What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-15 · 350 added, 138 removed, 293 unchanged (62% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We are a leading asset-light freight provider of transportation services, including LTL, truckload and intermodal drayage services and freight brokerage and supply chain services across North America, Europe, and Asia.

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

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Fuel shortages, changes in fuel prices, and the potential volatility in fuel surcharge revenue may impact our results of operations and overall profitability.

Fuel surcharge revenue as a percentage of operating revenues decreased to 11.7% for the quarter ended March 31, 2024 compared to 18.0% for the quarter ended March 31, 2023 as a result of the inclusion of Omni in the results for the quarter ended March 31, 2024 .

Fuel surcharge revenue as a percentage of operating revenues decreased to 10.1% for the quarter ended June 30, 2024 compared to 17.9% for the quarter ended June 30, 2023 as a result of the inclusion of Omni in the results for the quarter ended June 30, 2024 .

Recent Events and Factors Affecting Comparability

Omni Acquisition

On January 25, 2024, we acquired Omni Newco, LLC (“Omni Logistics”) for a combination of (a) $100 million in cash and (b) (i) common equity consideration representing 5,135 shares of our common stock on an as-converted and as-exchanged basis and (ii) non-voting, convertible perpetual preferred equity consideration representing, if our shareholders approve, an additional 8,880 shares of our common stock on an as-exchanged basis (“Omni Acquisition”).

On January 25, 2024, we completed the Omni Acquisition pursuant to which we acquired Omni for a combination of

(a) $100,499 in cash (which includes pre-acquisition Omni costs of approximately $80 million) (b) 14,015 shares of common stock on an as-converted and as-exchanged basis consisting of:

(i) 1,910 shares of common stock (of which 1,210 were issued upon conversion of the Series C Preferred Units upon the Conversion Approval) and (ii) 12,105 Opco Class B Units and corresponding Series B Preferred Units, which are exchangeable into shares of common stock (of which 7,670 units were issued upon conversion of the units of Opco designated as “Opco Series C-2 Preferred Units” upon the Conversion Approval).

See Note 4, Acquisitions, to our Condensed Consolidated Financial Statements for more information about our acquisitions.

Omni Logistics revenues and segment income from January 25, 2024 through March 31, 2024 are included in our condensed consolidated statements of comprehensive (loss) income for the three months ended March 31, 2024.

The changes in our results of operations for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 are partially driven by the inclusion of the results of operations of Omni Logistics.

The following table sets forth the financial data of our Omni Logistics segment for the three months ended March 31, 2024 (unaudited and in thousands):

Omni Logistics revenues and segment income from January 25, 2024 through June 30, 2024 are included in our condensed consolidated statements of comprehensive (loss) income for the three months ended June 30, 2024.

The changes in our results of operations for the three and six months ended June 30, 2024 as compared to the three months ended June 30, 2023 are primarily driven by the inclusion of the results of operations of Omni Logistics.

The following table sets forth the financial data of our Omni Logistics segment for the three and six months ended June 30, 2024 (unaudited and in thousands):

Three Months Ended

March 31, 2024 Percent of Revenue

June 30, 2024 Percent of Revenue

Operating revenue $ 311,856 100.0 %

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Other operating expenses 24,790 7.9

Impairment of goodwill 1,092,714 350.4

Total operating expenses 1,417,727 454.6

Loss from operations $ (1,105,871) (354.6) %

Six Months Ended

June 30, 2024 Percent of Revenue

Operating revenue $ 536,694 100.0 %

Operating expenses:

Purchased transportation 323,098 60.2

Salaries, wages and employee benefits 106,311 19.8

Operating leases 45,878 8.5

Depreciation and amortization 50,104 9.3

Insurance and claims 4,898 0.9

Fuel expense 1,486 0.3

Other operating expenses 46,661 8.7

Impairment of goodwill 1,092,714 203.7

Total operating expenses 1,671,150 311.4

Loss from operations $ (1,134,456) (211.4) %

Results from Operations

The following table sets forth our consolidated financial data for the three months ended March 31, 2024 and 2023 (unaudited and in thousands):

The following table sets forth our consolidated financial data for the three months ended June 30, 2024 and 2023 (unaudited and in thousands):

Three Months Ended

March 31, 2024 March 31, 2023 Change Percent Change

June 30, 2024 June 30, 2023 Change Percent Change

Operating revenues:

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Omni Logistics 311,856 — 311,856 —

Eliminations and other operations (12,612) (37) (12,575) 33,986.5

Eliminations and other operations (18,771) (65) (18,706) NM

Operating revenues 643,666 333,622 310,044 92.9

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Other operating expenses 65,666 37,263 28,403 76.2

Impairment of goodwill 1,092,714 — 1,092,714 —

Total operating expenses 1,739,421 307,297 1,432,124 466.0

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Interest expense, net (47,265) (2,585) (44,680) 1,728.4

Foreign exchange loss (668) — (668) —

Foreign exchange gain 1,567 — 1,567 —

Other income, net 40 — 40 —

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Net (loss) income from continuing operations (966,471) 17,127 (983,598) (5,743.0)

Income from discontinued operation, net of tax — 2,464 (2,464) (100.0)

(Loss) income from discontinued operation, net of tax (4,876) 2,824 (7,700) (272.7)

Net (loss) income (971,347) 19,951 (991,298) (4,968.7)

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Net (loss) income attributable to Forward Air $ (645,433) $ 19,951 $ (665,384) (3335.1) %

NM=Not Meaningful

Operating Revenues

Operating revenues increased $184,104, or 51.5%, to $541,813 for the three months ended March 31, 2024 compared to $357,709 for the three months ended March 31, 2023.

Operating revenues increased $310,044, or 92.9%, to $643,666 for the three months ended June 30, 2024 compared to $333,622 for the three months ended June 30, 2023.

The increase was primarily due to the inclusion of $311,856 from the Omni Logistics segment and an increase in our Expedited Freight segment of $21,846 due to increased Network revenue, offset by a decrease from our Intermodal segment of $4,952.

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Operating Expenses

Operating expenses increased $297,032, or 95.7%, to $607,545 for the three months ended March 31, 2024 compared to $310,513 for the three months ended March 31, 2023.

The increase was primarily due to the inclusion of the $253,423 of operating expenses from the Omni Logistics segment and a $13,905 increase in operating expenses from the Expedited Freight segment, partially offset by a $24,260 decrease in operating expenses from the Intermodal segment.

Operating expenses increased $1,432,124, or 466.0%, to $1,739,421 for the three months ended June 30, 2024 compared to $307,297 for the three months ended June 30, 2023.

The increase was primarily due to the inclusion of the $1,417,727 of operating expenses from the Omni Logistics segment which includes an impairment charge of $1,092,714 and a $26,963 increase in operating expenses from the Expedited Freight segment, partially offset by a $5,957 decrease in operating expenses from the Intermodal segment.

Purchased transportation expense is our largest expense which includes our independent contractor fleet owners and owner-operators, who lease their equipment to our motor carriers (“Leased Capacity Providers ”), third-party motor carriers and capacity secured by transportation intermediaries, while Company-employed drivers are included in salaries, wages and employee benefits.

Income from Continuing Operations and Segment Operations

Income from operations decreased $112,928, or 239.3%, to a $65,732 loss for the three months ended March 31, 2024 compared to a $47,196 of income for the three months ended March 31, 2023.

