UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31,June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-22490

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FORWARD AIR CORPORATIONCORPORATION
(Exact name of registrant as specified in its charter)


Tennessee 62-1120025
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
1915 Snapps Ferry Road
Building N
Greeneville TennesseeTN 37745
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (423) (423) 636-7000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueFWRDThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Yes x No ¨


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

Yes x  No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerx
x
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).
 
Yes o No x
 
The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of April 22,July 23, 2019 was 28,695,985.28,313,007.





Table of Contents
   
Forward Air Corporation
   
  Page
  Number
Part I.Financial Information 
   
Item 1.Financial Statements (Unaudited) 
   
 
   
 
   
 
   
 
   
Item 2.
   
Item 3.
   
Item 4.
   
Part II.Other Information 
   
Item 1.
   
Item 1A.
   
Item 2.
   
Item 3.
   
Item 4.
   
Item 5.
   
Item 6.
   




Part I.Financial Information
  
Item 1.Financial Statements (Unaudited).
Forward Air CorporationCondensed Consolidated Balance Sheets(Dollars in thousands, except share and per share amounts)(Unaudited)
March 31,
2019
 December 31,
2018
June 30,
2019
 December 31,
2018
Assets      
Current assets:      
Cash and cash equivalents$42,165
 $25,657
$14,777
 $25,657
Accounts receivable, less allowance of $2,721 in 2019 and $2,081 in 2018150,623
 156,359
Accounts receivable, less allowance of $2,329 in 2019 and $2,081 in 2018154,715
 156,359
Other current assets9,283
 19,066
23,580
 19,066
Total current assets202,071
 201,082
193,072
 201,082
      
Property and equipment417,606
 413,900
422,968
 413,900
Less accumulated depreciation and amortization210,750
 204,005
214,126
 204,005
Total property and equipment, net206,856
 209,895
208,842
 209,895
Operating lease right-of-use assets133,361
 
149,544
 
Goodwill and other acquired intangibles: 
  
 
  
Goodwill199,092
 199,092
218,373
 199,092
Other acquired intangibles, net of accumulated amortization of $83,177 in 2019 and $80,666 in 2018111,150
 113,661
Other acquired intangibles, net of accumulated amortization of $85,845 in 2019 and $80,666 in 2018126,482
 113,661
Total goodwill and other acquired intangibles, net310,242
 312,753
344,855
 312,753
Other assets33,047
 36,485
40,244
 36,485
Total assets$885,577
 $760,215
$936,557
 $760,215
      
      
Liabilities and Shareholders’ Equity      
Current liabilities:      
Accounts payable$31,124
 $34,630
$30,585
 $34,630
Accrued expenses41,434
 39,784
50,414
 39,784
Other current liabilities6,069
 
Current portion of debt and finance lease obligations264
 309
197
 309
Current portion of operating lease obligations43,824
 
49,370
 
Total current liabilities116,646
 74,723
136,635
 74,723
      
Debt and finance lease obligations, less current portion47,312
 47,335
57,311
 47,335
Operating lease obligations, less current portion89,915
 
100,752
 
Other long-term liabilities40,257
 47,739
51,365
 47,739
Deferred income taxes38,010
 37,174
40,452
 37,174
      
Shareholders’ equity: 
  
 
  
Preferred stock
 

 
Common stock, $0.01 par value: Authorized shares - 50,000,000, Issued and outstanding shares - 28,415,052 in 2019 and 28,534,935 in 2018284
 285
Common stock, $0.01 par value: Authorized shares - 50,000,000, Issued and outstanding shares - 28,040,047 in 2019 and 28,534,935 in 2018280
 285
Additional paid-in capital214,173
 210,296
218,080
 210,296
Retained earnings338,980
 342,663
331,682
 342,663
Total shareholders’ equity553,437
 553,244
550,042
 553,244
Total liabilities and shareholders’ equity$885,577
 $760,215
$936,557
 $760,215
      
The accompanying notes are an integral part of the financial statements.


Forward Air CorporationCondensed Consolidated Statements of Comprehensive Income(In thousands, except per share data)(Unaudited)
      
Three months endedThree months ended Six months ended
March 31,
2019
 March 31,
2018
June 30,
2019
 June 30,
2018
 June 30,
2019
 June 30,
2018
Operating revenue$321,471
 $302,608
$345,756
 $330,343
 $667,227
 $632,951
          
Operating expenses:          
Purchased transportation144,014
 139,666
155,124
 155,716
 299,138
 295,382
Salaries, wages and employee benefits76,362
 69,581
80,278
 72,073
 156,640
 141,655
Operating leases19,173
 17,964
20,326
 18,006
 39,499
 35,970
Depreciation and amortization10,827
 10,690
10,681
 10,362
 21,508
 21,052
Insurance and claims9,371
 7,153
13,229
 10,086
 22,601
 17,238
Fuel expense5,608
 5,554
5,929
 5,598
 11,537
 11,152
Other operating expenses31,382
 27,765
29,639
 25,632
 61,020
 53,397
Total operating expenses296,737
 278,373
315,206
 297,473
 611,943
 575,846
Income from operations24,734
 24,235
30,550
 32,870
 55,284
 57,105
          
Other expense:          
Interest expense(575) (371)(581) (483) (1,156) (854)
Other, net(1) 
(1) (1) (2) (1)
Total other expense(576) (371)(582) (484) (1,158) (855)
Income before income taxes24,158
 23,864
29,968
 32,386
 54,126
 56,250
Income tax expense5,751
 6,123
7,638
 8,088
 13,389
 14,212
Net income and comprehensive income$18,407

$17,741
$22,330

$24,298
 $40,737
 $42,038
          
Net income per share:          
Basic$0.64
 $0.60
$0.78
 $0.83
 $1.42
 $1.42
Diluted$0.64
 $0.60
$0.78
 $0.82
 $1.41
 $1.42
          
Dividends per share:$0.18
 $0.15
$0.18
 $0.15
 $0.36
 $0.30


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




Forward Air CorporationCondensed Consolidated Statements of Cash Flows(In thousands)(Unaudited)
  
Three months endedSix months ended
March 31,
2019
 March 31,
2018
June 30,
2019
 June 30,
2018
  
Operating activities:      
Net income$18,407
 $17,741
$40,737
 $42,038
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization10,827
 10,690
21,508
 21,052
Share-based compensation3,047
 2,261
6,244
 4,678
(Gain) loss on disposal of property and equipment(61) 82
Gain on disposal of property and equipment(88) (134)
Provision for loss on receivables629
 134
631
 457
Provision for revenue adjustments540
 817
1,280
 1,829
Deferred income tax expense836
 3,713
3,278
 4,494
Changes in operating assets and liabilities      
Accounts receivable4,567
 805
(267) (6,732)
Prepaid expenses and other current assets2,699
 2,715
(4,984) (3,639)
Income taxes4,631
 1,768
(2,182) (1,428)
Accounts payable and accrued expenses(4,596) 87
5,607
 4,375
Net cash provided by operating activities41,526
 40,813
71,764
 66,990
      
Investing activities:      
Proceeds from disposal of property and equipment407
 644
1,272
 4,839
Purchases of property and equipment(4,090) (6,221)(16,598) (17,606)
Acquisition of business, net of cash acquired(27,000) 
Other(6) (91)
 (347)
Net cash used in investing activities(3,689) (5,668)(42,326) (13,114)
      
Financing activities:      
Payments of finance lease obligations(68) (74)(137) (151)
Proceeds from senior credit facility10,000
 
Proceeds from exercise of stock options830
 
1,278
 1,112
Payments of cash dividends(5,189) (4,413)(10,333) (8,828)
Repurchase of common stock (repurchase program)(14,181) (19,993)(38,617) (28,165)
Proceeds from common stock issued under employee stock purchase plan261
 237
Cash settlement of share-based awards for tax withholdings(2,721) (1,823)(2,770) (1,872)
Net cash used in financing activities(21,329) (26,303)(40,318) (37,667)
Net increase in cash16,508
 8,842
Net (decrease) increase in cash(10,880) 16,209
Cash at beginning of period25,657
 3,893
25,657
 3,893
Cash at end of period$42,165
 $12,735
$14,777
 $20,102
 
The accompanying notes are an integral part of the financial statements.




Forward Air Corporation
Consolidated Statements of Shareholders' Equity
(In thousands)
          
 Common Stock Additional Paid-in
Capital
 Retained Earnings Total Shareholders' Equity
 Shares Amount   
Balance at December 31, 201828,535
 $285
 $210,296
 $342,663
 $553,244
Net income and comprehensive income
 
 
 18,407
 18,407
Other
 2
 
 
 2
Exercise of stock options18
 
 830
 
 830
Share-based compensation
 
 3,047
 
 3,047
Dividends ($0.18 per share)
 
 1
 (5,190) (5,189)
Cash settlement of share-based awards for minimum tax withholdings(44) (1) 
 (2,720) (2,721)
Share repurchases(230) (2) 
 (14,179) (14,181)
Vesting of previously non-vested shares136
 
 
 
 
Balance at March 31, 201928,415
 284
 214,174
 338,981
 553,439
Net income and comprehensive income
 
 
 22,330
 22,330
Other
 
 (2) (2) (4)
Exercise of stock options10
 
 448
 
 448
Common stock issued under employee stock purchase plan5
 
 261
 
 261
Share-based compensation
 
 3,197
 
 3,197
Dividends ($0.18 per share)
 
 2
 (5,146) (5,144)
Cash settlement of share-based awards for minimum tax withholdings(1) 
 
 (49) (49)
Share repurchases(407) (4) 
 (24,432) (24,436)
Vesting of previously non-vested shares18
 
 
 
 
Balance at June 30, 201928,040
 $280
 $218,080
 $331,682
 $550,042
          
The accompanying notes are an integral part of the financial statements.




Forward Air Corporation
Consolidated Statements of Shareholders' Equity, continued
(In thousands, except share data)
          
 Common Stock Additional Paid-in
Capital
 Retained Earnings Total Shareholders' Equity
 Shares Amount   
Balance at December 31, 201729,454
 $295
 $195,346
 $337,058
 $532,699
Net income and comprehensive income
 
 
 17,741
 17,741
Other
 (2) 
 (27) (29)
Share-based compensation
 
 2,261
 
 2,261
Dividends ($0.15 per share)
 
 1
 (4,414) (4,413)
Cash settlement of share-based awards for minimum tax withholdings(33) 
 
 (1,823) (1,823)
Share repurchases(364) (4) 
 (19,989) (19,993)
Vesting of previously non-vested shares105
 1
 (1) 
 
Balance at March 31, 201829,162
 290
 197,607
 328,546
 526,443
Net income and comprehensive income
 
 
 24,298
 24,298
Other
 
 
 (2) (2)
Exercise of stock options26
 1
 1,111
 
 1,112
Common stock issued under employee stock purchase plan5
 
 237
 
 237
Share-based compensation
 
 2,418
 
 2,418
Dividends ($0.15 per share)
 
 1
 (4,416) (4,415)
Cash settlement of share-based awards for minimum tax withholdings(1) 
 
 (49) (49)
Share repurchases(133) (1) 
 (8,171) (8,172)
Vesting of previously non-vested shares15
 1
 (1) 
 
Balance at June 30, 201829,074
 $291
 $201,373
 $340,206
 $541,870
          
The accompanying notes are an integral part of the financial statements.



Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31,June 30, 2019




1.    Description of Business and Basis of Presentation


Forward Air Corporation ("the Company", "We", "Our") is a leading asset-light freight and logistics company. Forward Air Corporation's services can be classified into four reportable segments: Expedited LTL, Intermodal, Truckload Premium Services ("TLS") and Pool Distribution ("Pool") (See Note 13).
 
Through the Expedited LTL segment, we operate a comprehensive national network to provide expedited regional, inter-regional and national less-than-truckload ("LTL") services. Expedited LTL offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, final mile solutions, customs brokerage and other handling. Because of our roots in serving the deferred air freight market, our terminal network is located at or near airports in the United States and Canada.


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 CFScontainer freight station ("CFS") warehouse and handling services. Today, Intermodal operates primarily in the Midwest and Southeast, with a smaller operational presence in the Southwest United States.


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.


In our Pool 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.


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with 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 (as described in our 2018 Form 10-K) when measured on a quarterly basis; therefore operating results for the threesix months ended March 31,June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. 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, 2018.


The accompanying unaudited condensed consolidated financial statements of the Company include Forward Air Corporation and its subsidiaries. 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Under current accounting guidance, credit losses are recognized when it is probable a loss has been incurred. The updated guidance will require financial assets to be measured at amortized costs less a reserve, equal to the net amount expected to be collected. This standard will be effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the effects that the adoption of this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use asset with a corresponding lease liability on their balance sheet for most leases classified as operating leases under previous guidance. Lessors are required to recognize a net lease investment for most leases. Additional qualitative and quantitative disclosures are also required. The Company applied the transition requirements as of January 1, 2019, which resulted in recording right-of-use lease assets and corresponding lease liabilities of $133,361$149,544 and $133,739,$150,122, respectively, as of March 31,June 30, 2019. There was no impact to the Company's Statements of Comprehensive Income or Statements of Cash Flows. In addition, comparative financial statements have not been
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

presented as allowed per the guidance. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have also been implemented. See Note 9, Leases, for additional discussion over this new standard, including the impact on the Company's financial statements.


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

3.     Revenue


The Company's revenue is generated from providing transportation and related services to customers in accordance with contractual agreements, bill of lading ("BOL") contracts and general tariff provisions. Related services include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage. These services are distinct and are accounted for as separate performance obligations. Generally, the Company's performance obligations begin when a customer's BOL is received and are satisfied when the delivery of a shipment and related services are completed. The Company generally recognizes revenue for its services over time to coincide with when its customers simultaneously receive and consume the benefits of these services. Performance obligations are short-term with transit days typically less than a week. Upon delivery of a shipment or related service, customers are billed and remit payment according to payment terms.


Our revenue from contracts with customers is disclosed within our four reportable segments: Expedited LTL, Intermodal, TLS and Pool. This is consistent with our disclosures in earnings releases and annual reports and with the information regularly reviewed by the chief operating decision maker for evaluating financial performance. See additional discussion in Note 13, Segment Reporting.


4.    Acquisitions and Goodwill


Expedited LTL Acquisitions

As part of our strategy to expand our final mile pickup and delivery operations, in April 2019, we acquired certain assets of FSA Network, Inc. doing business as FSA Logistix (“FSA”) for $27,000 and a potential earnout of up to $15,000. This acquisition provides an opportunity for our Expedited LTL segment to expand its final mile service offering into additional geographic markets, form relationships with new customers, and add volumes to our existing locations. The assets, liabilities, and operating results of this acquisition have been included in the Company's consolidated financial statements from the date of acquisition and have been assigned to the Expedited LTL reportable segment.

The acquisition agreement provides the sellers an earnout opportunity of up to $15,000 based on the achievement of certain revenue milestones over a two year period, beginning May 1, 2019. As of June 30, 2019, the fair value of the earn-out liability was $10,321 and is included in other current and long-term liabilities in the condensed consolidated balance sheet. The earn-out liability was classified as Level 3 of the fair value hierarchy as defined in the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“the FASB Codification”) and the value was determined based on estimated revenues and the probability of achieving them. The fair value was based on the two-year performance of FSA's acquired customer revenue and was estimated using a Monte Carlo simulation. The weighted average assumptions used in the Monte Carlo simulation are summarized in the following table:
FSA Earn-out
Risk-free rate2.4%
Revenue discount rate8.5%
Revenue volatility9.0%


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019


Allocations of Purchase Price

The following table presents the allocation of the FSA purchase price to the assets acquired and liabilities assumed based on their estimated fair values and resulting residual goodwill (in thousands):

FSA

April 21, 2019
Tangible assets: 
Cash$202
Other receivables1,491
Property and equipment40
Total tangible assets1,733
Intangible assets: 
Non-compete agreements900
Customer relationships17,100
Goodwill19,281
Total intangible assets37,281
Total assets acquired39,014

 
Liabilities assumed: 
Current liabilities7,664
Other liabilities4,350
Total liabilities assumed12,014
Net assets acquired$27,000


The above purchase price allocation for FSA is preliminary, as the Company is still in the process of finalizing the valuation of the acquired assets and liabilities assumed. The above estimated fair values of assets acquired and liabilities assumed for FSA are based on the information that was available as of the acquisition date through the date of this filing. The acquired definite-lived intangible assets have the following useful lives:
FSA Useful Lives
Non-compete agreements5 years
Customer relationships15 years


The fair value of the non-compete agreements and customer relationships assets were estimated using an income approach. The Company's inputs into fair value estimates are classified within level 3 of the fair value hierarchy. Under this method, an intangible asset's fair value is equal 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. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the remaining economic useful life of each class of intangible asset.

