers' Increased Focus on Expedited Freight.
Integrated air cargo carriers that transport heavy freight, such as Emery
Worldwide and BAX Global, are increasingly targeting their marketing efforts
at higher yielding expedited or overnight freight to better utilize their
high fixed-cost infrastructures. As a result, these carriers are
increasingly outsourcing deferred freight to surface transportation
providers like Forward Air.
Reduced Airline Cargo Capacity. Since the 1980's, when the airlines
eliminated many of their all-cargo aircraft, growth in demand for air cargo
services has generally outpaced the growth of aircraft cargo capacity. More
recently, airlines have been modifying their domestic route systems to
provide higher frequency service to more destinations, therefore replacing
many of their wide-body aircraft with narrow-body aircraft that have less
cargo capacity. Federal Aviation Administration ("FAA") mandates have also
reduced air cargo capacity because most all-cargo aircraft are older, and it
often is not economically feasible to modify these older aircraft to meet
the FAA's noise reduction standards.
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COMPETITIVE ADVANTAGES
The Company believes that its competitive advantages are:
- Focus on the deferred air freight market. Forward Air focuses
on providing ground transportation services to the deferred
air freight market. The Company believes that this focus and
commitment to reliable service has enabled Forward Air to
provide a higher level of service in a more cost effective
manner than its competitors.
- Concentrated marketing strategy. The Company provides its
services to air freight forwarders, integrated air cargo
carriers and airlines rather than marketing its services
directly to shippers. The Company does not place significant
size or weight restrictions on shipments and, therefore, does
not compete with small or overnight package delivery services
such as DHL Worldwide, UPS and Airborne. The Company believes
that air freight forwarders prefer to purchase their
transportation services from Forward Air because it does not
market its services to their shipper customers and is not
competing with them for customers.
- Established nationwide network of terminals and sorting
facilities. The Company has built a network throughout the
United States and Canada located on or near airports. The
Company believes it would be difficult for a competitor to
duplicate its nationwide network without the expertise it has
acquired and without expending significant management
resources and capital. Forward Air's network enables it to
provide regularly scheduled service between most markets,
on-time delivery with minimal freight damage or loss, all at
rates significantly below air freight rates.
- Low-capital-intensive business model. The Company purchases
virtually all of its transportation requirements from
owner-operators or truckload carriers, rather than acquiring
and operating its own tractors. This allows the Company to
respond quickly to changing demands and opportunities in its
industry and to generate a higher return on assets with lower
capital expenditures.
- Enhanced technology. The Company is committed to using
information technology to improve its service and reduce its
operating costs. Technology allows the Company to increase the
volume of freight that it can handle in its network and
provides real-time tracking and tracing of shipments
throughout the transportation process. Forward Air is
currently enhancing its systems to permit its customers to
obtain real-time information about that shipment via the
Internet.
- Broad customer base. The Company has established close
relationships with a large number of air freight forwarders,
integrated air cargo carriers and airlines. The Company's five
largest customers only accounted for approximately 18.0% of
its operating revenue in 2000, and no single customer
accounted for more than ten percent.
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GROWTH STRATEGY
The key elements of Forward Air's growth strategy are to:
- Increase freight volume from existing customers. Many of the
Company's customers currently use Forward Air for only a
portion of their overall transportation needs. In addition,
many of the Company's air freight forwarder customers are
growing rapidly, and the Company expects that they will have a
greater need for its services as their businesses grow. The
Company will continue to market directly to these customers to
capture additional freight volume.
- Improve efficiency of its transportation network. The Company
constantly seeks to improve the efficiency of its network
without changing its infrastructure or incurring significant
capital expenditures. As the volume of freight between key
markets increases, the Company intends to continue to add
regional hubs and direct shuttles. Additional regional hubs
and direct shuttles improve Forward Air's efficiency by
reducing the number of miles freight must be transported and
reducing the number of times freight must be handled and
sorted. Increased freight volumes should increase the
Company's profits and operating margins because these
additional shipments help cover the substantial fixed costs of
its operations.
- Develop new customers. The Company will actively market its
services to potential new air freight forwarder customers. The
Company believes air freight forwarders will move away from
integrated air cargo carriers because of those carriers'
higher costs and away from less-than-truckload carriers
because of those carriers' less reliable service. The Company
also believes that there is significant potential for
increased freight volume from airlines as well as from the
integrated air cargo carriers.
- Enhance information systems. The Company is committed to
continued enhancement of its information systems in ways that
can provide it both competitive service advantages and
increased productivity. Management believes that Forward Air's
customers will increasingly demand more sophisticated
information systems to track and trace shipments. Forward Air
believes its enhanced systems will enable it to retain
existing customers and encourage them to increase the volume
of freight they send through its network. The Company also
believes these enhanced information systems will attract new
customers.
- Expand logistics services. The Company will continue to expand
its national and international logistics services to increase
revenue and improve utilization of its terminal facilities and
labor force. The Company has added a number of services in the
past few years, such as exclusive-use transportation services,
and insurance, customs brokerage and terminal handling
services. These services directly benefit Forward Air's
customers, particularly air freight forwarders who cannot
justify providing the services for themselves, attract new
customers and improve utilization of the Forward Air network
by increasing its revenue without significantly increasing the
Company's costs.
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- Pursue acquisitions. The Company intends to continue to
evaluate acquisitions that can increase its penetration of a
geographic area, add customers or freight density or allow it
to offer additional services. Since its inception, the Company
has acquired the assets of eight of its regional competitors
that met one or more of these criteria.
OPERATIONS
The Company receives freight from air freight forwarders, airlines and
integrated air cargo carriers at its terminals, which are located on or near
airports in the United States and Canada. The Company consolidates and
transports these shipments by truck through the Forward Air network to the
terminals nearest the ultimate destinations of the shipments. The Company
operates regularly scheduled service to and from each of its terminals through
its Columbus, Ohio central sorting facility or through one of its regional hubs.
The Company also operates regularly scheduled shuttle service directly between
cities where the volume of freight warrants bypassing the Columbus sorting
facility or a regional hub. When a shipment arrives at the terminal nearest its
destination, the customer arranges for the shipment to be picked up at the
terminal and delivered to its final destination.
A typical shipment consists of a pallet load of freight, often
computers, telecommunications equipment, machine parts, trade show exhibit
materials or medical equipment. Since Forward Air commenced operations in
November 1990, the weekly volume of freight moving through its network has
increased from an average of approximately 1.2 million pounds to over 24.0
million pounds in 2000. During 2000, an average shipment weighed over 700
pounds. Shipments range from small boxes weighing only a few pounds to large
shipments of several thousand pounds. Although the Company imposes no
significant size or weight restrictions, it focuses its marketing and price
structure on shipments of 200 pounds or more. As a result, the Company does not
directly compete for most of its business with overnight couriers or small
package delivery companies.
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TERMINALS
The Forward Air network includes 75 terminals located in the following
cities:
City Airport Served
- ---- --------------
Albany, NY......................................ALB
Albuquerque, NM.................................ABQ
Atlanta, GA.....................................ATL
Austin, TX......................................AUS
Baltimore, MD...................................BWI
Baton Rouge, LA.................................BTR
Birmingham, AL..................................BHM
Boston, MA......................................BOS
Buffalo, NY.....................................BUF
Charleston, SC..................................CHS
Charlotte, NC...................................CLT
Chicago, IL.....................................ORD
Cincinnati, OH..................................CVG
Cleveland, OH...................................CLE
Columbia, SC....................................CAE
Columbus, OH....................................CMH
Dallas/Ft. Worth, TX............................DFW
Dayton, OH......................................DAY
Denver, CO......................................DEN
Detroit, MI.....................................DTW
El Paso, TX.....................................ELP
Greensboro, NC..................................GSO
Greenville, SC..................................GSP
Hartford, CT....................................BDL
Houston, TX.....................................IAH
Huntsville, AL..................................HSV
Indianapolis, IN................................IND
Jackson, MS.....................................JAN
Jacksonville, FL................................JAX
Kansas City, MO.................................MCI
Knoxville, TN...................................TYS
Lafayette, LA...................................LFT
Laredo, TX......................................LRD
Las Vegas, NV...................................LAS
Little Rock, AR.................................LIT
Los Angeles, CA.................................LAX
Louisville, KY..................................SDF
Memphis, TN.....................................MEM
Miami, FL.......................................MIA
Milwaukee, WI...................................MKE
Minneapolis, MN.................................MSP
Mobile, AL......................................MOB
Nashville, TN...................................BNA
Newark, NJ......................................EWR
Newburgh, NY....................................SWF
New Orleans, LA.................................MSY
New York, NY....................................JFK
Norfolk, VA.....................................ORF
Oklahoma City, OK...............................OKC
Omaha, NE.......................................OMA
Orlando, FL.....................................MCO
Pensacola, FL...................................PNS
Philadelphia, PA................................PHL
Phoenix, AZ.....................................PHX
Pittsburgh, PA..................................PIT
Portland, OR....................................PDX
Raleigh, NC.....................................RDU
Richmond, VA....................................RIC
Rochester, NY...................................ROC
Sacramento, CA..................................SMF
Salt Lake City, UT..............................SLC
San Antonio, TX.................................SAT
San Diego, CA...................................SAN
San Francisco, CA...............................SFO
Seattle, WA.....................................SEA
St. Louis, MO...................................STL
Syracuse, NY....................................SYR
Tampa, FL.......................................TPA
Toledo, OH......................................TOL
Tucson, AZ......................................TUS
Tulsa, OK.......................................TUL
Washington, DC..................................IAD
Montreal, Canada................................YUL
Ottawa, Canada..................................YOW
Toronto, Canada.................................YYZ
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Independent agents operate twelve of these locations, which typically
handle relatively low volumes of freight.
SHUTTLE SERVICE AND REGIONAL HUBS
The Company operates direct terminal-to-terminal shuttles and regional
overnight service between cities where justified by freight volumes. The Company
currently provides regional overnight service to many of the markets within its
network. Direct service allows the Company to provide quicker scheduled service
at a lower cost because it can transport freight over the most direct route and
eliminate the added time and cost of handling the freight at its central or a
regional hub sorting facility. Direct shipments also reduce the likelihood of
damage because of reduced handling and sorting of the freight. As Forward Air
continues to increase volume between various cities, it intends to continue to
add direct shuttles. For example, the Northeast Shuttle transports freight
between Albany, Baltimore, Boston, Buffalo, Hartford, Newark, Newburgh, New
York, Philadelphia, Rochester, Syracuse and Washington. The Company accomplishes
this by direct shipment, as from Boston to Newark, or by overnight service
routed through the Newburgh regional hub. Where warranted by sufficient volume
in a region, the Company utilizes larger terminals as regional sorting hubs,
which allows it to bypass the Columbus sorting facility. These regional hubs
improve the Company's operating efficiency and enhance customer service. The
Company currently operates regional hubs in Atlanta, Dallas/Ft. Worth, Kansas
City, Los Angeles, New Orleans, Newburgh, Orlando and San Francisco.
