Forward Air Corporation

430 Airport Road
Greeneville, Tennessee 37745
U.S.A.
Telephone: (423) 636-7000
Fax: (423) 636-7279
Web site: http://www.forwardair.com

Public Company
Incorporated: 1981 as Landair Transport, Inc.
Employees: 1,623
Sales: $282.2 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: FWRD
NAIC: 484121 General Freight Trucking, Long-Distance, Truckload

Forward Air Corporation is a Greeneville, Tennessee-based company that specializes in the surface transportation of deferred air freight, a less expensive alternative to air freight. Unlike time-sensitive air freight, deferred air freight is time definite, a less specific category. Forward Air receives cargo transported by air and sorts it at nearby facilities, where the shipments are consolidated and then sent to the terminal closest to the final destination. All told, Forward Air operates some 80 terminals in the United States and Canada, located on or near airports, a central sorting facility in Columbus, Ohio, and eight regional hubs located in key markets. The company focuses on shipments of 200 pounds and greater. Hence, it does not compete with overnight or small package delivery services, and it primarily markets its services to passenger and cargo airlines, integrated air cargo carriers, and air freight forwarders. Forward Air does not own its own fleet of trucks, preferring to operate as a non-asset based provider. Instead, the company contracts with truck owner-operators and truckload carriers. Because at its core Forward Air is a coordinator, the company offers to others some of the services it provides to itself, including truck brokerage, warehousing, customs brokerage, and shipment consolidation and handling. Forward Air is a public company listed on the NASDAQ.

Parent Company's Founding in the 1980s

Forward Air was originally part of Landair Transport before a split in 1998. Landair was cofounded by Forward Air's chairman and longtime chief executive officer, Scott M. Niswonger. Born in Ohio, Niswonger graduated from Purdue University in 1968 with a degree in aviation technology. An avid flyer, he went to work as a pilot for the president of the Magnavox Company (which maintained a factory in Greeneville, Tennessee, and led to Niswonger's connection to the community) and later graduated from United Airlines Training Academy and the Fairfield Aircraft Factory School. (In the 1980s he returned to college as a chief executive officer, earning a degree in business administration from Tusculum College.) He became a certified airline transport pilot, able to fly small airplanes as well as jumbo jets. Having gained an understanding of the transportation industry, Niswonger decided to strike out on his own in 1974, founding General Aviation, Inc., an all-cargo airline that he headed as president and chief executive officer for the next seven years. In 1980 the trucking industry was deregulated, leading to many air-freight operators seeking to create a reliable ground transport system. Sensing an opportunity, Niswonger in 1981 invested $2,000 along with partner Ed Saylor who invested a similar amount and cofounded Landair Transport as a truckload carrier and contractor to the air cargo industry on a time-definite basis. Saylor would soon die of bone cancer, leaving Niswonger as the sole owner of the business.

Although air freight operators were Landair's first major customers, the company received an increasing amount of business from manufacturers who were employing just-in-time inventory systems. Under Niswonger's leadership, Landair spent heavily to make sure it could deliver goods exactly as they were required, allowing customers to organize their operations as efficiently as possible. In order to meet this goal, Landair assigned two drivers instead of one on longer trips and replaced its tractors every three years, much faster than the norm in the trucking industry. Niswonger also began investing in satellite tracking equipment in the late 1980s, allowing Landair to track the status of its trucks and provide an even greater level of precision to its customers.

Company Growing Out of 1988 Contract

Forward Air established its roots in 1988 when Landair contracted with North American Van Lines to provide less-than-truckload scheduled air cargo service. It was through this venture that Columbus, Ohio housed a central sorting facility and served as the heart of a hub-and-spoke network. Two years later the business transcended the North American Van Lines contract, and the Forward Air unit came under Landair's direction and control.

Landair generated about $30 million in revenues by the end of the 1980s. That amount would grow to $95.3 million in 1993 to go along with net income of nearly $2 million. It was in 1993 that Landair Transport became Landair Services and was taken public. The business was divided between two units: Forward Air and Truckload, a high-service operation providing shortto medium-haul deliveries on an "on demand" basis. By now Forward Air was the larger of the two subsidiaries.

