FORWARD AIR CORP 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this annual report on Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures are effective at the reasonable assurance level. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, management used the framework set forth by the Committee on Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (“2013 Framework”). Based on our assessment, we have concluded, as of December 31, 2023, that our internal control over financial reporting was effective based on those criteria. Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements for the year ended December 31, 2023, has issued an attestation report on the Company’s internal control over financial reporting. Changes in Internal Control over Financial Reporting None. 67 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Forward Air Corporation Opinion on Internal Control over Financial Reporting We have audited Forward Air Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Forward Air Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”) and our report dated March 15, 2024 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Atlanta, GA March 15, 2024 68 Item 9B. Other Information During the quarter ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading agreement” or “non-Rule 10b5-1 trading agreement,” as each term is defined in Item 408(a) of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable Part III Item 10. Directors, Executive Officers and Corporate Governance Information required by this item is incorporated herein by reference to our proxy statement for the 2024 Annual Meeting of Shareholders (the “2024 Proxy Statement”). The 2024 Proxy Statement will be filed with the SEC not later than 120 days subsequent to December 31, 2023. Item 11. Executive Compensation The information required by this item is incorporated herein by reference to the 2024 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters The information required by this item is incorporated herein by reference to the 2024 Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated herein by reference to the 2024 Proxy Statement. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated herein by reference to the 2024 Proxy Statement. Part IV Item 15. Exhibits, Financial Statement Schedules (a)(1) and (2) List of Financial Statements and Financial Statement Schedules. The response to this portion of Item 15 is submitted as a separate section of this report. (a)(3) List of Exhibits. The response to this portion of Item 15 is submitted as a separate section of this report. (b) Exhibits. The response to this portion of Item 15 is submitted as a separate section of this report. (c) Financial Statement Schedules. The response to this portion of Item 15 is submitted as a separate section of this report. 69 EXHIBIT INDEX No. Exhibit 2.1 Agreement and Plan of Merger, dated as of August 10, 2023 by and among, among others, Forward Air Corporation and Omni Newco LLC (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 14, 2023). 2.2 Amendment No. 1 to the Original Merger Agreement, dated January 22, 2024, by and among Forward Air Corporation and Omni Newco, LLC (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 2 4, 202 4 ). 3.1 Restated Charter of the registrant (incorporated herein by reference to Exhibit 3 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 1999 (File No. 0-22490)) 3.2 Amended and Restated Bylaws of the registrant (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13 , 202 3 ). 3.3 Articles of Amendment to the Restated Charter of Forward Air Corporation (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31 , 2024). 4.1 Form of Forward Air Corporation Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998 filed with the Securities and Exchange Commission on November 16, 1998 (File No. 0-22490)) 4.2 Description of Capital Stock 4.3 Indenture, dated as of October 2, 2023, by and among Clue Opco LLC (as successor to GN Bondco, LLC), as issuer, and U.S. Bank Trust Company, National Association, as trustee and notes collateral agent (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 4.4 First Supplemental Indenture, dated as of January 25, 2024, by and among Clue Opco LLC, as issuer, Forward Air Corporation and the other guarantors party thereto, as guarantors, and U.S. Bank Trust Company, National Association, as trustee and notes collateral agent (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.1 * Forward Air Corporation 2005 Employee Stock Purchase Plan (incorporated herein by reference to the registrant's Proxy Statement filed with the Securities and Exchange Commission on April 20, 2005 (File No. 0-22490)) 10.2 Air Carrier Certificate, effective August 28, 2003 (incorporated herein by reference to Exhibit 10.5 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Securities and Exchange Commission on March 11, 2004 (File No. 0-22490)) 10.3 Form of Director Indemnification Agreement (incorporated herein by reference to Exhibit 10.4 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the Securities and Exchange Commission on February 23, 2018 (File No. 0-22490)) 10.4 * Form of Non-Qualified Stock Option Agreement under the registrant's Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the Securities and Exchange Commission on February 24, 2011 (File No. 0-22490)) 10.5 * Forward Air Corporation Amended and Restated Stock Option and Incentive Plan, as further amended and restated on February 7, 2013 (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13, 2013 (File No. 0-22490)) 10.6 First Amendment to the Forward Air Corporation Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, filed with the Securities and Exchange Commission on April 27, 2016 (File No. 0-22490)) 10.7 * Form of Nonqualified Stock Option Agreement under the registrant’s Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2016 (File No. 0-22490)) 10.8 * Form of CEO Nonqualified Stock Option Agreement under the registrant’s Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2016 (File No. 0-22490)) 10.9 * Form of Non-Employee Director Restricted Stock Units Agreement under the registrant’s Amended and Restated Non- Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2016 (File No. 0-22490)) 10.10 * Form of Non-Employee Director Restricted Stock Agreement under the registrant’s Amended and Restated Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2016 (File No. 0-22490)) 10.11 * Form of Employee Restricted Share Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 filed with the Securities and Exchange Commission on July 27, 2016)) 10.12 * Form of CEO Nonqualified Stock Option Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2017) 10.13 * Form of Nonqualified Stock Option Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.44 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2017) 10.14 * Form of Performance Share Agreement under the registrant’s 2016 Omnibus Compensation Plan (incorporated herein by reference to Exhibit 10.45 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2017) 10.15 * Form of Notice of Grant of Performance Shares under the registrant’s 2016 Omnibus Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 27, 2017) 10.16 * Forward Air Corporation 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 27, 2017 (File No. 0-22490)) 10.17 * Amended and Restated Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 27, 2017 (File No. 02-22490)) 10.18 Credit Agreement dated September 29, 2017 among Forward Air Corporation and Forward Air, Inc., as the borrowers, the subsidiaries of the borrowers identified therein as the guarantors, Bank of America, N.A., U.S. Bank National Association and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2017) 10.18A First Amendment dated April 16, 2020 to Credit Agreement dated September 29, 2017 by and among Forward Air Corporation and Forward Air, Inc., as borrowers, certain subsidiaries of the borrowers as guarantors, Bank of America, N.A., as administrative agent and lender, U.S. Bank National Association, as lender, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 1, 2020) 10.18B Second Amendment dated July 20, 2021 to Credit Agreement dated September 29, 2017 by and among Forward Air Corporation and Forward Air, Inc., as borrowers, certain subsidiaries of the borrowers as guarantors, Bank of America, N.A., as administrative agent and lender, U.S. Bank National Association, as lender and the other lenders part thereto (incorporated herein by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2021) 10.18C Third Amendment, dated December 29, 2021, to the Credit Agreement dated September 29, 2017 by and among Forward Air Corporation and Forward Air, Inc., as borrowers, certain subsidiaries of the borrowers as guarantors, Bank of America, N.A., as administrative agent and lender, U.S. Bank National Association, as lender and the other lenders part thereto (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2022) 10.19 * Form of CEO Nonqualified Stock Option Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 26, 2018) 10.20 * Form of CEO Performance Share Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 26, 2018) 10.21 * Form of CEO Restricted Stock Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 26, 2018) 10.22 * Employment Agreement, dated June 6, 2018, between Forward Air Corporation and Thomas Schmitt (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2018) 10.23 * Restrictive Covenants Agreement, dated June 6, 2018, between Forward Air Corporation and Thomas Schmitt (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2018) 10.24 * Waiver and Acknowledgment, dated June 11, 2018 between Forward Air Corporation and Bruce Campbell (incorporated herein by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2018) 10.25 Consulting Agreement effective May 7, 2019, between Forward Air Corporation and Bruce A. Campbell (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 25, 2019) 10.26 Form of Performance Share Agreement (Total Shareholder Return) under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 25, 2019) 10.27 Form of Performance Share Agreement (EBITDA per Share) under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.4 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 25, 2019) 10.28 * Scott E. Schara Offer Letter, dated as of July 23, 2020 (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 27, 2020) 10.29 * Amended and Restated Consulting Agreement effective July 28, 2020, between Forward Air Corporation and Matthew J. Jewell (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 31, 2020) 10.30 Advisory Agreement effective April 5, 2021, between Forward Air Corporation and Michael J. Morris (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2021) 10.31 Amendment No. 1 dated October 29, 2021 to Advisory Agreement, dated October 29, 2021, between Forward Air Corporation and Michael J. Morris (incorporated herein by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 2021) 10.32 Rebecca J. Garbrick Offer Letter dated as of June 21, 2021 (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 25, 2021 (File No. 0-22490)) 10.33 Form of CEO Nonqualified Stock Option Agreement under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.35 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022) 10.34 Form of Non-Qualified Stock Option Agreement under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.36 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022) 10.35 Form of Performance Share Agreement (Total Shareholder Return) under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.37 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022) 10.36 * Forward Air Corporation Executive Severance and Change in Control Plan Amended and Restated, effective as of October 25, 2021 (incorporated herein by reference to Exhibit 10.38 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022) 10.37 Separation and General Release Agreement between Scott E. Schara and Forward Air Corporation (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 filed with the Securities and Exchange Commission on May 09, 2022) 10.38 Equity Purchase Agreement, dated December 20, 2023 by and between Forward Air Corporation, Forward Air Final Mile, LLC, FFM, LLC, Forward Air, Inc., FAF, Inc., and Hub Group, Inc. (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on Decem ber 27 , 20 23 ) 10.39 Credit Agreement, dated as of December 19, 2023, by and among, GN Loanco, LLC, the other credit parties party thereto from time to time, Citibank, N.A. and the lenders and L/C issuers party thereto from time to time (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.40 Escrow Release Date Assumption and Joinder Agreement, dated as of January 25, 2024, among GN Loanco, LLC, Clue Opco LLC, Forward Air Corporation, the subsidiary guarantors party thereto and Citibank, N.A. (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.41 Escrow Release Date Incremental Revolving Amendment, dated as of January 25, 2024, among Clue Opco LLC, the credit parties party thereto from time to time, the lenders party thereto from time to time and Citibank, N.A. (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.42 Shareholder Agreement, dated as of January 25, 2024, by and among, Forward Air Corporation, REP Omni Holdings, L.P. and the other parties thereto (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.43 Shareholder Agreement, dated as of January 25, 2024, by and among, Forward Air Corporation, EVE Omni Investor, LLC and Omni Investor Holdings, LLC and the other parties thereto (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.44 Investor Rights Agreement, dated as of January 25, 2024, by and among Forward Air Corporation, REP Omni Holdings, L.P. and Omni Investor Holdings L.P. (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.45 Tax Receivable Agreement, dated as of January 25, 2024, by and among Forward Air Corporation, Central States Logistics, Inc., Clue Opco LLC and the members from time to time party thereto (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 31, 2024). 10.46 Amendment No. 2, dated as of February 12, 2024, among Clue Opco LLC, the revolving lenders party thereto and Citibank, N.A. (incorporated herein by reference to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 1 5 , 2024). 