SHIPMENTS
Since operations were commenced in November 1990, the weekly volume of
freight moving through the Company's network has increased from an average of
approximately 1.2 million pounds to over 24.0 million pounds per week as shown
below:
Average Weekly
Volume in Pounds
--------------------------
(In millions)
1990...................................... 1.2
1991...................................... 1.4
1992...................................... 2.3
1993...................................... 3.8
1994...................................... 7.4
1995...................................... 8.5
1996...................................... 10.5
1997...................................... 12.4
1998...................................... 15.4
1999...................................... 19.4
2000...................................... 24.0
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CUSTOMERS AND MARKETING
The Company's customers are air freight forwarders, airlines and
integrated air cargo carriers. Air freight forwarder customers vary in size from
small, independent, single facility companies to large, international logistics
companies, such as USF Worldwide, Associated Global Systems, Pilot Air Freight,
AIT Freight Systems and Eagle Global Logistics. Airline customers include Virgin
Atlantic, Delta, Northwest Airlines, Continental, United Airlines, British
Airways, Air Nippon, Air France, Korean Airlines, KLM and Japan Airlines.
Because of Forward Air's reputation for dependable service, integrated air cargo
carriers such as Emery Worldwide, Airborne, BAX Global and UPS utilize its
services to provide overflow capacity and other services.
The Company markets its services through a sales and marketing staff
located in various regions of the United States. Senior management also is
actively involved in sales and marketing at the national account level and
supports local sales activity. The Company has a strong commitment to marketing
and focuses on air freight forwarders, airlines and integrated air cargo
carriers that have time sensitive shipping requirements requiring customized
services. The Company also participates in air cargo trade shows and advertises
its services through direct mail programs and through the Internet via
www.forwardair.com.
LOGISTICS SERVICES
Customers increasingly demand more than the movement of freight from
their transportation providers. To meet these demands, the Company continually
seeks ways to customize its logistics services and add new services. Logistics
services increase the Company's profit margins by increasing its revenue without
corresponding increases in its fixed costs.
Forward Air logistics services include providing:
- exclusive-use transportation services;
- dock, warehouse and office space;
- customs brokerage, such as assistance with customs procedures
for both import and export shipments; and
- terminal handling, such as shipment build-up and break-down
and reconsolidation of air or ocean pallets or containers.
TECHNOLOGY AND INFORMATION SYSTEMS
The regular enhancement of the Company's information systems is a key
component of its growth strategy. The Company has invested and will continue to
invest significant management and financial resources on improving its
information systems in an effort to provide accurate, real-
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time information to its management and customers. Management believes the
ability to provide accurate, real-time information on the status of shipments
will become increasingly important and that its efforts in this area will result
in both competitive service advantages and increased productivity throughout the
Forward Air network.
PURCHASED TRANSPORTATION
The Company contracts for most of its transportation services from
owner-operators. The owner-operators own, operate and maintain their own
vehicles and employ their own drivers. The Company also purchases transportation
from Landair Corporation and from other truckload carriers to handle overflow
volume. Of the $91.4 million of purchased transportation in 2000, the Company
purchased 70.9% from owner-operators, 2.4% from Landair Corporation and 26.7%
from other common carriers.
The Company seeks to establish long-term relationships with
owner-operators to assure dependable service and availability, and the Company
has consistently experienced a low turnover of owner-operators. The Company has
established guidelines relating to safety records, driving experience and
personal evaluations that it uses to select its owner-operators. To enhance the
Company's relationship with the owner-operators, it pays per mile rates above
prevailing market rates and offers each driver a consistent work schedule,
typically to the same destination.
COMPETITION
The air freight transportation industry is highly competitive and very
fragmented. The Company's competitors include regional trucking companies that
specialize in handling deferred air freight and regional and national
less-than-truckload carriers. To a lesser extent, the Company competes with
integrated air cargo carriers and airlines. The Company's competition ranges
from small operators that compete within a limited geographic area to companies
with substantially greater financial and other resources and larger freight
capacity. The Company also faces competition from its air freight forwarder
customers who decide to establish their own networks to transport deferred air
freight. The Company believes competition is based on service, primarily on-time
delivery and reliability, as well as rates. The Company believes it offers its
services at rates that are substantially below the charge to transport the same
shipment to the same destination by air. The Company believes it has an
advantage over less-than-truckload carriers based upon its reputation for
faster, more reliable service between many cities.
EMPLOYEES
As of December 31, 2000, the Company employed 1,820 persons, 930 of
whom were freight handlers and customer service personnel. None of the Company's
employees is covered by a collective bargaining agreement. The Company
recognizes that its workforce, including its freight handlers, is one of its
most valuable assets. The recruitment, training and retention of qualified
employees are essential to support the Company's continued growth and to meet
the service requirements of its customers.
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RISK MANAGEMENT AND LITIGATION
Under Department of Transportation regulations, the Company may be
liable for property damage or personal injuries caused by owner-operators while
they are transporting freight on its behalf. The Company is self-insured for
property damage to its own equipment. The Company believes that its insurance
coverage is sufficient to adequately protect it from significant claims.
From time to time, the Company is a party to litigation arising in the
normal course of its business, most of which involve claims for personal injury,
property damage related to the transportation and handling of freight or
workers' compensation. The Company does not believe that any of these pending
actions, individually or in the aggregate, will have a material adverse effect
on its business, financial condition or results of operations.
REGULATION
The Company, through its Forward Air, Inc. subsidiary, is a licensed
property broker holding authority issued by the Federal Motor Carrier Safety
Administration ("FMCSA") at Docket No. MC-249708. The Company, through its FAF,
Inc. subsidiary, is an interstate motor carrier licensed by the FMCSA at Docket
No. MC-333604. The Company's air freight business is subject to regulation as an
indirect air cargo carrier under the Federal Aviation Act, although freight
brokers have been exempted from most of the requirements of the Federal Aviation
Act by the Economic Aviation Regulations promulgated thereunder. In addition,
the Company's domestic customs brokerage operations are subject to the licensing
requirements of the United States Department of the Treasury and are regulated
by the United States Customs Service. The Federal Maritime Commission regulates
the Company's ocean freight forwarding operations.
The Company believes that it is in substantial compliance with
applicable regulatory requirements relating to its operations. If the Company
does not comply with applicable laws and regulations, it could be required to
pay substantial fines and could have its licenses revoked.
The Company is also subject to federal and state environmental laws and
regulations, including those dealing with the transportation of hazardous
materials and storage of fuel. The Company believes that it is in substantial
compliance with applicable environmental laws and regulations. The Company does
not expect any material expenditures for compliance with federal, state or local
environmental laws and regulations in 2001.
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ITEM 2. PROPERTIES
PROPERTIES AND EQUIPMENT
The Company's headquarters are located in Greeneville, Tennessee. The
Company leases this building from the Greeneville-Greene County Airport
Authority. The Company's central sorting facility in Columbus, Ohio was
constructed in 1994. During the third quarter of 2000, the Company entered into
a ten-year lease with the Rickenbacker Port Authority for a 50,000 square foot
building on the Rickenbacker Airport in Columbus near the hub. The Company owns
a terminal facility in Atlanta.
The Company leases 61 additional terminal facilities for terms
typically ranging from three to five years. The Company shares its Indianapolis
terminal with Landair Corporation. The Company believes that, in most of the
markets it serves, replacement space comparable to these terminal facilities is
obtainable. The Company believes that its facilities are adequate to support its
current operations. The remaining twelve terminals are agent stations operated
by independent agents who handle freight for the Company on a commission basis.
The Company owns or leases the trailers it uses to move freight through
the Forward Air network. Substantially all of the Company's trailers are 53'
long, and many have specialized roller bed equipment required to serve air cargo
industry customers. The average age of the Company's owned trailer fleet was
approximately 2.9 years at December 31, 2000.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to litigation arising in the
normal course of its business, most of which involve claims for personal injury
and property damage related to the transportation and handling of freight or
workers' compensation. The Company does not believe that any of these pending
actions, individually or in the aggregate, will have a material adverse effect
on its business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended December 31, 2000,
no matters were submitted to a vote of security holders through the solicitation
of proxies or otherwise.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General
Instruction G(3) to Form 10-K, the following information is included in Part I
of this report.
The following are the Company's executive officers:
Name Age Position
------------------- --------- ---------------------------------------
Scott M. Niswonger (1)................... 53 Chairman of the Board and Chief Executive Officer
Bruce A. Campbell........................ 49 President and Chief Operating Officer
Edward W. Cook........................... 42 Chief Financial Officer, Senior Vice President and
Treasurer
David E. Queen........................... 55 Senior Vice President, Operations
Michael A. Roberts....................... 56 Senior Vice President, Marketing
Richard H. Roberts (1)................... 46 Senior Vice President, General Counsel and Secretary
James R. Weiland......................... 56 Senior Vice President, Sales
- ---------------
(1) Also serves as an executive officer of Landair Corporation.
There are no family relationships between any of the executive officers
of the Company. All officers hold office at the pleasure of the Board of
Directors.
Scott M. Niswonger is a co-founder of the Company, has served as a
director since its founding in October 1981 and as Chairman of the Board and
Chief Executive Officer since February 1988. Mr. Niswonger served as President
of the Company from October 1981 until August 1998. He also serves as a director
of Landair Corporation and on the Regional Advisory Board of First Tennessee
Bank National Association.
Bruce A. Campbell has served as Chief Operating Officer of the Company
since April 1990, a director since April 1993 and President since August 1998.
Mr. Campbell served as Executive Vice President of the Company from April 1990
until August 1998. Prior to joining the Company, Mr. Campbell served as Vice
President of Ryder-Temperature Controlled Carriage in Nashville, Tennessee from
September 1985 until December 1989. Mr. Campbell also serves as a director of
Greene County Bancshares.
Edward W. Cook has served the Company as Chief Financial Officer,
Senior Vice President and director since September 1994 and as Treasurer since
May 1995. Prior to joining the Company, Mr. Cook was employed as a certified
public accountant by Ernst & Young LLP for eleven years, most recently as a
senior manager in the Nashville, Tennessee office.
David E. Queen has served as Senior Vice President, Operations, since
October 1997. He served as Vice President of Operations and General Manager from
November 1987 until October 1997. From December 1984 to November 1987, Mr. Queen
was Manager of the Columbus, Ohio hub for The Flying Tiger Line.
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Michael A. Roberts has served as Senior Vice President, Marketing, of
the Company since April 1990. He served as Vice President of Marketing from
November 1987 until April 1990. Mr. Roberts served as a consultant to the
Company from 1982 to 1987.
Richard H. Roberts has served as Senior Vice President and General
Counsel of the Company since July 1994 and as Secretary and a director since May
1995. Prior to joining the Company, Mr. Roberts was a partner with the Baker,
Worthington, Crossley & Stansberry law firm from January 1991 until July 1994.
Mr. Roberts also serves as a director of Landair Corporation and Miller
Industries, Inc.
James R. Weiland has served as Senior Vice President, Sales, since
October 1997. He served as Vice President, Sales from November 1990 until
October 1997. From May 1984 to October 1990, Mr. Weiland served the Company in
various capacities, including Regional Operations Manager and Director of Sales
and Marketing.
