FORWARD AIR CORP 10-Q

Item 1. Financial Statements (Unaudited). Forward Air Corporation Condensed Consolidated Balance Sheets (unaudited and in thousands, except share and per share amounts) September 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 51,930 $ 40,254 Accounts receivable, less allowance of $ 2,828 in 2021 and $ 2,273 in 2020 205,165 156,490 Other receivables 14,218 — Other current assets 17,948 28,150 Current assets held for sale — 21,002 Total current assets 289,261 245,896 Property and equipment 396,094 380,519 Less accumulated depreciation and amortization 199,875 190,652 Total property and equipment, net 196,219 189,867 Operating lease right-of-use assets 142,623 123,338 Goodwill 254,776 244,982 Other acquired intangibles, net of accumulated amortization of $ 103,635 in 2021 and $ 93,009 in 2020 142,196 145,032 Other assets 45,433 45,181 Noncurrent assets held for sale — 53,097 Total assets $ 1,070,508 $ 1,047,393 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 42,885 $ 38,371 Accrued expenses 63,577 51,264 Other current liabilities 4,155 10,580 Current portion of debt and finance lease obligations 1,841 1,801 Current portion of operating lease liabilities 46,008 43,680 Current liabilities held for sale — 25,924 Total current liabilities 158,466 171,620 Long-term debt and finance lease obligations, less current portion and debt issuance costs 161,312 117,408 Operating lease liabilities, less current portion 97,181 80,346 Other long-term liabilities 57,354 54,129 Deferred income taxes 40,659 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 - 26,958,243 in 2021 and 27,316,434 in 2020 270 273 Additional paid-in capital 255,071 242,916 Retained earnings 300,195 304,140 Total shareholders’ equity 555,536 547,329 Total liabilities and shareholders’ equity $ 1,070,508 $ 1,047,393 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Comprehensive Income (unaudited and in thousands, except per share amounts) Three Months Ended September 30, 2021 September 30, 2020 Operating revenues $ 419,625 $ 331,997 Operating expenses: Purchased transportation 205,474 173,054 Salaries, wages and employee benefits 84,410 66,927 Operating leases 20,536 17,327 Depreciation and amortization 9,416 9,172 Insurance and claims 9,984 8,671 Fuel expense 4,457 2,715 Other operating expenses 42,872 30,621 Total operating expenses 377,149 308,487 Income from continuing operations 42,476 23,510 Other expense: Interest expense ( 973 ) ( 1,304 ) Total other expense ( 973 ) ( 1,304 ) Income before income taxes 41,503 22,206 Income tax expense 11,000 5,214 Net income from continuing operations 30,503 16,992 Loss from discontinued operation, net of tax ( 6,967 ) ( 345 ) Net income and comprehensive income $ 23,536 $ 16,647 Basic net income (loss) per share Continuing operations $ 1.12 $ 0.61 Discontinued operation ( 0.26 ) ( 0.01 ) Net income per basic share $ 0.86 $ 0.60 Diluted net income (loss) per share Continuing operations $ 1.12 $ 0.61 Discontinued operation ( 0.26 ) ( 0.01 ) Net income per diluted share $ 0.86 $ 0.60 Dividends per share $ 0.21 $ 0.18 The accompanying notes are an integral part of the condensed consolidated financial statements. 4 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Comprehensive Income (unaudited and in thousands, except per share amounts) Nine Months Ended September 30, 2021 September 30, 2020 Operating revenues $ 1,202,498 $ 919,232 Operating expenses: Purchased transportation 605,299 465,721 Salaries, wages and employee benefits 243,948 200,258 Operating leases 60,073 52,598 Depreciation and amortization 28,067 27,919 Insurance and claims 30,616 26,437 Fuel expense 12,218 9,247 Other operating expenses 114,953 83,854 Total operating expenses 1,095,174 866,034 Income from continuing operations 107,324 53,198 Other expense: Interest expense ( 3,461 ) ( 3,355 ) Total other expense ( 3,461 ) ( 3,355 ) Income before income taxes 103,863 49,843 Income tax expense 25,969 12,209 Net income from continuing operations 77,894 37,634 Loss from discontinued operation, net of tax ( 12,500 ) ( 9,458 ) Net income and comprehensive income $ 65,394 $ 28,176 Basic net income (loss) per share Continuing operations $ 2.84 $ 1.35 Discontinued operation ( 0.46 ) ( 0.34 ) Net income per basic share 1 $ 2.39 $ 1.01 Diluted net income (loss) per share Continuing operations $ 2.83 $ 1.35 Discontinued operation ( 0.46 ) ( 0.34 ) Net income per diluted share $ 2.37 $ 1.01 Dividends per share $ 0.63 $ 0.54 1 Rounding may impact summation of amounts. The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Cash Flows (unaudited and in thousands) Nine Months Ended September 30, 2021 September 30, 2020 Operating activities: Net income from continuing operations $ 77,894 $ 37,634 Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations Depreciation and amortization 28,067 27,919 Change in fair value of earn-out liability ( 385 ) ( 2,209 ) Share-based compensation expense 8,179 7,852 Provision for revenue adjustments 5,504 2,972 Deferred income tax (benefit) expense ( 1,384 ) 4,317 Other 406 714 Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses: Accounts receivable ( 49,086 ) ( 20,436 ) Other receivables ( 14,218 ) — Other current and noncurrent assets 8,198 1,253 Accounts payable and accrued expenses 19,577 20,477 Net cash provided by operating activities of continuing operations 82,752 80,493 Investing activities: Proceeds from sale of property and equipment 2,339 1,415 Purchases of property