The decrease was primarily due to a decrease in Other Operations of $66,539, Omni Logistics segment of $28,585, Expedited Freight segment of $10,187, and Intermodal segment of $7,617.

Income from operations decreased $1,122,080, or 4,262.4%, to a $1,095,755 loss for the three months ended June 30, 2024 compared to a $26,325 of income for the three months ended June 30, 2023.

The decrease was primarily due to a decrease in Omni Logistics segment of $1,105,871, driven by an impairment charge of $1,092,714, Expedited Freight segment of $5,117, and Intermodal segment of $1,005.

Interest Expense, net

Interest expense, net was $40,753 for the three months ended March 31, 2024 compared to $2,355 for the three months ended March 31, 2023.

The increase in interest expense was primarily due to an increase in the average interest rate during the first quarter of 2024 on higher borrowings outstanding as compared to the same period in 2023.

In connection with the acquisition of Omni Logistics, the outstanding borrowings increased in the first quarter of 2024.

The weighted-average interest rate on the outstanding borrowings were 9.58% and 5.96% during the three months ended March 31, 2024 and 2023, respectively.

Interest expense, net was $47,265 for the three months ended June 30, 2024 compared to $2,585 for the three months ended June 30, 2023.

The increase in interest expense was primarily due to higher borrowings outstanding during the second quarter of 2024 as compared to the same period in 2023 and an increase in the average interest rate.

In connection with the Omni Acquisition, the outstanding borrowings remained steady in the second quarter of 2024.

The weighted-average interest rate on the outstanding borrowings were 9.56% and 6.32% during the three months ended June 30, 2024 and 2023, respectively.

Income Taxes on a Continuing Basis

The effective tax rate for the three months ended March 31, 2024 was 17.1% compared to 24.3% for the three months ended March 31, 2023.

The effective tax rate varied from the statutory United States federal rate of 21% in the first quarter of 2024 primarily due to the effect of the noncontrolling interest, non-deductible executive compensation, excess tax benefits realized on share-based awards, partially offset by state income taxes, net of the federal benefit, and foreign taxes.

The effective tax rate varied from the statutory United States federal rate of 21% in the first quarter of 2023 primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards.

The effective tax rate for the three months ended June 30, 2024 was 15.3% compared to 27.8% for the three months ended June 30, 2023.

The effective tax rate varied from the statutory United States federal rate of 21% in the second quarter of 2024 primarily due to the effect of the noncontrolling interest, non-deductible executive compensation, excess tax benefits realized on share-based awards, partially offset by state income taxes, net of the federal benefit, and foreign taxes.

The effective tax rate varied from the statutory United States federal rate of 21% in the second quarter of 2023 primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards.

Income from Discontinued Operations, net of Tax

Income from discontinued operations, net of tax decreased $2,464 or 100% for the three months ended March 31, 2024.

The decrease was due to the sale of our Final Mile business in December 2023.

Loss from discontinued operations, net of tax increased $7,700 or 272.7% for the three months ended June 30, 2024 compared to the same period in 2023.

The increase was due to the final net working capital settlement following the sale of our Final Mile business in December 2023.

Net (Loss) Income

As a result of the foregoing factors, net income decreased $125,162, or 344.2%, to a $88,794 loss for the three months ended March 31, 2024 compared to $36,368 income for the three months ended March 31, 2023.

Expedited Freight - Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

The following table sets forth the financial data of our Expedited Freight segment for the three months ended March 31, 2024 and 2023 (unaudited and in thousands):

As a result of the foregoing factors, net income decreased $991,298, to a $971,347 loss for the three months ended June 30, 2024 compared to $19,951 income for the three months ended June 30, 2023.

Expedited Freight - Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

The following table sets forth the financial data of our Expedited Freight segment for the three months ended June 30, 2024 and 2023 (unaudited and in thousands):

Three Months Ended

March 31, 2024 Percent of Revenue March 31, 2023 Percent of Revenue Change Percent Change

June 30, 2024 Percent of Revenue June 30, 2023 Percent of Revenue Change Percent Change

Operating revenues:

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Three Months Ended

March 31, 2024 March 31, 2023 Percent Change

June 30, 2024 June 30, 2023 Percent Change

Business days 64 64 — %

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Operating Revenues

Expedited Freight operating revenues increased $3,718, or 1.4%, to $273,295 for the three months ended March 31, 2024 from $269,577 for the three months ended March 31, 2023.

The increase was primarily due to increased Network revenue, partially offset by decreased Truckload revenue.

Expedited Freight operating revenues increased $21,846, or 8.1%, to $291,282 for the three months ended June 30, 2024 from $269,436 for the three months ended June 30, 2023.

The increase was primarily due to increased Network and Truckload revenue.

Network revenue increased due to a 5.9% increase in pounds per day, offset by a 1.2% decrease in revenue per hundredweight excluding fuel as compared to the same period in 2023.

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The increase in shipments is due to higher demand for our services while the increase in weight per shipment was the result of more dense freight in our network driven by a change in the mix of services provided to customers.

Fuel surcharge revenue increased $1,286, or 2.7% as a result of the increased tonnage in our Network, partially offset by a decline in the average price of fuel as compared to the same period in 2023.

Truckload revenue decreased $4,689, primarily due to challenged market conditions that led to decreased customer demand for our services.

Other revenue, which includes accessorial revenue, warehousing and terminal handling, decreased $155.

Fuel surcharge revenue increased $4,151, or 9.2% as a result of the increased tonnage in our Network as compared to the same period in 2023.

Truckload revenue increased $4,246, primarily due to increased customer demand for our services.

Purchased Transportation

Expedited Freight purchased transportation increased $2,566, or 2.0%, to $127,760 for the three months ended March 31, 2024 from $125,194 for the three months ended March 31, 2023.

Purchased transportation was 46.7% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 46.4% for the same period in 2023.

Expedited Freight purchased transportation increased $18,390, or 14.8%, to $142,512 for the three months ended June 30, 2024 from $124,122 for the three months ended June 30, 2023.

Purchased transportation was 48.9% of Expedited Freight operating revenues for the three months ended June 30, 2024 compared to 46.1% for the same period in 2023.

Expedited Freight purchased transportation includes Leased Capacity Providers and third-party motor carriers and transportation intermediaries, while Company-employed drivers are included in salaries, wages and employee benefits.

The increase in purchased transportation was primarily due to higher volumes in Network, and the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers for Network and Truckload services.

For the three months ended March 31, 2024, 65.5%, 30.0% and 4.5% of our freight capacity was purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers, respectively, for Network and Truckload.

For the three months ended June 30, 2024, 62.8%, 33.2% and 4.0% of our freight capacity was purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers, respectively, for Network and Truckload.

This compares to 62.1%, 32.7% and 5.3%, respectively, in the same period in 2023.

Salaries, Wages and Employee Benefits

Expedited Freight salaries, wages and employee benefits increased $6,635, or 11.9%, to $62,553 for the three months ended March 31, 2024 from $55,918 for the three months ended March 31, 2023.

Salaries, wages and employee benefits were 22.9% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 20.7% for the same period in 2023.

Expedited Freight salaries, wages and employee benefits increased $6,208, or 10.8%, to $63,845 for the three months ended June 30, 2024 from $57,637 for the three months ended June 30, 2023.

Salaries, wages and employee benefits were 21.9% of Expedited Freight operating revenues for the three months ended June 30, 2024 compared to 21.4% for the same period in 2023.

