What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-03-15 compared with 2023-03-01 · 75 added, 54 removed, 244 unchanged (35% of the section changed)

Forward Air Corporation (“Forward”, the “Company”, “we”, “our”, or “us”) is a leading asset-light freight and logistics company.

We provide less-than-truckload (“LTL”), final mile, truckload and intermodal drayage services across the United States and in Canada.

We provide less-than-truckload (“LTL”), truckload and intermodal drayage services across the United States and in Canada and Mexico.

We offer premium services that typically require precision execution, such as expedited transit, delivery during tight time windows and special handling.

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Our common stock is listed on the Nasdaq Global Select Market under the symbol “FWRD”.

Discontinued Operation

On April 23, 2020, the Company made a decision to divest of Pool and the sale was completed on February 12, 2021.

As a result, the results of Pool were classified to “Loss from discontinued operation, net of tax” in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2021.

Discontinued Operations

In December 2023, our Board of Directors approved a strategy to divest of the Final Mile business (“Final Mile”), and the sale of Final Mile was completed on December 20, 2023.

Final Mile provided delivery and installation of heavy bulky appliances such as washing machines, dryers, dishwashers and refrigerators throughout the United States.

As a result of the divestiture of the Final Mile business, the results of operations for Final Mile are presented as a discontinued operation in our Consolidated Statements of Comprehensive Income for all periods presented and all assets and liabilities were reflected as “Assets and liabilities held for sale” in our Consolidated Balance Sheets for the prior period.

On April 23, 2020, we made a decision to divest of Pool and the sale was completed on February 12, 2021.

As a result, the results of Pool were classified to “Loss from discontinued operation, net of tax” in our Consolidated Statements of Comprehensive Income for the year ended December 31, 2021.

Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and were allocated to continuing operations.

Omni Acquisition

As described in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Omni Acquisition”, on January 25, 2024 (the “ Closing Date ” ), we completed the acquisition of Omni Newco LLC (“Omni”) pursuant to the Agreement and Plan of Merger, dated as of August 10, 2023 (the “ Merger Agreement ” , and as amended by Amendment No.

1, dated as of January 22, 2024, the “Amended Merger Agreement”) (the “Omni Acquisition”).

This acquisition and the related debt are discussed in detail within Note 3, Acquisitions to our Consolidated Financial Statements included in this Form 10-K.

Omni, founded in 2000 and headquartered in Dallas, Texas, is an asset-light, high-touch logistics and supply chain management company with deep customer relationships in high-growth end markets.

Omni delivers domestic and international freight forwarding, fulfillment services, customs brokerage, distribution, and value-added services for time-sensitive freight to United States-based customers operating both domestically and internationally.

Omni provides business-to-business (“B2B”) solutions to prominent United States-based customers across a variety of attractive end markets, including the technology, retail, media, logistics, life sciences and e-commerce sectors, many of which have had long-term relationships with Omni.

Core Offerings

Omni focuses on providing customized logistics solutions for high-value, mission-critical freight for some of the industry’s most demanding customers.

Its core offerings include:

• Value-Added Warehousing and Distribution

◦ Global warehousing and distribution and e-commerce fulfillment solutions, including inventory management, cross docking, kitting and pick and pack;

◦ Free Trade zone and bonded warehouse capabilities;

◦ System level testing, tape and reel, ink/laser marking, repair, splitting, baking, kitting, packing, binning and returns management.

• International Freight

◦ Primarily focused on Asia to the United States and Intra-Asia air transportation;

◦ International compliance and customs brokerage ensure stringent compliance requirements are met while expediting delivery times.

• Domestic Freight

◦ Partnering with leading carriers to provide a full menu of less-than-truckload (“LTL”), expedited and truckload services based on various time requirements;

◦ Specialized delivery for high-value freight, including white glove and team delivery, installation, unpacking, debris removal, light assembly, repackaging, inspection and crating/uncrating;

◦ Supply chain engineering, appointment scheduling, site survey, track and trace, 24-hour call center and database management;

◦ Air charter, next flight out, hand carry and other expedited services;

◦ Reverse logistics, tradeshows, project logistics, cold chain management, chain of custody and small pack;

◦ Internal linehaul network provides a competitive advantage in the middle mile through cost and service quality controls.