and equipment ( 23,015 ) ( 16,439 ) Purchase of a business, net of cash acquired ( 23,053 ) ( 55,931 ) Net cash used in investing activities of continuing operations ( 43,729 ) ( 70,955 ) Financing activities: Repayments of finance lease obligations ( 1,445 ) ( 529 ) Proceeds from revolving credit facility 45,000 65,000 Payments on revolving credit facility — ( 20,000 ) Payment of debt issuance costs ( 119 ) — Payment of earn-out liability ( 6,519 ) ( 5,284 ) Proceeds from issuance of common stock upon stock option exercises 3,563 1,901 Payments of dividends to shareholders ( 17,270 ) ( 15,090 ) Repurchases and retirement of common stock ( 48,989 ) ( 45,248 ) Proceeds from common stock issued under employee stock purchase plan 388 294 Payment of minimum tax withholdings on share-based awards ( 3,074 ) ( 3,444 ) Contributions from (distributions to) subsidiary held for sale 1,118 ( 8,897 ) Net cash used in financing activities from continuing operations ( 27,347 ) ( 31,297 ) Net increase (decrease) in cash and cash equivalents of continuing operations 11,676 ( 21,759 ) Cash from discontinued operation: Net cash used in operating activities of discontinued operation ( 6,902 ) ( 8,090 ) Net cash provided by (used in) investing activities of discontinued operation 8,020 ( 807 ) Net cash (used in) provided by financing activities of discontinued operation ( 1,118 ) 8,897 Net increase (decrease) in cash and cash equivalents 11,676 ( 21,759 ) Cash and cash equivalents at beginning of period of continuing operations 40,254 64,749 Cash at beginning of period of discontinued operation — — Net increase (decrease) in cash and cash equivalents 11,676 ( 21,759 ) Less: cash at end of period of discontinued operation — — Cash and cash equivalents at end of period of continuing operations $ 51,930 $ 42,990 The accompanying notes are an integral part of the condensed consolidated financial statements. 6 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Shareholders’ Equity (unaudited and in thousands) Common Stock Additional Paid-in Capital Retained Earnings Total Shareholders’ Equity Shares Amount Balance at December 31, 2020 27,316 $ 273 $ 242,916 $ 304,140 $ 547,329 Net income — — — 11,181 11,181 Stock options exercised 40 — 2,147 — 2,147 Share-based compensation expense — — 2,613 — 2,613 Payment of dividends to shareholders — — 3 ( 5,800 ) ( 5,797 ) Payment of minimum tax withholdings on share-based awards ( 35 ) — — ( 2,744 ) ( 2,744 ) Repurchases and retirement of common stock ( 114 ) ( 1 ) — ( 9,997 ) ( 9,998 ) Issuance of share-based awards 111 1 ( 1 ) — — Balance at March 31, 2021 27,318 $ 273 $ 247,678 $ 296,780 $ 544,731 Net income — — — 30,677 30,677 Stock options exercised 26 — 1,416 — 1,416 Common stock issued under employee stock purchase plan 5 — 388 — 388 Share-based compensation expense — — 2,981 — 2,981 Payment of dividends to shareholders — — 3 ( 5,771 ) ( 5,768 ) Payment of minimum tax withholdings on share-based awards ( 1 ) — — ( 82 ) ( 82 ) Repurchases and retirement of common stock ( 252 ) ( 2 ) — ( 23,992 ) ( 23,994 ) Issuance of share-based awards 24 — — — — Balance at June 30, 2021 27,120 $ 271 $ 252,466 $ 297,612 $ 550,349 Net income — — — 23,536 23,536 Share-based compensation expense — — 2,601 — 2,601 Payment of dividends to shareholders — — 4 ( 5,709 ) ( 5,705 ) Payment of minimum tax withholdings on share-based awards ( 3 ) — — ( 248 ) ( 248 ) Repurchases and retirement of common stock ( 169 ) ( 1 ) — ( 14,996 ) ( 14,997 ) Issuance of share-based awards 10 — — — — Balance at September 30, 2021 26,958 $ 270 $ 255,071 $ 300,195 $ 555,536 7 Table of Contents Common Stock Additional Paid-in Capital Retained Earnings Total Shareholders’ Equity Shares Amount Balance at December 31, 2019 27,850 $ 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 awards 139 1 ( 2 ) — ( 1 ) Balance at March 31, 2020 27,679 $ 277 $ 230,135 $ 335,429 $ 565,841 Net income — — — 3,155 3,155 Common stock issued under employee stock purchase plan 7 — 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 awards 56 — ( 1 ) — ( 1 ) Balance at June 30, 2020 27,729 $ 277 $ 233,086 $ 332,929 $ 566,292 Net income — — — 16,647 16,647 Stock options exercised 42 1 1,901 — 1,902 Share-based compensation expense — — 2,507 — 2,507 Payment of dividends to shareholders — — 3 ( 5,008 ) ( 5,005 ) Payment of minimum tax withholdings on share-based awards ( 3 ) — — ( 158 ) ( 158 ) Repurchases and retirement of common stock ( 519 ) ( 5 ) — ( 29,984 ) ( 29,989 ) Issuance of share-based awards 9 — — — — Balance at September 30, 2020 27,258 $ 273 $ 237,497 $ 314,426 $ 552,196 The accompanying notes are an integral part of the condensed consolidated financial statements. 8 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 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 provides expedited regional, inter-regional and national less-than-truckload (“LTL ” ), truckload and final mile services. Expedited Freight also offers customers local pick-up and delivery and other services including shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling. 