SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2017~~2022

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

Commission File No. 000-22490

FORWARD AIR CORPORATION

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

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

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.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

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

Large accelerated filerx

Accelerated filero

Non-accelerated filero

Smaller reporting companyo

☐

Emerging growth companyo

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares outstanding of the registrant’s common stock, $0.01 par value, as ~~of October 24, 2017~~ of November 3, 2022 was ~~29,772,242.~~



Part I.			Financial Information

Item 1.			Financial Statements (Unaudited).


Forward Air Corporation
Condensed Consolidated Balance Sheets
(unaudited and in thousands, except share and per share amounts)

	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	46,846	$	37,316
Accounts receivable, less allowance of $3,477 in 2022 and $3,260 in 2021	247,730		208,085
Other receivables, less allowance of $235 in 2022 and $— in 2021	—		8,097
Other current assets	18,391		29,309

Total current assets	312,967		282,807

Property and equipment, net of accumulated depreciation and amortization of $214,039 in 2022 and $200,867 in 2021	230,924		219,095
Operating lease right-of-use assets	147,283		148,198

Goodwill	288,496		266,752
Other acquired intangibles, net of accumulated amortization of $119,453 in 2022 and $107,336 in 2021	155,161		154,717

Other assets	51,228		46,254

Total assets	$	1,186,059	$	1,117,823

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	50,666	$	44,837
Accrued expenses	67,980		61,621
Other current liabilities	4,411		4,614
Current portion of debt and finance lease obligations	7,891		6,088
Current portion of operating lease liabilities	48,611		47,532

Total current liabilities	179,559		164,692

Finance lease obligations, less current portion	11,134		9,571
Long-term debt, less current portion and debt issuance costs	106,934		155,466
Operating lease liabilities, less current portion	102,889		101,409
Other long-term liabilities	57,476		49,624
Deferred income taxes	45,369		43,407


Shareholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2022 and 2021	—		—
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 26,589,697 in 2022 and 26,968,788 in 2021	266		270
Additional paid-in capital	267,809		258,474
Retained earnings	414,623		334,910
Total shareholders’ equity	682,698		593,654
Total liabilities and shareholders’ equity	$	1,186,059	$	1,117,823

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

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

Nine months ended
September 30,
2017 September 30,
2016

Operating activities:
Net income $ 51,948
$ 14,964
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 30,578
28,409
Impairment of goodwill, intangible and other assets
—
42,442
Share-based compensation 5,965
6,204
Loss on disposal of property and equipment 701
201
Provision for loss on receivables 1,788
268
Provision for revenue adjustments 2,131
1,570
Deferred income tax 132
661
Excess tax benefit for stock options exercised —
(137 )
Changes in operating assets and liabilities
Accounts receivable (19,417 ) (8,000 )
Other current assets (1,411 ) (1,354 )
Accounts payable and accrued expenses 5,296
9,380
Net cash provided by operating activities 77,711
94,608

Investing activities:
Proceeds from disposal of property and equipment 1,497
1,795
Purchases of property and equipment (13,610 ) (28,725 )
Acquisition of business, net of cash acquired (22,500 ) (11,800 )
Other (73 ) (673 )
Net cash used in investing activities (34,686 ) (39,403 )

Financing activities:
Payments of debt and capital lease obligations (42,715 ) (41,825 )
Proceeds from senior credit facility 55,000
—
Proceeds from exercise of stock options 5,642
7,041
Payments of cash dividends (13,584 ) (10,987 )
Repurchase of common stock (repurchase program) (41,983 ) (29,986 )
Common stock issued under employee stock purchase plan 226
215
Excess tax benefit for stock options exercised —
137
Cash settlement of share-based awards for tax withholdings (1,699 ) (1,800 )
Net cash used in financing activities (39,113 ) (77,205 )
Net increase (decrease) in cash 3,912
(22,000 )
Cash at beginning of period 8,511
33,312
Cash at end of period $ 12,423
$ 11,312

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


Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited and in thousands, except per share amounts)

	Nine Months Ended
	September 30, 2022		September 30, 2021
Operating revenues	$	1,492,203	$	1,202,498

Operating expenses:
Purchased transportation	693,648		605,299
Salaries, wages and employee benefits	263,194		243,948
Operating leases	71,097		60,073
Depreciation and amortization	34,994		28,067
Insurance and claims	37,257		30,616
Fuel expense	20,951		12,218
Other operating expenses	166,501		114,953

Total operating expenses	1,287,642		1,095,174
Income from continuing operations	204,561		107,324

Other expense:
Interest expense	(3,521)		(3,461)

Total other expense	(3,521)		(3,461)
Income before income taxes	201,040		103,863
Income tax expense	50,791		25,969
Net income from continuing operations	150,249		77,894
Loss from discontinued operation, net of tax	—		(12,500)
Net income and comprehensive income	$	150,249	$	65,394

Basic net income (loss) per share
Continuing operations	$	5.56	$	2.84
Discontinued operation	—		(0.46)
Net income per basic share1	$	5.56	$	2.39

Diluted net income (loss) per share
Continuing operations	$	5.53	$	2.83
Discontinued operation	—		(0.46)
Net income per diluted share	$	5.53	$	2.37

Dividends per share	$	0.72	$	0.63

1 Rounding may impact summation of amounts.

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


Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited and in thousands)

	Nine Months Ended
	September 30, 2022		September 30, 2021

Operating activities:
Net income from continuing operations	$	150,249	$	77,894
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization	34,994		28,067

Change in fair value of earn-out liability	(294)		(385)
Share-based compensation expense	8,743		8,179
Provision for revenue adjustments	7,302		5,504
Deferred income tax expense (benefit)	1,962		(1,384)
Other	417		406
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable	(43,172)		(49,086)
Other receivables	8,097		(14,218)
Other current and noncurrent assets	6,743		8,198
Accounts payable, accrued expenses and other long-term liabilities	21,773		19,577
Net cash provided by operating activities of continuing operations	196,814		82,752

Investing activities:
Proceeds from sale of property and equipment	1,423		2,339
Purchases of property and equipment	(25,401)		(23,015)
Purchases of a business, net of cash acquired	(40,433)		(23,053)
Net cash used in investing activities of continuing operations	(64,411)		(43,729)

Financing activities:
Repayments of finance lease obligations	(4,209)		(1,445)
Proceeds from credit facility	—		45,000
Payments on credit facility	(48,625)		—
Payment of debt issuance costs	—		(119)
Payment of earn-out liability	(91)		(6,519)
Proceeds from issuance of common stock upon stock option exercises	206		3,563
Payments of dividends to shareholders	(19,461)		(17,270)
Repurchases and retirement of common stock	(47,774)		(48,989)
Proceeds from common stock issued under employee stock purchase plan	374		388
Payment of minimum tax withholdings on share-based awards	(3,293)		(3,074)
Contributions from subsidiary held for sale	—		1,118
Net cash used in financing activities from continuing operations	(122,873)		(27,347)
Net increase in cash and cash equivalents of continuing operations	9,530		11,676

Cash from discontinued operation:
Net cash used in operating activities of discontinued operation	—		(6,902)
Net cash provided by investing activities of discontinued operation	—		8,020
Net cash used in financing activities of discontinued operation	—		(1,118)
Net increase in cash and cash equivalents	9,530		11,676
Cash and cash equivalents at beginning of period of continuing operations	37,316		40,254
Cash at beginning of period of discontinued operation	—		—
Net increase in cash and cash equivalents	9,530		11,676
Less: cash at end of period of discontinued operation	—		—
Cash and cash equivalents at end of period of continuing operations	$	46,846	$	51,930

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


Forward Air Corporation
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited and in thousands)

	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2021	26,969	$	270	$	258,474	$	334,910	$	593,654
Net income	—	—		—		42,686		42,686
Stock options exercised	3	—		206		—		206

Share-based compensation expense	—	—		2,761		—		2,761
Payment of dividends to shareholders	—	—		4		(6,506)		(6,502)
Payment of minimum tax withholdings on share-based awards	(30)	—		—		(3,254)		(3,254)
Repurchases and retirement of common stock	(176)	(2)		—		(17,778)		(17,780)
Issuance of share-based awards	96	1		(1)		—		—
Balance at March 31, 2022	26,862	$	269	$	261,444	$	350,058	$	611,771
Net income	—	—		—		55,430		55,430

Common stock issued under employee stock purchase plan	5	—		374		—		374
Share-based compensation expense	—	—		3,306		—		3,306
Payment of dividends to shareholders	—	—		5		(6,497)		(6,492)
Payment of minimum tax withholdings on share-based awards	(1)	—		—		(39)		(39)

Issuance of share-based awards	14	—		—		—		—
Balance at June 30, 2022	26,880	$	269	$	265,129	$	398,952	$	664,350
Net income	—	—		—		52,133		52,133


Share-based compensation expense	—	—		2,676		—		2,676
Payment of dividends to shareholders	—	—		4		(6,471)		(6,467)

Repurchases and retirement of common stock	(290)	(3)		—		(29,991)		(29,994)

Balance at September 30, 2022	26,590	$	266	$	267,809	$	414,623	$	682,698


	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2020	27,316	$	273	$	242,916	$	304,140	$	547,329
Net income	—	—		—		11,181		11,181
Stock options exercised	40	—		2,147		—		2,147
Share-based compensation expense	—	—		2,613		—		2,613
Payment of dividends to shareholders	—	—		3		(5,800)		(5,797)
Payment of minimum tax withholdings on share-based awards	(35)	—		—		(2,744)		(2,744)
Repurchases and retirement of common stock	(114)	(1)		—		(9,997)		(9,998)
Issuance of share-based awards	111	1		(1)		—		—
Balance at March 31, 2021	27,318	$	273	$	247,678	$	296,780	$	544,731
Net income	—	—		—		30,677		30,677
Stock options exercised	26	—		1,416		—		1,416
Common stock issued under employee stock purchase plan	5	—		388		—		388
Share-based compensation expense	—	—		2,981		—		2,981
Payment of dividends to shareholders	—	—		3		(5,771)		(5,768)
Payment of minimum tax withholdings on share-based awards	(1)	—		—		(82)		(82)
Repurchases and retirement of common stock	(252)	(2)		—		(23,992)		(23,994)
Issuance of share-based awards	24	—		—		—		—
Balance at June 30, 2021	27,120	$	271	$	252,466	$	297,612	$	550,349
Net income	—	—		—		23,536		23,536


Share-based compensation expense	—	—		2,601		—		2,601
Payment of dividends to shareholders	—	—		4		(5,709)		(5,705)
Payment of minimum tax withholdings on share-based awards	(3)	—		—		(248)		(248)
Repurchases and retirement of common stock	(169)	(1)		—		(14,996)		(14,997)
Issuance of share-based awards	10	—		—		—		—
Balance at September 30, 2021	26,958	$	270	$	255,071	$	300,195	$	555,536

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

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

1. Description of Business and Basis of Presentation

Basis of Presentation and Principles of Consolidation

Forward Air Corporation and its subsidiaries (“Forward Air” or the “Company”) is a leading asset-light freight and logistics company. ~~Forward Air Corporation's ("the Company", "We", "Our") services can be classified into four principal~~The Company has two reportable segments: Expedited ~~LTL, Truckload Premium Services ("TLS"), Intermodal~~Freight and ~~Pool Distribution ("Pool") (See note 11).~~Intermodal. The Company conducts business in the United States and Canada.

~~Through the~~The Expedited ~~LTL~~Freight segment ~~we operate a comprehensive national network to provide~~provides expedited regional, inter-regional and national less-than-truckload ~~("LTL"~~(“LTL”), truckload and final mile services. Expedited ~~LTL~~Freight also offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

~~Through our TLS segment, we provide expedited truckload brokerage, dedicated fleet services, as well as high security and temperature-controlled logistics services in the United States and Canada.~~

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

The Company’s condensed consolidated financial statements include Forward Air Corporation and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the ~~Midwest and Southeast, with~~Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Results for interim periods are not necessarily indicative of the results for the year.

On April 23, 2020, the Board of Directors (the “Board”) of the Company approved a ~~smaller operational presence in~~strategy to divest the ~~Southwest.~~

~~In our~~ Pool Distribution ~~segment, we provide~~business (“Pool”), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. ~~We offer this service throughout~~As a result of the ~~Mid-Atlantic, Southeast, Midwest~~strategy to divest of Pool, the results of operations for Pool were presented as a discontinued operation in the Condensed Consolidated Statements of Comprehensive Income for the prior period. Unless otherwise noted, amounts, percentages and ~~Southwest United States.~~discussion for the prior period reflect the results of operations, financial condition and cash flows from the Company’s continuing operations. Refer to Note 3, Discontinued Operation, for further discussion.

~~The accompanying unaudited condensed consolidated financial statements have been prepared~~

2. Revenue Recognition

Revenue is recognized when the Company satisfies the performance obligation by the delivery of a shipment in accordance with ~~United States generally accepted accounting principles for interim financial information~~contractual agreements, bills of lading (“BOLs”) and ~~with~~general tariff provisions. The amount of revenue recognized is measured as the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by United States generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Company’s operating results are subject to seasonal trends when measured on a quarterly basis; therefore operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. For further information, refer to the consolidated financial statements and notes thereto included in the Forward Air Corporation Annual Report on Form 10-K for the year ended December 31, 2016.

~~The accompanying unaudited condensed consolidated financial statements of~~consideration the Company include Forward Air Corporation and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to the prior period financial information to conform to the current year presentation.

~~2. Recent Accounting Pronouncements~~

In March 2016, the Financial Accounting Standards Board ("FASB") issued guidance that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital ("APIC") pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for, and we elected, to account for forfeitures as they occur rather than on an estimated basis. We adopted this guidance in January 2017 and the elimination of APIC pools resulted in approximately $147 of income tax benefit during the nine months ended September 30, 2017. This guidance has been applied prospectively and no prior periods have been adjusted.

In February 2016, the FASB, issued ASU 2016-02, Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The guidance will be effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. We are evaluating the impact of the future adoption of this standard on our consolidated financial statements.

In May 2014, the FASB issued guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to ~~be entitled to~~receive in exchange for those services pursuant to a contract with a customer. A contract exists once the Company enters into a contractual agreement with a customer. The Company does not recognize revenue in cases where collectibility is not probable, and defers recognition until collection is probable or payment is received.

The Company generates revenue from the delivery of a shipment and the completion of related services. Revenue for the delivery of a shipment is recorded over time to coincide with when customers simultaneously receive and consume the benefits of the delivery services. Accordingly, revenue billed to a customer for the transportation of freight are recognized over the transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a shipment based on the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of a reporting period. The determination of the transit period and how much of it has been completed as of a given reporting date may require the Company to make judgments that impact the timing of revenue recognized. For delivery of shipments with a pick-up date in one reporting period and a delivery date in another reporting period, the Company recognizes revenue based on relative transit

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

~~goods or services. The guidance provides a five-step analysis~~time in each reporting period. A portion of ~~transactions to determine when and how~~the total revenue ~~is recognized. Other major provisions include capitalization of certain contract costs, consideration of time value of money in the transaction price, and allowing estimates of variable consideration~~ to be billed to the customer after completion of a delivery is recognized ~~before contingencies~~in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Upon delivery of a shipment or related service, customers are ~~resolved in certain circumstances. The guidance also requires enhanced disclosures regarding~~billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage.

Revenue is classified based on the line of business as the Company believes that best depicts the nature, ~~amount,~~ timing and ~~uncertainty~~amount of revenue and cash ~~flows arising from an entity’s contracts with customers. The guidance~~flows. For all lines of business, the Company records revenue on a gross basis as it is ~~effective~~the principal in the transaction as the Company has discretion to determine the amount of consideration. Additionally, the Company has the discretion to select drivers and other vendors for the ~~interim~~services provided to customers. These factors, discretion in the amount of consideration and ~~annual periods beginning on or after December 15, 2017. The guidance permits~~ the ~~use~~selection of ~~either a full retrospective or modified retrospective adoption approach with a cumulative effect adjustment recorded in either scenario as necessary upon transition.~~

As permitted by the guidance, we will implement the use of full retrospective presentation. While evaluating principal versus agent relationships under the new standard, we determined that we will transition certaindrivers and other vendors, support revenue ~~streams from an agent to principal relationship. This will cause these revenue streams and their associated costs to be~~ recognized on a gross ~~basis that have historically been netted. This would increase revenue~~basis.

3. Discontinued Operation

As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool and ~~expenses by approximately $46,000~~the sale was completed on February 12, 2021. As a result, the results of Pool were classified to “Loss from discontinued operation, net of tax” in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2017~~2021. Certain corporate overhead and ~~$33,000~~other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and were allocated to continuing operations. These costs were classified to the eliminations column in the segment reconciliation in Note 13, Segment Reporting.

Transition Services Agreement

On February 12, 2021, the Company entered into a Transition Services Agreement (“TSA”) with TOG FAS Holdings LLC, the buyer of the Pool business. Under the TSA, the Company performed certain services on an interim basis in order to facilitate the orderly transition of the Pool business. The effective date of the TSA was February 12, 2021 and remained in effect until the date all services were completed, but no more than six months following the effective date. The TSA provided the right to extend the term of the TSA with no limit on the number of the mutually agreed upon extensions. In exchange for the ~~same period~~services performed by the Company under the TSA, the Company received a monthly service charge. For the three and nine months ended September 30, 2021, the Company recognized $229 and $641, respectively, in “Other operating expenses” in the Condensed Consolidated Statements of ~~2016~~Comprehensive Income, for the services performed under the TSA. The TSA ended in October 2021 when all services were completed.

Additionally, under the TSA, the Company remitted payments to outside vendors on behalf of TOG FAS Holdings LLC for expenses incurred by the Pool business up to a limit of $18,000. The Company was reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment was remitted. As of September 30, 2022 and ~~would have no impact on operating income.~~

~~In addition, based on~~December 31, 2021, the Company recorded a ~~review~~net receivable in the amount of ~~our customer shipping arrangements, we currently believe~~zero and $8,097 respectively, in “Other receivables” in the ~~implementation of this standard will change our revenue recognition policy from recognizing revenue upon shipment completion to recognizing revenue over time based on~~Condensed Consolidated Balance Sheets for the ~~progress toward completion of shipments in transit at each period end. While the timing of revenue recognition will be accelerated,~~reimbursement due to the ~~short duration of our transit times and relatively low dollar value of individual shipments,~~Company. The Company evaluates the ~~anticipated impact on our consolidated financial position, revenue and results from operations is not expected to be significant.~~

~~3. Acquisitions and Goodwill~~

~~Acquisition of Atlantic, Triumph and Ace~~

~~As part~~collectability of the ~~Company's strategy~~receivable at least quarterly and if the Company is aware of the inability of TOG FAS Holdings LLC to ~~expand~~meet its ~~Intermodal operations,~~financial obligations to the Company, the Company will record a specific reserve in ~~May 2017, we acquired certain assets~~order to reduce the receivable to the amount the Company reasonably believes will be collected. As of ~~Atlantic Trucking~~September 30, 2022, the Company ~~Inc., Heavy Duty Equipment Leasing, LLC, Atlantic Logistics, LLC and Transportation Holdings, Inc. (together referred to as “Atlantic” in this note) for $22,500 and~~recorded a potential earnout of $1,000. The acquisition was funded by a combination of cash on hand and funds from our revolving credit facility. Atlantic was a privately held provider of intermodal, drayage and related services headquartered in Charleston, South Carolina. It also has terminal operations in Atlanta, Charlotte, Houston, Jacksonville, Memphis, Nashville, Norfolk and Savannah. These locations allow Intermodal to significantly expand its footprintspecific reserve in the ~~southeastern region. During~~amount of $235 in order to reduce the ~~year ended December 31, 2016, Atlantic generated approximately $62,300 in revenue.~~

~~In August 2016, we also acquired certain assets of Triumph Transport, Inc. and Triumph Repair Service, Inc. (together referred~~receivable to ~~as “Triumph”) for $10,100 and~~ an earnout of $1,250 paid in September 2017. The assets, liabilities, and operating results of Triumph have been included in the Company's consolidated financial statements from the date of acquisition and have been assigned to the Intermodal reportable segment. In January 2016,amount the Company ~~also acquired certain assets of Ace Cargo, LLC ("Ace") for $1,700.~~reasonably believes will be collected.

The assets, liabilities, and operating results of Atlantic, Triumph and Ace have been included in the Company's consolidated financial statements from the respective dates of acquisition and have been assigned to the Intermodal reportable segment. During the third quarter of 2017, Atlantic contributed $14,745 in revenue and $1,119 in operating income.

~~Allocations of Purchase Prices~~

The following table presents the allocations of the Atlantic, Triumph and Ace purchase prices to the assets acquired and liabilities assumed based on their estimated fair values and resulting residual goodwill (in thousands):

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~September 30, 2022

Summarized Discontinued Operation Financial Information

A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 is as follows:








	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Operating revenue	$	—	$	17,087

Operating expenses:
Purchased transportation	—		4,290
Salaries, wages and employee benefits	—		9,674
Operating leases	—		2,907
Depreciation and amortization	—		—
Insurance and claims	—		929
Fuel expense	—		644
Other operating expenses	—		2,087
Impairment charge	6,967		6,967
Total operating expenses	6,967		27,498
Loss from discontinued operation	(6,967)		(10,411)
Loss on sale of business	—		(2,860)
Loss from discontinued operation before income taxes	(6,967)		(13,271)
Income tax benefit	—		(771)
Loss from discontinued operation, net of tax	$	(6,967)	$	(12,500)

Intermodal Acquisitions

In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport”) for $16,339 and a potential earn-out of up to $2,000.

The purchase agreement for Proficient Transport included an earn-out up to $2,000 based on the achievement of certain revenue milestones over a one-year period, beginning March 1, 2021. The estimated fair value of the earn-out liability on the date of acquisition was $829. The fair value was based on the estimated one-year performance of the acquired customer revenue and was calculated using the option pricing method.

The fair value of the earn-out liability was adjusted at each reporting period based on changes in the expected cash flows and related assumptions used in the option pricing method. During the three and nine months ended September 30, 2022, the fair value of the earn-out changed by zero and ($294) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. During the three and nine months ended September 30, 2021, the fair value of the earn-out changed by zero and ($333) respectively, and the change in fair value was recorded in “Other operating expenses” in the Condensed Consolidated Statements of Comprehensive Income. The one-year period ended in the first quarter of 2022 and the Company paid $91 in the second quarter of 2022 based on the terms of the purchase agreement. As of December 31, 2021, the fair value of the earn-out liability was $385, which was reflected in “Other current liabilities” in the Condensed Consolidated Balance Sheets.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, ~~2017~~2022

~~The above purchase price allocation for Atlantic is preliminary, as~~In November 2021, the Company ~~is still in the process of finalizing the valuation of the~~ acquired certain assets and liabilities ~~assumed.~~of BarOle Trucking, Inc. (“BarOle”) for $35,436. BarOle is an intermodal drayage company headquartered in Roseville, Minnesota. The ~~above estimated fair values~~acquisition of BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area. In addition, BarOle has a larger terminal location, which allows for further expansion in the future. The acquisition was financed by cash flows from operations. The results of BarOle have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.

In May 2022, the Company acquired certain assets and liabilities of Edgmon Trucking, LLC (“Edgmon”) for $40,433 and a potential earn-out of up to $5,000, based on the achievement of certain profit contribution milestones over a nineteen month period, beginning May 30, 2022. Edgmon, headquartered in Kent, Washington, operates a terminal in Kent and a yard in Seattle, servicing both the Port of Seattle and the Port of Tacoma. The acquisition of Edgmon marks the Company’s first Intermodal location on the West Coast, a key area of expansion in the Intermodal strategic growth plan. The acquisition was financed by cash flows from operations. The results of Edgmon have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.

Fair Value of Assets Acquired and Liabilities Assumed

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


	BarOle		Edgmon
	November 30, 2021		May 30, 2022
Tangible assets:

Accounts receivable	$	2,481	$	4,831


Property and equipment	6,464		613


Total tangible assets	8,945		5,444
Intangible assets:
Customer relationships	11,120		17,950
Non-compete agreements	221		465
Goodwill	15,418		17,003
Total intangible assets	26,759		35,418
Total assets acquired	35,704		40,862

Liabilities assumed:
Current liabilities	268		429



Total liabilities assumed	268		429
Net assets acquired	$	35,436	$	40,433

The preliminary purchase price for BarOle and Edgmon has been allocated to assets acquired and liabilities assumed ~~for Atlantic are~~ based on the Company’s best estimates and assumptions using the information ~~that was~~ available as of the acquisition date through the date of this filing. The provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to these acquisitions, are subject to adjustments in subsequent periods as the Company finalizes its purchase price allocations, including the third-party valuations. During the nine months ended September 30, 2022, the Company recorded measurement period adjustments to the provisional amounts initially recorded for acquired ~~definite-lived intangible assets have the following useful lives:~~

~~The fair value of the~~property and equipment and acquired customer relationships and non-compete agreements related to the BarOle acquisition. The measurement period adjustments resulted in a $1,113 increase to acquired property and equipment and a combined $5,854 decrease to acquired customer relationships ~~assets were estimated using an income approach (level 3). Under this method, an intangible asset's fair value is equal~~and non-compete agreements, with a corresponding net increase to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To estimate fair value, the Company used cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset.goodwill. The Company ~~believes that~~expects to finalize the ~~level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through~~valuations as soon as practicable, but no later than one year from the ~~remaining economic useful life of each class of intangible asset.~~

~~In 2015, the Company acquired CLP Towne Inc. (“Towne”) resulting in Towne becoming an indirect, wholly-owned subsidiary of the Company. At the time of~~respective acquisition $16,500 of the total purchase price was placed into an escrow account, to settle any shortfall in Towne’s net working capital and to be available for a period of time to settle certain possible claims against Towne’s common stockholders for indemnification. During the second quarter of 2017, we received $2,525 from this escrow for reimbursement of various claims. Approximately $1,621 was credited to operating leases and other operating expenses to offset related costs incurred in previous periods. The remaining $904 was used to establish reserves for various pending claims.

The Company conducted its annual impairment assessments and tests of goodwill for each reporting unit as of June 30, 2017 and no impairment charges were required. The first step of the goodwill impairment test is the Company's assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount, including goodwill. When performing the qualitative assessment, the Company considers the impact of factors including, but not limited to, macroeconomic and industry conditions, overall financial performance of each reporting unit, litigation and new legislation. If based on the qualitative assessments, the Company believes it more likely than not that the fair value of a reporting unit is less than the reporting unit's carrying amount, or periodically as deemed appropriate by management, the Company

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

~~will prepare an estimation~~The estimated useful lives of the respective reporting unit's fair value utilizing a quantitative approach. If a quantitative fair value estimation is required, the Company estimates the fair value of the applicable reporting units, using a combination of discounted projected cash flows and market valuations for comparable companiesacquired intangible assets as of the ~~valuation date. The Company's inputs into the fair value estimates for goodwill~~acquisition date are ~~classified within level 3 of the fair value hierarchy as defined~~summarized in the ~~FASB Accounting Standards Codification~~following table:

Estimated Useful Lives

BarOle

Edgmon

Customer relationships

8 years

7 years

Non-compete agreements

5 years

5. Goodwill and Intangible Assets

Changes in the ~~Hierarchy of Generally Accepted Accounting Principles (“the FASB Codification”). If this estimation of fair value indicates that impairment potentially exists, the Company will then measure the~~carrying amount of ~~the impairment, if any. Goodwill impairment exists when the estimated implied fair value of~~ goodwill ~~is less than its carrying value. Changes in strategy or market conditions could significantly impact these fair value estimates and require adjustments to recorded asset balances.~~

We have five reporting units - Expedited LTL, TLX Forward Air, Intermodal, Pool Distribution and Total Quality, Inc. ("TQI"). The TLX Forward Air and the TQI reporting units are assigned to the Truckload Premium Services reporting segment. Currently, there is no goodwill assigned to the TLX Forward Air reporting unit.

In 2016, due to the financial performance of the Total Quality, Inc. ("TQI") reporting unit falling notably short of previous projections, declining revenue from significant customers and strategic initiatives not having the required impact on financial results, the Company reduced TQI's projected cash flows and as a result the estimate of TQI's fair value no longer exceeded the respective carrying value. As a result of these assessments, the Company concluded that an impairment loss was probable and could be reasonably estimated for the TQI reporting unit, which is included in the TLS reportable segment. Consequently, the Company recorded a goodwill impairment charge of $25,686 for the TQI reporting unit during ~~the three months ended June 30, 2016.~~

~~The following is a summary of the changes to goodwill for~~ the nine months ended September 30, ~~2017. Approximately $112,391~~2022 are summarized as follows:


	Expedited Freight		Intermodal		Consolidated




Balance as of December 31, 2021	$	169,288	$	97,464	$	266,752
Acquisition	—		17,003		17,003
Acquisition adjustment	—		4,741		4,741
Balance as of September 30, 2022	$	169,288	$	119,208	$	288,496

The Company’s accumulated goodwill impairment is $25,686 related to impairment charges the Company recorded during 2016 pertaining to its Truckload Services reporting unit. The Truckload Services reporting unit operates within the Expedited Freight reportable segment. As of September 30, 2022, approximately $209,353 of goodwill is deductible for tax purposes.

Expedited LTL TLS Pool Distribution Intermodal Total
Accumulated Accumulated Accumulated Accumulated
Goodwill Impairment Goodwill Impairment Goodwill Impairment Goodwill Impairment Net
Beginning balance, December 31, 2016 $ 97,593
$ —

$ 45,164
$ (25,686 )
$ 12,359
$ (6,953 )
$ 62,198
$ —

$ 184,675
Atlantic Acquisition —
—

—
—

—
—

6,860
—

6,860
Ending balance, September 30, 2017 $ 97,593
$ —

$ 45,164
$ (25,686 )
$ 12,359
$ (6,953 )
$ 69,058
$ —

$ 191,535

~~Intangibles and Other Long-Lived Assets~~

~~Additionally, the Company reviews its long-lived assets~~Goodwill is tested for impairment ~~whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is recognized~~ on ~~assets classified~~an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as ~~held and used when the sum~~ of undiscounted estimated cash flows expected to result from the use of the asset is less than the carrying value. If such measurement indicates a possible impairment, the estimated fair value of the asset is compared to its net book value to measure the impairment charge, if any. In conjunction with the June 30 ~~2016 TQI goodwill~~each year. There have been no indicators of impairment assessment, the Company determined there were indicators that TQI's customer relationship and non-compete intangible assets were impaired as the undiscounted cash flows associated with the applicable assets no longer exceeded the related assets' net book values. The Company then estimated the current market values of the customer relationship and non-compete assets using an income approach (level 3). As a result of these estimates the Company recorded an impairment charge of $16,501 related to TQI customer relationships during the three months ended ~~June~~September 30, ~~2016.~~2022.

In addition, during the three months ended June 30, 2016, the Company also discontinued use of an owned maintenance facility and began efforts to sell the property. In conjunction with these actions, the Company incurred a $255 impairment charge that was estimated using current offers received to sell the property less estimated cost to sell the facility.

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Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

Other Intangible Assets

~~4. Share-Based Payments~~

Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2022 are summarized as follows:


	Gross Carrying Amount
	Customer Relationships1		Non-Compete Agreements		Trade Names		Total
Balance as of December 31, 2021	$	251,377	$	9,176	$	1,500	$	262,053
Acquisition	17,950		465		—		18,415
Acquisition adjustment	(5,162)		(692)		—		(5,854)
Balance as of September 30, 2022	$	264,165	$	8,949	$	1,500	$	274,614


	Accumulated Amortization
	Customer Relationships1		Non-Compete Agreements		Trade Names		Total
Balance as of December 31, 2021	$	99,093	$	6,743	$	1,500	$	107,336
Amortization expense	11,507		610		—		12,117
Balance as of September 30, 2022	$	110,600	$	7,353	$	1,500	$	119,453

1Carrying value as of September 30, 2022 and December 31, 2021 is inclusive of $16,501 of accumulated impairment.

6. Stock Incentive Plans

Stock Incentive Plan

The ~~Company’s general practice has been to make a single annual grant of~~Company recorded share-based compensation ~~to key employees~~expense as follows for the three and ~~to make other employee grants only in connection with new employment or promotions. Forms of share-based compensation granted to employees by~~nine months ended September 30, 2022 and 2021:


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Salaries, wages and employee benefits - continuing operations	$	2,355	$	2,283	$	7,661	$	7,015
Salaries, wages and employee benefits - discontinued operation	—		—		—		16
Total share-based compensation expense	$	2,355	$	2,283	$	7,661	$	7,031

In May 2016, the Company ~~include~~adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 common shares to employees. As of September 30, 2022, approximately 693 shares remain available for grant under the Omnibus Plan.

Certain executives are eligible to receive grants of stock options. Stock options ~~non-vested shares~~vest over a three-year period from the date of ~~common stock (“non-vested share”), and performance shares.~~grant. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. The Company ~~also typically makes a single annual grant of non-vested shares to non-employee directors in conjunction with~~estimates the ~~annual election of non-employee directors to the Board of Directors. Share-based compensation is based on the grant date~~ fair value of the ~~instrument and is recognized ratably over the requisite service period, or vesting period. All share-based compensation expense is recognized in salaries, wages and employee benefits.~~

~~Employee Activity - Stock Options~~

~~Stock option~~ grants ~~to employees generally expire~~ ~~seven~~ ~~years from the grant date and typically vest ratably over a~~ ~~three-year period. The Company used~~using the Black-Scholes option-pricing ~~model to estimate the grant-date fair value of options granted. The weighted-average fair value of options granted and assumptions used to estimate their fair value during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~were as follows:~~model.

Three months ended

September 30,
2017
September 30,
2016
Expected dividend yield 1.3 %
— %
Expected stock price volatility 28.7 %
— %
Weighted average risk-free interest rate 2.0 %
— %
Expected life of options (years) 6.0

0
Weighted average grant date fair value $ 14

$ —

Nine months ended

September 30,
2017
September 30,
2016
Expected dividend yield 1.3 %
1.0 %
Expected stock price volatility 28.7 %
29.0 %
Weighted average risk-free interest rate 2.0 %
1.3 %
Expected life of options (years) 6.0

6.0
Weighted average grant date fair value $ 13

$ 12

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

Stock option transactions during the nine months ended September 30, 2022 on a continuing operations basis were as follows:


	Stock Options	Weighted-Average Exercise Price
Outstanding as of January 1	342	$	58.44
Granted	64	106.13
Exercised	(3)	60.42
Forfeited	(6)	106.29
Outstanding as of September 30	397	$	65.32

As of September 30, 2022, the total share-based compensation expense related to unvested stock options not yet recognized was $1,687, and the weighted-average period over which it is expected to be recognized is approximately two years.

Restricted Shares

The ~~following tables summarize~~Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive shares of the Company’s ~~employee~~common stock ~~option activity~~subject to vesting requirements based on continued employment. Shares granted under the restricted share award plan are restricted from sale or transfer until vesting, and ~~related information:~~the restrictions lapse in three equal installments beginning one year after the date of grant. Dividends are paid in cash on a current basis throughout the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period.

Three months ended September 30, 2017

Weighted-

Weighted-
Aggregate
Average

Average
Intrinsic
Remaining

Options
Exercise
Value
Contractual

(000)
Price
(000)
Term
Outstanding at June 30, 2017 507

$ 44

Granted 5

54

Exercised (18 )
41

Forfeited (22 )
47

Outstanding at September 30, 2017 472

$ 44

$ 3,963

4.5
Exercisable at September 30, 2017 255

$ 42

$ 2,671

3.3

Three months ended

September 30,
2017
September 30,
2016
Share-based compensation for options $ 294

$ 377
Tax benefit for option compensation $ 105

$ 140
Unrecognized compensation cost for options, net of estimated forfeitures $ 1,909

$ 2,036
Weighted average period over which unrecognized compensation will be recognized (years) 1.9

Nine months ended September 30, 2017

Weighted-

Weighted-
Aggregate
Average

Average
Intrinsic
Remaining

Options
Exercise
Value
Contractual

(000)
Price
(000)
Term
Outstanding at December 31, 2016 564

$ 41

Granted 123

48

Exercised (169 )
34

Forfeited (46 )
46

Outstanding at September 30, 2017 472

$ 44

$ 3,963

4.5
Exercisable at September 30, 2017 255

$ 42

$ 2,671

3.3

Nine months ended

September 30,
2017
September 30,
2016
Share-based compensation for options $ 993

$ 1,101
Tax benefit for option compensation $ 354

$ 407
Unrecognized compensation cost for options, net of estimated forfeitures $ 1,909

$ 2,036
Weighted average period over which unrecognized compensation will be recognized (years) 1.9

~~Table of Contents~~

~~Forward Air Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(In thousands, except~~Restricted share ~~and per share data)~~

~~(Unaudited)~~

transactions during the nine months ended September 30, ~~2017~~

2022 on a continuing operations basis were as follows:


	Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	191	$	69.84
Granted	80	105.66
Vested	(91)	67.36
Forfeited	(25)	84.20
Outstanding as of September 30	155	$	87.42

~~Employee Activity - Non-vested Shares~~

~~Non-vested share grants to employees vest ratably over a~~ ~~three-year period. The non-vested shares’ fair values were estimated using closing market prices on the day~~As of ~~grant. The following tables summarize the Company’s employee non-vested share activity and related information:~~

Three months ended September 30, 2017

Weighted-
Aggregate

Non-vested
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at June 30, 2017 232

$ 47

Granted 1

54

Vested —

—

Forfeited (4 )
47

Outstanding and non-vested at September 30, 2017 229

$ 47

$ 10,658

Three months ended

September 30,
2017
September 30,
2016
Share-based compensation for non-vested shares $ 1,243

$ 1,176
Tax benefit for non-vested share compensation $ 444

$ 434
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures $ 7,410

$ 7,147
Weighted average period over which unrecognized compensation will be recognized (years) 1.9

Nine months ended September 30, 2017

Weighted-
Aggregate

Non-vested
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at December 31, 2016 222

$ 45

Granted 127

48

Vested (104 )
45

Forfeited (16 )
47

Outstanding and non-vested at September 30, 2017 229

$ 47

$ 10,658

Nine months ended

September 30,
2017
September 30,
2016
Share-based compensation for non-vested shares $ 3,762

$ 3,434
Tax benefit for non-vested share compensation $ 1,343

$ 1,270
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures $ 7,410

$ 7,147
Weighted average period over which unrecognized compensation will be recognized (years) 1.9

~~Table of Contents~~

~~Forward Air Corporation~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(In thousands, except share and per share data)~~

~~(Unaudited)~~

September 30, ~~2017~~

2022, the total share-based compensation expense related to restricted shares not yet recognized was $9,402, and the weighted-average period over which it is expected to be recognized is approximately two years.

~~Employee Activity -~~ Performance ~~Shares~~Awards

The Company annually grants performance shares to key employees. Under the terms of the performance share agreements, following the end of a three-year performance period, the Company will issue to the employees a calculated number of common stock sharesPerformance awards are based on ~~the~~ ~~three~~ ~~year performance of~~achieving certain financial targets, such as targets for earnings before interest, taxes, depreciation and amortization, and the Company’s total shareholder return as compared to the total shareholder return of a selected peer ~~group. No shares may be issued if~~group, as determined by the ~~Company's total shareholder return outperforms~~ ~~30%~~ ~~or less~~Board. Performance targets are set at the beginning of each three-year measurement period. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, the compensation expense is determined based on the projected assessment of the ~~peer group, but~~level of performance that will be achieved. The Company estimates the ~~number of shares issued may be doubled if the Company's total shareholder return performs better than~~ ~~90%~~ ~~of the peer group. The~~ fair value of the ~~performance shares was estimated~~grants with a financial target based on the Company’s total shareholder return using a Monte Carlo ~~simulation. The weighted average assumptions used in the Monte Carlo estimate were as follows:~~simulation model.

Nine months ended

September 30,
2017
September 30,
2016
Expected stock price volatility 24.7 %
22.3 %
Weighted average risk-free interest rate 1.4 %
0.8 %

~~The following tables summarize the Company’s employee performance share activity, assuming median share awards, and related information:~~

Three months ended September 30, 2017

Weighted-
Aggregate

Performance
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at June 30, 2017 72

$ 57

Granted 1

54

Forfeited (4 )
$ 57

Outstanding and non-vested at September 30, 2017 69

$ 57

$ 3,956

Three months ended

September 30,
2017
September 30,
2016
Share-based compensation for performance shares $ 249

$ 367
Tax benefit for performance share compensation $ 88

$ 136
Unrecognized compensation cost for performance shares, net of estimated forfeitures $ 1,740

$ 2,076
Weighted average period over which unrecognized compensation will be recognized (years) 1.8

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

Performance award transactions during the nine months ended September 30, 2022 on a continuing operations basis were as follows assuming target levels of performance:


	Performance Awards	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	79	$	75.61
Granted	14	127.29

Earned	(7)	63.40
Forfeited or unearned	(16)	74.79
Outstanding as of September 30	70	$	87.74

Nine months ended September 30, 2017

Weighted-
Aggregate

Performance
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at December 31, 2016 80

$ 55

Granted 26

56

Additional shares awarded based on performance —

—

Vested —

—

Forfeited (37 )
51

Outstanding and non-vested at September 30, 2017 69

$ 57

$ 3,956

As of September 30, 2022, the total share-based compensation expense related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was $3,448, and the weighted-average period over which it is expected to be recognized is approximately two years.

Nine months ended

September 30,
2017
September 30,
2016
Share-based compensation for performance shares $ 689

$ 1,080
Tax benefit for performance share compensation $ 246

$ 400
Unrecognized compensation cost for performance shares, net of estimated forfeitures $ 1,740

$ 2,076
Weighted average period over which unrecognized compensation will be recognized (years) 1.8

~~Employee Activity -~~ Employee Stock Purchase Plan

Under the 2005 Employee Stock Purchase Plan (the “ESPP”), ~~which has been approved by shareholders,~~ the Company is authorized to issue up to a remaining ~~376,625~~318 shares of common stock to ~~employees of the Company.~~employees. These shares may be issued at a price equal to 90% of the lesser of the market value on ~~the~~the first day or the last day of each ~~six month~~six-month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions. ~~For~~

Employee stock purchase plan activity and related information was as follows on a continuing operations basis:


	Nine Months Ended
	September 30, 2022		September 30, 2021
Shares purchased by participants under the ESPP	5		5
Average purchase price	$	82.76	$	68.76
Weighted-average fair value of each purchase right under the ESPP granted¹	$	9.20	$	20.99
Share-based compensation expense for ESPP	$	42	$	118

¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period.

Director Restricted Shares

Under the ~~nine months ended~~Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”), approved in May 2007 and further amended in February 2013 and January 2016, up to 360 of common shares may be issued. As of September 30, ~~2017, participants~~2022, approximately 60 shares remain available for grant under the ~~plan purchased 5,188~~Amended Plan. Under the Amended Plan, each non-employee director receives an annual grant of restricted shares ~~at an average price~~ of ~~$43.59 per share. For~~ the ~~nine months ended September 30, 2016, participants under~~Company’s common stock. The restricted shares vest on the ~~plan purchased 5,592 shares at an average price~~either of ~~$38.50 per share. The weighted-average fair value of each purchase right under~~(a) the ~~ESPP granted for the nine months ended September 30, 2017, which is equal~~day immediately prior to the ~~discount from~~first annual shareholder meeting that occurs after the ~~market value of~~grant date or (b) one year after the common stock at the end of each six month purchase period, was $9.69 per share. The weighted-average fair value of each purchase right under the ESPP granted for the nine months ended September 30, 2016, which is equal to the discount from the market value of the common stock at the end of each six month purchase period, was $6.03 per share. Share-based compensation expense of $51 and $34 was recognized during the nine months ended September 30, 2017 and 2016, respectively.grant date.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

Director restricted share transactions during the nine months ended September 30, 2022 were as follows:

~~Non-employee Director Activity - Non-vested Shares~~


	Director Restricted Shares	Weighted-Average Grant Date Fair Value
Outstanding as of January 1	15	$	93.46
Granted	15	93.70
Vested	(15)	93.46
Forfeited	—	—
Outstanding as of September 30	15	$	93.70

~~Grants~~For the three and ninemonths ended September 30, 2022, the Company recorded $321 and $1,040, respectively, of ~~non-vested shares to non-employee directors vest ratably over~~share-based compensation expense associated with these grants. For the ~~elected term~~three and ninemonths ended September 30, 2021, the Company recorded $318 and $1,046, respectively, of share-based compensation expense associated with these grants. As of September 30, 2022, the total share-based compensation expense related to the ~~Board of Directors, or~~restricted shares not yet recognized was $841, and the weighted-average period over which it is expected to be recognized is approximately less than one year. ~~The following tables summarize the Company’s non-employee non-vested share activity and related information:~~

Three months ended September 30, 2017

Weighted-
Aggregate

Non-vested
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at June 30, 2017 10

$ 51

Granted 4

54

Vested —

—

Forfeited (1 )
$ 51

Outstanding and non-vested at September 30, 2017 13

$ 52

$ 656

Three months ended

September 30,
2017
September 30,
2016
Share-based compensation for non-vested shares $ 153

$ 173
Tax benefit for non-vested share compensation $ 54

$ 64
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures $ 430

$ 419
Weighted average period over which unrecognized compensation will be recognized (years) 0.6

Nine months ended September 30, 2017

Weighted-
Aggregate

Non-vested
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at December 31, 2016 16

$ 44

Granted 14

52

Vested (16 )
44

Forfeited (1 )
51

Outstanding and non-vested at September 30, 2017 13

$ 52

$ 656

Nine months ended

September 30,
2017
September 30,
2016
Share-based compensation for non-vested shares $ 470

$ 555
Tax benefit for non-vested share compensation $ 167

$ 198
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures $ 430

$ 419
Weighted average period over which unrecognized compensation will be recognized (years) 0.6

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

7. Indebtedness

~~5. Senior Credit Facility~~

Long-term debt consisted of the following as of September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
Credit facility, expires 2026	$	108,875	$	157,500
Debt issuance costs	(447)		(534)
	108,428		156,966

Less: Current portion of long-term debt	(1,494)		(1,500)
Total long-term debt, less current portion	$	106,934	$	155,466

In September ~~29,~~ 2017, the Company entered into a five-year senior unsecured revolving credit facility (the “Facility”) with a maximum aggregate principal amount of $150,000, with a sublimit of $30,000 for letters of credit and a sublimit of $30,000 for swing line loans. The maturity date of the Facility ~~may be~~was September 29, 2022. In April 2020, the Company entered into the first amendment to the Facility, which increased the maximum aggregate principal amount to $225,000. The Facility could have been increased by up to ~~$100,000~~$25,000 to a maximum aggregate principal amount of $250,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. In July 2021, the Company entered into the second amendment to the Facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available under the Facility. In December 2021, the Company entered into the third amendment to the Facility, which increased the amount available for borrowing under the Facility to $450,000, consisting of a $300,000 revolving line of credit and a term loan of $150,000. In connection with the third amendment, the Company borrowed $150,000 under the term loan and simultaneously repaid $150,000 on the revolving line of credit from the borrowings received. Under the third amendment, the Facility may be increased by up to $75,000 to a maximum aggregate principal amount of $525,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. Such increases to the Facility may be in the form of additional revolving credit loans, term loans or a combination thereof, and are contingent upon there being no events of default under the ~~Facility~~Facility. As of September 30, 2022 and ~~satisfaction~~December 31, 2021, the Company had $279,966 and $272,466 respectively, of ~~other conditions precedent and are subject to~~available borrowing capacity under the ~~other limitations set forth in the credit agreement.~~Facility.

The Facility is scheduled to mature in September 2022 and may be used to refinance existing indebtedness of the Company and for working capital, capital expenditures and other general corporate purposes. The Facility refinances the Company’s existing obligations for its unsecured credit facility under the credit agreement dated as of February 4, 2015, as amended, which has been terminated as of the date of the new Facility.

Unless the Company elects otherwise under the credit agreement, interest on borrowings under the Facility is based on the highest of (a) the federal funds rate (not less than 0%) plus 0.5%, (b) the administrative agent's prime rate and (c) the LIBOR Rate plus 1.0%, in each case plus a margin that can range from 0.3% to 0.8% with respect to the Facility depending on the Company’s ratio of consolidated funded indebtedness to earnings before interest, taxes, depreciation and amortization, as set forth in the credit agreement. The Facility contains ~~financial covenants and other~~ covenants that, among other things, restrict the ability of the Company, ~~and its subsidiaries,~~ without the approval of the required lenders, to engage in certain mergers, consolidations, asset sales, dividends and stock repurchases, investments, and other transactions or to incur liens or indebtedness in excess of agreed thresholds, as set forth in the credit agreement. The Company also has to fulfill financial covenants with respect to a leverage ratio and an interest coverage ratio. As of September 30, ~~2017, we had $40,500~~2022, the Company was in ~~borrowings~~compliance with the aforementioned covenants.

Under the amended Facility, interest accrues on the amounts outstanding under the ~~revolving credit facility, $8,677 utilized~~Facility at the Company’s option, at either (1) Bloomberg Short-Term Bank Yield Index rate (the “BSBY Rate”), which cannot be less than zero, plus a margin ranging from 1.25% to 1.75% based on the Company’s leverage ratio, or (2) the base rate, which cannot be less than 2.00%. The base rate is the highest of (i) the federal funds rate, which cannot be less than zero, plus 0.50%, (ii) the administrative agent’s prime rate and (iii) the BSBY Rate, which cannot be less than zero, plus 1.00%, plus a margin ranging from 0.00% to 0.50% based on the Company’s leverage ratio. Interest is payable in arrears for ~~outstanding letters~~each loan that is based on the BSBY rate on the last day of the interest period applicable to each loan, and interest is payable in arrears on loans not based on the BSBY rate on the last day of ~~credit and $100,823 of available borrowing capacity under the revolving credit facility.~~each quarter. The interest rate on the outstanding ~~borrowing~~borrowings under the ~~revolving credit facility~~Facility was ~~2.6% at~~3.33% as of September 30, ~~2017.~~

~~Our new facility is replacing our previously existing unsecured credit facility, which had a maximum aggregate principal amount~~2022 and 1.35% as of ~~$275,000, including a revolving credit facility of $150,000 and a term loan facility of $125,000. The previous revolving credit facility was scheduled to expire in February 2020.~~

~~6. Net Income Per Share~~

~~The following table sets forth the computation of basic and diluted net income per share:~~September 30, 2021.

Three months ended Nine months ended
September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Numerator:
Net income and comprehensive income $ 18,155
$ 11,931

$ 51,948

$ 14,964
Income allocated to participating securities (145 ) (93 )
(419 )
(114 )
Numerator for basic and diluted income per share - net income $ 18,010
$ 11,838
$ 51,529
$ 14,850
Denominator (in thousands):

Denominator for basic income per share - weighted-average shares 29,855
30,191
29,977
30,316
Effect of dilutive stock options (in thousands) 52
117
62
151
Effect of dilutive performance shares (in thousands) 33
30
30
29
Denominator for diluted income per share - adjusted weighted-average shares 29,940
30,338
30,069
30,496
Basic net income per share $ 0.60
$ 0.39
$ 1.72
$ 0.49
Diluted net income per share $ 0.60
$ 0.39
$ 1.71
$ 0.49

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~September 30, 2022

Letters of Credit

The Company has an arrangement under the Facility to issue letters of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. As of both September 30, 2022 and December 31, 2021, outstanding letters of credit totaled $20,034.

8. Net Income (Loss) Per Share

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

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, ~~2017~~2022

A reconciliation of net income (loss) attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income (loss) per share during the three and nine months ended September 30, 2022 and 2021 is as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Numerator:
Net income and comprehensive income from continuing operations	$	52,133	$	30,503	$	150,249	$	77,894
Net loss and comprehensive loss from discontinued operation	—		(6,967)		—		(12,500)
Net income attributable to Forward Air	$	52,133	$	23,536	$	150,249	$	65,394

Income allocated to participating securities from continuing operations	(325)		(235)		(838)		(541)
Loss allocated to participating securities from discontinued operation	—		—		—		—
Income allocated to participating securities	(325)		(235)		(838)		(541)

Numerator for basic and diluted net income per share for continuing operations	$	51,808	$	30,268	$	149,411	$	77,353
Numerator for basic and diluted net loss per share for discontinued operation	$	—	$	(6,967)	$	—	$	(12,500)

Denominator:
Denominator for basic net income per share - weighted-average number of common shares outstanding	26,769		27,034		26,864		27,217
Dilutive stock options and performance share awards	133		110		135		134
Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding	26,902		27,144		26,999		27,351

Basic net income (loss) per share:
Continuing operations	$	1.94	$	1.12	$	5.56	$	2.84
Discontinued operation	—		(0.26)		—		(0.46)
Net income per basic share1	$	1.94	$	0.86	$	5.56	$	2.39

Diluted net income (loss) per share:
Continuing operations	$	1.93	$	1.12	$	5.53	$	2.83
Discontinued operation	—		(0.26)		—		(0.46)
Net income per diluted share	$	1.93	$	0.86	$	5.53	$	2.37

1 Rounding may impact summation of amounts.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

The number of ~~instruments that could potentially dilute net income per basic share in the future, but~~shares that were not included in the ~~computation~~calculation of net income (loss) per diluted share because to do so would have been anti-dilutive for the ~~periods presented,~~three and nine months ended September 30, 2022 and 2021 are as follows:


	Three Months Ended		Nine Months Ended
	September 30, 2022	September 30, 2021	September 30, 2022	September 30, 2021
Anti-dilutive stock options	57	39	49	39
Anti-dilutive performance shares	13	—	11	—
Anti-dilutive restricted shares and deferred stock units	—	—	—	—
Total anti-dilutive shares	70	39	60	39

September 30,
2017 September 30,
2016
Anti-dilutive stock options (in thousands) 172
309
Anti-dilutive performance shares (in thousands) —
—
Anti-dilutive non-vested shares and deferred stock units (in thousands) —
—
Total anti-dilutive shares (in thousands) 172
309

7.9. Income Taxes

For the nine months ended September 30, 2022 and 2021, the Company recorded income tax expense of $50,791 and $25,969, respectively, for continuing operations. The effective tax rate of 25.3% for the nine months ended September 30, 2022 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards. The effective tax rate of 25.0% for the nine months ended September 30, 2021 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards.

The Company ~~or one of its subsidiaries files~~recognizes income tax ~~returns in~~benefits from uncertain tax positions where the ~~U.S. federal jurisdiction, various states~~realization of the ultimate benefit is uncertain. As of both September 30, 2022 and ~~Canada.~~December 31, 2021, the Company had $241 of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. As of both September 30, 2022 and December 31, 2021, the Company had accrued interest and penalties related to unrecognized tax benefits of $88. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian examinations by tax authorities for years before ~~2010.~~2014.

~~For~~The sale of Pool resulted in a capital loss in the ~~three~~amount of $4,230, which expires in 2026. The Company concluded that it was more likely than not the capital loss carryforward will not be realized and ~~nine months ended~~ ~~September 30, 2017~~ ~~and 2016, the effective income tax rates varied from the statutory federal income tax rate~~therefore, established a valuation allowance of ~~35.0%, primarily as~~$4,230 to reserve against its capital loss carryforward. The Company also maintains a ~~result~~valuation allowance to reserve against its state net operating loss carryforwards of $395. A valuation allowance is established when it is more likely than not that some portion or all of the ~~effect of state~~deferred tax assets will not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income ~~taxes,~~and available tax planning strategies. In making this assessment, all available evidence was considered including economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the federal benefit, and permanent differences between book and tax net income. The combined federal and state effective tax rate for the nine months ended September 30, 2017 was 34.3% compared to a rate of 50.7%~~for the same period~~valuation allowance, in 2016. The higher effective tax rate for the first nine months of 2016 was primarily due to the TQI goodwill impairment (Note 3) that was not deductible for tax purposes. The effective tax rate for 2017 was also lower due to a change in the estimated tax benefit from a technology credit and the implementation of new FASB guidance that requires we recognize the income tax effects of awards when the awards vest or are settled. Previously any income tax effect was recognized in additional paid in capital. See further discussion in the "Impact of Recent Accounting Pronouncements" section of this document.future years.

~~8. Financial Instruments~~

10. Fair Value of Financial Instruments

The ~~following methods~~Company categorizes its assets and liabilities into one of three levels based on the assumptions ~~were~~ used byin valuing the ~~Company in estimating its~~asset or liability. Estimates of fair value ~~disclosures for~~ financial ~~instruments:~~

~~Accounts receivable~~assets and ~~accounts payable: The carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate their~~liabilities are based on a fair value ~~based on their short-term nature.~~

~~The Company’s revolving credit facility and term loan bear variable interest rates plus additional basis points based upon covenants related~~hierarchy that prioritizes the inputs to ~~total indebtedness~~valuation techniques used to ~~earnings. As the revolving credit facility bears a variable interest rate, the carrying value approximates~~measure fair value. ~~Using interest rate quotes and discounted cash flows, the Company estimated the~~Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value ~~of its outstanding capital lease obligations as follows:~~

September 30, 2017
Carrying Value Fair Value
Capital leases $ 954
$ 935

~~The Company's fair value estimates for the above financial instruments~~measurements are classified ~~within level 3~~under the following hierarchy:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the ~~fair value hierarchy.~~assets or liabilities.

~~9. Shareholders' Equity~~

During the fourth quarter of 2016 and each quarter of 2017, our Board of Directors declared a cash dividend of $0.15 per share of common stock. During the first, second and third quarters of 2016, the Company's Board of Directors declared a cash dividend of $0.12 per share of common stock. The Company expects to continue to pay regular quarterly cash dividends, though each subsequent quarterly dividend is subject to review and approval by the Board of Directors.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

•Level 3 - Model-derived valuations in which one or more significant inputs are unobservable.

~~On July 21, 2016, our~~As previously discussed in Note 4, Acquisitions, the estimated fair value of the earn-out liability was determined using the option pricing method. The significant inputs used to calculate the estimated fair value are derived from a combination of observable and unobservable market data. Observable inputs used in the option pricing method include the risk-free rate and the revenue volatility while unobservable inputs include the revenue discount rate and the estimated revenue projections.

Assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 are summarized below:


	As of September 30, 2022
	Level 1		Level 2		Level 3		Total
Earn-out liability	$	—	$	—	$	—	$	—

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Earn-out liability	$	—	$	—	$	385	$	385

Cash and cash equivalents, accounts receivable, other receivables, and accounts payable are valued at their carrying amounts in the Company’s Condensed Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments.

The carrying amount of long-term debt under the Company’s credit facility approximates fair value based on the borrowing rates currently available to the Company for a loan with similar terms and average maturity.

As of September 30, 2022, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $16,923, compared to its carrying value of $17,531. As of December 31, 2021, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $14,312, compared to its carrying value of $14,159.

11. Shareholders’ Equity

Cash Dividends

During the first, second and third quarters of 2022, the Board declared and the Company has paid a quarterly cash dividend of $0.24 per common share. During each quarter of 2021, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.21 per common share.

On October 25, 2022, the Board declared a quarterly cash dividend of $0.24 per common share that will be paid in the fourth quarter of 2022.

Share Repurchase Program

On February 5, 2019, the Board approved a stock repurchase ~~authorization for~~plan authorizing the repurchase of up to ~~three million~~5,000 shares of the Company’s common ~~stock. During~~stock (the “2019 Repurchase Plan”). The 2019 Repurchase Plan expires when the ~~three months ended~~ shares authorized for repurchase are exhausted or the 2019 Repurchase Plan is canceled.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, ~~2017, we repurchased 579,769 for $29,988, or $51.72 per share.~~ 2022

During the nine months ended September 30, ~~2017, we~~2022, the Company repurchased ~~826,633~~through open market transactions 466 shares of common stock for ~~$41,983,~~$47,774, or ~~$50.79~~an average of $102.44 per ~~share. During the three months ended September 30, 2016, we repurchased 222,388 for $9,996, or $44.95 per share. During~~share, and during the nine months ended September 30, ~~2016, we~~2021, the Company repurchased ~~676,773~~through open market transactions 535 shares of common stock for ~~$29,986,~~$48,989, or an average of ~~$44.31~~$91.46 per share. ~~The repurchases made for~~All shares received were retired upon receipt, and the ~~three and nine months ended September 30, 2016 were made under a previous~~excess of the purchase price over the par value per share ~~repurchase plan approved by our Board of Directors on February 7, 2014. This plan~~ was ~~canceled and replaced on July 21, 2016.~~ recorded to “Retained Earnings” in the Condensed Consolidated Balance Sheets.

As of September 30, ~~2017, 1,939,851~~2022, the remaining shares ~~remain~~permitted to be ~~purchased~~repurchased under the ~~2016 Plan.~~2019 Repurchase Plan were approximately 2,366 shares.

~~10.~~12. Commitments and Contingencies

~~From time to time, the~~Contingencies

The Company is party to ~~ordinary, routine litigation~~various legal claims and actions incidental to its business, including claims related to vehicle liability, workers’ compensation, property damage and ~~arising in the normal course of business.~~employee medical benefits. The Company ~~does~~accrues for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Based on the knowledge of the facts, the Company believes the resolution of claims and pending litigation, taking into account existing reserves, will 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~~Condensed Consolidated Financial Statements. Moreover, the results of ~~operations.~~

~~The primary claims~~complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the ~~Company’s business relate to workers’ compensation, property damage, vehicle liability~~future as the litigation and ~~medical benefits. Most of the Company’s insurance~~related events unfold.

Insurance coverage provides ~~for self-insurance levels~~the Company with primary and excess coverage ~~which management believes is sufficient~~for claims related to ~~adequately protect~~vehicle liability, workers’ compensation, property damage and employee medical benefits.

For vehicle liability, the Company retains a portion of the risk. Below is a summary of the Company’s risk retention on vehicle liability insurance coverage maintained by the Company through $10,000:

Company
Risk Retention

Frequency

Layer

Policy Term

Expedited Freight¹

LTL business

3,000

Occurrence/Accident²

$0 to $3,000

10/1/2021 to 10/1/2022

Truckload business

2,000

Occurrence/Accident²

$0 to $2,000

10/1/2021 to 10/1/2022

LTL business

6,000

Policy Term Aggregate³

$3,000 to $5,000

10/1/2021 to 10/1/2022

LTL, Truckload and Intermodal businesses

2,500

Policy Term Aggregate³

$5,000 to $10,000

10/1/2021 to 10/1/2022

Intermodal

1,000

Occurrence/Accident²

$0 to $1,000

10/1/2021 to 10/1/2022

¹ Excluding the Final Mile business, which is primarily a brokered service.

² For each and every accident, the Company is responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.

³ During the Policy Term, the Company is responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Company Risk Retention before insurance will respond.

Also, from ~~catastrophic claims. In~~time to time, when brokering freight, the ~~opinion~~Company may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and the Company maintains third-party liability insurance coverage with a $100 deductible per occurrence for most of its brokered services. Additionally, the Company maintains workers’ compensation insurance with a self-insured retention of $500 per occurrence.

Insurance coverage in excess of the self-insured retention limit is an important part of the Company’s risk management ~~adequate provision has been made~~process. The Company accrues for the costs of the uninsured portion of pending claims within the self-insured retention based on the nature and severity of individual claims and historical claims development trends. The Company believes the recorded

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited and in thousands, except per share data)

September 30, 2022

reserves are sufficient for all incurred claims up to the self-insured retention limits, including ~~provision~~an estimate for ~~estimated~~ claims incurred but not reported.

~~The~~ However, estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult, and the Company ~~estimates its self-insurance loss exposure by evaluating the merits~~may fail to establish sufficient insurance reserves and ~~circumstances surrounding individual known claims and by performing hindsight and actuarial analysis to determine an~~adequately estimate ~~of probable losses on claims incurred but not reported. Such losses should be realized immediately as the events underlying the claims have already occurred as of the balance sheet dates.~~

~~Because of the uncertainty of~~for future insurance claims. Since the ultimate resolution of outstanding claims as well as ~~uncertainty regarding~~ claims incurred but not reported is uncertain, it is possible that ~~management’s provision~~the reserves recorded for these losses could change materially in the near term. ~~However, no~~Although, an estimate ~~can currently~~cannot be made of the range of additional loss that is at least reasonably possible.

~~11.~~13. Segment Reporting

The Company ~~operates in~~ ~~four~~has two reportable ~~segments~~segments: Expedited Freight and Intermodal. The Company evaluates segment performance based on information available to and used by the chief operating decision maker. Expedited LTL operates a comprehensive national network that provides expedited regional, inter-regional and national LTL services. The TLS segment provides expedited truckload brokerage, dedicated fleet services and high security and temperature-controlled logistics services. The Intermodal segment primarily provides first- and last-mile high value intermodal container drayage services both to andincome from ~~seaports and railheads. Pool Distribution provides high-frequency handling and distribution of time sensitive product to numerous destinations.~~

Except for certain insurance activity, the accounting policies of the segments are the same as those described in the summary of significant accounting policies disclosed in Note 1 of the Forward Air Corporation Annual Report on Form 10-K for the year ended December 31, 2016. For workers compensation and vehicle claims each segment is charged an insurance premium and is also charged a deductible that corresponds with our corporate deductibles. However, any losses beyond our deductibles and any loss development factors applied to our outstanding claims as a result of actuarial analysis are not passed to the segments, but reported at the corporate level.

operations. Segment ~~data includes~~results include intersegment revenues and shared costs. Costs ofrelated to the corporate headquarters, shared services and shared assets, such as trailers, are allocated to ~~the segments~~each segment based on usage. ~~The cost basis of shared~~Shared assets are not ~~allocated. Beginning~~allocated to each segment, but rather the shared assets, such as trailers, are allocated to the Expedited Freight segment. Corporate includes revenues and expenses as well as assets that are not attributable to any of the Company’s reportable segments.

The accounting policies applied to each segment are the same as those described in the ~~first quarter~~Summary of ~~2017, a trailer expense allocation was included~~Significant Accounting Policies as disclosed in ~~Pool's 2017 results from operations. The Company evaluates~~Note 1 to the ~~performance of its segments based~~Annual Report on ~~income from operations. The Company’s business~~Form 10-K for the year ended December 31, 2021, except for certain self-insurance loss reserves related to vehicle liability and workers’ compensation. Each segment is ~~conducted~~allocated an insurance premium and deductible that corresponds to the self-insured retention limit for that particular segment. Any self-insurance loss exposure beyond the deductible allocated to each segment is recorded in ~~the U.S. and Canada.~~

Corporate.

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022

~~The following tables summarize segment information about~~Segment results from operations ~~and assets used by the chief operating decision maker of the Company in making decisions regarding allocation of assets and resources as of and~~ for the three and nine months ended September 30, ~~2017~~2022 and ~~2016.~~2021 are as follows:



	Three Months Ended September 30, 2022
	Expedited Freight		Intermodal		Corporate		Eliminations		Consolidated - Continuing Operations
External revenues	$	395,607	$	114,416	$	—	$	—	$	510,023
Intersegment revenues	28		5		—		(33)		—
Depreciation	6,331		1,782		—		—		8,113
Amortization	1,809		2,347		—		—		4,156
Income (loss) from continuing operations	56,304		16,610		(1,249)		—		71,665
Purchases of property and equipment	6,434		294		—		—		6,728

	Three Months Ended September 30, 2021
	Expedited Freight		Intermodal		Corporate		Eliminations		Consolidated - Continuing Operations
External revenues	$	341,461	$	78,164	$	—	$	—	$	419,625
Intersegment revenues	96		9		—		(105)		—
Depreciation	4,942		841		16		—		5,799
Amortization	1,842		1,775		—		—		3,617
Income (loss) from continuing operations	34,636		8,712		(872)		—		42,476
Purchases of property and equipment	13,769		671		—		—		14,440

	Nine Months Ended September 30, 2022
	Expedited Freight		Intermodal		Corporate		Eliminations		Consolidated - Continuing Operations
External revenues	$	1,180,947	$	311,256	$	—	$	—	$	1,492,203
Intersegment revenues	136		16		—		(152)		—
Depreciation	18,010		4,766		101		—		22,877
Amortization	5,428		6,689		—		—		12,117
Income (loss) from continuing operations	167,091		43,005		(5,535)		—		204,561
Purchases of property and equipment	24,155		1,246		—		—		25,401

	Nine Months Ended September 30, 2021
	Expedited Freight		Intermodal		Corporate		Eliminations		Consolidated - Continuing Operations
External revenues	$	996,769	$	205,786	$	—	$	—	$	1,202,555
Intersegment revenues	709		34		—		(800)		(57)
Depreciation	14,924		2,475		42		—		17,441
Amortization	5,437		5,189		—		—		10,626
Income (loss) from continuing operations	93,854		21,607		(8,137)		—		107,324
Purchases of property and equipment	21,905		1,110		—		—		23,015

Three months ended September 30, 2017
Expedited LTL Truckload Premium Pool Distribution Intermodal Eliminations & other Consolidated
External revenues $ 155,006
$ 43,865
$ 39,122
$ 42,208
$ —
$ 280,201
Intersegment revenues 697
2,076
58
84
(2,915 ) —
Depreciation and amortization 5,438
1,546
1,652
1,690
—
10,326
Share-based compensation expense 1,604
101
90
144
—
1,939
Interest expense 1
—
—
12
275
288
Income from operations 23,204
136
681
3,480
(603 ) 26,898
Total assets 633,914
59,657
53,201
145,394
(222,998 ) 669,168
Capital expenditures 8,372
7
239
330
—
8,948

Three months ended September 30, 2016
Expedited LTL Truckload Premium Pool Distribution Intermodal Eliminations & other Consolidated
External revenues $ 143,753
$ 41,927
$ 36,305
$ 27,567
$ —
$ 249,552
Intersegment revenues 584
283
132
12
(1,011 ) —
Depreciation and amortization 5,470
1,470
1,472
987
—
9,399
Share-based compensation expense 1,792
98
84
119
—
2,093
Interest expense 385
—
—
12
(181 ) 216
Income (loss) from operations 21,014
2,038
66
3,041
(1,459 ) 24,700
Total assets 634,028
52,465
46,327
128,048
(219,355 ) 641,513
Capital expenditures 11,915
36
722
11
—
12,684

Table of Contents

Forward Air Corporation

Notes to Condensed Consolidated Financial Statements

(Inunaudited and in thousands, except ~~share and~~ per share data)

~~(Unaudited)~~

September 30, ~~2017~~2022




















Total Assets
As of September 30, 2022	$	698,313	$	304,378	$	183,409	$	(41)	$	1,186,059
As of December 31, 2021	777,987		249,467		90,588		(219)		1,117,823

A reconciliation from the segment information to the consolidated balances for revenues is set forth below:


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Intersegment revenues - continuing operations	$	—	$	—	$	—	$	(57)
Intersegment revenues - discontinued operation	—		—		—		57
Consolidated intersegment revenues	$	—	$	—	$	—	$	—

Revenue from the individual services within the Expedited Freight segment for the three and nine months ended September 30, 2022 and 2021 are as follows:







	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021







Expedited Freight revenues:
Network	$	240,482	$	199,360	$	726,054	$	579,373
Truckload	55,607		53,651		171,659		162,999
Final Mile	76,822		71,355		215,608		203,494
Other	22,724		17,191		67,762		51,612
Total	$	395,635	$	341,557	$	1,181,083	$	997,478

Nine months ended September 30, 2017
Expedited LTL Truckload Premium Pool Distribution Intermodal Eliminations & other Consolidated
External revenues $ 446,658
$ 128,666
$ 113,639
$ 105,737
$ —
$ 794,700
Intersegment revenues 1,913
4,246
199
116
(6,474 ) —
Depreciation and amortization 16,521
4,694
5,067
4,296
—
30,578
Share-based compensation expense 4,980
281
297
407
—
5,965
Interest expense 2
—
—
36
768
806
Income (loss) from operations 64,596
3,699
3,672
9,133
(1,204 ) 79,896
Total assets 633,914
59,657
53,201
145,394
(222,998 ) 669,168
Capital expenditures 12,640
15
524
431
—
13,610

Nine months ended September 30, 2016
Expedited LTL Truckload Premium Pool Distribution Intermodal Eliminations & other Consolidated
External revenues $ 421,194
$ 119,574
$ 100,726
$ 76,243
$ —
$ 717,737
Intersegment revenues 2,216
696
427
148
(3,487 ) —
Depreciation and amortization 16,278
4,944
4,434
2,753
—
28,409
Share-based compensation expense 5,353
260
251
340
—
6,204
Interest expense 1,345
—
—
66
(181 ) 1,230
Income (loss) from operations 63,026
(36,679 ) (191 ) 8,170
(2,570 ) 31,756
Total assets 634,028
52,465
46,327
128,048
(219,355 ) 641,513
Capital expenditures 24,487
1,821
2,275
142
—
28,725



Item 2.			~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview ~~and Executive Summary~~

~~Forward Air Corporation is~~We are a leading asset-light freight provider of transportation services, including less-than-truckload (“LTL”), truckload, final mile and ~~logistics company.~~ intermodal drayage services across the United States and in Canada. We offer premium services that typically require precision execution, such as expedited transit, delivery during tight time windows and special handling. We utilize an asset-light strategy to minimize our investments in equipment and facilities and to reduce our capital expenditures.

Our services are classified into ~~four~~two reportable segments: Expedited ~~LTL, Truckload Premium Services ("TLS"), Intermodal~~Freight and ~~Pool Distribution ("Pool").~~Intermodal.

~~Through the~~Our Expedited ~~LTL~~Freight segment ~~we operate a comprehensive national network to provide~~provides expedited regional, inter-regional and national LTL services. Expedited ~~LTL~~Freight also offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling. ~~Because of~~We plan to grow our ~~roots in serving the deferred air freight market, our terminal network is located at or near airports in the United States~~LTL and ~~Canada.~~

~~Through our TLS segment, we provide expedited truckload brokerage, dedicated fleet services,~~final mile geographic footprints through greenfield start-ups as well as ~~high security and temperature-controlled logistics services in the United States and Canada.~~through acquisitions.

Our Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. Intermodal also offers dedicated contract and Container Freight Station (“CFS”) warehouse and handling ~~services. Intermodal operates primarily~~services, and in ~~the Midwest~~select locations, linehaul and ~~Southeast, with a smaller operational presence in the Southwest.~~LTL services. We plan to grow ~~Intermodal’s~~our Intermodal geographic footprint through acquisitions as well as through greenfield start-ups where ~~we do not have an acceptable~~no suitable acquisition ~~target.~~is available.

In our Pool Distribution segment, we provide high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. We offer this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States.

Our operations, particularly our network of hubs and terminals, represent substantial fixed costs. Consequently, our ability to increase our earnings depends in significant part on our ability to increase the amount of freight and the revenue per pound or shipment for the freight shipped or moved through our ~~networks and to grow~~network. Additionally, our earnings depend on the growth of other ~~lines of businesses,~~services, such as ~~TLS, Intermodal~~LTL pickup and ~~Pool Distribution,~~delivery, which will allow us to maintain revenue growth in a challenging ~~shipping environments.~~freight environment. We continue to execute synergies across our services, particularly with services offered in the Expedited Freight reportable segment. Synergistic opportunities include the ability to share resources, in particular our fleet resources.

We monitor and analyze a number of key operating statistics in order to manage our business and evaluate our financial and operating performance. These key operating statistics are defined below and are referred to throughout the discussion of the financial results of our Expedited Freight and Intermodal reportable segments. Our key operating statistics should not be interpreted as better measurements of our results than income from operations as determined under U.S. generally accepted accounting principles.

Within our Expedited Freight reportable segment, our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing LTL network. Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour and door pounds handled per hour. In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology. Revenue per hundredweight is also a commonly-used indicator for general pricing trends in the LTL industry and can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul. Therefore, changes in revenue per hundredweight may not necessarily indicate actual changes in underlying base rates. We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges. The fuel surcharge is generally designed to offset fluctuations in the cost of our petroleum-based products and is indexed to diesel fuel prices published by the U.S. Department of Energy. We believe our yield management process focused on account level profitability, and ongoing improvements in operating efficiencies, are both key components of our ability to grow profitably.

The key operating statistics necessary to understand the operating results of our Expedited Fright reportable segment are described below in more detail:

Tonnage - Total weight of shipments in pounds. The level of freight tonnage is affected by economic cycles and conditions, customers’ business cycles, changes in customers’ business practices and capacity in the truckload market.

Weight Per Shipment - Total pounds divided by the number of shipments. Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of

transportation, such as truckload, in response to capacity, service and pricing issues. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight.

Revenue Per Hundredweight - Network revenue per every 100 pounds of shipment weight. Our LTL transportation services are generally priced based on weight, commodity, and distance. Our pricing policies are reflective of the services we provide, and can be influenced by competitive market conditions. Changes in the freight profile factors such as average shipment size, average length of haul, freight density, and customer and geographic mix can impact the revenue per hundredweight. Fuel surcharges and intercompany revenue between Network and Truckload are included in this measurement.

Revenue Per Shipment - Network revenue divided by the number of shipments. Fuel surcharges and intercompany revenue between Network and Truckload are included in this measurement.

Average Length of Haul - Total miles between origin and destination service centers for all shipments, with miles based on the size of shipments. Length of haul is used to analyze our tonnage and pricing trends for shipments with similar characteristics. Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight.

Within our Intermodal reportable segment, our primary revenue focus is to increase the number of shipments. The key operating statistic necessary to understand the operating results of our Intermodal reportable segment is described below in more detail:

Drayage Revenue Per Shipment - Intermodal revenue divided by the number of drayage shipments. Revenue derived from container freight station warehouse and handling, and linehaul and LTL services is excluded from this measurement. Fuel surcharges and accessorial charges are included in this measurement.

On April 23, 2020, our Board of Directors (the “Board”) approved a strategy to divest of the Pool Distribution business (“Pool”), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. As a result of the strategy to divest of Pool, the results of operations for Pool were presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for the prior period. Unless otherwise noted, amounts, percentages and discussion for the prior period reflect the results of operations, financial condition and cash flows from our continuing operations. Refer to Note 3, Discontinued Operation, to our Condensed Consolidated Financial Statements for further discussion.

Trends and Developments

~~Acquisitions~~COVID-19

Our business is highly susceptible to changes in economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy. The COVID-19 pandemic adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to the financial markets. Efforts to control the spread of COVID-19 led governments and other authorities to impose restrictions which resulted in business closures and disrupted supply chains worldwide. As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services.

Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 and its variants remains fluid and may be further impacted by the policies of President Biden’s administration, the availability and success of a vaccine and vaccination rates. The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition in 2022 will depend on future developments, which are highly uncertain and cannot be predicted by, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, including the new variants, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume.

In ~~August 2016,~~addition, although we believe we have sufficient capital and liquidity to manage our ~~Intermodal segment acquired~~business over the short- and long-term, our liquidity may be materially affected if conditions in the credit and financial markets deteriorate as a result of COVID-19 including failure by us or our customers to secure any necessary financing in a timely manner.

Labor Shortages

Like many other businesses affected by current macroeconomic conditions, we are experiencing a labor shortage relating to our employee drivers, terminal and dock workers and otherwise throughout our business and operations. We are also operating in an environment where competition is intense for independent fleet owner-operators, creating shortages in the marketplace. These factors have adversely affected our operations, by increasing our operational costs for labor and purchased transportation. The steps we have taken to address these shortages include paying sign-on bonuses, and offering enhanced wages in select competitive markets. These measures have increased costs in certain ~~assets~~areas of ~~Triumph~~our business. We will continue our efforts to mitigate the effects of the labor shortages and other inflationary conditions through similar actions.

Fuel

We depend heavily upon the availability of adequate diesel fuel supplies, and recently, fuel availability and prices have fluctuated significantly. Fuel availability and prices can be impacted by factors beyond our control, such as natural or man-made disasters, adverse weather conditions, political events, economic sanctions imposed against oil-producing countries or specific industry participants, disruptions or failure of technology or information systems, price and supply decisions by oil producing countries and cartels, terrorist activities, armed conflict, tariffs, sanctions, other changes to trade agreements and world supply and demand imbalance. Through our fuel surcharge programs, we have been able to mitigate the impact of fluctuations in fuel prices. Our fuel surcharge rates are set weekly based on the national average for ~~$10.1 million~~fuel prices as published by the U.S. Department of Energy and our fuel surcharge table. In periods of changing fuel prices, our fuel surcharges vary by different degrees and may not fully offset fuel price fluctuations or may result in higher than expected increases in revenue. Fuel shortages, changes in fuel prices, and the potential volatility in fuel surcharge revenue may impact our results of operations and overall profitability. Fuel surcharge revenue as a ~~potential earnout~~percentage of ~~$1.3 million. In May 2017,~~operating revenues increased to 17.7% for the three months ended September 30, 2022 compared to 11.6% for the three months ended September 30, 2021, as a result of the changes in fuel prices.

Environmental Protection and Community Support

We embrace a comprehensive definition of sustainability that addresses Environmental, Social, and Governance factors (“ESG”). To our ~~Intermodal segment acquired certain assets of Atlantic for $22.5 million~~employees, our communities, our customers, our suppliers, and ~~a potential earnout of $1.0 million. These acquisitions provide an opportunity~~our investors, each impact area matters.

The following are the ten ESG topic priority areas we identified relevant to our business and the foundation for our ~~Intermodal segment~~sustainability approach:

•Roadway Health and Safety; Workplace Health and Safety; Independent Contractor Practices; Diversity and Inclusion Practices; Community Impact and Partnerships; Measure and Disclose; Information Security; Responsible Supplier Practices; Green House Gas (“GHG”) Emissions Reduction Practices; and Air Quality Practices

We are committed to ~~expand into additional geographic markets or add volumes~~supporting and giving back to the communities where we live and work, particularly through the support of our ~~existing locations.~~employee Veterans, and to the community of Veterans in North America. We continue to support our Veterans through our charitable organization, Operation: Forward Freedom, a manifestation of our ongoing commitment to Veteran-related causes. Operation Forward Freedom’s largest fundraising event was The Inaugural Drive for Hope Golf tournament. The Drive For Hope Golf Tournament which took place on May 19, 2022 was a huge success, raising $375,000 for injured service members and veterans.

In addition, we partner with non-profit organizations that positively impact our communities and our industry. Through our partnership with Truckers Against Trafficking, we have conducted training for over-the-road drivers to educate and equip them with the tools needed to combat human trafficking. We also partner with Women in Trucking to encourage and promote the employment of women within our industry. Our team of drivers is currently comprised of 15% women, roughly twice the U.S. industry average, and we continue to seek opportunities to improve upon that percentage.

We are committed to promoting a healthier natural environment by striving for continuous environmental improvements in all aspects of our business. We are currently reducing emissions and energy consumption through several ongoing programs and are committed to tracking and reducing our GHG emissions and improving energy efficiency. We are also aligning with industry certifications, continuing to be a SmartWay certified company. SmartWay is a certification from the U.S. Environmental Protection Agency (“EPA”) verifying company compliance with EPA regulations, including fuel efficiency ranges and emission standards.

In 2021, we published our first ESG Report outlining our commitments and associated focus areas. Since publication, we have been focused on data aggregation. In our future reporting, we will incorporate data requirements identified by widely accepted sustainability frameworks and set measurable targets and goals for our priority areas. We are committed to making our results count across the country and will continue to update our future disclosures accordingly.

Table of Contents

Results from Operations

The following table sets forth our consolidated ~~historical~~ financial data for the three months ended September 30, ~~2017~~2022 and ~~2016 (in millions)~~2021 (unaudited and in thousands):


	Three Months Ended
	September 30, 2022		September 30, 2021		Change		Percent Change
Operating revenues:
Expedited Freight	$	395,635	$	341,557	$	54,078	15.8	%
Intermodal	114,421		78,173		36,248		46.4
Eliminations and other operations	(33)		(105)		72		(68.6)
Operating revenues	510,023		419,625		90,398		21.5
Operating expenses:
Purchased transportation	229,326		205,474		23,852		11.6
Salaries, wages, and employee benefits	90,755		84,410		6,345		7.5
Operating leases	24,965		20,536		4,429		21.6
Depreciation and amortization	12,269		9,416		2,853		30.3
Insurance and claims	12,093		9,984		2,109		21.1
Fuel expense	6,772		4,457		2,315		51.9
Other operating expenses	62,178		42,872		19,306		45.0

Total operating expenses	438,358		377,149		61,209		16.2
Income (loss) from continuing operations:
Expedited Freight	56,304		34,636		21,668		62.6
Intermodal	16,610		8,712		7,898		90.7

Other Operations	(1,249)		(872)		(377)		43.2
Income from continuing operations	71,665		42,476		29,189		68.7
Other expense:
Interest expense	(1,544)		(973)		(571)		58.7

Total other expense	(1,544)		(973)		(571)		58.7
Income from continuing operations before income taxes	70,121		41,503		28,618		69.0
Income tax expense	17,988		11,000		6,988		63.5
Net income from continuing operations	52,133		30,503		21,630		70.9
Loss from discontinued operation, net of tax	—		(6,967)		6,967		—
Net income and comprehensive income	$	52,133	$	23,536	$	28,597	121.5	%

Table of Contents

Three months ended September 30
2017 2016 Change Percent Change
Operating revenue:
Expedited LTL $ 155.7
$ 144.3
$ 11.4
7.9 %
Truckload Premium Services 45.9
42.2
3.7
8.8
Pool Distribution 39.2
36.4
2.8
7.7
Intermodal 42.3
27.6
14.7
53.3
Eliminations and other operations (2.9 ) (1.0 ) (1.9 ) 190.0
Operating revenue 280.2
249.5
30.7
12.3
Operating expenses:
   Purchased transportation 123.3
105.0
18.3
17.4
   Salaries, wages, and employee benefits 64.9
60.2
4.7
7.8
   Operating leases 16.8
16.2
0.6
3.7
   Depreciation and amortization 10.3
9.4
0.9
9.6
   Insurance and claims 7.9
7.2
0.7
9.7
   Fuel expense 4.1
3.4
0.7
20.6
   Other operating expenses 26.0
23.4
2.6
11.1
      Total operating expenses 253.3
224.8
28.5
12.7
Income from operations:
Expedited LTL 23.2
21.0
2.2
10.5
Truckload Premium Services 0.1
2.0
(1.9 ) (95.0 )
Pool Distribution 0.7
0.1
0.6
600.0
Intermodal 3.5
3.0
0.5
16.7
Other operations (0.6 ) (1.4 ) 0.8
(57.1 )
Income from operations 26.9
24.7
2.2
8.9
Other expense:
   Interest expense (0.3 ) (0.2 ) (0.1 ) 50.0
      Total other expense (0.3 ) (0.2 ) (0.1 ) 50.0
Income before income taxes 26.6
24.5
2.1
8.6
Income taxes 8.4
12.6
(4.2 ) (33.3 )
Net income $ 18.2
$ 11.9
$ 6.3
52.9 %
Operating Revenues

~~During the three months ended September 30, 2017, we experienced a 12.3% increase in our consolidated~~

Operating revenues ~~compared to the three months ended September 30, 2016. Operating income~~ increased ~~$2.2 million,~~$90,398, or ~~8.9%~~21.5%, to ~~$26.9 million~~$510,023 for the three months ended September 30, ~~2017 from $24.7 million for the same period of 2016.~~

~~Segment Operations~~

~~Expedited LTL's revenue increased $11.4 million, or 7.9%, and operating income increased $2.2 million, or 10.5%~~2022 compared to $419,625 for the three months ended September 30, ~~2017, compared to the same period in 2016.~~2021. The increase ~~of Expedited LTL's revenue~~ was ~~the result of higher LTL volumes, increased pick up and delivery shipments and increased net fuel surcharge revenue as a result of the~~primarily due to an increase in ~~fuel prices since the third quarter~~our Expedited Freight segment of ~~2016. Improvement~~$54,078 driven by Network, Truckload and Final Mile revenue, and in ~~income from operations was caused~~our Intermodal segment of $36,248, driven by ~~the increase in revenue. Also contributing~~increased drayage and accessorial revenues.

Operating Expenses

Operating expenses increased $61,209, or 16.2%, to ~~the improvement were decreases in insurance liability reserves and dock and network efficiencies partly offset by an increased utilization of third party providers.~~

~~TLS revenue increased $3.7 million, or 8.8% while operating income decreased $1.9 million~~$438,358 for the three months ended September 30, ~~2017,~~2022 compared to ~~the same period in 2016. The increase in revenue was due to an increase in overall miles, an~~

~~increase in revenue per mile and new business wins. The decrease of TLS operating income was due to increased utilization of third party providers and a large increase to vehicle claim reserves.~~

~~Pool Distribution revenue increased $2.8 million, or 7.7%, and operating results increased $0.6 million~~$377,149 for the three months ended September 30, ~~2017, compared~~2021. The increase was primarily due to an increase in purchased transportation expense of $23,852, salaries, wages and employee benefits of $6,345 and other operating expenses of $19,306 in both our Expedited Freight and Intermodal segments. Purchased transportation expense includes our independent contractor fleet owners and owner-operators, who lease their equipment to our motor carrier (“Leased Capacity Providers”) and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. Purchased transportation expense increased due to higher Leased Capacity Provider and third party carrier costs, partially offset by the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers. Salaries, wages and employee benefits increased primarily due to the ~~same period~~additional employees hired in ~~2016. The revenue~~response to the increase ~~was~~in volumes for the third quarter of 2022, and an increase in the reserve for incentive compensation. Other operating expenses increased due to ~~new business, rate increases~~higher travel expenses, maintenance costs, and terminal and office expenses. Other operating expenses also increased ~~volumes from existing customers and lanes. The increase~~due to additional expenses incurred in ~~operating income was the result of improved leverage on fixed costs as a result~~support of the ~~rate increases~~higher accessorial revenues as noted above for the Intermodal segment.

Income from Continuing Operations and ~~the additional revenue.~~Segment Operations

~~Intermodal revenue~~Income from continuing operations increased ~~$14.7 million,~~$29,189, or ~~53.3%~~68.7%, ~~and operating income increased $0.5 million, or 16.7%,~~to $71,665 for the three months ended September 30, ~~2017,~~2022 compared to ~~the same period in 2016. The increases in operating revenue and income were primarily attributable to the Atlantic and Triumph acquisitions and the positive impact of increased fuel surcharges.~~

~~Fuel Surcharge~~

~~Our net fuel surcharge revenue is the result of our fuel surcharge rates, which are set weekly using the national average~~$42,476 for ~~diesel price per gallon, and volume transiting our network. During~~ the three months ended September 30, ~~2017, total net fuel surcharge revenue increased 27.5%~~2021. The increase was primarily driven by an increase in income from continuing operations in our Expedited Freight segment and Intermodal segment of $21,668 and $7,898, respectively. The results of our two reportable segments are discussed below in more detail.

Interest Expense

Interest expense was $1,544 for the three months ended September 30, 2022 compared to $973 for the three months ended September 30, 2021. The increase in interest expense was due to a higher variable interest rate during the third quarter of 2022 as compared to the same period in ~~2016, mostly due to increased fuel prices~~the prior year. The weighted-average interest rate on the outstanding borrowings under our credit facility was 3.33% and ~~increased volumes in~~1.35% during the ~~Expedited LTL~~three months ended September 30, 2022 and ~~Pool Distribution segment.~~2021, respectively.

~~Interest Expense~~Income Taxes on a Continuing Basis

~~Interest expense was $0.3 million~~The effective tax rate on a continuing basis for the three months ended September 30, ~~2017~~2022 was 25.7% compared to ~~$0.2 million~~26.5% for the three months ended September 30, 2021. The lower effective tax rate for the three months ended September 30, 2022 was primarily due to a return to provision expense adjustment recorded in the third quarter of 2021. A similar adjustment was not recorded in the third quarter of 2022.

Net Income

As a result of the foregoing factors, net income increased $28,597, or 121.5%, to $52,133 for the three months ended September 30, 2022 compared to $23,536 for the three months ended September 30, 2021.

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Expedited Freight - Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

The following table sets forth the financial data of our Expedited Freight segment for the three months ended September 30, 2022 and 2021 (unaudited and in thousands):





	Three Months Ended
	September 30, 2022		Percent of Revenue		September 30, 2021		Percent of Revenue		Change		Percent Change
Operating revenues:
Network1	$	240,482	60.8	%	$	199,360	58.4	%	$	41,122	20.6	%
Truckload	55,607		14.1		53,651		15.7		1,956		3.6
Final Mile	76,822		19.4		71,355		20.9		5,467		7.7
Other	22,724		5.7		17,191		5.0		5,533		32.2
Total operating revenues	395,635		100.0		341,557		100.0		54,078		15.8

Operating expenses:
Purchased transportation	200,783		50.7		182,596		53.5		18,187		10.0
Salaries, wages and employee benefits	71,543		18.1		65,898		19.3		5,645		8.6
Operating leases	15,819		4.0		14,687		4.3		1,132		7.7
Depreciation and amortization	8,140		2.1		6,784		2.0		1,356		20.0
Insurance and claims	9,196		2.3		8,074		2.4		1,122		13.9
Fuel expense	2,873		0.7		2,225		0.7		648		29.1
Other operating expenses	30,977		7.8		26,657		7.8		4,320		16.2

Total operating expenses	339,331		85.8		306,921		89.9		32,410		10.6
Income from operations	$	56,304	14.2	%	$	34,636	10.1	%	$	21,668	62.6	%

1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

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Expedited Freight Operating Statistics

	Three Months Ended
	September 30, 2022		September 30, 2021		Percent Change
Business days	64		64		—	%

Tonnage1,2
Total pounds	698,004		687,816		1.5
Pounds per day	10,906		10,747		1.5

Shipments1,2
Total shipments	916		845		8.4
Shipments per day	14.3		13.2		8.3

Weight per shipment	762		814		(6.4)

Revenue per hundredweight3	$	34.70	$	29.32	18.3
Revenue per hundredweight, ex fuel3	$	26.05	$	24.34	7.0

Revenue per shipment3	$	264.30	$	238.68	10.7
Revenue per shipment, ex fuel3	$	198.39	$	198.18	0.1

1 In thousands
2 Excludes accessorial, Truckload and Final Mile products
3 Includes intercompany revenue between the Network and Truckload revenue streams

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Operating Revenues

Expedited Freight operating revenues increased $54,078, or 15.8%, to $395,635 for the three months ended September 30, 2022 from $341,557 for the three months ended September 30, 2021. The increase was attributable to higher Network, Truckload and Final Mile revenue. Network revenue increased due to a 1.5% increase in tonnage and a 7.0% increase in revenue per hundredweight ex fuel as compared to the same period in the prior year. The increase in tonnage reflects a decrease in weight per shipment of 6.4% on 8.4% higher number of shipments. The decrease in the weight per shipment was the result of a change in the mix of freight in our network. The increase in the revenue per hundredweight ex fuel was driven by the execution of our revenue growth strategies, pricing initiatives, including our general rate increase, and continued strong demand for our services. Network fuel surcharge revenue increased $26,195, or 76.6% as a result of the rise in the average price of fuel and an increase in tonnage. Truckload and Final Mile revenue increased $1,956 and $5,467, respectively, primarily due to continued strong demand for our services. Other revenue, which includes warehousing and terminal handling, increased $5,533 due to the higher number of shipments and pricing initiatives.

Purchased Transportation

Expedited Freight purchased transportation increased $18,187, or 10.0%, to $200,783 for the three months ended September 30, 2022 from $182,596 for the three months ended September 30, 2021. Purchased transportation was 50.7% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 53.5% for the same period in 2021. Expedited Freight purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation expense was primarily due to higher Leased Capacity Provider and third party carrier costs, partially offset by the change in the mix of ~~2016.~~freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services. In the third quarter of 2022, we purchased 68.3%, 28.1% and 3.6% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively. This compares to 66.0%, 30.2% and 3.8% in the same period in 2021.

Salaries, Wages and Employee Benefits

Expedited Freight salaries, wages and employee benefits increased $5,645, or 8.6%, to $71,543 for the three months ended September 30, 2022 from $65,898 for the three months ended September 30, 2021. Salaries, wages and employee benefits were 18.1% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 19.3% for the same period in 2021. The increase in salaries, wages and employee benefits expense was primarily due to additional employees hired in response to the increased volumes in the third quarter of 2022, higher salaries and wages, and an increase in the reserve for incentive compensation compared to the same period in 2021.

Operating Leases

Expedited Freight operating leases increased $1,132, or 7.7%, to $15,819 for the three months ended September 30, 2022 from $14,687 for the three months ended September 30, 2021. Operating leases were 4.0% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 4.3% for the same period in 2021. The increase in operating leases expense was primarily due to higher facility expense in the third quarter of 2022 as compared to the same period in 2021.

Depreciation and Amortization

Expedited Freight depreciation and amortization increased $1,356, or 20.0%, to $8,140 for the three months ended September 30, 2022 from $6,784 for the three months ended September 30, 2021. Depreciation and amortization was 2.1% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 2.0% for the same period in 2021. The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation in the third quarter of 2022 as compared to the same period in 2021.

Insurance and Claims

Expedited Freight insurance and claims increased $1,122, or 13.9%, to $9,196 for the three months ended September 30, 2022 from $8,074 for the three months ended September 30, 2021. Insurance and claims was 2.3% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 2.4% for the same period in 2021. The increase in insurance and claims expense was primarily due to an increase in insurance premiums and vehicle repairs offset by a decrease in cargo claims in the third quarter of 2022 as compared to the same period in 2021. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations” section below.

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Fuel Expense

Expedited Freight fuel expense increased $648, or 29.1%, to $2,873 for the three months ended September 30, 2022 from $2,225 for the three months ended September 30, 2021. Fuel expense was 0.7% of Expedited Freight operating revenues for both the three months ended September 30, 2022 and 2021. Fuel expense increased primarily due to a rise in the average price of fuel in the third quarter of 2022 as compared to the same period in 2021.

Other Operating Expenses

Expedited Freight other operating expenses increased $4,320, or 16.2%, to $30,977 for the three months ended September 30, 2022 from $26,657 for the three months ended September 30, 2021. Other operating expenses were 7.8% of Expedited Freight operating revenues for both the three months ended September 30, 2022 and 2021. Other operating expenses include equipment maintenance, facility expenses, legal and professional fees, and other over-the-road costs. The increase in other operating expenses was primarily due to an increase in maintenance costs, terminal and office expenses, and travel expenses in the third quarter of 2022 as compared to the same period in 2021.

Income from Operations

Expedited Freight income from operations increased $21,668, or 62.6%, to $56,304 for the three months ended September 30, 2022 compared to $34,636 for the three months ended September 30, 2021. Income from operations was 14.2% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 10.1% for the same period in 2021. The increase in income from operations as a percentage of operating revenues was primarily due to increased tonnage and revenue per hundredweight ex fuel combined with higher fuel surcharge revenue, partially offset by higher Leased Capacity Provider and third party carrier costs.

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Intermodal - Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

The following table sets forth the financial data of our Intermodal segment for the three months ended September 30, 2022 and 2021 (unaudited and in thousands):





	Three Months Ended
	September 30, 2022		Percent of Revenue		September 30, 2021		Percent of Revenue		Change		Percent Change
Operating revenues	$	114,421	100.0	%	$	78,173	100.0	%	$	36,248	46.4	%

Operating expenses:
Purchased transportation	28,610		25.0		22,984		29.4		5,626		24.5
Salaries, wages and employee benefits	17,945		15.7		17,596		22.5		349		2.0
Operating leases	9,146		8.0		5,856		7.5		3,290		56.2
Depreciation and amortization	4,129		3.6		2,616		3.3		1,513		57.8
Insurance and claims	2,241		2.0		2,708		3.5		(467)		(17.2)
Fuel expense	3,899		3.4		2,231		2.9		1,668		74.8
Other operating expenses	31,841		27.8		15,470		19.8		16,371		105.8
Total operating expenses	97,811		85.5		69,461		88.9		28,350		40.8
Income from operations	$	16,610	14.5	%	$	8,712	11.1	%	$	7,898	90.7	%


Intermodal Operating Statistics

	Three Months Ended
	September 30, 2022		September 30, 2021		Percent Change
Drayage shipments	89,236		91,774		(2.8)	%
Drayage revenue per shipment1	$	1,203	$	742	62.1


1 Excludes revenue derived from container freight station warehouse and handling, and linehaul and LTL services.

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Operating Revenues

Intermodal operating revenues increased $36,248, or 46.4%, to $114,421 for the three months ended September 30, 2022 from $78,173 for the three months ended September 30, 2021. The increase in operating revenue was primarily due to a 62.1% increase in drayage revenue per shipment as compared to the same period in 2021. The increase in drayage revenue per shipment was driven by the execution of our pricing initiatives, the acquisitions of BarOle in November 2021 and Edgmon in May 2022, higher accessorial revenue in support of our customers and continued strong demand for our services. In addition, fuel surcharge revenue increased $8,317, or 114.3% as a result of the rise in the average price of fuel.

Purchased Transportation

Intermodal purchased transportation increased $5,626, or 24.5%, to $28,610 for the three months ended September 30, 2022 from $22,984 for the three months ended September 30, 2021. Purchased transportation was 25.0% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 29.4% for the same period in 2021. Intermodal purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in purchased transportation costs was primarily due to higher Leased Capacity Provider and third party carrier costs, and the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Salaries, Wages and Employee Benefits

Intermodal salaries, wages and employee benefits increased $349, or 2.0%, to $17,945 for the three months ended September 30, 2022 compared to $17,596 for the three months ended September 30, 2021.�� Salaries, wages and employee benefits were 15.7% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 22.5% for the same period in 2021. The increase in salaries, wages and employee benefits expense was primarily due to additional employees hired in the third quarter of 2022 and higher salaries and wages as compared to the same period in 2021.

Operating Leases

Intermodal operating leases increased $3,290, or 56.2%, to $9,146 for the three months ended September 30, 2022 compared to $5,856 for the three months ended September 30, 2021. Operating leases were 8.0% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 7.5% for the same period in 2021. The increase in operating leases expense was due to higher facility expense and additional equipment leases in the third quarter of 2022 as compared to the same period in 2021.

Depreciation and Amortization

Intermodal depreciation and amortization increased $1,513, or 57.8%, to $4,129 for the three months ended September 30, 2022 from $2,616 for the three months ended September 30, 2021. Depreciation and amortization was 3.6% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 3.3% for the same period in 2021. The increase in depreciation and amortization expense was primarily due to the equipment and intangible assets acquired in connection with the acquisitions completed in the fourth quarter of 2021 and the second quarter of 2022.

Insurance and Claims

Intermodal insurance and claims decreased $467, or 17.2%, to $2,241 for the three months ended September 30, 2022 from $2,708 for the three months ended September 30, 2021. Insurance and claims were 2.0% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 3.5% for the same period in 2021. The decrease in insurance and claims expense was primarily due to the decrease in insurance premiums and vehicle liability claims, offset by an increase in vehicle repairs during the third quarter of 2022 as compared to the same period in 2021. See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations” section below.

Fuel Expense

Intermodal fuel expense increased $1,668, or 74.8%, to $3,899 for the three months ended September 30, 2022 from $2,231 for the three months ended September 30, 2021. Fuel expense was 3.4% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 2.9% for the same period in 2021. Intermodal fuel expense increased primarily due to the rise in the average price of fuel in the third quarter of 2022 as compared to the same period in 2021.

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Other Operating Expenses

Intermodal other operating expenses increased $16,371, or 105.8%, to $31,841 for the three months ended September 30, 2022 from $15,470 for the three months ended September 30, 2021. Other operating expenses were 27.8% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 19.8% for the same period in 2021. The increase in Intermodal other operating expenses was primarily due to additional expenses incurred in support of the increased accessorial revenues, and maintenance costs in the third quarter of 2022 as compared to the same period in 2021.

Income from Operations

Intermodal income from operations increased $7,898, or 90.7%, to $16,610 for the three months ended September 30, 2022 compared to $8,712 for the three months ended September 30, 2021. Income from operations was 14.5% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 11.1% for the same period in 2021. The increase in income from operations as a percentage of operating revenues was primarily due to increased drayage revenue per shipment, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers and higher Leased Capacity Provider and third party carrier costs.

Other Operations - Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Other operations included a $1,249 operating loss during the three months ended September 30, 2022 compared to an $872 operating loss during the three months ended September 30, 2021. The change in the operating loss was primarily due to an increase in self-insurance reserves for vehicle liability claims, partially offset by a decrease in the reserves for group health insurance claims and the recovery of bad debt related to other receivables. The increase in the self-insurance reserves for vehicle liability claims was due to the unfavorable loss development factor of historical claims.

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Results from Operations

The following table sets forth our consolidated financial data for the nine months ended September 30, 2022 and 2021 (unaudited and in thousands):


	Nine Months Ended
	September 30, 2022		September 30, 2021		Change		Percent Change
Operating revenues:
Expedited Freight	$	1,181,083	$	997,478	$	183,605	18.4	%
Intermodal	311,272		205,820		105,452		51.2
Eliminations and other operations	(152)		(800)		648		(81.0)
Operating revenues	1,492,203		1,202,498		289,705		24.1
Operating expenses:
Purchased transportation	693,648		605,299		88,349		14.6
Salaries, wages, and employee benefits	263,194		243,948		19,246		7.9
Operating leases	71,097		60,073		11,024		18.4
Depreciation and amortization	34,994		28,067		6,927		24.7
Insurance and claims	37,257		30,616		6,641		21.7
Fuel expense	20,951		12,218		8,733		71.5
Other operating expenses	166,501		114,953		51,548		44.8

Total operating expenses	1,287,642		1,095,174		192,468		17.6
Income (loss) from continuing operations:
Expedited Freight	167,091		93,854��		73,237		78.0
Intermodal	43,005		21,607		21,398		99.0
Other Operations	(5,535)		(8,137)		2,602		(32.0)
Income from continuing operations	204,561		107,324		97,237		90.6
Other expense:
Interest expense	(3,521)		(3,461)		(60)		1.7

Total other expense	(3,521)		(3,461)		(60)		1.7
Income from continuing operations before income taxes	201,040		103,863		97,177		93.6
Income tax expense	50,791		25,969		24,822		95.6
Net income from continuing operations	150,249		77,894		72,355		92.9
Loss from discontinued operation, net of tax	—		(12,500)		12,500		(100.0)
Net income and comprehensive income	$	150,249	$	65,394	$	84,855	129.8	%

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Operating Revenues

Operating revenues increased $289,705, or 24.1% to $1,492,203 for the nine months ended September 30, 2022 compared to $1,202,498 for the nine months ended September 30, 2021. The increase was primarily due to an increase in our Expedited Freight segment of $183,605, driven by increased Network, Truckload and Final Mile revenue, and in our Intermodal segment of $105,452 driven by increased drayage and accessorial revenues.

Operating Expenses

Operating expenses increased $192,468, or 17.6%, to $1,287,642 for the nine months ended September 30, 2022 compared to $1,095,174 for the nine months ended September 30, 2021. The increase was primarily due to an increase in purchased transportation expense of $88,349, salaries, wages and employee benefits of $19,246 and other operating expenses of $51,548 in both our Expedited Freight and Intermodal segments. Purchased transportation expense includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. Purchased transportation expense increased due to higher Lease Capacity Provider and third party carrier costs, and the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers. Salaries, wages and employee benefits increased primarily due to the additional employees hired in response to the increase in volumes in 2022, higher salaries and wages, and an increase in the reserve for incentive compensation. Other operating expenses increased due to maintenance costs, travel expenses, recruiting costs, and terminal and office expenses, partially offset by lower professional fees. Other operating expenses also increased due to additional expenses incurred in support of the increased accessorial revenues as noted above for the Intermodal segment.

Income from Continuing Operations and Segment Operations

Income from continuing operations increased $97,237, or 90.6%, to $204,561 for the nine months ended September 30, 2022 compared to $107,324 for the nine months ended September 30, 2021. The increase was primarily driven by an increase in income from continuing operations in our Expedited Freight segment and Intermodal segment of $73,237 and $21,398, respectively. The results of our two reportable segments are discussed below in more detail.

Interest Expense

Interest expense was $3,521 for the nine months ended September 30, 2022 compared to $3,461 for the nine months ended September 30, 2021. The increase in interest expense was ~~attributable~~due to ~~additional~~a higher borrowings outstanding under our credit facility during the nine months ended September 30, 2022 partially offset by a lower weighted-average interest rate during the nine months ended September 30, 2022. The weighted-average interest rate on the outstanding borrowings under our ~~revolving~~ credit ~~facility.~~facility was 2.27% and 2.51% during the nine months ended September 30, 2022 and 2021, respectively.

Income Taxes on a Continuing Basis

The ~~combined federal and state~~effective tax rate on a continuing basis for the nine months ended September 30, 2022 was 25.3% compared to a rate of 25.0% for the nine months ended September 30, 2021. The higher effective tax rate for the ~~third~~ ~~quarter of 2017~~nine months ended September 30, 2022 was ~~31.8%~~primarily due to lower excess tax benefits realized on share-based awards in 2022 compared to ~~a rate of 51.3% for~~ the same period in ~~2016. The effective~~2021.

Loss from Discontinued Operation, net of tax ~~rate~~

There was no loss from discontinued operation, net of tax for the ~~third quarter~~nine months ended September 30, 2022 compared to a loss from discontinued operation, net of ~~2017~~tax of $12,500 for the nine months ended September 30, 2021. Loss from discontinued operation includes ~~a change in estimated tax benefit from a technology credit~~our Pool business and, as discussed above, the ~~result of the impairment of goodwill in the second quarter of 2016 that is non-deductible for tax purposes.~~Pool business was sold on February 12, 2021.

Net Income

As a result of the foregoing factors, net income increased by ~~$6.3 million,~~$84,855, or ~~52.9%~~129.8%, to ~~$18.2 million for the~~ ~~third~~ ~~quarter of 2017 from $11.9 million for the same period in 2016.~~

~~Expedited LTL - Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016~~

~~The following table sets forth our historical financial data of the Expedited LTL segment for the three months ended September 30, 2017 and 2016 (in millions):~~

Expedited LTL Segment Information
(In millions)
(Unaudited)

Three months ended
September 30, Percent of September 30, Percent of Percent
2017 Revenue 2016 Revenue Change Change
Operating revenue $ 155.7
100.0 % $ 144.3
100.0 % $ 11.4
7.9 %

Operating expenses:
Purchased transportation 64.0
41.1
56.3
39.0
7.7
13.7
Salaries, wages and employee benefits 35.2
22.6
33.8
23.4
1.4
4.1
Operating leases 9.4
6.0
9.0
6.2
0.4
4.4
Depreciation and amortization 5.4
3.5
5.5
3.8
(0.1 ) (1.8 )
Insurance and claims 3.3
2.1
3.9
2.7
(0.6 ) (15.4 )
Fuel expense 0.9
0.6
0.8
0.6
0.1
12.5
Other operating expenses 14.3
9.2
14.0
9.7
0.3
2.1
Total operating expenses 132.5
85.1
123.3
85.4
9.2
7.5
Income from operations $ 23.2
14.9 % $ 21.0
14.6 % $ 2.2
10.5 %

Expedited LTL Operating Statistics

Three months ended
September 30, September 30, Percent
2017 2016 Change

Operating ratio 85.1 % 85.4 % (0.4 )%

Business days 63.0
64.0
(1.6 )
Business weeks 12.6
12.8
(1.6 )

Expedited LTL:
Tonnage
    Total pounds ¹ 636,009
588,929
8.0
    Average weekly pounds ¹ 50,477
46,010
9.7

Linehaul shipments
    Total linehaul 986,632
909,787
8.4
    Average weekly 78,304
71,077
10.2

Forward Air Complete shipments 242,902
195,594
24.2
As a percentage of linehaul shipments 24.6 % 21.5 % 14.4

Average linehaul shipment size 645
647
(0.3 )

Revenue per pound ²

    Linehaul yield $ 16.89
$ 17.71
(3.7 )
    Fuel surcharge 1.11
1.06
0.2
    Forward Air Complete 3.94
3.49
2.1
Total Expedited LTL yield $ 21.94
$ 22.26
(1.4 )%

¹ - In thousands
² - In dollars per hundred pound; percentage change is expressed as a percent of total yield.

Expedited LTL had operating revenue increase $11.4 million, or 7.9%, to $155.7 million from $144.3 million, accounting for 55.6% of consolidated operating revenue for the three months ended September 30, 2017 compared to 57.8% for the same period in 2016. The increase in revenue is mostly the result of increases to our Forward Air Complete ("Complete"), pick-up and delivery services and linehaul revenues. Linehaul revenue, which is the largest portion of Expedited LTL revenue, increased $3.1 million, or 3.0%, on higher tonnage partly offset by the decrease in average base revenue per pound noted in the preceding table. The increase in tonnage is due to a growing percentage of total volume from class rated shipments, which have higher density attributes and a slightly lower length of haul than our traditional shipments. While increasing tonnage, class rated tonnage has caused a decrease in average base revenue per pound.

The $11.4 million revenue increase is primarily the result of a $4.5 million, or 21.8%, increase in Complete revenue. The increase in Complete revenue was attributable to an increase in shipping volumes in our Expedited LTL network and a 14.4% increase in the attachment rate of Complete to linehaul shipments. Additionally, compared to the same period in 2016, net fuel surcharge revenue increased $0.9 million largely due to the increase in fuel prices and tonnage volumes. Other terminal based revenues, which includes dedicated local pickup and delivery services, warehousing and terminal handling, increased $2.9 million, or 22.0%, to $16.1 million in the third quarter of 2017 from $13.2 million in the same period of 2016. The increase in other terminal revenue was mainly attributable to increases in certain dedicated local pickup and delivery revenues.

~~Purchased Transportation~~

Expedited LTL’s purchased transportation increased by $7.7 million, or 13.7%, to $64.0 million for the three months ended September 30, 2017 from $56.3 million for the three months ended September 30, 2016. As a percentage of segment operating revenue, Expedited LTL purchased transportation was 41.1% during the three months ended September 30, 2017 compared to 39.0% for the same period in 2016. The increase is mostly due to a 6.3% increase in Expedited LTL cost per mile. The increase in cost per mile is due to increased utilization of third party carriers, which are more costly than our network of owner operators. The increase is also due to increased Complete attachment on higher linehaul volumes. Complete purchased transportation is a much higher percentage of Complete revenue than our linehaul services.

~~Salaries, Wages, and Benefits~~

Salaries, wages and employee benefits of Expedited LTL increased $1.4 million, or 4.1%, to $35.2 million in the third quarter of 2017 from $33.8 million for the same period in 2016. Salaries, wages and employee benefits were 22.6% of Expedited LTL’s operating revenue in the third quarter of 2017 compared to 23.4% for the same period of 2016. The improvement in salaries, wages and employee benefits as a percentage of revenue was primarily attributable to a 0.7% decrease in health insurance costs and a 0.1% decrease in workers' compensation costs as a percentage of revenue.

~~Operating Leases~~

Operating leases increased $0.4 million, or 4.4%, to $9.4 million for the three months ended September 30, 2017 from $9.0 million for the same period in 2016. Operating leases were 6.0% of Expedited LTL operating revenue for the three months ended September 30, 2017 compared to 6.2% for the same period of 2016. The increase in cost is due to a $0.3 million increase in truck, trailer and equipment rentals and leases and $0.1 million of additional facility lease expenses. Facility leases increased due to the expansion of certain facilities. Vehicle leases increased due to the replacement of older, owned power equipment with leased power equipment.

~~Depreciation and Amortization~~

Depreciation and amortization decreased $0.1 million, or 1.8%, to $5.4 million in the third quarter of 2017 from $5.5 million in the same period of 2016. Depreciation and amortization expense as a percentage of Expedited LTL operating revenue was 3.5% in the third quarter of 2017 compared to 3.8% in the same period of 2016. The decrease as a percentage of revenue was due to the increase in leased equipment mentioned above instead of purchased equipment.

~~Insurance and Claims~~

Expedited LTL insurance and claims expense decreased $0.6 million, or 15.4%, to $3.3 million for the three months ended September 30, 2017 from $3.9 million for the same period of 2016. Insurance and claims was 2.1% of operating revenue for the three months ended September 30, 2017 compared to 2.7% in the same period of 2016. The decrease was attributable to a $0.5 million decrease in vehicle liability reserves and a $0.1 million decrease in reserves for cargo claims due to improved claims activity.

Expedited LTL fuel expense increased $0.1 million, or 12.5%, to $0.9 million for the third quarter of 2017 from $0.8 million in the same period of 2016. Fuel expenses were 0.6% of Expedited LTL operating revenue in the third quarter of 2017 and 2016. Expedited LTL fuel expenses increased due to an increase in year-over-year fuel prices.

~~Other Operating Expenses~~

Other operating expenses increased $0.3 million, or 2.1%, to $14.3 million during the three months ended September 30, 2017 from $14.0 million in the same period of 2016. Other operating expenses were 9.2% of Expedited LTL operating revenue in the third quarter of 2017 compared to 9.7% in the same period of 2016. The decrease as percentage of revenue was primarily the result of decreased legal and professional fees and network efficiencies, such as lower tolls. The prior period also included a corporate event that did not occur in 2017. These improvements were partly offset by an increase in receivables allowance.

~~Income from Operations~~

Income from operations increased by $2.2 million, or 10.5%, to $23.2 million for the third quarter of 2017 compared with $21.0 million for the same period in 2016. Income from operations as a percentage of Expedited LTL operating revenue was 14.9% for the three months ended September 30, 2017 compared with 14.6% in the same period of 2016. Improvement in income from operations was due to increases in revenue due to higher tonnage and Complete attachment and lower vehicle liability reserves. These improvements were partly offset by increased utilization of third party transportation providers.

~~Truckload Premium Services - Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016~~

~~The following table sets forth our historical financial data of the Truckload Premium Services segment for the three months ended September 30, 2017 and 2016 (in millions):~~

TLS revenue increased $3.7 million, or 8.8%, to $45.9 million in the third quarter of 2017 from $42.2 million in the third quarter of 2016. TLS revenue increased due to a 6.4% increase in overall miles on new business wins. TLS also experienced a 0.6% increase in average revenue per mile on an increase in pharmaceutical revenue which historically has a higher revenue per mile than traditional truckload business.

~~Purchased Transportation~~

Purchased transportation costs for our TLS revenue increased $4.2 million, or 14.1%, to $33.9 million for the three months ended September 30, 2017 from $29.7 million for the same period in 2016. For the three months ended September 30, 2017, TLS purchased transportation costs represented 73.9% of TLS revenue compared to 70.4% for the same period in 2016. The increase in TLS purchased transportation was attributable to a 5.8% increase in non-Company miles driven and a 6.0% increase in cost per mile during the three months ended September 30, 2017 compared to the same period in 2016. The increase in TLS non-Company miles driven was attributable to the business wins discussed above. The increase in cost per mile was due to TLS utilizing third party carriers, which are more costly than owner operators, to cover the additional miles. This increased utilization of third party carriers also led to the increase in purchased transportation as a percentage of revenue.

~~Salaries, Wages, and Benefits~~

Salaries, wages and employee benefits of TLS increased by $0.1 million, or 2.0%, to $5.0 million in the third quarter of 2017 from $4.9 million in the same period of 2016. Salaries, wages and employee benefits were 10.9% of TLS’s operating revenue in the third quarter of 2017 compared to 11.6% for the same period of 2016. The decrease in salaries, wages and employee benefits as a percentage of revenue was mostly attributable to the increase in revenue outpacing the increase in pay to office staff. The decrease as a percentage of revenue was also attributable to improved efficiencies in our Company driver fleet. These improvements were partly offset by an increase in employee incentives.

~~Operating Leases~~

Operating leases increased $0.2 million to $0.3 million for the third quarter of 2017 from $0.1 million for the same period in 2016. Operating leases were 0.6% of LTL operating revenue for the third quarter of 2017 compared to 0.2% for the same period in 2016. The $0.2 million increase in cost is due to additional trailer rentals for the new business wins mentioned above.

~~Depreciation and Amortization~~

Depreciation and amortization increased $0.1 million, or 6.7%, to $1.6 million in the third quarter of 2017 from $1.5 million for the same period of 2016. Depreciation and amortization expense as a percentage of TLS operating revenue was 3.5% in the third quarter of 2017 compared to 3.6% in the same period of 2016. The decrease as a percentage of revenue was due to the use of rental trailers to handle new business wins instead of company trailers.

~~Insurance and Claims~~

TLS insurance and claims expense increased $0.9 million, or 81.8%, to $2.0 million for the three months ended September 30, 2017 from $1.1 million for the same period of 2016. Insurance and claims were 4.4% of operating revenue for the three months ended September 30, 2017 compared to 2.6% in the same period of 2016. The increase was due to developments on a large vehicle claim reserve and increased vehicle insurance premiums associated with our insurance plan renewals partly offset by a benefit from a prior period insurance premium audit.

TLS fuel expense increased $0.1 million, or 14.3%, to $0.8 million for the third quarter of 2017 from $0.7 million for the same period of 2016. Fuel expense as a percentage of TLS operating revenue was 1.7% in the third quarter of 2017 and 2016. The increase was mostly attributable to an increase in year-over-year fuel prices and the increase in Company driver miles.

~~Other Operating Expenses~~

Other operating expenses were $2.2 million for the three months ended September 30, 2017 and 2016. Other operating expenses were 4.8% of TLS operating revenue in the third quarter of 2017 compared to 5.2% in the same period of 2016. The decline in other operating expenses as a percentage of revenue was due to reduced legal fees and decreased office costs.

~~Results from Operations~~

Income from operations decreased by $1.9 million to $0.1 million during the third quarter of 2017 compared with $2.0 million for the same period in 2016. The deterioration in income from operations was due to a large increase to vehicle claims reserves and increased utilization of third party carriers which led to the increase in cost per mile outpacing the increase in revenue per mile.

~~Pool Distribution - Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016~~

~~The following table sets forth our historical financial data of the Pool Distribution segment for the three months ended September 30, 2017 and 2016 (in millions):~~

Pool Distribution (Pool) operating revenue increased $2.8 million, or 7.7%, to $39.2 million for the three months ended September 30, 2017 from $36.4 million for the same period in 2016. The increase was attributable to higher shipping volumes from previously existing customers and current year rate increases slightly offset by lost revenues from the impact of weather on southeast and southwest terminals.

~~Purchased Transportation~~

Pool purchased transportation increased $0.3 million, or 3.0%, to $10.4 million for the three months ended September 30, 2017 compared to $10.1 million for the same period of 2016. Pool purchased transportation as a percentage of revenue was 26.5% for the three months ended September 30, 2017 compared to 27.7% for the same period of 2016. The improvement in Pool purchased transportation as a percentage of revenue was attributable to an increased utilization of owner operators over more costly third party carriers and revenue increases associated with rate increases.

~~Salaries, Wages, and Benefits~~

Pool salaries, wages and employee benefits increased $0.9 million, or 6.3%, to $15.3 million for the three months ended September 30, 2017 compared to $14.4 million for the same period of 2016. As a percentage of Pool operating revenue, salaries, wages and benefits increased to 39.0% for the three months ended September 30, 2017 compared to 39.6% for the same period in 2016. The decrease in salaries, wages and benefits as a percentage of revenue was the result of improvements in dock efficiencies and decreased driver pay partly offset by increases in employee incentives, administrative salaries and workers' compensation costs. These decreases benefited from the revenue volumes discussed above.

~~Operating Leases~~

Operating leases were $3.3 million for the three months ended September 30, 2017 and 2016. Operating leases were 8.4% of Pool operating revenue for the three months ended September 30, 2017 compared with 9.1% in the same period of 2016. Operating

leases decreased as a percentage of revenue due to decreases in facility rent, as prior year included transition and relocation costs for certain terminals that did not occur in the third quarter of 2017.

~~Depreciation and Amortization~~

Pool depreciation and amortization increased $0.3 million, or 21.4%, to $1.7 million for the three months ended September 30, 2017 from $1.4 million for the same period in 2016. Depreciation and amortization expense as a percentage of Pool operating revenue was 4.4% in the third quarter of 2017 compared to 3.8% in the same period of 2016. The increase in Pool depreciation and amortization in total dollars was due to the allocation of trailer depreciation, which reflect Pool's increased utilization of our trailer fleet.

~~Insurance and Claims~~

Pool insurance and claims expense increased $0.1 million, or 10.0%, to $1.1 million for the three months ended September 30, 2017 from $1.0 million for the same period of 2016. Insurance and claims were 2.8% of operating revenue for the three months ended September 30, 2017 compared to 2.7% in the same period of 2016. The increase as a percentage of revenue was due to increased vehicle insurance premiums.

Pool fuel expense increased $0.1 million, or 8.3%, to $1.3 million for the third quarter of 2017 from $1.2 million in the same period of 2016. Fuel expenses were 3.3% of Pool operating revenue in the third quarter of 2017 and 2016. Pool fuel expenses increased in total dollars due to an increase in year-over-year fuel prices and higher revenue volumes. These increases were partially offset by increased utilization of owner operators.

~~Other Operating Expenses~~

Pool other operating expenses increased $0.5 million, or 10.2%, to $5.4 million for the three months ended September 30, 2017 from $4.9 million in the same period of 2016. Pool other operating expenses for the third quarter of 2017 were 13.8% compared to 13.5% for the same period of 2016. The increase in percentage of revenue was due to increased activity at agent stations partly offset by decreased dock and office costs.

~~Results from Operations~~

Income from operations increased $0.6 million to $0.7 million for the third quarter of 2017 from $0.1 million for the same period in 2016. Income from operations as a percentage of Pool operating revenue was 1.8% for the three months ended September 30, 2017 compared to 0.3% for the same period of 2016. The improvement in Pool operating income was primarily the result of increased revenue volumes, current year rate increases and dock, driver and purchased transportation efficiencies slightly mitigated by lost revenues from the impact of weather.

~~Intermodal - Three Months Ended September 30, 2017 compared to Three Months Ended September 30, 2016~~

~~The following table sets forth our historical financial data of the Intermodal segment for the three months ended September 30, 2017 and 2016 (in millions):~~

Intermodal operating revenue increased $14.7 million, or 53.3%, to $42.3 million for the three months ended September 30, 2017 from $27.6 million for the same period in 2016. The increases in operating revenue were primarily attributable to the acquisitions of Atlantic and Triumph, the impact of increased fuel surcharges and increased storage revenues.

~~Purchased Transportation~~

Intermodal purchased transportation increased $7.8 million, or 80.4%, to $17.5 million for the three months ended September 30, 2017 from $9.7 million for the same period in 2016. Intermodal purchased transportation as a percentage of revenue was 41.4% for the three months ended September 30, 2017 compared to 35.1% for the three months ended September 30, 2016. The increase in Intermodal purchased transportation as a percentage of revenue was attributable to higher utilization of owner operators as opposed to Company-employed drivers, as Atlantic utilized more owner operators than Company drivers.

~~Salaries, Wages, and Benefits~~

Intermodal salaries, wages and employee benefits increased $2.4 million, or 36.4%, to $9.0 million for the three months ended September 30, 2017 compared to $6.6 million for the three months ended September 30, 2016. As a percentage of Intermodal operating revenue, salaries, wages and benefits decreased to 21.3% for the three months ended September 30, 2017 compared to 23.9% for the same period in 2016. The improvement in salaries, wages and employee benefits as a percentage of revenue was attributable to lower workers' compensation and health insurance costs and dock efficiencies.

~~Operating Leases~~

Operating leases increased $0.5 million, or 15.2%, to $3.8 million for the three months ended September 30, 2017 compared to $3.3 million for the same period of 2016. Operating leases were 9.0% of Intermodal operating revenue for the three months ended September 30, 2017 compared with 12.0% in the same period of 2016. Operating leases decreased as a percentage of revenue due to consistent trailer rental charges while other revenue that does not require trailer rentals increased. The decrease as a percentage of revenue is also attributable utilization of owned equipment acquired from Atlantic.

~~Depreciation and Amortization~~

Depreciation and amortization increased $0.7 million, or 70.0%, to $1.7 million for the three months ended September 30, 2017 compared to $1.0 million for the same period in 2016. Depreciation and amortization expense as a percentage of Intermodal operating revenue was 4.0% in the ~~third~~ ~~quarter of 2017 compared to 3.6% in the same period of 2016~~. ~~The higher depreciation and amortization was due to the acquisitions of equipment and intangible assets from Atlantic and Triumph.~~

~~Insurance and Claims~~

Intermodal insurance and claims increased $0.4 million, or 50.0%, to $1.2 million for the three months ended September 30, 2017 from $0.8 million for the same period in 2016. Intermodal insurance and claims were 2.8% of operating revenue for the three months ended September 30, 2017 compared with 2.9% for the same period in 2016. The increase in Intermodal insurance and claims was attributable to higher insurance premiums due to acquisitions.

Intermodal fuel expense increased $0.4 million, or 57.1%, to $1.1 million for the third quarter of 2017 from $0.7 million in the same period of 2016. Fuel expenses were 2.6% of Intermodal operating revenue in the third quarter of 2017 compared with 2.5% for the same period of 2016. Intermodal fuel expenses increased on higher year-over-year fuel prices and revenue volumes. These increases were partially offset by higher utilization of owner operators as opposed to Company-employed drivers.

~~Other Operating Expenses~~

Intermodal other operating expenses increased $2.0 million, or 80.0%, to $4.5 million for the three months ended September 30, 2017 compared to $2.5 million for the same period of 2016. Intermodal other operating expenses for the ~~third~~ quarter of 2017 were 10.6% compared to 9.1% for the same period of 2016. The increase in Intermodal other operating expenses was due mostly to a $1.3 million increase in container related rental and storage charges associated with revenue increases discussed previously. The increase was also due to higher terminal expenses and other variable costs, such as maintenance and tolls, corresponding with the increases in revenue and professional fees related to the acquisition of Atlantic.

~~Income from Operations~~

~~Intermodal’s income from operations increased by $0.5 million, or 16.7%, to $3.5 million for the~~ ~~third~~ quarter of 2017 compared with $3.0 million for the same period in 2016. Income from operations as a percentage of Intermodal operating revenue was 8.3% for the three months ended September 30, 2017 compared to 10.9% in the same period of 2016. The increase in operating income was primarily attributable to the Atlantic and Triumph acquisitions. The decrease in income from operations as a percentage of revenue was attributable to increased depreciation and amortization associated with Intermodal's acquisitions, insurance premiums and acquisition related professional fees.

~~Other Operations~~

Other operating activity improved from a $1.4 million operating loss during the three months ended September 30, 2016 to a $0.6 million operating loss during the three months ended September 30, 2017. The $0.6 million of other expenses for the three months ended September 30, 2017 is due to increased claims activity during 2017 resulting in increases to our loss development factors for workers' compensation and vehicle claims.

The $1.4 million in operating loss included in other operations and corporate activities for the three months ended September 30, 2016 was primarily for a $0.6 million increase to reserves for remaining net payments on duplicate facilities vacated following the Towne acquisition, as several facilities had yet to be sub-leased. The remaining $0.8 million was due to increased claims activity during 2016 resulting in increases to our loss development factors for workers' compensation and vehicle claims.

~~Results from Operations~~

~~The following table sets forth our consolidated historical financial data~~$150,249 for the nine months ended September 30, ~~2017 and 2016 (in millions):~~2022 compared to $65,394 for the nine months ended September 30, 2021.

Nine months ended September 30
2017 2016 Change Percent Change
Operating revenue:
Expedited LTL $ 448.6
$ 423.4
$ 25.2
6.0 %
Expedited Truckload 132.9
120.3
12.6
10.5
Pool Distribution 113.8
101.2
12.6
12.5
Intermodal 105.9
76.4
29.5
38.6
Eliminations and other operations (6.5 ) (3.5 ) (3.0 ) 85.7
Operating revenue 794.7
717.8
76.9
10.7
Operating expenses:
   Purchased transportation 342.0
300.8
41.2
13.7
   Salaries, wages, and employee benefits 191.3
175.9
15.4
8.8
   Operating leases 47.2
44.7
2.5
5.6
   Depreciation and amortization 30.6
28.4
2.2
7.7
   Insurance and claims 21.4
19.2
2.2
11.5
   Fuel expense 11.4
9.4
2.0
21.3
   Other operating expenses 70.9
65.2
5.7
8.7
   Impairment of goodwill, intangibles and other assets —
42.4
(42.4 ) 100.0
      Total operating expenses 714.8
686.0
28.8
4.2
Income (loss) from operations:
Expedited LTL 64.6
63.0
1.6
2.5
Expedited Truckload 3.7
(36.7 ) 40.4
NM
Pool Distribution 3.7
(0.2 ) 3.9
NM
Intermodal 9.1
8.2
0.9
11.0
Other operations (1.2 ) (2.5 ) 1.3
(52.0 )
Income from operations 79.9
31.8
48.1
151.3
Other expense:
   Interest expense (0.8 ) (1.2 ) 0.4
(33.3 )
   Other, net —
(0.2 ) 0.2
(100.0 )
      Total other expense (0.8 ) (1.4 ) 0.6
(42.9 )
Income before income taxes 79.1
30.4
48.7
160.2
Income taxes 27.2
15.4
11.8
76.6
Net income $ 51.9
$ 15.0
$ 36.9
246.0 %

Expedited ~~LTL~~Freight - Nine Months Ended September 30, ~~2017~~2022 compared to Nine Months Ended September 30, ~~2016~~2021

The following table sets forth ~~our historical~~the financial data of ~~the~~our Expedited ~~LTL~~Freight segment for the nine months ended September 30, ~~2017~~2022 and ~~2016 (in millions)~~2021 (unaudited and in thousands):


	Nine Months Ended
	September 30, 2022		Percent of Revenue		September 30, 2021		Percent of Revenue		Change		Percent Change
Operating revenues:
Network1	$	726,054	61.5	%	$	579,373	58.1	%	$	146,681	25.3	%
Truckload	171,659		14.5		162,999		16.3		8,660		5.3
Final Mile	215,608		18.3		203,494		20.4		12,114		6.0
Other	67,762		5.7		51,612		5.2		16,150		31.3
Total operating revenues	1,181,083		100.0		997,478		100.0		183,605		18.4

Operating expenses:
Purchased transportation	613,392		51.9		538,608		54.0		74,784		13.9
Salaries, wages and employee benefits	209,259		17.7		195,145		19.6		14,114		7.2
Operating leases	47,483		4.0		43,773		4.4		3,710		8.5
Depreciation and amortization	23,438		2.0		20,361		2.0		3,077		15.1
Insurance and claims	26,258		2.2		24,070		2.4		2,188		9.1
Fuel expense	8,752		0.7		6,365		0.6		2,387		37.5
Other operating expenses	85,410		7.2		75,302		7.5		10,108		13.4

Total operating expenses	1,013,992		85.9		903,624		90.6		110,368		12.2
Income from operations	$	167,091	14.1	%	$	93,854	9.4	%	$	73,237	78.0	%

1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

Expedited LTL Segment Information
(In millions)
(Unaudited)

Nine months ended
September 30, Percent of September 30, Percent of Percent
2017 Revenue 2016 Revenue Change Change
Operating revenue $ 448.6
100.0 % $ 423.4
100.0 % $ 25.2
6.0 %

Operating expenses:
Purchased transportation 180.5
40.2
165.5
39.1
15.0
9.1
Salaries, wages and employee benefits 107.0
23.9
102.6
24.2
4.4
4.3
Operating leases 27.6
6.2
25.5
6.0
2.1
8.2
Depreciation and amortization 16.5
3.7
16.3
3.8
0.2
1.2
Insurance and claims 10.3
2.3
10.1
2.4
0.2
2.0
Fuel expense 2.8
0.6
2.4
0.6
0.4
16.7
Other operating expenses 39.3
8.7
38.0
9.0
1.3
3.4
Total operating expenses 384.0
85.6
360.4
85.1
23.6
6.5
Income from operations $ 64.6
14.4 % $ 63.0
14.9 % $ 1.6
2.5 %


Expedited Freight Operating Statistics

	Nine Months Ended
	September 30, 2022		September 30, 2021		Percent Change
Business days	192		191		0.5	%

Tonnage1,2
Total pounds	2,145,744		2,067,346		3.8
Pounds per day	11,176		10,824		3.3

Shipments1,2
Total shipments	2,769		2,967		(6.7)
Shipments per day	14.4		15.5		(7.1)

Weight per shipment	775		697		11.2

Revenue per hundredweight3	$	34.09	$	28.35	20.2
Revenue per hundredweight, ex fuel3	$	25.95	$	23.68	9.6

Revenue per shipment3	$	264.19	$	197.52	33.8
Revenue per shipment, ex fuel3	$	201.10	$	165.02	21.9



1 In thousands
2 Excludes accessorial, Truckload and Final Mile products
3 Includes intercompany revenue between the Network and Truckload revenue streams

Expedited LTL Operating Statistics

Nine months ended
September 30, September 30, Percent
2017 2016 Change

Operating ratio 85.6 % 85.1 % 0.6 %

Business days 191.0
192.0
(0.5 )
Business weeks 38.2
38.4
(0.5 )

Expedited LTL:
Tonnage
    Total pounds ¹ 1,828,227
1,758,689
4.0
    Average weekly pounds ¹ 47,859
45,799
4.5

Linehaul shipments
    Total linehaul 2,893,057
2,751,019
5.2
    Average weekly 75,734
71,641
5.7

Forward Air Complete shipments 696,873
579,973
20.2
As a percentage of linehaul shipments 24.1 % 21.1 % 14.2

Average linehaul shipment size 632
639
(1.1 )

Revenue per pound ²

    Linehaul yield $ 17.13
$ 17.72
(2.7 )
    Fuel surcharge 1.17
0.93
1.1
    Forward Air Complete 3.84
3.29
2.5
Total Expedited LTL yield $ 22.14
$ 21.94
0.9 %

¹ - In thousands
² - In dollars per hundred pound; percentage change is expressed as a percent of total yield.

Expedited ~~LTL~~Freight operating revenues increased $183,605, or 18.4%, to $1,181,083 for the nine months ended September 30, 2022 from $997,478 for the nine months ended September 30, 2021. The increase was attributable to higher Network, Truckload and Final Mile revenue. Network revenue increased ~~$25.2 million,~~due to a 3.8% increase in tonnage and a 9.6% increase in revenue per hundredweight ex fuel as compared to the same period in the prior year. The increase in tonnage reflects an increase in weight per shipment of 11.2% on 6.7% fewer number of shipments. The increase in the weight per shipment was the result of more dense freight in our network primarily driven by our freight rationalization actions to capture higher quality freight. The increase in the revenue per hundredweight ex fuel was driven by the execution of our revenue growth strategies, pricing initiatives, including our general rate increase, and continued strong demand for our services. Network fuel surcharge revenue increased $78,265, or ~~6.0%~~81.2% as a result of the rise in the average price of fuel and an increase in tonnage. Truckload and Final Mile revenue increased $8,660 and $12,114, respectively, primarily due to continued strong demand for our services. Other revenue, which includes warehousing and terminal handling, increased $16,150 due to the pricing initiatives, partially offset by the lower number of shipments.

Purchased Transportation

Expedited Freight purchased transportation increased $74,784, or 13.9%, to ~~$448.6 million~~$613,392 for the nine months ended September 30, 2022 from ~~$423.4 million, accounting~~$538,608 for ~~56.4%~~the nine months ended September 30, 2021. Purchased transportation was 51.9% of ~~consolidated~~Expedited Freight operating revenue for the nine months ended September 30, ~~2017~~2022 compared to ~~59.0%~~54.0% for the same period in ~~2016.~~2021. Expedited Freight purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The increase in ~~revenue is mostly the result of increases to Complete activity and fuel surcharge revenues. Linehaul revenue, which is the largest portion of Expedited LTL, increased $1.7 million, or 0.5%,~~purchased transportation expense was primarily due to higher Leased Capacity Provider and third party carrier costs, and the ~~increase in tonnage partly offset by the decrease in linehaul yield noted~~change in the ~~preceding table. The increase~~mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services. For the nine months ended September 30, 2022, we purchased 65.7%, 30.9% and 3.4% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively. This compares to 66.7%, 29.7% and 3.6% in tonnage is due to a growing percentage of total volume from shipments with higher density attributes and a slightly lower length of haul than our traditional shipments, driving the decrease in average base revenue per pound.



Table of Contents

Forward Air Corporation

				Page
				Number
			Part I.	I: Financial Information

Item 1.			Financial Statements (Unaudited)

			Condensed Consolidated Balance Sheets – September 30, ~~2017~~2022 and December 31, ~~2016~~2021	3

			Condensed Consolidated Statements of Comprehensive Income - Three ~~and nine months ended~~Months Ended September 30, ~~2017~~2022 and ~~2016~~2021	4

			Condensed Consolidated Statements of Comprehensive Income - Nine Months Ended September 30, 2022 and 2021	5

			Condensed Consolidated Statements of Cash Flows – Nine ~~months ended~~ Months Ended September 30, ~~2017~~2022 and ~~2016~~2021	56

			Condensed Consolidated Statements of Shareholders’ Equity – Three and Nine Months Ended September 30, 2022 and 2021	7

			Notes to Condensed Consolidated Financial Statements – September 30, ~~2017~~2022	69

Item 2.			~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2127

Item 3.			Quantitative and Qualitative Disclosures About Market Risk	4852

Item 4.			Controls and Procedures	4852

			Part ~~II.~~	II: Other Information

Item 1.			Legal Proceedings	4952

Item ~~1A.~~2.			~~Risk Factors~~	49

~~Item 2.~~	Unregistered Sales of Equity Securities and Use of Proceeds	4953

Item 3.			Defaults Upon Senior Securities	4953

Item 4.			Mine Safety Disclosures	4953

Item 5.			Other Information	4953

Item 6.			Exhibits	5154

Signatures				5255



Forward Air Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
(Unaudited)
	September 30, 2017		December 31, 2016
Assets
Current assets:
Cash	$	12,423	$	8,511
Accounts receivable, less allowance of $2,898 in 2017 and $1,714 in 2016	132,100		116,602
Other current assets	13,319		11,157
Total current assets	157,842		136,270

Property and equipment	383,890		379,021
Less accumulated depreciation and amortization	192,109		178,816
Total property and equipment, net	191,781		200,205
Goodwill and other acquired intangibles:
Goodwill	191,535		184,675
Other acquired intangibles, net of accumulated amortization of $68,971 in 2017 and $61,334 in 2016	113,562		106,650
Total net goodwill and other acquired intangibles	305,097		291,325
Other assets	14,448		13,491
Total assets	$	669,168	$	641,291


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	22,377	$	18,012
Accrued expenses	35,354		31,903
Current portion of debt and capital lease obligations	466		28,012
Total current liabilities	58,197		77,927

Long-term debt and capital lease obligations, less current portion	40,696		725
Other long-term liabilities	22,681		21,699
Deferred income taxes	42,004		41,871

Shareholders’ equity:
Preferred stock	—		—
Common stock, $0.01 par value: Authorized shares - 50,000,000, Issued and outstanding shares - 29,532,362 in 2017 and 30,090,335 in 2016	295		301
Additional paid-in capital	191,352		179,512
Retained earnings	313,943		319,256
Total shareholders’ equity	505,590		499,069
Total liabilities and shareholders’ equity	$	669,168	$	641,291

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



	~~Useful Lives~~
	~~Atlantic~~	~~Triumph & Ace~~
~~Customer relationships~~	~~15 years~~	~~15 years~~
~~Non-compete agreements~~	~~5 years~~	~~5 years~~



Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
(Unaudited)

	Three months ended						Nine months ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Operating revenue	$	280,201		$	249,552		$	794,700		$	717,737

Operating expenses:
Purchased transportation	123,326			105,039			342,017			300,783
Salaries, wages and employee benefits	64,882			60,161			191,282			175,857
Operating leases	16,809			16,215			47,205			44,684
Depreciation and amortization	10,326			9,399			30,578			28,409
Insurance and claims	7,844			7,170			21,379			19,213
Fuel expense	4,096			3,416			11,448			9,375
Other operating expenses	26,020			23,452			70,895			65,218
Impairment of goodwill, intangibles and other assets	—			—			—			42,442
Total operating expenses	253,303			224,852			714,804			685,981
Income from operations	26,898			24,700			79,896			31,756

Other income (expense):
Interest expense	(288		)	(216		)	(806		)	(1,230		)
Other, net	(2		)	(4		)	(11		)	(149		)
Total other income (expense)	(290		)	(220		)	(817		)	(1,379		)
Income before income taxes	26,608			24,480			79,079			30,377
Income tax expense	8,453			12,549			27,131			15,413
Net income and comprehensive income	$	18,155		$	11,931		$	51,948		$	14,964

Net income per share:
Basic	$	0.60		$	0.39		$	1.72		$	0.49
Diluted	$	0.60		$	0.39		$	1.71		$	0.49

Dividends per share:	$	0.15		$	0.12		$	0.45		$	0.36



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

	Nine months ended
	September 30, 2017			September 30, 2016

Operating activities:
Net income	$	51,948		$	14,964
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	30,578			28,409
Impairment of goodwill, intangible and other assets	—			42,442
Share-based compensation	5,965			6,204
Loss on disposal of property and equipment	701			201
Provision for loss on receivables	1,788			268
Provision for revenue adjustments	2,131			1,570
Deferred income tax	132			661
Excess tax benefit for stock options exercised	—			(137		)
Changes in operating assets and liabilities
Accounts receivable	(19,417		)	(8,000		)
Other current assets	(1,411		)	(1,354		)
Accounts payable and accrued expenses	5,296			9,380
Net cash provided by operating activities	77,711			94,608

Investing activities:
Proceeds from disposal of property and equipment	1,497			1,795
Purchases of property and equipment	(13,610		)	(28,725		)
Acquisition of business, net of cash acquired	(22,500		)	(11,800		)
Other	(73		)	(673		)
Net cash used in investing activities	(34,686		)	(39,403		)

Financing activities:
Payments of debt and capital lease obligations	(42,715		)	(41,825		)
Proceeds from senior credit facility	55,000			—
Proceeds from exercise of stock options	5,642			7,041
Payments of cash dividends	(13,584		)	(10,987		)
Repurchase of common stock (repurchase program)	(41,983		)	(29,986		)
Common stock issued under employee stock purchase plan	226			215
Excess tax benefit for stock options exercised	—			137
Cash settlement of share-based awards for tax withholdings	(1,699		)	(1,800		)
Net cash used in financing activities	(39,113		)	(77,205		)
Net increase (decrease) in cash	3,912			(22,000		)
Cash at beginning of period	8,511			33,312
Cash at end of period	$	12,423		$	11,312



	Atlantic		Triumph & Ace
	May 7, 2017		2016
Tangible assets:
Property and equipment	$	1,821	$	1,294
Total tangible assets	1,821		1,294
Intangible assets:
Non-compete agreements	1,150		139
Customer relationships	13,400		5,335
Goodwill	6,860		6,282
Total intangible assets	21,410		11,756
Total assets acquired	23,231		13,050

Liabilities assumed:
Other liabilities	590		1,250
Debt and capital lease obligations	141		—
Total liabilities assumed	731		1,250
Net assets acquired	$	22,500	$	11,800



	Expedited LTL				TLS					Pool Distribution					Intermodal				Total
			Accumulated				Accumulated					Accumulated					Accumulated
	Goodwill		Impairment		Goodwill		Impairment			Goodwill		Impairment			Goodwill		Impairment		Net
Beginning balance, December 31, 2016	$	97,593	$	—	$	45,164	$	(25,686	)	$	12,359	$	(6,953	)	$	62,198	$	—	$	184,675
Atlantic Acquisition	—		—		—		—			—		—			6,860		—		6,860
Ending balance, September 30, 2017	$	97,593	$	—	$	45,164	$	(25,686	)	$	12,359	$	(6,953	)	$	69,058	$	—	$	191,535



	Three months ended September 30, 2017
							Weighted-
			Weighted-		Aggregate		Average
			Average		Intrinsic		Remaining
	Options		Exercise		Value		Contractual
	(000)		Price		(000)		Term
Outstanding at June 30, 2017	507		$	44
Granted	5		54
Exercised	(18	)	41
Forfeited	(22	)	47
Outstanding at September 30, 2017	472		$	44	$	3,963	4.5
Exercisable at September 30, 2017	255		$	42	$	2,671	3.3




	Nine months ended September 30, 2017
							Weighted-
			Weighted-		Aggregate		Average
			Average		Intrinsic		Remaining
	Options		Exercise		Value		Contractual
	(000)		Price		(000)		Term
Outstanding at December 31, 2016	564		$	41
Granted	123		48
Exercised	(169	)	34
Forfeited	(46	)	46
Outstanding at September 30, 2017	472		$	44	$	3,963	4.5
Exercisable at September 30, 2017	255		$	42	$	2,671	3.3



	September 30, 2017	September 30, 2016
Anti-dilutive stock options (in thousands)	172	309
Anti-dilutive performance shares (in thousands)	—	—
Anti-dilutive non-vested shares and deferred stock units (in thousands)	—	—
Total anti-dilutive shares (in thousands)	172	309



	September 30, 2017
	Carrying Value		Fair Value
Capital leases	$	954	$	935



	Three months ended September 30, 2017
	Expedited LTL		Truckload Premium		Pool Distribution		Intermodal		Eliminations & other			Consolidated
External revenues	$	155,006	$	43,865	$	39,122	$	42,208	$	—		$	280,201
Intersegment revenues	697		2,076		58		84		(2,915		)	—
Depreciation and amortization	5,438		1,546		1,652		1,690		—			10,326
Share-based compensation expense	1,604		101		90		144		—			1,939
Interest expense	1		—		—		12		275			288
Income from operations	23,204		136		681		3,480		(603		)	26,898
Total assets	633,914		59,657		53,201		145,394		(222,998		)	669,168
Capital expenditures	8,372		7		239		330		—			8,948

	Three months ended September 30, 2016
	Expedited LTL		Truckload Premium		Pool Distribution		Intermodal		Eliminations & other			Consolidated
External revenues	$	143,753	$	41,927	$	36,305	$	27,567	$	—		$	249,552
Intersegment revenues	584		283		132		12		(1,011		)	—
Depreciation and amortization	5,470		1,470		1,472		987		—			9,399
Share-based compensation expense	1,792		98		84		119		—			2,093
Interest expense	385		—		—		12		(181		)	216
Income (loss) from operations	21,014		2,038		66		3,041		(1,459		)	24,700
Total assets	634,028		52,465		46,327		128,048		(219,355		)	641,513
Capital expenditures	11,915		36		722		11		—			12,684



	Three months ended September 30
	2017			2016			Change			Percent Change
Operating revenue:
Expedited LTL	$	155.7		$	144.3		$	11.4		7.9	%
Truckload Premium Services	45.9			42.2			3.7			8.8
Pool Distribution	39.2			36.4			2.8			7.7
Intermodal	42.3			27.6			14.7			53.3
Eliminations and other operations	(2.9		)	(1.0		)	(1.9		)	190.0
Operating revenue	280.2			249.5			30.7			12.3
Operating expenses:
Purchased transportation	123.3			105.0			18.3			17.4
Salaries, wages, and employee benefits	64.9			60.2			4.7			7.8
Operating leases	16.8			16.2			0.6			3.7
Depreciation and amortization	10.3			9.4			0.9			9.6
Insurance and claims	7.9			7.2			0.7			9.7
Fuel expense	4.1			3.4			0.7			20.6
Other operating expenses	26.0			23.4			2.6			11.1
Total operating expenses	253.3			224.8			28.5			12.7
Income from operations:
Expedited LTL	23.2			21.0			2.2			10.5
Truckload Premium Services	0.1			2.0			(1.9		)	(95.0	)
Pool Distribution	0.7			0.1			0.6			600.0
Intermodal	3.5			3.0			0.5			16.7
Other operations	(0.6		)	(1.4		)	0.8			(57.1	)
Income from operations	26.9			24.7			2.2			8.9
Other expense:
Interest expense	(0.3		)	(0.2		)	(0.1		)	50.0
Total other expense	(0.3		)	(0.2		)	(0.1		)	50.0
Income before income taxes	26.6			24.5			2.1			8.6
Income taxes	8.4			12.6			(4.2		)	(33.3	)
Net income	$	18.2		$	11.9		$	6.3		52.9	%



Expedited LTL Segment Information
(In millions)
(Unaudited)

	Three months ended
	September 30,		Percent of		September 30,		Percent of					Percent
	2017		Revenue		2016		Revenue		Change			Change
Operating revenue	$	155.7	100.0	%	$	144.3	100.0	%	$	11.4		7.9	%

Operating expenses:
Purchased transportation	64.0		41.1		56.3		39.0		7.7			13.7
Salaries, wages and employee benefits	35.2		22.6		33.8		23.4		1.4			4.1
Operating leases	9.4		6.0		9.0		6.2		0.4			4.4
Depreciation and amortization	5.4		3.5		5.5		3.8		(0.1		)	(1.8	)
Insurance and claims	3.3		2.1		3.9		2.7		(0.6		)	(15.4	)
Fuel expense	0.9		0.6		0.8		0.6		0.1			12.5
Other operating expenses	14.3		9.2		14.0		9.7		0.3			2.1
Total operating expenses	132.5		85.1		123.3		85.4		9.2			7.5
Income from operations	$	23.2	14.9	%	$	21.0	14.6	%	$	2.2		10.5	%



Expedited LTL Operating Statistics

	Three months ended
	September 30,			September 30,			Percent
	2017			2016			Change

Operating ratio	85.1		%	85.4		%	(0.4	)%

Business days	63.0			64.0			(1.6	)
Business weeks	12.6			12.8			(1.6	)

Expedited LTL:
Tonnage
Total pounds ¹	636,009			588,929			8.0
Average weekly pounds ¹	50,477			46,010			9.7

Linehaul shipments
Total linehaul	986,632			909,787			8.4
Average weekly	78,304			71,077			10.2

Forward Air Complete shipments	242,902			195,594			24.2
As a percentage of linehaul shipments	24.6		%	21.5		%	14.4

Average linehaul shipment size	645			647			(0.3	)

Revenue per pound ²
Linehaul yield	$	16.89		$	17.71		(3.7	)
Fuel surcharge	1.11			1.06			0.2
Forward Air Complete	3.94			3.49			2.1
Total Expedited LTL yield	$	21.94		$	22.26		(1.4	)%

¹ - In thousands
² - In dollars per hundred pound; percentage change is expressed as a percent of total yield.



Truckload Premium Services Segment Information
(In millions)
(Unaudited)

	Three months ended
	September 30,		Percent of		September 30,		Percent of					Percent
	2017		Revenue		2016		Revenue		Change			Change
Operating revenue	$	45.9	100.0	%	$	42.2	100.0	%	$	3.7		8.8	%

Operating expenses:
Purchased transportation	33.9		73.9		29.7		70.4		4.2			14.1
Salaries, wages and employee benefits	5.0		10.9		4.9		11.6		0.1			2.0
Operating leases	0.3		0.6		0.1		0.2		0.2			200.0
Depreciation and amortization	1.6		3.5		1.5		3.6		0.1			6.7
Insurance and claims	2.0		4.4		1.1		2.6		0.9			81.8
Fuel expense	0.8		1.7		0.7		1.7		0.1			14.3
Other operating expenses	2.2		4.8		2.2		5.2		—			—
Total operating expenses	45.8		99.8		40.2		95.3		5.6			13.9
Income from operations	$	0.1	0.2	%	$	2.0	4.7	%	$	(1.9	)	(95.0	)%



Truckload Premium Services Operating Statistics

	Three months ended
	September 30,		September 30,		Percent
	2017		2016		Change

Company driver ¹	1,990		1,761		13.0	%
Owner operator ¹	11,454		13,125		(12.7	)
Third party ¹	11,263		8,339		35.1
Total Miles	24,707		23,225		6.4

Revenue per mile	$	1.79	$	1.78	0.6

Cost per mile	$	1.44	$	1.37	5.1	%

¹ - In thousands



Pool Distribution Segment Information
(In millions)
(Unaudited)

	Three months ended
	September 30,		Percent of		September 30,		Percent of				Percent
	2017		Revenue		2016		Revenue		Change		Change
Operating revenue	$	39.2	100.0	%	$	36.4	100.0	%	$	2.8	7.7	%

Operating expenses:
Purchased transportation	10.4		26.5		10.1		27.7		0.3		3.0
Salaries, wages and employee benefits	15.3		39.0		14.4		39.6		0.9		6.3
Operating leases	3.3		8.4		3.3		9.1		—		—
Depreciation and amortization	1.7		4.4		1.4		3.8		0.3		21.4
Insurance and claims	1.1		2.8		1.0		2.7		0.1		10.0
Fuel expense	1.3		3.3		1.2		3.3		0.1		8.3
Other operating expenses	5.4		13.8		4.9		13.5		0.5		10.2
Total operating expenses	38.5		98.2		36.3		99.7		2.2		6.1
Income from operations	$	0.7	1.8	%	$	0.1	0.3	%	$	0.6	600.0	%



Intermodal Segment Information
(In millions)
(Unaudited)

	Three months ended
	September 30,		Percent of		September 30,		Percent of				Percent
	2017		Revenue		2016		Revenue		Change		Change
Operating revenue	$	42.3	100.0	%	$	27.6	100.0	%	$	14.7	53.3	%

Operating expenses:
Purchased transportation	17.5		41.4		9.7		35.1		7.8		80.4
Salaries, wages and employee benefits	9.0		21.3		6.6		23.9		2.4		36.4
Operating leases	3.8		9.0		3.3		12.0		0.5		15.2
Depreciation and amortization	1.7		4.0		1.0		3.6		0.7		70.0
Insurance and claims	1.2		2.8		0.8		2.9		0.4		50.0
Fuel expense	1.1		2.6		0.7		2.5		0.4		57.1
Other operating expenses	4.5		10.6		2.5		9.1		2.0		80.0
Total operating expenses	38.8		91.7		24.6		89.1		14.2		57.7
Income from operations	$	3.5	8.3	%	$	3.0	10.9	%	$	0.5	16.7	%



	Nine months ended September 30
	2017			2016			Change			Percent Change
Operating revenue:
Expedited LTL	$	448.6		$	423.4		$	25.2		6.0	%
Expedited Truckload	132.9			120.3			12.6			10.5
Pool Distribution	113.8			101.2			12.6			12.5
Intermodal	105.9			76.4			29.5			38.6
Eliminations and other operations	(6.5		)	(3.5		)	(3.0		)	85.7
Operating revenue	794.7			717.8			76.9			10.7
Operating expenses:
Purchased transportation	342.0			300.8			41.2			13.7
Salaries, wages, and employee benefits	191.3			175.9			15.4			8.8
Operating leases	47.2			44.7			2.5			5.6
Depreciation and amortization	30.6			28.4			2.2			7.7
Insurance and claims	21.4			19.2			2.2			11.5
Fuel expense	11.4			9.4			2.0			21.3
Other operating expenses	70.9			65.2			5.7			8.7
Impairment of goodwill, intangibles and other assets	—			42.4			(42.4		)	100.0
Total operating expenses	714.8			686.0			28.8			4.2
Income (loss) from operations:
Expedited LTL	64.6			63.0			1.6			2.5
Expedited Truckload	3.7			(36.7		)	40.4			NM
Pool Distribution	3.7			(0.2		)	3.9			NM
Intermodal	9.1			8.2			0.9			11.0
Other operations	(1.2		)	(2.5		)	1.3			(52.0	)
Income from operations	79.9			31.8			48.1			151.3
Other expense:
Interest expense	(0.8		)	(1.2		)	0.4			(33.3	)
Other, net	—			(0.2		)	0.2			(100.0	)
Total other expense	(0.8		)	(1.4		)	0.6			(42.9	)
Income before income taxes	79.1			30.4			48.7			160.2
Income taxes	27.2			15.4			11.8			76.6
Net income	$	51.9		$	15.0		$	36.9		246.0	%


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1
July 1, 2022 through July 31, 2022	—	$	—	—	2,656,555
August 1, 2022 through August 31, 2022	210,976	105.62		210,976	2,445,579
September 1, 2022 through September 30, 2022	79,083	97.51		79,083	2,366,496
Total	290,059	$	103.41	290,059	2,366,496

1On February 5, 2019, our Board approved the 2019 Repurchase Plan authorizing up to 5.0 million shares of our common stock. The 2019 Share Repurchase Plan expires when the shares authorized for repurchase are exhausted or the 2019 Repurchase Plan is canceled.

	~~Exhibit~~
~~3.1~~No.			Exhibit
3.1			Restated Charter of the registrant (incorporated herein by reference to Exhibit 3 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 1999 (File No. 0-22490))
3.2			Amended and Restated Bylaws of the registrant (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2017 (File No. 0-22490))
~~4.1~~31.1			Form of Forward Air Corporation Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, filed with the Securities and Exchange Commission on November 16, 1998 (File No. 0-22490))
~~10.1~~		Forward Air Corporation 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed with the Securities and Exchange Commission on July 27, 2017 (File No. 0-22490))
~~10.2~~		Amended and Restated Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed with the Securities and Exchange Commission on July 27, 2017 (File No. 0-22490))
~~10.3~~		Credit Agreement dated September 29, 2017 among the registrant and certain of its subsidiaries and Bank of America, N.A., as administrative agent and other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2017 (File No. 0-22490))
~~31.1~~		Certification of ~~Chief~~Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a))
31.2			Certification of ~~Chief~~Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a))
32.1			Certification of ~~Chief~~Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of ~~Chief~~Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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104			Cover Page Interactive File (formatted in Inline XBRL and contained in Exhibit 101).


		Forward Air Corporation
November 9, 2022	By:	/s/ Thomas Schmitt
		Thomas Schmitt President and Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer)


		Forward Air Corporation
November 9, 2022	By:	/s/ Rebecca J. Garbrick
		Rebecca J. Garbrick Chief Financial Officer and Treasurer (Principal Financial Officer and Duly Authorized Officer)



			~~Forward Air Corporation~~
~~Date: October 26, 2017~~	~~By:~~	~~/s/ Michael J. Morris~~
		~~Michael J. Morris~~ ~~Chief Financial Officer, Senior Vice President and Treasurer~~ ~~(Principal Financial Officer)~~



~~No.~~		~~Exhibit~~
~~3.1~~		Restated Charter of the registrant (incorporated herein by reference to Exhibit 3 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 1999 (File No. 0-22490))
~~3.2~~		Amended and Restated Bylaws of the registrant (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the Commission on July 31, 2017 (File No. 0-22490))
~~4.1~~		Form of Forward Air Corporation Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, filed with the Securities and Exchange Commission on November 16, 1998 (File No. 0-22490))
~~10.1~~		Forward Air Corporation 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed with the Securities and Exchange Commission on July 27, 2017 (File No. 0-22490))
~~10.2~~		Amended and Restated Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, filed with the Securities and Exchange Commission on July 27, 2017 (File No. 0-22490))
~~10.3~~		Credit Agreement dated September 29, 2017 among the registrant and certain of its subsidiaries and Bank of America, N.A., as administrative agent and other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2017 (File No. 0-22490))
~~31.1~~		~~Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a))~~
~~31.2~~		~~Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a))~~
~~32.1~~		~~Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~32.2~~		~~Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
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