Customer and Go-To Market Strategy

Omni’s sales force is focused on servicing the global supply chain of United States-based customers with support from a centralized solutions team with cross-functional expertise dedicated to supporting the salespeople in global multi-modal supply chain solutions.

Omni deploys global, multi-modal capabilities, which allows the salespeople to partner across customers’ organizations and supply chains by offering a comprehensive suite of global services.

Services Provided

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We operate a comprehensive national network that provides expedited regional, inter-regional and national 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 services.

We have, and plan to continue to grow our LTL and final mile geographic footprints through greenfield start-ups as well as acquisitions.

Expedited Freight offers customers local pick-up and delivery and other services including truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling services.

We have, and plan to continue to grow our LTL geographic footprint through greenfield start-ups as well as acquisitions.

During the year ended December 31, 2023, Expedited Freight accounted for 80.0% of our consolidated revenue.

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A key part of our growth strategy is to offer new and enhanced services that address our customers’ premium transportation needs.

Over the past few years, we added or enhanced LTL pickup and delivery, final mile solutions, expedited truckload, temperature-controlled shipments, warehousing, drayage, customs brokerage and shipment consolidation and handling services.

Over the past few years, we added or enhanced LTL pickup and delivery, expedited truckload, temperature-controlled shipments, warehousing, drayage, customs brokerage and shipment consolidation and handling services.

These services benefit our existing customers and increase our ability to attract new customers.

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Since the acquisition of CST, we have completed fifteen additional intermodal acquisitions.

In order to enhance our final mile footprint, we acquired FSA Network, Inc.

(“FSA”) in April 2019, Linn Star Holdings, Inc., Linn Star Transfer, Inc.

and Linn Star Logistics, LLC (collectively, “Linn Star”) in January 2020 and CLW Delivery, Inc.

(“CLW”) in October 2020.

In May 2021, we acquired J&P Hall Express Delivery (“J&P”) to expand the expedited LTL footprint across the Southeast.

In May 2021, we acquired J&P Hall Express Delivery to expand the expedited LTL footprint across the Southeast.

In January 2023, we acquired Land Air Express to accelerate the expedited LTL footprint expansion in the middle part of the United States.

On January 25, 2024, shortly after the fiscal year end of this report, we completed the Omni Acquisition which will allow us to expand our operations both domestically and internationally.

• Enhance Information Systems.

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Expedited Freight

Our Expedited Freight segment provides expedited regional, inter-regional and national LTL, final mile and truckload services.

We market our Expedited Freight services primarily to freight and logistics intermediaries (such as freight forwarders and third-party logistics companies), airlines (such as integrated air cargo carriers, and passenger and cargo airlines) and retailers (such as retailers of heavy bulky appliances).

Our Expedited Freight segment provides expedited regional, inter-regional and national LTL and truckload services.

We market our Expedited Freight services primarily to freight and logistics intermediaries (such as freight forwarders and third-party logistics companies), and airlines (such as integrated air cargo carriers, and passenger and cargo airlines).

We offer our customers a high level of service with a focus on on-time, damage-free deliveries.

Our Expedited Freight network encompasses approximatel y 92% of all continental U.S.

zip codes, with service in Canada and Mexico.

Our Expedited Freight network encompasses approximately 92% of all continental United States zip codes, with service in Canada and Mexico.

During 2023, approximately 30% of the freight handled by our LTL network was for overnight delivery, approximately 58% was for delivery within two to three days and the balance was for delivery in four or more days.

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• Company-owned equipment operated by employee drivers.

The majority of the transportation capacity utilized by Expedited Freight is provided by Leased Capacity Providers, with whom we seek to establish long-term relationships with to assure dependable service and availability.

The majority of the transportation capacity utilized by Expedited Freight is provided by Leased Capacity Providers, with whom we seek to establish long-term relationships to assure dependable service and availability.

We believe Expedited Freight has experienced significantly higher average retention of Leased Capacity Providers compared to other over-the-road transportation providers.

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We also purchase transportation capacity supplied by third-party contracted motor carriers and transportation intermediaries.

The majority of the transportation capacity utilized in our big and bulky final mile service is provided by third-party motor carriers, and we utilize capacity from both third-party motor carriers and transportation intermediaries to support other Expedited Freight service offerings in response to seasonal demands and volume surges in particular markets, to handle overflow volume.