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 conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the 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. On April 23, 2020, the Board of Directors (the “Board ”) of the Company approved a strategy to divest of the Pool Distribution business (“Pool ” ), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. As a result of the strategy to divest of Pool, the results of operations for Pool are presented as a discontinued operation in the Condensed Consolidated Statements of Comprehensive Income for all periods presented. In addition, assets and liabilities were reflected as “Assets and liabilities 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 the Company’s 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 recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the 9 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 applicable reporting period. Upon delivery of a shipment or related service, customers are billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage. Revenue is classified based on the line of business as the Company believes that best depicts the nature, timing and amount of revenue and cash flows. For all lines of business, the Company records revenue on a gross basis as it is the principal in the transaction as the Company has discretion to determine the amount of consideration. Additionally, the Company has the discretion to select drivers and other vendors for the services provided to customers. These factors, discretion in the amount of consideration and the selection of drivers and other vendors, support revenue recognized on a gross basis. 3. Discontinued Operation 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 nine months ended September 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 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 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 spread 1.2 % Earnings before interest, taxes, depreciation and amortization discount rate 15.0 % Asset volatility 55.0 % Subsequent to the date of sale, the Company recognized any increases in the carrying value of the earn-out asset when the change was realized and evaluated the earn-out asset for impairment at each reporting period. The financial performance of the Pool business significantly deteriorated during the three months ended September 30, 2021. As a result, an evaluation of the earn-out asset for impairment was completed, which included a review of revised forecasts, updated strategic operating decisions and current market conditions. The revised forecasts indicated an impairment of the entire earn-out asset was necessary as of September 30, 2021. A non-cash charge of $ 6,967 was recorded as an “Impairment charge ” in the summarized discontinued operation financial information for the three and nine months ended September 30, 2021. Transition Services Agreement On February 12, 2021, the Company entered into a Transition Services Agreement (“TSA ” ) with TOG FAS Holdings LLC, the buyer of the Pool business. Under the TSA, the Company performed certain services on an interim basis in order to facilitate the orderly transition of the Pool business. The effective date of the TSA was February 12, 2021 and remained in effect until the date all services were completed, but no more than six months following the effective date. The TSA provided the right to extend the term of the TSA with no limit on the number of the mutually agreed upon extensions. In exchange for the services performed by the Company under the TSA, the Company received a monthly service charge. For the three and nine months ended September 30, 2021, the Company recognized $ 229 and $ 641 , respectively, in “Other operating expenses ” in the 10 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 Condensed Consolidated Statements of Comprehensive Income, for the services performed under the TSA. The TSA ended in October 2021 when all services were completed. Additionally, under the TSA, the Company remitted payments to outside vendors on behalf of TOG FAS Holdings LLC for expenses incurred by the Pool business up to a limit of $ 18,000 . The Company is reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment is remitted. As of September 30, 2021, the Company recorded a receivable in the amount o f $ 14,218 in “Other receivables ” in the Condensed Consolidated Balance Sheets for the reimbursement due to the Company. The Company evaluates the collectability of the receivable at least quarterly and if the Company is aware of the inability of TOG FAS Holdings LLC to meet its financial obligations to the Company, the Company will record a specific reserve in order to reduce the receivable to the amount the Company reasonably believes will be collected. The Company believes collectibility of the receivable is probable as of September 30, 2021. Summarized Discontinued Operation Financial Information A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 is as follows: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Operating revenues $ — $ 37,521 $ 17,087 $ 88,447 Operating expenses: Purchased transportation — 8,700 4,290 21,383 Salaries, wages and employee benefits — 17,012 9,674 42,519 Operating leases — 5,304 2,907 15,950 Depreciation and amortization — — — 1,657 Insurance and claims — 1,525 929 4,538 Fuel expense — 1,045 644 2,785 Other operating expenses — 4,467 2,087 12,309 Impairment charge 6,967 — 6,967 — Total operating expenses 6,967 38,053 27,498 101,141 Loss from discontinued operation ( 6,967 ) ( 532 ) ( 10,411 ) ( 12,694 ) Loss on sale of business — — ( 2,860 ) — Loss from discontinued operation before income taxes ( 6,967 ) ( 532 ) ( 13,271 ) ( 12,694 ) Income tax benefit — ( 187 ) ( 771 ) ( 3,236 ) Loss from discontinued operation, net of tax $ ( 6,967 ) $ ( 345 ) $ ( 12,500 ) $ ( 9,458 ) 