15
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The $.01 par value common stock of the Company (the "Common Stock")
trades on The Nasdaq National Market tier of The Nasdaq Stock Market(R) under
the symbol "FWRD." The following table sets forth the high and low sale prices
for the Common Stock as reported by The Nasdaq National Market for each full
quarterly period within the two most recent fiscal years. All prices have been
restated to reflect a three-for-two stock split distributed in January 2000.
High Low
---- ---
1999
First Quarter........................................$10.50 $ 6.17
Second Quarter.......................................$19.17 $ 8.67
Third Quarter........................................$22.00 $13.00
Fourth Quarter.......................................$29.50 $13.58
2000 High Low
First Quarter........................................$33.50 $19.31
Second Quarter.......................................$41.00 $20.00
Third Quarter........................................$48.25 $33.63
Fourth Quarter.......................................$47.75 $27.75
There were approximately 3,700 shareholders of record (including
brokerage firms and other nominees) of the Common Stock as of December 31, 2000.
The Company has not paid cash dividends on its Common Stock in the two
preceding fiscal years, and it is the current intention of management to retain
earnings to finance the growth of the Company's business. Future payment of
dividends will depend upon the financial condition, results of operations,
contractual restrictions and capital requirements of the Company, as well as
other factors deemed relevant by the Board of Directors.
16
17
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data of the Company.
The selected financial data should be read in conjunction with the Company's
financial statements and notes thereto, included elsewhere in this report.
Year ended December 31
-----------------------------------------------------------------------------------
2000 1999 1998 1997(4) 1996
-------------- ------------- -------------- -------------- -------------
(In thousands, except per share data)
INCOME STATEMENT DATA: (1), (2)
Operating revenue $214,907 $170,843 $130,438 $105,140 $ 80,737
Income from operations 37,301 26,444 16,011 13,064 8,516
Operating margin (3) 17.4% 15.5% 12.3% 12.4% 10.5%
Income from continuing operations 23,445 16,040 9,189 7,444 4,884
Income from continuing operations
per share: (5)
Basic 1.11 0.80 0.49 0.42 0.27
Diluted 1.05 0.76 0.48 0.40 0.27
Cash dividends declared per
common share (5) -- -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets of continuing operations $115,968 $ 79,617 $ 56,808 $ 39,965 $ 31,887
Long-term obligations of continuing
operations, net of current portion 7,232 4,754 20,126 8,254 7,323
Shareholders' equity (6) 83,453 54,952 19,071 50,460 41,264
(1) Reflects the Truckload Business as a discontinued operation.
(2) Includes certain allocations of corporate administrative expenses by
the Company (see Note 1 of Notes to Consolidated Financial Statements).
(3) Income from operations as a percentage of operating revenue.
(4) During the third quarter of 1997, the Company benefited from
non-recurring revenue that resulted from the UPS strike. This
additional revenue, net of variable costs and income taxes, but not
allocated fixed costs, resulted in approximately $2.3 million of
additional operating revenue, $1.2 million of income from operations
and $.06 of diluted earnings per share.
(5) Restated to reflect a three-for-two stock split distributed in January
2000 and a two-for-one stock split distributed in March 1999.
(6) Shareholders' equity at December 31, 1998 reflects the Spin-off of
$44.3 million of net assets of Landair Corporation.
17
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company provides scheduled ground transportation of cargo on a
time-definite basis. As a result of the Company's established transportation
schedule and network of terminals, its operating cost structure includes
significant fixed costs. The Company's ability to improve its operating margins
will depend on its ability to increase the volume of freight moved through its
network.
The following does not include a discussion and analysis of the
truckload carrier business, which has been accounted for as a discontinued
operation as a result of the Spin-off.
Results of Operations
The following table sets forth the percentage relationship of expense
items to operating revenue for the periods indicated.
\
Year Ended December 31
-----------------------------------------------------------------
2000 1999 1998
---------------- ---------------- ---------------
Operating revenue 100.0% 100.0% 100.0%
Operating expenses:
Purchased transportation 42.5 43.8 43.2
Salaries, wages and employee benefits 22.0 22.4 23.9
Operating leases 4.7 5.2 5.3
Depreciation and amortization 2.7 2.9 3.3
Insurance and claims 1.7 1.2 1.8
Other operating expenses 9.0 9.0 10.2
---------------- ---------------- ---------------
Total operating expenses 82.6 84.5 87.7
---------------- ---------------- ---------------
Income from operations 17.4 15.5 12.3
---------------- ---------------- ---------------
Interest expense -- (0.5) (0.9)
Other income, net 0.3 0.2 --
---------------- ---------------- ---------------
Income from continuing operations before
income taxes 17.7 15.2 11.4
Income taxes 6.8 5.8 4.4
---------------- ---------------- ---------------
Income from continuing operations 10.9% 9.4% 7.0%
================ ================ ===============
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Operating revenue increased by $44.1 million, or 25.8%, to $214.9
million for 2000 from $170.8 million in 1999. This increase resulted primarily
from increased volume from domestic and international air cargo customers, an
increased number of operating terminals and direct shuttles, and enhanced
logistics services.
18
19
Purchased transportation was 42.5% of operating revenue in 2000 compared
to 43.8% in 1999. The decrease in purchased transportation was primarily
attributable to operating efficiencies resulting from increased volumes of
freight transported through the Forward Air network.
Salaries, wages and employee benefits were 22.0% of operating revenue in
2000 compared to 22.4% in 1999. The decrease in salaries, wages and employee
benefits as a percentage of operating revenue was due primarily to operating
efficiencies resulting from increased volumes of freight transported through the
Forward Air network.
Operating leases, the largest component of which is terminal rent, were
4.7% of operating revenue in 2000 compared to 5.2% in 1999. This decrease in
operating leases as a percentage of revenue was attributable to increased
leverage resulting from increased operating revenue.
Depreciation and amortization expense as a percentage of operating
revenue was 2.7% in 2000, compared to 2.9% in 1999. The decrease in depreciation
and amortization expense as a percentage of revenue was attributable to
increased utilization of operating equipment during 2000 as a result of
increased operating revenue.
Insurance and claims as a percentage of revenue was 1.7% of operating
revenue in 2000, compared with 1.2% in 1999. This increase in insurance and
claims expense as a percentage of revenue was due primarily to an increase in
the frequency and severity of accidents and higher premium costs during 2000.
Other operating expenses were 9.0% of operating revenue in 2000 and
1999.
Income from operations increased by $10.9 million, or 41.3%, to $37.3
million for 2000 compared to $26.4 million for 1999. This increase in income
from operations is due primarily to a lower operating cost structure resulting
from an increase in operating revenue, which allowed the Company to spread the
fixed costs of its network over a larger revenue base. The increase in income
from operations during 2000 was partially offset by operating losses of
approximately $1.6 million relating to the Company's information technology
subsidiary, LogTech Corporation. In 2001, the Company plans to wind-down the
LogTech operations and begin offering its information technology services to its
existing customer base. The wind-down of LogTech operations will result in an
additional estimated $350,000, or $.01 per share, of operating losses during the
first quarter of 2001.
Interest expense was $107,000 in 2000 compared to $787,000, or 0.5% of
revenue, in 1999. The decrease in interest expense was due to lower average net
borrowings during 2000 coupled with the capitalization of interest costs
totaling $301,000 during 2000 relating to the development of internal-use
software.
The combined federal and state effective tax rate for 2000 was 38.2%,
compared to a rate of 38.3% for 1999. For information concerning income taxes,
as well as information regarding differences between effective tax rates and
statutory rates, see Note 6 of the Notes to Consolidated Financial Statements.
19
20
As a result of the foregoing factors, income from continuing operations
increased by $7.4 million, or 46.3%, to $23.4 million for 2000, from $16.0
million in 1999.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Operating revenue increased by $40.4 million, or 31.0%, to $170.8
million for 1999 from $130.4 million in 1998. This increase resulted primarily
from increased volume from domestic and international air cargo customers, an
increased number of operating terminals and direct shuttles, and enhanced
logistics services.
Purchased transportation was 43.8% of operating revenue in 1999
compared to 43.2% in 1998. This increase was primarily attributable to an
increase in revenue from exclusive use transportation services which have a
higher purchased transportation percentage than freight transported through the
Forward Air network. The increase in purchased transportation was partially
offset by operating efficiencies resulting from increased volumes of freight
transported through the Forward Air network.
Salaries, wages and employee benefits were 22.4% of operating revenue
in 1999 compared to 23.9% in 1998. The decrease in salaries, wages and employee
benefits as a percentage of operating revenue was due primarily to operating
efficiencies resulting from increased volumes of freight transported through the
Forward Air network coupled with a reduction in the number of Company drivers
which were hired initially as a part of the acquisition of certain of the assets
of Adams Air Cargo, Inc. in October 1997.
Operating leases, the largest component of which is terminal rent, were
5.2% of operating revenue in 1999 compared to 5.3% in 1998. This decrease was
attributable to increased leverage resulting from increased operating revenue.
Depreciation and amortization expense as a percentage of operating
revenue was 2.9% in 1999, compared to 3.3% in 1998. The decrease in depreciation
and amortization expense as a percentage of revenue was attributable to
increased utilization of operating equipment during 1999 as a result of
increased operating revenue.
Insurance and claims as a percentage of revenue was 1.2% of operating
revenue in 1999, compared with 1.8% in 1998. This decrease was due primarily to
a decrease in the frequency and severity of accidents and lower premium costs
during 1999.
Other operating expenses were 9.0% of operating revenue in 1999
compared to 10.2% in 1998. The decrease in other operating expenses as a
percentage of operating revenue was primarily attributable to a lower operating
cost structure due to increased operating revenue and a reduction in commissions
paid to agent terminals.
Income from operations increased by $10.4 million, or 65.0%, to $26.4
million for 1999 compared to $16.0 million for 1998. This increase in income
from operations is due primarily
20
21
to a lower operating cost structure resulting from an increase in operating
revenue, which allowed the Company to spread the fixed costs of its network over
a larger revenue base.
Interest expense was $787,000, or 0.5%, of operating revenue in 1999,
compared to $1.2 million, or 0.9%, in 1998. The decrease in interest expense was
due to lower average net borrowing during 1999 coupled with the capitalization
of interest costs totaling $71,000 during 1999 relating to the development of
internal-use software.
The combined federal and state effective tax rate for 1999 was 38.3%,
compared to a rate of 38.1% for 1998. For information concerning income taxes,
as well as information regarding differences between effective tax rates and
statutory rates, see Note 6 of the Notes to Consolidated Financial Statements.
As a result of the foregoing factors, income from continuing operations
increased by $6.8 million, or 73.9%, to $16.0 million for 1999, from $9.2
million in 1998.
Liquidity and Capital Resources
Prior to the Spin-off in September 1998, the Company operated its
business and the truckload carrier business of Landair Corporation. As a result,
the Company's statement of cash flows for 1998 does not reflect the cash flows
of its business on a stand-alone basis.