The increase in salaries, wages and employee benefits expense was primarily due to an increase in Company-employed drivers in response to the higher volumes, an increase in the reserve for incentive compensation and an increase in salaries and wages as compared to the same period in 2023.

Operating Leases

Expedited Freight operating leases decreased $756, or 4.8%, to $14,982 for the three months ended March 31, 2024 from $15,738 for the three months ended March 31, 2023.

Operating leases were 5.5% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 5.8% for the same period in 2023.

The decrease in operating lease expense was primarily due to fewer equipment leases in the first quarter of 2024 as compared to the same period in 2023.

Expedited Freight operating leases decreased $1,471, or 9.1%, to $14,730 for the three months ended June 30, 2024 from $16,201 for the three months ended June 30, 2023.

Operating leases were 5.1% of Expedited Freight operating revenues for the three months ended June 30, 2024 compared to 6.0% for the same period in 2023.

The decrease in operating lease expense was primarily due to fewer equipment leases in the second quarter of 2024 as compared to the same period in 2023.

Depreciation and Amortization

Expedited Freight depreciation and amortization increased $2,664, or 34.9%, to $10,290 for the three months ended March 31, 2024 from $7,626 for the three months ended March 31, 2023.

Depreciation and amortization was 3.8% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 2.8% for the same period in 2023.

The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation in the first quarter of 2024 as compared to the same period in 2023 as the result of purchasing and placing in service new equipment in the second half of 2023 and 2024.

Insurance and Claims

Expedited Freight insurance and claims increased $1,433, or 15.5%, to $10,652 for the three months ended March 31, 2024 from $9,219 for the three months ended March 31, 2023.

Insurance and claims was 3.9% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 3.4% for the same period in 2023.

The increase in insurance and claims expense was primarily due to an increase in equipment repairs and vehicle liability claims in the first quarter of 2024 as compared to the same period in 2023.

See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations ” section below.

Expedited Freight fuel expense increased $68, or 2.7%, to $2,581 for the three months ended March 31, 2024 from $2,513 for the three months ended March 31, 2023.

Fuel expense was 0.9% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 0.9% and for the same period in 2023.

Expedited Freight fuel expense increased primarily due to additional miles driven by Company-employed drivers, partially offset by a decrease in the average price of fuel in the first quarter of 2024 as compared to the same period in 2023.

Other Operating Expenses

Expedited Freight other operating expenses increased $1,295, or 5.5%, to $24,979 for the three months ended March 31, 2024 from $23,684 for the three months ended March 31, 2023.

Other operating expenses were 9.2% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 9.0% for the same period in 2023.

Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and other over-the-road costs.

The increase in other operating expenses was primarily due to an increase in software license and subscription fees, partially offset by a decrease in maintenance and repair expense, professional fees, and contract labor in the first quarter of 2024 as compared to the same period in 2023.

Expedited Freight depreciation and amortization increased $2,253, or 26.7%, to $10,692 for the three months ended June 30, 2024 from $8,439 for the three months ended June 30, 2023.

Depreciation and amortization was 3.7% of Expedited Freight operating revenues for the three months ended June 30, 2024 compared to 3.1% for the same period in 2023.

The increase in depreciation and amortization expense was primarily as the result of purchasing and placing in service new equipment in the second half of 2023 and in the first half of 2024.

Income from Operations

Expedited Freight income from operations decreased $10,187, or 34.3%, to $19,498 for the three months ended March 31, 2024 compared to $29,685 for the three months ended March 31, 2023.

Income from operations was 7.1% of Expedited Freight operating revenues for the three months ended March 31, 2024 compared to 11.0% for the same period in 2023.

The decrease in income from operations as a percentage of operating revenues was driven by decreased revenue per hundredweight excluding fuel on increased tonnage, the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers for Network and Truckload, and increased operating expenses for the three months ended March 31, 2024 compared to the same period in 2023.

Intermodal - Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

The following table sets forth the financial data of our Intermodal segment for the three months ended March 31, 2024 and 2023 (unaudited and in thousands):

Expedited Freight income from operations decreased $5,117, or 18.9%, to $21,946 for the three months ended June 30, 2024 compared to $27,063 for the three months ended June 30, 2023.

Income from operations was 7.5% of Expedited Freight operating revenues for the three months ended June 30, 2024 compared to 10.0% for the same period in 2023.

The decrease in income from operations as a percentage of operating revenues was driven by the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers for Network and Truckload for the three months ended June 30, 2024 compared to the same period in 2023.

Intermodal - Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

The following table sets forth the financial data of our Intermodal segment for the three months ended June 30, 2024 and 2023 (unaudited and in thousands):

Three Months Ended

March 31, 2024 Percent of Revenue March 31, 2023 Percent of Revenue Change Percent Change

June 30, 2024 Percent of Revenue June 30, 2023 Percent of Revenue Change Percent Change

Operating revenues $ 59,299 100.0 % $ 64,251 100.0 % $ (4,952) (7.7) %

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Three Months Ended

March 31, 2024 March 31, 2023 Percent Change

June 30, 2024 June 30, 2023 Percent Change

Drayage shipments 64,877 68,180 (4.8) %

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Operating Revenues

Intermodal operating revenues decreased $31,877, or 36.2%, to $56,292 for the three months ended March 31, 2024 from $88,169 for the three months ended March 31, 2023.

Intermodal operating revenues decreased $4,952, or 7.7%, to $59,299 for the three months ended June 30, 2024 from $64,251 for the three months ended June 30, 2023.

The decrease in operating revenues was primarily due to a 4.8% decrease in drayage shipments and a decrease in drayage revenue per shipment of 3.2% as compared to the same period in 2023.

The decrease in drayage shipments and lower accessorial revenues to support customers was primarily due to the challenged market conditions that led to decreased customer demand for our services in the first quarter of 2024 as compared to the same period in 2023.

In addition, fuel surcharge revenue decreased $2,135, or 21.4%, as a result of the decline in the average price of fuel and fewer drayage shipments.

The decrease in drayage shipments and lower accessorial revenues to support customers was primarily due to the challenged market conditions that led to decreased customer demand for our services in the second quarter of 2024 as compared to the same period in 2023.

Purchased Transportation

Intermodal purchased transportation decreased $2,571, or 12.8%, to $17,443 for the three months ended March 31, 2024 from $20,014 for the three months ended March 31, 2023.

Purchased transportation was 31.0% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 22.7% for the same period in 2023.

Intermodal purchased transportation increased $1,264, or 7.1%, to $19,173 for the three months ended June 30, 2024 from $17,909 for the three months ended June 30, 2023.

Purchased transportation was 32.3% of Intermodal operating revenues for the three months ended June 30, 2024 compared to 27.9% for the same period in 2023.

Intermodal purchased transportation includes Leased Capacity Providers and third-party motor carriers, while Company-employed drivers are included in salaries, wages and employee benefits.

The decrease in purchased transportation was primarily due to fewer drayage shipments and the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and Company-employed drivers compared to the same period in 2023.

The increase in purchased transportation was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and Company-employed drivers compared to the same period in 2023.

Salaries, Wages and Employee Benefits

Intermodal salaries, wages and employee benefits decreased $3,832, or 20.3%, to $15,082 for the three months ended March 31, 2024 compared to $18,914 for the three months ended March 31, 2023.