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 11 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 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 nine months ended September 30, 2021, the fair value of the earn-out changed by zero 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 nine months ended September 30, 2020, the fair value of the earn-out changed by $ 493 and ($ 2,209 ), 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 paid $ 6,813 in the third quarter of 2021 based on the terms of the purchase agreement. As of December 31, 2020, the fair value of the earn -out liability was $ 6,865 , 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, 2021 September 30, 2021 Risk-free rate 0.1 % 0.1 % Revenue discount rate 8.3 % 8.3 % Revenue volatility 27.3 % 19.7 % 12 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 During the three and nine months ended September 30, 2021, the fair value of the earn-out changed by zero and ($ 333 ), respectively, and the change in the fair value was recorded in “Other operating expenses ” in the Condensed Consolidated Statements of Comprehensive Income. As of September 30, 2021, the fair value of the earn-out liabili ty 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 Transport J&P February 28, 2021 May 30, 2021 Tangible assets: Accounts receivable $ 4,171 $ 1,942 Prepaid expenses and other current assets — 32 Property and equipment 140 934 Other assets 24 3 Total tangible assets 4,335 2,911 Intangible assets: Customer relationships 6,060 1,580 Non-compete agreements 18 132 Goodwill 6,249 3,545 Total intangible assets 12,327 5,257 Total assets acquired 16,662 8,168 Liabilities assumed: Current liabilities 323 625 Total liabilities assumed 323 625 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 Transport J&P Customer relationships 8 years 12 years Non-compete agreements 1 year 5 years 13 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 5. Goodwill and Other Intangible Assets Goodwill Changes in the carrying amount of goodwill during the nine months ended September 30, 2021 are summarized as follows: Expedited Freight Intermodal Consolidated Balance as of December 31, 2020 $ 165,268 $ 79,714 $ 244,982 Acquisitions 3,545 6,249 9,794 Balance as of September 30, 2021 $ 168,813 $ 85,963 $ 254,776 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 September 30, 2021 and concluded there were no indicators of impairment during the three months ended September 30, 2021. Other Intangible Assets Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2021 are summarized as follows: Gross Carrying Amount Customer Relationships 1 Non-Compete Agreements Trade Names Total Balance as of December 31, 2020 $ 228,416 $ 8,125 $ 1,500 $ 238,041 Acquisitions 7,640 150 — 7,790 Balance as of September 30, 2021 $ 236,056 $ 8,275 $ 1,500 $ 245,831 Accumulated Amortization Customer Relationships 1 Non-Compete Agreements Trade Names Total Balance as of December 31, 2020 $ 85,930 $ 5,579 $ 1,500 $ 93,009 Amortization expense 9,652 974 — 10,626 Balance as of September 30, 2021 $ 95,582 $ 6,553 $ 1,500 $ 103,635 1 Carrying value as of September 30, 2021 and December 31, 2020 is inclusive of $ 16,501 of accumulated impairment. 14 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 6. Stock Incentive Plans Stock Incentive Plan The Company recorded share-based compensation expense as follows for the three and nine months ended September 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Salaries, wages and employee benefits - continuing operations $ 2,283 $ 2,085 $ 7,015 $ 7,056 Salaries, wages and employee benefits - discontinued operation — 162 16 572 Total share-based compensation expense $ 2,283 $ 2,247 $ 7,031 $ 7,628 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 September 30, 2021, appro ximately 799 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 nine months ended September 30, 2021 on a continuing operations basis were as follows: Stock Options Weighted-Average Exercise Price Outstanding as of January 1, 2021 359 $ 55.79 Granted 39 75.05 Exercised ( 52 ) 54.57 Forfeited — — Outstanding as of September 30, 2021 346 $ 58.30 As of September 30, 2021, the total share-based compensation expense related to unvested stock options not yet recognized was $ 800 , and the weighted-average period over which it is expected to be recognized is approximately two years . Stock option transactions during the nine months ended September 30, 2021 on a discontinued operation basis were as follows: Stock Options Weighted-Average Exercise Price Outstanding as of January 1, 2021 14 $ 52.15 Granted — — Exercised ( 14 ) 52.15 Forfeited — — Outstanding as of September 30, 2021 — $ — 15 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 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 nine months ended September 30, 2021 on a continuing operations basis were as follows: Restricted Shares Weighted-Average Grant Date Fair Value Outstanding as of January 1, 2021 210 $ 62.78 Granted 109 75.35 Vested ( 108 ) 61.67 Forfeited ( 17 ) 69.78 Outstanding as of September 30, 2021 194 $ 69.84 As of September 30, 2021, the total share-based compensation expense related to restricted shares not yet recognized was $ 9,495 , and the weighted-average period over which it is expected to be recognized is approximately two years . Restricted share transactions during the nine months ended September 30, 2021 on a discontinued operation basis were as follows: Restricted Shares Weighted-Average Grant Date Fair Value Outstanding as of January 1, 2021 10 $ 61.25 Granted — — Vested ( 5 ) 60.49 Forfeited ( 5 ) 61.92 Outstanding as of September 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. Performance award transactions during the nine months ended September 30, 2021 on a continuing operations basis were as follows assuming target levels of performance: Performance Awards Weighted-Average Grant Date Fair Value Outstanding as of January 1, 2021 65 $ 67.62 Granted 36 87.33 Earned ( 11 ) 72.30 Forfeited or unearned ( 11 ) 70.22 Outstanding as of September 30, 2021 79 $ 75.61 16 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 As of September 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 $ 4,120 , and the weighted-average period over which it is expected to be recognized is approximately two years . Employee Stock Purchase Plan As of September 30, 2021, the Company is authorized to issue up to a re maining 330 share s 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: Nine Months Ended September 30, 2021 September 30, 2020 Shares purchased by participants under the ESPP 5 6 Average purchase price $ 68.76 $ 44.84 Weighted-average fair value of each purchase right under the ESPP granted¹ $ 20.99 $ 4.98 Share-based compensation expense for ESPP $ 118 $ 30 ¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period. Employee stock purchase plan activity and related information was as follows on a discontinued operation basis: Nine Months Ended September 30, 2021 September 30, 2020 Shares purchased by participants under the ESPP — 1 Average purchase price $ — $ 44.84 Weighted-average fair value of each purchase right under the ESPP granted¹ $ — $ 4.98 Share-based compensation expense for ESPP $ — $ 3 ¹ Equal to the discount from the market value of the common stock at the end of each six month purchase period. 17 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 Director Restricted Shares Under the Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”), approved in May 2007 and further amended in February 2013 and January 2016, up to 360 of common shares may be issued. As of September 30, 2021, approximat ely 75 shares remain available for grant under the Amended Plan. Director restricted share transactions during the nine months ended September 30, 2021 were as follows: Director Restricted Shares Weighted-Average Grant Date Fair Value Outstanding as of January 1, 2021 24 $ 42.88 Granted 17 93.39 Vested ( 26 ) 47.12 Forfeited — — Outstanding as of September 30, 2021 15 $ 93.46 For the three and nine months ended September 30, 2021, the Company recorded $ 318 and $ 1,046 , respectively, of share-based compensation expense associated with these grants. For the three and nine months ended September 30, 2020, the Company recorded $ 260 and $ 766 , respectively, of share-based compensation expense associated with these grants. As of September 30, 2021, the total share-based compensation expense related to the restricted shares not yet recognized was $ 875 , and the weighted-average period over which it is expected to be recognized is approximately less than one year . 18 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 7. Indebtedness As of September 30, 2021, the Company had $ 157,500 in borrowings outstanding under the revolving credit facility, $ 17,326 utilized for outstanding letters of credit and $ 50,174 of available borrowing capacity under the revolving credit facility. As of December 31, 2020, the Company had $ 112,500 in borrowings outstanding under the revolving credit facility, $ 18,326 utilized for outstanding letters of credit and $ 94,174 of available borrowing capacity under the revolving credit facility. The interest rate on the outstanding borrowings under the revolving credit facility was 1.35 % and 3.27 % as of September 30, 2021 and September 30, 2020 respectively. In September 2017, the Company entered into a five-year senior unsecured revolving credit facility (the “Facility”) with a maximum aggregate principal amount of $ 150,000 , with a sublimit of $ 30,000 for letters of credit and a sublimit of $ 30,000 for swing line loans. The maturity date of the Facility was September 29, 2022. In April 2020, the Company entered into the first amendment to the Facility, which increased the maximum aggregate principal amount to $ 225,000 . The Facility could have been increased by up to $ 25,000 to a maximum aggregate principal amount of $ 250,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. In July 2021, the Company entered into the second amendment to the Facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available under the Facility. Under the second amendment, the Facility may be increased by up to $ 75,000 to a maximum aggregate principal amount of $ 300,000 pursuant to the terms of the amended credit agreement, subject to the l enders’ 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. Under the amended Facility, interest accrues on the amounts outstanding under the Facility at the Company ’s option, at either (1) Bloomberg Short-Term Bank Yield Index rate (the “BSBY Rate ”), which cannot be less than zero , plus a margin ranging from 1.25 % to 1.75 % based on the Company ’s leverage ratio, or (2) the base rate, which cannot be less than 2.00 %. The base rate is the highest of (i) the federal funds rate, which cannot be less than zero , plus 0.50 %, (ii) the administrative agent ’s prime rate and (iii) the BSBY Rate, which cannot be less than zero , plus 1.00 %, plus a margin ranging from 0.00 % to 0.50 % based on the Company ’s leverage ratio. Interest is payable in arrears for each loan that is based on the BSBY rate on the last day of the interest period applicable to each loan, and interest is payable in arrears on loans not based on the BSBY rate on the last day of each quarter. Previously, under the Facility, interest accrued on the amounts outstanding under the Facility, at the Company’s option, at either (1) London Interbank Offered Rate (“LIBOR ” ) rate, not less than 1.00 %, plus a margin ranging from 2.25 % to 2.75 % based on the Company’s leverage ratio, or (2) base rate, which cannot be less than 3.00 %. The base rate was the highest of (i) the federal funds rate, not less than zero , plus 0.50 %, (ii) the administrative agent’s prime rate and (iii) the LIBOR rate, not less than 1.00 %, plus 1.00 %, plus a margin ranging from 0.25 % to 0.75 % based on the Company’s leverage ratio. Interest was payable in arrears for each loan that was based on the LIBOR rate on the last day of the interest period applicable to each loan, and interest was payable in arrears on loans not based on the LIBOR rate on the last day of each quarter. The Facility contains covenants that, among other things, restrict the ability of the Company, without the approval of the required lenders, to engage in certain mergers, consolidations, asset sales, dividends and stock repurchases, investments, and other transactions or to incur liens or indebtedness in excess of agreed thresholds, as set forth in the credit agreement. The Company also has to fulfill financial covenants with respect to a leverage ratio and an interest coverage ratio. As of September 30, 2021, the Company was in compliance with the aforementioned covenants. 19 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 8. Net Income (Loss) Per Share A reconciliation of net income attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income per share during the three and nine months ended September 30, 2021 and 2020 is as follows: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Numerator: Net income and comprehensive income from continuing operations $ 30,503 $ 16,992 $ 77,894 $ 37,634 Net loss and comprehensive loss from discontinued operation ( 6,967 ) ( 345 ) ( 12,500 ) ( 9,458 ) Net income attributable to Forward Air $ 23,536 $ 16,647 $ 65,394 $ 28,176 Income allocated to participating securities ( 235 ) ( 150 ) ( 541 ) ( 184 ) Numerator for basic and diluted net income per share for continuing operations $ 30,268 $ 16,842 $ 77,353 $ 37,450 Numerator for basic and diluted net loss per share for discontinued operation $ ( 6,967 ) $ ( 345 ) $ ( 12,500 ) $ ( 9,458 ) Denominator: Denominator for basic net income per share - weighted-average number of common shares outstanding 27,034 27,559 27,217 27,732 Dilutive stock options and performance share awards 110 47 134 57 Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding 27,144 27,606 27,351 27,789 Basic net income (loss) per share: Continuing operations $ 1.12 $ 0.61 $ 2.84 $ 1.35 Discontinued operation ( 0.26 ) ( 0.01 ) ( 0.46 ) ( 0.34 ) Net income per basic share 1 $ 0.86 $ 0.60 $ 2.39 $ 1.01 Diluted net income (loss) per share: Continuing operations $ 1.12 $ 0.61 $ 2.83 $ 1.35 Discontinued operation ( 0.26 ) ( 0.01 ) ( 0.46 ) ( 0.34 ) Net income per diluted share $ 0.86 $ 0.60 $ 2.37 $ 1.01 1 Rounding may impact summation of amounts. 20 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 The number of shares that were not included in the calculation of net income per diluted share because to do so would have been anti-dilutive for the three and nine months ended September 30, 2021 and 2020 are as follows: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Anti-dilutive stock options 39 219 39 219 Anti-dilutive performance shares — 17 — 31 Anti-dilutive restricted shares and deferred stock units — 6 — 100 Total anti-dilutive shares 39 242 39 350 9. Income Taxes For the nine months ended September 30, 2021 and 2020, the Company recorded income tax expense of $ 25,969 and $ 12,209 , respectively, for continuing operations. The effective tax rate of 25.0 % for the nine months ended September 30, 2021 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards. The effective tax rate of 24.5 % for the nine months ended September 30, 2020 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards and a refund for Tennessee tax credits. As of both September 30, 2021 and December 31, 2020, the Company had $ 544 of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. As of both September 30, 2021 and December 31, 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of $ 168 . 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 2013. The sale of Pool resulted in a capital loss in the amount of $ 4,195 , which expires in 2026. The Company concluded that it was more likely than not the capital loss carryforward will not be realized and therefore, established a valuation allowance of $ 4,195 to reserve against its capital loss carryforward. The Company also maintains a valuation allowance to reserve against its state net operating loss carryforwards. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and available tax planning strategies. In making this assessment, all available evidence was considered including economic climate, as well as reasonable tax planning strategies. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the valuation allowance, in future years. 10. Fair Value of Financial Instruments The Company categorizes its assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. Estimates of fair value financial assets and liabilities are based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. 21 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 • Level 3 - Model-derived valuations in which one or more significant inputs are unobservable. As previously discussed in Note 4, Acquisitions, the estimated fair value of the earn-out liability was determined using either the Monte Carlo simulation model or the option pricing method. The significant inputs used to calculate the estimated fair value are derived from a combination of observable and unobservable market data. Observable inputs used in either the Monte Carlo simulation model or the option pricing method include the risk-free rate and the revenue volatility while unobservable inputs include the revenue discount rate and the estimated revenue projections. Assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 are summarized below: As of September 30, 2021 Level 1 Level 2 Level 3 Total Earn-out liability $ — $ — $ 496 $ 496 As of December 31, 2020 Level 1 Level 2 Level 3 Total Earn-out liability $ — $ — $ 6,865 $ 6,865 Cash and cash equivalents, accounts receivable, and accounts payable are valued at their carrying amounts in the Company’s Condensed Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments. The carrying amount of long-term debt under the Company’s credit facility approximate fair value based on the borrowing rates currently available to the Company for a loan with similar terms and average maturity. As of September 30, 2021, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $ 5,895 , compared to its carrying value of $ 5,834 . As of December 31, 2020, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $ 7,009 , compared to its carrying value of $ 6,811 . 11. Shareholders’ Equity Cash Dividends During the third quarter of 2021, second quarter of 2021, first quarter of 2021 and the fourth quarter of 2020, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $ 0.21 per share of common stock. On October 26, 2021, the Company's Board of Directors declared a quarterly cash dividend of $ 0.21 per common share that will be paid in the fourth quarter of 2021. Share Repurchase Program On July 21, 2016, the Company’s Board of Directors approved a stock repurchase program for up to 3,000 shares of the Company’s common stock (the “2016 Repurchase Plan ” ). On February 5, 2019, the Board of Directors canceled the Company’s 2016 Repurchase Plan and approved a revised stock repurchase plan authorizing up to 5,000 shares of the Company’s common stock (the “2019 Repurchase Plan”). The 2019 Repurchase Plan expires when the shares authorized for repurchase are exhausted or the 2019 Repurchase Plan is canceled. 22 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 During the nine months ended September 30, 2021, the Company repurchased through open market transactions 535 shares of common stock for $ 48,989 , or $ 91.46 per share, and during the nine months ended September 30, 2020, the Company repurchased 787 shares of common stock for $ 45,248 , or $ 57.53 per share. All shares received were retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Retained Earnings ” in the Condensed Consolidated Balance Sheets. As of September 30, 2021, the remaining shares to be repurchased under the 2019 Repurchase Plan were approximately 2,833 shares. 12. Commitments and Contingencies Contingencies The Company is party to various legal claims and actions incidental to its business, including claims related to vehicle liability, workers’ compensation, property damage and employee medical benefits. We accrue for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Based on the knowledge of the facts, management believes the resolution of claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our condensed consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and related events unfold. Insurance coverage provides the Company with primary and excess coverage for claims related to vehicle liability, workers’ compensation, property damage and employee medical benefits. For vehicle liability, the Company retains a portion of the risk. Below is a summary of the Company’s risk retention on vehicle liability insurance coverage maintained by the Company through $ 10,000 : Company Risk Retention Frequency Layer Policy Term Expedited Freight¹ LTL business $ 3,000 Occurrence/Accident² $ 0 to $ 3,000 10/1/2021 to 10/1/2022 Truckload business $ 2,000 Occurrence/Accident² $ 0 to $ 2,000 10/1/2021 to 10/1/2022 LTL and Truckload businesses $ 6,000 Policy Term Aggregate³ $ 3,000 to $ 5,000 10/1/2021 to 10/1/2022 LTL and Truckload businesses 4 $ 2,500 Policy Term Aggregate³ $ 5,000 to $ 10,000 10/1/2021 to 10/1/2022 Intermodal $ 1,000 Occurrence/Accident² $ 0 to $ 1,000 10/1/2021 to 10/1/2022 ¹ Excluding the Final Mile business, which is primarily a brokered service. ² For each and every accident, the Company is responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident. ³ During the Policy Term, the Company is responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Company Risk Retention before insurance will respond. 