21.1 Subsidiaries of the registrant 23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 31.1 Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a)) 31.2 Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a)) 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive File (formatted in Inline XBRL and contained in Exhibit 101). *Denotes a management contract or compensatory plan or arrangement. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Forward Air Corporation Date: March 15, 2024 By: /s/ Rebecca J. Garbrick Rebecca J. Garbrick Chief Financial Officer and Treasurer (Principal Financial Officer, Principal Accounting Officer and Duly Authorized Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Michael L. Hance Interim Chief Executive Officer, Chief Legal Officer and Secretary March 15, 2024 Michael L. Hance (Principal Executive Officer) /s/ Rebecca J. Garbrick Chief Financial Officer and Treasurer March 15, 2024 Rebecca J. Garbrick (Principal Financial Officer and Principal Accounting Officer) /s/ George Mayes Chairman and Director March 15, 2024 George Mayes /s/ Ronald W. Allen Director March 15, 2024 Ronald W. Allen /s/ Ana B. Amicarella Director March 15, 2024 Ana B. Amicarella /s/ Charles Anderson Director March 15, 2024 Charles Anderson /s/ Valerie A. Bonebrake Director March 15, 2024 Valerie A. Bonebrake /s/ C. Robert Campbell Director March 15, 2024 C. Robert Campbell /s/ R. Craig Carlock Director March 15, 2024 R. Craig Carlock /s/ Robert Edwards, Jr. Director March 15, 2024 Robert Edwards, Jr. /s/ Michael Hodge Director March 15, 2024 Michael Hodge /s/ G. Michael Lynch Director March 15, 2024 G. Michael Lynch /s/ Chitra Nayak Director March 15, 2024 Chitra Nayak /s/ Javier Polit Director March 15, 2024 Javier Polit /s/ Christopher Schmachtenberger Director March 15, 2024 Christopher Schmachtenberger /s/ Laurie A. Tucker Director March 15, 2024 Laurie A. Tucker /s/ W. Gil West Director March 15, 2024 W. Gil West Annual Report on Form 10-K Item 8, Item 15(a)(1) and (2), (a)(3), (b) and (c) List of Financial Statements and Financial Statement Schedule Financial Statements and Supplementary Data Certain Exhibits Financial Statement Schedule Year Ended December 31, 2023 Forward Air Corporation Greeneville, Tennessee F-1 Forward Air Corporation Form 10-K — Item 8 and Item 15(a)(1) and (2) Index to Financial Statements and Financial Statement Schedule The following consolidated financial statements of Forward Air Corporation are included as a separate section of this report: Page No. Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F- 3 Consolidated Balance Sheets — December 31, 202 3 and 20 22 F- 5 Consolidated Statements of Comprehensive Income — Years Ended December 31, 202 3 , 202 2 and 20 21 F- 6 Consolidated Statements of Shareholders’ Equity — Years Ended December 31, 202 3 , 202 2 and 20 21 F- 7 Consolidated Statements of Cash Flows — Years Ended December 31, 202 3 , 202 2 and 202 1 F- 8 Notes to Consolidated Financial Statements — December 31, 20 23 F- 10 The following financial statement schedule of Forward Air Corporation is included as a separate section of this report. Schedule II - Valuation and Qualifying Accounts S- 1 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted. F-2 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Forward Air Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Forward Air Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 15, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F-3 Self-Insurance Loss Reserves Description of the Matter The liability for self-insurance loss reserves totaled $66.4 million at December 31, 2023 which includes self-insurance reserves for vehicle liability claims. The long-term portion of this liability was included in “Other long-term liabilities,” and the remainder was included in “Accrued expenses” on the Company’s Consolidated Balance Sheet. As more fully described in Note 1 to the consolidated financial statements, the self-insurance reserves include estimates for both known claims and future claims development and are based on company-specific and industry data, as well as general economic information. Auditing the Company’s self-insurance reserves for vehicle liability claims was complex, highly subjective and required significant judgment due to the actuarial techniques and significant assumptions used. The Company utilizes actuarial analyses to evaluate open claims and estimate the ongoing development exposure. The most significant assumptions used in the estimation process include determining the trend in loss costs, the expected consistency in the frequency and severity of claims incurred but not yet reported, changes in the timing of the reporting of losses from the loss date to the notification date, and the expected costs to settle unpaid claims. How We Addressed the Matter in Our Audit We tested internal controls over management’s review of the completeness and accuracy of data inputs used in the actuarial analysis and review of the actuarial assumptions and reserve calculations. To test the self-insurance loss reserves for vehicle liability claims, our audit procedures included, among others, evaluating the methodologies used and the significant actuarial assumptions discussed above, as well as performing substantive procedures over underlying data and calculations used in the analyses. We tested claims data by agreeing the data to supporting source documentation and payment information. We evaluated whether changes to the reserves for known claims were being recognized timely based on the underlying available data and current estimates. We involved actuarial specialists to assist in our evaluation of the actuarial methodologies used as well as to independently calculate a range of reserve estimates for comparison to the recorded reserves. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1991. Atlanta, GA March 15, 2024 F-4 Forward Air Corporation Consolidated Balance Sheets (In thousands, except share data) December 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 121,969 $ 45,822 Restricted cash equivalents 39,604 — Accounts receivable, less allowance of $ 2,206 in 2023 and $ 3,129 in 2022 153,267 188,229 Other receivables 5,408 — Prepaid expenses 25,682 24,769 Other current assets 1,098 10,553 Current assets held for sale — 34,942 Total current assets 347,028 304,315 Noncurrent restricted cash equivalents 1,790,500 — Property and equipment, net of accumulated depreciation and amortization of $ 250,185 in 2023 and $ 218,145 in 2022 258,095 246,329 Operating lease right-of-use assets 111,552 131,097 Goodwill 278,706 257,987 Other acquired intangibles, net of accumulated amortization of $ 127,032 in 2023 and $ 110,993 in 2022 134,789 115,582 Other assets 58,863 51,739 Noncurrent assets held for sale — 101,027 Total assets $ 2,979,533 $ 1,208,076 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 45,430 $ 50,094 Accrued expenses 62,948 49,918 Other current liabilities 71,727 3,944 Current portion of debt and finance lease obligations 12,645 9,315 Current portion of operating lease liabilities 44,344 42,266 Current liabilities held for sale — 13,861 Total current liabilities 237,094 169,398 Finance lease obligations, less current portion 26,736 15,711 Long-term debt, less current portion and debt issuance costs — 106,588 Long-term debt held in escrow 1,790,500 — Operating lease liabilities, less current portion 71,598 92,903 Other long-term liabilities 47,144 59,044 Deferred income taxes 42,200 51,093 Noncurrent liabilities held for sale — 6,095 Shareholders’ equity: Preferred stock, $ 0.01 par value: Authorized shares - 5,000,000 ; no shares issued or outstanding in 2023 and 2022 — — Common stock, $ 0.01 par value: Authorized shares - 50,000,000 ; issued and outstanding shares - 25,670,663 in 2023 and 26,461,293 in 2022 257 265 Additional paid-in capital 283,684 270,855 Retained earnings 480,320 436,124 Total shareholders’ equity 764,261 707,244 Total liabilities and shareholders’ equity $ 2,979,533 $ 1,208,076 The accompanying notes are an integral part of the consolidated financial statements. F-5 Forward Air Corporation Consolidated Statements of Comprehensive Income (In thousands, except per share data) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Operating revenue $ 1,370,735 $ 1,679,634 $ 1,387,227 Operating expenses: Purchased transportation 586,195 730,412 665,421 Salaries, wages and employee benefits 287,566 302,759 288,171 Operating leases 87,413 85,290 68,237 Depreciation and amortization 57,405 42,552 34,966 Insurance and claims 50,133 47,478 39,409 Fuel expense 22,004 26,956 16,478 Other operating expenses 191,809 196,596 127,520 Total operating expenses 1,282,525 1,432,043 1,240,202 Income from continuing operations 88,210 247,591 147,025 Other expense: Interest expense, net ( 31,571 ) ( 5,138 ) ( 4,338 ) Total other expense ( 31,571 ) ( 5,138 ) ( 4,338 ) Income before income taxes 56,639 242,453 142,687 Income tax expense 13,836 63,039 35,808 Net income from continuing operations 42,803 179,414 106,879 Income (loss) from discontinued operations, net of tax 124,548 13,777 ( 1,020 ) Net income and comprehensive income $ 167,351 $ 193,191 $ 105,859 Basic net income (loss) per share: Continuing operations $ 1.64 $ 6.66 $ 3.91 Discontinued operations 4.78 0.51 ( 0.04 ) Net income per basic share $ 6.42 $ 7.17 $ 3.87 Diluted net income (loss) per share: Continuing operations $ 1.64 $ 6.63 $ 3.89 Discontinued operations 4.77 0.51 ( 0.04 ) Net income per diluted share 1 $ 6.40 $ 7.14 $ 3.85 Dividends per share: $ 0.96 $ 0.96 $ 0.84 1 Rounding may impact summation of amounts. The accompanying notes are an integral part of the consolidated financial statements. F-6 Forward Air Corporation Consolidated Statements of Shareholders' Equity (In thousands) Common Stock Additional Paid-in Capital Retained Earnings Total Shareholders’ Equity Shares Amount Balance at December 31, 2020 27,316 $ 273 $ 242,916 $ 304,140 $ 547,329 Net income — — — 105,859 105,859 Stock options exercised 69 1 3,705 — 3,706 Common stock issued under employee stock purchase plan 12 — 911 — 911 Share-based compensation expense — — 10,929 — 10,929 Payment of dividends to shareholders — — 14 ( 22,990 ) ( 22,976 ) Payment of minimum tax withholdings on share-based awards ( 39 ) — — ( 3,115 ) ( 3,115 ) Repurchases and retirement of common stock ( 535 ) ( 5 ) — ( 48,984 ) ( 48,989 ) Issuance of share-based awards 146 1 ( 1 ) — — Balance at December 31, 2021 26,969 $ 270 $ 258,474 $ 334,910 $ 593,654 Net income — — — 193,191 193,191 Stock options exercised 3 — 206 — 206 Common stock issued under employee stock purchase plan 10 — 783 — 783 Share-based compensation expense — — 11,376 — 11,376 Payment of dividends to shareholders — — 17 ( 25,882 ) ( 25,865 ) Payment of minimum tax withholdings on share-based awards ( 31 ) — — ( 3,330 ) ( 3,330 ) Repurchases and retirement of common stock ( 600 ) ( 6 ) — ( 62,765 ) ( 62,771 ) Issuance of share-based awards 111 1 ( 1 ) — — Balance at December 31, 2022 26,462 $ 265 $ 270,855 $ 436,124 $ 707,244 Net income — — — 167,351 167,351 Common stock issued under employee stock purchase plan 11 — 800 — 800 Share-based compensation expense — — 12,012 — 12,012 Payment of dividends to shareholders — — 18 ( 25,013 ) ( 24,995 ) Payment of minimum tax withholdings on share-based awards ( 40 ) — — ( 4,340 ) ( 4,340 ) Repurchases and retirement of common stock ( 883 ) ( 9 ) — ( 93,802 ) ( 93,811 ) Issuance of share-based awards 121 1 ( 1 ) — — Balance at December 31, 2023 25,671 $ 257 $ 283,684 $ 480,320 $ 764,261 The accompanying notes are an integral part of the consolidated financial statements. F-7 Forward Air Corporation Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Operating activities: Net income from continuing operations $ 42,803 $ 179,414 $ 106,879 Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations: Depreciation and amortization 57,405 42,552 34,966 Change in fair value of earn-out liability — ( 294 ) ( 496 ) Share-based compensation expense 11,495 10,661 10,500 Provision for revenue adjustments 5,091 6,426 6,339 Deferred income tax expense ( 8,893 ) 7,686 1,421 Other ( 1,180 ) ( 1,279 ) 207 Changes in operating assets and liabilities, net of effects from the purchase of acquired companies: Accounts receivable 30,555 ( 2,588 ) ( 42,458 ) Other receivables ( 5,408 ) 8,097 ( 8,097 ) Other current and noncurrent assets 30,683 ( 13,280 ) ( 6,905 ) Accounts payable, accrued expenses and other long-term liabilities 36,661 12,766 18,252 Net cash provided by operating activities of continuing operations 199,212 250,161 120,608 Investing activities: Proceeds from sale of property and equipment 3,741 2,372 2,643 Purchases of property and equipment ( 30,725 ) ( 39,254 ) ( 38,375 ) Purchase of businesses, net of cash acquired ( 56,703 ) ( 66,105 ) ( 59,866 ) Net cash used in investing activities of continuing operations ( 83,687 ) ( 102,987 ) ( 95,598 ) Financing activities: Proceeds from credit facility 70,000 — 195,000 Payments on credit facility ( 178,500 ) ( 49,000 ) ( 150,000 ) Proceeds from long-term debt held in escrow 1,790,500 — — Repayments of finance lease obligations ( 9,500 ) ( 6,108 ) ( 2,423 ) Payment of debt issuance costs — — ( 482 ) Proceeds from issuance of common stock upon stock option exercises — 206 3,706 Payment of earn-out liability — ( 91 ) ( 6,519 ) Payments of dividends to shareholders ( 24,995 ) ( 25,865 ) ( 22,976 ) Repurchases and retirement of common stock ( 93,811 ) ( 62,771 ) ( 48,989 ) Proceeds from common stock issued under employee stock purchase plan 800 783 911 Payment of minimum tax withholdings on share-based awards ( 4,340 ) ( 3,330 ) ( 3,115 ) Contributions from subsidiary held for sale 240,572 7,508 6,939 Net cash provided by (used in) financing activities of continuing operations 1,790,726 ( 138,668 ) ( 27,948 ) Net increase in cash, cash equivalents and restricted cash equivalents from continuing operations 1,906,251 8,506 ( 2,938 ) Cash from discontinued operation: Net cash (used in) provided by operating activities of discontinued operations ( 17,824 ) 8,929 ( 347 ) Net cash provided by (used in) investing activities of discontinued operations 258,525 ( 1,475 ) 7,286 Net cash used in financing activities of discontinued operations ( 240,701 ) ( 7,454 ) ( 6,939 ) Net increase (decrease) in cash, cash equivalents and restricted cash equivalents 1,906,251 8,506 ( 2,938 ) Cash, cash equivalents, and restricted cash equivalents at beginning of period of continuing operations 45,822 37,316 40,254 Cash at beginning of period of discontinued operations — — — Net increase (decrease) in cash, cash equivalents, and restricted cash equivalents 1,906,251 8,506 ( 2,938 ) Less: cash at end of period of discontinued operations — — — Cash, cash equivalents, and restricted cash equivalents at end of period of continuing operations $ 1,952,073 $ 45,822 $ 37,316 F-8 Forward Air Corporation Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Reconciliation of cash, cash equivalents, and restricted cash equivalents: Cash and cash equivalents $ 121,969 $ 45,822 $ 37,316 Restricted cash equivalents 39,604 — — Noncurrent restricted cash equivalents 1,790,500 — — Total cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flow: $ 1,952,073 $ 45,822 $ 37,316 Non-cash activity: Equipment acquired under finance leases $ 25,217 $ 14,422 $ 6,758 The accompanying notes are an integral part of the consolidated financial statements F-9 Forward Air Corporation Notes To Consolidated Financial Statements December 31, 2023 (In thousands, except per share data) 1. Operations and Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation Forward Air Corporation and its subsidiaries (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, Canada, and Mexico. The Expedited Freight segment provides expedited regional, inter-regional and national less-than-truckload (“LTL ” ) and truckload 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 services. 