Intermodal Acquisitions


As part of the Company's strategy to expand its Intermodal operations, in July 2018, the Company acquired certain assets of Multi-Modal Transport Inc. ("MMT") for $3,737, and in October 2018, the Company acquired certain assets of Southwest Freight Distributors (“Southwest”) for $16,250. The MMT acquisition provides Intermodal with an expanded footprint in the Minnesota, North Dakota, South Dakota, Iowa and Wisconsin markets, and the Southwest acquisition provides an expanded footprint in Texas. Both MMT and Southwest also provide access to several strategic customer relationships.
The assets, liabilities, and operating results of these collective acquisitions have been included in the Company's consolidated financial statements from their dates of acquisition and have been included in the Intermodal reportable segment.

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

Goodwill


The Company conducted its annual impairment assessments and test of goodwill for each reporting unit as of June 30, 20182019 and
no impairment charges were required at that time. 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 will prepare an estimation 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 companies as of the valuation date (level 3). If this estimation of fair value indicates that impairment potentially exists, the Company will then measure the 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. During the threesix months ended March 31,June 30, 2019, no indicators of impairment were identified.


The following is a summary of the Company's goodwill as of March 31, 2019. There were no changes to goodwill during the three months ended March 31, 2019.June 30, 2019. Approximately $119,948$139,229 of goodwill is deductible for tax purposes.
 Beginning balance, December 31, 2018 FSA Acquisition Ending balance, June 30, 2019
Expedited LTL     
Goodwill$97,593
 $19,281
 $116,874
Accumulated Impairment
 
 
      
Intermodal     
Goodwill76,615
 
 76,615
Accumulated Impairment
 
 
TLS     
Goodwill45,164
 
 45,164
Accumulated Impairment(25,686) 
 (25,686)
      
Pool Distribution     
Goodwill12,359
 
 12,359
Accumulated Impairment(6,953) 
 (6,953)
      
Total$199,092
 $19,281
 $218,373

  March 31, 2019
Expedited LTL  
Goodwill $97,593
Accumulated Impairment 
   
Intermodal  
Goodwill 76,615
Accumulated Impairment 
TLS  
Goodwill 45,164
Accumulated Impairment (25,686)
   
Pool Distribution  
Goodwill 12,359
Accumulated Impairment (6,953)
   
   
Total $199,092
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

5.    Share-Based Payments


The Company’s general practice has been to make a single annual grant of share-based compensation in the first quarter to key employees and to make other employee grants only in connection with new employment or promotions.  Forms of share-based compensation granted to employees by the Company include stock options, non-vested shares of common stock (“non-vested shares”), and performance shares.  The Company also typically makes a single annual grant of non-vested shares to non-employee directors in conjunction with 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.




Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

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 historically used the Black-Scholes option-pricing model to estimate the grant-date fair value of options granted.  The Company did not make any stock option grants in the threesix months ended March 31, 2019.June 30, 2019.
    
The following tables summarize the Company’s employee stock option activity and related information:

Three months ended March 31, 2019







Weighted-



Weighted-
Aggregate
Average



Average
Intrinsic
Remaining

Options
Exercise
Value
Contractual

(000)
Price
(000)
Term
Outstanding at December 31, 2018538

$51




Granted






Exercised(18)
46




Forfeited






Outstanding at March 31, 2019520

$52

$5,031

4.5
Exercisable at March 31, 2019308

$46

$4,598

3.5

Three months ended

March 31,
2019

March 31,
2018
Share-based compensation for options$439

$342
Tax benefit for option compensation$105

$88
Unrecognized compensation cost for options, net of estimated forfeitures$2,768

$2,589
Weighted average period over which unrecognized compensation will be recognized (years)1.9


        
    
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019
        

Six months ended June 30, 2019







Weighted-



Weighted-


Average



Average
Aggregate
Remaining



Exercise
Intrinsic
Contractual

Options
Price
Value
Term
Outstanding at December 31, 2018538

$51




Exercised(27)
47




Outstanding at June 30, 2019511

$52

$4,970

4.2
Exercisable at June 30, 2019299

$46

$4,508

3.2

    

Six months ended

June 30,
2019

June 30,
2018
Share-based compensation for options$850

$688
Tax benefit for option compensation$217

$172
Unrecognized compensation cost for options, net of estimated forfeitures$2,358

$2,243
Weighted average period over which unrecognized compensation will be recognized (years)1.7
  


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 of grant. The following tables summarize the Company’s employee non-vested share activity and related information:

Three months ended March 31, 2019



Weighted-
Aggregate

Non-vested
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at December 31, 2018315

$55


Granted108

59


Vested(114)
61


Forfeited(2)
54


Outstanding and non-vested at March 31, 2019307

$58

$17,861

Three months ended

March 31,
2019

March 31,
2018
Share-based compensation for non-vested shares$2,042

$1,399
Tax benefit for non-vested share compensation$486

$360
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures$15,251

$11,747
Weighted average period over which unrecognized compensation will be recognized (years)2.1


    �� 
    
      

Six months ended June 30, 2019



Weighted-




Average
Aggregate

Non-vested
Grant Date
Grant Date

Shares
Fair Value
Fair Value
Outstanding and non-vested at December 31, 2018315

$55


Granted111

59


Vested(116)
61


Forfeited(5)
55


Outstanding and non-vested at June 30, 2019305

$58

$17,779

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

    

Six months ended

June 30,
2019

June 30,
2018
Share-based compensation for non-vested shares$4,142

$2,965
Tax benefit for non-vested share compensation$1,056

$741
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures$13,192

$13,371
Weighted average period over which unrecognized compensation will be recognized (years)2.0
  


Employee Activity - Performance Shares


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 these employees a calculated number of common stock shares based on meeting certain performance targets. For shares granted during the threesix months ended March 31,June 30, 2019, 50% of the performance share issuances will be based on meeting earnings before interest, taxes, depreciation and amortization ("EBITDA") per share targets and the remaining 50% of the performance share issuances will be based on the three year performance of the Company’s total shareholder return ("TSR") as compared to the TSR of a selected peer group. All performance shares granted during the threesix months ended March 31,June 30, 2018 were based on achieving total shareholder return targets.


Depending upon the EBITDA per share targets met, 0% to 200% of the granted shares may ultimately be issued. For shares granted based on total shareholder return, 0% of the shares will be issued if the Company's total shareholder return outperforms 25% or less of the peer group, but 200% of the shares will be issued if the Company's total shareholder return performs better than 90% of the peer group.  


The fair value of the performance shares granted based on meeting EBITDA per share targets were estimated using the closing market prices on the day of grant and the probability of meeting these targets as of the date of grant.measurement date.

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019


The fair value of the performance shares granted based on the three year performance of the Company’s total shareholder return was estimated using a Monte Carlo simulation. The weighted average assumptions used in the Monte Carlo estimate were as follows:

Three months endedSix months ended

March 31,
2019

March 31,
2018
June 30,
2019

June 30,
2018
Expected stock price volatility23.4%
24.3%23.4%
24.3%
Weighted average risk-free interest rate2.5%
2.2%2.5%
2.2%


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

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

Three months ended March 31, 2019



Weighted-
Aggregate

Performance
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at December 31, 201865

$58


Granted27

61


Additional shares awarded based on performance




Vested(23)
64


Forfeited




Outstanding and non-vested at March 31, 201969

$62

$4,318

Three months ended

March 31,
2019

March 31,
2018
Share-based compensation for performance shares$348

$335
Tax benefit for performance share compensation$83

$86
Unrecognized compensation cost for performance shares, net of estimated forfeitures$2,806

$2,343
Weighted average period over which unrecognized compensation will be recognized (years)2.3



Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

Non-employee Director Activity - Non-vested Shares

Grants of non-vested shares to non-employee directors vest ratably over the elected term to the Board of Directors, or approximately one year.  The following tables summarize the Company’s non-employee non-vested share activity and related information:

Three months ended March 31, 2019



Weighted-
Aggregate

Non-vested
Average
Grant Date

Shares
Grant Date
Fair Value

(000)
Fair Value
(000)
Outstanding and non-vested at December 31, 201815

$59


Granted




Vested




Forfeited




Outstanding and non-vested at March 31, 201915

$59

$886

Three months ended

March 31,
2019

March 31,
2018
Share-based compensation for non-vested shares$218

$185
Tax benefit for non-vested share compensation$52

$47
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures$142

$65
Weighted average period over which unrecognized compensation will be recognized (years)0.2


      
      

Six months ended June 30, 2019



Weighted-




Average
Aggregate

Performance
Grant Date
Grant Date

Shares
Fair Value
Fair Value
Outstanding and non-vested at December 31, 201865

$58


Granted27

61


Vested(23)
64


Outstanding and non-vested at June 30, 201969

$62

$4,318
    

Six months ended

June 30,
2019

June 30,
2018
Share-based compensation for performance shares$717

$642
Tax benefit for performance share compensation$183

$161
Unrecognized compensation cost for performance shares, net of estimated forfeitures$2,436

$2,036
Weighted average period over which unrecognized compensation will be recognized (years)2.0
  


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 357 shares of common stock to employees of the Company. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six-month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions. The following table summarizes the Company’s employee stock purchase activity and related information:

    

Six months ended

June 30,
2019

June 30,
2018
Shares purchased by participants under plan5

5
Average purchase price$49

$52
Weighted-average fair value of each purchase right under the ESPP granted ¹$10

$7
Share-based compensation for ESPP shares$52

$32
    
¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period   



Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

Non-employee Director Activity - Non-vested Shares

Grants of non-vested shares to non-employee directors vest ratably over the elected term to the Board of Directors, or approximately one year.  The following tables summarize the Company’s non-employee non-vested share activity and related information:
    
      

Six months ended June 30, 2019



Weighted-




Average
Aggregate

Non-vested
Grant Date
Grant Date

Shares
Fair Value
Fair Value
Outstanding and non-vested at December 31, 201815

$59


Granted15

62


Vested(15)
59


Outstanding and non-vested at June 30, 201915

$62

$920
    

Six months ended

June 30,
2019

June 30,
2018
Share-based compensation for non-vested shares$483

$351
Tax benefit for non-vested share compensation$123

$88
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures$784

$703
Weighted average period over which unrecognized compensation will be recognized (years)0.9
  


6.    Senior Credit Facility


On 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 Facility may be increased by up to $100,000 to a maximum aggregate principal amount of $250,000 pursuant to the terms of the 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 and satisfaction of other conditions precedent and are subject to the other limitations set forth in the credit agreement. 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.


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. Payments of interest for each loan that is based on the LIBOR Rate are due in arrears on the last day of the interest period applicable to such loan (with interest periods of one, two or three months being available, at the Company’s option). Payments of interest on loans that are not based on the LIBOR Rate are due on the last day of each quarter ended March 31, June 30, September 30 and December 31 of each year. All unpaid amounts of principal and interest are due at maturity. As of March 31,June 30, 2019 we, the Company had $47,500$57,500 in borrowings outstanding under the revolving credit facility, $12,704 utilized for outstanding letters of credit and $89,796$79,796 of available borrowing capacity under the revolving credit facility.  The interest rate on the outstanding borrowing under the revolving credit facility was 3.9%3.6% as of March 31,June 30, 2019.


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31,June 30, 2019


The Facility contains customary events of default including, among other things, payment defaults, breach of covenants, cross acceleration to material indebtedness, bankruptcy-related defaults, material judgment defaults, and the occurrence of certain change of control events. The occurrence of an event of default may result in, among other things, the termination of the Facilities, acceleration of repayment obligations and the exercise of remedies by the lenders with respect to the Company and its subsidiaries that are party to the Facility. The Facility also 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. As of March 31,June 30, 2019, the Company was in compliance with the aforementioned covenants.


7.    Net Income Per Share


The following table sets forth the computation of basic and diluted net income per share:
  Three months ended Six months ended
  June 30,
2019
 June 30,
2018
 June 30,
2019
 June 30,
2018
Numerator:        
Net income and comprehensive income $22,330
 $24,298

$40,737

$42,038
Income allocated to participating securities (251) (209)
(459)
(359)
Numerator for basic and diluted income per share - net income $22,079
 $24,089
 $40,278
 $41,679
Denominator:  
  
    
Denominator for basic income per share - weighted-average shares 28,268
 29,169
 28,421
 29,288
Effect of dilutive stock options 77
 74
 76
 71
Effect of dilutive performance shares 28
 29
 34
 32
Denominator for diluted income per share - adjusted weighted-average shares 28,373
 29,272
 28,531
 29,391
Basic net income per share $0.78
 $0.83
 $1.42
 $1.42
Diluted net income per share $0.78
 $0.82
 $1.41
 $1.42

  Three months ended
  March 31,
2019
 March 31,
2018
Numerator:    
Net income and comprehensive income $18,407
 $17,741
Income allocated to participating securities (208) (145)
Numerator for basic and diluted income per share - net income $18,199
 $17,596
Denominator (in thousands):  
  
Denominator for basic income per share - weighted-average shares 28,530
 29,375
Effect of dilutive stock options 76
 70
Effect of dilutive performance shares 42
 35
Denominator for diluted income per share - adjusted weighted-average shares 28,648
 29,480
Basic net income per share $0.64
 $0.60
Diluted net income per share $0.64
 $0.60


The number of instruments that could potentially dilute net income per basic share in the future, but that were not included in the computation of net income per diluted share because to do so would have been anti-dilutive for the periods presented, are as follows:
 June 30, 2019 June 30, 2018
Anti-dilutive stock options194
 82
Anti-dilutive performance shares
 15
Anti-dilutive non-vested shares and deferred stock units
 5
Total anti-dilutive shares194
 102

 March 31, 2019 March 31, 2018
Anti-dilutive stock options (in thousands)195
 67
Anti-dilutive performance shares (in thousands)8
 11
Anti-dilutive non-vested shares and deferred stock units (in thousands)
 9
Total anti-dilutive shares (in thousands)203
 87


8.    Income Taxes


The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various states and Canada. 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 2011.


For the three and six months ended March 31,June 30, 2019 and 2018, the effective income tax rates varied from the statutory federal income tax rate of 21.0%, primarily as a result of the effect of state income taxes, net of the federal benefit, and permanent differences between book and tax net income. The combined federal and state effective tax rate for the threesix months ended March 31,June 30, 2019 was 23.8%24.7% compared to a rate of 25.7%25.3%for the same period in 2018. The lower effective tax rate for the first quarter of six months ended June 30,
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

2019 is the result of increased stock based compensation vesting and exercises when compared to the same period in 2018, which was impacted by forfeited performance shares and no option activity.shares. This was partly offset by increased executive compensation in 2019, which is not deductible for income tax purposes.
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

9.     Leases


As of January 1, 2019, the Company adopted ASU 2016-02, Leases, which required the Company to recognize a right-of-use asset and a corresponding lease liability on its balance sheet for most leases classified as operating leases under previous guidance. The Company adopted the standard using the modified retrospective approach as of January 1, 2019 and comparative financial statements have not been presented as allowed per the guidance.


The Company elected several of the practical expedients permitted under the transition guidance within the new standard. The package of practical expedients elected allowed the Company to carryforward its conclusions over whether any existing contracts contain a lease, to carryforward historical lease classification, and to carryforward its evaluation of initial direct costs for any existing leases. In addition, the Company elected the practical expedients to combine lease and non-lease components and to keep leases with an initial term of 12 months or less, after the consideration of options, off the balance sheet. For leases with an initial term of 12 months or less, after the consideration of options, the Company recognized the corresponding lease expense on a straight-line basis over the lease term. These practical expedients have been elected for all leases and subleases and will be applied on a go-forward basis.


A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. An entity controls the use of the identified asset if both of the following are true: (1) the entity obtains the right to substantially all of the economic benefits from use of the identified asset and (2) the entity has the right to direct the use of the identified asset. For the three and six months ended March 31,June 30, 2019, the Company leased facilities and equipment under operating and finance leases.


The Company leases some of its facilities under noncancelable operating leases that expire in various years through 2026. Certain leases may be renewed for periods varying from 1 to 10 years.  The Company has entered into or assumed through acquisition several equipment operating leases for assets including tractors, straight trucks and trailers with original lease terms between 2 and 6 years.  These leases expire in various years through 2024 and certain leases may not be renewed beyond the original term.for periods varying from 1 to 3 years.  Primarily through acquisitions, the Company assumed a few equipment leases that met the criteria for classification as a finance lease.  The finance leased equipment is being amortized over the shorter of the lease term or useful life and are not considered material to the Company's financial statements for the three and six months ended March 31,June 30, 2019. The Company also subleases certain facility leases to independent third parties; however, as the Company is not relieved of its primary obligation under these leases, these assets are included in the right-of-use lease assets and corresponding lease liabilities as of March 31,June 30, 2019.