4 Intermodal is also included in this Layer, damages for which would contribute to the aggregate risk retention. Also, from time to time, when brokering freight, the Company may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and the Company maintains third-party liability insurance coverage with a $ 100 deductible per occurrence for most of its brokered services. Additionally, the Company maintains workers’ compensation insurance with a self-insured retention of $ 500 per occurrence. Insurance coverage in excess of the self-insured retention limit is an important part of the Company’s risk management process. The Company believes the recorded reserves are sufficient for all incurred claims up to the self-insured retention limits, including an estimate for claims incurred but not reported. Since the ultimate resolution of outstanding claims as well as 23 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 claims incurred but not reported is uncertain, it is possible that the reserves recorded for these losses could change materially in the near term. However, an estimate cannot be made of the range of additional loss that is at least reasonably possible. 13. Segment Reporting The Company has two reportable segments: Expedited Freight and Intermodal. The Company evaluates segment performance based on income from operations. Segment results include intersegment revenues and shared costs. Costs related to the corporate headquarters, shared services and shared assets, such as trailers, are allocated to each segment based on usage. Shared assets are not allocated to each segment, but rather the shared assets, such as trailers, are allocated to the Expedited Freight segment. Corporate includes revenues and expenses as well as assets that are not attributable to any of the Company’s reportable segments. The accounting policies applied to each segment are the same as those described in the Summary of Significant Accounting Policies as disclosed in Note 1 to the Annual Report on Form 10-K for the year ended December 31, 2020, except for certain self-insurance loss reserves related to vehicle liability and workers’ compensation. Each segment is allocated an insurance premium and deductible that corresponds to the self-insured retention limit for that particular segment. Any self-insurance loss exposure beyond the deductible allocated to each segment is recorded in Corporate. Segment results from operations for the three and nine months ended September 30, 2021 and 2020 are as follows: Three Months Ended September 30, 2021 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 341,461 $ 78,164 $ — $ — $ 419,625 Intersegment revenues 96 9 — ( 105 ) — Depreciation 4,942 841 16 — 5,799 Amortization 1,842 1,775 — — 3,617 Income (loss) from continuing operations 34,636 8,712 ( 872 ) — 42,476 Purchases of property and equipment 13,769 671 — — 14,440 Three Months Ended September 30, 2020 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 283,025 $ 48,940 $ — $ — $ 331,965 Intersegment revenues 489 8 — ( 465 ) 32 Depreciation 4,981 789 36 — 5,806 Amortization 1,799 1,567 — — 3,366 Income (loss) from continuing operations 23,461 4,837 ( 4,788 ) — 23,510 Purchases of property and equipment 2,037 188 — — 2,225 24 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 Nine Months Ended September 30, 2021 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 996,769 $ 205,786 $ — $ — $ 1,202,555 Intersegment revenues 709 34 — ( 800 ) ( 57 ) Depreciation 14,924 2,475 42 — 17,441 Amortization 5,437 5,189 — — 10,626 Income (loss) from continuing operations 93,854 21,607 ( 8,137 ) — 107,324 Purchases of property and equipment 21,905 1,110 — — 23,015 Nine Months Ended September 30, 2020 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 771,585 $ 147,815 $ — $ — $ 919,400 Intersegment revenues 1,216 21 — ( 1,405 ) ( 168 ) Depreciation 14,897 2,923 79 — 17,899 Amortization 5,318 4,702 — — 10,020 Income (loss) from continuing operations 50,394 12,963 ( 10,159 ) — 53,198 Purchases of property and equipment 15,987 452 — — 16,439 Total Assets As of September 30, 2021 $ 750,775 $ 212,203 $ 107,327 $ 203 $ 1,070,508 As of December 31, 2020 905,081 221,963 47,641 ( 201,391 ) 973,294 A reconciliation from the segment information to the consolidated balances for revenues and total assets is set forth below: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Intersegment revenues - continuing operations $ — $ 32 $ ( 57 ) $ ( 168 ) Intersegment revenues - discontinued operation — ( 32 ) 57 168 Consolidated intersegment revenues $ — $ — $ — $ — September 30, 2021 December 31, 2020 Segment assets - continuing operations $ 1,070,508 $ 973,294 Current assets held for sale — 21,002 Noncurrent assets held for sale — 53,097 Consolidated total assets $ 1,070,508 $ 1,047,393 25 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2021 Revenue from the individual services within the Expedited Freight segment for the three and nine months ended September 30, 2021 and 2020 are as follows: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Expedited Freight revenues: Network $ 207,656 $ 169,300 $ 606,213 $ 455,482 Truckload 53,651 49,836 162,999 139,220 Final Mile 71,355 56,994 203,494 158,223 Other 8,895 7,384 24,772 19,876 Total $ 341,557 $ 283,514 $ 997,478 $ 772,801 14. Subsequent Event On November 1, 2021, the Company entered into an agreement to acquire certain assets and liabilities of BarOle Trucking, Inc. (“BarOle”) for $ 35,436 . BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area. In addition, BarOle has a larger terminal location, which allows for further expansion in the future. 26