Salaries, wages and employee benefits were 26.8% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 21.5% for the same period in 2023.

The decrease in salaries, wages and employee benefits expense was primarily due to a decrease in the reserve for incentive compensation and fewer Company-employed drivers and office employees in response to the lower volumes, as compared to the same period in 2023.

Intermodal salaries, wages and employee benefits decreased $1,751, or 10.5%, to $14,899 for the three months ended June 30, 2024 compared to $16,650 for the three months ended June 30, 2023.

Salaries, wages and employee benefits were 25.1% of Intermodal operating revenues for the three months ended June 30, 2024 compared to 25.9% for the same period in 2023.

The decrease in salaries, wages and employee benefits expense was primarily due to fewer Company-employed drivers and office employees in response to the lower volumes, as compared to the same period in 2023.

Operating Leases

Intermodal operating leases decreased $3,643, or 43.7%, to $4,692 for the three months ended March 31, 2024 compared to $8,335 for the three months ended March 31, 2023.

Operating leases were 8.3% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 9.5% for the same period in 2023.

The decrease in operating leases expense was primarily due to lower equipment expense incurred to support decreased accessorial revenues in the first quarter of 2024 as compared to the same period in 2023.

Intermodal operating leases decreased $1,919, or 28.7%, to $4,776 for the three months ended June 30, 2024 compared to $6,695 for the three months ended June 30, 2023.

Operating leases were 8.1% of Intermodal operating revenues for the three months ended June 30, 2024 compared to 10.4% for the same period in 2023.

The decrease in operating leases expense was primarily due to lower equipment expense incurred to support decreased accessorial revenues in the second quarter of 2024 as compared to the same period in 2023.

Other Operating Expenses

Intermodal other operating expenses decreased $2,812, or 33.6%, to $5,560 for the three months ended June 30, 2024 from $8,372 for the three months ended June 30, 2023.

Other operating expenses were 9.4% of Intermodal operating revenues for the three months ended June 30, 2024 compared to 13.0% for the same period in 2023.

Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and accessorial storage costs.

The decrease in other operating expenses was primarily due to lower accessorial storage costs incurred as a result of decreased accessorial revenues in the second quarter of 2024 compared to the same period in 2023.

Income from Operations

Intermodal income from operations increased $1,005, or 23.3%, to $5,317 for the three months ended June 30, 2024 compared to $4,312 for the three months ended June 30, 2023.

Income from operations was 9.0% of Intermodal operating revenues for the three months ended June 30, 2024 compared to 6.7% for the same period in 2023.

The increase in income from operations as a percentage of operating revenues was primarily due to lower operating expenses in response to lower volumes.

Other Operations - Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

Other operations included a $17,147 operating loss during the three months ended June 30, 2024 compared to $5,050 of operating income during the three months ended June 30, 2023.

The change in the operating loss was primarily due to $10,018 of professional fees incurred for transaction and integration costs in connection with the Omni Acquisition, incentive compensation and severance costs partially offset by a decrease in the reserves for vehicle liability claims.

Results from Operations

The following table sets forth our consolidated financial data for the six months ended June 30, 2024 and 2023 (unaudited and in thousands):

Six Months Ended

June 30, 2024 June 30, 2023 Change Percent Change

Operating revenues:

Expedited Freight $ 564,577 $ 539,013 $ 25,564 4.7 %

Intermodal 115,591 152,420 (36,829) (24.2)

Omni Logistics 536,694 — 536,694 —

Eliminations and other operations (31,383) (102) (31,281) NM

Operating revenues 1,185,479 691,331 494,148 71.5

Operating expenses:

Purchased transportation 598,602 287,138 311,464 108.5

Salaries, wages, and employee benefits 272,867 140,610 132,257 94.1

Operating leases 85,061 46,969 38,092 81.1

Depreciation and amortization 80,425 25,617 54,808 214.0

Intermodal depreciation and amortization decreased $119, or 2.5%, to $4,627 for the three months ended March 31, 2024 from $4,746 for the three months ended March 31, 2023.

Depreciation and amortization was 8.2% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 5.4% for the same period in 2023 .

The decrease in depreciation and amortization expense was primarily due to the lower amount of depreciable equipment in the first quarter of 2024 as compared to the same period in 2023.

Insurance and claims 27,579 26,019 1,560 6.0

Intermodal insurance and claims increased $257, or 10.9%, to $2,606 for the three months ended March 31, 2024 from $2,349 for the three months ended March 31, 2023.

Insurance and claims were 4.6% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 2.7% for the same period in 2023.

The increase in insurance and claims expense was primarily due to an increase in vehicle liability claims, partially offset by decreased equipment repairs in the first quarter of 2024 as compared to the same period in 2023.

Fuel expense 11,105 10,888 217 2.0

Other operating expenses 178,613 80,569 98,044 121.7

Impairment of goodwill 1,092,714 — 1,092,714 —

Total operating expenses 2,346,966 617,810 1,729,156 279.9

Income (loss) from operations:

Expedited Freight 41,444 56,748 (15,304) (27.0)

Intermodal 8,903 15,515 (6,612) (42.6)

Omni Logistics (1,134,456) — (1,134,456) —

Other Operations (77,378) 1,258 (78,636) NM

(Loss) income from operations (1,161,487) 73,521 (1,235,008) (1,679.8)

Other expense:

Interest expense, net (88,018) (4,940) (83,078) 1,681.7

Foreign exchange loss 899 — 899 —

Other income, net 49 — 49 —

Total other expense (87,070) (4,940) (82,130) 1,662.6

(Loss) income from operations before income taxes (1,248,557) 68,581 (1,317,138) (1,920.6)

Income tax (benefit) expense (193,292) 17,550 (210,842) (1,201.4)

Net income from continuing operations (1,055,265) 51,031 (1,106,296) (2,167.9)

(Loss) income from discontinued operation, net of tax (4,876) 5,288 (10,164) (192.2)

Net (loss) income (1,060,141) 56,319 (1,116,460) (1,982.4)

Net loss attributable to noncontrolling interest (352,996) — (352,996) —

Net (loss) income attributable to Forward Air $ (707,145) $ 56,319 $ (763,464) (1,355.6) %

NM=Not Meaningful

Operating Revenues

Operating revenues increased $494,148, or 71.5% to $1,185,479 for the six months ended June 30, 2024 compared to $691,331 for the six months ended June 30, 2023.

The increase was primarily due to the inclusion of $536,694 from the Omni Logistics segment and an increase in our Expedited Freight segment revenue of $25,564 due to increased Network revenue, offset by a decrease from our Intermodal segment of $36,829, The results for our reportable segments are discussed in detail in the following sections.

Operating Expenses

Operating expenses increased $1,729,156, or 279.9%, to $2,346,966 for the six months ended June 30, 2024 compared to $617,810 for the six months ended June 30, 2023.

The increase was primarily due to the inclusion of the $1,671,150 of operating expenses from the Omni Logistics segment which includes a goodwill impairment charge of $1,092,714 and a $40,868 increase in operating expenses from the Expedited Freight segment, partially offset by a $30,217 decrease in operating expenses from the Intermodal segment.

Purchased transportation expense includes our Leased Capacity Providers, third-party motor carriers and capacity secured by transportation intermediaries, while Company-employed drivers are included in salaries, wages and employee benefits.