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 Company’s consolidated financial statements includes the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The Company holds interests in certain wholly-owned subsidiaries of Omni Newco, LLC (“Omni”) that are considered Variable Interest Entities (“VIEs”). VIEs are legal entities in which equity investors do not have sufficient equity at risk for the entity to independently finance its activities, or as a group, the holders of the equity investment at risk lack the power through voting or similar rights to direct the activities of the entity that most significantly impact its economic performance, or do not have the obligation to absorb the expected losses of the entity or the right to receive expected residual returns of the entity. Consolidation of a VIE is required if a reporting entity is the primary beneficiary of the VIE. Investments in these VIEs are evaluated to determine if the Company is the primary beneficiary. This evaluation gives appropriate consideration to the design of the entity and the variability that the entity was designed to create and pass along, the relative power of each party, and to the Company’s obligation to absorb losses or receive residual returns of the entity. The Company concluded that the VIEs should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses and the right to receive benefits, which could potentially be significant. For changes in facts and circumstances, the Company re-assesses whether or not it is a primary beneficiary of a VIE. Refer to Note 3, Acquisitions, for additional disclosures regarding the Company’s VIEs. In December 2023, the Board of Directors (the “Board ”) of the Company 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 the 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 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. Refer to Note 2, Discontinued Operation and Held for Sale, for further discussion. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period presentation. F-10 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Cash and Cash Equivalents Cash as of December 31, 2023 and 2022 of $ 111,969 and $ 30,743 , respectively, consisted of cash on hand and bank deposits. Cash equivalents as of December 31, 2023 and 2022 of $ 10,000 and $ 15,079 , respectively, consisted of money market deposits. The Company considers all investments with an original maturity of three months or less to be cash and cash equivalents. Restricted Cash and Cash Equivalents Restricted cash equivalents and noncurrent restricted cash equivalents are related to the amounts held in escrow in connection with the financing of the acquisition of Omni. Amounts are restricted until the acquisition of Omni is closed. Refer to Note 3, Acquisitions , for additional disclosures regarding the amounts held in escrow. Allowance for Doubtful Accounts and Revenue Adjustments The Company has a broad range of customers, including freight forwarders, third-party logistics companies, passenger and cargo airlines, steamship lines, and retailers, located across a diverse geography. In circumstances in which the Company is aware of a specific customer’s inability to meet its financial obligations to the Company, the Company records a specific reserve in order to reduce the net recognized accounts receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes a general reserve based on a percentage of revenue to ensure accounts receivables are properly recorded at the net amount expected to be collected. The Company sets the general reserve based on historical collection experience combined with forecasts about any expected changes to the collection experience. If circumstances change, expected recoverability of amounts due to the Company may change by a material amount. Accounts are written off after all means of collection, including legal action, have been exhausted. The Company records an allowance for revenue adjustments as result of future billing rate changes. Adjustments arise: (a) when small rate changes (“spot quotes”) are granted to customers that differ from the standard rates in the billing system; (b) when freight requires dimensionalization or is reweighed which results in a different rate; (3) when billing errors occur; and (4) when data entry errors occur. In 2023, average revenue adjustments per month were approximately $ 424 on average revenue per month of approximately $ 114,228 ( 0.4 % of monthly revenue). The Company estimates an allowance for revenue adjustments based on historical experience, trends and current information. The average amount of revenue adjustments per month can vary in relation to the level of revenue or as a result of other factors. Both the average monthly revenue adjustments and the average lag assumptions are continually evaluated for appropriateness. Inventories Inventories are valued at the lower of cost or net realizable value, using first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business. Replacement parts are expensed when placed in service, while tires are capitalized and amortized over their estimated useful life. Expenses related to the utilization of inventories are recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of 30 to 40 years for building and improvements, three to ten years for equipment, the lesser of the estimated useful life or the initial lease term for leasehold improvements and five years for computer software. Land is not depreciated and construction in progress is not depreciated until ready for service. Expenditures for maintenance and repairs are charged to expense as incurred. For internally developed software, all costs incurred during planning and evaluation are expensed. Costs incurred during the application development stage are capitalized and included in property and equipment. Capitalized software also includes software acquired for internal use. F-11 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Property and equipment as of December 31, 2023 and 2022 consisted of the following: December 31, 2023 December 31, 2022 Land $ 26,479 $ 26,479 Buildings and improvements 94,277 94,277 Equipment 320,557 283,526 Leasehold improvements 24,386 16,779 Computer software 31,063 29,511 Construction in progress 11,518 13,902 Total property and equipment 508,280 464,474 Less accumulated depreciation and amortization 250,185 218,145 Total property and equipment, net $ 258,095 $ 246,329 As of December 31, 2023 and 2022, the net book value of computer software included in property and equipment, net was $ 7,361 and $ 8,737 , respectively. For the years ended December 31, 2023, 2022 and 2021, amortization expense of computer software was $ 2,909 , $ 2,558 and $ 2,394 , respectively. Cloud Computing Costs The Company capitalizes the costs incurred during the implementation stage for cloud computing or hosting arrangements. Costs incurred in the preliminary project stage and post-implementation stage, which includes maintenance and training costs, are expensed as incurred. Capitalized software costs are amortized using the straight-line method over three to five years and are recorded in “Prepaid expenses” and “Other assets” in the Consolidated Balance Sheets. Goodwill, Intangible Assets and Other Long-Lived Assets The Company tests goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. The Company’s reporting units are not its reportable segments. Goodwill is evaluated annually as of June 30 for impairment using a qualitative assessment or a quantitative one-step assessment. If the Company elects to perform a qualitative assessment and determines the fair value of its reporting units more likely than not exceed the carrying value of their net assets, no further evaluation is necessary. For reporting units where the Company performs a one-step quantitative assessment, the Company compares the estimated fair value of each reporting unit, which is determined based on a combination of an income approach using a discounted cash flow model, and a market approach, which considers comparable companies, to its respective carrying value of net assets, including goodwill. If the estimated fair value of the reporting unit exceeds its carrying value of net assets, the goodwill is not considered impaired. If the carrying value of net assets is higher than the estimated fair value of the reporting unit, the impairment charge is the amount by which the carrying value exceeds the reporting unit’s estimated fair value. The Company reviews its long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If the Company determines that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on various factors, including current operating results, expected market trends and competitive influences. The Company also evaluates the amortization periods assigned to its intangible assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or estimated fair value, less estimated costs to sell. F-12 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) The results of the Company’s goodwill impairment analyses conducted as of June 30, 2023, 2022 and 2021 indicated that no reduction in the carrying amount of the Company’s goodwill was required. Changes in the carrying amount of goodwill during the years ended December 31, 2023, 2022 and 2021 are summarized as follows: Expedited Freight Intermodal Consolidated Balance as of December 31, 2021 $ 121,091 $ 97,464 $ 218,555 Acquisitions — 34,754 34,754 Acquisition adjustment — 4,678 4,678 Balance as of December 31, 2022 $ 121,091 $ 136,896 $ 257,987 Acquisition 20,629 — 20,629 Acquisition adjustment — 90 90 Balance as of December 31, 2023 $ 141,720 $ 136,986 $ 278,706 The Company’s accumulated goodwill impairment is $ 25,686 related to impairment charges the Company recorded during 2016 pertaining to its Truckload Services ("TLS") reporting unit. The TLS reporting unit operates within the Expedited Freight reportable segment. As of December 31, 2023, approximate ly $ 247,760 of goodwill is deductible for tax purposes. The Company amortizes certain acquired identifiable intangible assets on a straight-line basis over their estimated useful lives, which range from one year to 20 years. The acquired intangible assets have a weighted-average useful life as follows: Intangible Assets Weighted-Average Useful Life Customer relationships 14 years Non-compete agreements 5 years Trade names 4 years For the years ended December 31, 2023, 2022 and 2021, acquired intangible asset amortization was $ 16,039 , $ 12,213 and $ 10,539 , respectively. The Company estimates amortization of existing intangible assets will be $ 16,053 in 2024, $ 16,052 in 2025, $ 16,030 in 2026, $ 15,958 in 2027, and $ 15,701 in 2028. Changes in the carrying amount of acquired intangible assets during 2023 and 2022 are summarized as follows: Gross Carrying Amount Customer Relationships 1 Non-Compete Agreements Trade Names Total Balance as of December 31, 2021 $ 202,176 $ 6,826 $ 1,500 $ 210,502 Acquisitions 21,655 272 — 21,927 Acquisition adjustment ( 5,162 ) ( 692 ) — ( 5,854 ) Balance as of December 31, 2022 $ 218,669 $ 6,406 $ 1,500 $ 226,575 Acquisition 35,200 — — 35,200 Acquisition adjustment 45 1 — 46 Balance as of December 31, 2023 $ 253,914 $ 6,407 $ 1,500 $ 261,821 F-13 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Accumulated Amortization Customer Relationships Non-Compete Agreements Trade Names Total Balance as of December 31, 2021 $ 91,713 $ 5,567 $ 1,500 $ 98,780 Amortization expense 11,891 322 — 12,213 Balance as of December 31, 2022 $ 103,604 $ 5,889 $ 1,500 $ 110,993 Amortization expense 15,389 650 — 16,039 Balance as of December 31, 2023 $ 118,993 $ 6,539 $ 1,500 $ 127,032 1 Carrying value as of December 31, 2023, 2022 and 2021 is inclusive of $ 16,501 of accumulated impairment. Accrued Expenses Accrued expenses as of December 31, 2023 and 2022 consisted of the following: December 31, 2023 December 31, 2022 Accrued payroll and related items $ 15,267 $ 21,919 Insurance and claims accruals 19,566 19,167 Payables to Leased Capacity Providers 10,663 8,832 Accrued interest payable 1 17,452 — Accrued expenses $ 62,948 $ 49,918 ¹ Amounts held in escrow by the VIEs. Other Current Liabilities Other current liabilities as of December 31, 2023 and 2022 consisted of the following: December 31, 2023 December 31, 2022 Income taxes payable $ 31,190 $ — Accrued legal and professional fees 34,721 1,294 Other 5,816 2,650 Other current liabilities $ 71,727 $ 3,944 Self-Insurance Loss Reserves The Company’s licensed motor carrier contracts with independent contractor fleets, owner-operators and other third-party transportation capacity providers for most of the transportation services. The Company’s independent contractor fleet owners and owner-operators lease their equipment to the Company (“Leased Capacity Providers”) and own, operate and maintain their own tractors and employ their own drivers. Under U.S. Department of Transportation regulations, the Company is liable for bodily injury and property damage caused by the Leased Capacity Providers and employee drivers while they are operating equipment under the Company’s various motor carrier authorities. The potential liability associated with any accident can be severe and occurrences are unpredictable. F-14 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 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 (in thousands): Company Risk Retention Frequency Layer Policy Term Expedited Freight LTL business $ 5,000 Occurrence/Accident¹ $ 0 to $ 5,000 10/1/2023 to 10/1/2024 Truckload business $ 5,000 Occurrence/Accident¹ $ 0 to $ 5,000 10/1/2023 to 10/1/2024 LTL, Truckload and Intermodal businesses $ 5,000 Policy Term Aggregate² $ 5,000 to $ 10,000 10/1/2023 to 10/1/2024 Intermodal $ 1,000 Occurrence/Accident¹ $ 0 to $ 1,000 10/1/2023 to 10/1/2024 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. 