The Company has historically financed its working capital needs,
including capital purchases, with cash flows from operations and borrowings
under its bank lines of credit. Net cash provided by operating activities
totaled approximately $33.8 million for 2000, $20.1 million for 1999 and $1.9
million for 1998. The increases in net cash provided by operating activities in
2000 and 1999 are mainly attributable to growth and improvements in results of
operations.
Net cash used in investing activities was approximately $26.9 million
in 2000, $13.4 million in 1999 and $17.0 million in 1998. Investing activities
consisted primarily of acquisitions in 2000 and 1999 and the $5.0 million
capital contribution to Landair Corporation in 1998, along with the purchase of
operating equipment and management information systems during all three years.
Net cash provided by financing activities was $2.6 million and $14.6
million in 2000 and 1998, respectively, compared to cash used in financing
activities of $1.2 million in 1999. Financing activities included the continued
financing of operating equipment and working capital needs, repayment of
long-term debt and capital leases, proceeds received from the exercise of stock
options, Common Stock issued under the Company's employee stock purchase plan,
and Common Stock issued from a public offering.
On May 4, 1999, 1.5 million shares of the Common Stock of the Company
were sold under a Form S-3 Registration Statement dated April 23, 1999. The net
proceeds of the offering were $18.0 million and were used principally to repay
outstanding debt.
21
22
The Company expects net capital expenditures in 2001 for operating
equipment and management information systems, excluding acquisitions, to be less
than $5 million. The Company expects to fund these expenditures through cash
provided by operating activities and borrowings under its credit facility.
The credit facility consists of a working capital line of credit. As
long as the Company complies with several financial covenants and ratios, the
credit facility permits it to borrow up to $20.0 million. Interest rates for
advances under the facilities vary based on covenants related to total
indebtedness, cash flows, results of operations and other ratios. The facility
bears interest at LIBOR plus 1.00% to 1.90%, expires in April 2002 and is
secured by accounts receivable. The amount the Company can borrow under the line
of credit is reduced by the amount of any outstanding letters of credit.
Management believes that the Company's available cash, expected cash
generated from future operations and borrowings under available lines of credit,
will be sufficient to satisfy anticipated cash needs for at least the next
twelve months.
On February 24, 1999, the Board of Directors approved a two-for-one
stock split which was distributed on March 19, 1999. On January 10, 2000, the
Board of Directors approved a three-for-two stock split which was distributed on
January 28, 2000. All share, earnings per share, dividends per share, and
quarterly stock price data included herein and in the Consolidated Financial
Statements and Notes thereto have been restated to give effect to the stock
splits.
Impact of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 133, as amended, is required to be adopted by
the Company in 2001. Management does not anticipate that the adoption of the
Statement will have a significant effect on the financial position or results of
operations of the Company.
Forward-Looking Statements
The Company, or its officers and directors on behalf of the Company,
may from time to time make written or oral "forward-looking statements." Written
forward-looking statements may appear in documents filed with the Securities and
Exchange Commission (the "Commission"), in press releases and in reports to
shareholders. Oral forward-looking statements may be made by the Company's
officers and directors on behalf of the Company to the press, potential
investors, securities analysts and others. The Private Securities Litigation
Reform Act of 1995 contains a safe harbor for forward-looking statements. The
Company relies on this safe harbor in making such disclosures. In connection
with this safe harbor provision, the Company is hereby identifying important
factors that could cause actual results to differ materially from those
contained in any forward-looking statement made by or on behalf of the Company.
Without limitation, factors that might cause such a difference include economic
factors such as recessions, inflation, higher interest rates and downturns in
customer business cycles, the Company's inability
22
23
to maintain its historical growth rate due to a decreased volume of freight
moving through the Company's network, competition, surplus inventories, loss of
a major customer, the ability of the Company's information systems to handle
increased volume of freight moving through its network, and the availability and
compensation of qualified independent owner-operators to serve the Company's
transportation needs. The Company disclaims any intent or obligation to update
these forward-looking statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On May 4, 1999, the Company sold 1.5 million shares of Common Stock in
a public offering. The net proceeds of $18.0 million were used principally to
repay outstanding debt. With this repayment, the Company's exposure to market
risk related to its remaining outstanding debt is not significant.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
23
24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors of the
Company is incorporated herein by reference to the Company's definitive proxy
statement for its 2001 Annual Meeting of Shareholders (the "2001 Proxy
Statement"). The 2001 Proxy Statement will be filed with the Commission not
later than 120 days subsequent to December 31, 2000.
Pursuant to Item 401(b) of Regulation S-K, the information required by
this item with respect to executive officers of the Company is set forth in Part
I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to the 2001 Proxy Statement, which will be filed with the Commission
not later than 120 days subsequent to December 31, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to the 2001 Proxy Statement, which will be filed with the Commission
not later than 120 days subsequent to December 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to the 2001 Proxy Statement, which will be filed with the Commission
not later than 120 days subsequent to December 31, 2000.
24
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) List of Financial Statements and Financial Statement
Schedules.
The response to this portion of Item 14 is submitted
as a separate section of this report.
(a)(3) List of Exhibits.
The response to this portion of Item 14 is submitted
as a separate section of this report.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on December
13, 2000 in connection with the December 3, 2000
purchase by Forward Air, Inc. of the assets of DTSI,
Inc. from SouthTrust Bank.
(c) Exhibits.
The response to this portion of Item 14 is submitted
as a separate section of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted
as a separate section of this report.
25
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Forward Air Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FORWARD AIR CORPORATION
By: /s/ Scott M. Niswonger
--------------------------------------
Scott M. Niswonger, Chairman
and Chief Executive Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME CAPACITY DATE
/s/ Scott M. Niswonger Chairman and March 30, 2001
- ------------------------------------- Chief Executive Officer
Scott M. Niswonger (Principal Executive Officer)
/s/ Edward W. Cook Chief Financial Officer, March 30, 2001
- ------------------------------------- Senior Vice President, Treasurer
Edward W. Cook and Director (Principal Financial
and Accounting Officer)
/s/ Bruce A. Campbell President, Chief Operating March 30, 2001
- ------------------------------------- Officer and Director
Bruce A. Campbell
/s/ Richard H. Roberts Senior Vice President, General March 30, 2001
- ------------------------------------- Counsel, Secretary and Director
Richard H. Roberts
/s/ James A. Cronin, III Director March 30, 2001
- -------------------------------------
James A. Cronin, III
/s/ Robert K. Gray Director March 30, 2001
- -------------------------------------
Hon. Robert K. Gray
/s/ Ray A. Mundy Director March 30, 2001
- -------------------------------------
Ray A. Mundy
26
27
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2), (c) and (d)
List of Financial Statements and Financial Statement Schedule
Financial Statements and Supplementary Data
Certain Exhibits
Financial Statement Schedule
Year Ended December 31, 2000
Forward Air Corporation
Greeneville, Tennessee
28
Forward Air Corporation
Form 10-K -- Item 8 and Item 14(a)(1) and (2)
Index to Financial Statements and Financial Statement Schedule
The following consolidated financial statements of Forward Air Corporation are
included as a separate section of this report:
Page No.
--------
Report of Ernst & Young LLP, Independent Auditors............................................................F-3
Consolidated Balance Sheets - December 31, 2000 and 1999.....................................................F-4
Consolidated Statements of Income - Years Ended December 31, 2000,
1999 and 1998.............................................................................................F-6
Consolidated Statements of Shareholders' Equity - Years Ended
December 31, 2000, 1999 and 1998..........................................................................F-7
Consolidated Statements of Cash Flows - Years Ended December 31, 2000,
1999 and 1998.............................................................................................F-8
Notes to Consolidated Financial Statements - December 31, 2000..............................................F-10
The following financial statement schedule of Forward Air Corporation is
included as a separate section of this report.
Schedule II - Valuation and Qualifying Accounts..............................................................S-1
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
F-2
29
Report of Independent Auditors
The Board of Directors and Shareholders
Forward Air Corporation
We have audited the accompanying consolidated balance sheets of Forward Air
Corporation as of December 31, 2000 and 1999, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 2000. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Forward Air
Corporation at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
Ernst & Young LLP
Nashville, Tennessee
February 7, 2001
F-3
30
Forward Air Corporation
Consolidated Balance Sheets
December 31
2000 1999
----------------------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 15,589 $ 5,989
Accounts receivable, less allowances of $1,184 in
2000 and $918 in 1999 33,617 27,342
Income taxes receivable 1,926 --
Inventories 439 640
Prepaid expenses 2,398 1,791
Deferred income taxes 956 652
----------------------------
Total current assets 54,925 36,414
Property and equipment:
Land 3,199 3,199
Buildings 9,936 6,919
Equipment 42,636 33,890
Leasehold improvements 1,642 1,372
Software development in progress 6,707 1,817
----------------------------
64,120 47,197
Accumulated depreciation and amortization 19,059 14,307
----------------------------
45,061 32,890
Goodwill and other intangibles, net 15,083 9,458
Other assets 899 855
----------------------------
Total assets $ 115,968 $ 79,617
============================
F-4
31
December 31
2000 1999
--------- ---------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,730 $ 7,436
Accrued payroll and related items 2,215 2,798
Insurance and claims accruals 2,354 2,127
Income taxes payable -- 633
Other accrued expenses 3,856 2,587
Current portion of long-term debt 532 758
Current portion of capital lease obligations 446 513
----------------------------
Total current liabilities 19,133 16,852
Long-term debt, less current portion 2,784 835
Capital lease obligations, less current portion 4,448 3,919
Deferred income taxes 6,150 3,059
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000
No shares issued -- --
Common stock, $.01 par value:
Authorized shares - 50,000,000
Issued and outstanding shares - 21,311,799 in
2000 and 20,732,963 in 1999 213 207
Additional paid-in capital 40,578 35,528
Retained earnings 42,662 19,217
----------------------------
Total shareholders' equity 83,453 54,952
----------------------------
Total liabilities and shareholders' equity $ 115,968 $ 79,617
============================
See accompanying notes.
F-5
32
Forward Air Corporation
Consolidated Statements of Income
Year ended December 31
2000 1999 1998
----------------------------------------------------
(In thousands, except per share data)
Operating revenue $ 214,907 $ 170,843 $ 130,438
Operating expenses:
Purchased transportation 91,421 74,836 56,345
Salaries, wages and employee benefits 47,253 38,325 31,191
Operating leases 10,059 8,807 6,876
Depreciation and amortization 5,783 4,996 4,346
Insurance and claims 3,639 2,007 2,402
Other operating expenses 19,451 15,428 13,267
----------------------------------------------------
177,606 144,399 114,427
----------------------------------------------------
Income from operations 37,301 26,444 16,011
Other income (expense):
Interest expense (107) (787) (1,206)
Other, net 773 333 37
----------------------------------------------------
666 (454) (1,169)
----------------------------------------------------
Income from continuing operations before
income taxes 37,967 25,990 14,842
Income taxes 14,522 9,950 5,653
----------------------------------------------------
Income from continuing operations 23,445 16,040 9,189
----------------------------------------------------
Discontinued operations:
Income from operations (less income taxes of $850) -- -- 1,345
Loss on Spin-off (less income taxes of $440) -- -- (380)
----------------------------------------------------
-- -- 965
----------------------------------------------------
Net income $ 23,445 $ 16,040 $ 10,154
====================================================
Income per share:
Basic:
Income from continuing operations $ 1.11 $ .80 $ .49
Income from discontinued operations -- -- .06
----------------------------------------------------
Net income $ 1.11 $ .80 $ .55
====================================================
Diluted:
Income from continuing operations $ 1.05 $ .76 $ .48
Income from discontinued operations -- -- .05
----------------------------------------------------
Net income $ 1.05 $ .76 $ .53
====================================================
See accompanying notes.