Income from Operations and Segment Operations

Income from operations decreased $1,235,008, or 1,679.8%, to $1,161,487 for the six months ended June 30, 2024 compared to $73,521 for the six months ended June 30, 2023.

The decrease was primarily driven by a decrease in Omni Logistics segment of $1,134,456 as a result of a goodwill impairment charge of $1,092,714, Other Operations of $78,636, Expedited Freight segment of $15,304, and our Intermodal segment of $6,612.

Interest Expense, net

Interest expense, net was $88,018 for the six months ended June 30, 2024 compared to $4,940 for the six months ended June 30, 2023.

The increase in interest expense was due to higher variable interest rates during the six months ended June 30, 2024 on higher borrowings outstanding under the Revolving Credit Facility as compared to the same period in 2023.

The weighted-average interest rate on the borrowings under the Revolving Credit Facility was 9.56% and 6.05% during the six months ended June 30, 2024 and 2023, respectively.

Income Taxes on a Continuing basis

The effective tax rate for the six months ended June 30, 2024 was 15.5% compared to a rate of 25.7% for the six months ended June 30, 2023.

(Loss) Income from Discontinued Operations, net of Tax

Loss from discontinued operations, net of tax increased $10,164 or 192% for the six months ended June 30, 2024 compared to the same period in 2023.

The increase was due to the final net working capital settlement following the sale of our Final Mile business in December 2023.

Net (Loss) Income

As a result of the foregoing factors, net income decreased $1,116,460, or 1,982.4%, to a loss of $1,060,141 for the six months ended June 30, 2024 compared to $56,319 income for the six months ended June 30, 2023.

Expedited Freight - Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

The following table sets forth the financial data of our Expedited Freight segment for the six months ended June 30, 2024 and 2023:

Expedited Freight Segment Information

(unaudited and in thousands)

Six Months Ended

June 30, 2024 Percent of Revenue June 30, 2023 Percent of Revenue Change Percent Change

Operating revenues:

$ 437,827 77.5 % $ 411,693 76.4 % $ 26,134 6.3 %

Truckload 81,732 14.5 82,176 15.2 (444) (0.5)

Other 45,018 8.0 45,144 8.4 (126) (0.3)

Total operating revenues 564,577 100.0 539,013 100.0 25,564 4.7

Operating expenses:

Purchased transportation 270,272 47.9 249,316 46.3 20,956 8.4

Salaries, wages and employee benefits 126,398 22.4 113,555 21.1 12,843 11.3

Operating leases 29,712 5.3 31,939 5.9 (2,227) (7.0)

Depreciation and amortization 20,982 3.7 16,065 3.0 4,917 30.6

Insurance and claims 21,621 3.8 19,323 3.6 2,298 11.9

Fuel expense 5,015 0.9 5,024 0.9 (9) (0.2)

Other operating expenses 49,133 8.7 47,043 8.7 2,090 4.4

Total operating expenses 523,133 92.7 482,265 89.5 40,868 8.5

Income from operations $ 41,444 7.3 % $ 56,748 10.5 % $ (15,304) (27.0) %

1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial and Truckload revenue.

Expedited Freight Operating Statistics

Six Months Ended

June 30, 2024 June 30, 2023 Percent Change

Business days 128 128 — %

Total pounds 1,398,914 1,303,958 7.3

Pounds per day 10,929 10,187 7.3

Shipments 1,2

Total shipments 1,698 1,658 2.4

Shipments per day 13.3 13.0 2.3

Weight per shipment 824 786 4.8

Revenue per hundredweight 3

$ 31.31 $ 32.03 (2.2)

Revenue per hundredweight, ex fuel 3

$ 24.27 $ 24.89 (2.5)

Revenue per shipment 3

$ 257.94 $ 251.66 2.5

Revenue per shipment, ex fuel 3

$ 199.92 $ 195.53 2.2

1 In thousands

2 Excludes accessorial and Truckload products

3 Includes intercompany revenue between the Network and Truckload revenue streams

Operating Revenues

Expedited Freight operating revenues increased $25,564, or 4.7%, to $564,577 for the six months ended June 30, 2024 from $539,013 for the six months ended June 30, 2023.

The increase was driven by increased Network revenue.

Network revenue increased due to a 7.3% increase in tonnage offset by a 2.5% decrease in revenue per hundredweight ex fuel as compared to the same period in the prior year.

The increase in tonnage reflects an increase in weight per shipment of 4.8% on 2.4% more shipments.

Fuel surcharge revenue increased $5,437, or 5.8% due to an increase in tonnage in the Network.

Purchased Transportation

Expedited Freight purchased transportation increased $20,956, or 8.4%, to $270,272 for the six months ended June 30, 2024 from $249,316 for the six months ended June 30, 2023.

Purchased transportation was 47.9% of Expedited Freight operating revenue for the six months ended June 30, 2024 compared to 46.3% for the same period in 2023.

The increase in purchased transportation was primarily due to higher volumes in the Network and the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers for Network and Truckload services.

For the six months ended June 30, 2024, we purchased 64.0%, 31.7% and 4.3% of our freight capacity from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers, respectively.

This compares to 66.5%, 28.8.9% and 4.7% in the same period in 2023.

Salaries, Wages, and Employee Benefits

Expedited Freight salaries, wages and employee benefits increased $12,843, or 11.3%, to $126,398 for the six months ended June 30, 2024 from $113,555 for the six months ended June 30, 2023.

Salaries, wages and employee benefits were 22.4% of Expedited Freight operating revenues for the six months ended June 30, 2024 compared to 21.1% for the same period in 2023.

The increase in salaries, wages and employee benefits expense was primarily due to a increase in the reserve for incentive compensation, an increase in Company-employed drivers in response to the higher volumes and an increase in salaries and wages compared to the same period in 2023.

Operating Leases

Expedited Freight operating leases decreased $2,227, or 7.0%, to $29,712 for the six months ended June 30, 2024 from $31,939 for the six months ended June 30, 2023.

Operating leases were 5.3% of Expedited Freight operating revenues for the six months ended June 30, 2024 compared to 5.9% for the same period in 2023.

The decrease in operating leases expense was primarily due to fewer equipment leases for the six months ended June 30, 2024, as compared to the same period in 2023.

Depreciation and Amortization

Expedited Freight depreciation and amortization increased $4,917, or 30.6%, to $20,982 for the six months ended June 30, 2024 from $16,065 for the six months ended June 30, 2023.

Depreciation and amortization was 3.7% of Expedited Freight operating revenues for the six months ended June 30, 2024 compared to 3.0% for the same period in 2023.

The increase in depreciation and amortization expense was primarily the result of purchasing and placing in service new equipment in 2024.

Insurance and Claims

Expedited Freight insurance and claims increased $2,298, or 11.9%, to $21,621 for the six months ended June 30, 2024 from $19,323 for the six months ended June 30, 2023.

Insurance and claims were 3.8% of Expedited Freight operating revenues for the six months ended June 30, 2024 compared to 3.6% for the same period in 2023.

The increase in insurance and claims expense was primarily due to an increase in vehicle liability claims, equipment repair claims, and insurance premiums, for the six months ended June 30, 2024 as compared to the same period in 2023.

See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations ” section below.

Intermodal fuel expense decreased $812, or 25.6%, to $2,361 for the three months ended March 31, 2024 from $3,173 for the three months ended March 31, 2023.

Fuel expense was 4.2% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 3.6% for the same period in 2023.