For the next five years Landair continued to house two separate transportation businesses and sales grew steadily, reaching $148 million in 1995 and $190.4 million in 1997. Net income also kept pace, totaling $8.6 million in 1997. To remain competitive, Forward Air made significant investments in high technology during this period. In 1995 the company began work on a new comprehensive real-time system to log freight orders, track them, and bill customers. The first phase was ready to be rolled out in mid-1997, and the installation was complete in early 1998. As a result, all of Forward Air's terminals were linked together and every shipment could be traced from the moment it was received to the time it was delivered. In addition, the system provided management with a detailed financial picture of the organization on a daily basis, allowing information to be assembled about a specific terminal, customer, or even a particular shipment.

Forward Air's growth was internal, the result of significant growth in the deferred domestic air freight market, until 1997 when it acquired the air cargo assets of Adams Air Cargo, Inc., an Arbuckle, California-based surface transportation contractor to the air cargo industry. It was an important acquisition, given that the West Coast was becoming the most important part of Forward Air's business. The company was well positioned to enjoy further growth through acquisitions, as consolidation in the deferred domestic air freight market was on the horizon, with hundreds of regional less-than-truckload carriers ready to sell their air cargo operations. But first Niswonger restructured Landair Services.

In July 1998 Landair announced that it would split into two separate, publicly traded companies. As had been rumored in the industry for some time, the Truckload and Forward Air operations would go their separate ways. Although older, the Truckload unit was now smaller, generating revenues of about $96 million a year while Forward Air was doing $112 million in business. The Truckload unit was spun off and named Landair Corporation. Landair Services would then take the name of its remaining subsidiary, becoming Forward Air Corporation. According to a Traffic World article, "The decision to split the two companies [was] meant to bring a higher profile to the fast-growing Forward Air division. Industry analyst Alex Brand was quoted as saying that the two divisions were 'more or less run as separate companies now. It's a hard sell as a combined company. The Forward Air business is a cleaner story. It's neat and easy, like an airline that moves over land.'" Niswonger explained his strategy in a press release, stating, "We believe investors, analysts and lenders will be better able to assess the different operating characteristics, capital requirement and growth expectations of each business." He added, "The strategic separation will enable both businesses to motivate their key employees and attract new employees by offering economic incentives such as stock options whose value will be directly related to the performance of the truckload business of the Forward Air business." Niswonger became chairman of both companies, but it was clearly Forward Air that emerged from the split as the stronger of the two entities. Within a year, Landair was struggling; its president resigned and Niswonger had to step in to run the company until a replacement was hired.

Forward Air, in the meantime, continued to grow at a steady clip, pursuing a consolidation strategy. In October 1999 it acquired the air cargo operations of Quick Delivery Services, a Mobile, Alabama-based carrier that focused on the Southeast. Forward Air expanded its reach and could not provide greater coverage to its existing customers while adding new customers. Later in the month, Forward Air added the air cargo operating assets of Tennessee-based LTD Express, again adding reach and revenues. After 1999 came to a close, Forward Air reported revenues of $170.8 million for the year, a 30 percent increase over 1998, and a 62 percent improvement over 1997.

Market Downturn at the Close of the 1990s

In December 1999 freight levels dropped sharply, a foreshadowing of a downturn in the economy that would soon visit the country, but it did little to blunt Forward Air's momentum. Once again the company produced record results, with sales increasing more than 25 percent to $214.9 million and net income increasing 46.2 percent to $23.4 million. Forward Air also completed another acquisition during 2000, purchasing the assets of Dedicated Transportation Services, Inc., a subsidiary of Professional Transportation Group, at a cost of $10.7 million. A Chattanooga-based freight hauler and Dedicated's line hauler, U.S. Xpress Enterprises Inc. also had tried to acquire the assets, and after failing began using the "Dedicated" name on another business. Forward Air sued U.S. Xpress for antitrust violations in federal court in 2001, and a year later the two parties reached a settlement, with U.S. Xpress agreeing, without admitting guilt, to pay Forward Air $1.3 million and dropping the Dedicated name on its air transport business.

Company Perspectives:

Forward Air Corporation is a leading provider of time-definite surface transportation and related logistics services to the North American deferred air freight market. We provide scheduled surface transportation of cargo as a cost effective, reliable alternative to air transportation.

Another acquisition followed early in 2001 when Forward Air acquired assets of Expedited Delivery Services, Inc., a Dallas-based deferred air freight contractor. Overall the year proved to be problematic, despite the company again producing record sales, improving to $227.5 million. The company's technology subsidiary, LogTech, experienced problems, which led its operations to be folded into Forward Air's existing sales operations. On the positive side, Forward Air made strides in expanding its national sales presence and landed significant national accounts with Northwest Airlines and British Airways. In addition, the carrier expanded its service from St. Louis to the Southwest in 2001 and launched a three-day service from San Francisco to ten cities. Investors grew somewhat concerned and the price of Forward Air dropped 9.1 percent. Given that the NASDAQ composite was down 20.7 percent, it was not an entirely dismal performance, however.

Challenges continued in 2002, as Forward Air had to contend with the effects of a sputtering economy that resulted in a soft air freight market. The company was able to make the best of a poor situation, as it experienced a 1 percent decline in revenues to $226 million but still managed to post net income of $21.6 million, the company's second most profitable year in its history. Wall Street, on the other hand, was not impressed, as shares of Forward Air lost 43 percent of their value in 2002.

Forward Air experienced a changing of the guard in October 2003. Niswonger announced that he would step down as CEO at the end of the year, opting to devote more of his time to his many philanthropic endeavors. Replacing him was Bruce Campbell, who had served as chief operating officer since 1990. Niswonger stayed on as the non-executive chairman of the board. He left the company in excellent shape, due in no small measure to a significant rebound in the expedited domestic freight shipping market. Sales increased to $241.5 million and net income improved to $25.8 million. Moreover, the company had $87 million of cash on hand and less than $1 million in debt at the end of the year. Investors took note and bid up the price of Forward Air stock by 37 percent in 2003.

Demand for shipping continued in 2004, prompting Forward Air to recruit more truck owner-operators. In addition, for the first time in 13 years, the company increased the pay of its owner-operators, adding three cents a mile to their compensation. For the year 2004, sales increased to $282.2 million and net income jumped to $34.4 million. The company was the clear leader in its category and reaping the benefits. In 2005 it bought the customer list used by Xpress Global Systems, which had tried to copy the Forward Air business model and failed. Another rival, Maryland-based Air Cargo, also had exited the field, providing Forward Air with even greater opportunities. The company opened its 81st service facility, located in Harrisburg, Pennsylvania, in June 2005 and also began expanding its Columbus hub facility. There was every indication that Forward Air would continue to enjoy strong growth for some time to come.

Principal Subsidiaries

FAF, Inc.; Forward Air, Inc.; Forward Air International Airlines, Inc.; Forward Air Royalty Company; Forward Air Systems Technology, Inc.; Forward Air Licensing Company; Transportation Properties, Inc.

Principal Competitors

BAS Global Inc.; International Cargo Marketing Consultants; New Penn Motor Express, Inc.; Old Dominion Freight Line, Inc.

Key Dates:

1981:

Scott M. Niswonger and Ed Saylor found Landair Transport, Inc.

1988:

The roots of Forward Air are planted with a North American Van Lines contract.

1990:

Forward Air becomes a Landair business unit.

1993:

Landair goes public as Landair Services, Inc.

1998:

Landair Services spins off its Truckload business unit and changes its name to Forward Air Corporation.

2003:

Niswonger steps down as CEO.

Further Reading

Armbruster, William, "Forward to Buy Air Cargo Assets," Journal of Commerce, September 30, 1999, p. 16.

Flessner, Dave, "Two Tennessee Trucking Companies Reach Settlement in Anti-Trust Suit," Chattanooga Times/Free Press, November 26, 2002.

Krause, Kristin S., "Forward Shares Tumble," Traffic World, February 26, 2001, p. 36.

――――, "Landair Splits Off Unit," Traffic World, July 27, 1998, p. 25.

McKenna, Ed, "Forward Air's Kick Start," Traffic World, August 8, 2005, p. 1.

――――, "Forward Air's Stable Records," Traffic World, February 28, 2005, p. 1.

――――, "Profits and Capacity Up," Traffic World, November 8, 2004, p. 1.

Posner, Bruce G., "Prime Time: Landair Transport Inc.," Inc., December 1989, p. 125.

Saccomano, Ann, "Seizing the High Ground," World Trade, January 2002, p. 20.