FORWARD AIR CORP 10-Q

Item 1. Financial Statements (Unaudited). Forward Air Corporation Condensed Consolidated Balance Sheets (unaudited and in thousands, except share and per share amounts) September 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 136,616 $ 121,969 Restricted cash and restricted cash equivalents 1,540 39,604 Accounts receivable, less allowance of $ 2,782 in 2024 and $ 2,206 in 2023 361,003 153,267 Other receivables 1,695 5,408 Prepaid expenses 31,174 25,682 Other current assets 13,053 1,098 Total current assets 545,081 347,028 Noncurrent restricted cash equivalents — 1,790,500 Property and equipment, net of accumulated depreciation and amortization of $ 281,636 in 2024 and $ 250,185 in 2023 324,782 258,095 Operating lease right-of-use assets 355,139 111,552 Goodwill 716,071 278,706 Other acquired intangibles, net of accumulated amortization of $ 190,369 in 2024 and $ 127,032 in 2023 1,033,352 134,789 Other assets 81,415 58,863 Total assets $ 3,055,840 $ 2,979,533 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 157,230 $ 45,430 Accrued expenses 135,590 62,948 Other current liabilities 49,571 71,727 Current portion of debt and finance lease obligations 16,741 12,645 Current portion of operating lease liabilities 89,566 44,344 Total current liabilities 448,698 237,094 Finance lease obligations, less current portion 32,731 26,736 Long-term debt, less current portion 1,673,292 — Long-term debt held in escrow — 1,790,500 Operating lease liabilities, less current portion 275,843 71,598 Liabilities under tax receivable agreement 36,797 — Other long-term liabilities 42,423 47,144 Deferred income taxes 209,522 42,200 Shareholders' equity: Preferred stock, $ 0.01 par value: Authorized shares - 5,000,000 ; no shares issued or outstanding in 2024 and 2023 — — Preferred stock, Class B, $ 0.01 par value: Authorized shares - 15,000 ; issued and outstanding shares - 11,130 in 2024 and none in 2023 — — Common stock, $ 0.01 par value: Authorized shares - 50,000,000 ; issued and outstanding shares - 28,689,172 in 2024 and 25,670,663 in 2023 287 257 Additional paid-in capital 528,255 283,684 Retained (deficit) earnings ( 301,634 ) 480,320 Accumulated other comprehensive loss ( 824 ) — Total Forward Air shareholders' equity 226,084 764,261 Noncontrolling interest 110,450 — Total shareholders' equity 336,534 764,261 Total liabilities and shareholders' equity $ 3,055,840 $ 2,979,533 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited and in thousands, except per share amounts) Three Months Ended September 30, 2024 September 30, 2023 Operating revenue $ 655,937 $ 340,976 Operating expenses: Purchased transportation 332,469 148,706 Salaries, wages and employee benefits 133,516 75,373 Operating leases 48,810 19,536 Depreciation and amortization 25,893 14,209 Insurance and claims 17,382 12,969 Fuel expense 4,855 5,845 Other operating expenses 55,564 52,649 Impairment of goodwill 14,751 — Total operating expenses 633,240 329,287 Income from continuing operations 22,697 11,689 Other income and expenses: Interest expense, net ( 52,770 ) ( 2,655 ) Foreign exchange (loss) gain ( 2,812 ) — Other income (expense), net ( 11 ) — Total other expense ( 55,593 ) ( 2,655 ) (Loss) income before income taxes ( 32,896 ) 9,034 Income tax (benefit) expense 1,302 2,541 Net (loss) income from continuing operations ( 34,198 ) 6,493 (Loss) income from discontinued operation, net of tax ( 1,137 ) 2,795 Net (loss) income ( 35,335 ) 9,288 Net income (loss) attributable to noncontrolling interest 38,073 — Net (loss) income attributable to Forward Air $ ( 73,408 ) $ 9,288 Basic net (loss) income per share attributable to Forward Air: Continuing operations $ ( 2.62 ) $ 0.25 Discontinued operations ( 0.04 ) 0.11 Net (loss) income per basic share $ ( 2.66 ) $ 0.36 Diluted net (loss) income per share attributable to Forward Air: Continuing operations $ ( 2.62 ) $ 0.25 Discontinued operations ( 0.04 ) 0.11 Net (loss) income per diluted share $ ( 2.66 ) $ 0.36 Dividends per share $ — $ 0.24 Net (loss) income $ ( 35,335 ) $ 9,288 Other comprehensive (loss) income: Foreign currency translation adjustments 176 — Comprehensive (loss) income ( 35,159 ) 9,288 Comprehensive loss attributable to noncontrolling interest 38,073 — Comprehensive income attributable to Forward Air $ ( 73,232 ) $ 9,288 The accompanying notes are an integral part of the condensed consolidated financial statement 4 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited and in thousands, except per share amounts) Nine Months Ended September 30, 2024 September 30, 2023 Operating revenues $ 1,841,416 $ 1,032,307 Operating expenses: Purchased transportation 931,072 435,844 Salaries, wages and employee benefits 406,382 215,983 Operating leases 133,871 66,505 Depreciation and amortization 106,321 39,826 Insurance and claims 44,961 38,988 Fuel expense 15,960 16,733 Other operating expenses 234,175 133,218 Impairment of goodwill 1,107,465 — Total operating expenses 2,980,207 947,097 (Loss) income from continuing operations ( 1,138,791 ) 85,210 Other income and expenses: Interest expense, net ( 140,788 ) ( 7,595 ) Foreign exchange (loss) gain ( 1,912 ) — Other income (expense), net 38 — Total other expense ( 142,662 ) ( 7,595 ) (Loss) income before income taxes ( 1,281,453 ) 77,615 Income tax (benefit) expense ( 191,990 ) 20,091 Net (loss) income from continuing operations ( 1,089,463 ) 57,524 (Loss) income from discontinued operation, net of tax ( 6,013 ) 8,083 Net (loss) income ( 1,095,476 ) 65,607 Net income (loss) attributable to noncontrolling interest ( 314,923 ) — Net (loss) income attributable to Forward Air $ ( 780,553 ) $ 65,607 Basic net (loss) income per share attributable to Forward Air: Continuing operations $ ( 28.73 ) $ 2.20 Discontinued operations ( 0.22 ) 0.31 Net (loss) income per basic share $ ( 28.95 ) $ 2.51 Diluted net (loss) income per share attributable to Forward Air: Continuing operations $ ( 28.73 ) $ 2.19 Discontinued operations ( 0.22 ) 0.31 Net (loss) income per diluted share $ ( 28.95 ) $ 2.50 Dividends per share $ — $ 0.72 Net (loss) income $ ( 1,095,476 ) $ 65,607 Other comprehensive (loss) income: Foreign currency translation adjustments ( 824 ) — Comprehensive (loss) income ( 1,096,300 ) 65,607 Comprehensive loss attributable to noncontrolling interest ( 314,923 ) — Comprehensive (loss) income attributable to Forward Air $ ( 781,377 ) $ 65,607 The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Cash Flows (unaudited and in thousands) Nine Months Ended September 30, 2024 September 30, 2023 Operating activities: Net (loss) income