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 its brokered services. Additionally, the Company maintains workers’ compensation insurance with a self-insured retention of $ 500 per occurrence. The Company provides for the estimated costs of vehicle liability and workers’ compensation claims both reported and for claims incurred but not reported. The amount of self-insurance loss reserves and loss adjustment expenses is determined based on an estimation process that uses information obtained from both Company-specific and industry data, as well as general economic information. The most significant assumptions used in the estimation process include determining the trend in loss costs, the expected consistency in the frequency and severity of claims incurred but not yet reported, changes in the timing of the reporting of losses from the loss date to the notification date, and the expected costs to settle unpaid claims. The Company estimates its self-insurance loss exposure by evaluating the merits and circumstances surrounding individual known claims and through actuarial analysis to determine an estimate of probable losses on claims incurred but not reported. T he Company accrues for the costs of the uninsured portion of pending claims, based on the nature and severity of individual claims and historical claims development trends. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. Failure to establish sufficient insurance reserves and adequately estimate for future insurance claims may cause unfavorable differences between actual self-insurance costs and the reserve estimates. As of December 31, 2023 and 2022, the Company recorded self-insurance loss reserves of $ 66,374 and $ 67,860 , respectively, inclusive of reserves in excess of the self-insured retention limit that are expected to be reimbursed from insurance carriers. As of December 31, 2023, $ 19,566 was recorded in “Accrued expenses” and $ 46,808 was recorded in “Other long-term liabilities” in the Consolidated Balance Sheets. As of December 31, 2022, $ 19,167 was recorded in “Accrued expenses” and $ 48,693 was recorded in “Other long-term liabilities” in the Consolidated Balance Sheets. As of December 31, 2023 and 2022, the Company recognized a receivable for insurance proceeds and a corresponding claims payable for vehicle liability and workers’ compensation claims in excess of the self-insured retention limit. As of December 31, 2023 and 2022, the Company recorded $ 26,712 and $ 29,087 , respectively, in “Other assets” and “Other long-term liabilities” in the Consolidated Balance Sheets. 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 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. F-15 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 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 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. Leases The Company accounts for leases under Accounting Standards Codification 842, Leases, (“ASC 842”), where lessees are required to record an asset (right-of-use asset or finance lease asset) and a lease liability. ASC 842 allows for two types of leases for recognition purposes: operating leases and finance leases. Operating leases result in the recognition of a single lease expense on a straight-line basis over the lease term, while finance leases result in an accelerated expense. The Company determines if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period. All leases greater than 12 months result in the recognition of a right-of-use asset and liability at the lease commencement date based on the present value of the lease payments over the lease term. The present value of the lease payments is calculated using the applicable weighted-average discount rate. The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The incremental borrowing rate is estimated based on the contractual lease term and the Company’s applicable borrowing rate. Business Combinations Upon the acquisition of a business, the fair value of the assets acquired and liabilities assumed are estimated, which may require judgment regarding the identification of acquired assets and liabilities assumed. Once the acquired assets and assumed liabilities are identified, the fair value of the assets and liabilities are estimated using a variety of approaches that require significant judgments. For intangible assets, significant judgments include, but are not limited to, future cash flows, selection of discount rates, determination of terminal growth rates, and estimated useful life and pattern of use of the underlying intangible assets. For tangible assets, significant judgements include, but are not limited to, current market values, physical and functional obsolescence of the assets, and remaining useful lives. Consideration is typically paid in the form of cash paid upon closing while contingent consideration is paid upon the satisfaction of a future obligation. If contingent consideration is included as a component of the consideration, the Company values the consideration as of the acquisition date. F-16 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Refer to Note 7, Income Taxes , for further discussion. F-17 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Net Income (Loss) Per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each period. Restricted shares have non-forfeitable rights to dividends and as a result, are considered participating securities for purposes of computing net income (loss) per common share pursuant to the two-class method. Diluted net income (loss) per common share assumes the exercise of outstanding stock options and the vesting of performance share awards using the treasury stock method when the effects of such assumptions are dilutive. A reconciliation of net income attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income (loss) per share during the years ended December 31, 2023, 2022 and 2021 is as follows: 2023 2022 2021 Numerator: Net income and comprehensive income from continuing operations $ 42,803 $ 179,414 $ 106,879 Net income and comprehensive income from discontinued operations 124,548 13,777 ( 1,020 ) Net income attributable to Forward Air $ 167,351 $ 193,191 $ 105,859 Income allocated to participating securities from continuing operations ( 220 ) ( 993 ) ( 737 ) Income allocated to participating securities from discontinued operations ( 639 ) ( 77 ) — Income allocated to participating securities ( 859 ) ( 1,070 ) ( 737 ) Numerator for basic and diluted net income per share for continuing operations $ 42,583 $ 178,421 $ 106,142 Numerator for basic and diluted net (loss) income per share for discontinued operations $ 123,909 $ 13,700 $ ( 1,020 ) Denominator: Denominator for basic net income per share - weighted-average number of common shares outstanding 25,913 26,783 27,155 Dilutive stock options and performance share awards 90 143 137 Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding 26,003 26,926 27,292 Basic net income (loss) per share: Continuing operations $ 1.64 $ 6.66 $ 3.91 Discontinued operations 4.78 0.51 ( 0.04 ) Net income per basic share $ 6.42 $ 7.17 $ 3.87 Diluted net income (loss) per share: Continuing operations $ 1.64 $ 6.63 $ 3.89 Discontinued operations 4.77 0.51 ( 0.04 ) Net income per diluted share 1 $ 6.40 $ 7.14 $ 3.85 1 Rounding may impact summation of amounts. F-18 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) The number of shares that were not included in the calculation of net income (loss) per diluted share because to do so would have been anti-dilutive for the years ended December 31, 2023, 2022 and 2021 are as follows: 2023 2022 2021 Anti-dilutive stock options 112 57 — Anti-dilutive performance shares 18 13 — Anti-dilutive restricted shares and deferred stock units 67 2 — Total anti-dilutive shares 197 72 — Share-Based Compensation The Company grants awards under the stock incentive plans to certain employees of the Company. The awards include stock options, restricted shares and performance shares. The fair value of the stock options is estimated on the grant date using the Black-Scholes option pricing model, and share-based compensation expense is recognized on a straight-line basis over the three-year vesting period. The fair value of the restricted shares is the quoted market value of the Company’s common stock on the grant date, and the share-based compensation expense is recognized on a straight-line basis over the vesting period. For certain performance shares, the fair value is the quoted market value of the Company’s common stock on the grant date less the present value of the expected dividends not received during the relevant period. For these performance shares, the share-based compensation expense is recognized on a straight-line basis over the vesting period based on the projected assessment of the level of performance that will be achieved. The fair value of other performance shares that have a financial target of the Company’s total shareholder return as compared to the total shareholder return of a selected peer group, is estimated on the grant date using a Monte Carlo simulation model. The share-based compensation expense is recognized on a straight-line basis over the vesting period. All share-based compensation expense is recognized in salaries, wages and employee benefits in the Consolidated Statements of Comprehensive Income. Refer to Note 6, Stock Incentive Plan , for further discussion. Ransomware Incident In December 2020, the Company detected a ransomware incident impacting its operational and information technology systems, which caused service delays for many of its customers (“Ransomware Incident”). Promptly upon its detection of the incident, the Company initiated response protocols, launched an investigation and engaged the services of cybersecurity and forensics professionals. The Company also engaged with the appropriate law enforcement authorities. The Company continued to cooperate with law enforcement in connection with the criminal investigation into those responsible for the Ransomware Incident. For the year ended 2021 expenses related to the Ransomware Incident were $ 434 , which were recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income. No expenses were incurred for the years ended December 31, 2023 and 2022. Expenses include costs to investigate and remediate the Ransomware Incident and legal and other professional services related to the incident. Recent Accounting Pronouncements The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the financial condition or the results of operations of the Company. F-19 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 2. Discontinued Operations and Held for Sale Sale of Final Mile On December 20, 2023, the Company completed the sale of the Final Mile business for estimated total cash consideration of $ 260,916 . As a result, the assets and liabilities of Final Mile have been 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 Consolidated Balance Sheets as of December 31, 2022. The results of operations of Final Mile, as well as the gain realized on the sale of $ 155,829 , have been presented under the caption “ Income from discontinued operations, net of tax ” in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021. Sale of Pool As previously disclosed, 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 operations, net of tax” in the 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. These costs were classified to the eliminations column in the segment reconciliation in Note 12, Segment Reporting. 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. 