For leases and subleases with terms greater than 12 months, the Company recorded the related right-of-use asset as the balance of the related lease liability, adjusted for any prepaid or accrued lease payments. Unamortized initial direct costs and lease incentives were not significant as of March 31,June 30, 2019. The lease liability was recorded at the present value of the lease payments over the term. Many of the Company's leases include rental escalation clauses, renewal options and/or termination options that were contemplated intoin the determination of lease payments when appropriate. As of March 31,June 30, 2019, the Company was not reasonably certain of exercising any renewal options. Further, as of March 31,June 30, 2019, it was reasonably certain that all termination options would not be exercised. As such, there were no adjustments made to its right-of-use lease assets or corresponding liabilities as a result. In addition, the Company does not have any leases with residual value guarantees or material restrictions or covenants as of March 31,June 30, 2019.


The Company did not separate lease and nonlease components of contracts for purposes of determining the right-of use lease asset and corresponding liability. Additionally, variable lease and variable nonlease components were not contemplated in the calculation of the right-of-use asset and corresponding liability. For facility leases, variable lease costs include the costs of common area maintenance, taxes, and insurance for which the Company pays its lessors an estimate that is adjusted to actual expense on a quarterly or annual basis depending on the underlying contract terms. For equipment leases, variable lease costs may include additional fees for using equipment in excess of estimated annual mileage thresholds.


In addition, the Company holds contracts with independent owner operators. These contracts explicitly identify the tractors to be operated by the independent owner operators and therefore, the Company concluded that these represent embedded leases. However,
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

the contract compensation is variable based upon a rate per shipment and a rate per mile. As such, these amounts are excluded from the calculation of the right-of useright-of-use lease asset and corresponding liability and are instead disclosed as part of variable lease costs below. Costs incurred for independent owner operators in accordance with these embedded leases are included in purchased
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

transportation on the Company's Statements of Comprehensive Income, totaling $73,947$86,430 and $163,873 for the three and six months ended March 31,June 30, 2019.


When available, the Company uses the rate implicit in the lease or sublease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement. The incremental borrowing rate is defined as the rate of interest that the Company would have to pay to borrow, on a collateralized basis and over a similar term, an amount equal to the lease payments in a similar economic environment. If using the Company’s incremental borrowing rate, management has elected to utilize a portfolio approach and applies the rates to a portfolio of leases with similar underlying assets and terms. Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.


The following table summarizes the Company's lease costs for the quarterthree and six months ended March 31,June 30, 2019 and related information:
 Three months ended Six months ended
 June 30, 2019 June 30, 2019
Lease cost   
Operating lease cost$13,971
 $26,788
Short-term lease cost2,656
 5,505
Variable lease cost91,261
 173,349
Sublease income(559) (1,094)
Total lease cost$107,329
 $204,548
    
Other information   
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows from operating leases$13,776
 $26,329
Right-of-use assets obtained in exchange for new operating lease liabilities$26,674
 $173,496
Weighted-average remaining lease term - operating leases (in years)3.9
 3.9
Weighted-average discount rate - operating leases4.3% 4.3%

 Three months ended
 March 31, 2019
Lease cost 
Operating lease cost$13,861
Short-term lease cost2,849
Variable lease cost77,547
Sublease income(535)
Total lease cost$93,722
  
Other information 
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$13,451
Right-of-use assets obtained in exchange for new operating lease liabilities$146,822
Weighted-average remaining lease term - operating leases (in years)4
Weighted-average discount rate - operating leases4.4%


The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet as of March 31,June 30, 2019:


Payment Due PeriodOperating Leases
2019$28,742
202047,828
202133,959
202222,459
202315,560
Thereafter14,966
Total minimum lease payments163,514
Less: amount of lease payments representing interest(13,392)
Present value of future minimum lease payments150,122
Less: current obligations under leases(49,370)
Long-term lease obligations$100,752
Payment Due PeriodOperating Leases
2019$37,526
202040,201
202127,619
202218,036
202312,129
Thereafter13,948
Total minimum lease payments149,459
Less: amount of lease payments representing interest(15,720)
Present value of future minimum lease payments133,739
Less: current obligations under leases(43,824)
Long-term lease obligations$89,915


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31,June 30, 2019



As of March 31,June 30, 2019, the Company has certain obligations to lease tractors, which will be delivered throughout the remainder of 2019. These leases are expected to have terms of approximately 3 to 4 years and are not expected to materially impact the Company's right-of-use lease assets or liabilities as of March 31,June 30, 2019.


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

10.    Financial Instruments


Fair Value of Financial Instruments


The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:


Accounts receivable and accounts payable: The carrying amounts reported in the balance sheet for accounts receivable and accounts payable approximate their fair value based on their short-term nature.
 
Revolving credit facility: The Company’s revolving credit facility bears variable interest rates plus additional basis points based upon covenants related to total indebtedness to earnings.  As the revolving credit facility bears a variable interest rate, the carrying value approximates fair value.


11.    Shareholders' Equity


During the first, second and third quarter of 2018, ourthe Company's Board of Directors declared a cash dividend of $0.15 per share of common stock. During the fourth quarter of 2018 and the first and second quarter of 2019, ourthe Company's Board of Directors declared a cash dividend of $0.18 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.


On July 21, 2016, ourthe Company's Board of Directors approved a stock repurchase authorization for up to three million3,000 shares of the Company’s common stock (the "2016 Repurchase Plan"). On February 5, 2019, our Board of Directors cancelled the Company’s 2016 Repurchase Plan and approved a new stock repurchase plan authorizing up to five million5,000 shares of the Company’s common stock (the “2019 Repurchase Plan”) that shall remain in effect until such time as the shares authorized for repurchase are exhausted or until earlier terminated.the plan is cancelled.  The Company is not obligated to repurchase any specific number of shares and may suspend or cancel the plan at any time.


The following table summarizestables summarize our share repurchases for the three and six months ended March 31,June 30, 2019 and 2018.

Three months endedThree months ended

March 31, 2019
March 31, 2018June 30, 2019
June 30, 2018

Shares repurchasedCost of shares repurchasedAverage cost per share
Shares repurchasedCost of shares repurchasedAverage cost per shareShares repurchasedCost of shares repurchasedAverage cost per share
Shares repurchasedCost of shares repurchasedAverage cost per share















2016 Repurchase Plan67,572
$3,850
$56.97

364,286
$19,993
$54.88

$
$

133
$8,172
$61.50
2019 Repurchase Plan162,300
10,331
63.66




407
24,436
60.05




Total229,872
$14,181
$61.69

364,286
$19,993
$54.88
407
$24,436
$60.05

133
$8,172
$61.50

 Six months ended
 June 30, 2019 June 30, 2018
 Shares repurchasedCost of shares repurchasedAverage cost per share Shares repurchasedCost of shares repurchasedAverage cost per share
        
2016 Repurchase Plan68
$3,850
$56.97
 497
$28,165
$56.65
2019 Repurchase Plan569
34,767
61.08
 


Total637
$38,617
$60.65
 497
$28,165
$56.65

As of March 31,June 30, 2019, 4,837,7004,431 shares were available to be purchased under the 2019 Plan.
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

12.    Commitments and Contingencies


From time to time, the Company is party to ordinary, routine litigation incidental to and arising in the normal course of business.  The Company does not believe that any of these pending actions, individually or in the aggregate, will have a material adverse effect on its business, financial condition or results of operations.


The primary claims in the Company’s business relate to workers’ compensation, property damage, vehicle liability and medical benefits. Most of the Company’s insurance coverage provides for self-insurance levels with primary and excess coverage which management believes is sufficient to adequately protect the Company from catastrophic claims. In the opinion of management, adequate provision has been made for all incurred claims up to the self-insured limits, including provision for estimated claims incurred but not reported.
 
The Company estimates its self-insurance loss exposure by evaluating the merits and circumstances surrounding individual known claims and by performing hindsight and actuarial analysis to determine an 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
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

sheet dates. 

During the three months ended June 30, 2019, the Company recorded a $5,000 reserve for pending vehicular claims. The claims underlying this reserve are still developing and may further impact the Company’s results. The Company is responsible for the first $7,500 per claim until it meets the $6,000 aggregate deductible for claims between $3,000 and $5,000 and the $2,500 aggregate deductible for claims between $5,000 and $10,000.

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


13.    Segment Reporting


The Company operates in four reportable segments 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 Intermodal segment primarily provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. The TLS segment provides expedited truckload brokerage, dedicated fleet services and high security and temperature-controlled logistics services. 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, 2018. For workers compensation and vehicle claims, each segment is charged an insurance premium and is also charged a deductible that corresponds with each segment's individual self-retention limit. 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 ("Eliminations & other").


Segment data includes intersegment revenues and shared costs.  Costs of the corporate headquarters, shared services and shared assets, such as trailers, are allocated to the segments based on usage. The cost basis of shared assets are not allocated. The basis for the majority of shared assets, such as trailers, are included in Expedited LTL.  The Company evaluates the performance of its segments based on income from operations.   The Company’s business is conducted in the U.S. and Canada.


Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
March 31, 2019

The following tables summarize segment information about 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 six months ended March 31,June 30, 2019 and 2018.
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

 Three months ended March 31, 2019 Three months ended June 30, 2019
 Expedited LTL Intermodal Truckload Premium Pool Distribution Eliminations & other Consolidated Expedited LTL Intermodal Truckload Premium Pool Distribution Eliminations & other Consolidated
External revenues $177,355
 $54,097
 $44,923
 $45,096
 $
 $321,471
 $203,989
 $50,522
 $45,543
 $45,702
 $
 $345,756
Intersegment revenues 1,198
 18
 744
 89
 (2,049) 
 1,733
 17
 570
 103
 (2,423) 
Depreciation 4,968
 469
 1,564
 1,315
 
 8,316
 4,848
 463
 1,478
 1,224
 
 8,013
Amortization 825
 1,407
 22
 257
 
 2,511
 1,060
 1,330
 21
 257
 
 2,668
Share-based compensation expense 2,021
 531
 148
 182
 165
 3,047
 2,272
 443
 118
 153
 211
 3,197
Interest expense 
 13
 1
 
 561
 575
 
 
 2
 
 579
 581
Income (loss) from operations 19,547
 6,181
 841
 1,251
 (3,086) 24,734
 26,889
 5,245
 689
 1,567
 (3,840) 30,550
Total assets 566,887
 182,489
 74,638
 102,678
 (41,115) 885,577
 608,716
 187,815
 74,822
 103,720
 (38,516) 936,557
Capital expenditures 2,081
 73
 156
 1,780
 
 4,090
 11,589
 142
 172
 605
 
 12,508
                        
 Three months ended March 31, 2018 Three months ended June 30, 2018
 Expedited LTL Intermodal Truckload Premium Pool Distribution Eliminations & other Consolidated Expedited LTL Intermodal Truckload Premium Pool Distribution Eliminations & other Consolidated
External revenues $168,363
 $48,477
 $43,161
 $42,607
 $
 $302,608
 $191,159
 $49,084
 $46,903
 $43,197
 $
 $330,343
Intersegment revenues 1,581
 91
 2,933
 64
 (4,669) 
 1,732
 78
 2,044
 108
 (3,962) 
Depreciation 4,623
 509
 1,703
 1,546
 
 8,381
 4,732
 444
 1,541
 1,448
 1
 8,166
Amortization 905
 1,092
 55
 257
 
 2,309
 825
 1,093
 21
 257
 
 2,196
Share-based compensation expense 1,675
 290
 180
 116
 
 2,261
 1,877
 210
 166
 113
 51
 2,417
Interest expense 
 13
 1
 
 357
 371
 
 24
 2
 
 457
 483
Income (loss) from operations 20,773
 3,469
 (43) 1,371
 (1,335) 24,235
 26,526
 5,543
 1,717
 1,589
 (2,505) 32,870
Total assets 442,802
 150,321
 65,263
 57,324
 (25,503) 690,207
 466,329
 151,962
 69,082
 58,695
 (34,776) 711,292
Capital expenditures 6,058
 81
 4
 78
 
 6,221
 10,648
 125
 36
 576
 
 11,385
Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(In thousands, except per share data)
(Unaudited)
June 30, 2019

             
  Six months ended June 30, 2019
  Expedited LTL Intermodal Truckload Premium Pool Distribution Eliminations & other Consolidated
External revenues $381,343
 $104,619
 $90,467
 $90,798
 $
 $667,227
Intersegment revenues 2,932
 35
 1,313
 192
 (4,472) 
Depreciation 9,817
 932
 3,043
 2,538
 (1) 16,329
Amortization 1,884
 2,737
 43
 515
 
 5,179
Share-based compensation expense 4,294
 974
 266
 334
 376
 6,244
Interest expense 
 2
 4
 
 1,150
 1,156
Income (loss) from operations 46,436
 11,426
 1,530
 2,818
 (6,926) 55,284
Total assets 608,716
 187,815
 74,822
 103,720
 (38,516) 936,557
Capital expenditures 13,670
 215
 328
 2,385
 
 16,598
             
  Six months ended June 30, 2018
  Expedited LTL Intermodal Truckload Premium Pool Distribution Eliminations & other Consolidated
External revenues $359,521
 $97,562
 $90,064
 $85,804
 $
 $632,951
Intersegment revenues 3,314
 169
 4,976
 172
 (8,631) 
Depreciation 9,355
 953
 3,244
 2,994
 
 16,546
Amortization 1,730
 2,185
 76
 515
 
 4,506
Share-based compensation expense 3,553
 500
 345
 229
 51
 4,678
Interest expense 1
 37
 3
 
 813
 854
Income (loss) from operations 47,298
 9,012
 1,674
 2,960
 (3,839) 57,105
Total assets 466,329
 151,962
 69,082
 58,695
 (34,776) 711,292
Capital expenditures 16,705
 207
 40
 654
 
 17,606


14.    Subsequent Events


On April 21,July 14, 2019, the Company acquired substantially all of the assets of FSA Logistix (“FSA”)O.S.T. Logistics, Inc. and O.S.T. Trucking Co., Inc.(together referred to as “OST” in this note) for $27,000 plus additional contingent consideration based upon future revenue generation.$12,000. This transaction was funded using cash flows from operations. FSA specializes in last mile logistics forOST is a wide range of American companies, including national retailers, manufacturers, eTailers,drayage company and third party logistics companies. FSA currently has management offices in Ft. Lauderdale, FL and Southlake, TX and has operationsprovides the Intermodal segment with an expanded footprint on the east coast, with locations in the East, Midwest, SouthwestPennsylvania, Maryland, Virginia, South Carolina and West regions.Georgia markets. The Company anticipates FSAOST will contribute approximately $75,000$32,000 of revenue and $3,000$2,500 of operating income on an annualized basis.




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


Overview and Executive Summary
 
Forward Air Corporation is a leading asset-light freight and logistics company. Our services are classified into four reportable segments: Expedited LTL, Intermodal, Truckload Premium Services ("TLS") and Pool Distribution ("Pool").Distribution.
 
Through the Expedited LTL segment, we operate a comprehensive national network to provide expedited regional, inter-regional and national LTL services. Expedited LTL offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, final mile solutions, customs brokerage and other handling. Because of our roots in serving the deferred air freight market, our terminal network is located at or near airports in the United States and Canada.


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 CFS warehouse and handling services. Intermodal operates primarily in the Midwest and Southeast, with a smaller operational presence in the Southwest. We plan to grow Intermodal’s geographic footprint through acquisitions as well as greenfield start-ups where we do not have an acceptable acquisition target.


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.


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 for the freight shipped through our networks and to grow other lines of businesses, such as TLS, Intermodal and Pool Distribution, which will allow us to maintain revenue growth in challenging shipping environments.


Trends and Developments


AppointmentExpedited LTL Acquisitions

As part of New Presidentour strategy to expand our final mile pickup and Chief Executive Officer

Effective September 1, 2018delivery operations, in April 2019, we acquired certain assets of FSA for $27.0 million in cash and additional contingent consideration ("Effective Date"earnout"), Thomas Schmitt was named based upon future revenue generation. The earnout opportunity is $15.0 million and had a fair value of $10.3 million as of June 30, 2019. This acquisition provides an opportunity for our Expedited LTL segment to expand its final mile service offering into additional geographic markets, form relationships with new customers, and add volumes to our existing locations. The assets, liabilities, and operating results of this acquisition has been included in the Company's Presidentconsolidated financial statements from the date of acquisition and Chief Executive Officer and Bruce A. Campbell, our then President and Chief Executive Officer, assumed the position of Executive Chairman. The Company's Board of Directors (the "Board") appointed Mr. Schmitthas been assigned to the Board as of the Effective Date. On February 5, 2019, Mr. Campbell informed the Board of his intentExpedited LTL reportable segment. See additional discussion in Note 4, Acquisitions and Goodwill, to retire from his position as Executive Chairman of the Company and decision not to stand for re-election to the Board immediately preceding the Company’s 2019 annual meeting of shareholders (the “2019 Annual Meeting”) which is expected to occur on May 7, 2019. The Board and Mr. Campbell agreed that he will continue to serve the Company as a consultant for 24 months following his retirement. Following Mr. Campbell’s retirement, Mr. Schmitt is expected to become the Chairman of the Board and Craig Carlock is expected to become the Company’s Lead Independent Director, subject to their reelection to the Board at the Company’s 2019 Annual Meeting.our Consolidated Financial Statements.