from continuing operations $ ( 1,089,463 ) $ 57,524 Adjustments to reconcile net (loss) income of continuing operations to net cash (used in) provided by operating activities of continuing operations Depreciation and amortization 106,321 39,826 Impairment of goodwill 1,107,465 — Share-based compensation expense 8,088 8,570 Provision for revenue adjustments 2,761 4,026 Deferred income tax (benefit) expense ( 197,156 ) 2,199 Other 4,296 ( 1,045 ) Changes in operating assets and liabilities, net of effects from the purchase of acquired businesses: Accounts receivable ( 34,050 ) 20,967 Other receivables 6,159 — Other current and noncurrent assets ( 18,215 ) 3,609 Accounts payable and accrued expenses 58,024 6,444 Net cash (used in) provided by operating activities of continuing operations ( 45,770 ) 142,120 Investing activities: Proceeds from sale of property and equipment 2,493 3,275 Purchases of property and equipment ( 29,810 ) ( 22,080 ) Purchase of a business, net of cash acquired ( 1,565,242 ) ( 56,703 ) Other ( 319 ) — Net cash used in investing activities of continuing operations ( 1,592,878 ) ( 75,508 ) Financing activities: Repayments of finance lease obligations ( 15,339 ) ( 6,840 ) Proceeds from credit facility — 45,000 Payments on credit facility ( 80,000 ) ( 31,125 ) Payment of debt issuance costs ( 60,591 ) — Payment of earn-out liability ( 12,247 ) — Payments of dividends to shareholders — ( 18,798 ) Repurchases and retirement of common stock — ( 93,811 ) Proceeds from common stock issued under employee stock purchase plan 355 421 Payment of minimum tax withholdings on share-based awards ( 1,572 ) ( 4,315 ) Contributions from subsidiary held for sale — 15,877 Net cash used in financing activities of continuing operations ( 169,394 ) ( 93,591 ) Effect of exchange rate changes on cash 138 — Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents from continuing operations ( 1,807,904 ) ( 26,979 ) Cash from discontinued operation: Net cash (used in) provided by operating activities of discontinued operation ( 6,013 ) 17,311 Net cash used in investing activities of discontinued operation — ( 1,338 ) Net cash used in financing activities of discontinued operation — ( 15,973 ) Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents ( 1,813,917 ) ( 26,979 ) Cash, cash equivalents and restricted cash equivalents at beginning of period of continuing operations 1,952,073 45,822 Cash at beginning of period of discontinued operation — — Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents ( 1,813,917 ) ( 26,979 ) 6 Table of Contents Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period of continuing operations $ 138,156 $ 18,843 Forward Air Corporation Condensed Consolidated Statements of Cash Flows (In thousands) Nine Months Ended September 30, 2024 September 30, 2023 Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents: Cash and cash equivalents $ 136,616 $ 18,843 Restricted cash and restricted cash equivalents 1,540 — Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the statement of cash flow: $ 138,156 $ 18,843 Non-Cash Transactions: Equipment acquired under finance leases $ 10,976 $ 18,394 The accompanying notes are an integral part of the condensed consolidated financial statements. 7 Table of Contents Forward Air Corporation Condensed Consolidated Statements of Shareholders' Equity (unaudited and in thousands) Common Stock Preferred Stock - Class B Amount Preferred Stock - Class C Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained (Deficit) Earnings Noncontrolling Interest Total Shareholders' Equity Shares Amount Shares Amount Shares Amount Balance at December 31, 2023 25,671 $ 257 — $ — — $ — $ 283,684 $ — $ 480,320 $ — $ 764,261 Net loss — — — — — — — — ( 61,712 ) ( 27,082 ) ( 88,794 ) Foreign currency translation adjustments — — — — — — — ( 151 ) — — ( 151 ) Shares issued - acquisition 700 7 4 — 1 — 223,425 — — 433,449 656,881 Share-based compensation expense — — — — — — 1,567 — — — 1,567 Payment of minimum tax withholdings on share-based awards ( 33 ) — — — — — — — ( 1,326 ) — ( 1,326 ) Issuance of share-based awards 100 1 — — — — ( 1 ) — — — — Balance at March 31, 2024 26,438 $ 265 4 $ — 1 $ — $ 508,675 $ ( 151 ) $ 417,282 $ 406,367 $ 1,332,438 Net loss — — — — — — — — ( 645,433 ) ( 325,914 ) ( 971,347 ) Foreign currency translation adjustments — — — — — — — ( 849 ) — — ( 849 ) Common stock issued under employee stock purchase plan 21 — — — — — 355 — — — 355 Conversion of preferred C series 1,210 12 8 — ( 1 ) — ( 12 ) — — — — Share-based compensation expense — — — — — — 3,620 — — — 3,620 Issuance of share-based awards 30 — — — — — — — — — — Balance at June 30, 2024 27,699 $ 277 12 $ — — $ — $ 512,638 $ ( 1,000 ) $ ( 228,151 ) $ 80,453 364,217 Net loss — — — — — — — — ( 73,408 ) 38,073 ( 35,335 ) Foreign currency translation adjustment — — — — — — — 176 — — 176 Common stock issued under employee stock purchase plan — — — — — — — — — — — Series B - Share Conversions 967 10 ( 1 ) — — — 8,066 — — ( 8,076 ) — Share-based compensation expense — — — — — — 2,901 — — — 2,901 Payment of minimum tax withholdings on share-based awards ( 1 ) — — — — — — — ( 75 ) — ( 75 ) Tax receivable agreement liability — — — — — — 4,650 — — — 4,650 Issuance of share-based awards 24 — — — — — — — — — Balance at September 30, 2024 28,689 $ 287 11 $ — — $ — $ 528,255 $ ( 824 ) $ ( 301,634 ) $ 110,450 336,534 8 Table of Contents Common Stock Additional Paid-in Capital Retained Earnings Total Shareholders’ Equity Shares Amount Balance at December 31, 2022 26,462 $ 265 $ 270,855 $ 436,124 $ 707,244 Net income — — — 36,368 36,368 Share-based compensation expense — — 3,149 — 3,149 Payment of dividends to shareholders — — 4 ( 6,349 ) ( 6,345 ) Payment of minimum tax withholdings on share-based awards ( 40 ) — — ( 4,292 ) ( 4,292 ) Repurchases and retirement of common stock ( 474 ) ( 5 ) — ( 50,486 ) ( 50,491 ) Issuance of share-based awards 105 1 ( 1 ) — — Balance at March 31, 2023 26,053 $ 261 $ 274,007 $ 411,365 $ 685,633 Net income — — — 19,951 19,951 Common stock issued under employee stock purchase plan 4 — 421 — 421 Share-based compensation expense — — 3,160 — 3,160 Payment of dividends to shareholders — — 5 ( 6,260 ) ( 6,255 ) Repurchases and retirement of common stock ( 285 ) ( 3 ) — ( 29,298 ) ( 29,301 ) Issuance of share-based awards 14 — — — — Balance at June 30, 2023 25,786 $ 258 $ 277,593 $ 395,758 $ 673,609 Net income — — — 9,288 9,288 Stock options exercised — — — — — Common stock issued under employee stock purchase plan — — — — — Share-based compensation expense — — 3,043 — 3,043 Payment of dividends to shareholders — — 4 ( 6,202 ) ( 6,198 ) Payment of minimum tax withholdings on share-based awards — — — ( 23 ) ( 23 ) Repurchases and retirement of common stock ( 124 ) ( 1 ) — ( 14,018 ) ( 14,019 ) Issuance of share-based awards — — — — — Balance at September 30, 2023 25,662 $ 257 $ 280,640 $ 384,803 $ 665,700 The accompanying notes are an integral part of the condensed consolidated financial statements. 