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 third quarter of 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. A non-cash charge of $ 6,967 was recorded as an “Impairment charge ” in the summarized discontinued operation financial information for the year ended December 31, 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 year ended December 31, 2021, the Company recognized $ 747 , in “Other operating expenses ” in the Consolidated Statements of Comprehensive Income, for the services performed under the TSA. The TSA ended in October 2021 when all services were completed. F-20 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Summarized Held for Sale and Discontinued Operation Financial Information A summary of the carrying amounts of major classes of assets and liabilities, which are included in assets and liabilities held for sale in the Consolidated Balance Sheets, is as follows: December 31, 2022 Assets Current assets: Accounts receivable, less allowance of $ 29 in 2022 $ 32,799 Prepaid expenses 5 Other current assets 2,138 Total current assets held for sale $ 34,942 Property and equipment, net of accumulated depreciation and amortization of $ 2,524 $ 2,751 Operating lease right-of-use assets 10,768 Goodwill 48,197 Other acquired intangibles, net of accumulated amortization of $ 12,332 in 2022 39,219 Other assets 92 Total noncurrent assets held for sale $ 101,027 Liabilities Current liabilities: Accounts payable $ 4,507 Accrued expenses 4,373 Other current liabilities 13 Current portion of debt and finance lease obligations 128 Current portion of operating lease liabilities 4,840 Total current liabilities held for sale $ 13,861 Finance lease obligations, less current portion $ 133 Operating lease liabilities, less current portion 5,962 Total noncurrent liabilities held for sale $ 6,095 F-21 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) A summary of the results of operations classified as a discontinued operations, net of tax, in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 is as follows: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Operating revenue $ 273,873 $ 293,769 $ 292,976 Operating expenses: Purchased transportation 158,233 176,137 171,035 Salaries, wages and employee benefits 51,304 45,211 49,101 Operating leases 12,325 11,804 13,685 Depreciation and amortization 5,212 4,834 4,586 Insurance and claims 2,586 2,281 3,706 Fuel expense 305 627 1,057 Other operating expenses 36,842 34,490 37,946 Impairment charge — — 6,967 Total operating expenses 266,807 275,384 288,083 Income from discontinued operations 7,066 18,385 4,893 Gain (loss) on sale of business 155,829 — ( 2,860 ) Income from discontinued operations before income taxes 162,895 18,385 2,033 Income tax expense 38,347 4,608 3,053 Income (loss) from discontinued operations, net of tax $ 124,548 $ 13,777 $ ( 1,020 ) F-22 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 3. Acquisitions Expedited Freight In January 2023, the Company acquired certain assets of Land Air Express, Inc. (“Land Air”) for $ 56,567 . Land Air, headquartered in Bowling Green, Kentucky, offers a variety of less-than-truckload services including guaranteed, standard, exclusive, same day, hot shot and pickup and delivery, and operates in over 25 terminals across the United States. The acquisition of Land Air is expected to accelerate the expansion of the Company’s national terminal footprint, particularly in the middle part of the United States, and strategically position the Company to better meet the current and future needs of customers. The acquisition was funded using cash flow from operations and proceeds from the Company’s credit facility. The results of Land Air have been included in the Company’s 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 In May 2022, the Company acquired certain assets and liabilities of Edgmon Trucking, LLC (“Edgmon”) for $ 40,993 and a potential earn-out of up to $ 5,000 , based on the achievement of certain profit contribution milestones over a nineteen month period, beginning May 31, 2022. The estimated fair value of the earn-out liability on the date of acquisition was immaterial. The fair value was based on the estimated certain profit contribution during the nineteen month period and was calculated using the option pricing method. The nineteen month period ended on December 31, 2023 and the certain profit contribution milestones were not achieved during that period. Edgmon, headquartered in Kent, Washington, operates a terminal in Kent and a yard in Seattle, servicing both the Port of Seattle and the Port of Tacoma. The acquisition of Edgmon marks the Company’s first Intermodal location on the West Coast, a key area of expansion in the Intermodal strategic growth plan. The acquisition was funded using cash flows from operations. The results of Edgmon have been included in the Company’s Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment. Acquisition of Omni Newco, LLC On January 25, 2024, (the “Closing”) the Company completed the acquisition of Omni Newco, LLC (the "Omni Acquisition") pursuant to the Agreement and Plan of Merger, dated as of August 10, 2023 (the “Merger Agreement”, and amended by Amendment No. 1, dated as of January 22, 2024, the “Amended Merger Agreement”). Omni, headquartered in Dallas, Texas, is an asset-light, high-touch logistics and supply chain management company with 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 U.S.-based customers operating both domestically and internationally. Pursuant to the Amended Merger Agreement, through a series of transactions involving the Company’s direct and indirect subsidiaries (collectively, with the other transactions contemplated by the Amended Merger Agreement and the other Transaction Agreements referred to therein, the “Transactions”), acquired Omni for a combination of (a) $ 20,000 in cash and (b) (i) common equity consideration representing 5,135 shares of the Company’s outstanding common stock, par value $ 0.01 per share on an as-converted and as-exchanged basis (the “Common Equity Consideration”) and (ii) non-voting, convertible perpetual preferred equity consideration representing, if the Company’s shareholders give the Conversion Approval (as defined below), an additional 8,880 shares of common stock on an as-exchanged basis (the “Convertible Preferred Equity Consideration”). The Common Equity Consideration represents, as of the Closing and before any Conversion Approval, approximately 16.5 % of the Company’s common stock, on a fully diluted, as-exchanged basis. If the Company’s shareholders approve the conversion of the Convertible Preferred Equity Consideration to Forward Common Stock in accordance with the listing rules of NASDAQ (the “Conversion Approval”), the Common Equity Consideration and the Convertible Preferred Equity Consideration together will represent as of the Closing 35.0 % of the Company’s common stock on a fully diluted and as-exchanged basis. F-23 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Prior to the consummation of the Transactions, the Company completed a restructuring, pursuant to which, among other things, the Company contributed all of its operating assets to Clue Opco LLC, a newly formed subsidiary of the Company (“Opco”). Opco has been structured as an umbrella partnership C corporation through which the existing direct and certain indirect equityholders of Omni (“Omni Holders”), as of Closing, hold (i) a portion of the Common Equity Consideration in the form of units of Opco designated as “Class B Units” (“Opco Class B Units”) and corresponding Series B Preferred Units (as defined below) and (ii) a portion of the Convertible Preferred Equity Consideration in the form of units of Opco designated as “Series C-2 Preferred Units” (“Opco Series C-2 Preferred Units”). Effective as of the Closing, the Company operates its business through Opco, which indirectly holds all of the assets and operations of the Company and Omni. Opco is governed by an amended and restated limited liability company agreement of Opco that became effective at the Closing (“Opco LLCA”). The portion of the transaction consideration paid to Omni Holders that is Common Equity Consideration consists of (a) shares of the Company’s common stock and (b) Opco Class B Units and corresponding Series B Preferred Units that are exchangeable at the option of the holders thereof into shares of the Company’s common stock pursuant to the Opco LLCA. The portion of the transaction consideration paid to Omni Holders that is Convertible Preferred Equity Consideration consists of (a) Series C Preferred Units that will automatically convert into shares of the Company’s common stock upon the receipt of the Conversion Approval and (b) Opco Series C-2 Preferred Units that will be economically equivalent to Series C Preferred Units and will automatically convert into Opco Class B Units and corresponding Series B Preferred Units upon receipt of the Conversion Approval pursuant to the Opco LLCA. If the Conversion Approval is obtained, the Convertible Preferred Equity Consideration will convert into (i) the Company’s common stock and (ii) Opco Class B Units and corresponding Series B Preferred Units. In connection with the Transactions, the Company has agreed to use its reasonable best efforts to obtain the Conversion Approval at the first annual meeting of the Company’s shareholders following the Closing. If the Company does not obtain the Conversion Approval at such annual meeting, then, so long as any Series C Preferred Units remain outstanding, the Company has agreed to continue to use its reasonable best efforts to obtain the Conversion Approval at each annual meeting of shareholders thereafter until the Conversion Approval is obtained. At the Closing, the Company, Opco, Omni Holders and certain other parties entered into a tax receivable agreement (the “Tax Receivable Agreement”), which sets forth the agreement among the parties regarding the sharing of certain tax benefits realized by the Company as a result of the Transactions. Pursuant to the Tax Receivable Agreement, the Company is generally obligated to pay certain Omni Holders 83.5 % of (a) the total tax benefit that the Company realizes as a result of increases in tax basis in Opco’s assets resulting from certain actual or deemed distributions and the future exchange of units of Opco for shares of securities of the Company (or cash) pursuant to the Opco LLCA, (b) certain pre-existing tax attributes of certain Omni Holders that are corporate entities for tax purposes, (c) the tax benefits that the Company realizes from certain tax allocations that correspond to items of income or gain required to be recognized by certain Omni Holders, and (d) other tax benefits attributable to payments under the Tax Receivable Agreement. Series B Preferred Stock Pursuant to Articles of Amendment to the Restated Charter of the Company filed with the Secretary of State of the State of Tennessee at the Closing (the “Charter Amendment”), the Company established the terms of a new series of preferred stock of the Company designated as “Series B Preferred Stock” (the “Series B Preferred Stock”), and, at the Closing, certain Omni Holders received fractional units (the “Series B Preferred Units”) each representing one one-thousandth of a share of the Company Series B Preferred Stock. Each Series B Preferred Unit will, together with a corresponding Opco Class B Unit, be exchangeable at the option of the holder thereof into one share of the Company’s common stock. F-24 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Series C Preferred Stock Pursuant to the Charter Amendment, the Company established the terms of a new series of convertible preferred stock of the Company designated as “Series C Preferred Stock” (the “Series C Preferred Stock”), and, at Closing, certain Omni Holders received fractional units (each, a “Series C Preferred Unit”) each representing one one-thousandth of a share of Series C Preferred Stock. The liquidation preference of Series C Preferred Unit is equal to $ 110.00 per unit, subject to adjustment for any in-kind payment of the Annual Coupon as described below (the “Liquidation Preference”). In addition, the Series C Preferred Units accrue on each anniversary of issuance a cumulative annual dividend (without any interim accrual) equal to the product of (a) a rate to be fixed at Closing (which equals the rate per annum equal to a spread of 3.50 % above the yield payable on the most junior tranche of debt issued in connection with the Transactions, rounded to the nearest 0.25%) multiplied by (b) the Liquidation Preference (the “Annual Coupon”). The Annual Coupon will be paid, at the Company’s option, in cash or in-kind by automatically increasing the Liquidation Preference in an equal amount. Senior Secured Notes In order to finance a portion of the cash consideration payable for the Omni Acquisition and the costs and expenses incurred in connection with the transaction, GN Bondco, LLC, a wholly owned subsidiary of Omni, (the “Escrow Issuer” and consolidated VIE) commenced a private offering of $ 725,000 aggregate principal amount of its 9.5 % senior secured notes due 2031 (the “Notes”) in a transaction exempt from registration under the Securities Act. Upon closing of the Omni Acquisition, Opco assumed the Escrow Issuer’s obligations under the Notes. The Notes bear interest at a rate of 9.5 % per annum, payable semiannually in cash in arrears on April 15 and October 15 of each year, commencing April 15, 2024. The Notes were issued at 98.0 % of the face amount and will mature on October 15, 2031. Notes were issued pursuant to an indenture dated as of October 2, 2023, between the Escrow Issuer and U.S. Bank Trust Company, National Association, as trustee and notes collateral agent. The Notes are guaranteed on a senior secured basis in an aggregate principal amount in excess of $ 100,000 . Prior to October 15, 2026, Opco may redeem some or all of the Notes at any time and from time to time at a redemption price equal to 100.000 % of the principal amount thereof plus the applicable “make-whole” premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. On or after October 15, 2026, Opco may redeem some or all of the Notes at the following prices (expressed as a percentage of principal), plus in each case accrued and unpaid interest, if any, to, but excluding, the redemption date: (a) in the case of a redemption occurring during the 12-month period commencing October 15, 2026, at a redemption price of 104.750 %; (b) in the case of a redemption occurring during the 12-month period commencing on October 15, 2027, at a redemption price of 102.375 %; and (c) in the case of a redemption occurring on or after October 15, 2028, at a redemption price of 100.000 %. In addition, at any time prior to October 15, 2026, Opco may redeem up to 40.000 % of the original aggregate principal amount of the Notes in an amount not to exceed the amount of net cash proceeds from one or more equity offerings at a redemption price equal to 109.5 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Upon the occurrence of a “change of control”, Opco will be required to offer to repurchase all of the outstanding principal amount of the Notes at a purchase price of 101.000 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase. Senior Secured Term Loan Facility In order to finance a portion of the cash consideration payable for the Omni Acquisition and the costs and expenses incurred in connection with the transaction. GN Loanco, LLC, a wholly owned subsidiary of Omni, (the “Escrow Loan Borrower” and consolidated VIE), entered into a credit agreement (the “Credit Agreement”) with Citibank, N.A., as administrative agent and collateral agent and as initial term loan lender on December 19, 2023. Pursuant to the Credit Agreement, the Escrow Loan Borrower obtained senior secured term B loans in an aggregate principal amount of $ 1,125,000 (the “New Term Loans”) and the ability to draw down up to $ 400,000 under a line of credit (the “Revolving Credit Facility”). The New Term Loans bear interest based, at Opco’s election, on (a) SOFR plus an applicable margin or (b) the base rate plus an applicable margin. The base rate is equal to the highest of the following: (i) the prime rate; (ii) 0.50 % above the overnight federal funds rate; and (iii) the one-month Term SOFR plus 1.00 %. The applicable margin for Term SOFR loans is 4.50 % and the applicable margin for base rate loans is 3.50 %. The New Term Loans are subject to customary amortization of 1.00 % per year. The New Term Loans