F-6
33
Forward Air Corporation
Consolidated Statements of Shareholders' Equity
Common Stock Additional Total
----------------- Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
----------------------------------------------------------------
(In thousands)
Balance at December 31, 1997 18,073 $ 181 $ 26,683 $ 23,596 $ 50,460
Net income for 1998 -- -- -- 10,154 10,154
Exercise of stock options 798 8 2,402 -- 2,410
Common stock issued under
employee stock purchase plan 11 -- 69 -- 69
Income tax benefit from stock
options exercised -- -- 232 -- 232
Spin-off of Landair Corporation -- -- (13,681) (30,573) (44,254)
----------------------------------------------------------------
Balance at December 31, 1998 18,882 189 15,705 3,177 19,071
Net income for 1999 -- -- -- 16,040 16,040
Exercise of stock options 336 3 1,328 -- 1,331
Common stock issued under
employee stock purchase plan 15 -- 136 -- 136
Income tax benefit from stock
options exercised -- -- 341 -- 341
Net proceeds of public offering 1,500 15 18,018 -- 18,033
----------------------------------------------------------------
Balance at December 31, 1999 20,733 207 35,528 19,217 54,952
Net income for 2000 -- -- -- 23,445 23,445
Exercise of stock options 573 6 2,611 -- 2,617
Common stock issued under
employee stock purchase plan 6 -- 177 -- 177
Income tax benefit from stock
options exercised -- -- 2,262 -- 2,262
----------------------------------------------------------------
Balance at December 31, 2000 21,312 $ 213 $ 40,578 $ 42,662 $ 83,453
================================================================
See accompanying notes.
F-7
34
Forward Air Corporation
Consolidated Statements of Cash Flows
Year ended December 31
2000 1999 1998
----------------------------------------------------
(In thousands)
OPERATING ACTIVITIES
Net income $ 23,445 $ 16,040 $ 10,154
Adjustments to reconcile net income to
net cash provided by operating activities:
Income from discontinued operations -- -- (2,075)
Depreciation and amortization 5,783 4,996 4,346
(Gain) loss on sale of property and equipment 33 (43) (128)
Provision for losses on receivables 433 295 438
Provision for revenue adjustments 1,258 1,245 1,641
Deferred income taxes 2,787 1,450 1,893
Changes in operating assets and liabilities,
net of effects from acquisition of businesses:
Accounts receivable (2,410) (9,128) (4,162)
Inventories 201 (251) (89)
Prepaid expenses (607) 754 (1,191)
Accounts payable and accrued expenses 3,207 5,021 8,314
Income taxes (297) (275) 203
Due to Truckload Business subsidiaries -- -- (17,447)
----------------------------------------------------
Net cash provided by operating activities 33,833 20,104 1,897
INVESTING ACTIVITIES
Purchases of property and equipment (16,547) (7,412) (11,764)
Proceeds from disposal of property and equipment 494 1,001 117
Acquisition of businesses (10,711) (6,814) --
Contribution of capital to discontinued operations -- -- (5,000)
Other (87) (139) (335)
----------------------------------------------------
Net cash used in investing activities (26,851) (13,364) (16,982)
FINANCING ACTIVITIES
Proceeds from long-term debt 1,853 -- 21,792
Payments of long-term debt (1,479) (19,739) (8,631)
Payments of capital lease obligations (550) (967) (995)
Proceeds from exercise of stock options 2,617 1,331 2,410
Proceeds from common stock issued under
employee stock purchase plan 177 136 69
Net proceeds from public offering of common stock -- 18,033 --
----------------------------------------------------
Net cash provided by (used in) financing activities 2,618 (1,206) 14,645
----------------------------------------------------
Net increase (decrease) in cash and cash equivalents 9,600 5,534 (440)
Cash and cash equivalents at beginning of year 5,989 455 895
----------------------------------------------------
Cash and cash equivalents at end of year $ 15,589 $ 5,989 $ 455
====================================================
F-8
35
Forward Air Corporation
Consolidated Statements of Cash Flows (continued)
Year ended December 31
2000 1999 1998
-----------------------------------------
(In thousands)
Non-cash transactions:
Issuance of note payable to DTSI for non-compete
agreement $ 1,349 $ -- $ --
=========================================
Capital lease obligation to Rickenbacker
Port Authority $ 1,011 $ -- $ --
=========================================
Issuance of notes payable to Quick Delivery Service,
Inc. and LTD Air Cargo, Inc. for asset acquisitions
and non-compete agreements $ -- $ 1,400 $ --
=========================================
See accompanying notes.
F-9
36
Forward Air Corporation
Notes to Consolidated Financial Statements
December 31, 2000
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of the Company include
Forward Air Corporation and its subsidiaries. Significant intercompany accounts
and transactions have been eliminated in consolidation.
On July 9, 1998 (the "Measurement Date"), the Board of Directors of the Company
authorized the separation of the Company into two publicly-held corporations,
one owning and operating the deferred air freight operations and the other
owning and operating the truckload operations (the "Spin-off").
The Spin-off was effected on September 23, 1998 through the distribution to
shareholders of the Company of all of the outstanding shares of common stock of
a new truckload holding company (formerly "the Truckload Business"), Landair
Corporation. Pursuant to the Spin-off, the common stock of Landair Corporation
was distributed on a pro rata basis of one share of Landair Corporation common
stock for every one share of the Company's common stock held as of the record
date. Subsequent to the Spin-off, the Company has continued as the legal entity
that owns and operates the deferred air freight operations through its operating
subsidiaries and Landair Corporation is the legal entity that owns and operates
the truckload operations. As a result of the Spin-off, the results of operations
and cash flows of the Truckload Business have been reported as discontinued
operations for all periods presented in the accompanying consolidated financial
statements (see Note 2).
As used in the accompanying consolidated financial statements, the term "Forward
Air Business" refers to the deferred air freight operations; Landair
Corporation, or the term "Truckload Business," refers to the truckload
operations; and the "Company" refers to the entity which, prior to the Spin-off,
through its subsidiaries operated both the Forward Air Business and the
Truckload Business and which, after the Spin-off, continues to operate the
Forward Air Business.
The Company operates a comprehensive national network for the time-definite
surface transportation of deferred freight. The Company provides its
transportation services through a network of terminals located on or near
airports in the United States and Canada. The Company's customers consist
primarily of air freight forwarders, domestic and international airlines and
integrated air cargo carriers. The Company's operations involve receiving
deferred freight shipments at its terminals and transporting them by truck to
the terminal nearest their destination.
F-10
37
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
OPERATING REVENUE
Operating revenue and related costs are recognized as of the date shipments are
completed. No single customer accounted for more than 10% of operating revenue
from continuing operations in 2000, 1999 or 1998.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories of tires, replacement parts, supplies, and fuel for equipment are
stated at the lower of cost or market utilizing the FIFO (first-in, first-out)
method of determining cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated based upon the cost of the asset, reduced by its
estimated salvage value, using the straight-line method over the estimated
useful lives as follows:
Buildings................................... 30-40 years
Equipment................................... 3-10 years
Leasehold improvements...................... 1-15 years
The Company reviews its long-lived assets, including goodwill and other
intangibles, for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The measurement of possible
impairment is based upon determining whether
F-11
38
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
projected undiscounted future cash flows from the use of the asset over its
remaining useful life are less than the carrying value of the asset. As of
December 31, 2000, in the opinion of management, there has been no such
impairment.
RISK MANAGEMENT
The Company is self-insured for certain of its workers' compensation, property
damage, auto liability and medical benefit claims. The Company has entered into
agreements with independent insurance companies to limit its losses with respect
to these claims.
INCOME PER SHARE
The Company calculates income per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. Under SFAS
No. 128, basic earnings per share exclude any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share includes any
dilutive effects of options, warrants and convertible securities, and uses the
treasury stock method in calculating dilution. All earnings per share data
included in the consolidated financial statements and notes thereto have been
restated to give effect to a three-for-two stock split and a two-for-one stock
split (see Note 5).
COMPREHENSIVE INCOME
The Company had no items of other comprehensive income in 2000, 1999 and 1998
and, accordingly, comprehensive income is equivalent to net income.
EMPLOYEE STOCK OPTIONS
The Company grants options for a fixed number of shares to employees with an
exercise price equal to the fair value of the shares at the grant date. The
Company accounts for employee stock option grants in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and,
accordingly, recognizes no compensation expense for the stock option grants.
COMMON EXPENSES
Prior to the Spin-off, certain administrative and back office functions were
shared by both the Forward Air Business and the Truckload Business. The expenses
related to these services were allocated to the Forward Air Business and the
Truckload Business in accordance with the provisions of a Transition Services
Agreement as discussed in Note 2. These administrative
F-12
39
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
expenses, which would have been incurred by the Forward Air Business and the
Truckload Business if each had been operated as an independent stand-alone
entity, totaled $2.8 million for the Forward Air Business and $3.2 million for
the Truckload Business for the period January 1, 1998 through September 23,
1998.
Interest expense of $661,000 for the Forward Air Business and $1.4 million for
the Truckload Business for the period from January 1, 1998 through September 23,
1998 has been allocated by the Company on an annual basis based upon the pro
rata share of average operating assets of the Truckload Business and the Forward
Air Business.
Management believes these allocation methods are reasonable.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued and was required to be adopted in years beginning after
June 15, 1999. In June 1999, SFAS No. 137 was issued, deferring the effective
date of SFAS No. 133 for one year. This Statement requires all derivatives to be
recorded on the balance sheet at fair value. This results in the offsetting
changes in fair values or cash flows of both the hedge and the hedged item being
recognized in earnings or other comprehensive income, as appropriate, in the
same period. Changes in fair value of derivatives not meeting the Statement's
hedge criteria are included in income. The Company adopted the new Statement as
of January 1, 2001. The Company does not expect the adoption of this Statement
to have a significant effect on its results of operations or financial position.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform to the 2000 presentation. These reclassifications had no effect on
net income as previously reported.
2. DISCONTINUED OPERATIONS
As discussed in Note 1, on July 9, 1998, the Board of Directors of the Company
authorized the separation of the Company into two publicly-held corporations,
one owning and operating the Forward Air Business and the other owning and
operating the Truckload Business. The Spin-off was effected on September 23,
1998.