9 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 1. Description of Business and Basis of Presentation Basis of Presentation and Principles of Consolidation Forward Air Corporation and its subsidiaries (“Forward Air ” or the “Company ” ) is a leading asset-light freight and logistics company. The Company has three reportable segments: Expedited Freight, Intermodal and Omni Logistics. The Company conducts business in North and South America, Europe, and Asia. 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 Omni Logistics segment provides a full suite of global logistics services. Services include air and ocean freight consolidation and forwarding, custom brokerage, warehousing and distribution, time-definite transportation services and other supply chain solutions. The Company’s condensed consolidated financial statements include Forward Air Corporation and its wholly-owned and majority owned domestic and foreign subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. A noncontrolling interest in a consolidated subsidiary represents the portion of equity (net assets) in a subsidiary, attributable, directly or indirectly, to the Company. Noncontrolling interests are presented as a separate component of equity in the consolidated balance sheet and the presentation of net loss presents losses attributable to controlling and noncontrolling interests. In the fourth quarter of 2023, the Company held interests in two wholly-owned subsidiaries of Omni Newco, LLC (“Omni”), GN Bondco, LLC and GN Loanco, LLC, that were 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. Interests 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 as of December 31, 2023 because the Company had (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. On January 25, 2024 (“the Closing”), the Company completed the acquisition of Omni (“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”). The VIEs were acquired as part of the Omni Acquisition and assumed into the Company's consolidated subsidiaries as of January 25, 2024. Refer to Note 4, Acquisitions, for additional disclosures regarding the Company’s previously held VIEs. 10 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 The condensed consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature necessary to present fairly the Company’s financial position, results of operations, and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Results for interim periods are not necessarily indicative of the results for the year. Foreign Currency Foreign currency amounts attributable to foreign operations have been translated into United States dollars. Assets and liabilities are translated to United States dollars at period-end exchange rates and income and expense items are translated at average rates of exchange prevailing during the period. Translation adjustments are included in “Accumulated other comprehensive loss” in stockholders’ equity within the Condensed Consolidated Balance Sheets and gains and losses, which result from foreign currency transactions, are included in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. Restricted Cash As of September 30, 2024, the Company had restricted cash in the amount of $ 1,540 related to a letter of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. Immaterial Correction of Previously Issued Consolidated Financial Statements Subsequent to the issuance of the Company's fiscal year 2023 consolidated financial statements, the Company identified errors in the application of Accounting Standards Codification ("ASC") 835, "Debt Issuance Costs" and in the cut-off of certain payables. In connection with debt issued in the prior year for the Omni Acquisition, approximately $ 8,200 of debt issuance costs were expensed and not capitalized. The correction of this error resulted in an out of period adjustment to reduce Other operating expense by $ 8,200 , with an offset of $ 7,400 to debt issuance costs (a reduction of Long-term debt) and approximately $ 800 of Interest expense, net in the three and nine months ended September 30, 2024. Additionally, the nine months ended September 30, 2024 also includes $ 3,200 of out-of-period adjustments to increase Other operating expense related to incremental payables for services incurred prior to December 31, 2023 that were not accrued at December 31, 2023. Also, approximately $ 47,400 of year-to-date incurred losses were allocated to the noncontrolling interest associated with the goodwill impairment recorded in the previous three-month period ended June 30, 2024. A correction resulted in approximately net $ 38,000 of income to noncontrolling interest during the three-month period ended September 30, 2024. Refer to the Consolidated Statements of Operations and Comprehensive (Loss) Income. The Company has evaluated the effects of the corrections described above, in accordance with guidance in ASC 250, "Accounting Change and Error Correction". The Company concluded such corrections to be immaterial to previously issued financial statements and for the three months ended September 30, 2024. 2. Revenue Recognition Revenue is recognized when the Company satisfies the performance obligation by the delivery of a shipment in accordance with contractual agreements, bills of lading (“BOLs”) and general tariff provisions. The amount of revenue recognized is measured as the consideration the Company expects to receive in exchange for those services pursuant to a contract with a customer. A contract exists once the Company enters into a contractual agreement with a customer. The Company does not recognize revenue in cases where collectability is not probable, and defers recognition until collection is probable or payment is received. 11 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 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. 