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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 June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-22490
fwrd-20210630_g1.jpg
FORWARD AIR CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee62-1120025
(State or other jurisdiction of incorporation)(I.R.S. Employer Identification No.)
1915 Snapps Ferry RoadBuilding NGreenevilleTN37745
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code: (423) 636-7000
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each 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 ¨

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 filerxAccelerated filer¨Non-accelerated filer¨Smaller reporting companyEmerging growth company

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

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

 The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of August 5, 2021 was 27,100,389.



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 2.
   
Item 3.
   
Item 4.
Item 5.
Item 6.
   

2

Part I.Financial Information
  
Item 1.Financial Statements (Unaudited).
Forward Air Corporation
Condensed Consolidated Balance Sheets
(unaudited and in thousands, except share and per share amounts)
 June 30,
2021
December 31,
2020
Assets
Current assets:  
Cash and cash equivalents$50,844 $40,254 
Accounts receivable, less allowance of $2,187 in 2021 and $2,273 in 2020
209,187 156,490 
Other receivables16,999  
Other current assets19,982 28,150 
Current assets held for sale 21,002 
Total current assets297,012 245,896 
Property and equipment383,155 380,519 
Less accumulated depreciation and amortization196,168 190,652 
Total property and equipment, net186,987 189,867 
Operating lease right-of-use assets148,651 123,338 
Goodwill254,993 244,982 
Other acquired intangibles, net of accumulated amortization of $100,018 in 2021 and $93,009 in 2020
145,813 145,032 
Other assets48,385 45,181 
Noncurrent assets held for sale 53,097 
Total assets$1,081,841 $1,047,393 
Liabilities and Shareholders’ Equity 
Current liabilities:  
Accounts payable$43,655 $38,371 
Accrued expenses70,894 51,264 
Other current liabilities6,813 10,580 
Current portion of debt and finance lease obligations1,867 1,801 
Current portion of operating lease liabilities46,042 43,680 
Current liabilities held for sale 25,924 
Total current liabilities169,271 171,620 
Long-term debt and finance lease obligations, less current portion and debt issuance costs161,729 117,408 
Operating lease liabilities, less current portion103,280 80,346 
Other long-term liabilities55,741 54,129 
Deferred income taxes41,471 41,986 
Noncurrent liabilities held for sale 34,575 
Shareholders’ equity:  
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2021 and 2020
  
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 27,120,389 in 2021 and 27,316,434 in 2020
271 273 
Additional paid-in capital252,466 242,916 
Retained earnings297,612 304,140 
Total shareholders’ equity550,349 547,329 
Total liabilities and shareholders’ equity$1,081,841 $1,047,393 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3

    
Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited and in thousands, except per share amounts)
 Three Months Ended
 June 30,
2021
June 30,
2020
Operating revenues$420,671 $281,678 
Operating expenses: 
Purchased transportation215,217 142,069 
Salaries, wages and employee benefits84,641 63,772 
Operating leases20,370 17,387 
Depreciation and amortization9,414 9,413 
Insurance and claims10,891 7,722 
Fuel expense4,059 2,519 
Other operating expenses33,955 24,882 
Total operating expenses378,547 267,764 
Income from continuing operations42,124 13,914 
Other expense: 
Interest expense(1,323)(1,198)
Total other expense(1,323)(1,198)
Income before income taxes40,801 12,716 
Income tax expense10,124 3,491 
Net income from continuing operations30,677 9,225 
Loss from discontinued operation, net of tax (6,071)
Net income and comprehensive income $30,677 $3,154 
Basic net income (loss) per share
Continuing operations$1.12 $0.33 
Discontinued operation (0.22)
Net income per basic share$1.12 $0.11 
Diluted net income (loss) per share
Continuing operations$1.11 $0.33 
Discontinued operation (0.22)
Net income per diluted share$1.11 $0.11 
Dividends per share$0.21 $0.18 