Intermodal fuel expense decreased due to fewer miles driven by Company-employed drivers and a decrease in the average price of fuel in the first quarter of 2024 as compared to the same period in 2023.

Other Operating Expenses

Intermodal other operating expenses decreased $13,540, or 69.7%, to $5,895 for the three months ended March 31, 2024 from $19,435 for the three months ended March 31, 2023.

Other operating expenses were 10.5% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 21.9% for the same period in 2023.

Expedited Freight other operating expenses increased $2,090, or 4.4%, to $49,133 for the six months ended June 30, 2024 from $47,043 for the six months ended June 30, 2023.

Other operating expenses were 8.7% of Expedited Freight operating revenues for the six months ended June 30, 2024 compared to 8.7% for the same period in 2023.

Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and other over-the-road costs.

The increase in other operating expenses was primarily driven by an increase in software license and subscription fees, partially offset by a decrease in professional fees and maintenance and repair expense for six months ended June 30, 2024 as compared to the same period in 2023.

Income from Operations

Expedited Freight income from operations decreased $15,304, or 27.0%, to $41,444 for the six months ended June 30, 2024 compared to $56,748 for the six months ended June 30, 2023.

Income from operations was 7.3% of Expedited Freight operating revenues for six months ended June 30, 2024 compared to 10.5% for the same period in 2023.

Intermodal - Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

The following table sets forth the financial data of our Intermodal segment for the six months ended June 30, 2024 and 2023:

Intermodal Segment Information

(unaudited and in thousands)

Six Months Ended

June 30, 2024 Percent of Revenue June 30, 2023 Percent of Revenue Change Percent Change

Operating revenue $ 115,591 100.0 % $ 152,420 100.0 % $ (36,829) (24.2) %

Operating expenses:

Purchased transportation 36,616 31.7 37,923 24.9 (1,307) (3.4)

Salaries, wages and employee benefits 29,981 25.9 35,564 23.3 (5,583) (15.7)

Operating leases 9,468 8.2 15,030 9.9 (5,562) (37.0)

Depreciation and amortization 9,339 8.1 9,553 6.3 (214) (2.2)

Insurance and claims 5,225 4.5 5,164 3.4 61 1.2

Fuel expense 4,604 4.0 5,864 3.8 (1,260) (21.5)

Other operating expenses 11,455 9.9 27,807 18.2 (16,352) (58.8)

Total operating expenses 106,688 92.3 136,905 89.8 (30,217) (22.1)

Income from operations $ 8,903 7.7 % $ 15,515 10.2 % $ (6,612) (42.6) %

Intermodal Operating Statistics

Six Months Ended

June 30, 2024 June 30, 2023 Percent Change

Drayage shipments 127,536 140,645 (9.3) %

Drayage revenue per shipment $ 824 $ 999 (17.5) %

Operating Revenues

Intermodal operating revenues decreased $36,829, or 24.2%, to $115,591 for the six months ended June 30, 2024 from $152,420 for the six months ended June 30, 2023.

The decrease in operating revenues was primarily due to a 9.3% decrease in drayage shipments and a decrease in drayage revenue per shipment of 17.5% as compared to the same period in 2023.

The decrease in drayage shipments and lower accessorial revenue to support customers was primarily due to challenged market demand for our services driven by an extended weak freight environment for the six months ended June 30, 2024 as compared to the same period in 2023.

Purchased Transportation

Intermodal purchased transportation decreased $1,307, or 3.4%, to $36,616 for the six months ended June 30, 2024 from $37,923 for the six months ended June 30, 2023.

Purchased transportation was 31.7% of Intermodal operating revenues for the six months ended June 30, 2024 compared to 24.9% for the same period in 2023.

Intermodal purchased transportation includes Leased Capacity Providers and third-party motor carriers, while Company-employed drivers are included in salaries, wages and employee benefits.

The decrease in purchased transportation was primarily due to fewer drayage shipments and the change in the mix of freight capacity purchased from Lease Capacity Providers, third-party motor carriers and Company-employed drivers compared to the same period in 2023.

Salaries, Wages, and Employee Benefits

Intermodal salaries, wages and employee benefits decreased $5,583, or 15.7%, to $29,981 for the six months ended June 30, 2024 compared to $35,564 for the six months ended June 30, 2023.

Salaries, wages and employee benefits were 25.9% of Intermodal operating revenues for the six months ended June 30, 2024 compared to 23.3% for the same period in 2023.

The decrease in salaries, wages and employee benefits expense was primarily due to a decreased reserve for incentive compensation, fewer Company-employed drivers in response to the lower volumes, and lower salaries and wages as compared to the same period in 2023.

Operating Leases

Intermodal operating leases decreased $5,562, or 37.0%, to $9,468 for the six months ended June 30, 2024 from $15,030 for the six months ended June 30, 2023.

Operating leases were 8.2% of Intermodal operating revenues for the six months ended June 30, 2024 compared to 9.9% for the same period in 2023.

The decrease in operating leases expense was primarily due to decreased equipment rental expense incurred to support the decreased accessorial revenues for the six months ended June 30, 2024 as compared to the same period in 2023.

Intermodal fuel expense decreased $1,260, or 21.5%, to $4,604 for the six months ended June 30, 2024 from $5,864 for the six months ended June 30, 2023.

Fuel expense was 4.0% of Intermodal operating revenues for the six months ended June 30, 2024 compared to 3.8% for the same period in 2023.

Intermodal fuel expense decreased due to fewer miles driven by Company-employed drivers and a decrease in the average price of fuel for the six months ended June 30, 2024 as compared to the same period in 2023.

Other Operating Expenses

Intermodal other operating expenses decreased $16,352, or 58.8%, to $11,455 for the six months ended June 30, 2024 compared to $27,807 for the six months ended June 30, 2023.

Other operating expenses were 9.9% of Intermodal operating revenues for the six months ended June 30, 2024 compared to 18.2% for the same period in 2023.

Other operating expenses include contract labor, equipment maintenance, facility expenses, legal and professional fees, and accessorial storage costs.

The decrease in other operating expenses was partially due to lower accessorial storage costs incurred as a result of decreased accessorial revenues, contract labor, maintenance and repairs expense and warehouse supplies in the first quarter of 2024 as compared to the same period in 2023.

The decrease in other operating expenses was primarily driven by lower accessorial storage costs incurred to support the decreased accessorial revenues for the six months ended June 30, 2024 as compared to the same period in 2023.

Income from Operations

Intermodal income from operations decreased $7,617, or 68.0%, to $3,586 for the three months ended March 31, 2024 compared to $11,203 for the three months ended March 31, 2023.

Income from operations was 6.4% of Intermodal operating revenues for the three months ended March 31, 2024 compared to 12.7% for the same period in 2023.

The decrease in income from operations as a percentage of operating revenues was primarily due to lower drayage revenue per shipment on fewer drayage shipments, partially offset by the a change in mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers, and Company-employed drivers.

Other Operations - Three Months Ended March 31, 2024 compared to Three Months Ended March 31, 2023

Other operations included a $60,231 operating loss during the three months ended March 31, 2024 compared to $6,308 of operating income during the three months ended March 31, 2023.

The change in the operating loss was primarily due to $58,226 of professional fees incurred for transaction and integration costs in connection with the acquisition of Omni, partially offset by a decrease in the reserves for vehicle liability claims.