3. Discontinued Operation As previously disclosed, in December 2023, the Company made a decision to divest of the Final Mile business and the sale was completed on December 20, 2023. As a result, the results of operations of Final Mile, have been presented under the caption “(Loss) income from discontinued operations, net of tax” in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2023. Settlement payment of $ 6,013 have been incurred in the nine months ended September 30, 2024 in relation to this disposal. Summarized Discontinued Operation Financial Information A summary of the results of operations classified as a discontinued operation, net of tax, in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2023 is as follows: Three Months Ended Nine Months Ended September 30, 2023 September 30, 2023 Operating revenue $ 72,471 $ 210,388 Operating expenses: Purchased transportation 42,060 121,782 Salaries, wages and employee benefits 12,786 38,382 Operating leases 3,126 9,589 Depreciation and amortization 1,297 3,828 Insurance and claims 657 1,780 Fuel expense 72 242 Other operating expenses 8,669 23,782 Total operating expenses 68,667 199,385 Income from discontinued operation before income taxes 3,804 11,003 Income tax expense 1,009 2,920 Income from discontinued operation, net of tax $ 2,795 $ 8,083 12 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 4. Acquisitions Expedited Freight Acquisition 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 Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment. Acquisition of Omni On January 25, 2024, the Company completed the Omni Acquisition pursuant to the Merger Agreement, as amended by 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”), the Company acquired Omni for a combination of (a) $ 100,499 in cash (which includes pre-acquisition Omni costs of approximately $ 80 million) and (b) 14,015 shares of the Company’s outstanding common stock, on an as-converted and as-exchanged basis (the “Equity Consideration”) consisting of: (i) 1,910 shares of common stock (of which 1,210 were issued upon conversion of the Series C Preferred Units upon approval of the Company’s shareholders at the 2024 Annual Shareholders Meeting held on June 3, 2024 (the “Conversion Approval”)) and (ii) 12,105 Opco Class B Units (as defined below) and corresponding Series B Preferred Units (as defined below), which are exchangeable into shares of Common Stock (of which 7,670 units were issued upon conversion of the units of Opco (defined below) designated as “Opco Series C-2 Preferred Units” upon the Conversion Approval. The Equity Consideration represents, as of September 30, 2024, 34 % of the Company’s outstanding common stock on a fully-diluted and as-exchanged basis. 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 equity holders of Omni (“Omni Holders”) hold a portion of the Equity Consideration in the form of units of Opco designated as “Class B Units” (“Opco Class B Units”) and corresponding Series B 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”). 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. 13 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 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 (as defined below) and New Term Loan (as defined below) recorded in “Noncurrent restricted cash equivalents” and the corresponding long-term debt recorded in “Long-term debt held in escrow” on the Condensed 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. 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 Condensed 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 Condensed Consolidated Balance Sheets. At the Closing, the funds held in escrow were released, the aforementioned VIEs were dissolved, and the proceeds were distributed to the Company to affect the Transactions. The Notes and New Term Loans are discussed in Note 6, Indebtedness. The Omni Acquisition enables the Company to provide a differentiated service offering and expanded geographic footprint to customers. In addition, the combination of these complementary businesses positions the Company to deliver integrated global supply chain solutions for customers’ most service-sensitive logistics needs. Goodwill recognized related to the preliminary purchase price represents planned operational synergies, expanded geographic reach of our services, and strategic market positioning. The results of Omni have been included in the Condensed Consolidated Financial Statements as of and from the date of acquisition. The associated goodwill has been included in the Omni reportable segment and is not expected to be deductible for tax purposes. Consideration transferred of Omni The acquisition-date fair value sources of the consideration transferred consists of the followings: Omni Cash $ 100,499 Liabilities under tax receivable agreement 13,270 Common shares 32,795 Series B preferred shares (each issued with a corresponding Opco class B unit) 207,880 Series C preferred shares 56,713 Opco C-2 preferred units 359,493 Extinguishment of Omni's indebtedness 1,543,003 Preliminary consideration transferred $ 2,313,653 14 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 Fair Value of Assets Acquired and Liabilities Assumed Assets acquired and liabilities assumed as of the acquisition date are presented in the following table: Land Air Omni January 31, 2023 January 25, 2024 Tangible assets: Cash $ — $ 78,260 Accounts receivable — 181,570 Property and equipment 738 75,292 Other assets — 35,639 Operating lease right-of-use assets — 234,025 Total tangible assets 738 604,786 Intangible assets: Customer relationships 35,200 915,400 Non-compete agreements — 23,400 Trademarks and other — 23,100 Goodwill 20,629 1,544,830 Total intangible assets 55,829 2,506,730 Total assets acquired 56,567 3,111,516 Liabilities assumed: Current liabilities — 156,002 Finance lease obligations — 14,606 Operating lease liabilities — 234,025 Other liabilities — 643 Deferred income taxes — 392,587 Total liabilities assumed — 797,863 Net assets acquired $ 56,567 $ 2,313,653 The estimated fair values of the assets acquired and liabilities assumed including the consideration transferred are based on the Company’s best estimates and assumptions using the information available as of the acquisition date through the date of this filing. As a part of the Omni Acquisition, the interest in Opco not owned by Company was valued to be $ 433,449 on January 25, 2024 and is disclosed in the Condensed Consolidated Statements of Shareholders’ Equity. The Company continues to evaluate the impact of this acquisition on its Condensed Consolidated Financial Statements. The primary areas of the acquisition accounting that are not yet finalized include, but are not limited to, the following: (1) finalizing the review and valuation of the acquired tangible and intangible assets and liabilities (including the key assumptions, inputs, and estimates) and (2) finalizing the identification of the tangible and intangible assets acquired and liabilities assumed and identified. Actual values may differ (possibly materially) when final information becomes available that differs from our current estimates. We believe that the information gathered to date provides a reasonable basis for estimating the preliminary fair values of assets acquired and liabilities assumed. The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date. 15 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 During the three months ended September 30, 2024, the Company recorded measurement period adjustments to decrease Customer Relationships by $ 147.3 million, decrease Non-compete Agreements by $ 19.1 million, and decrease Trademarks and other by $ 19.4 million. As a result of the adjusted acquisition-date fair value of assets acquired, the Company recorded an increase of $ 185.8 million to the Goodwill recognized. The measurement period adjustments were recorded in the condensed consolidated financial statements as of and for the three months ended September 30, 2024 and were made to reflect facts and circumstances that existed as of the acquisition date. The Company initially recorded the purchase price allocation on initial estimates, and in the three months ended September 30, 2024 an updated valuation was performed. The effects of the remeasuring the intangible assets resulted in a reduction of $ 11.8 million in amortization expense for the three and nine month period ended September 30, 2024, recognized in Depreciation and amortization on the Condensed Consolidated Statements of Operations and Comprehensive (Loss) income. The fair value estimates of assets acquired and liabilities assumed is pending the completion of various items and is anticipated to be completed in the last three months of the fiscal year. For the three and nine months ended September 30, 2024 , the Company recorded $( 549 ) and $ 71,393 of transactions and integration costs incurred in connection with the Omni Acquisition. The transaction and integration costs were recorded in “Other operating expenses” in the Condensed Consolidated Statements of Operations. The preliminary estimated useful life of acquired intangible assets as of the acquisition date are summarized in the following table: Estimated Useful Lives Land Air Omni Customer relationships 15 years 14 years Non-compete agreements — 4 years Trademarks and other — 5 years Supplemental Pro Forma Information The following table represents the pro forma financial information as if Omni had been included in the consolidated results of the Company since January 1, 2023 (unaudited and in thousands) : Nine Months Ended September 30, 2024 September 30, 2023 Pro forma revenue $ 1,923,416 $ 2,002,935 Pro forma net loss from continuing operations ( 1,155,014 ) ( 133,216 ) The pro forma financial information adjusts the net loss for amortization of the intangible assets and the fair value adjustments of the assets acquired in connection with the Omni Acquisition as if the Closing had occurred on January 1, 2023. 16 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 5. Goodwill and Intangible Assets Goodwill Changes in the carrying amount of goodwill during the nine months ended September 30, 2024 are summarized as follows: Expedited Freight Intermodal Omni Logistics Consolidated Balance as of December 31, 2023 $ 141,720 $ 136,986 $ — $ 278,706 Acquisition — — 1,544,830 1,544,830 Impairment — — ( 1,107,465 ) ( 1,107,465 ) Balance as of September 30, 2024 $ 141,720 $ 136,986 $ 437,365 $ 716,071 The Company's accumulated impairment loss for the Omni Logistics segment is $ 1,107,465 as of September 30, 2024. The Company’s accumulated goodwill impairment also includes $ 25,686 related to impairment charges the Company recorded during 2016 pertaining to its Truckload Services reporting unit. The Truckload Services reporting unit operates within the Expedited Freight reportable segment. The Company tests goodwill for impairment, at the reporting unit level, annually as of June 30 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. If the fair value of the reporting unit is below its carrying value, the difference between the total fair value of the reporting unit and the carrying value is recognized as an impairment to the reporting unit's goodwill. The Company’s annual impairment analyses were performed as of June 30, 2024 for all reporting units. For the reporting units in the Expedited Freight and Intermodal reportable segments, we performed a discounted cash flow (DCF) analysis and these reporting units continue to result in an excess of fair value over carrying value. The Omni reporting unit’s fair value was calculated using a DCF model and a guideline public company method, with each method weighted equally. Under the DCF model, the fair value of a reporting unit is the present value of estimated future cash flows and is based on all known or knowable information at the measurement date. Under the guideline public company method, the fair value is based upon market multiples derived from publicly-traded companies with similar operating and investment characteristics of the reporting unit. The inputs to both the DCF and the guideline public company method are Level 3 valuation inputs. 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 during the six months ended June 30, 2024. Due to measurement period adjustments in the three months ended September 30, 2024, an additional $ 14,751 of goodwill impairment was recorded. The cumulative goodwill impairment through the nine months ended September 30, 2024 is $ 1,107,465 . The goodwill impairment expense was recorded in the Impairment of goodwill caption on the Condensed Consolidated Statement of Operations. Additionally, as qualifying measurement-period adjustments are made to the Omni purchase price allocation, which is not yet finalized (See Note 4, Acquisitions), further adjustments to the goodwill impairment may be required. 17 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 Other Intangible Assets Changes in the carrying amount of acquired intangible assets during the nine months ended September 30, 2024 are summarized as follows: Gross Carrying Amount Customer Relationships 1 Non-Compete Agreements Trade Names Total Balance as of December 31, 2023 $ 253,914 $ 6,407 $ 1,500 $ 261,821 Acquisition 915,400 23,400 23,100 961,900 Balance as of September 30, 2024 $ 1,169,314 $ 29,807 $ 24,600 $ 1,223,721 Accumulated Amortization Customer Relationships 1 Non-Compete Agreements Trade Names Total Balance as of December 31, 2023 $ 118,993 $ 6,539 $ 1,500 $ 127,032 Amortization expense 55,373 4,884 3,080 63,337 Balance as of September 30, 2024 $ 174,366 $ 11,423 $ 4,580 $ 190,369 1 Carrying value as of September 30, 2024 and December 31, 2023 is inclusive o f $ 16,501 of accumulated impairment. 18 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 6. Indebtedness Long-term debt consisted of the following as of September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 Term Loan, expiring 2030 1 $ 1,045,000 $ — Senior Secured Notes, maturing 2031 1 725,000 — Debt issuance discount ( 55,601 ) — Debt issuance costs 2 ( 41,107 ) — Total long-term debt $ 1,673,292 $ — 1 On December 31, 2023 the debt instruments and related proceeds were consolidated but were restricted under an escrow agreement contingent upon the Closing of the Omni Acquisition. 2 Debt issuance costs of $ 9,835 related to the Revolving Credit Facility are recorded in Other Assets. 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) completed 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 of 1933, as amended (the “Securities Act”) . As of December 31, 2023, the Notes were included in Long-term debt held in escrow on the Condensed Consolidated Balance Sheets. Upon the Closing, 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”). 19 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 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. 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 September 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 . If the financial performance covenant is not met, the Company will lose access to the Revolving Credit Facility. 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 Credit 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 Agreemen t. As of the date of this report, the Company was in compliance with these aforementioned covenants. 20 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 As of September 30, 2024 the Company had no outstanding borrowings under this revolving credit facility. Former Credit Facility 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 could have been 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 could have been in the form of additional revolving credit loans, term loans or a combination thereof, and were contingent upon there being no events of default under the Facility. As of December 31, 2023 the Company had no outstanding borrowings under the Facility. No borrowings were made under the Facility prior to the extinguishment upon the Closing. Letters of Credit The Company had an arrangement to issue a letter of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. As of December 31, 2023 and September 30, 2024, the outstanding letter of credit totaled $ 19,834 and $ 1,540 , respectively. Under the Revolving Credit Facility, the outstanding letter of credit totaled $ 17,688 as of September 30, 2024. 21 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 7. Net (Loss) Income Per Share Basic net income per common share is computed by dividing net income 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 per common share pursuant to the two-class method. Diluted net income 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 per share during the three and nine months ended September 30, 2024 and 2023 is as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Numerator: Net (loss) income from continuing operations $ ( 72,271 ) $ 6,493 $ ( 774,540 ) $ 57,524 Net (loss) income from discontinued operation ( 1,137 ) 2,795 ( 6,013 ) 8,083 Net (loss) income attributable to Forward Air ( 73,408 ) 9,288 ( 780,553 ) 65,607 Income allocated to participating securities from continuing operations — ( 40 ) — ( 313 ) Income allocated to participating securities from discontinued operation — ( 17 ) — ( 44 ) Income allocated to participating securities — ( 57 ) — ( 357 ) Numerator for basic and diluted net (loss) income per share for continuing operations $ ( 73,101 ) $ 6,453 $ ( 775,347 ) $ 57,211 Numerator for basic and diluted net income per share for discontinued operation $ ( 1,137 ) $ 2,778 $ ( 6,013 ) $ 8,039 Denominator: Denominator for basic net (loss) income per share - weighted-average number of common shares outstanding 27,941 25,697 26,983 25,995 Dilutive stock options and performance share awards — 74 — 101 Denominator for diluted net (loss) income per share - weighted-average number of common shares and common share equivalents outstanding 27,941 25,771 26,983 26,096 Basic net (loss) income per share attributable to Forward Air: Continuing operations $ ( 2.62 ) $ 0.25 $ ( 28.73 ) $ 2.20 Discontinued operation ( 0.04 ) 0.11 ( 0.22 ) 0.31 Net (loss) income per basic share $ ( 2.66 ) $ 0.36 $ ( 28.95 ) $ 2.51 Diluted net (loss) income per share attributable to Forward Air: Continuing operations $ ( 2.62 ) $ 0.25 $ ( 28.73 ) $ 2.19 Discontinued operation ( 0.04 ) 0.11 ( 0.22 ) 0.31 Net (loss) income per diluted share 1 $ ( 2.66 ) $ 0.36 $ ( 28.95 ) $ 2.50 1 Rounding may impact summation of amounts. 22 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 The number of shares that were not included in the calculation of net income per diluted share because to do so would have been anti-dilutive for the three and nine months ended September 30, 2024 and 2023 are as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Anti-dilutive stock options 287 112 287 105 Anti-dilutive performance shares 7 18 13 16 Anti-dilutive restricted shares and deferred stock units 166 72 166 61 Total anti-dilutive shares 460 202 466 182 8. Income Taxes The Company is taxed as a C corporation and is subject to federal and state income taxes. The Company’s sole material tax asset is Opco, which is a limited liability company that is taxed as a partnership for federal and certain state and local income tax purposes. Opco’s net taxable income and related tax credits, if any, are passed through to its partners and included in the partner’s tax returns. The income tax burden on the earnings taxed to the noncontrolling interest holders is not reported by the Company in its condensed consolidated financial statements. As a result, the Company’s effective tax rate differs materially from the statutory rate. For the nine months ended September 30, 2024 and 2023, the Company recorded an income tax benefit of $ 191,990 and income tax expense of $ 20,091 , respectively. The effective tax rate of 15.0 % for the nine months ended September 30, 2024 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of the tax impact of the goodwill impairment charge, noncontrolling interest, partially offset by state income taxes, net of the federal benefit, and foreign taxes. The effective tax rate of 25.9 % for the nine months ended September 30, 2023 varied from the statutory United States federal income tax rate of 21.0% primarily due to the effect of state income taxes, net of the federal benefit, and non-deductible executive compensation, partially offset by excess tax benefits realized on share-based awards. The Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain. As of both September 30, 2024 and December 31, 2023, the Company had $ 153 of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. As of both September 30, 2024 and December 31, 2023, the Company had accrued interest and penalties related to unrecognized tax benefits of $ 82 . 