Intermodal Acquisitions


As part of our strategy to expand our Intermodal operations, in July 2018, we acquired certain assets of MMT for $3.7 million and in October 2018 we acquired certain assets of Southwest for $16.3 million. These acquisitions provide an opportunity for our Intermodal segment to expand into additional geographic markets and add volumes to our existing locations. The assets, liabilities, and operating results of these acquisitions have been included in the Company's consolidated financial statements from the date of acquisition and have been assigned to the Intermodal reportable segment.


On July 14, 2019, the Company acquired substantially all of the assets of OST for $12.0 million. This transaction was funded using cash flows from operations. OST is a drayage company and provides the Intermodal segment with an expanded footprint on the east coast, with locations in the Pennsylvania, Maryland, Virginia, South Carolina and Georgia markets. The Company anticipates OST will contribute approximately $32.0 million of revenue and $2.5 million of operating income on an annualized basis.




Environmental and Social Protection Efforts


Forward Air is committed to protecting the environment and we have taken a variety of steps to improve the sustainability of our operations. We are implementing new practices and technologies, improving our training, and incorporating sustainability objectives in our growth strategies. Our initiatives will be focused on reducing overall waste, electricity consumption and carbon emissions, while working to increase employee engagement and community involvement.




As a partner of the U.S. Environmental Protection Agency (EPA) SmartWay program since 2008, Forward Air has continued to adopt new environmentally safe policies and innovations to improve fuel efficiency and reduce emissions. For example, we actively seek to utilize equipment with reduced environmental impact. We utilize trailers with light weight composites and employ trailer skirts to decrease aerodynamic drag, both of which improve fuel efficiency. We are also increasing our use of electronic forklifts and transitioning to automatic transmission tractors, which will decrease our fuel consumption.


Through vendor partnerships, we are implementing new solutions to manage waste and improve recycling across our facilities. Annually, we recycle tons of dunnage and thousands of aluminum load bars. Forward Air also participates in ReCaps, providing and purchasing recycled trailer tires.


In addition, we are a corporate partner of Truckers Against Trafficking, a nonprofit organization that educates, equips, empowers and mobilizes members of the trucking and busing industries to combat human trafficking.












Results from Operations
The following table sets forth our consolidated historical financial data for the three months ended March 31,June 30, 2019 and 2018 (in millions):
Three months ended March 31Three months ended June 30,
2019 2018 Change Percent Change2019 2018 Change Percent Change
Operating revenue:              
Expedited LTL$178.6
 $169.9
 $8.7
 5.1 %$205.7
 $192.9
 $12.8
 6.6 %
Intermodal54.1
 48.6
 5.5
 11.3
50.5
 49.2
 1.3
 2.6
Truckload Premium Services45.7
 46.1
 (0.4) (0.9)46.1
 48.9
 (2.8) (5.7)
Pool Distribution45.2
 42.7
 2.5
 5.9
45.8
 43.3
 2.5
 5.8
Eliminations and other operations(2.1) (4.7) 2.6
 (55.3)(2.4) (4.0) 1.6
 (40.0)
Operating revenue321.5
 302.6
 18.9
 6.2
345.7
 330.3
 15.4
 4.7
Operating expenses:              
Purchased transportation144.0
 139.7
 4.3
 3.1
155.1
 155.7
 (0.6) (0.4)
Salaries, wages, and employee benefits76.4
 69.6
 6.8
 9.8
80.3
 72.1
 8.2
 11.4
Operating leases19.2
 18.0
 1.2
 6.7
20.3
 18.0
 2.3
 12.8
Depreciation and amortization10.8
 10.7
 0.1
 0.9
10.7
 10.3
 0.4
 3.9
Insurance and claims9.4
 7.1
 2.3
 32.4
13.2
 10.1
 3.1
 30.7
Fuel expense5.6
 5.5
 0.1
 1.8
5.9
 5.6
 0.3
 5.4
Other operating expenses31.4
 27.8
 3.6
 12.9
29.6
 25.6
 4.0
 15.6
Total operating expenses296.8
 278.4
 18.4
 6.6
315.1
 297.4
 17.7
 6.0
Income (loss) from operations:              
Expedited LTL19.6
 20.8
 (1.2) (5.8)26.9
 26.5
 0.4
 1.5
Intermodal6.2
 3.5
 2.7
 77.1
5.2
 5.6
 (0.4) (7.1)
Truckload Premium Services0.9
 
 0.9
 100.0
0.7
 1.7
 (1.0) (58.8)
Pool Distribution1.3
 1.4
 (0.1) (7.1)1.6
 1.6
 
 
Other operations(3.3) (1.5) (1.8) 120.0
(3.8) (2.5) (1.3) 52.0
Income from operations24.7
 24.2
 0.5
 2.1
30.6
 32.9
 (2.3) (7.0)
Other expense:              
Interest expense(0.6) (0.4) (0.2) 50.0
(0.6) (0.5) (0.1) 20.0
Total other expense(0.6) (0.4) (0.2) 50.0
(0.6) (0.5) (0.1) 20.0
Income before income taxes24.1
 23.8
 0.3
 1.3
30.0
 32.4
 (2.4) (7.4)
Income tax expense5.7
 6.1
 (0.4) (6.6)7.7
 8.1
 (0.4) (4.9)
Net income and comprehensive income$18.4
 $17.7
 $0.7
 4.0 %$22.3
 $24.3
 $(2.0) (8.2)%
Revenues


During the three months ended March 31,June 30, 2019, revenue increased 6.2%4.7% compared to the yearthree months ended March 31,June 30, 2018. The revenue increase was primarily driven by increased revenue from our Expedited LTL Expedited segment of $8.7$12.8 million driven by final mile revenue from the acquisition of FSA in April 2019. The Company's other segments also had revenue growth over prior year with the exception of the TLS Segment where revenue decreased due to a softening in revenue per mile.

Operating Expenses
Operating expenses increased $17.7 million primarily driven by salaries, wages and employee benefits increases of $8.2 million and insurance and claims increases of $3.1 million. Salaries, wages and employee benefits increased primarily due to additional salaries from acquisitions and increased Company-employed drivers. Insurance increased due to a $5.0 million reserve recorded in the second quarter of 2019 for pending vehicular claims, partly offset by decreases to our loss development factors for vehicle and workers' compensation claims. The claims underlying this reserve are still developing and may further impact the Company’s results.



Operating Income and Segment Operations

Operating income decreased $2.3 million, or 7.0%, to $30.6 million for the three months ended June 30, 2019 from the same period in 2018. The results for our four reportable segments are discussed in detail in the following sections.

Interest Expense

Interest expense was $0.6 million for the three months ended June 30, 2019 compared to $0.5 million for the same period in 2018. The increase in interest expense was attributable to additional borrowings on our revolving credit facility.

Income Taxes

The combined federal and state effective tax rate for the three months ended June 30, 2019 was 25.5% compared to a rate of 25.0% for the same period in 2018. The higher effective tax rate for the three months ended June 30, 2019 was the result of increased executive compensation, which is not deductible for income tax purposes.


Expedited LTL - Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018

The following table sets forth the historical financial data of our Expedited LTL segment for the three months ended June 30, 2019 and 2018 (in millions):
Expedited LTL Segment Information
(In millions)
(Unaudited)
            
 Three months ended
 June 30, Percent of June 30, Percent of   Percent
 2019 Revenue 2018 Revenue Change Change
Operating revenue$205.7
 100.0% $192.9
 100.0% $12.8
 6.6%
            
Operating expenses:
          
Purchased transportation90.6
 44.0
 90.5
 46.9
 0.1
 0.1
Salaries, wages and employee benefits46.2
 22.5
 41.2
 21.4
 5.0
 12.1
Operating leases11.8
 5.7
 10.2
 5.3
 1.6
 15.7
Depreciation and amortization5.9
 2.9
 5.6
 2.9
 0.3
 5.4
Insurance and claims5.3
 2.6
 3.6
 1.9
 1.7
 47.2
Fuel expense2.0
 1.0
 1.6
 0.8
 0.4
 25.0
Other operating expenses17.0
 8.3
 13.7
 7.1
 3.3
 24.1
Total operating expenses178.8
 86.9
 166.4
 86.3
 12.4
 7.5
Income from operations$26.9
 13.1% $26.5
 13.7% $0.4
 1.5%
Expedited LTL Operating Statistics
      
 Three months ended
 June 30, June 30, Percent
 2019 2018 Change
      
Business days64
 64
  %
      
Tonnage     
    Total pounds ¹626,748
 668,129
 (6.2)
    Pounds per day ¹9,793
 10,440
 (6.2)
      
Shipments     
    Total shipments ¹1,014.3
 1,094.9
 (7.4)
    Shipments per day ¹15.8
 17.1
 (7.4)
      
Weight per shipment618
 610
 1.3
      
Revenue per hundredweight$27.39
 $25.91
 5.7
Revenue per hundredweight, ex fuel22.91
 21.89
 4.7
      
Revenue per shipment$171
 $160
 6.9
Revenue per shipment, ex fuel144
 136
 5.9
      
Network revenue from door-to-door shipments as a percentage of network revenue 2,3
39.9% 36.0% 10.8 %
      
¹ In thousands     
2 Door-to-door shipments include all shipments with a pickup and/or delivery
3 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial and final mile revenue


Revenues
Expedited LTL operating revenue increased $12.8 million, or 6.6%, to $205.7 million from $192.9 million, accounting for 59.5% of consolidated operating revenue for the three months ended June 30, 2019 compared to 58.4% for the same period in 2018. The increase was due to increased final mile revenue over the prior year slightly offset by a decrease in network revenue. Final mile revenue increased $15.0 million primarily due to the acquisition of FSA in April 2019. Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial and final mile revenue. Network revenue, excluding fuel decreased $3.0 million due to a 6.2% decrease in tonnage, partly offset by a 4.7% increase in revenue per hundredweight, ex fuel. The increase in revenue per hundredweight was primarily due to rate increases and higher pickup and delivery revenue. The decrease in tonnage was due to lower volumes from traditional linehaul. In addition, fuel surcharge revenue increased $1.2 million largely due to rate increases to our fuel surcharges. The remaining decrease was due to other terminal based revenue, which includes terminal handling and warehousing.
Purchased Transportation
Expedited LTL purchased transportation increased by $0.1 million, or 0.1%, to $90.6 million for the three months ended June 30, 2019 from $90.5 million for the three months ended June 30, 2018. As a percentage of segment operating revenue, Expedited LTL purchased transportation was 44.0% during the three months ended June 30, 2019 compared to 46.9% for the same period in 2018. The decrease in purchased transportation as a percentage of revenue was mostly due to an increased utilization of owner-operators and Company-employed drivers over more costly third party transportation providers. Company-employed driver pay is included in the salaries, wages and benefits line item. Purchased transportation for the linehaul business decreased $10.2 million due to a 10.5% decrease in linehaul cost per mile due to an increased utilization of owner-operators and Company-employed drivers. This decrease was offset primarily by an increase in final mile purchased transportation due to the acquisition of FSA and increased network revenue with a pickup and/or delivery.
Salaries, Wages, and Benefits
Expedited LTL salaries, wages and employee benefits increased $5.0 million, or 12.1%, to $46.2 million for the three months ended June 30, 2019 from $41.2 million for the same period in 2018.  Salaries, wages and employee benefits were 22.5% of Expedited LTL’s operating revenue for the three months ended June 30, 2019 compared to 21.4% for the same period in 2018.  The increase in total dollars and as a percentage of revenue was primarily due to additional headcount from the acquisition of FSA and increased utilization of Company-employed drivers to fulfill linehaul and local pickup and delivery services, partly offset by a decrease in employee incentives.
Operating Leases
Expedited LTL operating leases increased $1.6 million, or 15.7%, to $11.8 million for the three months ended June 30, 2019 from $10.2 million for the same period in 2018.  Operating leases were 5.7% of Expedited LTL operating revenue for the three months ended June 30, 2019 compared to 5.3% for the same period in 2018. The increase in cost was primarily due to a $1.1 million increase in facility leases mostly from additional facilities acquired from FSA and a $0.7 million increase in tractor rentals and leases to correspond with the increase in Company-employed driver usage mentioned above. These increases were partly offset by a decrease in trailer rentals and leases, as old leases were replaced with purchased trailers.
Depreciation and Amortization
Expedited LTL depreciation and amortization increased $0.3 million, or 5.4%, to $5.9 million for the three months ended June 30, 2019 from $5.6 million in the same period in 2018.  Depreciation and amortization expense as a percentage of Expedited LTL operating revenue was 2.9% for the three months ended June 30, 2019 and 2018.  The increase in total dollars was due to the purchase of new trailers since the second quarter of 2018 and increased amortization of acquired intangibles from FSA partly offset by lower tractor depreciation, as we utilized leased tractors mentioned above.
Insurance and Claims
Expedited LTL insurance and claims expense increased $1.7 million, or 47.2%, to $5.3 million for the three months ended June 30, 2019 from $3.6 million for the same period in 2018.  Insurance and claims was 2.6% of operating revenue for the three months ended June 30, 2019 compared to 1.9% in the same period in 2018. The increase was attributable to a $1.0 million vehicle claim reserve recorded in the second quarter of 2019 for pending vehicular claims and increased vehicle insurance premiums. See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the "Other operations" section below.




Fuel Expense
Expedited LTL fuel expense increased $0.4 million, or 25.0%, to $2.0 million for the three months ended June 30, 2019 from $1.6 million in the same period in 2018.  Fuel expenses were 1.0% of Expedited LTL operating revenue in the second quarter of 2019 compared to 0.8% in the same period in 2018.  Expedited LTL fuel expenses increased due to higher Company-employed driver miles.
Other Operating Expenses
Expedited LTL other operating expenses increased $3.3 million, or 24.1%, to $17.0 million for the three months ended June 30, 2019 from $13.7 million in the same period in 2018.  Other operating expenses were 8.3% of Expedited LTL operating revenue for the three months ended June 30, 2019 compared to 7.1% in the same period in 2018. Other operating expenses included equipment maintenance, terminal and office expenses, legal and professional fees and other over-the-road costs. The increase in total dollars and as a percentage of revenue was primarily attributable to an increase in parts costs for final mile installations due to the acquisition of FSA, higher facility expenses and higher travel-related expenses.
Income from Operations
Expedited LTL income from operations increased by $0.4 million, or 1.5%, to $26.9 million for the three months ended June 30, 2019 compared to $26.5 million for the same period in 2018.  Income from operations as a percentage of Expedited LTL operating revenue was 13.1% for the three months ended June 30, 2019 compared to 13.7% in the same period in 2018. The deterioration in income as a percentage of revenue was due to lower linehaul tonnage, the large vehicle claim reserve and the acquisition of FSA, partly offset by increased utilization of owner-operators and Company-employed drivers.




Intermodal - Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018

The following table sets forth the historical financial data of our Intermodal segment for the three months ended June 30, 2019 and 2018 (in millions):

Intermodal Segment Information
(In millions)
(Unaudited)
            
 Three months ended
 June 30, Percent of June 30, Percent of   Percent
 2019 Revenue 2018 Revenue Change Change
Operating revenue$50.5
 100.0% $49.2
 100.0% $1.3
 2.6 %
            
Operating expenses:
   
      
Purchased transportation18.2
 36.0
 19.4
 39.4
 (1.2) (6.2)
Salaries, wages and employee benefits12.4
 24.6
 10.5
 21.3
 1.9
 18.1
Operating leases4.0
 7.9
 3.9
 7.9
 0.1
 2.6
Depreciation and amortization1.8
 3.6
 1.5
 3.1
 0.3
 20.0
Insurance and claims1.7
 3.4
 1.4
 2.8
 0.3
 21.4
Fuel expense1.7
 3.4
 1.7
 3.5
 
 
Other operating expenses5.5
 10.9
 5.2
 10.6
 0.3
 5.8
Total operating expenses45.3
 89.7
 43.6
 88.6
 1.7
 3.9
Income from operations$5.2
 10.3% $5.6
 11.4% $(0.4) (7.1)%

Intermodal Operating Statistics
  
 Three months ended
 June 30, June 30, Percent
 2019 2018 Change
Drayage shipments76,074
 74,021
 2.8%
Drayage revenue per shipment$571
 $565
 1.1
Number of locations21
 19
 10.5%

Revenues

Intermodal operating revenue increased $1.3 million, or 2.6%, to $50.5 million for the three months ended June 30, 2019 from $49.2 million for the same period in 2018.  The increases in operating revenue were primarily attributable to the MMT and Southwest acquisitions.

Purchased Transportation

Intermodal purchased transportation decreased $1.2 million, or 6.2%, to $18.2 million for the three months ended June 30, 2019 from $19.4 million for the same period in 2018.  Intermodal purchased transportation as a percentage of revenue was 36.0% for the three months ended June 30, 2019 compared to 39.4% for the three months ended June 30, 2018.  The decrease in Intermodal purchased transportation as a percentage of revenue was attributable to increased utilization of Company-employed drivers compared to the same period in 2018.