We utilize capacity from both third-party motor carriers and transportation intermediaries to support other Expedited Freight service offerings in response to seasonal demands and volume surges in particular markets, to handle overflow volume.

A small portion of Expedited Freight’s transportation capacity is provided by employee drivers operating company-owned equipment.

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Expedited Freight provides additional value-added services that are integrated into the overall operation of its network.

Expedited Freight offers final mile services which include the delivery and installation of heavy bulky appliances such as washing machines, dryers, dishwashers and refrigerators.

We significantly expanded the final mile geographic footprint and operate in over 117 locations nationwide.

Expedited Freight continues to integrate these deliveries into its LTL pickup and delivery and terminal operations so as to increase network density and lower overall LTL unit costs.

Expedited Freight offers truckload services which include expedited truckload brokerage, dedicated fleet services, as well as high security and temperature-controlled logistics services.

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Our Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads.

Intermodal also offers dedicated contract and container freight station (“CFS”) warehouse and handling services.

Intermodal also provides linehaul and local less-than-truckload service in the Midwest, as well as CFS warehousing services (e.g.

Intermodal also offers dedicated contract and CFS warehouse and handling services.

Intermodal also provides linehaul and local LTL service in the Midwest, as well as CFS warehousing services (e.g.

devanning, unit load device build-up/tear-down, and security screening) for air and ocean import/export freight at five of its Midwest terminals.

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Intermodal utilizes a mix of Company-employed drivers, Leased Capacity Providers and third-party motor carriers.

During 2022, approximate ly 71% of Intermodal’s direct transportation expenses were provided by Leased Capacity Providers, 24% by Company-employed drivers, and 5% by third-party motor carriers.

During 2023, approximately 61% of Intermodal’s direct transportation expenses were provided by Leased Capacity Providers, 35% by Company-employed drivers, and 4% by third-party motor carriers.

All of our Intermodal company and independent contractor tractors are equipped with computer tablets, which enable us to communicate with our drivers, plan and monitor shipment progress and monitor our drivers’ hours of service.

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Intermodal’s customer base is primarily comprised of international freight forwarders, passenger and cargo airlines, beneficial cargo owners and steamship lines.

In 2022, Intermodal’s ten largest customers accounted for approximate ly 33% of its operating revenue and had one customer with revenue greater than 10% of Intermodal revenue for 2022.

In 2023, Intermodal’s ten largest customers account ed for approximately 28% of its operating revenue and had no single customer with revenue greater than 10% of Intermodal revenue for 2023.

We compete in the North American transportation and logistics services industry, and the markets in which we operate are highly competitive, very fragmented and historically have few barriers to entry.

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Our Expedited Freight segment primarily competes with other national and regional truckload carriers.

Expedited Freight also competes with less-than-truckload carriers, and to a lesser extent, integrated air cargo carriers and passenger and cargo airlines.

Expedited Freight also competes with LTL carriers, and to a lesser extent, integrated air cargo carriers and passenger and cargo airlines.

Our Intermodal segment primarily competes with national and regional drayage providers.

We believe competition in our segments is based primarily on quality of service, price, available capacity, on-time delivery, flexibility, reliability, security, transportation rates, location of facilities, and business relationships, and we believe we compete favorably with other transportation service companies in these areas.

To that end, we believe our Expedited Freight segment has an advantage over other truckload and less-than-truckload carriers because Expedited Freight delivers faster, more reliable services between cities at rates that are generally significantly below the price to transport the same shipments to the same destinations by air.

To that end, we believe our Expedited Freight segment has an advantage over other truckload and LTL carriers because Expedited Freight delivers faster, more reliable services between cities at rates that are generally significantly below the price to transport the same shipments to the same destinations by air.

We believe our Intermodal segment has a competitive advantage over other drayage providers because we deliver more reliable service while offering greater shipment visibility and security.

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We own the majority of the trailers we use, but we supplement at times with leased trailers.

As of December 31, 2022, we had 6,021 owned trailers in our fleet with an average age of approximately nine years.

As of December 31, 2023, we had 6,184 owned trailers in our fleet with an average age of approximately seven years.

In addition, as of December 31, 2023, we also had 453 leased trailers in our fleet.