F-13
40
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
2. DISCONTINUED OPERATIONS (CONTINUED)
Summarized income statement information relating to the Truckload Business (as
reported in discontinued operations) is as follows (in thousands):
1998(1)
--------
Operating revenue $ 51,543
Operating expenses 48,450
--------
Income from operations 3,093
Interest expense (924)
Other income 26
--------
Income before income taxes 2,195
Income taxes 850
--------
Income from discontinued operations $ 1,345
========
(1) The fiscal 1998 summarized income statement information above includes
the results of operations only through the July 9, 1998 Measurement
Date.
The loss on Spin-off in the amount of $380,000 recorded in 1998 includes the
net of the after-tax income of the discontinued operations from the Measurement
Date through the date of the Spin-off of $730,000 ($1.2 million on a pre-tax
basis), and costs associated with the Spin-off of $1.1 million. The costs
associated with the Spin-off represent the cost of separating the two
businesses which are non-deductible for income tax purposes.
In connection with the Spin-off, the Company and Landair Corporation entered
into certain agreements which were effective upon the actual separation of the
two companies. The agreements were entered into to facilitate orderly changes
from an integrated transportation company to separate deferred air freight and
truckload operating companies in a way which is minimally disruptive to each
entity. Following are summaries of the principal agreements:
DISTRIBUTION AGREEMENT
The Distribution Agreement provided for, among other things, the principal
corporate transactions required to effect the Spin-off and the allocation of
certain assets and liabilities between the Company and Landair Corporation. The
Distribution Agreement provides that the Company and Landair Corporation each
have sole responsibility for claims arising out of their respective activities
after the Spin-off. It also provides that each party will indemnify the other
in the event of certain liabilities arising under the federal securities laws,
and that, for a period of three years after the Spin-off, neither the Company
nor Landair Corporation will directly solicit the employment of any employee of
the other company or its affiliates without the prior written consent of such
other company.
F-14
41
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
2. DISCONTINUED OPERATIONS (CONTINUED)
TRANSITION SERVICES AGREEMENT
The Transition Services Agreement describes the services which the Company and
Landair Corporation provide to each other following the Spin-off. Services
performed under the Transition Services Agreement are negotiated and paid for
on an arm's-length basis. The Company or Landair Corporation, as recipients of
the services, may terminate any or all such services at any time on thirty
days' irrevocable written notice, and the Company or Landair Corporation, as
providers of the services, may terminate any or all of the services, other than
information technology services, on three months' irrevocable notice.
Information technology services to be provided by the Company to Landair
Corporation have a thirty-six month term.
EMPLOYEE BENEFIT MATTERS AGREEMENT
The Employee Benefit Matters Agreement provided for the treatment of employee
benefit matters and other compensation arrangements for the employees of the
Company and Landair Corporation after the Spin-off. Pursuant to this agreement,
the Company continued sponsorship of the various employee benefit plans and
welfare plans of the Company with respect to employees of the Company after the
Spin-off, and Landair Corporation established such similar plans to provide to
its employees after the Spin-off substantially the same benefits previously
provided to them as employees of the Company. This Employee Benefit Matters
Agreement also provided for the adjustment and conversion of the existing
non-exercisable stock options of the Company into options of Landair
Corporation for those employees that continued employment with Landair
Corporation after the Spin-off. (See Note 5).
TAX SHARING AGREEMENT
The Tax Sharing Agreement describes the responsibilities of the Company and
Landair Corporation with respect to all tax matters occurring prior to and
after the Spin-off. The Tax Sharing Agreement provides for the allocation of
tax expense, assessments, refunds and other tax benefits. The Agreement also
sets forth the responsibility for filing tax returns and provides for
reasonable cooperation in the event of any audit, litigation or other
proceeding with respect to any federal, state or local tax.
3. ACQUISITION OF BUSINESSES
In December 2000, the Company acquired the assets of Dedicated Transportation
Services, Inc. ("DTSI"), a deferred air freight contractor to the air cargo
industry based in Santa Ana, California. The Company paid approximately $10.7
million in cash for certain assets of DTSI (including approximately $700,000 of
capitalized direct and/or out-of-pocket expenses related to
F-15
42
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
3. ACQUISITION OF BUSINESSES (CONTINUED)
the acquisition), which included accounts receivable, net of estimated costs to
collect such receivables, in the amount of approximately $5.4 million. As of
December 31, 2000, the Company has collected approximately $1.3 million in DTSI
accounts receivable and the remaining $4.1 million is included in accounts
receivable in the accompanying balance sheet. The acquisition was accounted for
as a purchase and the excess cost over fair value of the net assets acquired is
being amortized on a straight-line basis over a fifteen-year period. The
allocation of the purchase price resulted in a tentative allocation of $5.1
million to goodwill. This allocation may change upon the completion of the
collection of DTSI accounts receivable. The Company also entered into
non-compete agreements with the former owners of DTSI, which provide for a
total of $500,000 to be paid annually by the Company over a three-year period.
Non-compete agreements are being amortized over the terms of the agreements.
In October 1999, the Company acquired certain air cargo operating assets of
Quick Delivery Service, Inc. ("Quick"), a deferred air freight contractor to
the air cargo industry based in Mobile, Alabama and certain air cargo operating
assets of LTD Air Cargo, Inc. ("LTD"), a deferred air freight contractor to the
air cargo industry based in Franklin, Tennessee. The Company paid approximately
$6.8 million in cash and issued notes payable totaling $1.0 million for the
above two acquisitions. The acquisitions were accounted for as purchases. The
Company also entered into non-compete agreements with the former owners of
Quick and LTD for a total of $400,000 to be paid in installments by the Company
over the terms of the agreements. Non-compete agreements are being amortized
over the terms of the agreements. Goodwill relating to the Quick and LTD
acquisitions totaled approximately $6.4 million and is being amortized on a
straight-line basis over a life of fifteen years.
The results of operations for the acquired businesses are included in the
consolidated statements of income from the respective acquisition dates
forward.
Goodwill and other intangible assets totaled $16.2 million and $9.8 million at
December 31, 2000 and 1999, respectively. Accumulated amortization of goodwill
and other intangible assets totaled approximately $1.1 million and $300,000 at
each year end, respectively. The net present value of payments required under
the non-compete agreements are included as obligations in long-term debt (see
Note 4).
F-16
43
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
4. LONG-TERM DEBT
Long-term debt consists of the following:
December 31
2000 1999
------ ------
(In thousands)
Line of credit $1,853 $ --
Non-compete obligations 1,463 400
Other, principally 7.0% due through 2003 -- 1,193
------ ------
3,316 1,593
Less current portion 532 758
------ ------
$2,784 $ 835
====== ======
Effective with the Spin-off, the Company entered into a $20.0 million working
capital line of credit facility with a Tennessee bank which expires in April
2002. Interest rates for advances under the facility vary from LIBOR plus 1.0%
to 1.9% based upon covenants related to total indebtedness, cash flows, results
of operations and other ratios (7.8% and 6.8% at December 31, 2000 and 1999,
respectively). Advances are collateralized primarily by accounts receivable.
The agreement contains, among other things, restrictions that do not allow the
payment of dividends, and requires the maintenance of certain levels of net
worth and other financial ratios. At December 31, 2000, the Company had $1.9
million outstanding under the line and had utilized $4.3 million of
availability for outstanding letters of credit.
Maturities of long-term debt are as follows (in thousands):
2001 $ 532
2002 2,314
2003 470
------
$3,316
======
Interest payments during 2000, 1999 and 1998 were $409,000, $911,000 and $1.2
million, respectively, of which $301,000, $71,000 and $-0- was capitalized.
5. SHAREHOLDERS' EQUITY AND STOCK OPTIONS
Preferred Stock -- The Board of Directors is authorized to issue, at its
discretion, up to 5.0 million shares of preferred stock, par value $.01. The
terms and conditions of the preferred shares are to be determined by the Board
of Directors. No shares have been issued to date.
F-17
44
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
5. SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
Common Stock Splits -- On January 10, 2000, the Board of Directors approved a
three-for-two split of the common shares which was distributed on January 28,
2000 to shareholders of record as of January 21, 2000. On February 24, 1999,
the Board of Directors approved a two-for-one split of the common shares which
was distributed on March 19, 1999 to shareholders of record as of March 12,
1999. Common stock issued and additional paid-in capital have been restated to
reflect these splits for all years presented. All common share and per share
data included in the consolidated financial statements and notes thereto have
been restated to give effect to the stock splits.
Employee Stock Option and Incentive Plan -- The Company follows Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations in accounting for its employee stock options. Under
Opinion No. 25, because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized.
At December 31, 1998, the Company had reserved 3.0 million shares of common
stock under a Stock Option and Incentive Plan. In February 1999, the Company
reserved an additional 1.5 million common shares under the 1999 Stock Option
and Incentive Plan, resulting in a total of 4.5 million shares being reserved
at December 31, 2000 and 1999. Options issued under the Plans have eight to ten
year terms and vest over a four to five year period.
Pro forma information regarding net income and earnings per share is required
by SFAS No. 123, Accounting for Stock Based Compensation, which also requires
that the information be determined as if the Company has accounted for its
stock options granted subsequent to December 31, 1994 under the fair value
method of that Statement. The fair value for these options was estimated at the
date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2000, 1999 and 1998, respectively: risk-free
interest rates of 6.5%, 5.2% and 4.7%; dividend ratio of zero; volatility
factors of the expected market price of the common stock of 0.7, 0.7 and 0.5;
and a weighted-average expected life of the option of seven years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
F-18
45
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
5. SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the stock
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except per share data):
2000 1999 1998
---------- ---------- ---------
Pro forma net income $ 22,463 $ 14,946 $ 9,839
Pro forma net income per share:
Basic $ 1.07 $ .74 $ .53
Diluted $ 1.01 $ .71 $ .51
A summary of the Company's employee stock option activity and related
information for the years ended December 31 follows:
2000 1999 1998
---------------------- ---------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Options Exercise Options Exercise
(000) Price (000) Price (000) Price
------- --------- ------ --------- ------ ---------
Outstanding - beginning
of year 1,682 $ 6 1,146 $4 1,813 $4
Granted/converted 198 27 888 7 254 5
Exercised (573) 5 (336) 4 (708) 2
Forfeited (43) 11 (16) 4 (213) 4
------ ---- ------ -- ------ --
Outstanding - end of year 1,264 $ 9 1,682 $6 1,146 $4
====== ==== ====== == ====== ==
Exercisable at end of year 357 $ 5 490 $4 607 $4
====== ==== ====== == ====== ==
Options available for
grant 402 557 314
====== ====== =====
Weighted-average fair
value of options
granted during the year $19.69 $ 5.24 $3.37
====== ====== =====
Exercise prices for options outstanding as of December 31, 2000 ranged from
$2.67 to $37.41.