Salaries, Wages, and Benefits

Intermodal salaries, wages and employee benefits increased $1.9 million, or 18.1%, to $12.4 million for the three months ended June 30, 2019 compared to $10.5 million for the three months ended June 30, 2018.  As a percentage of Intermodal operating revenue, salaries, wages and benefits increased to 24.6% for the three months ended June 30, 2019 compared to 21.3% for the same period in 2018. The increase in salaries, wages and employee benefits as a percentage of revenue was attributable to higher administrative salaries, wages and benefits as a percentage of revenue and increased utilization of Company-employed drivers. The increase in administrative salaries, wages and benefits as a percentage of revenue was due to additional headcount from the acquisitions of Southwest and MMT while intermodal volumes increased only nominally during the second quarter of 2019 compared to the same period in 2018.

Operating Leases

Intermodal operating leases increased $0.1 million, or 2.6%, to $4.0 million for the three months ended June 30, 2019 compared to $3.9 million for the same period in 2018.  Operating leases were 7.9% of Intermodal operating revenue for the three months ended June 30, 2019 and 2018.  Operating leases were comprised primarily of facility rent expense as well as tractor and trailer leases and rentals.

Depreciation and Amortization

Intermodal depreciation and amortization increased $0.3 million, or 20.0%, to $1.8 million for the three months ended June 30, 2019 from $1.5 million for the same period in 2018. Depreciation and amortization expense as a percentage of Intermodal operating revenue was 3.6% in the second quarter of 2019 compared to 3.1% in the same period in 2018. The increase in depreciation and amortization was due to increased amortization of acquired intangibles.

Insurance and Claims

Intermodal insurance and claims increased $0.3 million, or 21.4%, to $1.7 million for the three months ended June 30, 2019 from $1.4 million for the same period in 2018. Intermodal insurance and claims were 3.4% of operating revenue for the three months ended June 30, 2019 compared to 2.8% for the same period in 2018. The increase in Intermodal insurance and claims as a percentage of revenue was attributable to increases in vehicle insurance premiums and vehicle damage and liability claims. See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the "Other operations" section below.

Fuel Expense

Intermodal fuel expense was $1.7 million for the three months ended June 30, 2019 and 2018.  Fuel expenses were 3.4% of Intermodal operating revenue for the three months ended June 30, 2019 compared to 3.5% for the same period in 2018.  Intermodal fuel expenses were flat due to increased Company-employed driver activity offset by lower fuel prices.
Other Operating Expenses
Intermodal other operating expenses increased $0.3 million, or 5.8%, to $5.5 million for the three months ended June 30, 2019 from $5.2 million for the same period in 2018.  Intermodal other operating expenses for the three months ended June 30, 2019 were 10.9% compared to 10.6% for the same period in 2018.  The increase in Intermodal other operating expenses in total dollars and as a percentage of revenue was due mostly to increased acquisition related legal and professional fees.
Income from Operations
Intermodal’s income from operations decreased by $0.4 million, or 7.1%, to $5.2 million for the three months ended June 30, 2019 compared to $5.6 million for the same period in 2018.  Income from operations as a percentage of Intermodal operating revenue was 10.3% for the three months ended June 30, 2019 compared to 11.4% in the same period in 2018.  The deterioration in operating income in total dollars and as a percentage of revenue was primarily attributable to losing leverage on fixed costs such as salaries, wages and benefits, amortization and insurance due to softening drayage revenue. The deterioration was partly offset by the contributions from the acquisitions of Southwest and MMT.


Truckload Premium Services - Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018

The following table sets forth our historical financial data of the Truckload Premium Services segment for the three months ended June 30, 2019 and 2018 (in millions):
Truckload Premium Services Segment Information
(In millions)
(Unaudited)
            
 Three months ended
 June 30, Percent of June 30, Percent of   Percent
 2019 Revenue 2018 Revenue Change Change
Operating revenue$46.1
 100.0% $48.9
 100.0% $(2.8) (5.7)%
            
Operating expenses:
          
Purchased transportation34.5
 74.8
 37.0
 75.7
 (2.5) (6.8)
Salaries, wages and employee benefits4.6
 10.0
 4.6
 9.4
 
 
Operating leases0.4
 0.9
 0.1
 0.2
 0.3
 300.0
Depreciation and amortization1.5
 3.3
 1.6
 3.3
 (0.1) (6.3)
Insurance and claims1.3
 2.8
 0.9
 1.8
 0.4
 44.4
Fuel expense0.8
 1.7
 0.8
 1.6
 
 
Other operating expenses2.3
 5.0
 2.2
 4.5
 0.1
 4.5
Total operating expenses45.4
 98.5
 47.2
 96.5
 (1.8) (3.8)
Income from operations$0.7
 1.5% $1.7
 3.5% $(1.0) (58.8)%

Truckload Premium Services Operating Statistics
  
 Three months ended
 June 30, June 30, Percent
 2019 2018 Change
      
Total Miles ¹19,259
 20,136
 (4.4)%
Empty Miles Percentage6.6% 9.3% (29.0)
Tractors (avg)337
 321
 5.0
Miles per tractor per week 2
1,912
 2,284
 (16.3)
      
Revenue per mile$2.29
 $2.32
 (1.3)
Cost per mile$1.83
 $1.86
 (1.6)%
      
¹ In thousands     
2 Calculated using Company-employed driver and owner-operator miles


Revenues
TLS revenue decreased $2.8 million, or 5.7%, to $46.1 million for the three months ended June 30, 2019 from $48.9 million in the same period in 2018.  TLS revenue decreased due to a 4.4% decrease in overall miles and a 1.3% decrease in average revenue per mile. The decreased revenue per mile was primarily driven by rate pressures from both spot market and contract rate customers.





Purchased Transportation

TLS purchased transportation costs decreased $2.5 million, or 6.8%, to $34.5 million for the three months ended June 30, 2019 from $37.0 million for the same period in 2018. For the three months ended June 30, 2019, purchased transportation costs as a percentage of revenue represented 74.8% compared to 75.7% for the same period in 2018.  TLS purchased transportation includes owner operators and third party carriers, while Company-employed drivers are included in salaries, wages and benefits. The decrease in purchased transportation was attributable to a 5.5% decrease in miles driven by owner operators and third party carriers and a 0.9% decrease in cost per mile during the three months ended June 30, 2019 compared to the same period in 2018. The decrease in purchased transportation miles was attributable to the revenue activity discussed above.

Salaries, Wages, and Benefits

TLS salaries, wages and employee benefits was $4.6 million for the three months ended June 30, 2019 and 2018.  Salaries, wages and employee benefits were 10.0% of TLS’s operating revenue for the three months ended June 30, 2019 compared to 9.4% for the same period in 2018.  The increase in salaries, wages and employee benefits as a percentage of revenue was mostly attributable to the decrease in revenue reducing leverage on fixed employee salaries, wages and benefits.
Operating Leases
TLS operating leases increased $0.3 million to $0.4 million for the three months ended June 30, 2019 from $0.1 million for the same period in 2018.  Operating leases were 0.9% of TLS operating revenue for the three months ended June 30, 2019 compared to 0.2% for the same period in 2018. The increase was due to an increase in tractor leases to replace older owned equipment.
Depreciation and Amortization

TLS depreciation and amortization decreased $0.1 million, or 6.3%, to $1.5 million for the three months ended June 30, 2019 from $1.6 million for the same period in 2018.  Depreciation and amortization expense as a percentage of TLS operating revenue was 3.3% for the three months ended June 30, 2019 and 2018.  The decrease in total dollars was due to lower tractor depreciation, as older units were replaced with tractor leases mentioned above.
Insurance and Claims

TLS insurance and claims expense increased $0.4 million to $1.3 million for the three months ended June 30, 2019 from $0.9 million for the same period in 2018.  Insurance and claims were 2.8% of operating revenue for the three months ended June 30, 2019 compared to 1.8% for the same period in 2018. The increase was primarily due to higher vehicle insurance premiums and vehicle claims reserves. At a consolidated level, vehicle claims reserves increased; see discussion in the "Other operations" section below.
Fuel Expense

TLS fuel expense was $0.8 million for the three months ended June 30, 2019 and 2018. Fuel expense was relatively consistent as a percentage of TLS operating revenue at 1.7% for the three months ended June 30, 2019 compared to 1.6% for the same period in 2018. Fuel expense was primarily comprised of fuel for Company-employed drivers.
Other Operating Expenses

TLS other operating expenses increased $0.1 million, or 4.5%, to $2.3 million for the three months ended June 30, 2019 from $2.2 million for the same period in 2018.  Other operating expenses were 5.0% of TLS operating revenue for the three months ended June 30, 2019 compared to 4.5% for the same period in 2018.  Other operating expenses included equipment maintenance, terminal and office expenses, professional fees and other costs of transiting shipments. The increase as a percentage of revenue was mostly due to increased spending on information technology and higher equipment maintenance costs.
Income from Operations
TLS income from operations decreased $1.0 million to $0.7 million during the second quarter of 2019 from $1.7 million for the same period in 2018. The deterioration in income from operations was due to lower revenue per mile and lower miles partly offset by operating efficiencies that have lowered the overall cost per mile.


Pool Distribution - Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018

The following table sets forth the historical financial data of our Pool Distribution segment for the three months ended June 30, 2019 and 2018 (in millions):

Pool Distribution Segment Information
(In millions)
(Unaudited)
            
 Three months ended
 June 30, Percent of June 30, Percent of   Percent
 2019 Revenue 2018 Revenue Change Change
Operating revenue$45.8
 100.0% $43.3
 100.0% $2.5
 5.8 %
            
Operating expenses:
   
      
Purchased transportation13.8
 30.1
 12.4
 28.6
 1.4
 11.3
Salaries, wages and employee benefits16.8
 36.7
 15.9
 36.7
 0.9
 5.7
Operating leases4.2
 9.2
 3.8
 8.8
 0.4
 10.5
Depreciation and amortization1.5
 3.3
 1.7
 3.9
 (0.2) (11.8)
Insurance and claims1.5
 3.3
 1.0
 2.3
 0.5
 50.0
Fuel expense1.5
 3.3
 1.6
 3.7
 (0.1) (6.3)
Other operating expenses4.9
 10.7
 5.3
 12.3
 (0.4) (7.5)
Total operating expenses44.2
 96.5
 41.7
 96.3
 2.5
 6.0
Income from operations$1.6
 3.5% $1.6
 3.7% $
  %

Pool Operating Statistics
  
 Three months ended
 June 30, June 30, Percent
 2019 2018 Change
Cartons ¹23,031
 20,101
 14.6 %
Revenue per carton$1.99
 $2.15
 (7.4)
Terminals28
 28
  %
      
¹ In thousands     

Revenues

Pool Distribution ("Pool") operating revenue increased $2.5 million, or 5.8%, to $45.8 million for the three months ended June 30, 2019 from $43.3 million for the same period in 2018.  The increase was due to rate increases, increased volumes from existing customers and new business wins.
Purchased Transportation

Pool purchased transportation increased $1.4 million, or 11.3%, to $13.8 million for the three months ended June 30, 2019 compared to $12.4 million for the same period in 2018.  Pool purchased transportation as a percentage of revenue was 30.1% for the three months ended June 30, 2019 compared to 28.6% for the same period in 2018.  The increase in Pool purchased transportation as a percentage of revenue was attributable to increased utilization of third party carriers.


Salaries, Wages, and Benefits

Pool salaries, wages and employee benefits increased $0.9 million, or 5.7%, to $16.8 million for the three months ended June 30, 2019 compared to $15.9 million for the same period in 2018.  As a percentage of Pool operating revenue, salaries, wages and benefits was 36.7% for the three months ended June 30, 2019 and 2018.   Group health insurance costs and Company-employed driver pay decreased as a percentage of revenue, but was offset by higher dock and office and administrative pay as a percentage of revenue. Dock pay deteriorated as a percentage of revenue as increased dedicated revenue volumes required the use of more costly contract labor.
Operating Leases

Pool operating leases increased $0.4 million, or 10.5%, to $4.2 million for the three months ended June 30, 2019 compared to $3.8 million for the same period in 2018.  Operating leases were 9.2% of Pool operating revenue for the three months ended June 30, 2019 compared to 8.8% in the same period in 2018.  Operating leases increased as a percentage of revenue due to increases in tractor leases for the additional revenue discussed above and the use of leased tractors to replace old purchased equipment.
Depreciation and Amortization

Pool depreciation and amortization decreased $0.2 million, or 11.8%, to $1.5 million for the three months ended June 30, 2019 from $1.7 million for the same period in  2018. Depreciation and amortization expense as a percentage of Pool operating revenue was 3.3% in the second quarter of 2019 compared to 3.9% in the same period in 2018. The decrease in Pool depreciation and amortization as a percentage of revenue was due to the increase in leased equipment mentioned above instead of purchased equipment.
Insurance and Claims

Pool insurance and claims expense increased $0.5 million, or 50.0%, to $1.5 million for the three months ended June 30, 2019 from $1.0 million for the same period in 2018.  Insurance and claims were 3.3% of operating revenue for the three months ended June 30, 2019 compared to 2.3% in the same period in 2018. The increase in total dollars and as a percentage of revenue was primarily due to an increase in cargo claims and claims related fees. At a consolidated level, vehicle claims reserves increased; see discussion in the "Other operations" section below.
Fuel Expense

Pool fuel expense decreased $0.1 million, or 6.3%, to $1.5 million for the three months ended June 30, 2019 from $1.6 million in the same period in 2018.  Fuel expenses were 3.3% of Pool operating revenue for the three months ended June 30, 2019 compared to 3.7% for the same period in 2018.  Pool fuel expenses decreased due to slightly lower Company-employed driver usage.
Other Operating Expenses

Pool other operating expenses decreased $0.4 million, or 7.5%, to $4.9 million for the three months ended June 30, 2019 from $5.3 million in the same period in 2018.  Pool other operating expenses as a percentage of revenue for the three months ended June 30, 2019 were 10.7% compared to 12.3% for the same period in 2018.  Other operating expenses included equipment maintenance, terminal and office expenses, professional fees and other over-the-road costs.  As a percentage of revenue the decrease was primarily attributable to a decrease in agent station handling costs due to lower agent station revenue volumes and a decrease in equipment maintenance costs as a percentage of revenue due to the increased usage of leased equipment instead of purchased equipment.
Income from Operations

Pool income from operations was $1.6 million for the three months ended June 30, 2019 and 2018.  Income from operations as a percentage of Pool operating revenue was 3.5% for the three months ended June 30, 2019 compared to 3.7% for the same period in 2018.  The deterioration in Pool operating income as a percentage of revenue was primarily the result of increased utilization of and higher rates charged by third party carriers and increased revenue volumes required the use of more costly contract labor. The deterioration was also due to increased cargo claims. These decreases were partly offset by current year revenue rate increases.


Other Operations - Three Months Ended June 30, 2019 compared to Three Months Ended June 30, 2018

Other operating activity declined from a $2.5 million operating loss during the three months ended June 30, 2018 to a $3.8 million operating loss during the three months ended June 30, 2019. The $3.8 million operating loss for the three months ended June 30, 2019 was primarily due to a $4.0 million vehicle claim reserve recorded in the second quarter of 2019 for pending vehicular claims, partly offset by decreases to our loss development factors for vehicle and workers' compensation claims of $0.5 million and $0.3 million, respectively. The remaining loss was attributed to $0.6 million in costs related to the CEO transition.

The $2.5 million operating loss included in other operations and corporate activities for the three months ended June 30, 2018 was due to a $2.7 million increase in self insurance reserves resulting from increases to our loss development factors for vehicle claims partly offset by a $0.2 decrease in self insurance reserves resulting from decreases to our loss development factors for workers' compensation claims.