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 2017. The Company also maintains a valuation allowance to reserve against its state net operating loss carryforwards of $ 395 . 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. In connection with the Omni Acquisition, the Company entered into a Tax Receivable Agreement with certain Omni Holders. As of September 30, 2024, the Company recorded a Tax Receivable Agreement liability of approximately $ 36,797 , after concluding that such Tax Receivable Agreement payments would be probable based on estimates of future taxable income over the term of the Tax Receivable Agreement. The determination of the Tax Receivable Agreement liability requires the Company to make judgments in estimating the amount of tax attributes as of the date of exchanges (such as cash to be received by the Company on a hypothetical sale of assets and allocation of gain or loss to the Company at the time of the exchanges taking into consideration partnership tax rules). The amounts payable under the Tax Receivable Agreement will also vary depending upon a number of factors, including tax rates in effect, as well as the amount, character, and timing of the taxable income of Opco in the future and the expected realization of tax benefits with respect to deferred tax assets related to tax attributes subject to Tax Receivable Agreement, which may result in a valuation allowance recorded against the deferred tax assets. If other tax attributes subject to the Tax Receivable Agreement are determined to be payable, additional Tax Receivable Agreement liabilities may be considered probable at that time. 23 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 The Organization for Economic Co-operation and Development enacted model rules for a new global minimum tax framework, also known as Pillar Two, and certain governments globally have enacted, or are in the process of enacting, legislation considering these model rules. These rules did not have a material impact on our taxes for the three and nine months ended September 30, 2024. The Organization for Economic Co-operation and Development (“OECD”), continues to put forth various initiatives, including Pillar Two rules which include the introduction of a global minimum tax at a rate of 15%. European Union member states agreed to implement the OECD’s Pillar Two rules with effective dates of January 1, 2024 and January 1, 2025, for different aspects of the directive and most have already enacted legislation. A number of other countries are also implementing similar legislation. As of September 30, 2024, based on the countries in which we do business that have enacted legislation effective January 1, 2024, the impact of these rules to our financial statements was not material. This may change as other countries enact similar legislation and further guidance is released. We continue to closely monitor regulatory developments to assess potential impacts. 9. Fair Value of Financial Instruments The Company categorizes its assets and liabilities into one of three levels based on the assumptions used in valuing the asset or liability. Estimates of fair value financial assets and liabilities are based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. In accordance with this guidance, fair value measurements are classified under the following hierarchy: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Model-derived valuations in which one or more significant inputs are unobservable. Assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 are summarized below: As of September 30, 2024 Level 1 Level 2 Level 3 Total Liabilities under tax receivable agreement $ — $ — $ 36,797 $ 36,797 As of December 31, 2023 Level 1 Level 2 Level 3 Total Liabilities under tax receivable agreement $ — $ — $ — $ — Cash, cash equivalents and restricted cash, accounts receivable, other receivables and accounts payable are valued at their carrying amounts in the Company’s Condensed Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments. In connection with the Omni acquisition noted in Note 4 and the deal structure, Preferred B shares totaling 966,764 were converted into common stock during the quarter and as a result, Tax Receivable Agreement liability increased to $ 36.8 million from $ 13.3 million. See Note 8 for more information on the Tax Receivable Agreement. 24 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 As of September 30, 2024, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $ 48,097 , compared to its carrying value of $ 49,472 . 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 . The carrying value of the long-term debt approximates fair value based on the borrowing rates currently available for a loan with similar terms and average maturity. 10. Shareholders’ Equity 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 is, together with a corresponding Opco Class B Unit, exchangeable at the option of the holder thereof into one share of the Company’s common stock. Holders of Series B Preferred Units and holders of the Company’s common stock will vote together as a single class on all matters to be voted on by the Company’s shareholders, subject to limited exceptions. Each holder of record of Series B Preferred Units is entitled to cast one vote for each such unit. Pursuant to the Charter Amendment, the Series B Preferred Units have a liquidation preference of $ 0.01 per unit and are not entitled to receive any dividends independent of their corresponding Opco Class B Units. A Series B Preferred Unit and its corresponding Opco Class B Unit may only be transferred together as a single, combined unit. Stock 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 nine months ended September 30, 2024, the Company did not repurchase any shares of common stock through open market transactions. During the nine months ended September 30, 2023, the Company repurchased through open market transactions 883 shares of common stock for $ 93,811 , or an average of $ 106.21 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 (Deficit) Earnings ” in the Condensed Consolidated Balance Sheets. As of September 30, 2024, the remaining shares permitted to be repurchased under the 2019 Repurchase Plan were approximately 1,349 shares. 