were issued at 96.0 % of the face amount and will mature on December 19, 2030. F-25 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) No borrowings under the Revolving Credit Facility were made in connection with the Omni Acquisition. The Revolving Credit Facility will mature on January 25, 2029. Loans made under the Revolving Credit Facility bear interest based, at Opco’s election, on (a) SOFR plus an applicable margin or (b) the base rate plus an applicable margin. Until delivery of a compliance certificate in respect of the fiscal quarter ending June 30, 2024, the applicable margin for SOFR loans is 4.25 % and the applicable margin for base rate loans is 3.25 %. Thereafter, the applicable margin can range from 3.75 % to 4.25 % for SOFR loans and from 2.75 % to 3.25 % for base rate loans, in each case depending on Opco’s first lien net leverage ratio, as set forth in the Credit Agreement. Upon closing of the Omni Acquisition, Opco assumed the Escrow Loan Borrower’s obligations under the Credit Agreement, which were further secured by certain guarantors. Opco’s obligations under the Credit Agreement are guaranteed on a senior secured basis by the Company and each of Opco’s existing and future domestic subsidiaries (subject to customary exceptions). On February 12, 2024, Opco and the parties to the Credit Agreement entered into Amendment No. 2 (“Amendment No. 2”) to the Credit Agreement, which (a) modifies the financial performance covenant in the Credit Agreement by temporarily increasing the 4.50 :1.00 maximum consolidated first lien net leverage ratio permitted by the covenant to (i) 6.00 :1.00 (for the second and third quarters of 2024), (ii) 5.50 :1.00 (for the fourth quarter of 2024), (iii) 5.25 :1.00 (for the first quarter of 2025), (iv) 5.00 :1.00 (for the second quarter of 2025) and (v) 4.75 :1.00 (for the third quarter of 2025) and (b) reduces the revolving credit commitments available under the Credit Agreement from an aggregate principal amount of $ 400,000 to an aggregate principal amount of $ 340,000 . Amendment No. 2 also amends certain other terms of the Credit Agreement. Prior to the effectiveness of Amendment No. 2, on February 12, 2024, Opco repaid $ 80,000 aggregate principal amount of the New Term Loans outstanding under the Credit Agreement, together with all accrued and unpaid interest thereon. Both the Notes and Revolving Facility contain 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 Revolving Credit Facility's terms also include a financial covenant which requires the Company to maintain a specific leverage ratio. As of the date of this report, the Company was in compliance with these aforementioned covenants. As of December 31, 2023, the Company consolidated the activities of GN Bondco, LLC (VIE) and GN Loanco, LLC (VIE) with the proceeds from the Notes and New Term Loan recorded in “Noncurrent restricted cash equivalents” and the corresponding long-term debt recorded in “Long-term debt held in escrow” on the Consolidated Balance Sheets. Pursuant to the Merger Agreement, the Company deposited the appropriate funds into escrow on behalf of GN Bondco, LLC and GN Loanco, LLC in connection with the interest accrued through the Closing Date. For the interest funded but unpaid as of December 31, 2023, the corresponding amounts were recorded in “Restricted cash equivalents” and “Accrued expenses” on the Consolidated Balance Sheets. Additionally, while held in escrow, the proceeds from the Notes and New Term Loan were invested in a liquid, short-term instrument. The receivable for the interest earned through December 31, 2023 was recorded in “Restricted cash equivalents” and “Other receivables” on the Consolidated Balance Sheets. Due to the timing of the Closing, the Company is evaluating the impact of this acquisition on its consolidated financial statements. Therefore, the accounting for the acquisition is incomplete and disclosures including the pro forma consolidated results and adjustments, amounts of major assets acquired and liabilities assumed, fair value of the noncontrolling interest, valuation method used to determine the fair value of the consideration transferred, qualitative factors about the goodwill recognized, goodwill expected to be deductible for tax purposes and the amount of goodwill by reportable segment are not yet available. Further disclosures regarding the impact of the acquisition will be provided in subsequent filings as the evaluation is finalized. Due Diligence, Transaction and Integration Costs For the year ended December 31, 2023, the Company recorded $ 57,490 of due diligence and transactions costs incurred in connection with the acquisition of Omni. The due diligence, transaction and integration costs were recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income. F-26 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Fair Value of Assets Acquired and Liabilities Assumed Assets acquired and liabilities assumed as of the acquisition date are presented in the following table: Edgmon Land Air May 31, 2022 January 31, 2023 Tangible assets: Accounts receivable $ 4,963 $ — Property and equipment 613 738 Total tangible assets 5,576 738 Intangible assets: Customer relationships 13,051 35,200 Non-compete agreements 172 — Goodwill 22,195 20,629 Total intangible assets 35,418 55,829 Total assets acquired 40,994 56,567 Liabilities assumed: Current liabilities 1 — Total liabilities assumed 1 — Net assets acquired $ 40,993 $ 56,567 The estimated useful life of acquired intangible assets as of the acquisition date are summarized in the following table: Estimated Useful Lives Edgmon Land Air Customer relationships 9 years 15 years Non-compete agreements 5 years — F-27 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 4. Indebtedness Long-term debt consisted of the following as of December 31, 2023 and 2022: December 31, 2023 December 31, 2022 Credit facility, expires 2026 $ — $ 108,500 Debt issuance costs — ( 418 ) — 108,082 Less: Current portion of long-term debt — ( 1,494 ) Total long-term debt, less current portion $ — $ 106,588 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. In December 2021, the Company entered into the third amendment to the Facility, which increased the amount available for borrowing under the Facility to $ 450,000 , consisting of a $ 300,000 revolving line of credit and a term loan of $ 150,000 . In connection with the third amendment, the Company borrowed $ 150,000 under the term loan and simultaneously repaid $ 150,000 on the revolving line of credit from the borrowings received. Under the third amendment, the Facility may be increased by up to $ 75,000 to a maximum aggregate principal amount of $ 525,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. Such increases to the Facility may be in the form of additional revolving credit loans, term loans or a combination thereof, and are contingent upon there being no events of default under the Facility. As of December 31, 2023 and December 31, 2022, the Company had $ 280,166 and $ 279,966 respectively, of available borrowing capacity under the Facility. 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. 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. The interest rate on the borrowings outstanding under the credit facility was — % and 4.85 % as of December 31, 2023 and December 31, 2022, respectively. Letters of Credit The Company has an arrangement under the Facility to issue letters of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. As of December 31, 2023 and December 31, 2022, outstanding letters of credit totaled $ 19,834 and $ 20,034 , respectively. F-28 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Interest Payments Cash payments for interest were $ 11,923 , $ 5,355 and $ 4,198 for the years ended December 31, 2023, 2022 and 2021 respectively. No interest was capitalized during the year ended December 31, 2023, 2022 and 2021. 5. Shareholders’ Equity Preferred Stock There are 5,000 shares of preferred stock with a par value of $ 0.01 authorized, but no shares have been issued to date. Cash Dividends For each quarter of 2023 and 2022, the Board declared and the Company has paid a quarterly cash dividend of $ 0.24 per common share. For each quarter of 2021, the Board declared and the Company paid a quarterly cash dividend of $ 0.21 per common share. Share Repurchase Program On February 5, 2019, the Board approved a stock repurchase plan authorizing the repurchase of 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. During the year ended December 31, 2023, the Company repurchased through open market transactions 883 shares of common stock for $ 93,811 , or an average of $ 106.21 per share, and during the year ended December 31, 2022, the Company repurchased through open market transactions 600 shares of common stock for $ 62,771 , or an average of $ 104.53 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 Consolidated Balance Sheets. As of December 31, 2023, the remaining shares permitted to be repurchased under the 2019 Repurchase Plan were approximately 1,349 shares. 6. Stock Incentive Plan Stock Incentive Plan The Company recorded share-based compensation expense as follows for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Salaries, wages and employee benefits - continuing operations $ 10,090 $ 9,196 $ 8,720 Salaries, wages and employee benefits - discontinued operation 504 706 404 Total share-based compensation expense $ 10,594 $ 9,902 $ 9,124 In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 common shares. As of December 31, 2023, approximately 581 shares remain available for grant under the Omnibus Plan. F-29 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Stock Options Certain executives are eligible to receive grants of stock options. Employees may exercise the stock options at anytime after the grant is vested but no later than seven years after the date of grant. Stock options vest over a three-year period from the date of grant. For stock option awards, under the Omnibus Plan, the exercise price is equal to the price of the Company’s common stock on the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option-pricing model. The weighted average grant-date fair value of the stock option awards granted under the Omnibus Plan and the weighted average assumptions under the Black-Scholes option-pricing model were as follows for the years ended December 31, 2023, 2022 and 2021. December 31, 2023 December 31, 2022 December 31, 2021 Weighted average grant-date fair value $ 39.75 $ 28.91 $ 18.36 Weighted average assumptions under Black-Scholes option model: Expected dividend yield 0.8 % 0.9 % 1.1 % Expected stock price volatility 32.5 % 28.7 % 28.9 % Risk-free interest rate 3.8 % 1.9 % 0.6 % Expected life of awards (years) 5.6 5.6 5.8 Stock option transactions during the year ended December 31, 2023 on a continuing operations basis were as follows: Number of Shares Weighted Average Exercise Price Outstanding as of January 1 376 $ 66.13 Granted 54 115.42 Exercised — — Forfeited or Canceled ( 60 ) 44.97 Outstanding as of December 31 370 $ 76.83 As of December 31, 2023 , the weighted average remaining contractual life of stock options outstanding was approximately three years and exercisable was approximatel y two years . The total fair value of stock options vested during 2023, 2022, 2021 was $ — , $ 855 , and $ 922 , respectively. As of December 31, 2023, the total share-based compensation expense related to unvested stock options not yet recog nized was $ 2,148 , and the weighted average period over which it is expected to be recognized is approximately two years . F-30 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price on a continuing operations basis as of December 31, 2023: Stock Options Outstanding Stock Options Exercisable Range of Exercise Prices Number of Shares Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Exercisable as of December 31, 2023 Weighted Average Exercise Price $ 47.82 - $ 59.89 83 0.5 $ 52.01 83 $ 52.01 $ 64.26 - $ 75.05 175 2.5 67.02 162 66.37 100.93 - 115.42 112 5.6 110.64 19 106.11 370 $ 76.83 264 $ 64.74 As of December 31, 2023 , the total intrinsic value of both outstanding and exercisable stock options was $ 900 . The total intrinsic value of stock options exercised during 2023, 2022 and 2021 was $ — , $ 142 and $ 2,137 , respectively. Stock option transactions during the year ended December 31, 2023 on a discontinued operation basis were as follows: Number of Shares Weighted Average Exercise Price Outstanding as of January 1 — $ — Granted 1 115.42 Exercised — — Forfeited or Canceled ( 1 ) 115.42 Outstanding as of December 31 — $ — Restricted Shares The Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive a share of the Company’s common stock subject to vesting requirements based on continued employment. Shares granted under the restricted share award plan are restricted from sale or transfer until vesting, and the restrictions lapse in three equal installments beginning one year after the date of grant. Dividends are paid in cash on a current basis throughout the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period. All forfeitures are recognized as incurred. Restricted share transactions on a continuing operations basis for the year ended December 31, 2023 were as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of January 1 138 $ 87.81 Granted 74 114.46 Vested ( 70 ) 81.32 Forfeited ( 9 ) 104.68 Outstanding as of December 31 133 $ 104.87 F-31 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) The weighted average grant-date fair value of the restricted shares granted under the Omnibus Plan during the years ended December 31, 2023 , 2022 and 2021 were $ 114.46 , $ 105.52 and $ 75.37 , respectively. The total fair value of restricted shares that vested during 2023, 2022 and 2021 was $ 7,833 , $ 9,246 , and $ 8,232 , respectively. As of December 31, 2023, the total share-based compensation expense related to restricted shares not yet recognized was $ 8,207 , and the weighted average period over which it is expected to be recognized is approxi mately two ye ars . Restricted share transactions on a discontinued operation basis for the year ended December 31, 2023 were as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of January 1 13 $ 87.96 Granted 5 115.42 Vested ( 6 ) 82.07 Forfeited ( 12 ) 103.38 Outstanding as of December 31 — $ — The weighted average grant-date fair value of the restricted shares granted under the Omnibus Plan during the