As of December 31, 2022, we had 273 owned tractors and straight trucks in our fleet, with an average age of approximately three years.

As of December 31, 2023, we had 306 owned tractors and straight trucks in our fleet, with an average age of approximately four years.

In addition, as of December 31, 2023, we also had 683 leased tractors and straight trucks in our fleet.

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and (iii) Environment.

After completing an ESG assessment in 2020 utilizing the Sustainable Accounting Standards Board (SASB) standards and conducting a third-party stakeholder assessment, we identified ten ESG priority areas within these three pillars that we believe are relevant to our business and important to our employees, communities, cusotmers, investors, partners and contractors, and which form the foundation for our sustainability strategy:

After completing an ESG assessment in 2020 utilizing the Sustainable Accounting Standards Board (SASB) standards and conducting a third-party stakeholder assessment, we identified ten ESG priority areas within these three pillars that we believe are relevant to our business and important to our employees, communities, customers, investors, partners and contractors, and which form the foundation for our sustainability strategy:

• Roadway Health & Safety

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At least annually, the Chair of the CG&N Committee will provide a report on these topics to the full Board.

In 2020, Forward’s leadership created the Head of Corporate ESG role to provide oversight of Forward’s ESG vision, strategic planning, performance management, and improvement activities.

In 2020, we created the Head of Corporate ESG role to provide oversight of our ESG vision, strategic planning, performance management, and improvement activities.

In 2021, we published our first ESG Report and created our internal ESG Steering Committee, which oversees our company-wide ESG strategy and meets at least quarterly and on an as-needed basis.

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The information on our website and our ESG report are not incorporated into, and are not a part of, this report.

In 2023, we completed our GHG inventory, collected additional data, and published our third ESG report.

We also completed our Task Force on Climate-Related Financial Disclosures analysis (“TCFD”) and submitted to CDP, a not-for-profit charity that runs the global disclosure system.

Both our CDP report and new TCFD index are included on our website in the 2022 ESG report update.

People and Communities

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As part of our assessment, we have identified improvement activities to develop a comprehensive Emergency Preparedness Plan (“EPP”) for all our facilities.

The EPP is under

development and in compliance with OSHA 29 CFR 1910 standards and FMCSA 49 CFR.

When completed, we will distribute and maintain this EPPP for employees and independent contractors alike, across our facilities and corporate offices.

The EPP is under development and in compliance with Occupational Safety and Health Administration standards.

We also remain committed to fostering a more diverse, equitable and inclusive work environment.

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Forward Freedom, a manifestation of our ongoing commitment to Veteran-related causes.

In 2022, we hosted our first annual Drive for Hope Golf tournament where we raised more than $375,000 for Hope for the Warriors.

In 2023, we hosted our second annual Drive for Hope Golf tournament where we raised $525,000 for Hope for the Warriors.

Hope for the Warriors is a 501(c)(3) nonprofit whose mission is to care for and empower service members and military families challenged by the physical, moral and psychological effects of war.

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We have also employed proactive measures to protect our network, computer systems and data from cyber threats, in part, by creating a robust Information Security program in early 2020.

We are continuously deploying infrastructure to meet the National Institute of Standards and Technology (NIST) requirements.

We are continuously deploying infrastructure to meet the National Institute of Standards and Technology requirements.

As part of our Responsible Supplier program, we work to understand the ESG goals of both our suppliers and customers.

By 2024, we expect to establish data tracking infrastructure and explore opportunities to grow our supplier diversity program and partnerships.

We are establishing new data tracking infrastructure and exploring opportunities to grow our supplier diversity program and partnerships.

We aim to establish supplier diversification goals in the coming years.

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We have established a preliminary goal to reduce absolute Scope 1 and Scope 2 GHG emissions (combined) by 2030 from a 2021 base year.

As part of this goal, in 2022, we partnered with carbon capture company Remora, reserving ten of its mobile devices for a pilot project tentatively scheduled for the second half of 2023.

As part of this goal, in 2022, we partnered with carbon capture company Remora, reserving ten of its mobile devices for a pilot project expected to launch in the next two years.

We are also aligning with industry certifications, continuing to be a SmartWay certified company.

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Risk Management and Litigation

Under DOT regulations, we are liable for bodily injury and property damage caused by Leased Capacity Providers and employee drivers while they are operating equipment under our various motor carrier authorities.

Under regulations of the Department of Transportation (“DOT”), we are liable for bodily injury and property damage caused by Leased Capacity Providers and employee drivers while they are operating equipment under our various motor carrier authorities.

The potential liability associated with any accident can be severe and occurrences are unpredictable.

For vehicle liability, we retain a portion of the risk.

Below is a summary of our risk retention on vehicle liability insurance coverage maintained by us through $10,000 (in thousands):

Below is a summary of our risk retention on vehicle liability insurance coverage maintained by us up to $10,000 (in thousands):

Risk Retention Frequency Layer Policy Term

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Intermodal $ 1,000 Occurrence/Accident¹ $0 to $1,000 10/1/2023 to 10/1/2024

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

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

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

Also, from time to time, when brokering freight, we may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and we maintain third-party liability insurance coverage with a $100 deductible per occurrence for most of our brokered services.

¹ For each and every accident/incident, the Company is responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident/incident.

² 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 contribute.

Additionally, we maintain workers’ compensation insurance with a self-insured retention of $500 per occurrence.

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The DOT and the Federal Motor Carrier Safety Administration (“FMCSA”), an agency within the DOT, manages a Compliance, Safety, Accountability initiative (“CSA”) which governs matters such as safety requirements and compliance, registration to engage in motor carrier operations, drivers’ hours of service (“HOS”) requirements, and certain mergers, consolidations, and acquisitions.

We are also subject to laws and regulations under the U.S.

Environmental Protection Agency and the Occupational Safety and Health Administration, which regulate safety, the supervision of hazardous materials, water discharges, air emissions, solid waste disposal and the release and cleanup of other substances.

We are also subject to laws and regulations under the United States Environmental Protection Agency and the Occupational Safety and Health Administration, which regulate safety, the supervision of hazardous materials, water discharges, air emissions, solid waste disposal and the release and cleanup of other substances.

These regulatory authorities have broad powers, generally governing matters such as authority to engage in motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, certain mergers and acquisitions and periodic financial reporting.

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increasingly stringent environmental, occupational safety and health regulations, limits on vehicle weight and size, ergonomics, port security, and hours of service.

Department of Homeland Security, and our domestic customs brokerage operations are licensed by CBP.

In addition, we are subject to compliance with cargo-security and transportation regulations issued by the Transportation Security Administration and Customs and Border Protection (“CBP”) within the United States Department of Homeland Security, and our domestic customs brokerage operations are licensed by CBP.

We are also subject to employment laws and regulations, including the changing regulatory landscape, with the potential effects of California Assembly Bill 5 (“California AB5”), which introduced a new test for determining worker classification that is viewed as expanding the scope of employee relationships and narrowing the scope of independent contractor relationships.

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Regulatory requirements, and changes in regulatory requirements, may affect our business or the economics of the industry by requiring changes in operating practices or by influencing the demand for and increasing the costs of providing transportation services.

In addition, Omni delivers international freight forwarding, fulfillment services, customs brokerage, distribution, and value-added services, primarily focused on Asia to the United States and Intra-Asia air transportation.

Service Marks

Through one of our subsidiaries, we hold U.S.

federal trademark registrations associated with the following service marks:

Forward (logo), Forward Air, Inc.

(logos), circle design (logo), Forward Air®, Forward Air (logos), Forward Air Complete®, Forward Air Complete (logo), Forward Air Solutions®, Forward Air Solutions (logo), TQI, inc.

(logo), TQI (logo), Central States Trucking Co.

Through one of our subsidiaries, we hold the United States federal trademark registrations associated with the following service marks:

Forward (logo), circle design (logo), Forward Air, Forward Air (logos), Forward Air Complete, Forward Air Complete (logo), TQI, inc.

(logo), FAF, Inc.

(logo), FSA Logistix (logo), First in “last mile” Home Delivery®, North America’s Most Complete Road Feeder Network®, and Keeping Your Business Moving Forward®.

(logo), Central States Trucking Co.

(logo), North America’s Most Complete Road Feeder Network, and Keeping Your Business Moving Forward.

We also hold an allowed federal trademark application for the Precision Execution logo.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business