25 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 11. Commitments and Contingencies Contingencies On September 26, 2023, Rodney Bell, Michael A. Roberts and Theresa Woods, (collectively, the "Plaintiffs"), three of our shareholders, filed a complaint against us and certain of its directors and officers in the Third District Chancery Court sitting in Greeneville, Tennessee (the "Shareholder Complaint"). The Shareholder Complaint alleges, among other things, that our 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 the Closing, the parties to the Amended Merger Agreement completed the Omni Acquisition. On May 2, 2024, Plaintiff Michael Roberts, together with the Cambria County Employees Retirement System filed a stipulation and proposed order seeking leave of court to file an amended class action complaint seeking damages, among other forms of relief. Upon receiving leave of the court, on May 15, 2024, the Plaintiffs filed the amended complaint. Like the earlier complaints, it challenges our determination not to subject the Omni Acquisition to a shareholder vote. We disagree with the allegations of the amended complaint and are in the process of defending the matter. 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 claims and pending litigation, taking into account existing reserves, will not have a material adverse effect on the condensed consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and related events unfold. Insurance coverage provides the Company with primary and excess coverage for claims related to vehicle liability, workers’ compensation, property damage and employee medical benefits. 26 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 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 Freight¹ 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 Risk Retention before insurance will continue. Also, from time to time, when brokering freight, the Company may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and the Company maintains third-party liability insurance coverage with a $ 100 deductible per occurrence for most of its brokered services. 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. Although, an estimate cannot be made of the range of additional loss that is at least reasonably possible. 27 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 12. Segment Reporting The Company has three reportable segments: Expedited Freight, Intermodal and Omni Logistics. The Company evaluates segment performance based on income from operations. Segment results include intersegment revenues and shared costs. Costs related to the corporate headquarters, shared services and shared assets, such as trailers, are allocated to each segment based on usage. Shared assets are not allocated to each segment, but rather the shared assets, such as trailers, are allocated to the Expedited Freight segment. Corporate includes revenues and expenses as well as assets that are not attributable to any of the Company’s reportable segments. The accounting policies applied to each segment are the same as those described in the Summary of Significant Accounting Policies as disclosed in Note 1 to the Annual Report on Form 10-K for the year ended December 31, 2023, except for certain self-insurance loss reserves related to vehicle liability and workers’ compensation. Each segment is allocated an insurance premium and deductible that corresponds to the self-insured retention limit for that particular segment. Any self-insurance loss exposure beyond the deductible allocated to each segment is recorded in Corporate. Segment results from operations for the three and nine months ended September 30, 2024 and 2023 are as follows: Three Months Ended September 30, 2024 Expedited Freight Intermodal Omni Logistics Corporate Eliminations Consolidated External revenues $ 264,129 $ 57,270 $ 334,538 $ — $ — $ 655,937 Intersegment revenues 20,578 142 — — ( 20,720 ) — Depreciation 9,029 2,020 3,346 — — 14,395 Amortization 1,452 2,562 7,484 — — 11,498 Income (loss) from operations 19,269 4,091 1,136 ( 1,799 ) — 22,697 Purchases of property and equipment 7,577 79 2,758 — — 10,414 Three Months Ended September 30, 2023 Expedited Freight Intermodal Omni Logistics Corporate Eliminations Consolidated External revenues $ 278,841 $ 62,135 $ — $ — $ — $ 340,976 Intersegment revenues 34 48 — — ( 82 ) — Depreciation 8,018 2,626 — — — 10,644 Amortization 1,004 2,561 — — — 3,565 Income (loss) from operations 32,547 4,744 — ( 25,602 ) — 11,689 Purchases of property and equipment 5,223 21 — — — 5,244 Revenue from the individual services within the Expedited Freight segment for the three and nine months ended September 30, 2024 and 2023 are as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Expedited Freight revenues: Network $ 217,289 $ 216,977 $ 655,116 $ 628,670 Truckload 43,635 38,800 125,368 120,976 Other 23,783 23,098 68,800 68,242 Total $ 284,707 $ 278,875 $ 849,284 $ 817,888 28 Table of Contents Forward Air Corporation Notes to Condensed Consolidated Financial Statements (unaudited and in thousands, except per share data) September 30, 2024 Nine Months Ended September 30, 2024 Expedited Freight Intermodal Omni Logistics Corporate Eliminations Consolidated External revenues $ 797,483 $ 172,701 $ 871,232 $ — $ — $ 1,841,416 Intersegment revenues 51,801 302 — — ( 52,103 ) — Depreciation 27,282 6,234 9,468 — — 42,984 Amortization 4,181 7,687 51,469 — — 63,337 Income (loss) from operations 60,713 12,994 ( 1,133,323 ) ( 79,175 ) — ( 1,138,791 ) Purchases of property and equipment 16,502 1,629 11,679 — — 29,810 Nine Months Ended September 30, 2023 Expedited Freight Intermodal Omni Logistics Corporate Eliminations Consolidated External revenues $ 817,785 $ 214,522 $ — $ — $ — $ 1,032,307 Intersegment revenues 103 81 — — ( 184 ) — Depreciation 22,123 7,056 — — — 29,179 Amortization 2,964 7,683 — — — 10,647 Income (loss) from operations 89,295 20,259 — ( 24,344 ) — 85,210 Purchases of property and equipment 21,496 584 — — — 22,080 Total Assets As of September 30, 2024 $ 674,896 $ 261,081 $ 1,971,503 $ 148,378 $ ( 18 ) $ 3,055,840 As of December 31, 2023 661,270 270,421 — 2,047,901 ( 59 ) 2,979,533 29