Forward Air talks about Omni integration, but remains silent on rumors that it is for sale

Management did say that an initiative to realize about $75 million in deal synergies in the first quarter of next year was slightly ahead of plan.

The company pointed to lower prices for class-based less-than-truckload shipments as the primary reason for the unfavorable outcome. According to the company, the company’s previous strategy was “focused more on volume than on profitability,” which resulted in many of its shipments being underpriced relative to the service provided to move them.

That strategy was implemented before the new regime took power.

The accelerated segment, which includes LTL operations, reported revenue of $285 million, which was up 2.1% year over year. Tonnage per day rose 2.4%, but revenue per hundredweight, or yield, fell 0.5% excluding fuel surcharges (down 1.2% from the second quarter). Forward said it will continue to offer class-based LTL services, but not at the unfavorable returns previously allowed.

The unit posted an operating margin of 6.8%, 490 basis points worse year-on-year. Most cost levels increased as a percentage of sales, while purchased transportation costs were up 260 basis points year over year.

Omni reported revenue of $335 million, up 7.3% from the second quarter. (Prior year results were not provided.) Omni generated $871 million in revenue in the first three quarters of the year, just over half the revenue it generated when the merger was announced.

Forward improved its liquidity position by $15 million to $460 million, while cash flow from operations was $53 million, compared to a loss of $45 million in the second quarter.

Net debt was reduced sequentially by $54 million to $1.65 billion, 5.4 times adjusted EBITDA. The leverage ratio increased from 5.2 times in the second quarter, but remained below the company’s debt covenant of 6 times. The 12-month EBITDA of $307 million gives the company a $32 million cushion under its credit agreement.

Management said a new Chief Commercial Officer will join Forward in January. The unnamed person has more than twenty years of experience in the global logistics industry.

Shares of FWRD fell 5.1% in after-hours trading on Monday.

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