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


4

Forward Air Corporation
Condensed Consolidated Statements of Comprehensive Income
(unaudited and in thousands, except per share amounts)
 Six Months Ended
 June 30,
2021
June 30,
2020
Operating revenues$782,873 $587,235 
Operating expenses:
Purchased transportation399,825 292,667 
Salaries, wages and employee benefits159,538 133,331 
Operating leases39,537 35,271 
Depreciation and amortization18,651 18,747 
Insurance and claims20,632 17,766 
Fuel expense7,761 6,532 
Other operating expenses72,081 53,234 
Total operating expenses718,025 557,548 
Income from continuing operations64,848 29,687 
Other expense:
Interest expense(2,488)(2,051)
Total other expense(2,488)(2,051)
Income before income taxes62,360 27,636 
Income tax expense14,969 6,995 
Net income from continuing operations47,391 20,641 
Loss from discontinued operation, net of tax(5,533)(9,112)
Net income and comprehensive income $41,858 $11,529 
Basic net income (loss) per share
Continuing operations$1.72 $0.72 
Discontinued operation(0.20)(0.31)
Net income per basic share$1.52 $0.41 
Diluted net income (loss) per share
Continuing operations$1.71 $0.72 
Discontinued operation(0.20)(0.32)
Net income per diluted share$1.51 $0.40 
Dividends per share$0.42 $0.36 

The accompanying notes are an integral part of the condensed consolidated financial statements.
5

Forward Air Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited and in thousands)
 Six Months Ended
 June 30,
2021
June 30,
2020
 
Operating activities:
Net income from continuing operations$47,391 $20,641 
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations
Depreciation and amortization18,651 18,747 
Change in fair value of earn-out liability(385)(2,702)
Share-based compensation expense5,578 5,507 
Provision for revenue adjustments3,525 1,787 
Deferred income tax (benefit) expense(572)4,668 
Other189 697 
Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses:
Accounts receivable(51,018)2,979 
Other receivables(13,491) 
Other current and noncurrent assets6,746 (29)
Accounts payable and accrued expenses23,047 7,634 
Net cash provided by operating activities of continuing operations39,661 59,929 
Investing activities:
Proceeds from sale of property and equipment1,314 988 
Purchases of property and equipment(8,575)(14,214)
Purchase of a business, net of cash acquired(22,543)(55,931)
Net cash used in investing activities of continuing operations(29,804)(69,157)
Financing activities:
Repayments of finance lease obligations(954)(676)
Proceeds from revolving credit facility45,000 65,000 
Payment of earn-out liability (5,284)
Proceeds from issuance of common stock upon stock option exercises3,570  
Payments of dividends to stockholders(11,565)(10,087)
Repurchases and retirement of common stock(33,992)(15,259)
Proceeds from common stock issued under employee stock purchase plan388 294 
Payment of minimum tax withholdings on share-based awards(2,832)(3,286)
Contributions from (distributions to) subsidiary held for sale1,118 (5,307)
Net cash provided by financing activities from continuing operations733 25,395 
Net increase in cash and cash equivalents of continuing operations10,590 16,167 
Cash from discontinued operation:
Net cash used in operating activities of discontinued operation(6,902)(4,672)
Net cash provided by (used in) investing activities of discontinued operation8,020 (635)
Net cash (used in) provided by financing activities of discontinued operation(1,118)5,307 
Net increase in cash and cash equivalents10,590 16,167 
Cash and cash equivalents at beginning of period of continuing operations40,254 64,749 
Cash at beginning of period of discontinued operation   
Net increase in cash and cash equivalents10,590 16,167 
Less: cash at end of period of discontinued operation  
Cash and cash equivalents at end of period of continuing operations$50,844 $80,916 

 The accompanying notes are an integral part of the condensed consolidated financial statements.
6



Forward Air Corporation
Condensed Consolidated Statements of Shareholders’ Equity
(unaudited and in thousands)
 Common StockAdditional Paid-in
Capital
Retained Earnings
Total Shareholders’ Equity
 SharesAmount
Balance at December 31, 202027,316 $273 $242,916 $304,140 $547,329 
Net income— — — 11,181 11,181 
Stock options exercised40 — 2,147 — 2,147 
Share-based compensation expense— — 2,613 — 2,613 
Payment of dividends to shareholders— — 3 (5,800)(5,797)
Payment of minimum tax withholdings on share-based awards(35)— — (2,744)(2,744)
Repurchases and retirement of common stock(114)(1)— (9,997)(9,998)
Issuance of share-based awards111 1 (1)—  
Balance at March 31, 202127,318 $273 $247,678 $296,780 $544,731 
Net income— — — 30,677 30,677 
Stock options exercised26 — 1,416 — 1,416 
Common stock issued under employee stock purchase plan5 — 388 — 388 
Share-based compensation expense— — 2,981 — 2,981 
Payment of dividends to shareholders— — 3 (5,771)(5,768)
Payment of minimum tax withholdings on share-based awards(1)— — (82)(82)
Repurchases and retirement of common stock(252)(2)— (23,992)(23,994)
Issuance of share-based awards24 — — — — 
Balance at June 30, 202127,120 $271 $252,466 $297,612 $550,349 