Under the provisions of the Company's stock option plan, options to purchase
shares of the Company's common stock that were exercisable at the time of the
Spin-off, and that were held by those employees who terminated employment with
the Company and became employees of Landair Corporation upon the Spin-off, were
canceled if not exercised prior to such employees' termination of employment
with the Company. Accordingly, employees that were leaving the Company and
continuing as employees of Landair Corporation exercised 297,000 vested options
during 1998 prior to the Spin-off. Unexercisable options held by employees of
the Company who remained or became employees of Landair Corporation upon
consummation of the Spin-off which totaled 153,000 were converted into options
to purchase Landair Corporation common stock under Landair Corporation's Stock
Option and Incentive Plan. Such conversion was on the basis of a formula
designed to preserve the fair market value of such converted options on the
date of the
F-19
46
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
5. SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
Spin-off. All options held by employees of the Company who remained or became
employees of the Company upon consummation of the Spin-off were adjusted on the
basis of a formula designed to preserve the fair market value of such options
on the date of the Spin-off. The adjustment of these options resulted in the
grant of options to purchase 225,000 additional shares during the year ended
December 31, 1998.
Non-Employee Director Options -- In July 2000, May 2000, May 1999 and August
1998, options to purchase 7,500, 15,000, 22,500 and 56,250 shares of common
stock, respectively, were granted to the non-employee directors of the Company
at option prices of $36.38, $33.75, $17.83 and $6.13 per share, respectively.
All options held by directors of the Company as of the Spin-off were adjusted
on the basis of a formula designed to preserve the fair market value of such
options on the date of the Spin-off.
The options have terms of ten years and are exercisable in installments which
vest over two-year periods from the date of grant. At December 31, 2000,
270,000 options are outstanding and will expire in May 2005 through July 2010,
unless a non-employee director resigns or is not re-elected, in which event the
options expire 90 days after the option holder is no longer a non-employee
director.
Employee Stock Purchase Plan -- The Company implemented an employee stock
purchase plan effective January 1, 1996 at which time participating employees
became entitled to purchase common stock through payroll deduction of up to 10%
of the employee's annual compensation. The issue price of the common stock is
equal to the lesser of (1) 85% of market price on the first trading day of the
semi-annual option period or (2) 85% of market price on the last trading day of
the semi-annual option period. The Company has reserved 900,000 shares of
common stock for issuance pursuant to the plan. At December 31, 2000,
approximately 81,000 shares had been issued under the Plan.
F-20
47
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
5. SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
Earnings Per Share -- The following table sets forth the computation of basic
and diluted income per share (in thousands, except per share data):
2000 1999 1998
------- ------- -------
Numerator:
Numerator for basic and diluted income per share:
Income from continuing operations $23,445 $16,040 $ 9,189
Income from discontinued operations -- -- 965
------- ------- -------
Net income $23,445 $16,040 $10,154
======= ======= =======
Denominator:
Denominator for basic income per share-
weighted-average shares 21,074 20,072 18,589
Effect of dilutive stock options 1,161 1,110 681
------- ------- -------
Denominator for diluted income per share-
adjusted weighted-average shares 22,235 21,182 19,270
======= ======= =======
Income per share - basic:
Income from continuing operations $ 1.11 $ .80 $ .49
Income from discontinued operations -- -- .06
------- ------- -------
Net income $ 1.11 $ .80 $ .55
======= ======= =======
Income per share - diluted:
Income from continuing operations $ 1.05 $ .76 $ .48
Income from discontinued operations -- -- .05
------- ------- -------
Net income $ 1.05 $ .76 $ .53
======= ======= =======
F-21
48
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES
The Company and Landair Corporation entered into a Tax Sharing Agreement in
connection with the Spin-off (see Note 2).
The provision for income taxes from continuing operations consists of the
following:
2000 1999 1998
------- ------ ------
(In thousands)
Current:
Federal $10,392 $7,509 $3,246
State 1,343 991 514
------- ------ ------
11,735 8,500 3,760
Deferred:
Federal 2,592 1,382 1,807
State 195 68 86
------- ------ ------
2,787 1,450 1,893
------- ------ ------
$14,522 $9,950 $5,653
======= ====== ======
The historical income tax expense differs from the amounts computed by applying
the federal statutory rate of 35% to income before income taxes as follows:
2000 1999 1998
-------- ------ ------
(In thousands)
Tax expense at the statutory rate $ 13,288 $9,097 $5,195
State income taxes, net of federal benefit 1,000 688 397
Meals and entertainment 357 165 61
Tax-exempt interest income (123) -- --
-------- ------ ------
$ 14,522 $9,950 $5,653
======== ====== ======
F-22
49
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:
December 31
2000 1999
------- -------
(In thousands)
Deferred tax assets:
Accrued expenses $ 1,177 $ 973
Allowance for doubtful accounts 372 345
Capital lease 59 --
------- -------
Total deferred tax assets 1,608 1,318
Deferred tax liabilities:
Tax over book depreciation 3,195 2,180
Research and development expenses 2,567 --
Prepaid expenses deductible when paid 523 476
Capital lease -- 332
Other 517 737
------- -------
Total deferred tax liabilities 6,802 3,725
------- -------
Net deferred tax liabilities $(5,194) $(2,407)
======= =======
The balance sheet classification of deferred income taxes is as follows:
December 31
2000 1999
------- -------
(In thousands)
Current assets $ 956 $ 652
Noncurrent assets (liabilities) (6,150) (3,059)
------- -------
$(5,194) $(2,407)
======= =======
Total income tax payments, net of refunds, during fiscal 2000, 1999 and 1998
were $12.3 million, $8.1 million and $3.4 million, respectively.
F-23
50
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
7. LEASES
In September 2000, the Company entered into an agreement with the Rickenbacker
Port Authority ("Rickenbacker") to lease a building located near the Company's
Columbus hub facility in Columbus, Ohio. At the inception of the lease, the
Company made a $2.0 million payment to Rickenbacker. The lease agreement has a
ten year initial term, with two five-year renewal options. The present value of
the future minimum lease payments of $1.0 million (at December 31, 2000) is
included in capital lease obligations in the accompanying consolidated balance
sheet. The leased building was recorded in property and equipment at $3.0
million (which represents the present value of minimum lease payments,
including the $2.0 million initial payment, as it is less than the fair value
at the inception date). The building is being depreciated over the initial
lease term, which is less than the estimated useful life of the building.
The Company has a capital lease agreement (with a bargain purchase option)
extending to 2008 with the Director of Development of the State of Ohio for a
terminal facility located in Columbus, Ohio. The amounts due under the lease
have been included in capital lease obligations. The Company is responsible for
all taxes, assessments and other costs of ownership under the lease agreement.
The lease also requires, among other things, restrictions on the payment of
dividends and the maintenance of certain levels of net worth and other
financial ratios. The assets are being amortized over the estimated useful
lives of the assets under the assumption that the bargain purchase option will
be exercised.
The Company leases certain equipment under capital leases. These equipment
leases expire in various years through 2001.
Property and equipment include the following amounts for leases that have been
capitalized:
December 31
2000 1999
------- ------
(In thousands)
Land $ 2,605 $2,605
Buildings 6,687 3,675
Equipment 2,472 2,702
------- ------
11,764 8,982
Less accumulated amortization 3,074 2,602
------- ------
$ 8,690 $6,380
======= ======
Amortization of leased assets is included in depreciation and amortization
expense.
The Company leases certain facilities and equipment under noncancellable
operating leases that expire in various years through 2008. Certain of these
leases may be renewed for periods varying
F-24
51
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
7. LEASES (CONTINUED)
from one to ten years. Landair Corporation shares certain facilities leased by
the Company, and has been allocated a portion of the rent expense related
thereto (see Note 1 - Common Expenses). As discussed below, the Company entered
into lease or sublease agreements with Landair Corporation related to certain
facilities on or prior to the date of the Spin-off. Sublease rental income was
$465,000, $773,000 and $653,000 in 2000, 1999 and 1998, respectively, and was
included in operating revenue in the accompanying consolidated statements of
income.
Included in operating leases is an aircraft leased under a dry lease
arrangement from a limited liability corporation owned by the Company's
Chairman and Chief Executive Officer which expired in July 1999. Under the
terms of the lease agreement, the Company paid the limited liability
corporation $700 per hour of usage subject to a 400 hour per year minimum usage
guarantee. The total net amount of rent expense for this lease was $107,000 and
$423,000 in 1999 and 1998, respectively. Upon expiration of the lease
agreement, the Company commenced chartering the aircraft on an as-needed hourly
basis. The air charter expense totaled $185,000 and $106,000 in 2000 and 1999,
respectively. In addition, during 2000, the Company paid salaries and benefits
of $130,000 for two pilots of the limited liability corporation.
On or prior to the date of the Spin-off, the Company entered into subleases
with Landair Corporation pursuant to which the Company sublet to Landair
Corporation (i) a portion of its terminal facility in Atlanta, Georgia; (ii) a
portion of its terminal facility in Chicago, Illinois; (iii) a portion of its
terminal facility in Detroit, Michigan; and (iv) a portion of the headquarters
of the Company in Greeneville, Tennessee that is leased from the
Greeneville-Greene County Airport Authority. The Company subleases the terminal
facilities to Landair Corporation for consideration based upon the cost of such
facilities to the Company and an agreed-upon percentage of usage. The Company
subleases a portion of Landair Corporation's facility in Indianapolis for
consideration based upon an agreed-upon percentage of usage. The Company
expects to receive aggregate future minimum rental payments under noncancelable
subleases of approximately $950,000.
F-25
52
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
7. LEASES (CONTINUED)
Future minimum rental payments under capital leases and noncancellable
operating leases with initial or remaining terms in excess of one year
consisted of the following at December 31, 2000:
Capital Operating
Fiscal Year Leases Leases
- ----------- ------ ---------
(In thousands)
2001 $ 775 $ 9,646
2002 775 6,809
2003 775 4,638
2004 775 2,718
2005 775 768
Thereafter 2,414 29
------ -------
Total minimum lease payments 6,289 $24,608
=======
Amounts representing interest 1,395
------
Present value of net minimum lease payments
(including current portion of $446) $4,894
======
8. TRANSACTIONS WITH LANDAIR CORPORATION
The Company and Landair Corporation routinely engage in operating transactions
as Landair Corporation hauls a portion of the deferred air freight shipments
for the Company which are in excess of the Company's scheduled capacity. During
2000, 1999 and 1998, Landair Corporation provided $2.1 million, $3.3 million
and $4.4 million, respectively, of transportation services for the Company
which were included in the accompanying statements of income in purchased
transportation.
In accordance with the terms included in the Transition Services Agreement,
subsequent to the Spin-off the Company provided accounts payable, payroll,
human resources, employee benefit plan administration, owner-operator
settlement, central purchasing, accounting and legal, general administrative,
and information technology services to Landair Corporation. The Company charged
Landair Corporation $1.5 million, $2.4 million and $797,000, respectively,
during the years ended December 31, 2000 and 1999 and the period September 24,
1998 through December 31, 1998 for these services. In addition, Landair
Corporation provided the Company safety, licensing, permitting and fuel tax,
recruiting and retention, and driver training center services subsequent to the
Spin-off. Landair Corporation charged the Company $230,000, $455,000 and
$193,000, respectively, during the years ended December 31, 2000 and 1999 and
the period September 24, 1998 through December 31, 1998 for these services.
In connection with the Spin-off, the Company settled all intercompany balances
for cash as of September 23, 1998. At December 31, 2000, accounts receivable
included $315,000 of amounts
F-26
53
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
8. TRANSACTIONS WITH LANDAIR CORPORATION (CONTINUED)
due from Landair Corporation related to services covered under the Transition
Services Agreement and various other transactions between both entities. At
December 31, 1999, accounts payable included $707,000 of amounts due to Landair
Corporation related to services covered under the Transition Services Agreement
and various transactions between both entities.
As discussed in Note 7, the Company subleases a portion of certain facilities
to Landair Corporation.
9. COMMITMENTS AND CONTINGENCIES
The primary claims in the Company's business are workers' compensation,
property damage, auto liability and medical benefits. Most of the Company's
insurance coverage provides for self-insurance levels with primary and excess
coverage which management believes is sufficient to adequately protect the
Company from catastrophic claims. In the opinion of management, adequate
provision has been made for all incurred claims up to the self-insured limits,
including provision for estimated claims incurred but not reported.
The Company estimates its self-insurance loss exposure by evaluating the merits
and circumstances surrounding individual known claims, and by performing
hindsight analysis to determine an estimate of probable losses on claims
incurred but not reported. Such losses could be realized immediately as the
events underlying the claims have already occurred as of the balance sheet
dates.
Because of the uncertainty of the ultimate resolution of outstanding claims, as
well as uncertainty regarding claims incurred but not reported, it is possible
that management's provision for these losses could change materially in the
near term. However, no estimate can currently be made of the range of
additional loss that is at least reasonably possible.
The estimated cost to complete software development in progress at December 31,
2000 is approximately $500,000.
10. EMPLOYEE BENEFIT PLAN
The Company has a retirement savings plan (the "401(k) Plan"). The 401(k) Plan
is a defined contribution plan whereby employees who have completed ninety days
of service, a minimum of 1,000 hours of service and are age 21 or older are
eligible to participate. The 401(k) Plan allows eligible employees to make
contributions of 2% to 15% of their annual compensation. Employer contributions
are made at 25% during 2000, 1999 and 1998 of the employee's contribution up to
a maximum of 6% during 2000 and 1999 and 4% during 1998 of total annual
compensation.
F-27
54
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
10. EMPLOYEE BENEFIT PLAN (CONTINUED)
Employer contributions vest 20% after two years of service and continue vesting
20% per year until fully vested. The Company's matching contribution included
in income from continuing operations for 2000, 1999 and 1998 was approximately
$190,000, $146,000 and $71,000, respectively. In connection with the Spin-off,
the account balances of Truckload employees were transferred to a Landair
Corporation plan in a trust-to-trust transfer during 1999.
11. FINANCIAL INSTRUMENTS
Off Balance Sheet Risk
At December 31, 2000, the Company had letters of credit outstanding totaling
$4.3 million, all of which guarantee obligations carried on the balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash investments and trade
accounts receivable. The Company does not generally require collateral from its
customers. Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of entities comprising the
Company's customer base and their dispersion across many different industries.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
Accounts receivable and accounts payable: The carrying amounts
reported in the balance sheet for accounts receivable and accounts
payable approximate their fair value.
Long-and short-term debt: The carrying amounts of the Company's
borrowings under its revolving credit arrangement approximate fair
value. The fair value of the Company's long-term debt and capital
lease obligations is estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
F-28
55
Forward Air Corporation
Notes to Consolidated Financial Statements (continued)
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the years
ended December 31, 2000 and 1999:
2000
------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(In thousands, except per share data)
Operating revenue $49,407 $54,058 $53,703 $57,739
Income from operations 7,371 9,766 9,758 10,406
Net income 4,589 6,118 6,145 6,593
Net income per share:
Basic $ .22 $ .29 $ .29 $ .31
Diluted $ .21 $ .28 $ .28 $ .30
1999
------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(In thousands, except per share data)
Operating revenue $37,728 $40,781 $42,599 $49,735
Income from operations 5,475 5,939 6,560 8,470
Net income 3,100 3,550 4,006 5,384
Net income per share:
Basic $ .16 $ .18 $ .19 $ .26
Diluted $ .16 $ .17 $ .18 $ .25
13. SUBSEQUENT EVENT
In January 2001, the Company completed an asset purchase transaction in which
it acquired certain assets of Expedited Delivery Services, Inc. ("Expedited").
Expedited is a provider of transportation services to the air cargo industry.
The aggregate consideration paid to Expedited consisted of approximately $2.0
million in cash. The acquisition will be accounted for using the purchase
method of accounting.
F-29
56
Forward Air Corporation
Schedule II -- Valuation and Qualifying Accounts
Col. A Col. B Col. C Col. D Col. E
- ----------------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------
(1) (2)
Charged Charged
Balance at to Costs to Other Balance at
Beginning and Accounts- Deductions- End of
Description of Period Expenses Describe Describe Period
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Year ended December 31, 2000:
Allowance for doubtful accounts $ 595 $ 433 $ -- $ 162(2) $ 866
Allowance for revenue adjustments(1) 323 1,258 -- 1,263(3) 318
-----------------------------------------------------------------------------
918 1,691 -- 1,425 1,184
Year ended December 31, 1999:
Allowance for doubtful accounts $ 577 $ 295 $ -- $ 277(2) $ 595
Allowance for revenue adjustments(1) 375 1,245 -- 1,297(3) 323
-----------------------------------------------------------------------------
952 1,540 -- 1,574 918
Year ended December 31, 1998:
Allowance for doubtful accounts $ 440 $ 438 $ -- $ 301(2) $ 577
Allowance for revenue adjustments(1) 313 1,641 -- 1,579(3) 375
-----------------------------------------------------------------------------
753 2,079 -- 1,880 952
(1) Represents an allowance for adjustments to accounts receivable due to
disputed rates, accessorial charges and other aspects of previously
billed shipments.
(2) Uncollectible accounts written off, net of recoveries.
(3) Adjustments to billed accounts receivable.
S-1
57
EXHIBIT INDEX
Exhibit No.
Under Exhibit No. in
Item 601 of Document Where
Regulation Incorporated by
S-K Reference
- ----------- ---------------
2.1(g)- Distribution between the 2.1
Registrant and Landair Corporation
3.1(j)- Restated Charter of the registrant 3
3.2(g)- Bylaws of the registrant, as amended 3.1
4.1(b)- Form of Landair Services, Inc. Common 4.1
Stock Certificate
4.2(g)- Form of Forward Air Corporation 4.1
Common Stock Certificate
4.3(j)- Rights Agreement dated May 18, 1999, 4
between the registrant and SunTrust Bank,
Atlanta, N.A., including the Form of Rights
Certificate (Exhibit A) and the Form of
Summary of Rights (Exhibit B)
10.1(f)- Registrant's Restated Employee Stock 10
Purchase Plan
10.2(e)- Registrant's Amended and Restated 10.1
Stock Option and Incentive Plan
10.3(b)- Lease Agreement, dated July 27, 1981, 10.18
between the Greeneville-Greene County
Airport Authority and General Aviation
of Tennessee, Inc., as assumed by the
registrant by agreement, dated May 10,
1988
10.4(b)- Assignment, Assumption and Release 10.19
Agreement, dated May 10, 1988,
between Greeneville-Greene County
Airport, General Aviation, Inc., and
the registrant
58
10.5(g)- Air Carrier Certificate, effective 10.4
September 9, 1993, reissued September
21, 1998
10.6(c)- Lease between the Director of 10.24
Development of the State of Ohio and
the registrant dated as of October 1, 1993
10.7(e)- Registrant's Non-Employee Director 10.2
Stock Option Plan
10.8(g)- Transition Services Agreement between the 10.1
registrant and Landair Corporation
10.9(g)- Employee Benefit Matters Agreement 10.2
between the registrant and Landair Corporation
10.10(g)- Tax Sharing Agreement between the registrant 10.3
and Landair Corporation
10.11(g)- Amended and Restated Loan and Security 10.5
Agreement, dated as of September 10, 1998,
between First Tennessee Bank National
Association and the registrant
10.12(g)- $20.0 million Amended and Restated Master 10.6
Secured Promissory Note (Line of Credit),
dated as of September 10, 1998, to First
Tennessee Bank National Association
10.13(g)- $15.0 million Amended and Restated 10.7
Secured Promissory Note (Equipment
Loan), dated as of September 10, 1998,
to First Tennessee Bank National Association
10.14(g)- Security Agreement, dated August 11, 1998, 10.8
between SunTrust Bank, Nashville, N.A.
and FAF, Inc.
10.15(g)- $8,022,000 Promissory Note, dated 10.9
August 11, 1998, to SunTrust Bank,
Nashville, N.A.
10.16(h)- Employment Agreement between the registrant 10.16
and Bruce A. Campbell
59
10.17(i)- 1999 Stock Option and Incentive Plan 10.1
10.18(i)- Loan and Security Agreement ($10.0 million 10.2
Line of Credit), dated as of January 13, 1999
among SunTrust Bank, Nashville, N.A. and
the registrant, FAF, Inc. and Forward Air,
Inc. (Certain exhibits to this document are
omitted from this filing but the registrant
will furnish supplemental copies of the
omitted materials to the Securities and
Exchange Commission (the"Commission")
upon request.)
10.19(k)- Cash Incentive Plan 10.19
10.20(l)- First Amendment to the Transition Services 10.1
Agreement, dated as of February 4, 2000, between
the registrant and Landair Corporation
10.21(m)- Non-Qualified Stock Option Agreement dated 10.1
August 21, 2000 between the registrant and
Ray A. Mundy
21.1(a)- Subsidiaries of the registrant --
23.1(a)- Consent of Ernst & Young LLP --
(a) Filed herewith.
(b) Filed as an exhibit to the registrant's Registration
Statement of Form S-1, filed with the Commission on September 27, 1993.
(c) Filed as an exhibit to the registrant's Annual Report on Form
10-K for the fiscal year ended December 25, 1993, filed with the Commission on
March 25, 1994.
(d) Filed as an exhibit to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, filed with the Commission on
March 31, 1995.
(e) Filed as an exhibit to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995, filed with the
Commission on August 14, 1995.
(f) Filed as an exhibit to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995, filed with the
Commission on November 14, 1995.
60
(g) Filed as an exhibit to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1998, filed with the
Commission on November 16, 1998.
(h) Filed as an exhibit to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, filed with the Commission on
March 11, 1999.
(i) Filed as an exhibit to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1999, filed with the
Commission on May 17, 1999.
(j) Filed as an exhibit to the registrant's Current Report on
Form 8-K filed with the Commission on May 28, 1999.
(k) Filed as an exhibit to the registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, filed with the Commission on
March 7, 2000.
(l) Filed as an exhibit to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2000, filed with the
Commission on May 5, 2000.
(m) Filed as an exhibit to the registrant's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2000, filed with the
Commission on November 6, 2000.