Results from Operations
The following table sets forth our consolidated historical financial data for the six months ended June 30, 2019 and 2018 (in millions):
 Six months ended June 30,
 2019 2018 Change Percent Change
Operating revenue:       
Expedited LTL$384.3
 $362.8
 $21.5
 5.9 %
Intermodal104.6
 97.7
 6.9
 7.1
Truckload Premium Services91.8
 95.0
 (3.2) (3.4)
Pool Distribution91.0
 86.0
 5.0
 5.8
Eliminations and other operations(4.5) (8.5) 4.0
 (47.1)
Operating revenue667.2
 633.0
 34.2
 5.4
Operating expenses:       
   Purchased transportation299.1
 295.4
 3.7
 1.3
   Salaries, wages, and employee benefits156.7
 141.7
 15.0
 10.6
   Operating leases39.5
 36.0
 3.5
 9.7
   Depreciation and amortization21.5
 21.1
 0.4
 1.9
   Insurance and claims22.6
 17.2
 5.4
 31.4
   Fuel expense11.5
 11.2
 0.3
 2.7
   Other operating expenses61.0
 53.3
 7.7
 14.4
      Total operating expenses611.9
 575.9
 36.0
 6.3
Income (loss) from operations:       
Expedited LTL46.5
 47.3
 (0.8) (1.7)
Intermodal11.4
 9.0
 2.4
 26.7
Truckload Premium Services1.5
 1.7
 (0.2) (11.8)
Pool Distribution2.8
 3.0
 (0.2) (6.7)
Other operations(6.9) (3.9) (3.0) 76.9
Income from operations55.3
 57.1
 (1.8) (3.2)
Other expense:       
   Interest expense(1.2) (0.9) (0.3) 33.3
      Total other expense(1.2) (0.9) (0.3) 33.3
Income before income taxes54.1
 56.2
 (2.1) (3.7)
Income tax expense13.4
 14.2
 (0.8) (5.6)
Net income and comprehensive income$40.7
 $42.0
 $(1.3) (3.1)%
Revenues

During the six months ended June 30, 2019, revenue increased 5.4% compared to the six months ended June 30, 2018. The revenue increase was primarily driven by increased revenue from our Expedited LTL segment of $21.5 million driven by increased final mile revenue primarily from the acquisition of FSA in April 2019 and increased network revenue,and fuel surcharge revenue and final mile revenue over the prior year. The Company's other segments also had revenue growth over prior year with the exception of the TLS Segment where revenue decreased due toa softening in revenue per mile and the deliberate shedding of lower margin business.


Operating Expenses
Operating expenses increased $18.4$36.0 million primarily driven by salaries, wages and employee benefits increases of $6.8$15.0 million and purchased transportationinsurance and claims increases of $4.3$5.4 million. Salaries, wages and employee benefits increased primarily due to additional salaries from acquisitions and increased Company-employed drivers and personnel needs to support the additional volumes. Purchased transportationdrivers. Insurance increased primarily due to increased volumesa $5.0 million reserve recorded


in the second quarter of 2019 for pending vehicular claims, partly offset by increased utilization of owner-operators during the first quarter of 2019 instead of more costly third-party transportation providers.


decreases to our loss development factors for vehicle and workers' compensation claims.
Operating Income and Segment Operations


Operating income increased $0.5decreased $1.8 million, or 2.1%3.2%, from 2018 to $24.7$55.3 million for the yearsix months ended March 31, 2019.June 30, 2019 from the same period in 2018. The results for our four reportable segments are discussed in detail in the following sections.


Interest Expense


Interest expense was $0.6$1.2 million for the threesix months ended March 31,June 30, 2019 compared to $0.4$0.9 million for the same period ofin 2018. The increase in interest expense was attributable to additional borrowings on our revolving credit facility.


Income Taxes


The combined federal and state effective tax rate for the first quarter ofsix months ended June 30, 2019 was 23.8%24.7% compared to a rate of 25.7%25.3% for the same period in 2018. The lower effective tax rate for the first quarter ofsix months ended June 30, 2019 iswas the result of increased stock based compensation vesting and exercises when compared to the same period in 2018, which was impacted by forfeited performance shares and no option activity.shares. This was partly offset by increased executive compensation in 2019, which is not deductible for income tax purposes.





Expedited LTL - ThreeSix Months Ended March 31,June 30, 2019 compared to ThreeSix Months Ended March 31,June 30, 2018


The following table sets forth theour historical financial data of ourthe Expedited LTL segment for the threesix months ended March 31,June 30, 2019 and 2018 (in millions):
Expedited LTL Segment Information
(In millions)
(Unaudited)
            
 Three months ended
 March 31, Percent of March 31, Percent of   Percent
 2019 Revenue 2018 Revenue Change Change
Operating revenue$178.6
 100.0% $169.9
 100.0% $8.7
 5.1 %
            
Operating expenses:           
Purchased transportation79.6
 44.6
 78.4
 46.2
 1.2
 1.5
Salaries, wages and employee benefits41.1
 23.0
 37.7
 22.2
 3.4
 9.0
Operating leases10.9
 6.1
 9.9
 5.8
 1.0
 10.1
Depreciation and amortization5.8
 3.2
 5.5
 3.2
 0.3
 5.5
Insurance and claims3.9
 2.2
 3.2
 1.9
 0.7
 21.9
Fuel expense1.8
 1.0
 1.3
 0.8
 0.5
 38.5
Other operating expenses15.9
 8.9
 13.1
 7.7
 2.8
 21.4
Total operating expenses159.0
 89.0
 149.1
 87.8
 9.9
 6.6
Income from operations$19.6
 11.0% $20.8
 12.2% $(1.2) (5.8)%
Expedited LTL Operating Statistics
      
 Three months ended
 March 31, March 31, Percent
 2019 2018 Change
      
Business days63
 64
 (1.6)%
      
Tonnage     
    Total pounds ¹596,640
 608,822
 (2.0)
    Pounds per day ¹9,470
 9,513
 (0.5)
      
Shipments     
    Total shipments ¹929.6
 970.8
 (4.2)
    Shipments per day ¹14.8
 15.2
 (2.6)
      
Weight per shipment642
 627
 2.4
      
Revenue per hundredweight$26.78
 $25.27
 6.0
Revenue per hundredweight, ex fuel22.74
 21.75
 4.6
      
Revenue per shipment$174
 $161
 8.1
Revenue per shipment, ex fuel148
 139
 6.5
      
Network revenue from door-to-door shipments as a percentage of network revenue 2,3
38.3% 34.1% 12.3 %
      
¹ In thousands     
2 Door-to-door shipments include all shipments with a pickup and/or delivery
3 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial and final mile revenue

Expedited LTL Segment Information
(In millions)
(Unaudited)
            
 Six months ended
 June 30, Percent of June 30, Percent of   Percent
 2019 Revenue 2018 Revenue Change Change
Operating revenue$384.3
 100.0% $362.8
 100.0% $21.5
 5.9 %
            
Operating expenses:           
Purchased transportation170.2
 44.3
 168.9
 46.6
 1.3
 0.8
Salaries, wages and employee benefits87.3
 22.7
 79.0
 21.8
 8.3
 10.5
Operating leases22.7
 5.9
 20.1
 5.5
 2.6
 12.9
Depreciation and amortization11.7
 3.0
 11.1
 3.0
 0.6
 5.4
Insurance and claims9.2
 2.4
 6.8
 1.9
 2.4
 35.3
Fuel expense3.8
 1.0
 2.8
 0.8
 1.0
 35.7
Other operating expenses32.9
 8.6
 26.8
 7.4
 6.1
 22.8
Total operating expenses337.8
 87.9
 315.5
 87.0
 22.3
 7.1
Income from operations$46.5
 12.1% $47.3
 13.0% $(0.8) (1.7)%



Expedited LTL Operating Statistics
      
 Six months ended
 June 30, June 30, Percent
 2019 2018 Change
      
Business days127
 128
 (0.8)%
      
Tonnage     
    Total pounds ¹1,223,388
 1,276,950
 (4.2)
    Pounds per day ¹9,633
 9,976
 (3.4)
      
Shipments     
    Total shipments ¹1,943.9
 2,065.7
 (5.9)
    Shipments per day ¹15.3
 16.1
 (5.2)
      
Weight per shipment$629
 $618
 1.8
      
Revenue per hundredweight$27.09
 $25.60
 5.8
Revenue per hundredweight, ex fuel$22.83
 $21.82
 4.6
      
Revenue per shipment$173
 $161
 7.5 %
Revenue per shipment, ex fuel$146
 $137
 6.3 %
      
Network revenue from door-to-door shipments as a percentage of network revenue 2,3
39.1% 35.1% 11.4 %
      
¹ In thousands     
2 Door-to-door shipments include all shipments with a pickup and/or delivery
3 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial and final mile revenue


Revenues
Expedited LTL operating revenue increased $8.7$21.5 million, or 5.1%5.9%, to $178.6$384.3 million from $169.9$362.8 million, accounting for 55.5%57.6% of consolidated operating revenue for the threesix months ended March 31,June 30, 2019 compared to 56.2%57.3% for the same period in 2018. ThisThe increase was due to increased network revenue and final mile revenue overand fuel surcharge revenue while network revenue was flat compared to the prior year. Final mile revenue increased $17.7 million primarily due to the acquisition of FSA in April 2019 and the addition of new service locations following business wins. Fuel surcharge revenue increased $3.8 million largely due to rate increases to our fuel surcharges. Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial and final mile revenue. Network revenue, excluding fuel increased $2.8 millionwas flat due to a 4.2% decrease in tonnage, mostly offset by a 4.6% increase in revenue per hundredweight, ex fuel, partly offset by a 2.0% decrease in tonnage compared to prior year.fuel. The increase in revenue per hundredweight was primarily due to rate increases and higher pickup and delivery revenue. The decrease in tonnage was due to one less business day and lower volumes from traditional linehaul. In addition, fuel surcharge revenue increased $2.6 million largely due to rate increases to our fuel surcharges, and final mile revenue increased $2.7 million primarily due to the addition of new service locations following business wins. The remaining increase is due to other terminal based revenue, which includes warehousing and terminal handling.

Purchased Transportation
Expedited LTL purchased transportation increased by $1.2$1.3 million, or 1.5%0.8%, to $79.6$170.2 million for the threesix months ended March 31,June 30, 2019 from $78.4$168.9 million for the threesix months ended March 31,June 30, 2018. As a percentage of segment operating revenue, Expedited LTL purchased transportation was 44.6%44.3% during the threesix months ended March 31,June 30, 2019 compared to 46.2%46.6% for the same period in 2018. The decrease in purchased transportation as a percentage of revenue iswas mostly due to an increased utilization of owner-operators and Company-employed drivers over more costly third party transportation providers. Company-employed driver pay is included in the salaries, wages and benefits line item.
Salaries, Wages, and Benefits
Expedited LTL salaries, wages and employee benefits increased $3.4by $8.3 million, or 9.0%10.5%, to $41.1$87.3 million infor the first quarter ofsix months ended June 30, 2019 from $37.7$79.0 million forin the same period in 2018. Salaries, wages and employee benefits were 23.0%22.7% of Expedited LTL’s operating revenue infor the first quarter ofsix months ended June 30, 2019 compared to 22.2%21.8% for the same period ofin 2018. The increase in salaries, wagestotal dollars and employee benefits as a percentage of revenue was primarily attributabledue to a 0.8% increase as a percentageadditional headcount from the acquisition of revenue inFSA and increased utilization of Company-employed drivers to servicefulfill linehaul and local pickup and delivery services.services, partly offset by a decrease in employee incentives.
Operating Leases
Expedited LTL operating leases increased $1.0$2.6 million, or 10.1%12.9%, to $10.9$22.7 million for the threesix months ended March 31,June 30, 2019 from $9.9$20.1 million for the same period in 2018.  Operating leases were 6.1%5.9% of Expedited LTL operating revenue for the threesix months ended March 31,June 30, 2019 compared to 5.8%5.5% for the same period ofin 2018. The increase in cost iswas primarily due to a $0.9$1.6 million increase in tractor rentals and leases to correspond with the increase in Company-employed driver usage mentioned above.above and a $1.5 million increase in office rent for new facilities and the additional facilities acquired from FSA. These increases were partly offset by a decrease in trailer rentals and leases, as old leases were replaced with purchased trailers.
Depreciation and Amortization
Expedited LTL depreciation and amortization increased $0.3$0.6 million, or 5.5%5.4%, to $5.8$11.7 million infor the first quarter ofsix months ended June 30, 2019 from $5.5$11.1 million infor the same period ofin 2018.  Depreciation and amortization expense as a percentage of Expedited LTL operating revenue was 3.2% in3.0% for the first quarter ofsix months ended June 30, 2019 and 2018.  The increase in expense was due to the purchase of new trailers since the firstsecond quarter of 2018 and increased amortization of acquired intangibles from FSA partly offset by lower tractor depreciation, as we utilized leased tractors mentioned above.
Insurance and Claims
Expedited LTL insurance and claims expense increased $0.7$2.4 million, or 21.9%35.3%, to $3.9$9.2 million for the threesix months ended March 31,June 30, 2019 from $3.2$6.8 million for the same period ofsix months ended June 30, 2018.  Insurance and claims was 2.2%2.4% of operating revenue for the threesix months ended March 31,June 30, 2019 compared to 1.9% infor the same period ofin 2018. The increase was attributable to an increase ina $1.0 million vehicle claim reservesreserve recorded in the second quarter of 2019 for pending vehicular claims and higher vehicle damage claims. The increase was also attributable to higher vehicle insurance premiums, higher cargo claims and claims related fees. See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the "Other operations" section below.
Fuel Expense
Expedited LTL fuel expense increased $0.5$1.0 million, or 38.5%35.7%, to $1.8$3.8 million for the first quarter ofsix months ended June 30, 2019 from $1.3$2.8 million in the same period ofin 2018.  Fuel expenses were 1.0% of Expedited LTL operating revenue infor the first quarter ofsix months ended


June 30, 2019 compared to 0.8% infor the same period ofin 2018.  Expedited LTL fuel expenses increased due to higherincreased Company-employed driver miles.


Other Operating Expenses
Expedited LTL other operating expenses increased $2.8$6.1 million, or 21.4%22.8%, to $15.9$32.9 million duringfor the threesix months ended March 31,June 30, 2019 from $13.1$26.8 million in the same period ofin 2018.  Other operating expenses were 8.9%8.6% of Expedited LTL operating revenue in the first quarter ofsix months ended June 30, 2019 compared to 7.7%7.4% in the same period ofin 2018. Other operating expenses includesincluded equipment maintenance, terminal and office expenses, legal and professional fees and other over-the-road costs. The increase in total dollars and as a percentage of revenue was primarily attributable to an increase in receivables allowanceparts costs for final mile installations due to the acquisition of FSA, higher facility expenses and higher legal and professional fees related to the acquisition.network transit costs such as tolls. The increase as a percentage of revenue was also the result of the prior year including a fuel tax credit that was no longer available in 2019.
Income from Operations
Expedited LTL income from operations decreased by $1.2$0.8 million, or 5.8%1.7%, to $19.6$46.5 million for the first quarter ofsix months ended June 30, 2019 compared to $20.8$47.3 million for the same period in 2018.  Income from operations as a percentage of Expedited LTL operating revenue was 11.0%12.1% for the threesix months ended March 31,June 30, 2019 compared with 12.2%to 13.0% in the same period ofin 2018. The decreasedeterioration in income from operationsas a percentage of revenue was due to sluggishlower linehaul tonnage, highera large vehicle claim reserves, cargo claims, legalliability reserve and professional fees and an increase in receivables allowance. These deteriorations werethe acquisition of FSA partly offset by increased utilization of owner-operators and Company-employed drivers.






Intermodal - ThreeSix Months Ended March 31,June 30, 2019 compared to ThreeSix Months Ended March 31,June 30, 2018


The following table sets forth the historical financial data of our Intermodal segment for the threesix months ended March 31,June 30, 2019 and 2018 (in millions):



Intermodal Segment Information(In millions)(Unaudited)
                      
Three months endedSix months ended
March 31, Percent of March 31, Percent of   PercentJune 30, Percent of June 30, Percent of   Percent
2019 Revenue 2018 Revenue Change Change2019 Revenue 2018 Revenue Change Change
Operating revenue$54.1
 100.0% $48.6
 100.0% $5.5
 11.3 %$104.6
 100.0% $97.7
 100.0% $6.9
 7.1 %
                      
Operating expenses:
   
                 
Purchased transportation18.4
 34.0
 18.7
 38.5
 (0.3) (1.6)36.6
 35.0
 38.1
 39.0
 (1.5) (3.9)
Salaries, wages and employee benefits12.7
 23.5
 10.3
 21.2
 2.4
 23.3
25.1
 24.0
 20.8
 21.3
 4.3
 20.7
Operating leases3.8
 7.0
 4.0
 8.2
 (0.2) (5.0)7.7
 7.4
 7.9
 8.1
 (0.2) (2.5)
Depreciation and amortization1.9
 3.5
 1.6
 3.3
 0.3
 18.8
3.7
 3.5
 3.1
 3.2
 0.6
 19.4
Insurance and claims1.4
 2.6
 1.4
 2.9
 
 
3.1
 3.0
 2.8
 2.8
 0.3
 10.7
Fuel expense1.6
 3.0
 1.6
 3.3
 
 
3.4
 3.3
 3.3
 3.4
 0.1
 3.0
Other operating expenses8.1
 15.0
 7.5
 15.4
 0.6
 8.0
13.6
 13.0
 12.7
 13.0
 0.9
 7.1
Total operating expenses47.9
 88.5
 45.1
 92.8
 2.8
 6.2
93.2
 89.1
 88.7
 90.8
 4.5
 5.1
Income from operations$6.2
 11.5% $3.5
 7.2% $2.7
 77.1 %$11.4
 10.9% $9.0
 9.2% $2.4
 26.7 %


Intermodal Operating Statistics
Intermodal Operating Statistics
Intermodal Operating Statistics
  
Three months endedSix months ended
March 31, March 31, PercentJune 30, June 30, Percent
2019 2018 Change2019 2018 Change
Drayage shipments75,607
 73,671
 2.6%151,681
 147,692
 2.7%
Drayage revenue per shipment$625
 $571
 9.5
Number of locations21
 19
 10.5%
Drayage revenue per Shipment$598
 $568
 5.3
Number of Locations21
 19
 10.5%


Revenues


Intermodal operating revenue increased $5.5$6.9 million, or 11.3%7.1%, to $54.1$104.6 million for the threesix months ended March 31,June 30, 2019 from $48.6$97.7 million for the same period in 2018. The increases in operating revenue were primarily attributable to the MMT and Southwest acquisitions.


Purchased Transportation


Intermodal purchased transportation decreased $0.3$1.5 million, or 1.6%3.9%, to $18.4$36.6 million for the threesix months ended March 31,June 30, 2019 from $18.7$38.1 million for the same period in 2018.  Intermodal purchased transportation as a percentage of revenue was 34.0%35.0% for the threesix months ended March 31,June 30, 2019 compared to 38.5%39.0% for the threesix months ended March 31,June 30, 2018.  The decrease in Intermodal purchased transportation as a percentage of revenue was attributable to increased utilization of Company-employed drivers compared to the same period in 2018 and the impact of improved pricing on intermodal shipments.2018.







Salaries, Wages, and Benefits


Intermodal salaries, wages and employee benefits increased $2.4$4.3 million, or 23.3%20.7%, to $12.7$25.1 million for the threesix months ended March 31,June 30, 2019 compared to $10.3$20.8 million for the threesix months ended March 31,June 30, 2018.  As a percentage of Intermodal operating revenue, salaries, wages and benefits increased to 23.5%24.0% for the threesix months ended March 31,June 30, 2019 compared to 21.2%21.3% for the same period in 2018.   The increase in salaries, wages and employee benefits as a percentage of revenue was attributable to higher employee incentive and share-based compensation, increased utilization of Company-employed drivers and increased administrative salaries, wages and benefits as a percentage of revenue.revenue and increased utilization of Company-employed drivers. The increase in administrative salaries, wages and benefits as a percentage of revenue was due to additional headcount from the acquisitions of Southwest and MMT while legacy intermodal volumes increased only nominally during the six months ended June 30, 2019 compared to the same period in 2018.


Operating Leases


Intermodal operating leases decreased $0.2 million, or 5.0%2.5%, to $3.8$7.7 million for the threesix months ended March 31,June 30, 2019 compared to $4.0from $7.9 million for the same period ofin 2018.  Operating leases were 7.0%7.4% of Intermodal operating revenue for the threesix months ended March 31,June 30, 2019 compared with 8.2%to 8.1% in the same period ofin 2018.  Operating leases decreased in total dollars and as a percentage of revenue due to decreases todecreased trailer rental charges.


Depreciation and Amortization


Intermodal depreciation and amortization increased $0.3$0.6 million, or 18.8%19.4%, to $1.9$3.7 million for the threesix months ended March 31,June 30, 2019 from $1.6$3.1 million for the same period in 2018. Depreciation and amortization expense as a percentage of Intermodal operating revenue was 3.5% infor the first quarter ofsix months ended June 30, 2019 compared to 3.3% in3.2% for the same period ofin 2018. The increase in depreciation and amortization was due to increased amortization of acquired intangibles.


Insurance and Claims


Intermodal insurance and claims was $1.4expense increased $0.3 million, or 10.7%, to $3.1 million for the threesix months ended March 31,June 30, 2019 andfrom $2.8 million for the six months ended June 30, 2018.   Intermodal insurance and claims were 2.6%3.0% of operating revenue for the threesix months ended March 31,June 30, 2019 compared with 2.9%to 2.8% for the same period in 2018. The decreaseincrease in Intermodal insurance and claims as a percentage of revenue was attributable to decreasesincreases in vehicle insurance premiums and cargovehicle liability and damage claims. See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the "Other operations" section below.


Fuel Expense


Intermodal fuel expense was $1.6increased $0.1 million, or 3.0%, to $3.4 million for the threesix months ended March 31,June 30, 2019 andfrom $3.3 million in the same period in 2018.  Fuel expenses were 3.0%3.3% of Intermodal operating revenue infor the first quarter ofsix months ended June 30, 2019 compared with 3.3% forto 3.4% in the same period ofin 2018.  Intermodal fuel expenses were flatslightly increased due to increased Company-employed driver activity offset by lower fuel prices.activity.

Other Operating Expenses

Intermodal other operating expenses increased $0.6$0.9 million, or 8.0%7.1%, to $8.1$13.6 million for the threesix months ended March 31,June 30, 2019 from $7.5compared to $12.7 million for the same period in 2018.  Intermodal other operating expenses for the first quartersix months ended June 30, 2019 and 2018 were 13.0% of 2019 were 15.0% compared to 15.4% for the same period of 2018.Intermodal operating revenue.  The decreaseincrease in Intermodal other operating expenses as a percentage of revenueexpense was due mostly to lower equipment maintenance.increased container related rental and storage charges and acquisition related legal and professional fees.

Income from Operations
Intermodal’s
Intermodal income from operations increased by $2.7$2.4 million, or 77.1%26.7%, to $6.2$11.4 million for the first quarter ofsix months ended June 30, 2019 compared with $3.5to $9.0 million for the same period in 2018.  Income from operations as a percentage of Intermodal operating revenue was 11.5%10.9% for the threesix months ended March 31,June 30, 2019 compared to 7.2%9.2% in the same period ofin 2018.  The increase in operating income in total dollars and as a percentage of revenue was primarily attributable to revenue rate increases and the acquisitions of Southwest and MMT.




Truckload Premium Services - ThreeSix Months Ended March 31,June 30, 2019 compared to ThreeSix Months Ended March 31,June 30, 2018


The following table sets forth our historical financial data of the Truckload Premium Services segment for the threesix months ended March 31,June 30, 2019 and 2018 (in millions):
Truckload Premium Services Segment Information(In millions)(Unaudited)
                      
Three months endedSix months ended
March 31, Percent of March 31, Percent of   PercentJune 30, Percent of June 30, Percent of   Percent
2019 Revenue 2018 Revenue Change Change2019 Revenue 2018 Revenue Change Change
Operating revenue$45.7
 100.0% $46.1
 100.0% $(0.4) (0.9)%$91.8
 100.0% $95.0
 100.0% $(3.2) (3.4)%
                      
Operating expenses:
                     
Purchased transportation34.5
 75.5
 34.8
 75.5
 (0.3) (0.9)69.0
 75.2
 71.8
 75.6
 (2.8) (3.9)
Salaries, wages and employee benefits4.6
 10.1
 5.1
 11.1
 (0.5) (9.8)9.3
 10.1
 9.8
 10.3
 (0.5) (5.1)
Operating leases0.1
 0.2
 0.2
 0.4
 (0.1) (50.0)0.5
 0.5
 0.3
 0.3
 0.2
 66.7
Depreciation and amortization1.6
 3.5
 1.8
 3.9
 (0.2) (11.1)3.1
 3.4
 3.3
 3.5
 (0.2) (6.1)
Insurance and claims1.0
 2.2
 1.0
 2.2
 
 
2.3
 2.5
 2.0
 2.1
 0.3
 15.0
Fuel expense0.7
 1.5
 1.1
 2.4
 (0.4) (36.4)1.4
 1.5
 1.8
 1.9
 (0.4) (22.2)
Other operating expenses2.3
 5.0
 2.1
 4.5
 0.2
 9.5
4.7
 5.1
 4.3
 4.5
 0.4
 9.3
Total operating expenses44.8
 98.0
 46.1
 100.0
 (1.3) (2.8)90.3
 98.4
 93.3
 98.2
 (3.0) (3.2)
Income from operations$0.9
 2.0% $
 % $0.9
 100.0 %$1.5
 1.6% $1.7
 1.8% $(0.2) (11.8)%


Truckload Premium Services Operating Statistics
Truckload Premium Services Operating Statistics
Truckload Premium Services Operating Statistics
  
Three months endedSix months ended
March 31, March 31, PercentJune 30, June 30, Percent
2019 2018 Change2019 2018 Change
          
Total Miles ¹18,757
 20,072
 (6.6)%38,015
 40,207
 (5.5)%
Empty Miles Percentage7.9% 9.7% (18.6)7.3% 9.5% (23.2)
Tractors (avg)306
 335
 (8.7)322
 328
 (1.8)
Miles per tractor per week 2
1,932
 2,229
 (13.3)1,922
 2,256
 (14.8)
          
Revenue per mile$2.33
 $2.19
 6.4
$2.31
 $2.25
 2.7
Cost per mile$1.86
 $1.81
 2.8 %$1.85
 $1.83
 1.1 %
          
¹ In thousands     
2 Calculated using Company-employed driver and owner-operator miles
¹ - In thousands     
2 - Calculated using Company driver and owner operator miles
2 - Calculated using Company driver and owner operator miles



Revenues
    
TLS revenue decreased $0.4$3.2 million, or 0.9%3.4%, to $45.7$91.8 million for the six months ended June 30, 2019 from $95.0 million in the first quarter of 2019 from $46.1 millionsame period in the first quarter of 2018.  TLS revenue decreased due to a 6.6%5.5% decrease in overall miles mostly offset by a 6.4%2.7% increase in average revenue per mile. The decrease in overall miles was due to deliberate shedding of lower margin business as well as reduced fleet capacity compared to the first quarter of last year. The increased revenue per mile was primarily driven by rate increases to existing customers and, to a lesser extent, the aforementioned shedding of lower margin business.



Purchased Transportation


TLS purchased transportation costs decreased $0.3$2.8 million, or 0.9%3.9%, to $34.5$69.0 million for the threesix months ended March 31,June 30, 2019 from $34.8$71.8 million for the six months ended June 30, 2018. For the six months ended June 30, 2019, TLS purchased transportation costs represented 75.2% of TLS revenue compared to 75.6% for the same period in 2018.  For the three months ended March 31, 2019 and 2018, purchased transportation costs represented 75.5%.  TLS purchased transportation includes owner


operators and third party carriers, while Company-employedcompany-employed drivers are included in salaries, wages and benefits. The decrease in purchased transportation was attributable to a 3.9%4.7% decrease in purchased transportation miles driven by owner operators and third party carriers partlymostly offset by a 3.6%1.3% increase in cost per mile during the threesix months ended March 31,June 30, 2019 compared to the same period in 2018. The decrease in TLS purchased transportation miles was attributable to the revenue activity discussed above. The increase in cost per mile was due to higherincreased utilization of third party carriers, which are more costly than owner operators.

Salaries, Wages, and Benefits


TLS salaries, wages and employee benefits decreased by $0.5 million, or 9.8%5.1%, to $4.6$9.3 million infor the first quarter ofsix months ended June 30, 2019 from $5.1$9.8 million in the same period ofin 2018.  Salaries, wages and employee benefits were 10.1% of TLS’s operating revenue in the first quarter ofsix months ended June 30, 2019 compared to 11.1%10.3% for the same period in 2018.  The slight decrease in salaries, wages and employee benefits as a percentage of revenue was mostly attributable to a decrease in Company-employed driver pay due tomiles partly offset by an increase in employee salaries, wages and benefits as a decrease in miles driven.percentage of revenue.
Operating Leases
TLS operating leases decreased $0.1increased $0.2 million, or 66.7%, to $0.1$0.5 million for the first quarter ofsix months ended June 30, 2019 from $0.2$0.3 million for the same period in 2018.  Operating leases were 0.2%0.5% of TLS operating revenue for the first quarter ofsix months ended June 30, 2019 compared to 0.4%0.3% for the same period in 2018. The decreaseincrease was due to an increase in tractor leases to replace older owned equipment partly offset by a decrease in trailer rentals, as TLS utilized more purchased trailers in first quarter of 2019 compared to the same period in 2018.rentals.
Depreciation and Amortization


TLS depreciation and amortization decreased $0.2 million, or 11.1%6.1%, to $1.6$3.1 million infor the first quarter ofsix months ended June 30, 2019 from $1.8$3.3 million forin the same period in 2018.  Depreciation and amortization expense as a percentage of TLS operating revenue was 3.5%3.4% for the first quarter ofsix months ended June 30, 2019 compared to 3.9% for3.5% in the same period in 2018. The decrease was due to lower tractor depreciation, as older units were not replaced due to lower Company-employed driver miles.with tractor leases mentioned above.
Insurance and Claims


TLS insurance and claims expense was $1.0increased $0.3 million, or 15.0%, to $2.3 million for the threesix months ended March 31,June 30, 2019 andfrom $2.0 million for the six months ended June 30, 2018.  Insurance and claims were 2.2%2.5% of operating revenue for the threesix months ended March 31,June 30, 2019 andcompared to 2.1% in the same period in 2018. LowerThe increase was primarily due to higher vehicle insurance premiums, and vehicle claims reserves were offset by higher cargo claims.and claims related fees. At a consolidated level, vehicle claims reserves increased; see discussion in the "Other operations" section below.
Fuel Expense


TLS fuel expense decreased $0.4 million, or 36.4%22.2%, to $0.7$1.4 million for the first quarter ofsix months ended June 30, 2019 from $1.1$1.8 million for the same period in 2018.  Fuel expense as a percentage of TLS operating revenue was 1.5% infor the first quarter ofsix months ended June 30, 2019 compared to 2.4% for1.9% in the same period ofin 2018. The decrease as was mostly attributable to a decrease inlower year-over-year Company-employed driver miles.
Other Operating Expenses


TLS other operating expenses increased $0.2$0.4 million, or 9.5%9.3%, to $2.3$4.7 million for the threesix months ended March 31,June 30, 2019 from $2.1$4.3 million forin the same period in 2018.  Other operating expenses were 5.0%5.1% of TLS operating revenue in the first quarter ofsix months ended June 30, 2019 compared to 4.5% forin the same period ofin 2018.  Other operating expenses includesincluded equipment maintenance, terminal and office expenses, professional fees and other costs of transiting shipments. The increase was mostly due to an increase in receivables allowance and increased spending on information technology.
Income from Operations
TLS income from operations increaseddecreased by $0.2 million, or 11.8%, to $0.9$1.5 million duringfor the first quarter ofsix months ended June 30, 2019 from breakevencompared to $1.7 million for the same period in 2018.  The improvementdeterioration in income from operations was due to rate increasesa decrease in revenue and higher fuel surcharges to existing customers, and the deliberate shedding of lower margin business.increased insurance costs.




Pool Distribution - ThreeSix Months Ended March 31,June 30, 2019 compared to ThreeSix Months Ended March 31,June 30, 2018


The following table sets forth the historical financial data of our Pool Distribution segment for the threesix months ended March 31,June 30, 2019 and 2018 (in millions):


Pool Distribution Segment Information(In millions)(Unaudited)
  ��                   
Three months endedSix months ended
March 31, Percent of March 31, Percent of   PercentJune 30, Percent of June 30, Percent of   Percent
2019 Revenue 2018 Revenue Change Change2019 Revenue 2018 Revenue Change Change
Operating revenue$45.2
 100.0% $42.7
 100.0% $2.5
 5.9 %$91.0
 100.0% $86.0
 100.0% $5.0
 5.8 %
                      
Operating expenses:    
                 
Purchased transportation13.4
 29.6
 12.1
 28.3
 1.3
 10.7
27.2
 29.9
 24.6
 28.6
 2.6
 10.6
Salaries, wages and employee benefits16.7
 36.9
 15.9
 37.2
 0.8
 5.0
33.6
 36.9
 31.7
 36.9
 1.9
 6.0
Operating leases4.3
 9.5
 3.7
 8.7
 0.6
 16.2
8.6
 9.5
 7.5
 8.7
 1.1
 14.7
Depreciation and amortization1.6
 3.5
 1.8
 4.2
 (0.2) (11.1)3.0
 3.3
 3.5
 4.1
 (0.5) (14.3)
Insurance and claims1.2
 2.7
 0.9
 2.1
 0.3
 33.3
2.7
 3.0
 1.9
 2.2
 0.8
 42.1
Fuel expense1.5
 3.3
 1.6
 3.8
 (0.1) (6.3)3.0
 3.3
 3.3
 3.8
 (0.3) (9.1)
Other operating expenses5.2
 11.5
 5.3
 12.4
 (0.1) (1.9)10.1
 11.1
 10.5
 12.2
 (0.4) (3.8)
Total operating expenses43.9
 97.1
 41.3
 96.7
 2.6
 6.3
88.2
 96.9
 83.0
 96.5
 5.2
 6.3
Income from operations$1.3
 2.9% $1.4
 3.3% $(0.1) (7.1)%
Income (loss) from operations$2.8
 3.1% $3.0
 3.5% $(0.2) (6.7)%


Pool Operating Statistics
  
Three months endedSix months ended
March 31, March 31, PercentJune 30, June 30, Percent
2019 2018 Change2019 2018 Change
Cartons ¹22,316
 20,223
 10.3 %
Revenue per carton$2.02
 $2.11
 (4.3)
Cartons¹45,347
 40,324
 12.5 %
Revenue per Carton$2.01
 $2.13
 (5.6)
Terminals28
 28
  %28
 28
  %
          
¹ In thousands          


Revenues


Pool Distribution ("Pool") operating revenue increased $2.5$5.0 million, or 5.9%5.8%, to $45.2$91.0 million for the threesix months ended March 31,June 30, 2019 from $42.7$86.0 million for the same period in 2018.  The increase was due to rate increases, increased volumes from existing customers and new business wins.
Purchased Transportation

Pool purchased transportation increased $1.3$2.6 million, or 10.7%10.6%, to $13.4$27.2 million for the threesix months ended March 31,June 30, 2019 compared to $12.1$24.6 million for the same period ofin 2018.  Pool purchased transportation as a percentage of revenue was 29.6%29.9% for the threesix months ended March 31,June 30, 2019 compared to 28.3%28.6% for the same period ofin 2018. The increase in Pool purchased transportation as a percentage of revenue was attributable to increased rates charged by, and increased utilization of, third party carriers.