 Common StockAdditional Paid-in
Capital
Retained Earnings
Total Shareholders’ Equity
 SharesAmount
Balance at December 31, 201927,850 $279 $226,869 $350,034 $577,182 
Net income— — — 8,375 8,375 
Share-based compensation expense— — 3,266 — 3,266 
Payment of dividends to shareholders— — 2 (5,052)(5,050)
Payment of minimum tax withholdings on share-based awards(42)— — (2,672)(2,672)
Repurchases and retirement of common stock(268)(3)— (15,256)(15,259)
Issuance of share-based awards139 1 (2)— (1)
Balance at March 31, 202027,679 $277 $230,135 $335,429 $565,841 
Net income— — — 3,155 3,155 
Common stock issued under employee stock purchase plan7 — 295 — 295 
Share-based compensation expense— — 2,654 — 2,654 
Payment of dividends to shareholders— — 3 (5,042)(5,039)
Payment of minimum tax withholdings on share-based awards(13)— — (613)(613)
Issuance of share-based awards56 — (1)— (1)
Balance at June 30, 202027,729 $277 $233,086 $332,929 $566,292 

The accompanying notes are an integral part of the condensed consolidated financial statements.
7

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

1.    Description of Business and Basis of Presentation

Basis of Presentation and Principles of Consolidation

Forward Air Corporation and its subsidiaries (“Forward Air or the “Company) is a leading asset-light freight and logistics company. The Company has two reportable segments: Expedited Freight and Intermodal. The Company conducts business in the United States and Canada.
The Expedited Freight segment operates a comprehensive national network to provide expedited regional, inter-regional and national less-than-truckload (“LTL) services. Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

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

The condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, and cash flows at the dates and for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Results for interim periods are not necessarily indicative of the results for the year.

The Board approved a strategy to divest the Pool Distribution business (“Pool) on April 23, 2020, and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. Pool offered this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States. Accordingly, the results of operations for Pool have been presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for all period presented. In addition, the assets and liabilities were presented as held for sale in the Condensed Consolidated Balance Sheets for the prior period. Unless otherwise noted, amounts, percentages and discussion for all periods reflect the results of operations, financial condition and cash flows from our continuing operations.

2.     Revenue Recognition

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

The Company generates revenue from the delivery of a shipment and the completion of related services. Revenue for the delivery of a shipment is recorded over time to coincide with when customers simultaneously receive and consume the benefits of the delivery services. Accordingly, revenue billed to a customer for the transportation of freight are recognized over the transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a shipment based on the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of a reporting period. The determination of the transit period and how much of it has been completed as of a given reporting date may require the Company to make judgments that impact the timing of revenue recognized. For delivery of shipments with a pick-up date in one reporting period and a delivery date in another reporting period, the Company recognizes revenue based on relative transit time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is
8

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Upon delivery of a shipment or related service, customers are billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage.

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

3.    Discontinued Operation and Held for Sale

As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool. The Pool business met the criteria for held for sale classification. As a result, the assets and liabilities of Pool were presented separately under the captions “Current assets held for sale”, “Noncurrent assets held for sale”, “Current liabilities held for sale” and “Noncurrent liabilities held for sale” in the Condensed Consolidated Balance Sheets as of December 31, 2020. The results of Pool were reclassified to “Loss from discontinued operation, net of tax” in the Condensed Consolidated Statements of Comprehensive Income for three and six months ended June 30, 2021 and 2020. Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and have been reallocated to continuing operations. These costs were reclassified to the eliminations and other column in the segment reconciliation in Note 13, Segment Reporting.
Sale of Pool
On February 12, 2021, the Company completed the sale of the Pool business for $8,000 in cash and up to a $12,000 earn-out based on earnings before interest, taxes, depreciation and amortization. The sale agreement for Pool included an earn-out based on the achievement of certain earnings before interest, taxes, depreciation and amortization attainment over an eleven-month period, beginning February 1, 2021. The Company will receive payment for the amount earned in the first quarter of 2022, and if elected, the buyer may defer the payment of up to half of the amount earned to first quarter of 2023. The estimated fair value of the earn-out asset on the date of sale was $6,967. The fair value was based on the estimated eleven-month period of the earnings before interest, taxes, depreciation and amortization and was calculated using a Monte Carlo simulation model.

The weighted-average assumptions under the Monte Carlo simulation model were as follows:

February 12, 2021
Counterparty credit spread1.2%
Earnings before interest, taxes, depreciation and amortization discount rate15.0%
Asset volatility55.0%

Subsequent to the date of sale, the Company will recognize any increases in the carrying value of the earn-out asset when the change is realized and will evaluate the earn-out asset for impairment at each reporting period. The Company concluded there were no indicators of impairment during the three months ended June 30, 2021. As of June 30, 2021, the Company recorded $3,508 in “Other receivables and $3,459 in “Other assets in the Condensed Consolidated Balance Sheets.

Transition Services Agreement

On February 12, 2021, the Company entered into a Transition Services Agreement (“TSA) with TOG FAS Holdings LLC, the buyer of the Pool business. Under the TSA, the Company performs certain services on an interim basis in order to facilitate the orderly transition of the Pool business. The effective date of the TSA was February 12, 2021 and will remain in effect until the date all services have been completed, but no more than six months following effective date. The TSA provides the right to extend the term of the TSA with no limit on the number of the mutually agreed upon extensions. In exchange for the services performed by the Company under the TSA, the Company receives a monthly service charge. For the three and six
9

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
months ended June 30, 2021, the Company recognized $241 and $412, respectively, in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income, for the services performed under the TSA.

Additionally, under the TSA, the Company remits payments to outside vendors on behalf of TOG FAS Holdings LLC for expenses incurred by the Pool business up to a limit of $18,000. The Company is reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment is remitted. As of June 30, 2021, the Company recorded a receivable in the amount of $13,491 in “Other receivables in the Condensed Consolidated Balance Sheets for the reimbursement due to the Company.

Summarized Discontinued Operation Financial Information

A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 is as follows:

 Three Months EndedSix Months Ended
 June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Operating revenues$ $13,974 $17,087 $50,926 
Operating expenses:  
Purchased transportation 3,147 4,290 12,683 
Salaries, wages and employee benefits 8,394 9,674 25,507 
Operating leases 4,966 2,907 10,646 
Depreciation and amortization 362  1,657 
Insurance and claims 1,287 929 3,013 
Fuel expense 413 644 1,740 
Other operating expenses 3,495 2,087 7,841 
Total operating expenses 22,064 20,531 63,087 
Loss from discontinued operation (8,090)(3,444)(12,161)
Loss on sale of business   (2,860) 
Loss from discontinued operation before income taxes (8,090)(6,304)(12,161)
Income tax benefit (2,019)(771)(3,049)
Loss from discontinued operation, net of tax$ $(6,071)$(5,533)$(9,112)
10

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

4.    Acquisitions

Expedited Freight Acquisition

As part of the Company’s strategy to expand final mile pickup and delivery operations, in April 2019, the Company acquired certain assets and liabilities of FSA Network, Inc., doing business as FSA Logistix (“FSA”), for $27,000 and a potential earn-out of up to $15,000. The purchase agreement for FSA included an earn-out up to $15,000 based on the achievement of certain revenue milestones over two one-year periods, beginning May 1, 2019. The estimated fair value of the earn-out liability on the date of acquisition was $11,803. The fair value was based on the estimated two-year performance of the acquired customer revenue and was calculated using a Monte Carlo simulation model. The fair value of the earn-out liability was adjusted at each reporting period based on changes in the expected cash flows and related assumptions used in the Monte Carlo simulation model. During the three and six months ended June 30, 2021, the fair value of the earn-out changed by ($4) and ($52), respectively, and the change in fair value was recorded in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income. During the three and six months ended June 30, 2020, the fair value of the earn-out changed by ($2,108) and ($2,702), respectively, and the change in fair value was recorded in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income. The first one-year period ended in the second quarter of 2020 and the Company paid $5,284 based on the terms of the purchase agreement. The second one-year period ended in the second quarter of 2021 and the Company will remit payment in the third quarter of 2021 based on the terms of purchase agreement. As of June 30, 2021 and December 31, 2020, the fair value of the earn-out liability was $6,813 and $6,865, respectively, which was reflected in “Other current liabilities in the Condensed Consolidated Balance Sheets.

In May 2021, the Company acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,543. J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia. The acquisition of J&P supports the Company’s strategic growth plan by expanding pickup and delivery, less than truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States. The acquisition was financed by cash flow from operations. The results of J&P have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment.

Intermodal Acquisition

In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport) for $15,510 and a potential earn-out up to $2,000. Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois. The acquisition of Proficient Transport supports the Company’s strategic growth plan by expanding the intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and introduces a new location in Ohio. The acquisition was financed by cash flows from operations. The results of Proficient Transport have been included in the Company’s Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.

The purchase agreement for Proficient Transport included an earn-out up to $2,000 based on the achievement of certain revenue milestones over a one-year period, beginning March 1, 2021. The estimated fair value of the earn-out liability on the date of acquisition was $829. The fair value was based on the estimated one-year performance of the acquired customer revenue and was calculated using the option pricing method. The weighted-average assumptions used to calculate the estimated fair value of the earn-out under the option pricing method were as follows:
February 28, 2021June 30, 2021
Risk-free rate0.1%0.1%
Revenue discount rate8.3%8.3%
Revenue volatility27.3%19.7%


11

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
During both the three and six months ended June 30, 2021, the fair value of the earn-out changed by ($333) and the change in the fair value was recorded in “Other operating expenses in the Condensed Consolidated Statements of Comprehensive Income. As of June 30, 2021, the fair value of the earn-out liability was $496, which was reflected in “Other current liabilities in the Condensed Consolidated Balance Sheets.

Fair Value of Assets Acquired and Liabilities Assumed

Assets acquired and liabilities assumed as of the acquisition date are presented in the following table:
Proficient TransportJ&P
February 28, 2021May 30, 2021
Tangible assets:
Accounts receivable$4,171 $1,686 
Prepaid expenses and other current assets 32 
Property and equipment140 934 
Other assets24 3 
Total tangible assets4,335 2,655 
Intangible assets:
Customer relationships6,060 1,580 
Non-compete agreements18 132 
Goodwill6,249 3,762 
Total intangible assets12,327 5,474 
Total assets acquired16,662 8,129 
Liabilities assumed:
Current liabilities323 586 
Total liabilities assumed323 586 
Net assets acquired$16,339 $7,543 

The fair value of the assets acquired and liabilities assumed are preliminary based on the information available as of the acquisition date through the date of this filing.


The weighted-average useful life of acquired intangible assets as of the acquisition date are summarized in the following table:
Weighted-Average Useful Lives
Proficient TransportJ&P
Customer relationships8 years12 years
Non-compete agreements1 year5 years
12

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021


5.    Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the six months ended June 30, 2021 are summarized as follows:
Expedited FreightIntermodalConsolidated
Balance as of December 31, 2020$165,268 $79,714 $244,982 
Acquisitions3,762 6,249 10,011 
Balance as of June 30, 2021$169,030 $85,963 $254,993 

Goodwill is tested for impairment on an annual basis and more often if indications of impairment exist. The Company conducts its annual impairment analyses as of June 30 each year. Based on the current macroeconomic conditions, the Company assessed its goodwill and other intangible assets for indications of impairment as of June 30, 2021. The Company concluded there were no indicators of impairment during the six months ended June 30, 2021.

Other Intangible Assets

Changes in the carrying amount of acquired intangible assets during the six months ended June 30, 2021 are summarized as follows:

Gross Carrying Amount
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2020$228,416 $8,125 $1,500 $238,041 
Acquisitions7,640 150  7,790 
Balance as of June 30, 2021$236,056 $8,275 $1,500 $245,831 

Accumulated Amortization
Customer Relationships1
Non-Compete AgreementsTrade NamesTotal
Balance as of December 31, 2020$85,930 $5,579 $1,500 $93,009 
Amortization expense6,344 665  7,009 
Balance as of June 30, 2021$92,274 $6,244 $1,500 $100,018 

1 Carrying value as of June 30, 2021 and December 31, 2020 is inclusive of $16,501 of accumulated impairment.
13

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021




6.    Stock Incentive Plans

Stock Incentive Plan

The Company recorded shared-based compensation expense as follows for the three and six months ended June 30, 2021 and 2020:
Three Months EndedSix Months Ended
June 30,
2021
June 30,
2020
June 30,
2021
June 30,
2020
Salaries, wages and employee benefits - continuing operations$2,463 $2,154 $4,732 $4,971 
Salaries, wages and employee benefits - discontinued operation 22216410
Total share-based compensation expense$2,463 $2,376 $4,748 $5,381 

In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 of common shares to employees. As of June 30, 2021, approximately 797 shares remain available for grant under the Omnibus Plan.

Stock Options
     
Share-based compensation expense associated with stock options is amortized ratably over the vesting period. The Company estimates the fair value of the grants using the Black-Scholes option-pricing model.

Stock option transactions during the six months ended June 30, 2021 on a continuing operations basis were as follows:

Stock OptionsWeighted-Average Exercise Price
Outstanding as of January 1, 2021359 $55.79 
Granted39 75.05 
Exercised(52)54.57 
Forfeited  
Outstanding as of June 30, 2021346 $58.30 

As of June 30, 2021, the total share-based compensation expense related to unvested stock options net yet recognized was $1,002, and the weighted-average period over which it is expected to be recognized is approximately two years.


14

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021
Stock option transactions during the six months ended June 30, 2021 on a discontinued operation basis were as follows:
Stock OptionsWeighted-Average Exercise Price
Outstanding as of January 1, 202114 $52.15 
Granted  
Exercised(14)52.15 
Forfeited  
Outstanding as of June 30, 2021 $ 

Restricted Shares

Restricted shares are restricted from sale or transfer until vesting, and restrictions lapse in three equal installments beginning one year after the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period. Restricted share transactions during the six months ended June 30, 2021 on a continuing operations basis were as follows:
Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 2021210 $62.78 
Granted108 75.28 
Vested(98)61.49 
Forfeited(15)69.91 
Outstanding as of June 30, 2021205 $69.31 

As of June 30, 2021, the total share-based compensation expense related to restricted shares not yet recognized was $11,227, and the weighted-average period over which it is expected to be recognized is approximately two years.

Restricted share transactions during the six months ended June 30, 2021 on a discontinued operation basis were as follows:
Restricted SharesWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 202110 $61.25 
Granted  
Vested(5)60.49 
Forfeited(5)61.92 
Outstanding as of June 30, 2021 $ 

Performance Awards

Performance awards are based on achieving certain financial targets, such as targets for earnings before interest, taxes, depreciation and amortization, and the Company’s total shareholder return as compared to the total shareholder return of a selected peer group, as determined by the Company’s Board of Directors. Performance targets are set at the beginning of each three-year measurement period. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, the compensation expense is based on the projected assessment of the level of performance that will be achieved.

15

Forward Air Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands, except per share data)
June 30, 2021

Performance award transactions during the six months ended June 30, 2021 on a continuing operations basis were as follows assuming target levels of performance:
Performance AwardsWeighted-Average Grant Date Fair Value
Outstanding as of January 1, 202165 $67.62 
Granted36 87.33 
Earned(11)72.30 
Forfeited or unearned(11)70.22 
Outstanding as June 30, 202179 $75.61 

As of June 30, 2021, the total share-based compensation expense related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance that will be achieved, was $4,621, and the weighted-average period over which it is expected to be recognized is approximately three years.


Employee Stock Purchase Plan

As of June 30, 2021, the Company is authorized to issue up to a remaining 330 shares of common stock to employees under the 2005 Employee Stock Purchase Plan (the “ESPP”). 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.

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

Six Months Ended
June 30,
2021
June 30,
2020
Shares purchased by participants under the ESPP5 6 
Average purchase price$68.76 $44.84 
Weighted-average fair value of each purchase right under the ESPP granted ¹$20.99