The decrease in the self-insurance reserves for vehicle liability claims was due to the favorable loss development factor of historical claims.

Intermodal income from operations decreased by $6,612, or 42.6%, to $8,903 for the six months ended June 30, 2024 compared to $15,515 for the six months ended June 30, 2023.

Income from operations was 7.7% of Intermodal operating revenue for the six months ended June 30, 2024 compared to 10.2% for the same period in 2023.

The decrease in income from operations as a percentage of operating revenues was driven by lower drayage revenue per shipment on fewer drayage shipments and lower operating expenses in response to lower volumes.

Other Operations - Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

Other operations included a $77,378 operating loss during the six months ended June 30, 2024 compared to a $1,258 operating loss during the six months ended June 30, 2023.

The change in the operating loss was primarily driven by $71,942 of professional fees incurred for due diligence and transaction costs incurred in connection with the Omni Acquisition, an increase in incentive compensation and severance costs, offset by a decrease in the reserves for vehicle liability claims.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in conformity with United States generally accepted accounting principles (“GAAP”).

The discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in conformity with GAAP.

The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and expenses during the reporting period.

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A description of critical accounting policies and related judgments and estimates that affect the preparation of the Condensed Consolidated Financial Statements is set forth in the Annual Report on Form 10-K for the year-ended December 31, 2023.

The following supplements the 2023 Annual Form 10-K.

We test goodwill at the reporting unit level for impairment annually as of June 30 and on an interim basis when events occur or circumstances exist that carrying value may not be recoverable.

We estimate the fair value of a reporting unit using a discounted cash flow (DCF), or as appropriate, a combination of the DCF and market approach known as the guideline public company approach.

Under the DCF model, we calculate the fair value of a reporting unit under the present value of estimated cash flows.

The significant assumptions in the DCF model primarily include, but are not limited to, forecast of annual revenue growth rates, annual operating income margin, and the terminal growth rate and the discount rate used to present value the cash flow projections.

When determining these assumptions and preparing these estimates, we consider historical performance trends, and the reporting units underlying business and other market trends that may affect the reporting unit.

The discount rate is based on the estimated weighted average cost of capital as of the test date of market participants in the industry in which the reporting unit operates.

Under the guideline public company method, we estimate the fair value based upon market multiples of revenue and earnings derived from publicly traded companies with similar operating and investment characteristics as the reporting unit.

Estimating the fair value of a reporting unit involves uncertainties because it requires management to develop numerous assumptions, including assumptions about the future growth and potential volatility in revenues and costs, capital expenditures, industry economic factors and future business strategy.

Changes in projected revenue growth rates, projected operating income margins or estimated discount rates due to uncertain market conditions, loss of one or more key customers, changes in our strategy, changes in technology or other factors could negatively affect the fair value in one or more of our reporting units and result in a material impairment charge in the future.

To assess the reasonableness of the calculated fair values of our reporting units, we also compare the sum of the reporting units’ fair values to our market capitalization and calculate an implied control premium.

2024 Annual Goodwill Analysis

The annual test of goodwill was performed for each of the reporting units with goodwill balances as of June 30, 2024.

As a result of the annual test, we recorded goodwill impairment charges totaling $1,092,714 million which all relates to our Omni Logistics reporting unit.

This reporting unit was acquired on January 25, 2024.

Primarily due to a decrease in the market value of the Company’s common stock during the second quarter of 2024, as a result of many factors including, but not limited to, general market factors, credit rating downgrades, and changes in executive leadership, and the inherent uncertainty associated with the combined enterprise, the Omni Logistics reporting unit’s fair value was determined to be less than its carrying value.

As a result, the Company recorded a non-cash impairment charge of $1,092,714 million during the three and six months ended June 30, 2024.

The goodwill impairment expense was recorded in the Impairment of goodwill caption on the Condensed Consolidated Statement of Operations.

To complete the Omni Logistics goodwill test, we determined the fair value of the reporting unit using the DCF model and a guideline public company approach with 50% of the value determined using the DCF and 50% of the value using the market approach.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.

Purchase price allocation of Omni Logistics is not yet complete, and as a result, there can be no assurance that there will not be a material impairment charge in the future.

Finite-Lived Intangible Assets and Other Long-Lived Assets

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.

The analysis differs from our goodwill impairment test in that an intangible or other long-lived asset is only deemed to have occurred if the sum of the forecasted undiscounted cash flows related to the assets being evaluated is less than the carrying value of the assets.

If the forecasted net cash flows are less than the carrying value, then the assets are written down to estimated value.

We did not identify any impairments of definite-lived assets in the three and six months ended June 30, 2024 and 2023.

Changes in the estimates of forecasted net cash flows may result in future asset impairments that could be material to our results of operations.

Liquidity and Capital Resources

We have historically financed our working capital needs, including capital expenditures, with available cash, cash flows from operations and borrowings under our credit facility.

In the first quarter of 2024, our credit facility was repaid and extinguished in tandem with the acquisition of Omni.

We believe that borrowings under our Revolving Credit Facility (defined below) and our New Term Loans (defined below), together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements over the next twelve months.

We have historically financed our working capital needs, including capital expenditures, with available cash, cash flows from operations and borrowings under the Revolving Credit Facility.

In the first quarter of 2024, our then existing credit facility was repaid and extinguished in tandem with the Omni Acquisition.

We believe that borrowings under the Revolving Credit Facility and our New Term Loans, together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements over the next twelve months.

As previously disclosed and more fully described below and in Note 4, Acquisitions, to the Condensed Consolidated Financial Statements, we incurred significant indebtedness in connection with the Omni Acquisition.

This substantial level of debt could have important consequences to our business, including, but not limited to the factors as more fully discussed in the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2023, Item 1A, “Risk Factors” - “Risks Relating to our Indebtedness”.

In addition, we frequently utilize operating leases to acquire revenue equipment.

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 therewith, GN Bondco, LLC, a Delaware limited liability company and wholly owned subsidiary of Omni Newco, LLC (the “Escrow Issuer” and consolidated VIE at December 31, 2023) launched 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 the closing of the Omni Acquisition, Clue Opco, LLC, a newly formed subsidiary, (“Opco”) assumed the Escrow Issuer’s obligations under the Notes.

In order to finance a portion of the cash consideration payable for the Omni Acquisition and the costs and expenses incurred in connection therewith, GN Bondco, LLC, a Delaware limited liability company and wholly owned subsidiary of Omni (the “Escrow Issuer” and consolidated VIE at December 31, 2023) launched a private offering of $725,000 aggregate principal amount of the Notes, in a transaction exempt from registration under the Securities Act.

Upon the 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.

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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 therewith, GN Loanco, LLC, a Delaware limited liability company and wholly owned subsidiary of Omni Newco, LLC (the “Escrow Loan Borrower” and consolidated VIE at December 31, 2023), entered into a credit agreement (the “Credit Agreement”) with Citibank, N.A., as administrative agent and collateral agent and as initial term loan lender.

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”).

In order to finance a portion of the cash consideration payable for the Omni Acquisition and the costs and expenses incurred in connection therewith, GN Loanco, LLC, a Delaware limited liability company and wholly owned subsidiary of Omni (the “Escrow Loan Borrower” and consolidated VIE at December 31, 2023), entered into the Credit Agreement.

Pursuant to the Credit Agreement, the Escrow Loan Borrower obtained the New Term Loans and the ability to draw down up to $400,000 under 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.