years ended December 31, 2023 , 2022 and 2021 were $ 115.42 , $ 106.29 and $ 75.05 , respectively. The total fair value of restricted shares that vested during 2023, 2022 and 2021 wa s $ 701 , $ 558 , and $ 619 , respectively. Performance Shares Certain executives and key employees are eligible to receive grants of performance awards. The performance share agreement provides for awards 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 Board. Performance targets are set at the beginning of each three-year measurement period. The share awards are earned over the vesting period, and the number of shares earned is determined based on the cumulative results for the measurement period. The performance agreement provides for employees to earn 0 % to 200 % of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Performance shares do not receive dividends until the shares are vested. Awards earned are paid in shares of common stock of the Company at the end of the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, share-based compensation expense is determined based on the projected assessment of the level of performance that will be achieved. All forfeitures are recognized as incurred. The grant-date fair value of performance shares granted with a financial target based on the Company’s total shareholder return was estimated using a Monte Carlo simulation model. The weighted average grant-date fair value of performance awards granted under the Omnibus Plan and the weighted average assumptions under the Monte Carlo simulation model were as follows for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Weighted average grant-date fair value $ 120.27 $ 127.29 $ 87.33 Weighted average assumptions under the Monte Carlo simulation model: Expected stock price volatility 37.8 % 35.5 % 34.5 % Weighted average risk-free interest rate 4.2 % 1.6 % 0.2 % F-32 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Performance award transactions for the year ended December 31, 2023 on a continuing operations basis were as follows assuming target levels of performance: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of January 1 70 $ 87.74 Granted 18 120.27 Additional shares awarded based on actual performance level achieved 4 68.75 Earned ( 31 ) 69.10 Forfeited or unearned — — Outstanding as of December 31 61 $ 105.88 As of December 31, 2023, 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 will be achieved, was $ 2,434 , and the weighted average period over which it is expected to be recognized is approximately two years . Total excess tax benefit realized for tax deductions in the United States related to the exercise of stock options, vesting of restricted stock and vesting of performance awards under the Omnibus Pl an was $ 2,518 , $ 1,012 , and $ 1,006 for the years ended December 31, 2023, 2022 and 2021, respectively. Employee Stock Purchase Plan Under the 2005 Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to a remaining 302 shares of common stock to employees. 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 lump sum contributions. Employee stock purchase plan activity and related information was as follows on a continuing operations basis: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Shares purchased by participants under the ESPP 10 8 11 Average purchase price $ 69.81 $ 82.48 $ 75.71 Weighted average fair value of each purchase under the ESPP granted 1 $ 7.76 $ 9.17 $ 30.68 Share-based compensation expense for ESPP $ 76 $ 78 $ 344 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: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Shares purchased by participants under the ESPP 1 1 1 Average purchase price $ 69.81 $ 82.48 $ 75.71 Weighted average fair value of each purchase under the ESPP granted 1 $ 7.76 $ 9.17 $ 30.68 Share-based compensation expense for ESPP $ 13 $ 9 $ 25 1 Equal to the discount from the market value of the common stock at the end of each six month purchase period F-33 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 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 common shares may be issued. As of December 31, 2023, approximately 47 shares remain available for grant under the Amended Plan. Under the Amended Plan, each non-employee director receives an annual grant of restricted shares of the Company’s common stock. The restricted shares vest on the earlier of (a) the day immediately prior to the first annual shareholder meeting that occurs after the grant date or (b) one year after the grant date. Each director may elect to defer receipt of the common shares until the director departs from the Board. If a director elects to defer receipt, the Company will issue deferred stock units in which the director does not have voting rights or other incidents of ownership until the shares are issued. Each deferred stock unit is eligible for a dividend equivalent in the form of additional restricted stock units for each cash dividend paid by the Company. F-34 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Director restricted share transactions for the year ended December 31, 2023 were a s follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of January 1 15 $ 93.70 Granted 15 96.10 Vested ( 15 ) 93.70 Forfeited ( 1 ) 96.10 Outstanding as of December 31 14 $ 96.10 Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Share-based compensation expense for restricted shares $ 1,329 $ 1,387 $ 1,436 Excess tax benefit for the vesting of restricted shares $ 40 $ 12 $ 342 The total fair value of restricted shares that vested during 2023, 2022 and 2021 was $ 1,424 , $ 1,436 , and $ 2,514 , respectively. As of December 31, 2023, the total share-based compensation expense related to the restricted shares not yet recognized was $ 464 , and the weighted average period over which it is expected to be recognized is less than one year . 7. Income Taxes The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various states and Canada. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian examinations by tax authorities for years before 2016. The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2023, 2022 and 2021 consisted of the following: 2023 2022 2021 Current: Federal $ 18,444 $ 43,327 $ 27,201 State 4,285 12,026 7,186 22,729 55,353 34,387 Deferred: Federal ( 6,268 ) 6,317 209 State ( 2,625 ) 1,369 1,212 ( 8,893 ) 7,686 1,421 $ 13,836 $ 63,039 $ 35,808 F-35 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) A reconciliation of income taxes computed at the U.S. federal statutory income tax r ate (21.0% for 2023, 2022 and 2021) to the provision for income taxes reflected in the Company’s Consolidated Statements of Co mprehensive Income for the years ended December 31, 2023, 2022 and 2021 is as follows: 2023 2022 2021 Tax expense at the statutory rate $ 11,894 $ 50,915 $ 29,964 State income taxes, net of federal income tax benefit 1,561 10,189 6,910 Share-based compensation ( 537 ) ( 840 ) ( 933 ) Other permanent differences ( 36 ) ( 30 ) 31 Non-deductible compensation 1,190 1,435 293 Change in income tax contingency reserves — — ( 260 ) Federal income tax credits ( 34 ) ( 107 ) ( 76 ) Other ( 202 ) 1,477 ( 121 ) $ 13,836 $ 63,039 $ 35,808 The significant components of the deferred tax assets and liabilities at December 31, 2023 and 2022 were as follows: December 31, 2023 December 31, 2022 Deferred tax assets: Accrued expenses $ 12,006 $ 13,743 Allowance for doubtful accounts 565 822 Operating lease liabilities 29,658 37,599 Due diligence and transaction costs 13,953 — Share-based compensation 4,995 4,458 Accruals for income tax contingencies 129 141 Capital loss carryforwards — 4,253 Net operating loss carryforwards 634 645 Total gross deferred tax assets 61,940 61,661 Valuation allowance ( 395 ) ( 4,648 ) Total net deferred tax assets 61,545 57,013 Deferred tax liabilities: Tax over book depreciation 33,373 32,888 Prepaid expenses 10,807 6,600 Operating lease right-of-use assets 28,559 36,600 Goodwill 23,744 23,681 Intangible assets 7,262 8,337 Total deferred tax liabilities 103,745 108,106 Net deferred tax liabilities $ ( 42,200 ) $ ( 51,093 ) The Company paid income taxes, net of refund s, of $ 20,842 , $ 65,388 and $ 35,766 for the years ended December 31, 2023, 2022 and 2021, respectively. F-36 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) In 2021, the sale of Pool resulted in a capital loss in the amount of $ 4,253 , which expires in 2026. A valuation allowance of $ 4,253 was recorded against the capital loss carryforward as of both December 31, 2022 and 2021. As of each reporting date, the Company considers new evidence, both positive and negative, that could affect the future realization of its deferred tax assets. As of December 31, 2023, the Company determined that there is sufficient evidence based on the capital gain realized from the sale of Final Mile to conclude that it is more likely than not that the capital loss carryforward of $ 4,253 is realizable. As a result, the Company realized a valuation allowance benefit in 2023, which was allocated to “ Income from discontinued operations, net of tax.” Therefore, the change in the valuation allowance recorded against the capital loss carryforward for the years ended December 31 2023, 2022 and 2021 was ($ 4,253 ), $ 23 and $ 4,230 , respectively. As of December 31, 2023, 2022 and 2021 the Company had state net operating loss carryforw ards of $ 13,240 , $ 13,574 and $ 13,819 , respectively, that expire between 2023 and 2034. The state net operating loss carryforwards are limited to the future taxable income of separate legal entities. The Company maintains a valuation allowance to reserve against its state net operating loss carryforwards of $ 395 as of both December 31, 2023 and 2022. There was no change in the valuation allowance for the state net operating loss carryforwards in 2023, 2022 and 2021. 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. A reconciliation of the beginning and ending amount of unrecognized tax benefits as of and during the years ended December 31, 2023 and 2022 is as follows: Balance at December 31, 2021 $ 241 Reductions for settlement with state taxing authorities ( 66 ) Additions for tax positions of current year 23 Balance at December 31, 2022 198 Reductions for settlement with state taxing authorities ( 66 ) Additions for tax positions of current year 21 Balance at December 31, 2023 $ 153 The Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain. As of December 31, 2023 and 2022, the Company had $ 153 and $ 198 , respectively, of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. At December 31, 2023 and 2022, the Company had accrued interest and penalties related to unrecognized tax benefits of $ 82 a nd $ 85 , respectively. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in “Interest expense, net” and “Other operating expenses”, respectively. 8. Leases The Company leases certain land, buildings, equipment and office equipment under finance and operating leases. Equipment includes tractors, straight trucks, forklifts and trailers. Equipment under a finance lease is amortized over the shorter of the lease term or its estimated useful life. The Company subleases certain facilities to independent third parties. Since the Company is not relieved of its obligation under these leases, a right-of-use lease asset and corresponding operating lease liability is recorded. Sublease rental income was $ 2,991 , $ 2,762 and $ 1,763 in 2023, 2022 and 2021, respectively. In 2024, the Company expects to receive aggregate future minimum rental payments under noncancelable subleases of approximately $ 1,859 . Noncancelable subleases expire between 2024 and 2028. F-37 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) The Company does not recognize a right-of-use asset or lease liability with respect to operating leases with an initial lease term of 12 months or less, and recognizes expense on such leases on a straight-line basis over the lease term. The Company does not account for lease components separately from nonlease components. The Company has certain leases that include one or more options to renew, with renewal periods ranging from one to 25 years. The exercise of the lease renewal options is at the discretion of the Company and is included in the determination of the right-of-use asset and operating lease liability when the option is reasonably certain of being exercised. The depreciable life of right-of-use assets and leasehold improvements is limited by the expected lease term. The Company has certain lease agreements for equipment that include variable rental payments based on estimated mileage. The variable rental payments are adjusted for periodically based on actual mileage. In addition, the Company has certain lease agreements that include variable rental payments that are adjusted periodically for inflation based on the index rate as defined by the applicable government authority. The Company ’ s leases generally do not provide an implicit rate, and therefore, the Company applies its incremental borrowing rate using information available at lease commencement or modification to determine the present value of lease payments. The incremental borrowing rate is an estimate based on the interest rate the Company would pay to borrow an amount equal to the lease payments on a collateralized basis and over a similar term, within a similar economic environment. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company has contracts with Leased Capacity Providers. Since the contracts explicitly identify the tractors operated by the Leased Capacity Providers, the Company determined the contracts contain an embedded lease. The compensation of Leased Capacity Providers, as specified in the contract, is variable based upon a rate per shipment and a rate per mile. The variable amounts are excluded from the calculation of the right-of-use lease asset and corresponding operating lease liability and are disclosed as variable lease costs. Variable lease costs related to the embedded leases were $ 409,080 , $ 440,756 and $ 353,347 , for the years ended December 31, 2023, 2022, and 2021, respectively, and were recorded in “Purchased transportation” in the Consolidated Statements of Comprehensive Income. Total lease assets and liabilities as of December 31, 2023 and 2022 were as follows: Lease Assets Classification December 31, 2023 December 31, 2022 Operating lease right-of-use assets Operating lease right-of-use assets $ 111,552 $ 131,097 Finance lease assets Property and equipment, net 1 38,015 22,957 Total leased assets $ 149,567 $ 154,054 Lease Liabilities Classification December 31, 2023 December 31, 2022 Current: Operating Current portion of operating lease liabilities $ 44,344 $ 42,266 Finance Current portion of debt and finance lease obligations 12,645 7,820 Noncurrent: Operating Operating lease liabilities, less current portion 71,598 92,903 Finance Finance lease obligations, less current portion 26,736 15,711 Total leased liabilities $ 155,323 $ 158,700 1 Finance lease assets are recorded net of accumulated depreciation of $ 22,051 and $ 10,949 as of December 31, 2023 and 2022, respectively. F-38 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Total lease cost for 2023 and 2022 was as follows: Year Ended Classification December 31, 2023 December 31, 2022 Operating lease cost Operating leases $ 54,604 $ 52,891 Short-term lease cost Operating leases 13,672 20,329 Variable lease cost Purchased transportation, operating leases and other operating expenses 428,385 456,093 Sublease income Operating revenue ( 2,991 ) ( 2,762 ) Finance lease cost: Amortization of leased assets Depreciation and amortization 11,102 6,114 Interest on leased liabilities Interest expense, net 1,395 563 Total lease cost $ 506,167 $ 533,228 Future minimum lease payments under noncancelable operating and finance leases with remaining terms greater than one year as of December 31, 2023 were as follows: Operating Leases Finance Leases 2024 $ 49,036 $ 14,455 2025 34,347 11,190 2026 23,186 9,012 2027 12,386 6,777 2028 5,854 2,123 Thereafter 6,660 192 Total minimum lease payments 131,469 43,749 Less: imputed interest ( 15,527 ) ( 4,368 ) Present value of future minimum lease payments 115,942 39,381 Less: current portion of lease obligations ( 44,344 ) ( 12,645 ) Long-term lease obligations $ 71,598 $ 26,736 The following table summarizes the weighted-average remaining lease term and weighted average discount rate: December 31, 2023 December 31, 2022 Weighted average remaining lease term (in years): Operating leases 3.0 3.6 Finance leases 3.6 3.6 Weighted average discount rate: Operating leases 3.4 % 3.0 % Finance leases 5.5 % 4.2 % F-39 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) The following table summarizes the supplemental cash flow information for 2023 and 2022: Year Ended December 31, 2023 December 31, 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 54,462 $ 51,780 Operating cash flows from finance leases 1,395 563 Financing cash flows from finance leases 11,074 6,108 Right-of-use assets obtained in exchange for operating lease liabilities $ 29,884 $ 47,721 Leased assets obtained in exchange for finance lease obligations 25,217 14,422 9. Commitments and Contingencies Commitments As of December 31, 2023, the Company had unconditional purchase obligations of $ 7,100 to purchase forklifts and other equipment during 2024. Contingencies On September 26, 2023, Rodney Bell, Michael A. Roberts and Theresa Woods, three shareholders of the Company, filed a complaint (the “Shareholder Complaint”) against the Company and certain of its directors and officers in the Third District Chancery Court sitting in Greeneville, Tennessee. The Shareholder Complaint alleges, among other things, that the Company’s shareholders have the right to vote on certain transactions contemplated by the Merger Agreement and sought an injunction against the consummation of the transaction until a shareholder vote was held. The court initially granted a temporary restraining order enjoining the transactions contemplated by the Merger Agreement but later dissolved it on October 25, 2023. Thereafter and as described below, on January 25, 2024, the parties to the Amended Merger Agreement completed the Omni Acquisition. The case remains pending. On October 31, 2023, Omni filed a complaint (the “Omni Complaint”) against the Company and certain of its direct and indirect subsidiaries in the Court of Chancery in the State of Delaware. The Omni Complaint alleged, among other things, that the Company breached its obligation to close the transactions contemplated by the Merger Agreement and sought specific performance to compel the Company to close and related declaratory relief. On January 22, 2024, the Company, Omni, and certain other parties entered into a Settlement and Release Agreement (the “Settlement Agreement”), settling all litigation claims that were the subject of proceedings pending in the matter of Omni Newco, LLC v Forward Air Corporation, et al, No. 2023-1104 (Del. Ch.) (the “Transaction Litigation”) asserted under the Merger Agreement among the Company, Omni and the other parties thereto, and stipulating to the dismissal of the Transaction Litigation. Pursuant to the Settlement Agreement, the parties agreed to enter into Amendment No. 1. On January 25, 2024, the Company, Omni, and certain other parties completed the Omni Acquisition as discussed in Note 3, Acquisitions . 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. The Company accrues for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Based on the knowledge of the facts, the Company believes the resolution of such incidental claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on our 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. F-40 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 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 up to $ 10,000 (in thousands): Company Risk Retention Frequency Layer Policy Term Expedited Freight LTL business $ 5,000 Occurrence/Accident¹ $ 0 to $ 5,000 10/1/2023 to 10/1/2024 Truckload business $ 5,000 Occurrence/Accident¹ $ 0 to $ 5,000 10/1/2023 to 10/1/2024 LTL, Truckload and Intermodal businesses $ 5,000 Policy Term Aggregate² $ 5,000 to $ 10,000 10/1/2023 to 10/1/2024 Intermodal $ 1,000 Occurrence/Accident¹ $ 0 to $ 1,000 10/1/2023 to 10/1/2024 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. 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 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 accrues for the costs of the uninsured portion of pending claims within the self-insured retention based on the nature and severity of individual claims and historical claims development trends. The Company believes the recorded reserves are sufficient for all incurred claims up to the self-insured retention limits, including an estimate for claims incurred but not reported. However, estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult, and the Company may fail to establish sufficient insurance reserves and adequately estimate for future insurance claims. Since the ultimate resolution of outstanding claims as well as claims incurred but not reported is uncertain, it is possible that the reserves recorded for these losses could change materially in the near term. 10. Employee Benefit Plan The Company sponsors a qualified defined contribution plan covering substantially all employees. Under the defined contribution plan, the Company contributes 25.0 % of the employee’s contribution up to a maximum of 6.0 % of annual compensation, subject to certain limits. The Company contributed $ 2,001 , $ 1,952 and $ 1,762 for the years ended December 31, 2023, 2022 and 2021, respectively. 11. Fair Value of Financial Instruments Cash, cash equivalents and restricted cash equivalents, accounts receivable, other receivables, and accounts payable are valued at their carrying amounts in the Company’s Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments. As of December 31, 2023, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $ 38,926 , compared to its carrying value of $ 39,381 . As of December 31, 2022, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $ 22,957 , compared to its carrying value of $ 23,531 . The carrying value of the long-term debt held in escrow approximates fair value based on the borrowing rates currently available for a loan with similar terms and average maturity. F-41 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis. Assets are recorded at fair value on a nonrecurring basis as a result of an impairment charge. The losses on assets measured at fair value on a nonrecurring, discontinued operation basis are summarized below: 2023 2022 2021 Earn-out asset impairment charge 1 $ — $ — $ 6,967 1 See Note 2, Discontinued Operations and Held for Sale . 12. 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 reportable segment. Corporate includes revenues and expenses as well as assets that are not attributable to any of the Company’s reportable segments. The Company is currently evaluating potential changes to its reportable segments, which may be reflected in future filings to more accurately align businesses within the segments. The accounting policies applied to each segment are the same as those in Note 1, Operations and Summary of Significant Accounting Policies , 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. No single customer accounted for more than 10% of the Company’s consolidated revenues from continuing operations for the years ended December 31, 2023, 2022 and 2021. F-42 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) Segment results from operations for the years ended December 31, 2023, 2022 and 2021 were as follows: Year Ended December 31, 2023 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 1,096,484 $ 273,925 $ — $ — $ 1,370,409 Intersegment revenues 474 118 — ( 266 ) 326 Depreciation 31,626 9,740 — — 41,366 Amortization 5,788 10,251 — — 16,039 Income (loss) from continuing operations 116,040 25,327 ( 53,157 ) — 88,210 Purchases of property and equipment 29,928 797 — — 30,725 Year Ended December 31, 2022 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 1,260,414 $ 419,698 $ — $ — $ 1,680,112 Intersegment revenues ( 293 ) 20 — ( 205 ) ( 478 ) Depreciation 23,597 6,641 101 — 30,339 Amortization 3,461 8,752 — — 12,213 Income (loss) from continuing operations 192,583 56,874 ( 1,866 ) — 247,591 Purchases of property and equipment 37,984 1,270 — — 39,254 Year Ended December 31, 2021 Expedited Freight Intermodal Corporate Eliminations Consolidated - Continuing Operations External revenues $ 1,098,847 $ 289,171 $ — $ — $ 1,388,018 Intersegment revenues 223 43 — ( 1,057 ) ( 791 ) Depreciation 20,826 3,538 63 — 24,427 Amortization 3,430 7,109 — — 10,539 Income (loss) from continuing operations 127,045 30,117 ( 10,137 ) — 147,025 Purchases of property and equipment 35,630 2,745 — — 38,375 Total Assets As of December 31, 2023 $ 661,270 $ 270,421 $ 2,047,901 $ ( 59 ) $ 2,979,533 As of December 31, 2022 547,417 322,001 202,756 ( 67 ) 1,072,107 F-43 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) A reconciliation from the segment information to the consolidated balances for revenues and total assets is set forth below: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Intersegment revenues - continuing operations $ 326 $ ( 478 ) $ ( 791 ) Intersegment revenues - discontinued operations ( 326 ) 478 791 Consolidated intersegment revenues $ — $ — $ — December 31, 2023 December 31, 2022 Segment assets - continuing operations $ 2,979,533 $ 1,072,107 Current assets held for sale — 34,942 Noncurrent assets held for sale — 101,027 Consolidated total assets $ 2,979,533 $ 1,208,076 Revenue from the individual services within the Expedited Freight segment for the years ended December 31, 2023, 2022 and 2021 were as follows: Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Expedited Freight revenues: Network $ 845,949 $ 947,817 $ 805,015 Truckload 159,513 221,979 223,026 Other 91,496 90,325 71,029 Total $ 1,096,958 $ 1,260,121 $ 1,099,070 F-44 Forward Air Corporation Notes to Consolidated Financial Statements (Continued) December 31, 2023 (In thousands, except per share data) 13. Quarterly Results of Operations (Unaudited) The following is a summary of the quarterly results of operations for the years ended December 31, 2023 and 2022: 2023 March 31 June 30 September 30 December 31 Operating revenue $ 357,709 $ 333,622 $ 340,976 $ 338,428 Net income (loss) from continuing operations $ 33,904 $ 17,127 $ 6,493 $ ( 14,721 ) Income from discontinued operations, net of tax 2,464 2,824 2,795 116,465 Net income and comprehensive income $ 36,368 $ 19,951 $ 9,288 $ 101,744 Basic net income (loss) per share: Continuing operations $ 1.28 $ 0.66 $ 0.25 $ ( 0.58 ) Discontinued operations 0.09 0.11 0.11 4.51 Net income per share 1 $ 1.37 $ 0.76 $ 0.36 $ 3.94 Diluted net income (loss) per share: Continuing operations $ 1.27 $ 0.65 $ 0.25 $ ( 0.58 ) Discontinued operations 0.09 0.11 0.11 4.51 Net income per share 1 $ 1.37 $ 0.76 $ 0.36 $ 3.93 2022 March 31 June 30 September 30 December 31 Operating revenue $ 401,203 $ 442,191 $ 433,201 $ 403,039 Net income from continuing operations $ 40,463 $ 51,434 $ 48,508 $ 39,009 Income from discontinued operations, net of tax 2,223 3,996 3,625 3,933 Net income and comprehensive income $ 42,686 $ 55,430 $ 52,133 $ 42,942 Basic net income per share: Continuing operations $ 1.49 $ 1.90 $ 1.80 $ 1.46 Discontinued operations 0.08 0.15 0.13 0.15 Net income per share 1 $ 1.57 $ 2.05 $ 1.94 $ 1.61 Diluted net income per share: Continuing operations $ 1.48 $ 1.89 $ 1.80 $ 1.45 Discontinued operations 0.08 0.15 0.13 0.15 Net income per share 1 $ 1.57 $ 2.04 $ 1.93 $ 1.60 1 Rounding may impact summation of amounts. F-45 Forward Air Corporation Schedule II — Valuation and Qualifying Accounts (In thousands) Additions Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Operating Revenue Deductions Balance at End of Period Year ended December 31, 2023 Allowance for doubtful accounts $ 1,499 $ 21 $ — $ 396 2 $ 1,124 Allowance for revenue adjustments 1 1,630 — 5,091 5,639 3 1,082 Deferred tax valuation allowance 4,648 ( 4,253 ) — — 395 7,777 ( 4,232 ) 5,091 6,035 2,601 Year ended December 31, 2022 Allowance for doubtful accounts $ 1,707 $ ( 46 ) $ — $ 162 2 $ 1,499 Allowance for revenue adjustments 1 1,526 — 6,426 6,322 3 1,630 Deferred tax valuation allowance 4,625 23 — — 4,648 7,858 ( 23 ) 6,426 6,484 7,777 Year ended December 31, 2021 Allowance for doubtful accounts $ 1,246 $ 776 $ — $ 315 2 $ 1,707 Allowance for revenue adjustments 1 1,005 — 6,339 5,818 3 1,526 Deferred tax valuation allowance 395 4,230 — — 4,625 2,646 5,006 6,339 6,133 7,858 1 Represents an allowance for revenue adjustments resulting from future billing rate changes. 2 Represents uncollectible accounts written off, net of recoveries. 3 Represents adjustments to billed accounts receivable. 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