Salaries, Wages, and Benefits


Pool salaries, wages and employee benefits increased $0.8$1.9 million, or 5.0%6.0%, to $16.7$33.6 million for the threesix months ended March 31,June 30, 2019 compared to $15.9$31.7 million for the same period ofin 2018.  As a percentage of Pool operating revenue, salaries, wages and benefits decreased towas 36.9% for the threesix months ended March 31,June 30, 2019 compared to 37.2% for the same period inand 2018.  The decrease in salaries, wages and benefits as a percentage of revenue was the result of decreases in groupGroup health insurance costs and Company-employed driver pay partlydecreased as a percentage of revenue, but were offset by higher dock and office and administrative pay as a percentage of revenue. Dock pay deteriorated as a percentage of revenue as increasingincreased dedicated revenue volumes required the use of more costly contract labor.
Operating Leases


Pool operating leases increased $0.6$1.1 million, or 16.2%14.7%, to $4.3$8.6 million for the threesix months ended March 31,June 30, 2019 compared to $3.7from $7.5 million for the same period ofin 2018.  Operating leases were 9.5% of Pool operating revenue for the threesix months ended March 31,June 30, 2019 compared withto 8.7% in the same period ofin 2018.  Operating leases increased as a percentage of revenue due to increases in tractor leases for the additional revenue discussed above and the use of leased tractors to replace old purchased equipment. The increase as a percentage of revenue was also due to increased facility rent due to terminal expansions to handle increased revenue volumes.
Depreciation and Amortization


Pool depreciation and amortization decreased $0.2$0.5 million, or 11.1%14.3%, to $1.6$3.0 million for the threesix months ended March 31,June 30, 2019 from $1.8$3.5 million for the same period in 2018. Depreciation and amortization expense as a percentage of Pool operating revenue was 3.5% in3.3% for the first quarter ofsix months ended June 30, 2019 compared to 4.2% in4.1% for the same period ofin 2018. The decrease in Pool depreciation and amortization as a percentage of revenue was due to the increase in leased equipment mentioned above instead of purchased equipment.
Insurance and Claims


Pool insurance and claims expense increased $0.3$0.8 million, or 33.3%42.1%, to $1.2$2.7 million for the threesix months ended March 31,June 30, 2019 from $0.9$1.9 million for the same period ofin 2018.  Insurance and claims were 2.7%3.0% of operating revenue for the threesix months ended March 31,June 30, 2019 compared to 2.1%2.2% in the same period ofin 2018. The increase in total dollars and as a percentage of revenue was primarily due to the prior period including a $0.3$0.5 million reimbursement for claims related legal fees. The remaining increase was due to increase cargo claims. At a consolidated level, vehicle claims reserves increased; see discussion in the "Other operations" section below.
Fuel Expense


Pool fuel expense decreased $0.1$0.3 million, or 6.3%9.1%, to $1.5$3.0 million for the first quarter ofsix months ended June 30, 2019 from $1.6$3.3 million in the same period ofin 2018.  Fuel expenses were 3.3% of Pool operating revenue induring the first quarter ofsix months ended June 30, 2019 compared to 3.8% forin the same period ofin 2018.  Pool fuel expenses decreasedincreased due to slightly lowerhigher year-over-year fuel prices, higher revenue volumes and increased Company-employed driver usage.miles.
Other Operating Expenses


Pool other operating expenses decreased $0.1$0.4 million, or 1.9%3.8%, to $5.2$10.1 million for the threesix months ended March 31,June 30, 2019 from $5.3compared to $10.5 million infor the same period ofin 2018.  Pool other operating expenses as a percentage of revenue for the first quarter ofsix months ended June 30, 2019 were 11.5%11.1% of operating revenue compared to 12.4%12.2% for the same period ofin 2018.  Other operating expenses includesincluded equipment maintenance, terminal and office expenses, professional fees and other over-the-road costs.  As a percentage of revenue the decrease was primarily attributable to a decrease in equipment maintenanceagent station handling costs as a percentage of revenue due to the increased usage of leased equipment instead of purchased equipment and a decrease inlower agent station revenue volumes.
Income from Operations

Pool income from operations decreased $0.1$0.2 million, or 7.1%6.7%, to $1.3$2.8 million for the first quarter ofsix months ended June 30, 2019 from $1.4$3.0 million for the same period in 2018.  Income from operations as a percentage of Pool operating revenue was 2.9%3.1% for the threesix months ended March 31,June 30, 2019 compared to 3.3% fora 3.5% in the same period ofin 2018. The deterioration in Pool operating income as a percentage of revenue was primarily the result of increased utilization of and higher rates charged by third party carriers and increasingincreased revenue volumes required the use of more costly contract labor. The deterioration was also due to increased cargo claims and the prior year period including a $0.5 million reimbursement of legal fees. These decreases were partly offset by current year revenue rate increases.




Other Operations - ThreeSix Months Ended March 31,June 30, 2019 compared to ThreeSix Months Ended March 31,June 30, 2018


Other operating activity declined from a $1.5$3.9 million operating loss during the threesix months ended March 31,June 30, 2018 to a $3.3$6.9 million operating loss during the threesix months ended March 31,June 30, 2019. The $3.3 million operating loss for the threesix months ended March 31,June 30, 2019 is primarily due toincluded a $1.8$4.0 million increasevehicle claim reserve recorded in self-insurance reserves related to existingthe second quarter of 2019 for pending vehicular claims and $0.6 in self-insurance reserves resulting from analysis ofincreases to our loss development factors for vehicle and workers' compensation claims.claims of $1.4 million and $0.2 million, respectively. The loss was also attributableattributed to $0.7$1.3 million in costs related to the CEO transition.


The $1.5$3.9 million operating loss included in other operations and corporate activities for the threesix months ended March 31,June 30, 2018 was the result of a $1.3included $3.7 million increase in claims activity during 2018 resulting in increases to our loss development factorsreserves for workers' compensation and vehicle claims and $0.2 million of turnincrease in costs from old equipment.reserves for workers' compensation claims.



Critical Accounting Policies


Our unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”).  The preparation of financial statements in accordance with GAAP requires our management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes.  Our estimates and assumptions are based on historical experience and changes in the business environment.  However, actual results may differ from estimates under different conditions, sometimes materially.  Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require management’s most subjective judgments. Management considers our policies on Self-Insurance Loss Reserves, Business Combinations and Goodwill and Other Intangible Assets to be critical. A summary of significant accounting policies is disclosed in Note 1 to the Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K. Our critical accounting policies are further described under the caption “Discussion of Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2018 Annual Report on Form 10-K.


Impact of Recent Accounting Pronouncements


In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use asset with a corresponding lease liability on their balance sheet for most leases classified as operating leases under previous guidance. Lessors are required to recognize a net lease investment for most leases. Additional qualitative and quantitative disclosures are also required. The Company applied the transition requirements as of January 1, 2019, which resulted in recording right-of-use lease assets and corresponding lease liabilities of $133.4$149.5 million and $133.7$150.1 million, respectively, as of March 31,June 30, 2019. There was no impact to the Company's Statements of Comprehensive Income or Statements of Cash Flows. In addition, comparative financial statements have not been presented as allowed per the guidance. Changes to processes and internal controls to meet the standard’s reporting and disclosure requirements have also been implemented. See Note 9, Leases, for additional discussion over this new standard, including the impact on the Company's financial statements.


Liquidity and Capital Resources
 
We have historically financed our working capital needs, including capital expenditures, with cash flows from operations and borrowings under our bank lines of credit.


ThreeSix Months Ended March 31,June 30, 2019 Cash Flows compared to March 31,Six Months Ended June 30, 2018 Cash Flows


Net cash provided by operating activities totaled approximately $41.5$71.8 million for the threesix months ended March 31,June 30, 2019 compared to approximately $40.8$67.0 million for the threesix months ended March 31,June 30, 2018. The $0.7$4.8 million increase in cash provided by operating activities iswas mainly attributable to a $3.8$6.5 million increaseimprovement in collection of receivables and a $1.6$1.2 million increase in accounts payable and accrued expenses. These increases were partly offset by a $1.3 million increase in prepaid expenses and other current assets, a $0.8 million decrease in net earnings after consideration of non-cash items and income taxes. These increases were partly offset by a $4.7$0.8 million increase in accounts payable and accrued expenses.income tax receivables.


Net cash used in investing activities was approximately $3.7$42.3 million for the threesix months ended March 31,June 30, 2019 compared withto approximately $5.7$13.1 million during the threesix months ended March 31,June 30, 2018. Investing activities during the threesix months ended March 31,June 30, 2019 consisted of the acquisition of FSA for $27.0 million and net capital expenditures of $3.7$15.3 million primarily for new trailers, information technology and facility equipment and new trailers.equipment.  Investing activities during the threesix months ended March 31,June 30, 2018 consisted primarily of net capital expenditures of $5.6$12.8 million primarily for new trailers, forklifts and information technology. The proceeds from disposal of property and equipment during the threesix months ended March 31,June 30, 2019 and 2018 were primarily from sales of older tractors and trailers.
  


Net cash used in financing activities totaled approximately $21.3$40.3 million for the threesix months ended March 31,June 30, 2019 compared withto net cash used in financing activities of $26.3$37.7 million for the threesix months ended March 31,June 30, 2018.  The $5.0$2.6 million decreaseincrease was attributable to a $5.8$10.5 million decreaseincrease in the repurchase of common stock. This decrease in cash used was partially offset bystock and a $0.8$1.5 million increase in payments of cash dividends due to an increase in first quarterthe quarterly dividend per share from $0.15 per share in the first six months of 2018 to $0.18 per share partlyfor the first six months of 2019. These increases were mostly offset by a decrease$10.0 million increase in borrowings on the outstanding share count during the three months ended March 31, 2019 compared to the same period in 2018.senior credit facility line of credit.


Credit Facility


See Note 6, Senior Credit Facility to our Consolidated Financial Statements for a discussion of the senior credit facility.


Share Repurchases


See Note 11, Shareholders' Equity to our Consolidated Financial Statements for a discussion of our share repurchases and dividends during during the period.


Forward-Looking Statements


This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. In this Form 10-Q, forward-looking statements include, but are not limited to, any projections of earnings, revenues, dividends, or other financial items or methods of interpretation or measurement; any statement of plans, strategies, and objectives of management for future operations; any statements regarding future performance; any statement regarding future insurance, claims and claims;litigation and any associated estimates or projections; any statements concerning proposed or intended new services or developments; any statements regarding intended expansion through acquisition or greenfield startups; any statements regarding future economic conditions or performance based on our business strategy, reliance on financial instruments or otherwise; any statement regarding certain tax and account matters, including the impact on our financial statements; and any statements of belief and any statements of assumptions underlying any of the foregoing. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.”  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the creditworthiness of our customers and their ability to pay for services rendered, the availability and compensation of qualified independent owner-operators and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2018. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations.  We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.


Our exposure to market risk related to our outstanding debt is not significant and has not changed materially from the information provided in our 2018 Form 10-K.


Item 4.Controls and Procedures.


Disclosure Controls and Procedures


We maintain controls and procedures designed to ensure that we are able to collect the information required to be disclosed in the reports we file with the Securities and Exchange Commission (“SEC”), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on an evaluation of our disclosure controls and procedures as of


the end of the period covered by this report conducted by management, with the participation of the Chief Executive Officer and


Chief Financial Officer, the Chief Executive Officer and Chief Financial Officer believe that these controls and procedures are effective to ensure that we are able to collect, process and disclose the information we are required to disclose in the reports we file with the SEC within the required time periods.


Changes in Internal Control


As part of the implementation of ASU 2016-02, Leases, as of January 1, 2019, the Company implemented changes to internal controls to meet the standard's reporting and disclosure requirements. Management believes that these controls were effective as of March 31,June 30, 2019. There were no other changes in our internal control over financial reporting during the three or six months ended March 31,June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Part II.Other Information
  
Item 1.Legal Proceedings.


From time to time, we are a party to ordinary, routine litigation incidental to and arising in the normal course of our business, most of which involve claims for personal injury and property damage related to the transportation and handling of freight, or workers’ compensation. We do not believe that any of these pending actions, individually or in the aggregate, will have a material adverse effect on our business, financial condition or results of operations.


Item 1A.Risk Factors.


A summary of factors which could affect results and cause results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf, are further described under the caption “Risk Factors” in the Business portion of our 2018 Annual Report on Form 10-K. There have been no changes in the nature of these factors since December 31, 2018.



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


Issuer Purchases of Equity Securities


Information regarding repurchases of our shares during the firstsecond quarter of 2019 is as follows:
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced 2016 Program (1) Total Number of Shares Purchased as Part of Publicly Announced 2019 Program (2) Maximum Number of Shares that May Yet Be Purchased Under the Program (1) (2)
January 1-31, 2019 58,716
 $56.73
 58,716
 
 650,679
February 1-28, 2019 39,756
 64.84
 8,856
 30,900
 4,969,100
March 1-31, 2019 131,400
 62.96
 
 131,400
 4,837,700
Total 229,872
 $61.69
 67,572
 162,300
 4,837,700
           
(1) On July 21, 2016, the Board of Directors approved a stock repurchase program for up to 3.0 million shares of the Company's common stock.
(2) On February 5, 2019, the Board of Directors canceled the Company’s remaining 2016 share repurchase authorization and approved a stock repurchase authorization for up to 5.0 million shares of the Company’s common stock that shall remain in effect until such time as the shares authorized for repurchase are exhausted or until earlier terminated.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
April 1-30, 2019 53,284
 $65.73
 53,284
 4,784,416
May 1-31, 2019 150,200
 60.77
 150,200
 4,634,216
June 1-30, 2019 203,410
 58.04
 203,410
 4,430,806
Total 406,894
 $60.05
 406,894
 4,430,806
         
(1) On February 5, 2019, the Board of Directors canceled the Company’s remaining 2016 share repurchase authorization and approved a share repurchase authorization for up to 5.0 million shares of the Company’s common shares that shall remain in effect until such time as the shares authorized for repurchase are exhausted or until earlier terminated.


Item 3.Defaults Upon Senior Securities.


Not applicable.



Item 4.Mine Safety Disclosures.


Not applicable.


Item 5.Other Information.


Not applicable.




Item 6.Exhibits.


In accordance with SEC Release No. 33-8212, Exhibits 32.1 and 32.2 are to be treated as “accompanying” this report rather than “filed” as part of the report.
 
No. Exhibit
3.1 
3.2 
10.1 
10.2 
10.3 
10.4 
31.1 
31.2 
32.1 
32.2 
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Signatures


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


  Forward Air Corporation
Date: April 25,July 26, 2019By: /s/ Michael J. Morris
  
Michael J. Morris
Chief Financial Officer Senior Vice President and Treasurer
(Principal Financial Officer and Duly Authorized Officer)




Forward Air Corporation
Date: July 26, 2019By: /s/ Christina W. Bottomley
Christina W. Bottomley
Chief Accounting Officer, Vice President and Controller
(Principal Accounting Officer and Duly Authorized Officer)




EXHIBIT INDEX


No. Exhibit
3.1 
3.2 
10.1 
10.2 
10.3 
10.4 
31.1 
31.2 
32.1 
32.2 
101.INS The instance document does not appear in the interactive data file because its XBRL Instance Document tags are embedded within the inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema 
101.CAL XBRL Taxonomy Extension Calculation Linkbase 
101.DEF XBRL Taxonomy Extension Definition Linkbase 
101.LAB XBRL Taxonomy Extension Label Linkbase 
101.PRE XBRL Taxonomy Extension Presentation Linkbase 




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