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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.

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Tax Receivable Agreement

In connection with the Omni Acquisition, we, 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 us as a result of the Omni Acquisition.

In connection with the Omni Acquisition, we, Opco, Omni Holders and certain other parties entered into the Tax Receivable Agreement, which sets forth the agreement among the parties regarding the sharing of certain tax benefits realized by us as a result of the Omni Acquisition.

Pursuant to the Tax Receivable Agreement, we are generally obligated to pay certain Omni Holders 83.5% of (a) the total tax benefit that we realize 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 us (or cash) pursuant to Opco’s operating agreement that became effective as of the Closing, (b) certain pre-existing tax attributes of certain Omni Holders that are corporate entities for tax purposes, (c) the tax benefits that we realize 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.

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Continuing Operations

Net cash used in operating activities of continuing operations was $51,719 for the three months ended March 31, 2024 compared to net cash provided by operating activities of $60,839 for the three months ended March 31, 2023.

Net cash used in operating activities of continuing operations was $96,924 for the six months ended June 30, 2024 compared to net cash provided by operating activities of $117,454 for the six months ended June 30, 2023.

The increase in net cash used in operating activities was primarily due to the change in net income from operations after consideration of non-cash items and the increase in accounts receivable and other current and noncurrent assets, partially offset by the change in accounts payable and accrued expenses.

Net cash used in investing activities was $1,569,452 for the three months ended March 31, 2024 compared to $61,271 for the three months ended March 31, 2023.

Capital expenditures for the first three months of 2024 were $4,970, which primarily related to the purchase of technology and operating equipment.

Capital expenditures for the first three months of 2023 were $6,519, which primarily related to the purchase of technology and operating equipment.

Investing activities of continuing operations for the first three months of 2024 included the Omni Acquisition for a preliminary purchase price of $2,313,653, while investing activities for the first three months of 2023 included the acquisition of Land Air Express, Inc for a preliminary purchase price of $56,567.

Net cash used in financing activities of continuing operations was $158,726 for the three months ended March 31, 2024 compared to $13,362 for the three months ended March 31, 2023.

Net cash used in investing activities was $1,583,406 for the six months ended June 30, 2024 compared to $70,368 for the six months ended June 30, 2023.

Capital expenditures for the first six months of 2024 were $19,396, which primarily related to the purchase of technology and operating equipment.

Capital expenditures for the first six months of 2023 were $16,836, which primarily related to the purchase of technology and operating equipment.

Investing activities of continuing operations for the first six months of 2024 included the Omni Acquisition for a preliminary purchase price of $2,313,653, while investing activities for the first six months of 2023 included the acquisition of Land Air for a preliminary purchase price of $56,567.

Net cash used in financing activities of continuing operations was $162,957 for the six months ended June 30, 2024 compared to $74,627 for the six months ended June 30, 2023.

The change in the net cash used in financing activities of continuing operations was primarily due to the payment of debt issuance costs, payments on the New Term Loans, and payment of an earn-out liability.

Discontinued Operation

Net cash provided by operating activities of discontinued operation was $— for the three months ended March 31, 2024 compared to $5,154 for the three months ended March 31, 2023.

Net cash used in operating activities of discontinued operation was $4,876 for the six months ended June 30, 2024 compared to net cash provided by operating activities for discontinued operations of $12,112 for the six months ended June 30, 2023.

The change in net cash provided by operating activities of discontinued operation was primarily related to a decrease in net income of discontinued operation after consideration of non-cash items.

The sale of Final Mile was completed on December 20, 2023.

Net cash used in investing activities of discontinued operation was $— for the three months ended March 31, 2024 compared to $270 for the three months ended March 31, 2023.

The change in the net cash used in investing activities of discontinued operation was due to the sale of Final Mile on December 20, 2023.

Net cash used in financing activities of discontinued operation was $— for the three months ended March 31, 2024 compared to $4,884 for the three months ended March 31, 2023.

Net cash used in investing activities of discontinued operation was $0 for the six months ended June 30, 2024 compared to $739 for the six months ended June 30, 2023.

The change in the net cash used in investing activities of discontinued operation was due to the sale of Final Mile, which was completed on December 20, 2023.

Net cash used in financing activities of discontinued operation was $0 for the six months ended June 30, 2024 compared to $11,373 for the six months ended June 30, 2023.

The change in the net cash used in financing activities of discontinued operation was due to decreased contributions to the parent.

The sale of Final Mile was completed on December 20, 2023.

Stock Repurchase Program

During the three months ended March 31, 2024, we did not repurchase any shares of our common stock.

During the three months ended March 31, 2023, we repurchased 474 shares of our common stock for approximately $50,491 through open market transactions.

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 our Condensed Consolidated Balance Sheets.

During the six months ended June 30, 2024, we did not repurchase any shares of our common stock.

During the six months ended June 30, 2023, we repurchased 759 shares of our common stock for approximately $79,792 through open market transactions.

All shares received were retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Retained (Deficit) Earnings” in our Condensed Consolidated Balance Sheets.

Forward-Looking Statements

This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance.

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(iii) our ability to maintain compliance with the covenants of our indebtedness instruments;

(iv) our expectations regarding our ability to recognize synergies as a result of the Omni Acquisition;

(v) our yield management process, any improvements in operating efficiencies and our ability to create synergies across our services;

(vi) fuel shortages, changes in fuel prices and volatility in fuel surcharge revenue, and the impact on our business;

(vii) consumer demand and inventory levels, and the impact on freight volumes;

(viii) future insurance, claims and litigation and any associated estimates or projections;

(ix) our ability to accelerate the expansion of the Company’s terminal footprint;

(x) certain tax and accounting matters, including the impact on our financial statements and our ability realize remaining net deferred tax assets;

(xi) intended expansion through acquisitions or greenfield startups, and the impact of any such acquisition on our business;

(xii) our ability to use key performance metrics to gauge growth strategies;

(xiii) future business, economic conditions or performance, as well as industry projections;

(xiv) competition, including our specific advantages, the capabilities of our segments, including the integration of services and our geographic location;

(xv) expectations regarding new vessel deliveries;

(xvi) expectations regarding plans, strategies, and objectives of management for future operations, including the Grow Forward strategy;

(xvii) the Company’s ability to finalize the valuation in connection with assets acquired and liabilities assumed in connection with the Omni Acquisition;

and (xviii) any belief and any statements of assumptions underlying any of the foregoing.

(iv) our yield management process, any improvements in operating efficiencies and our ability to create synergies across our services;

(v) fuel shortages, changes in fuel prices and volatility in fuel surcharge revenue, and the impact on our business;

(vi) consumer demand and inventory levels, and the impact on freight volumes;

(vii) future insurance, claims and litigation and any associated estimates or projections;

(viii) our ability to accelerate the expansion of the Company’s terminal footprint;

(ix) certain tax and accounting matters, including the impact on our financial statements and our ability realize remaining net deferred tax assets;

(x) intended expansion through acquisitions or greenfield startups, and the impact of any such acquisition on our business;

(xi) our ability to use key performance metrics to gauge growth strategies;

(xii) future business, economic conditions or performance, as well as industry projections;

(xiii) competition, including our specific advantages, the capabilities of our segments, including the integration of services and our geographic location;

(xiv) expectations regarding plans, strategies, and objectives of management for future operations and (xv) any belief and any statements of assumptions underlying any of the foregoing.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis