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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
Commission file number: 000-22490
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000-22490
FORWARD AIR CORPORATION
(Exact name of Registrant as specified in its charter)

Tennessee | 62-1120025
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)

1915 Snapps Ferry Road | Building N | Greeneville | TN | 37745
(Address of principal executive offices) | (Zip Code)

(423) 636-7000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered
Common Stock, $0.01 par value | FWRD | The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting Company | ☐ | Emerging Growth Company | ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $1,781,062,975 as of June 30, 2021.
The number of shares outstanding of the Registrant’s common st ock (as of February 25, 2022): 26,941,467.
Documents Incorporated By Reference
Portions of the proxy statement for the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

Table of Contents
| Forward Air Corporation | Page Number
| Part I. |
Item 1. | Business | 4
Item 1A. | Risk Factors | 14
Item 1B. | Unresolved Staff Comments | 24
Item 2. | Properties | 24
Item 3. | Legal Proceedings | 24
Item 4. | Mine Safety Disclosures | 24
| Part II. |
Item 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities | 25
Item 6. | [Reserved] | 26
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 43
Item 8. | Financial Statements and Supplementary Data | 43
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 43
Item 9A. | Controls and Procedures | 43
Item 9B. | Other Information | 46
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 46
| Part III. |
Item 10. | Directors, Executive Officers and Corporate Governance | 46
Item 11. | Executive Compensation | 46
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters | 46
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 46
Item 14. | Principal Accounting Fees and Services | 46
| Part IV. |
Item 15. | Exhibits, Financial Statement Schedules | 46
Signatures | 47
Index to Financial Statements | F-2
Financial Statement Schedule | S-1
Exhibit Index |

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Part I
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (this “Form 10-K”) contains
“forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance. Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.”
In this Form 10-K, forward-looking statements include, but are not limited to, any statements regarding the impact of the COVID-19 pandemic on our business, results of operations, future operations and financial condition; any projections of earnings, revenues, payment of dividends, other financial items or related accounting treatment, or cost reduction measures; any statements regarding future performance; any statements regarding the availability of cash; any statements regarding the impact of the Ransomware Incident on our business, future operations and results; any statements of plans, strategies, and objectives of management for future operations; any statements regarding future insurance, claims and litigation and any associated estimates or projections; any statements regarding regulation and legislative impacts on our business; any statements concerning proposed or intended, new services, developments or integration measures; any statements regarding our technology and information systems, including the effectiveness of each; any statements regarding competition, including our specific advantages, the capabilities of our segments, including the integration of services and our geographic location; any statement regarding our properties; any statements regarding intended expansion through acquisition or greenfield startups; any statements regarding future business, economic conditions or performance; any statements regarding our ESG and sustainability initiatives; any statement regarding certain tax and accounting matters, including the impact on our financial statements; and any statements of belief and any statements of assumptions underlying any of the foregoing.
These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in “Risk Factors” below. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-K may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Important factors that may materially affect the forward-looking statements include the risk factors summarized below.
The factors identified below are believed to be important factors, but not necessarily all of the important factors, that could cause actual results to differ materially from those expressed in any forward-looking statement made by us. Other factors not discussed herein could also have a material adverse effect on us. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. These forward-looking statements speak only as of the date of this Form 10-K. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as required by applicable law.
The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements: economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the COVID-19 pandemic, our ability to manage our growth and ability to grow, in part, through acquisitions, while being able to successfully integrate such acquisitions, our ability to secure terminal facilities in desirable locations at reasonable rates, more limited liquidity than expected which limits our ability to make key investments, the creditworthiness of our customers and their ability to pay for services rendered, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, seasonal trends, the occurrence of certain weather events, restrictions in our charter and bylaws. As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations. Except as required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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Part I
Item 1. Business
Overview
Forward Air Corporation (“Forward”, the “Company”, “we”, “our”, or “us”) is a leading asset-light freight and logistics company. We provide less-than-truckload (“LTL”), final mile, truckload and intermodal drayage services across the United States and in Canada. We offer premium services that typically require precision execution, such as expedited transit, delivery during tight time windows and special handling. We utilize an asset-light strategy to minimize our investments in equipment and facilities and to reduce our capital expenditures. Forward Air was formed as a corporation under the laws of the State of Tennessee on October 23, 1981. Our common stock is listed on the Nasdaq Global Select Market under the symbol “FWRD”.
Discontinued Operation
On April 23, 2020, the Board of Directors (the “Board”) approved a strategy to divest our Pool Distribution business (“Pool”), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region. Pool offered this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States. As a result of the strategy to divest of Pool, Pool’s results of operations are presented as a discontinued operation in our Consolidated Statements of Comprehensive Income for all periods presented. In addition, assets and liabilities were reflected as “Current assets held for sale”, “Noncurrent assets held for sale”, “Current liabilities held for sale” and “Noncurrent liabilities held for sale” in the Consolidated Balance Sheets as of December 31, 2020. Unless otherwise noted, amounts, percentages and discussion for all periods reflect the results of operations, financial condition and cash flows from our continuing operations.
Services Provided
Our services are classified into two reportable segments: Expedited Freight and Intermodal. For financial information relating to each of our business segments, see Note 12, Segment Reporting to our Consolidated Financial Statements included in this Form 10-K.
Expedited Freight. We operate a comprehensive national network to provide expedited regional, inter-regional and national LTL services. Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling. We plan to grow our LTL and final mile geographic footprints through greenfield start-ups as well as acquisitions. During the year ended December 31, 2021, Expedited Freight accounted for 82.6% of our consolidated revenue.
Intermodal. We provide 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. Today, Intermodal operates primarily in the Midwest and Southeast, with a smaller operational presence in the Southwest and Mid-Atlantic United States. We plan to grow Intermodal’s geographic footprint through acquisitions as well as greenfield start-ups where we do not have an acceptable acquisition target. During the year ended December 31, 2021, Intermodal accounted for 17.4% of our consolidated revenue.
Strategy
Our strategy is to take advantage of our core competencies in precision execution to provide asset-light freight and logistics services in order to profitably grow in the premium segments of the markets we serve. Principal components of our efforts include:
•Expand Service Offerings. A key part of our growth strategy is to offer new and enhanced services that address our customers’ premium transportation needs. Over the past few years, we added or enhanced LTL pickup and delivery, final mile solutions, expedited truckload, temperature-controlled shipments, warehousing, drayage, customs brokerage and shipment consolidation and handling services. These services benefit our existing
4

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customers and increase our ability to attract new customers. Another part of our growth strategy is to open new terminals in under penetrated markets away from airport locations.
•Pursue Strategic Acquisitions. We continue to evaluate and pursue acquisitions that support our growth strategy. In 2014 we created the foundation for what is our Intermodal segment by acquiring Central States Trucking Co. (“CST”). Since the acquisition of CST, we have completed thirteen additional intermodal acquisitions. In order to enhance our final mile footprint, we acquired FSA Network, Inc. (“FSA”) in April 2019, Linn Star Holdings, Inc., Linn Star Transfer, Inc. and Linn Star Logistics, LLC (collectively, “Linn Star”) in January 2020 and CLW Delivery, Inc. (“CLW”) in October 2020. In May 2021, we acquired J&P Hall Express Delivery (“J&P”) to expand the expedited LTL footprint across the Southeastern United States.
•Enhance Information Systems. We are committed to the development and enhancement of our information systems in order to provide competitive service advantages and increased productivity. We believe our information systems have and will assist us in capitalizing on new business opportunities with existing and new customers.
Operations
The following describes in more detail the operations of each of our reportable segments: Expedited Freight and Intermodal.
Expedited Freight
Overview
Our Expedited Freight segment provides expedited regional, inter-regional and national LTL, final mile and truckload services. We market our Expedited Freight services primarily to freight and logistics intermediaries (such as freight forwarders and third-party logistics companies), airlines (such as integrated air cargo carriers, and passenger and cargo airlines) and retailers (such as retailers of heavy bulky appliances). We offer our customers a high level of service with a focus on on-time, damage-free deliveries. Our Expedited Freight network encompasses approximatel y 92% of all continental U.S. zip codes, with service in Canada.
Shipments
During 2021, approximately 29% of the freight handled by our LTL network was for overnight delivery, approximately 57% was for delivery within two to three days and the balance was for delivery in four or more days.
The average weekly volume of freight moving through our LTL network was approximately 55.4 million pounds per week in 2021. During 2021, our average shipment weighed approximately 729 pounds. Although we impose no significant size or weight restrictions, we focus our marketing and price structure on shipments of 200 p ou nds or more.
Expedited Freight markets its services primarily to freight and logistics intermediaries; however, it may at times, provide such services to shippers if the opportunity is consistent with Expedited Freight’s strategy. Also, because Expedited Freight does not place significant size or weight restrictions on shipments, we generally do not compete directly with integrated air cargo carriers such as United Parcel Service and FedEx Corporation in the overnight delivery of small parcels.
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The table below summarizes the average weekly volume of freight moving through our LTL network for each year since 2007.

| Average Weekly
| Volume in Pounds
Year | (In millions)
2007 | 32.8
2008 | 34.2
2009 | 28.5
2010 | 32.6
2011 | 34.0
2012 | 34.9
2013 | 35.4
2014 | 37.4
2015 | 47.2
2016 | 46.5
2017 | 49.5
2018 | 50.2
2019 | 48.6
2020 | 46.3
2021 | 55.4

Transportation
Expedited Freight’s licensed motor carriers entered into contracts with independent contractor fleets, owner-operators and other third-party transportation capacity providers for most of its transportation services. Our independent contractor fleet owners and owner-operators lease their equipment to the Company’s motor carriers (“Leased Capacity Providers”) and own, operate and maintain their own tractors and employ their own drivers. Our freight handlers load and unload our trailers and vehicles for hauling by our Leased Capacity Providers between our terminals.
We seek to establish long-term relationships with Leased Capacity Providers to assure dependable service and availability. We believe Expedited Freight has experienced significantly higher average retention of Leased Capacity Providers compared to other over-the-road transportation providers. Expedited Freight has established specific guidelines relating to safety records, driving experience and personal evaluations that we use to select our Leased Capacity Providers. To enhance our relationship with the Leased Capacity Providers, Expedited Freight seeks to pay rates that are generally above prevailing market rates, and our Leased Capacity Providers often are able to negotiate a consistent work schedule for their drivers. Usually, Leased Capacity Providers negotiate schedules for their drivers that are between the same two cities or along a consistent route, improving quality of work life for the drivers of our Leased Capacity Providers and, in turn, increasing the retention rate of drivers and Leased Capacity Providers.
As a result of efforts to expand our logistics and other services, and in response to seasonal demands and volume surges in particular markets, we also purchase transportation from other surface transportation providers to handle overflow volume. Of the $743,418 incurred for Expedited Freight's transportation during 2021, we purchased 30.4% from the Leased Capacity Providers of our licensed motor carrier, 44.9% from third-party cartage agents and 24.7% from other surface transportation providers.
All of our Expedited Freight independent contractor tractors are equipped with in-cab communication devices, which enable us to communicate with drivers, plan and monitor shipment progress and monitor and record drivers’ hours of service. We use the real-time global positioning data obtained from these devices to improve customer and driver service.
Other Services
Expedited Freight continues to evolve the capabilities of its network to provide additional value-added services. Expedited Freight also seeks to lower its unit costs by integrating these services into the overall operation of its network.
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Expedited Freight offers final mile services which include the delivery and installation of heavy bulky appliances such as washing machines, dryers, dishwashers and refrigerators. Through the acquisition of FSA Logistix in 2019, Linn Star in January 2020, and CLW in October 2020, Expedited Freight significantly expanded its final mile geographic footprint and now operates in 112 locations nationwide. Expedited Freight is also increasingly integrating these deliveries into its LTL pickup and delivery and terminal operations so as to increase network density and lower overall LTL unit costs.
Expedited Freight offers truckload services which include expedited truckload brokerage, dedicated fleet services, as well as high security and temperature-controlled logistics services.
Other Expedited Freight services allow customers to access the following services from a single source:
•customs brokerage;
•warehousing, dock and office space;
•hotshot or ad hoc ultra-expedited services; and
•shipment consolidation and handling, such as shipment build-up and break-down and reconsolidation of air or ocean pallets or containers.
Customers
Our Expedited Freight wholesale customer base is primarily comprised of freight forwarders, third-party logistics (“3PL”) companies, integrated air cargo carriers and passenger, cargo airlines, steamship lines and retailers. Expedited Freight’s freight forwarder customers vary in size from small, independent, single facility companies to large, international logistics companies. Our dependable service and wide-ranging service offerings also make Expedited Freight an attractive option for 3PL providers, which is one of the fastest growing segments in the transportation industry. Because we deliver dependable service, integrated air cargo carriers use our network to provide overflow capacity and other services, including shipment of bigger packages and pallet-loaded cargo. In 2021, Expedited Freight’s ten largest customers accounted for approximately 40% of its operating revenue and no single customer had revenue greater than 10% of Expedited Freight operating revenue for 2021.
Intermodal
Overview
Our 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. Today, Intermodal operates primarily in the Midwest and Southeast, with smaller operational presence in Southwest and Mid-Atlantic United States. We plan to expand beyond our current geographic footprint through acquisitions as well as greenfield start-ups where no suitable acquisition is available. Intermodal also provides linehaul and local less-than-truckload service in the Midwest, as well as CFS warehousing services (e.g. devanning, unit load device build-up/tear-down, and security screening) for air and ocean import/export freight at five (5) of its Midwest terminals (Chicago, Cleveland, Milwaukee, Indianapolis and Detroit). Our Intermodal service differentiators include:
•Immediate proof of delivery (“POD”) and Signature Capture capability via tablets;
•All drivers receive dispatch orders on hand-held units and are trackable via GPS; and
•Daily container visibility and per diem management reports.
Operations
Intermodal’s primary office is located in Oak Brook, Illinois. Intermodal’s network consists of 29 locations primarily in the Midwest and Southeast, with a smaller operational presence in the Southwest and Mid-Atlantic United States.
Transportation
Intermodal utilizes a mix of Company-employed drivers, Leased Capacity Providers and third-party carriers. During 2021, approximately 71% of Intermodal’s direct transportation expenses were provided by Leased Capacity Providers, 24% by Company-employed drivers, and 5% by third-party carriers.
All of our Intermodal company and independent contractor tractors are equipped with computer tablets, which enable us to communicate with our drivers, plan and monitor shipment progress and monitor our drivers’ hours of service. We use the real-time global positioning data obtained from these devices to improve customer and driver service and provide a high level
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of shipment visibility to our customers (including immediate POD signature capture). We believe that our technology is a key differentiator and enables us to provide a higher level of service than our competitors.
Customers
Intermodal’s customer base is primarily comprised of international freight forwarders, passenger and cargo airlines, beneficial cargo owners and steamship lines. In 2021, Intermodal’s ten largest customers accounted for approximate ly 32% of its operating revenue and had one customer with revenue greater than 10% of Intermodal operating revenue for 2021.
Competition
We compete in the North American transportation and logistics services industry, and the markets in which we operate are highly competitive, very fragmented and historically have few barriers to entry. We compete with a large number of other asset-light logistics companies, asset-based carriers, integrated logistics companies, and third-party freight brokers. To a lesser extent, we also compete with integrated air cargo carriers and passenger airlines. Our competition ranges from small operators that compete within a limited geographic area to companies with substantially greater financial and other resources, including greater freight capacity.
Our Expedited Freight segment primarily competes with other national and regional truckload carriers. Expedited Freight also competes with less-than-truckload carriers, and to a lesser extent, integrated air cargo carriers and passenger and cargo airlines. Our Intermodal segment primarily competes with national and regional drayage providers.
We believe competition in our segments is based primarily on quality service, available capacity, on-time delivery, flexibility, reliability, security, transportation rates, location of facilities, and business relationships, and we believe we compete favorably with other transportation service companies in these areas. To that end, we believe our Expedited Freight segment has an advantage over other truckload and less-than-truckload carriers because Expedited Freight delivers faster, more reliable services between cities at rates that are generally significantly below the charge to transport the same shipments to the same destinations by air. We believe our Intermodal segment has a competitive advantage over other drayage providers because we deliver more reliable service while offering greater shipment visibility and security. Additionally, we believe our Intermodal segment is one of the leading providers of drayage and related services in North America today.
Marketing
We market all of our services through a sales and marketing staff located in major markets of the United States. Senior management is also actively involved in sales and marketing to the national and local account levels. We participate in trade shows and advertise our services through digital marketing channels, trade publications, and the Internet via www.tlxpedited.com, www.forwardair.com, www.forwardaircorp.com, and www.forward-intermodal.com. Our websites promote and describe our services in addition to lead generation support. The information on our websites is not part of this filing and is therefore not incorporated by reference unless such information is specifically referenced elsewhere in this report.
Seasonality
Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis. The first quarter has traditionally been the weakest and the third and fourth quarters have traditionally been the strongest. Typically, this pattern has been the result of factors such as economic conditions, customer demand, weather, and national holidays. Additionally, a significant portion of our revenue is derived from customers whose business levels are impacted by the economy.
Workforce
We recognize that our workforce, including our freight handlers, is our most valuable asset. We strive to put people at the center of everything we do by empowering our workforce to improve their lives and realize their full potential. The recruitment, training and retention of qualified employees is essential to support our continued growth and to meet the service requirements of our customers.
As of December 31, 2021, we had 4,035 full-time employees, 975 of whom were freight handlers and an additional 292 part-time employees, the majority of whom were freight handlers. In 2021, none of our employees were covered by a collective bargaining agreement.
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Roadway Health and Safety
We are committed to educating our people and promoting driver health and wellness through routine communication campaigns and information designed to improve knowledge and produce safer results. Drivers of our Leased Capacity Providers complete a three-day safety orientation as part of their onboarding where they are assigned several training courses. Safety trainings may also be assigned on an ongoing basis, based on driving behaviors.
We invest in a variety of programs focused on improving and maintaining driver health and wellness. We provide drivers access to a fatigue management service with the goal of reducing fatigue-related accidents and encouraging healthy, restful sleep. We have implemented fleet safety equipment, including electronic monitoring systems, to track driver safety, well-being, and health through monitoring of speed and proper hours-of-service-required rest breaks.
We provide a quarterly safety bonus and annual vehicle giveaway to incentivize our Leased Capacity Providers to promote safe driving practices. These initiatives celebrate drivers of our Leased Capacity Providers who have zero moving violations or accidents each quarter. Drivers who obtain four quarterly bonuses are eligible to win a new vehicle. In 2021, 211 Leased Capacity Providers as well as Company-employed drivers qualified for the vehicle giveaway. Looking ahead, we will continue to identify and promote opportunities to adopt health and wellness practices for the drivers of our Leased Capacity Providers.
Workplace Health and Safety
We are committed to maintaining safe facilities for our employees and independent contractors. We are also committed to evaluating our practices and training our employees and independent contractors to prevent workplace incidents.
Beyond our roadway safety focus, we employ, maintain, and monitor a robust health and safety program for all of our workers, which establishes procedures and policies to prevent workplace incidents. Policies and procedures exist to investigate accidents and monitor lessons learned, driving continuous improvement in the health and safety practices across our facilities. All of our employees are assigned to 36 training courses as part of onboarding and employees may be assigned additional refresher trainings based on corrective action or identified risk.
Diversity and Inclusion
We are committed to creating an even more diverse, equitable, and inclusive work environment than we have today. Our commitment to a diverse and inclusive workplace begins at the top, starting with our Board. Diversity in race, ethnicity, and gender are important factors in evaluating candidates for board nominees and since July 2017, we have added four female directors to our Board, two directors who identify as Hispanic, one director who identifies as African American and one director who identifies as Indian. We believe diverse backgrounds and experiences are important to provide a range of perspectives to overcome challenges, improve business performance, and support good decision making.
The skills and talents of our diverse workforce drive our performance and we respect the value they bring to our business. We strive for a diverse and inclusive environment where everyone can contribute and thrive. We have an ongoing commitment to ensure we have a diverse workforce and Board presence. We understand that a welcoming workplace attracts top talent, which drives performance and profitability. We seek candidates from all backgrounds, to continue to build our industry’s most qualified workforce.
In 2020, we created a Diversity and Inclusion (“D&I”) Council to promote employee inclusion and engagement through initiatives that celebrate the diversity of our employees. As an organization that puts people at the center of everything we do, our vision is increased employee engagement and retention in part through enhanced D&I practices. Our assessment identified several D&I improvement activities that foster an inclusive environment:
•Incorporate additional D&I training into our education programs for employees and leadership.
•Engage our employees in the celebration of diversity. We plan to launch a series of Employee Resource Groups to foster an inclusive environment and better understand our colleagues’ backgrounds.
•Assess our current benefits program to identify improvement opportunities to support our increasingly diverse employees’ unique needs.
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Our employees are also offered three D&I trainings throughout the year, Understanding Diversity, Generational Awareness, and Emotional Intelligence.
Compensation and Benefits
One of the most important ways we support our employees and their families is through a comprehensive benefits package for all full-time employees. Our employees have access to the following:
•Competitive Benefits. We provide a strong benefit package to employees that includes health care insurance, dental insurance, vision insurance, Company-paid life insurance, paid time off, Company-paid holidays, family medical leave, and a 401(k) with a Company match.
•Wellness Program. The Employee Wellness Program provides access to annual medical screenings and health fairs, at no cost to the employee, to help keep employees healthy. Additionally, the Employee Wellness Program provides discounted gym memberships, free weight loss and smoking cessation programs, a healthy pregnancy program with incentives, and an Employee Assistance program.
•Work / Life Balance. We understand that a work / life balance is important to our employees. We consistently strive to improve our paid time off benefits for all of our employees, which allows us to retain and recruit quality employees.
Beyond our benefits package, career advancement has always been at the forefront for our employees and we truly pride ourselves with being able to promote from within. Our continuous learning workshops range from customer service to leadership and beyond. We strive to provide meaningful development opportunities for 100% of our employee population.
Equipment
We manage a trailer pool that is utilized by all of our reportable segments to move freight through our networks. Our trailer pool includes dry van, refrigerated and roller-bed trailers, and substantially all of our trailers are 53 feet long. We own the majority of the trailers we use, but we supplement at times with leased trailers. As of December 31, 2021, we had 6,370 owned trailers in our fleet with an average age of approximately six years. In addition, as of December 31, 2021, we also had 404 leased trailers in our fleet. As of December 31, 2021, we had 267 owned tractors and straight trucks in our fleet, with an average age of approximately five years. In addition, as of December 31, 2021, we also had 598 leased tractors and straight trucks in our fleet.
Environmental Protection and Community Support
We embrace a comprehensive definition of sustainability that addresses Environmental, Social, and Governance factors (“ESG”). To our employees, our communities, our customers, our suppliers, and our investors, each impact area matters.
In 2019, our Board amended the Corporate Governance and Nominating (“CG&N”) Committee Charter to oversee our efforts related to environmental, social, and governance matters, and management of sustainability-related risks and opportunities. At least twice a year, the CG&N Committee is updated on each of these topics and provides feedback and recommendations that it deems appropriate.
At the beginning of 2020, our leadership created and staffed the Head of Corporate ESG role to provide oversight of our ESG vision, strategic planning, performance management and improvement activities. Shortly after, we initiated an ESG market analysis and benchmarking exercise that explored the ESG issues that most impact transportation and logistics industries and marketplaces.
In second quarter of 2020, we began to conduct an ESG assessment, starting with a third-party stakeholder assessment that served as a basis for identifying and prioritizing ESG topics most relevant to our industry, our business, and our stakeholders. The assessment’s findings yielded initial topics that we recognized as important. We followed with a more in-depth assessment of risks and opportunities, utilizing Sustainable Accounting Standards Board (“SASB”) standards as a guide, in order to further refine our disclosure topics and gain stakeholder alignment. SASB identifies us as part of the “Airfreight and Logistics” industry; we decided to also incorporate the disclosure topics under “Road Transportation” to assure that all relevant topics for our business were represented in this analysis.
This more detailed assessment yielded clarity of our ESG topics and prioritization based on the degree of both qualitative and quantitative impact to our business. We identified ten ESG topic priority areas relevant to our business and
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mapped each to widely adopted ESG reporting standards as identified by SASB. Within these ten topic areas, we identified specific related risks and opportunities, and aligned on improvement activities.
The following are the ten ESG topic priority areas we identified relevant to our business and the foundation for our sustainability approach:
•Roadway Health & Safety; Workplace Health & Safety; Independent Contractor Practices; Diversity & Inclusion Practices; Community Impact & Partnerships; Measure & Disclose; Information Security; Responsible Supplier Practices; Green House Gas (“GHG”) Emissions Reduction Practices; and Air Quality Practices
Beyond our roadway safety focus, we employ, maintain, and monitor a robust Health and Safety program for all of our workers which establishes procedures and policies to prevent workplace incidents. As part of our assessment, we have identified improvement activities to develop a comprehensive Emergency Preparedness Plan (“EPP”) for all our facilities. The EPP is under development and in compliance with OSHA 29 CFR 1910 standards and FMCSA 49 CFR. When completed, we will distribute and maintain this EPP for employees and independent contractors alike, across our facilities and corporate offices.
We are committed to supporting and giving back to the communities where we live and work, particularly through the support of our employee Veterans, and to the community of Veterans in North America.
We continue to support our Veterans through our charitable organization, Operation: Forward Freedom, a manifestation of our ongoing commitment to Veteran-related causes. Operation Forward Freedom’s largest fundraising event is intended to be The Inaugural Drive for Hope Golf tournament. In 2020 and 2021, the Inaugural Drive For Hope Golf Tournament was postponed due to COVID-19. The Drive For Hope Golf Tournament is scheduled to take place in 2022.
We also partner with non-profit organizations that positively impact our communities and our industry. Through our partnership with Truckers Against Trafficking, we have conducted training for over-the-road drivers to educate and equip them with the tools needed to combat human trafficking.
We partner with Women in Trucking to encourage and promote the employment of women within our industry. Our team of drivers is currently comprised of 15% women, roughly twice the U.S. industry average, and we continue to seek opportunities to improve upon that percentage.
We are committed to promoting a healthier natural environment by striving for continuous environmental improvements in all aspects of our business.
We are currently reducing emissions and energy consumption through several ongoing programs and is committed to tracking and reducing our GHG emissions and improving energy efficiency.
We are also aligning with industry certifications, continuing to be a SmartWay certified company. SmartWay is a certification from the U.S. Environmental Protection Agency (“EPA”) verifying company compliance with EPA regulations, including fuel efficiency ranges and emission standards.
In 2021, we published our first ESG Report outlining our commitments and associated focus areas. Since publication, we have been focused on data aggregation. In our future reporting, we will incorporate data requirements identified by widely accepted sustainability frameworks (CDP, SASB, GRI, etc.) and set measurable targets and goals for our priority areas. We are committed to making our results count across the country and will continue to update our future disclosures accordingly.
Risk Management and Litigation
Under DOT regulations, we are liable for bodily injury and property damage caused by Leased Capacity Providers and employee drivers while they are operating equipment under our various motor carrier authorities. The potential liability associated with any accident can be severe and occurrences are unpredictable.
For vehicle liability, we retain a portion of the risk. Below is a summary of our risk retention on vehicle liability insurance coverage maintained by us through $10,000 (in thousands):
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|  | Risk Retention |  | Frequency |  | Layer |  | Policy Term
Expedited Freight¹ |  |  |  |  |  |  |  |
LTL business |  | $ | 3,000 |  |  | Occurrence/Accident² |  | $0 to $3,000 |  | 10/1/2021 to 10/1/2022
Truckload business |  | $ | 2,000 |  |  | Occurrence/Accident² |  | $0 to $2,000 |  | 10/1/2021 to 10/1/2022
LTL business |  | $ | 6,000 |  |  | Policy Term Aggregate³ |  | $3,000 to $5,000 |  | 10/1/2021 to 10/1/2022
LTL, Truckload and Intermodal businesses |  | $ | 2,500 |  |  | Policy Term Aggregate³ |  | $5,000 to $10,000 |  | 10/1/2021 to 10/1/2022
Intermodal |  | $ | 1,000 |  |  | Occurrence/Accident² |  | $0 to $1,000 |  | 10/1/2021 to 10/1/2022

¹ Excluding the Final Mile business, which is primarily a brokered service.
² For each and every accident, we are responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.
³ During the Policy Term, we are responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Risk Retention before insurance will respond.
Also, from time to time, when brokering freight, we may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and we maintain third-party liability insurance coverage with a $100 deductible per occurrence for most of our brokered services. Additionally, we maintain workers’ compensation insurance with a self-insured retention of $500 per occurrence. We cannot guarantee that our self-insurance retention levels will not increase and/or that we may have to agree to more unfavorable policy terms as a result of market conditions, poor claims experience or other factors. We could incur claims in excess of our policy limits or incur claims not covered by our insurance. Any claims beyond the limits or scope of our insurance coverage may have a material adverse effect on us. Because we do not carry “stop loss” insurance, a significant increase in the number of claims that we must cover under our self-insurance retainage could adversely affect our profitability. In addition, we may be unable to maintain insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us against losses.
From time to time, we are a party to litigation arising in the normal course of our business, most of which involve claims for personal injury, property damage related to the transportation and handling of freight, or workers’ compensation. We do not believe that any of these pending actions, individually or in the aggregate, will have a material adverse effect on our business, financial condition or results of operations.
Regulation
We are regulated by various United States and state agencies, including the DOT. The DOT and the Federal Motor Carrier Safety Administration (“FMCSA”), an agency within the DOT, manages a Compliance, Safety, Accountability initiative (“CSA”) which governs matters such as safety requirements and compliance, registration to engage in motor carrier operations, drivers’ hours of service (“HOS”) requirements, and certain mergers, consolidations, and acquisitions. We are also subject to laws and regulations under the U.S. Environmental Protection Agency and the Occupational Safety and Health Administration, which regulate safety, the supervision of hazardous materials, water discharges, air emissions, solid waste disposal and the release and cleanup of other substances. These regulatory authorities have broad powers, generally governing matters such as authority to engage in motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, certain mergers and acquisitions and periodic financial reporting. The trucking industry is also subject to regulatory and legislative changes from a variety of other governmental authorities, which address matters such as: increasingly stringent environmental, occupational safety and health regulations, limits on vehicle weight and size, ergonomics, port security, and hours of service. In addition, we are subject to compliance with cargo-security and transportation regulations issued by the Transportation Security Administration and Customs and Border Protection (“CBP”) within the U.S. Department of Homeland Security, and our domestic customs brokerage operations are licensed by CBP.
We are also subject to employment laws and regulations, including the changing regulatory landscape, with the potential effects of California Assembly Bill 5 (“California AB5”), which introduced a new test for determining worker classification that is viewed as expanding the scope of employee relationships and narrowing the scope of independent contractor relationships.
Additionally, our Canada business activities are subject to similar requirements imposed by the laws and regulations of Canada, as well as its provincial laws and regulations. Regulatory requirements, and changes in regulatory requirements, may
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affect our business or the economics of the industry by requiring changes in operating practices or by influencing the demand for and increasing the costs of providing transportation services.
Service Marks
Through one of our subsidiaries, we hold U.S. federal trademark registrations associated with the following service marks: Forward (logo), Forward Air, Inc. (logos), circle design (logo), Forward Air®, Forward Air (logos), Forward Air Complete®, Forward Air Complete (logo), Forward Air Solutions®, Forward Air Solutions (logo), TQI, inc. (logo), TQI (logo), Central States Trucking Co. (logo), FAF, Inc. (logo), FSA Logistix (logo), First in “last mile” Home Delivery®, North America’s Most Complete Road Feeder Network®, and Keeping Your Business Moving Forward®. We also hold an allowed federal trademark application for the Precision Execution logo. We additionally have certain common law service mark rights, including in the tagline When It Matters, Think Forward, that are not currently registered with the United States Patent and Trademark Office. As our brands evolve, certain of these marks may go out of use, and others may be developed over time. Our marks are of significant value to our business.
Available Information
We file reports with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K. other reports and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended from time to time. We are an electronic filer and the SEC maintains an Internet site at www.sec.gov that contains these reports and other information filed electronically. We make available free of charge through the Investor Relations portion of our website such reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our website address is www.forwardaircorp.com. Our goal is to maintain our website as a portal through which investors can easily find or navigate to pertinent information about us. The information provided on the website is not part of this report, and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report.
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Item 1A. Risk Factors
The following are important risk factors that could affect our financial performance and could cause actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Annual Report on Form 10-K or our other filings with the SEC or in oral presentations such as telephone conferences and webcasts open to the public. You should carefully consider the following factors and consider these in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our Consolidated Financial Statements and related Notes in Item 8.
Risks Relating to Our Business and Operations
Overall economic conditions that reduce freight volumes could have a material adverse impact on our operating results and ability to achieve growth.
We are sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand and industry truck capacity. The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest and currency rate fluctuations, inflation and other economic factors beyond our control. Changes in U.S. trade policy could lead to ‘trade wars’ impacting the volume of economic activity in the United States, and as a result, trucking freight volumes may be materially reduced. Such a reduction may materially and adversely affect our business. Deterioration in the economic environment subjects our business to various risks, including the following that may have a material and adverse impact on our operating results and cause us not to maintain profitability or achieve growth:
•A reduction in overall freight volumes reduces our revenues and opportunities for growth. In addition, a decline in the volume of freight shipped due to a downturn in customers’ business cycles or other factors (including our ability to assess dimensional-based weight increases) generally results in decreases in freight pricing and decreases in average revenue per pound of freight, as carriers compete for loads to maintain truck productivity.
•Our base transportation rates are determined based on numerous factors such as length of haul, weight per shipment and freight class. During economic downturns, we may also have to lower our base transportation rates based on competitive pricing pressures and market factors.
•Some of our customers may face economic difficulties and may not be able to pay us, and some may go out of business. In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase.
•A significant number of our transportation providers may go out of business and we may be unable to secure sufficient equipment or other transportation services to meet our commitments to our customers.
•We may not be able to appropriately adjust our expenses to changing market demands. In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our staffing levels to our business needs.
•If the domestic freight forwarder, Expedited Freight’s primary customer type, is disintermediated, and we are not able to transition effectively into servicing other customers, like third-party logistics companies and beneficial cargo owners, our business and financial results could be materially adversely affected.
Our profitability could be negatively impacted if our pricing structure proves to be inaccurate.
The price we charge our customers for the services we provide is based on our calculations of, among other things, the costs of providing those services. The Company’s assessment of its costs and resulting pricing structure is subject to effectively identifying and measuring the impact of a number of key operational variables including, but not limited to volumes, operational efficiencies, length of haul, the mix of fixed versus variable costs, productivity and other factors. If we are incorrect in our assumptions and do not accurately calculate or predict the costs to us to provide our services, we could experience lower margins than anticipated, loss of business, or be unable to offer competitive products and services.
We may have difficulty effectively managing our growth, which could adversely affect our business, results of operations and financial condition.
Our growth strategy includes increasing freight volume from new and existing customers, expanding our service offerings and pursing strategic transactions. Our growth plans will place significant demands on our management and operating personnel. If we fail to successfully integrate, develop, and motivate new employees, it could harm our culture. Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, maintain our performance, or
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execute on our growth strategy.
To manage our current and anticipated future growth effectively, we must also continue to maintain, and may need to enhance, our operating and management information systems and information technology infrastructure, which will place additional demands on our resources and operations. Failure to manage our growth effectively could lead us to over-invest or under-invest in technology and operations; result in weaknesses in our infrastructure, systems, or controls; give rise to operational mistakes, losses, or loss of productivity or business opportunities; reduce customer satisfaction; limit our ability to respond to competitive pressures; and result in loss of employees and reduced productivity of remaining employees. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue could decline or may grow more slowly than expected, and we may be unable to implement our growth strategy.
If we have difficulty attracting and retaining Leased Capacity Providers, other third-party transportation capacity providers, or freight handlers, our profitability and results of operations could be adversely affected.
We depend on third-party transportation capacity providers for most of our transportation capacity needs. In 2021, 47.5% of our purchased transportation capacity was provided by Leased Capacity Providers. Competition for Leased Capacity Providers is intense, and sometimes there are shortages in the marketplace. In addition, a decline in the availability of trucks, tractors and trailers for purchase or use by Leased Capacity Providers may negatively affect our ability to obtain the needed transportation capacity. We also need a large number of employee freight handlers to operate our business efficiently. During periods of low unemployment in the areas where our terminals are located, we may have difficulty hiring and retaining a sufficient number of freight handlers. If we have difficulty attracting and retaining enough qualified freight handlers or Leased Capacity Providers, we may be forced to increase wages and benefits for our employees or to increase the cost at which we contract with our Leased Capacity Providers, either of which would increase our operating costs. This difficulty may also impede our ability to maintain our delivery schedules, which could make our service less competitive and force us to curtail our planned growth. A capacity deficit may lead to a loss of customers and a decline in the volume of freight we receive from customers.
To augment the transportation capacity provided by Leased Capacity Providers, we purchase transportation from other third-party motor carriers at a higher cost. As with Leased Capacity Providers, competition for third-party carriers is intense, and sometimes there are shortages of available third-party carriers. If we cannot secure a sufficient number of Leased Capacity Providers and have to purchase transportation from third-party carriers, our operating costs will increase. If our labor and operating costs increase, we may be unable to offset the increased costs by increasing rates without adversely affecting our business. As a result, our profitability and results of operations could be adversely affected.
Our inability to complete acquisitions on acceptable terms could negatively impact our growth rate and financial performance.
We have grown through acquisitions, and we intend to pursue opportunities to expand our business by acquiring other companies in the future. Our ability to grow revenues, earnings and cash flow depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize anticipated synergies and business performance. Appropriate targets for acquisition are difficult to identify and complete for a variety of reasons, including but not limited to, limited due diligence, high valuations, business and intellectual property evaluations, other interested parties, negotiations of the definitive documentation, satisfaction of closing conditions, the need to obtain antitrust or other regulatory approvals on acceptable terms, and availability of funding. The inability to close appropriate acquisitions on acceptable terms could adversely impact our growth rate, revenue, and financial performance.
The Company may encounter difficulties with acquisitions.
Acquisitions involve risks. Although the Company conducts due diligence reviews of potential acquisition candidates, it may not be able to identify all material liabilities or risks related to potential acquisition candidates. There can be no assurance that the Company will be able to locate and acquire any business, retain key personnel and customers of an acquired business or integrate any acquired business successfully. Additionally, there can be no assurance that financing for any acquisition, if necessary, will be available on acceptable terms, if at all, or that the Company will be able to accomplish its strategic objectives in connection with any acquisition.
Future acquisitions may be difficult to integrate into our existing operations, may disrupt our business, dilute shareholder value, divert management’s attention, or negatively affect our operating results.
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We have acquired multiple businesses since our inception, including four in fiscal 2021. Future acquisitions could involve substantial investment of funds or financings by issuance of debt or equity securities and could result in one-time charges and expenses and have the potential to either dilute the interests of existing shareholders or result in the issuance or assumption of debt. Any such acquisition may not be successful in generating revenues, income or other returns to us, and the resources committed to such activities will not be available to us for other purposes. Moreover, if we are unable to access capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so based upon less than optimal capital structure. Our inability to take advantage of growth opportunities for our business or to address risks associated with acquisitions or investments in businesses may negatively affect our operating results. Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially reduce our earnings which, in turn, may have an adverse material effect on the price of our common stock.
A determination by regulators that our Leased Capacity Providers are employees rather than independent contractors could expose us to various liabilities and additional ongoing expenses, and related litigation can subject us to substantial costs, which could have a material adverse effect on our results of operations and our financial condition.
At times, the Internal Revenue Service, the Department of Labor and state authorities have asserted that independent contractor transportation capacity providers like our Leased Capacity Providers are “employees,” rather than “independent contractors.” Additionally, we are aware of certain judicial decisions and recently enacted state laws that could bring about major reforms in the classification of workers, including the California legislature’s passage of California Assembly Bill 5 (“California AB 5”). California AB 5 purports to codify a new test for determining worker classification that is broadly viewed as expanding the scope of employee relationships and narrowing the scope of independent contractor relationships. Given the passage of California AB 5 and ongoing litigation regarding its applicability to motor carriers regulated by the U.S. Department of Transportation, there is a significant degree of uncertainty regarding its application. In addition, California AB 5 has been the subject of widespread national discussion and it is possible that other jurisdictions may enact similar laws.
A determination by regulators that our Leased Capacity Providers are employees rather than independent contractors could expose us to various liabilities and additional ongoing expenses, including but not limited to, employment-related expenses such as workers’ compensation insurance coverage and reimbursement of work-related expenses. Our exposure could include prior period compensation, as well as potential liability for employee benefits and tax withholdings. In addition, the topic of the classification of individuals as employees or independent contractors has gained increased attention among the plaintiffs’ bar and certain states have recently seen numerous class action lawsuits filed against transportation companies that engage independent contractors, some of which have resulted in significant damage awards and/or monetary settlements for workers who have been allegedly misclassified as independent contractors. The legal and other costs associated with any of these matters can be substantial and could have a material adverse effect on our results of operations and our financial condition.
Because a portion of our network costs are fixed, any factors that result in a decrease in the volume or revenue per pound of freight shipped through our networks will adversely affect our results of operations.
Our operations, particularly our networks of hubs and terminals, represent substantial fixed costs. As a result, any decline in the volume or revenue per pound of freight we handle will have an adverse effect on our operating margin and our results of operations. Several factors can result in such declines, including adverse business and economic conditions affecting shippers of freight as discussed above. In addition, volumes shipped through our network may be negatively impacted by lack of customer contractual obligations or cancellations of existing customer contracts. Typically, we do not enter into long-term contracts with our customers. Rather, our customer contracts typically allow for cancellation within 30 to 60 days. As a result, we cannot guarantee that our current customers will continue to utilize our services or that they will continue at the same levels. The timing of our capital investments, pricing models and service availability are generally based on our existing and anticipated customer contracts. Any change in one of the foregoing factors that results in a decrease in the volume or revenue per pound of freight shipped will adversely affect our results of operations.
We derive a significant portion of our revenue from a few major customers, the loss of one or more of which could have a material adverse effect on our business.
For the calendar year ended December 31, 2021, our top ten customers, based on revenue, accounted for approximately 35% of our revenue. No customer accounted for more than 10% of consolidated revenues. These customers can impact our revenues and profitability based on factors such as: industry trends related to e-commerce that may apply downward pricing pressures on the rates our customers can charge; the seasonality associated with the fourth quarter holiday season;
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business combinations and the overall growth of a customer's underlying business; and any disruptions to our customer’s businesses. These customers could choose to divert all or a portion of their business with us to one of our competitors, demand pricing concessions for our services, require us to provide enhanced services that increase our costs, or develop their own shipping and distribution capabilities. Our Expedited Freight and Intermodal segments typically do not have long-term contracts with their customers. A reduction in, or termination of, our services by one or more of our major customers could have a material adverse effect on our business and operating results. In addition, any increased direct sales efforts to direct shippers and beneficial cargo owners, as well as the potential acquisition of other businesses that may compete more directly with our customers, could adversely affect our expenses, pricing, third-party relationships and revenues, particularly if it affects any of these key customers.
We are dependent on our senior management team and other key employees, and the loss of any such personnel could materially and adversely affect our business, operating results and financial condition.
Our future performance depends, in significant part, upon the continued service of our senior management team and other key employees. We cannot be certain that we can retain these employees. The loss of the services of one or more of these or other key personnel could have a material adverse effect on our business, operating results and financial condition if we are unable to secure replacement personnel internally or through our recruitment programs and initiatives that have sufficient experience in our industry or in the management of our business. If we fail to develop, compensate, and retain a core group of senior management and other key employees and address issues of succession planning, it could hinder our ability to execute on our business strategies and maintain our level of service.
Our business is subject to seasonal trends.
Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis. Our first and second quarters have traditionally been the weakest compared to our third and fourth quarters. This trend is dependent on numerous factors including economic conditions, customer demand and weather. Because revenue is directly related to the available working days of shippers, national holidays and the number of business days during a given period may also create seasonal impact on our results of operations. After the winter holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels. In addition, a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue is, to a large degree, affected by factors that are outside of our control. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.
Our results of operations may be affected by harsh weather conditions, disasters and pandemics.
Certain weather-related conditions such as ice and snow can disrupt our operations. Our operating expenses have historically been higher in the winter months because of cold temperatures and other adverse winter weather conditions, which result in decreased fuel efficiency, increased cold weather-related maintenance costs of revenue equipment and increased insurance and claims costs. Harsh weather could also reduce our ability to transport freight, which could result in decreased revenues. Disasters, including severe weather and public health issues, such as pandemics, occurring in the United States or abroad, could result in the temporary lack of an adequate work force and the temporary disruption in the transport of goods to or from overseas which could prevent, delay or reduce freight volumes and could have an adverse impact on consumer spending and confidence levels, all of which could result in decreased revenues.
Labor shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability.
We have recently experienced labor shortages at some of our locations. A number of factors may adversely affect the labor force available to us, including high employment levels, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices, immigration, and federal vaccine mandates. A labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees and could negatively affect our ability to efficiently operate our business or otherwise operate at full capacity. An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on the company’s operations, results of operations, liquidity or cash flows.
Changes to our compensation and benefits could adversely affect our ability to attract and retain qualified employees.
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The compensation we offer our employees is subject to market conditions that may require increases in employee compensation, which becomes more likely as economic conditions improve. If we are unable to attract and retain a sufficient number of qualified employees, we could be required to increase our compensation and benefits packages, or reduce our operations and face difficulty meeting customer demands, any of which could adversely affect our financial condition, results of operations, liquidity and cash flows.
We could be required to record a material non-cash charge to income if our recorded intangible assets or goodwill are determined to be impaired.
We have $154,717 of recorded net definite-lived intangible assets on our consolidated balance sheet at December 31, 2021. Our definite-lived intangible assets primarily represent the value of customer relationships and non-compete agreements that were recorded in conjunction with our various acquisitions. We review our long-lived assets, such as our definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is recognized on these assets when the estimated fair value is less than the carrying value. If such measurement indicates impairment, we would be required to record a non-cash impairment charge to our consolidated statement of comprehensive income in the amount that the carrying value of these assets exceeds the estimated fair value of the assets.
We also have recorded goodwill of $266,752 on our consolidated balance sheet at December 31, 2021. Goodwill is assessed for impairment annually (or more frequently if circumstances indicate possible impairment) for each of our reporting units. This assessment includes comparing the fair value of each reporting unit to the carrying value of the assets assigned to each reporting unit. If the carrying value of the reporting unit was to exceed our estimated fair value of the reporting unit, we would then be required to estimate the fair value of the individual assets and liabilities within the reporting unit to ascertain the amount of fair value of goodwill and any potential impairment. If we determine that our fair value of goodwill is less than the related book value, we could be required to record a non-cash impairment charge to our consolidated statement of comprehensive income, which could have a material adverse effect on our earnings.
We operate in highly competitive and fragmented segments of our industry, and our business will suffer if we are unable to adequately address downward pricing pressures and other factors that may adversely affect our results of operations, growth prospects and profitability.
The segments of the freight transportation industry in which we participate are highly competitive, very fragmented and historically have few barriers to entry. We compete with a large number of other asset-light logistics companies, asset-based carriers, integrated logistics companies, and third-party freight brokers. To a lesser extent, we also compete with integrated air cargo carriers and passenger airlines. Our competition ranges from small operators that compete within a limited geographic area to companies with substantially greater financial and other resources, including greater freight capacity. We also face competition from freight forwarders who decide to establish their own networks to transport expedited ground freight, as well as from logistics companies, Internet matching services and Internet and third-party freight brokers, and new entrants to the market. In addition, customers can bring in-house some of the services we provide to them. We believe competition is based primarily on quality service, available capacity, on-time delivery, flexibility, reliability and security, transportation rates as well as the ability to acquire and maintain terminal facilities in desirable locations at reasonable rates. Many of our competitors periodically reduce their rates to gain business, especially during times of economic decline. In an effort to reduce costs, we have seen our customers solicit bids from multiple transportation providers and decide to develop or expand internal capabilities for some of the services that we provide.
In addition, competitors may pursue other strategies to gain a competitive advantage such as developing superior information technology systems or establishing cooperative relationships to increase their ability to address customer needs. The development of new information technology systems or business models could result in our disintermediation in certain businesses, such as freight brokerage. Furthermore, the transportation industry continues to consolidate. As a result of consolidation, our competitors may increase their market share and improve their financial capacity, and may strengthen their competitive positions. Business combinations could also result in competitors providing a wider variety of services at competitive prices, which could adversely affect our financial performance. These competitive pressures may cause a decrease in our volume of freight, require us to lower the prices we charge for our services and adversely affect our results of operations, growth prospects and profitability.
The ongoing coronavirus outbreak, and measures taken in response thereto, has and could continue to have a material adverse effect on our business, results of operations and financial condition.
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Our business is highly susceptible to changes in economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy. The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to financial markets. Efforts to control the spread of COVID-19 led governments and other authorities to impose restrictions which resulted in business closures and disrupted supply chains worldwide. As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services.
Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 and its variants remains fluid and may be further impacted by the policies of President Biden’s administration, the availability and success of the vaccines and vaccination rates and longer-term economic and market impacts including labor shortages and inflation. The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition during the balance of 2022 will depend on future developments, which are highly uncertain and cannot be predicted by, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, including the new variants, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume.
We periodically evaluate factors including, but not limited to, macroeconomic conditions, changes in our industry and the markets in which we operate and our market capitalization, as well as our reporting units’ expected future financial performance for purposes of evaluating asset impairments, including goodwill. We believe that the impact of COVID-19 may negatively affect certain key assumptions used in our analysis; however, we will need to assess the severity and nature of the long-term impacts to determine if we may be required to record charges for asset impairments in the future.
Volatility in fuel prices, shortages of fuel or the ineffectiveness of our fuel surcharge program can have a material adverse effect on our results of operations and profitability.
We are subject to risks associated with the availability and price of fuel. Fuel prices have fluctuated dramatically over recent years. Future fluctuations in the availability and price of fuel could adversely affect our results of operations. Fuel availability and prices can be impacted by factors beyond our control, such as natural or man-made disasters, adverse weather conditions, political events, economic sanctions imposed against oil-producing countries or specific industry participants, disruption or failure of technology or information systems, price and supply decisions by oil producing countries and cartels, terrorist activities, armed conflict, tariffs, sanctions, other changes to trade agreements and world supply and demand imbalance. Over time we have been able to mitigate the impact of the fluctuations through our fuel surcharge programs. Our fuel surcharge rates are set weekly based on the national average for fuel prices as published by the U.S. Department of Energy and our fuel surcharge table. Our fuel surcharge revenue is the result of our fuel surcharge rates and the tonnage transiting our networks. There can be no assurance that our fuel surcharge revenue programs will be effective in the future as the fuel surcharge may not capture the entire amount of the increase in fuel prices. Additionally, decreases in fuel prices reduce the cost of transportation services and accordingly, could reduce our revenues and may reduce margins for certain lines of business. In addition to changing fuel prices, fluctuations in volumes and related load factors may subject us to volatility in our fuel surcharge revenue. Fuel shortages, changes in fuel prices and the potential volatility in fuel surcharge revenue may adversely impact our results of operations and overall profitability.
Our increased direct sales efforts to direct shippers and beneficial cargo owners could be viewed as a competitive threat by our current domestic forwarder customers.
We are increasing our sales to direct shippers and beneficial cargo owners, which are the primary customers of freight forwarders, 3PLs and other transportation intermediaries. These companies are significant customers of our business in the United States. Our activities related to our increased direct sales efforts to direct shippers and beneficial cargo owners, as well as the potential acquisition of other businesses that compete with our customers, may result in the disruption of our business, which could harm relationships with our current customers, employees or suppliers, and could adversely affect our expenses, pricing, third‑party relationships and revenues. Further, a loss of a significant customer could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Risks Relating to Information Technology and Systems
If we fail to maintain our information technology systems, or if we fail to successfully implement new technology or enhancements, we may be at a competitive disadvantage and experience a decrease in revenues.
We rely heavily on our information technology systems to efficiently run our business, and they are a key component of our growth strategy and competitive advantage. We, our customers and third parties increasingly store and transmit data by
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means of connected information technology systems. We expect our customers to continue to demand more sophisticated, fully integrated information systems from their transportation providers. To keep pace with changing technologies and customer demands, we must correctly interpret and address market trends and enhance the features and functionality of our information technology systems in response to these trends, which may lead to significant ongoing software development costs. We may be unable to accurately determine the needs of our customers and the trends in the transportation services industry or to design and implement the appropriate features and functionality of our information technology systems in a timely and cost-effective manner, which could put us at a competitive disadvantage and result in a decline in our efficiency, decreased demand for our services and a corresponding decrease in our revenues. In addition, we could incur software development costs for technology that is ultimately not deployed and thus, would require us to write-off these costs, which would negatively impact our financial results. Furthermore, as technology improves, our customers may be able to find alternatives to our services for matching shipments with available freight hauling capacity.
Our information technology systems can also play an integral role in managing our internal freight and transportation information and creating additional revenue opportunities including assessing available backhaul capacity. A failure to capture and utilize our internal freight and transportation information may impair our ability to service our existing customers or grow revenue.
Our information technology systems are dependent upon Cloud infrastructure providers, Software as a Service, global communications providers, web browsers, telephone systems and other aspects of the Internet infrastructure that have experienced significant system failures and outages in the past. While we take measures to ensure our major systems have redundant capabilities, our systems are susceptible to outages from fire, floods, power loss, telecommunications failures, data leakage, human error, break-ins, cyber-attacks and similar events. The occurrence of any of these events could disrupt or damage our information technology systems and hamper our internal operations, impede our customers’ access to our information technology systems and adversely impact our customer service, volumes, and revenues and result in increased cost. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
Our business is subject to cybersecurity risks.
On December 15, 2020, we detected a Ransomware Incident impacting our operational and information technology systems, which caused service delays for our customers. We incurred unexpected costs and impacts from the Ransomware Incident, and may in the future, incur costs in connection with this Ransomware Incident and any future cybersecurity incidents, including infrastructure investments, remediation efforts and legal claims resulting from the above. For more information regarding this Ransomware Incident, see Item 1, Business and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our operations depend on effective and secure information technology systems. Threats to information technology systems, including as a result of cyber-attacks and cyber incidents, such as the Ransomware Incident on December 15, 2020, continue to grow. Cybersecurity risks could include, but are not limited to, malicious software, attempts to gain unauthorized access to our data and the unauthorized release, corruption or loss of our data and personal information, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems, or other electronic security, including with our property and equipment.
These cybersecurity risks could:
•Disrupt our operations and damage our information technology systems,
•Subject us to various penalties and fees by third parties,
•Negatively impact our ability to compete,
•Enable the theft or misappropriation of funds,
•Cause the loss, corruption or misappropriation of proprietary or confidential information, expose us to litigation and
•Result in injury to our reputation, downtime, loss of revenue, and increased costs to prevent, respond to or mitigate cybersecurity events.
If another cybersecurity event occurs, such as the Ransomware Incident on December 15, 2020, it could harm our business and reputation and could result in a loss of customers. Likewise, data privacy breaches by employees and others who access our systems may pose a risk that sensitive customer or vendor data may be exposed to unauthorized persons or to the public, adversely impacting our customer service, employee relationships and our reputation. Furthermore, any failure to
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comply with data privacy, security or other laws and regulations, such as the California Consumer Privacy Act, which took effect in January 2020, could result in claims, legal or regulatory proceedings, inquires or investigations.
While we continue to make efforts to evaluate and improve our systems and particularly the effectiveness of our security program, procedures and systems, it is possible that our business, financial and other systems could be compromised, which could go unnoticed for a prolonged period of time, and there can be no assurance that the actions and controls that we implement, or which we cause third-party service providers to implement, will be sufficient to protect our systems, information or other property. Additionally, customers or third parties upon whom we rely face similar threats, which could directly or indirectly impact our business and operations. The occurrence of a cyber-incident or attack could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Regulatory Environment
Claims for property damage, personal injuries or workers’ compensation and related expenses could significantly reduce our earnings.
Under DOT regulations, we are liable for bodily injury and property damage caused by Leased Capacity Providers and employee drivers while they are operating equipment under our various motor carrier authorities. The potential liability associated with any accident can be severe and occurrences are unpredictable.
For vehicle liability, we retain a portion of the risk. Below is a summary of our risk retention on vehicle liability insurance coverage maintained by us through $10,000 (in thousands):

|  | Risk Retention |  | Frequency |  | Layer |  | Policy Term
Expedited Freight¹ |  |  |  |  |  |  |  |
LTL business |  | $ | 3,000 |  |  | Occurrence/Accident² |  | $0 to $3,000 |  | 10/1/2021 to 10/1/2022
Truckload business |  | $ | 2,000 |  |  | Occurrence/Accident² |  | $0 to $2,000 |  | 10/1/2021 to 10/1/2022
LTL business |  | $ | 6,000 |  |  | Policy Term Aggregate³ |  | $3,000 to $5,000 |  | 10/1/2021 to 10/1/2022
LTL, Truckload and Intermodal businesses |  | $ | 2,500 |  |  | Policy Term Aggregate³ |  | $5,000 to $10,000 |  | 10/1/2021 to 10/1/2022
Intermodal |  | $ | 1,000 |  |  | Occurrence/Accident² |  | $0 to $1,000 |  | 10/1/2021 to 10/1/2022

¹ Excluding the Final Mile business, which is primarily a brokered service.
² For each and every accident, we are responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.
³ During the Policy Term, we are responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Risk Retention before insurance will respond.
Also, from time to time, when brokering freight, we may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and we maintain third-party liability insurance coverage with a $100 deductible per occurrence for most of our brokered services. Additionally, we maintain workers’ compensation insurance with a self-insured retention of $500 per occurrence. We cannot guarantee that our self-insurance retention levels will not increase and/or that we may have to agree to more unfavorable policy terms as a result of market conditions, poor claims experience or other factors. We could incur claims in excess of our policy limits or incur claims not covered by our insurance. Any claims beyond the limits or scope of our insurance coverage may have a material adverse effect on us. Because we do not carry “stop loss” insurance, a significant increase in the number of claims that we must cover under our self-insurance retainage could adversely affect our profitability. In addition, we may be unable to maintain insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us against losses.
Further, as we focus on growing our final mile solutions business that includes in-home installation of appliances and other over-the-threshold services, we may become increasingly subject to inherent risks associated with delivery and installation of products. These risks include incidents that can cause personal injury or loss of life, damage to or destruction of property, equipment or the environment, or the suspension of our operations.
We face risks related to self-insurance and third-party insurance that can be volatile to our earnings.
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We self-insure a significant portion of our claims exposure and related expenses for cargo loss, employee medical expense, bodily injury, workers’ compensation and property damage, and maintain insurance with insurance companies above our limits of self-insurance. Self-insurance retention and other limitations are detailed in Part II, Item 7, under “Self-Insurance Loss Reserves.” Because of these significant self-insured exposures, insurance and claims expense may fluctuate significantly from period-to-period. Additionally, our ability to obtain and maintain adequate insurance and the cost of such insurance may be affected by significant claims and conditions in the insurance market over which we have no control. In recent years the trucking industry has experienced significant increases in the cost of liability insurance and in the median verdict of trucking accidents. If the cost of insurance increases, we may decide to discontinue certain insurance coverage, reduce our level of coverage or increase our deductibles/retentions to offset the cost increase. In addition, our existing types and levels of insurance coverage could become difficult or impossible to obtain in the future. The occurrence of an event that is not fully covered by insurance, the loss of insurance coverage or a material increase in the cost of insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We accrue for the costs of the uninsured portion of pending claims, based on the nature and severity of individual claims and historical claims development trends. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. We may fail to establish sufficient insurance reserves and adequately estimate for future insurance claims. This, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates.
Our failure to comply with various applicable federal and state employment and labor laws and regulations could have a material, adverse impact on our business, financial condition and results of operations.
Various federal and state employment and labor laws and regulations govern our relationships with our employees. These laws and regulations relate to matters such as employment discrimination, wage and hour laws, requirements to provide meal and rest periods or other benefits, family leave mandates, employee and independent contractor classification rules, requirements regarding working conditions and accommodations to certain employees, citizenship or work authorization and related requirements, insurance and workers’ compensation rules, healthcare laws, scheduling notification requirements and anti-discrimination and anti-harassment laws. While the scope of these laws and regulations are subject to change in all jurisdictions, California routinely makes changes to the scope of such laws and regulations, many of which may be strictly enforced, and some of which have been in the past, and may be in the future, implemented on a retrospective basis (meaning we may not have an opportunity to change our employment practices in advance to avoid non-compliance). Complying with these laws and regulations, including ongoing changes thereto, subjects us to substantial expense and non-compliance could expose us to significant liabilities. In particular, we have been subject to employment litigation with respect to classification and wage and hour issues in the past and have wage and hour litigation currently pending. While we have not incurred material losses with respect to this litigation in the past, we may be subject to material claims in the future.
We operate in a regulated industry, and increased costs of compliance with, or liability for violation of, existing or future regulations and enforcement could have a material adverse effect on our business.
The DOT and various state and federal agencies have been granted broad regulatory powers over our business in the United States, and we are licensed by the DOT and U.S. Customs. Additionally, our Canada business activities are subject to the similar laws and regulations of Canada and its provinces, including the effects of the United States-Mexico-Canada Agreement (“USMCA”), a trade agreement between the United States, Mexico and Canada to replace NAFTA, which took effect on July 1, 2020. There can be no assurance that the ongoing transition from NAFTA to the USMCA will not adversely impact our business or disrupt our operations. If we fail to comply with any applicable regulations, our licenses may be revoked, or we could be subject to substantial fines or penalties and to civil and criminal liability. The transportation industry is subject to legislative and regulatory changes that can affect the economics of our business by requiring changes in operating practices or influencing the demand for, and the cost of providing, transportation services.
In December 2010, the FMCSA established the CSA motor carrier oversight program under which drivers and fleets are evaluated based on certain safety-related standards. Carriers’ safety and fitness ratings under CSA include the on-road safety performance of the carriers’ drivers. The FMCSA has also implemented changes to the HOS regulations which govern the work hours of commercial drivers and adopted a rule that requires commercial drivers who use paper log books to maintain hours-of-service records with electronic logging devices (“ELDs”) and required commercial drivers who use automatic on-board recording devices (“AOBRDs”) to record HOS to use ELDs by December 2019. As of December 2019, our fleets were updated to meet the ELD requirements. At any given time, there are also other proposals for safety-related standards that are pending legislative or administrative approval or adoption. If additional or more stringent standards are adopted, such may result in a reduction of the pool of qualified drivers available to us and to other motor carriers in our industry. If we experience safety and fitness violations, our safety and fitness scores could be adversely impacted, and our fleets could be ranked poorly as
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compared to our peers. A reduction in our safety and fitness scores or those of our contracted drivers could also reduce our competitiveness in relation to other companies that have higher scores. Additionally, competition for qualified drivers and motor carriers with favorable safety ratings may increase and thus result in increases in driver-related compensation costs.
In addition, there may be changes in applicable federal or state tax or other laws or interpretations of those laws. If this happens, we may incur additional taxes, as well as higher workers’ compensation and employee benefit costs, and possibly penalties and interest for prior periods. This could have an adverse effect on our results of operations.
We are subject to various environmental laws and regulations including legislative and regulatory responses to climate change, and costs of compliance with, or liabilities for violations of, existing or future laws and regulations could significantly increase our costs of doing business.
Our operations are subject to environmental laws and regulations dealing with, among other things, the handling of hazardous materials, discharge and retention of storm water, and emissions from our vehicles. We operate in industrial areas, where truck terminals and other industrial activities are located, and where groundwater or other forms of environmental contamination may have occurred. Our operations involve the risks of fuel spillage, environmental damage, and hazardous waste disposal, among others. If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of applicable environmental laws or regulations, it could significantly increase our cost of doing business. Under specific environmental laws and regulations, we could be held responsible for all of the costs relating to any contamination at our past or present terminals and at third-party waste disposal sites. If we fail to comply with applicable environmental laws and regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.
In addition, as global warming issues become more prevalent, federal and local governments and our customers are beginning to respond to these issues. This increased focus on sustainability may result in new regulations and customer requirements that could negatively affect us. This could cause us to incur additional direct costs or to make changes to our operations in order to comply with any new regulations and customer requirements, as well as increased indirect costs or loss of revenue resulting from, among other things, our customers incurring additional compliance costs that affect our costs and revenues. We could also lose revenue if our customers divert business from us because we have not complied with their sustainability requirements. These costs, changes and loss of revenue could have a material adverse effect on our business, financial condition and results of operations. Even without any new legislation or regulation, increased public concern regarding greenhouse gases emitted by transportation carriers could harm the reputations of companies operating in the transportation logistics industries and shift consumer demand toward more locally sourced products and away from our services.
The FMCSA’s CSA initiative could adversely impact our ability to hire qualified drivers or contract with qualified Leased Capacity Providers or third-party carriers, meet our growth projections and maintain our customer relationships, each of which could adversely impact our results of operations.
The FMCSA’s CSA is an enforcement and compliance program designed to monitor and improve commercial motor vehicle safety by measuring the safety record of both the motor carrier and the driver. These measurements are scored and used by the FMCSA to identify potential safety risks and to direct enforcement action. CSA scores are dependent upon safety and compliance experience, which could change at any time. In addition, the safety standards prescribed in CSA could change and our ability as well as our independent contractors’ ability to maintain an acceptable score could be adversely impacted. Public disclosure of certain CSA scores was restricted through the enactment of the Fixing America’s Surface Transportation Act of 2015 (the “FAST Act”) on December 4, 2015; however, the FAST Act does not restrict public disclosure of all data collected by the FMCSA. If we receive unacceptable CSA scores, and this data is made available to the public, our relationships with our customers could be damaged, which could result in a loss of business.
The requirements of CSA could also shrink the industry’s pool of drivers as those with unfavorable scores could leave the industry. As a result, the costs to attract, train and retain qualified drivers, Leased Capacity Providers or third-party carriers could increase. In addition, a shortage of qualified drivers could increase driver turnover, decrease asset utilization, limit growth and adversely impact our results of operations.
If our employees were to unionize, our operating costs would likely increase.
None of our employees is currently represented by a collective bargaining agreement. However, we have no assurance that our employees will not unionize in the future, which could increase our operating costs and force us to alter our operating methods. This could have a material adverse effect on our operating results.
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Our charter and bylaws and provisions of Tennessee law could discourage or prevent a takeover that may be considered favorable.
Our charter and bylaws and provisions of Tennessee law may discourage, delay or prevent a merger, acquisition or change in control that may be considered favorable. These provisions could also discourage proxy contests and make it more difficult for shareholders to elect directors and take other corporate actions. Among other things, these provisions:
•authorize us to issue preferred stock, the terms of which may be determined at the sole discretion of our Board of Directors and may adversely affect the voting or economic rights of our shareholders; and
•establish advance notice requirements for nominations for election to the Board of Directors and for proposing matters that can be acted on by shareholders at a meeting.
Our charter and bylaws and provisions of Tennessee law may discourage transactions that otherwise could provide for the payment of a premium over prevailing market prices for our Common Stock and also could limit the price that investors are willing to pay in the future for shares of our Common Stock.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Properties
We believe that we have adequate facilities for conducting our business, including properties owned and leased. Management further believes that in the event replacement property is needed, it will be available on terms and at costs substantially similar to the terms and costs experienced by competitors within the transportation industry.
We own our Columbus, Ohio central sorting facility which is used by our Expedited Freight segment. The Columbus, Ohio facility is 125,000 square feet with 168 trailer doors.
We also own facilities near Dallas/Fort Worth, Texas, Chicago, Illinois and Atlanta, Georgia, all of which are used by the Expedited Freight segment. The Dallas/Fort Worth, Texas facility has over 216,000 square feet with 134 trailer doors and approximately 28,000 square feet of office space. The Chicago, Illinois facility is over 125,000 square feet with 110 trailer doors and over 10,000 square feet of office space. The Atlanta, Georgia facility is over 142,000 square feet with 118 trailer doors and approximately 12,000 square feet of office space. We lease our shared services headquarters in Greeneville, Tennessee. The lease on this facility expires in 2024. We also lease our executive headquarters in Atlanta, Georgia.
We lease and maintain 168 additional terminals, office spaces and other properties located in major cities throughout the United States and Canada. Lease terms for these terminals are typically for three to seven years. In addition, we have operations in 29 cities operated by independent agents who handle freight for us on a commission basis.
Item 3. Legal Proceedings
From time to time, we are a party to ordinary, routine litigation incidental to and arising in the normal course of our business, most of which involve claims for personal injury, property damage related to the transportation and handling of freight, or workers’ compensation. For more information about our insurance program and legal proceedings, see Item 1A, Risk Factors - “Claims for property damage, personal injuries or workers’ compensation and related expenses could significantly reduce our earnings.” and “We face risks related to self-insurance and third-party insurance that can be volatile to our earnings.”, and “Our failure to comply with various applicable federal and state employment and labor laws and regulations could have a material, adverse impact on our business, financial condition and results of operations.”, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates, and Item 8, Financial Statements and Supplementary Data - Commitments and Contingencies.
Item 4. Mine Safety Disclosures
Not applicable.
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Part II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Our Common Stock trades on The Nasdaq Global Select Stock Market™ under the symbol “FWRD.”
There were approximately 222 shareholders of record of our Common Stock as of January 15, 2022.
Subsequent to December 31, 2021, our Board of Directors declared a cash dividend of $0.24 per share that will be paid in the first quarter of 2022 to the shareholders on record on March 3, 2022. The Company expects to continue to pay regular quarterly cash dividends, though each subsequent quarterly dividend is subject to review and approval by the Board of Directors.
There are no material restrictions on our ability to declare dividends.
None of our securities were sold during fiscal year 2021 without registration under the Securities Act.
Stock Performance Graph
The following graph compares the percentage change in the cumulative shareholder return on our Common Stock with The Nasdaq Trucking and Transportation Stocks Index and The Nasdaq Global Select Stock Market™ Index commencing on the last trading day of December 2016 and ending on the last trading day of December 2021. The graph assumes a base investment of $100 made on December 31, 2016 and the respective returns assume reinvestment of all dividends. The comparisons in this graph are required by the SEC and, therefore, are not intended to forecast or necessarily be indicative of any future return on our Common Stock.
The performance graph and related information shall not be deemed “soliciting material” or be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
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| 2016 |  | 2017 |  | 2018 |  | 2019 |  | 2020 |  | 2021
Forward Air Corporation | $ | 100 |  |  | $ | 114 |  |  | $ | 109 |  |  | $ | 139 |  |  | $ | 179 |  |  | $ | 256 |
Nasdaq Trucking and Transportation Stocks Index | 100 |  |  | 128 |  |  | 116 |  |  | 140 |  |  | 166 |  |  | 165 |
Nasdaq Global Select Stock Market Index | 100 |  |  | 147 |  |  | 141 |  |  | 200 |  |  | 258 |  |  | 295 |

Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section of this Form 10-K generally discusses our results of operations and financial condition for the year ended December 31, 2021. For a discussion of similar topics for the years ended December 31, 2020 and December 31, 2019, please refer to “Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K, filed on March 1, 2021, which is incorporated herein by reference.
Overview and Executive Summary
We have two reportable segments: Expedited Freight and Intermodal.
Through the Expedited Freight segment, we operate a comprehensive national network to provide expedited regional, inter-regional and national LTL services. Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling. We plan to grow our LTL and final mile geographic footprints through greenfield start-ups as well as acquisitions. During the year ended December 31, 2021, Expedited Freight accounted for 82.6% of our consolidated revenue.
Our 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. Today, Intermodal operates primarily in the Midwest and Southeast, with smaller operational presence in Southwest and Mid-Atlantic United States. We plan to grow Intermodal’s geographic footprint through acquisitions as well as greenfield start-ups where we do not have an acceptable acquisition target. During the year ended December 31, 2021, Intermodal accounted for 17.4% of our consolidated revenue.
Our operations, particularly our network of hubs and terminals, represent substantial fixed costs. Consequently, our ability to increase our earnings depends in significant part on our ability to increase the amount of freight and the revenue per pound for the freight shipped through our networks and to grow other services, such as LTL pickup and delivery, final mile solutions and intermodal services, which will allow us to maintain revenue growth in challenging shipping environments. In addition, we are continuing to execute synergies across our services, particularly with service offerings in the Expedited Freight segment. Synergistic opportunities include the ability to share resources, particularly our fleet resources.
In analyzing the components of our revenue, we monitor changes and trends in our LTL volumes and LTL revenue per hundredweight. While LTL revenue per hundredweight is a yield measurement, it is also a commonly-used indicator for general pricing trends in the LTL industry. This yield metric is not a true measure of price; however, as it can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul. As a result, changes in revenue per
hundredweight do not necessarily indicate actual changes in underlying base rates. LTL revenue per hundredweight and the key factors that can impact this metric are described in more detail below:
• LTL Revenue Per Hundredweight - Our LTL transportation services are generally priced based on weight, commodity, and distance. This measurement reflects the application of our pricing policies to the services we provide, which are influenced by competitive market conditions and our growth objectives. Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association, Inc. Light, bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense, heavy freight. Fuel surcharges and accessorial charges are included in this measurement.
• LTL Weight Per Shipment - Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand for our customers’ products and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of transportation, such as truckload, in response to capacity, service and pricing issues. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight.
• LTL Revenue Per Shipment - This measurement is primarily determined by the two metrics listed above as well as average length of haul and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue.
Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing network. Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different
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functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour, door pounds handled per hour and door shipments per hour. In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology. We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges. The fuel surcharge is generally designed to offset fluctuations in the cost of our petroleum-based products and is indexed to diesel fuel prices published by the U.S.
Trends and Developments
Intermodal Acquisitions
As part of the inorganic growth strategy, in February 2021, we acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport”) for $16,339 and a potential earn-out up to $2,000. The estimated fair value of the earn-out liability on the date of acquisition was $829. The fair value was based on the estimated one-year performance of the acquired customer revenue and was calculated using the option pricing method. Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois. The acquisition of Proficient Transport will expand our intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and will introduce a new location in Ohio. The acquisition was funded using cash flows from operations. The results of Proficient Transport have been included in our consolidated financial statements as of and from the date of acquisition.
In November 2021, we acquired certain assets and liabilities of BarOle Trucking, Inc. (“BarOle”) for $35,436. BarOle is an intermodal drayage company headquartered in Roseville, Minnesota. The acquisition of BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area. In addition, BarOle has a larger terminal location, which allows for further expansion in the future. The acquisition was financed by cash flows from operations. The results of BarOle have been included in our consolidated financial statements as of and from the date of acquisition.
Expedited Freight Acquisition
As part of the inorganic growth strategy, in May 2021, we acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,670. J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia. The acquisition of J&P supports our strategic growth plan by expanding pickup and delivery, less-than-truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States. The acquisition was funded using cash flow from operations. The results of J&P have been included in our consolidated financial statements as of and from the date of acquisition.
See Note 3, Acquisitions, to our Consolidated Financial Statements for more information about our acquisitions.
Sale of Pool
On February 12, 2021, we sold Pool for an $8,000 cash payment and up to a $12,000 earn-out based on 2021 earnings before interest, taxes, depreciation and amortization attainment, beginning February 1, 2021. The estimated fair value of the earn-out on the date of sale was $6,967, and was calculated based on the estimated performance of Pool using a Monte Carlo simulation model. A loss on the sale of Pool in the amount of $2,860 was recorded in 2021 in discontinued operation.
The financial performance of the Pool business significantly deteriorated during third quarter of 2021. As a result, an evaluation of the earn-out asset for impairment was completed, which included a review of the revised forecasts. The revised forecasts indicated an impairment of the entire earn-out asset was necessary. In 2021, a non-cash charge of $6,967 was recorded as an “Impairment charge” in discontinued operation.
COVID-19
Our business is highly susceptible to changes in the economic conditions. Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy. The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to the financial markets. Efforts to control the spread of COVID-19 led governments and other authorities to impose restrictions which resulted in business closures and disrupted supply chains worldwide. As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services.
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Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 and its variants remains fluid and may be further impacted by the policies of President Biden’s administration, the availability and success of a vaccine and vaccination rates. The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition during 2022 will depend on future developments, which are highly uncertain and cannot be predicted by, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, including the new variants, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume.
Like many other businesses affected by current macroeconomic conditions, we are experiencing a labor shortage relating to our employee drivers, terminal and dock workers and otherwise throughout our business and operations. We are also operating in an environment where competition is intense for independent fleet owner-operators, creating shortages in the marketplace. These factors have adversely affected our operations, by increasing our operational costs for labor and purchased transportation. The steps we have taken to address these shortages include paying sign-on bonuses, and offering enhanced wages in select competitive markets. These measures have increased costs in certain areas of our business. We will continue to mitigate the effects of the labor shortages and other inflationary conditions through similar actions.
In addition, although we believe we have sufficient capital and liquidity to manage our business over the short- and long-term, our liquidity may be materially affected if conditions in the credit and financial markets deteriorate as a result of COVID-19 including failure by us or our customers to secure any necessary financing in a timely manner.
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Results from Operations
The following table sets forth our consolidated financial data for the years ended December 31, 2021 and 2020 (in thousands):

| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | Change |  | Percent Change
Operating revenue: |  |  |  |  |  |  |
Expedited Freight | $ | 1,374,270 |  |  | $ | 1,072,301 |  |  | $ | 301,969 |  |  | 28.2 | %
Intermodal | $ | 289,214 |  |  | $ | 199,603 |  |  | $ | 89,611 |  |  | 44.9 |
Eliminations and other operations | $ | (1,057) |  |  | $ | (2,331) |  |  | $ | 1,274 |  |  | 54.7 |
Operating revenue | $ | 1,662,427 |  |  | $ | 1,269,573 |  |  | $ | 392,854 |  |  | 30.9 |
Operating expenses: |  |  |  |  |  |  |
Purchased transportation | $ | 833,075 |  |  | $ | 650,664 |  |  | $ | 182,411 |  |  | 28.0 |
Salaries, wages, and employee benefits | $ | 327,814 |  |  | $ | 270,785 |  |  | $ | 57,029 |  |  | 21.1 |
Operating leases | $ | 79,633 |  |  | $ | 69,720 |  |  | $ | 9,913 |  |  | 14.2 |
Depreciation and amortization | $ | 39,552 |  |  | $ | 37,125 |  |  | $ | 2,427 |  |  | 6.5 |
Insurance and claims | $ | 42,186 |  |  | $ | 34,912 |  |  | $ | 7,274 |  |  | 20.8 |
Fuel expense | $ | 17,027 |  |  | $ | 12,166 |  |  | $ | 4,861 |  |  | 40.0 |
Other operating expenses | $ | 163,839 |  |  | $ | 120,277 |  |  | $ | 43,562 |  |  | 36.2 |
Total operating expenses | $ | 1,503,126 |  |  | $ | 1,195,649 |  |  | $ | 307,477 |  |  | 25.7 |
Income (loss) from continuing operations: |  |  |  |  |  |  |
Expedited Freight | $ | 139,321 |  |  | $ | 71,266 |  |  | $ | 68,055 |  |  | 95.5 |
Intermodal | $ | 30,117 |  |  | $ | 16,391 |  |  | $ | 13,726 |  |  | 83.7 |
Other operations | $ | (10,137) |  |  | $ | (13,733) |  |  | $ | 3,596 |  |  | 26.2 |
Income from continuing operations | $ | 159,301 |  |  | $ | 73,924 |  |  | $ | 85,377 |  |  | 115.5 |
Other expense: |  |  |  |  |  |  |
Interest expense, net | $ | (4,338) |  |  | $ | (4,561) |  |  | $ | 223 |  |  | 4.9 |
Other, net | $ | — |  |  | $ | (3) |  |  | $ | 3 |  |  | 100.0 |
Total other expense | $ | (4,338) |  |  | $ | (4,564) |  |  | $ | 226 |  |  | (5.0) |
Income from continuing operations before income taxes | $ | 154,963 |  |  | $ | 69,360 |  |  | $ | 85,603 |  |  | 123.4 |
Income tax expense | $ | 38,872 |  |  | $ | 16,593 |  |  | $ | 22,279 |  |  | 134.3 |
Net income from continuing operations | $ | 116,091 |  |  | $ | 52,767 |  |  | $ | 63,324 |  |  | 120.0 |
Loss from discontinued operation, net of tax | $ | (10,232) |  |  | $ | (29,034) |  |  | $ | 18,802 |  |  | (64.8) |
Net income and comprehensive income | $ | 105,859 |  |  | $ | 23,733 |  |  | $ | 82,126 |  |  | 346.0 | %

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Revenues
Operating revenues increased $392,854, or 30.9% to $1,662,427 for the year ended December 31, 2021 compared to $1,269,573 for the year ended December 31, 2020. The revenue increase was primarily driven by increased revenue from our Expedited Freight segment of $301,969 due to increased Network, Truckload and Final Mile revenue.
Operating Expenses
Operating expenses increased $307,477 primarily driven by an increase in purchased transportation of $182,411, other operating expenses of $43,562 and salaries, wages and employee benefits of $57,029. Purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. Purchased transportation expense increased due to the utilization of more third-party carriers as it relates to the Expedited Freight segment. Other operating expenses increased primarily due to an increase in rail storage expenses, demurrage fees and professional fees. Salaries, wages and employee benefits increased primarily due the additional employees hired in response to the increase in volumes in 2021, increased reserve for incentive compensation and higher group health insurance premiums.
Income from Continuing Operations and Segment Operations
Income from continuing operations increased $85,377, or 115.5%, from the year ended December 31, 2020 to $159,301 for the year ended December 31, 2021. The increase was primarily driven by Expedited Freight segment and Intermodal segment of $68,055 and $13,726, respectively. The results for our two reportable segments are discussed in detail in the following sections.
Interest Expense, net
Interest expense, net was $4,338 for the year ended December 31, 2021 compared to $4,561 for the same period in 2020. The decrease in interest expense, net was primarily driven by a lower interest rate during the year ended December 31, 2021, partially offset by additional borrowings in 2021 under our revolving credit facility. The interest rate on outstanding borrowings under our revolving credit facility was 1.43% and 3.25% as of December 31, 2021 and 2020, respectively.
Income Taxes on a Continuing Basis
The combined federal and state effective tax rate for the year ended December 31, 2021 was 25.1% compared to a rate of 23.9% for the same period in 2020. The higher effective tax rate for the year ended December 31, 2021 was primarily due a return to provision expense adjustment recorded in 2021 compared to a return to provision benefit adjustment recorded in 2020, partially offset by increased excess tax benefits realized on share-based awards in 2021 compared to the same period in 2020. During the year ended December 31, 2020, a refund for Tennessee tax credits was received. A similar refund was not received during the year ended December 31, 2021.
Loss from Discontinued Operation, net of tax
Loss from discontinued operation, net of tax decreased $18,802 to a $10,232 loss for the year ended December 31, 2021 from $29,034 loss for the year ended December 31, 2020. Loss from discontinued operation includes our Pool business and, as discussed above, the Pool business was sold on February 12, 2021. An evaluation of the earn-out asset indicated an impairment was necessary and as a result, for the year ended December 31, 2021, a non-cash impairment charge was recorded. For the year ended December 31, 2020, our Pool business was adversely impacted by COVID-19 as many of our customers were affected by retail mall closure in response to stay-at-home orders beginning in March 2020. In addition, during 2020, a non-cash impairment charge of $28,384 was recorded to reflect the net assets held for sale at fair value less costs to sell.
Net Income
As a result of the foregoing factors, net income increased by $82,126, or 346.0%, to $105,859 for the year ended December 31, 2021 compared to $23,733 for the same period in 2020.
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Expedited Freight - Year Ended December 31, 2021 compared to Year Ended December 31, 2020
The following table sets forth our financial data of the Expedited Freight segment for the years ended December 31, 2021 and 2020 (unaudited and in thousands):

| Year Ended
| December 31, 2021 |  | Percent of Revenue |  | December 31, 2020 |  | Percent of Revenue |  | Change |  | Percent Change
Operating revenue: |  |  |  |  |  |  |  |  |  |  |
Network 1 | $ | 840,429 |  |  | 61.3 | % |  | $ | 625,517 |  |  | 58.3 | % |  | $ | 215 |  |  | 34.4 | %
Truckload | $ | 223,026 |  |  | 16.2 |  |  | $ | 194,058 |  |  | 18.1 |  |  | $ | 29 |  |  | 14.9 |
Final Mile | $ | 275,201 |  |  | 20.0 |  |  | $ | 224,475 |  |  | 20.9 |  |  | $ | 51 |  |  | 22.6 |
Other | $ | 35,614 |  |  | 2.6 |  |  | $ | 28,251 |  |  | 2.6 |  |  | $ | 7 |  |  | 26.1 |
Total operating revenue | $ | 1,374,270 |  |  | 100.0 |  |  | $ | 1,072,301 |  |  | 100.0 |  |  | $ | 302 |  |  | 28.2 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Purchased transportation | $ | 743,418 |  |  | 54.2 |  |  | $ | 583,552 |  |  | 54.4 |  |  | $ | 160 |  |  | 27.4 |
Salaries, wages and employee benefits | $ | 261,405 |  |  | 19.0 |  |  | $ | 218,421 |  |  | 20.4 |  |  | $ | 43 |  |  | 19.7 |
Operating leases | $ | 57,309 |  |  | 4.2 |  |  | $ | 53,680 |  |  | 5.0 |  |  | $ | 4 |  |  | 6.8 |
Depreciation and amortization | $ | 28,842 |  |  | 2.1 |  |  | $ | 27,003 |  |  | 2.5 |  |  | $ | 2 |  |  | 6.8 |
Insurance and claims | $ | 32,243 |  |  | 2.3 |  |  | $ | 24,021 |  |  | 2.2 |  |  | $ | 8 |  |  | 34.2 |
Fuel expense | $ | 8,752 |  |  | 0.6 |  |  | $ | 6,793 |  |  | 0.6 |  |  | $ | 2 |  |  | 28.8 |
Other operating expenses | $ | 102,980 |  |  | 7.5 |  |  | $ | 87,565 |  |  | 8.2 |  |  | $ | 15 |  |  | 17.6 |
Total operating expenses | $ | 1,234,949 |  |  | 89.9 |  |  | $ | 1,001,035 |  |  | 93.4 |  |  | $ | 234 |  |  | 23.4 |
Income from operations | $ | 139,321 |  |  | 10.1 | % |  | $ | 71,266 |  |  | 6.6 | % |  | $ | 68 |  |  | 95.5 | %
1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

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Expedited Freight Operating Statistics |  |  |
| Year Ended |  |  |
| December 31, 2021 |  | December 31, 2020 |  | Percent Change |  |  |
Business days | 254 |  |  | 256 |  |  | (0.8) | % |  |  |
Tonnage 1,2 |  |  |  |  |  |  |  |
Total pounds | 2,812,071 |  |  | 2,369,551 |  |  | 18.7 |  |  |  |
Pounds per day | 11,071 |  |  | 9,256 |  |  | 19.6 |  |  |  |
Shipments 1,2 |  |  |  |  |  |  |  |
Total shipments | 3,856 |  |  | 3,918 |  |  | (1.6) |  |  |  |
Shipments per day | 15.2 |  |  | 15.3 |  |  | (0.7) |  |  |  |
Weight per shipment | 729 |  |  | 605 |  |  | 20.5 |  |  |  |
Revenue per hundredweight 3 | $ | 28.90 |  |  | $ | 26.75 |  |  | 8.0 |  |  |  |
Revenue per hundredweight, excluding fuel 3 | $ | 24.69 |  |  | $ | 23.21 |  |  | 6.4 |  |  |  |
Revenue per shipment 3 | $ | 213 |  |  | $ | 160 |  |  | 33.5 |  |  |  |
Revenue per shipment, excluding fuel 3 | $ | 182 |  |  | $ | 138 |  |  | 32.0 |  |  |  |
Network revenue from door-to-door shipments as a percentage of network revenue 3,4 | 47.8 | % |  | 48.0 | % |  | (0.4) |  |  |  |
1 In thousands |  |  |  |  |  |  |  |
2 Excludes accessorial, full Truckload and Final Mile products |  |  |  |  |  |  |
3 Includes intercompany revenue between the Network and Truckload revenue streams |  |  |
4 Door-to-door shipments include all shipments with a pickup and/or delivery |  |  |

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Revenues
Expedited Freight operating revenue increased $301,969, or 28.2%, to $1,374,270 for the year ended December 31, 2021 from $1,072,301 for the same period of 2020. The increase was driven by increased Network, Truckload and Final Mile revenue. Network revenue increased due to a 18.7% increase in tonnage and a 8.0% increase in revenue per hundredweight partially offset by a 1.6% decrease in shipments as compared to the prior year. The increase in tonnage was primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations in 2020. Strategic pricing initiatives and freight rationalization actions contributed to the increase in the revenue per hundredweight. Fuel surcharge revenue increased $53,860, or 64.2% as a result of the rise in fuel prices and increased tonnage. Truckload revenue increased $28,968 primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations for 2020. Final Mile revenue increased $50,726 due to the combination of organic growth and the acquisition of CLW in October 2020. Other revenue, which includes warehousing and terminal handling, increased $7,363 due to the higher linehaul tonnage.
Purchased Transportation
Expedited Freight purchased transportation increased by $159,866, or 27.4%, to $743,418 for the year ended December 31, 2021 from $583,552 for the same period of 2020. As a percentage of segment operating revenue, Expedited Freight purchased transportation was 54.2% during the year ended December 31, 2021 compared to 54.4% for the same period of 2020. Expedited Freight purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and benefits. The decrease in purchased transportation as a percentage of segment operating revenue was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services. For the year ended December 31, 2021, 62.3%, 34.0% and 3.7% of our freight capacity was filled by Leased Capacity Providers, third party carriers and Company-employed drivers, respectively. This compares to 68.0%, 27.7% and 4.3% in the sam e period in 2020.
Salaries, Wages, and Benefits
Expedited Freight salaries, wages and employee benefits increased by $42,984, or 19.7%, to $261,405 for the year ended December 31, 2021 from $218,421 for the same period of 2020. Salaries, wages and employee benefits were 19.0% of Expedited Freight’s operating revenue for the year ended December 31, 2021 compared to 20.4% for the same period of 2020. The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in tonnage in 2021, increased reserve for incentive compensation and higher group health insurance premiums. Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.
Operating Leases
Expedited Freight operating leases increased $3,629, or 6.8%, to $57,309 for the year ended December 31, 2021 from $53,680 for the same period of 2020. Operating leases were 4.2% of Expedited Freight’s operating revenue for the year ended December 31, 2021 compared to 5.0% for the same period of 2020. The increase in operating leases expense was primarily due to higher facility expense in 2021, partially due to facility leases assumed in connection with the CLW and J&P acquisitions.
Depreciation and Amortization
Expedited Freight depreciation and amortization increased $1,839, or 6.8%, to $28,842 for the year ended December 31, 2021 from $27,003 for the same period of 2020. Depreciation and amortization expense as a percentage of Expedited Freight operating revenue was 2.1% in the year ended December 31, 2021 compared to 2.5% for the same period of 2020. The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation and additional amortization expense resulting from intangible assets recorded in connection with the CLW and J&P acquisitions.
Insurance and Claims
Expedited Freight insurance and claims expense increased $8,222, or 34.2%, to $32,243 for the year ended December 31, 2021 from $24,021 for the same period of 2020. Insurance and claims as a percentage of Expedited Freight’s operating revenue was 2.3% for the year ended December 31, 2021 compared to 2.2% for the same period of 2020. The increase in expense was primarily due to an increase in vehicle insurance premiums, and additional vehicle liability and cargo claims. See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the “Other Operations” section below.
Fuel Expense
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Expedited Freight fuel expense increased $1,959, or 28.8%, to $8,752 for the year ended December 31, 2021 from $6,793 for the same period of 2020. Fuel expense was 0.6% of Expedited Freight’s operating revenue for the year ended December 31, 2021 compared to 0.6% for the same period of 2020. Expedited Freight fuel expense increased due to the rise in the average price of fuel in 2021.
Other Operating Expenses
Expedited Freight other operating expenses increased $15,415, or 17.6%, to $102,980 for the year ended December 31, 2021 from $87,565 for the same period of 2020. Expedited Freight other operating expenses were 7.5% of operating revenue for the year ended December 31, 2021 compared to 8.2% for the same period of 2020. Other operating expenses include equipment maintenance, facility expenses, legal and professional fees and other over-the-road costs. The increase in other operating expenses was driven by an increase in equipment maintenance costs, terminal and office expenses, legal and professional fees, other over-the-road costs and parts for final mile installatio ns.
Income from Operations
Expedited Freight income from operations increased by $68,055, or 95.5%, to $139,321 for the year ended December 31, 2021 compared to $71,266 for the same period of 2020. Expedited Freight’s income from operations was 10.1% of operating revenue for the year ended December 31, 2021 compared to 6.6% for the same period of 2020. The increase in income from operations as a percentage of operating revenues was driven by increased revenue per hundredweight combined with cost-control measures and operational efficiencies, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.
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Intermodal - Year Ended December 31, 2021 compared to Year Ended December 31, 2020
The following table sets forth our financial data of the Intermodal segment for the years ended December 31, 2021 and 2020 (unaudited and in thousands):

| Year Ended
| December 31, 2021 |  | Percent of Revenue |  | December 31, 2020 |  | Percent of Revenue |  | Change |  | Percent Change
Operating revenue | $ | 289,214 |  |  | 100.0 | % |  | $ | 199,603 |  |  | 100.0 | % |  | $ | 89,611 |  |  | 44.9 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |
Purchased transportation | $ | 90,575 |  |  | 31.2 |  |  | $ | 68,705 |  |  | 34.4 |  |  | $ | 21,870 |  |  | 31.8 |
Salaries, wages and employee benefits | $ | 65,599 |  |  | 22.7 |  |  | $ | 48,698 |  |  | 24.4 |  |  | $ | 16,901 |  |  | 34.7 |
Operating leases | $ | 22,218 |  |  | 7.7 |  |  | $ | 16,325 |  |  | 8.2 |  |  | $ | 5,893 |  |  | 36.1 |
Depreciation and amortization | $ | 10,647 |  |  | 3.7 |  |  | $ | 9,977 |  |  | 5.0 |  |  | $ | 670 |  |  | 6.7 |
Insurance and claims | $ | 9,850 |  |  | 3.4 |  |  | $ | 7,872 |  |  | 3.9 |  |  | $ | 1,978 |  |  | 25.1 |
Fuel expense | $ | 8,275 |  |  | 2.9 |  |  | $ | 5,373 |  |  | 2.7 |  |  | $ | 2,902 |  |  | 54.0 |
Other operating expenses | $ | 51,933 |  |  | 18.0 |  |  | $ | 26,262 |  |  | 13.2 |  |  | $ | 25,671 |  |  | 97.7 |
Total operating expenses | $ | 259,097 |  |  | 89.6 |  |  | $ | 183,212 |  |  | 91.8 |  |  | $ | 75,885 |  |  | 41.4 |
Income from operations | $ | 30,117 |  |  | 10.4 | % |  | $ | 16,391 |  |  | 8.2 | % |  | $ | 13,726 |  |  | 83.7 | %

Intermodal Operating Statistics
| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | Percent Change
Drayage shipments | 369,601 |  |  | 301,454 |  |  | 22.6 | %
Drayage revenue per shipment | $ | 667 |  |  | $ | 563 |  |  | 18.5 | %
Number of locations | 29 |  |  | 24 |  |  | 20.8 | %

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Revenues
Intermodal operating revenue increased $89,611, or 44.9%, to $289,214 for the year ended December 31, 2021 from $199,603 for the same period of 2020. The increase in operating revenues was primarily attributable to a 22.6% increase in drayage shipments over the same period in 2020 and an increase in accessorial revenues. The increase in drayage shipments was driven by the combination of the economic recovery from COVID-19, which adversely impacted the results of operations for the year ended December 31, 2020, and the Proficient Transport acquisition in February 2021.
Purchased Transportation
Intermodal purchased transportation increased $21,870, or 31.8%, to $90,575 for the year ended December 31, 2021 from $68,705 for the same period of 2020. Intermodal purchased transportation as a percentage of revenue was 31.2% for the year ended December 31, 2021 compared to 34.4% for the year ended December 31, 2020. Intermodal purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits. The decrease in purchased transportation as a percentage of revenues was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.
Salaries, Wages, and Benefits
Intermodal salaries, wages and employee benefits increased $16,901, or 34.7%, to $65,599 for the year ended December 31, 2021 from $48,698 for the same period of 2020. Salaries, wages and employee benefits were 22.7% of Intermodal operating revenues for the year ended December 31, 2021 compared to 24.4% for the same period of 2020. The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in drayage shipments for the year ended December 31, 2021, an increased reserve for incentive compensation and higher group health insurance premiums. Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.
Operating Leases
Intermodal operating leases increased $5,893, or 36.1% to $22,218 for the year ended December 31, 2021 from $16,325 for the same period of 2020. Operating leases were 7.7% of Intermodal operating revenue for the year ended December 31, 2021 compared to 8.2% in the same period of 2020. The increase in operating leases expense was primarily due to new equipment and property leases in 2021.
Depreciation and Amortization
Intermodal depreciation and amortization increased $670, or 6.7%, to $10,647 for the year ended December 31, 2021 from $9,977 for the same period of 2020. Intermodal depreciation and amortization expense as a percentage of Intermodal operating revenue was 3.7% for the year ended December 31, 2021 compared to 5.0% for the same period of 2020. The increase in depreciation and amortization expense was primarily due to amortization expense resulting from intangible assets recorded in connection with the Proficient Transport acquisition, partially offset by a decrease in equipment depreciation.
Insurance and Claims
Intermodal insurance and claims expense increased $1,978, or 25.1%, to $9,850 for the year ended December 31, 2021 from $7,872 for the same period of 2020. Intermodal insurance and claims were 3.4% of operating revenue for the year ended December 31, 2021 compared to 3.9% for the same period of 2020. The increase in Intermodal insurance and claims was primarily due to an increase in vehicle insurance premiums. See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the “Other operations” section below.
Fuel Expense
Intermodal fuel expense increased $2,902, or 54.0%, to $8,275 for the year ended December 31, 2021 from $5,373 for the same period of 2020. Fuel expenses were 2.9% of Intermodal operating revenue for the year ended December 31, 2021 compared to 2.7% for the same period of 2020. Intermodal fuel expense increased due to the rise in the average price of fuel in 2021.
Other Operating Expenses
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Intermodal other operating expenses increased $25,671, or 97.7%, to $51,933 for the year ended December 31, 2021 from $26,262 for the same period of 2020. Intermodal other operating expenses as a percentage of revenue for the year ended December 31, 2021 were 18.0% compared to 13.2% for the same period of 2020. The increase in Intermodal other operating expenses was driven by additional expenses incurred to support the increased accessorial revenues noted above, increase in bad debt expense and higher equipment maintenance costs.
Income from Operations
Intermodal’s income from operations increased by $13,726, or 83.7%, to $30,117 for the year ended December 31, 2021 compared to $16,391 for the same period in 2020. Income from operations as a percentage of Intermodal operating revenue was 10.4% for the year ended December 31, 2021 compared to 8.2% in the same period of 2020. The increase in income from operations as a percentage of operating revenues was due to increase in drayage revenue per shipment combined with cost-control measures and operational efficiencies, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.
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Other operations - Year Ended December 31, 2021 compared to Year Ended December 31, 2020
Other operating activity was a $10,137 operating loss for the year ended December 31, 2021 compared to $13,733 for the same period in 2020. The change in the operating loss was driven by increased professional fees related to cybersecurity and shareholder engagement activities and an increased reserve for an incentive program established for employees in 2021, partially offset by decreased self-insurance reserves for vehicle liability, workers’ compensation and group health insurance claims. The decrease in self-insurance reserves for vehicle liability and workers’ compensation claims was due to the favorable loss development factor of historical claims attributable to the safety measures in place. For the year ended December 31, 2020, severance costs in the amount of $997 were recorded in accordance with severance agreements for former employees and a reserve in the amount of $2,300 was recorded for a litigated contract dispute. Similar costs were not recorded for the year ended December 31, 2021.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). The preparation of financial statements in accordance with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates and assumptions are based on historical experience and changes in the business environment. However, actual results may differ from estimates under different conditions, sometimes materially. The significant accounting policies followed in the preparation of the financial statements are detailed in Note 1 of our Consolidated Financial Statements included in this Form 10-K.
Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require management’s most subjective judgments. We believe that our application of the policies discussed below involves significant levels of judgment, estimates and complexity. Due to the levels of judgment, complexity and period of time over which many of these items are resolved, actual results could differ from those estimated at the time of preparation of the financial statements. Adjustments to these estimates would impact our financial position and future results of operations.
Self-Insurance Loss Reserves
We provide for the estimated costs of vehicle liability and workers’ compensation claims both reported and for claims incurred but not reported. The amount of self-insurance loss reserves and loss adjustment expenses is determined based on an estimation process that requires us to make significant judgments and use information obtained from both our-specific and industry data, as well as general economic information. We estimate our self-insurance loss exposure by evaluating the merits and circumstances surrounding individual known claims and through actuarial analysis to determine an estimate of probable losses on claims incurred but not reported. If the events underlying the claims have occurred as of the balance sheet date, then losses are recognized immediately. Historically, we have experienced both favorable and unfavorable development of claim estimates.
The estimation process for self-insurance loss exposure requires management to make significant judgments and continuously monitor and evaluate the life cycle of claims. Using data obtained from this monitoring and our assumptions about the emerging trends, management develops an estimate of ultimate claims based on its historical experience and other available market information. The most significant assumptions used in the estimation process include determining the trend in loss costs, the expected consistency in the frequency and severity of claims incurred but not yet reported, changes in the timing of the reporting of losses from the loss date to the notification date, and expected costs to settle unpaid claims. We utilize quarterly actuarial analyses to evaluate open claims and estimate the ongoing development exposure. The actual cost to settle our self-funded claim liabilities can differ from our reserve estimates because of a number of uncertainties, including the inherent difficulty in estimating the severity of a claim and the potential amount to defend and settle a claim.
As of December 31, 2021 and 2020, we recorded insurance reserves of $65,649 and $68,647, respectively, inclusive of reserves in excess of the self-insured retention limit that are expected to be reimbursed from insurance carriers. Additionally, we recognized a receivable for insurance proceeds and a corresponding claims payable for vehicle liability and workers’ compensation claims in excess of the self-insured retention limit in the amount of $28,667 and $35,088 as of December 31, 2021 and 2020, respectively.
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Business Combinations and Goodwill
Acquisitions are accounted for using the purchase method. Upon the acquisition of a business, the fair value of the assets acquired and liabilities assumed must be estimated. This requires judgments regarding the identification of acquired assets and liabilities assumed, some of which may not have been previously recorded by the acquired business, as well as judgments regarding the valuation of all identified acquired assets and assumed liabilities. The assets acquired and liabilities assumed are determined by reviewing the operations, interviewing management and reviewing the financial and contractual information of the acquired business. Consideration is typically paid in the form of cash paid upon closing or contingent consideration paid upon satisfaction of a future obligation. If contingent consideration is included in the purchase price, we value that consideration as of the acquisition date and it is recorded to goodwill.
Once the acquired assets and assumed liabilities are identified, the fair value of the assets and liabilities are estimated using a variety of approaches that require significant judgments. For example, intangible assets are typically valued using a discounted cash flow (“DCF”) analysis, which requires estimates of the future cash flows that are attributable to the intangible asset. A DCF analysis also requires significant judgments regarding the selection of discount rates that are intended to reflect the risks that are inherent in the projected cash flows, the determination of terminal growth rates, and judgments about the useful life and pattern of use of the underlying intangible asset. The valuation of acquired property, plant and equipment requires judgments about current market values, replacement costs, the physical and functional obsolescence of the assets and their remaining useful lives. A failure to appropriately assign a fair value to acquired assets and assumed liabilities could significantly impact the amount and timing of future depreciation and amortization expense, as well as significantly overstate or understate assets or liabilities.
Goodwill is recorded at cost based on the excess of purchase price over the fair value of net assets acquired. Goodwill and intangible assets with indefinite lives are not amortized but rather we conduct an annual, or more frequently if circumstances indicate possible impairment, impairment test of goodwill for each reporting unit at June 30 of each year. Examples of such events or circumstances could include a significant change in business climate or a loss of significant customers. Intangible assets are amortized over their useful lives.
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Liquidity and Capital Resources
We have historically financed our working capital needs, including capital expenditures, with available cash, cash flows from operations and borrowings under our credit facility. We believe that borrowings under our credit facility, together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. During 2021, we deferred a portion of our equipment purchases in order to increase our available cash in response to the disruption and uncertainty resulting from the COVID-19 pandemic. We also frequently utilize operating leases to acquire revenue equipment. In 2021, we completed multiple business acquisitions. See Note 3, Acquisitions, in the Notes to Consolidated Financial Statements for further discussion on this topic. We used existing cash and credit facility to finance these transactions and to provide any necessary liquidity for current and future operations.
To further support liquidity and capital resources, in July 2021, we entered into a second amendment to our credit facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available. In connection with the second amendment, we have replaced the London Interbank Offered Rate with the Bloomberg Short-Term Bank Yield Index rate as the reference rate in our credit facility to calculate interest due to our lender. In December 2021, we entered into a third amendment to our credit facility, which increased the amount available for borrowing to $450,000, consisting of a $300,000 revolving line of credit and a term loan of $150,000. The amendment resets the $75,000 limit on incremental loan facilities that may be incurred under the credit facility and establishes annual mandatory repayment of the principal amount of the term loan at: 1.0% per annum in 2022 and 2023; 2.5% per annum in 2024 and 2025; 5.0% per annum in 2026; with the remaining unpaid principal being due on July 20, 2026.
As of December 31, 2021, we were in compliance with our financial covenants contained in the credit facility and expect to maintain such compliance. In the event that we encounter difficulties, our historical relationships with our lenders has been strong and we anticipate their continued long-term support of our business. Refer to Note 4, Indebtedness, to our Consolidated Financial Statements for additional information regarding our credit facility.
Cash Flows
Year Ended December 31, 2021 Cash Flows compared to December 31, 2020 Cash Flows
Continuing Operations
Net cash provided by operating activities of continuing operations was $124,896 for the year ended December 31, 2021 compared to $96,105 for the year ended December 31, 2020. The increase in net cash provided by operating activities of continuing operations was primarily due to the increase in net income from continuing operations, partially offset by an increase in accounts receivable and other receivable balances. The accounts receivable balance changed due to the increase in operating revenues in 2021. The other receivables balance changed as a result of the Transition Services Agreement entered into with the buyer of the Pool business. Under the Transition Services Agreement, we remitted payments to outside vendors on behalf of the buyer for expenses incurred by the Pool business, up to a limit of $18,000, and we are reimbursed by the buyer within 60 days from the end of the month in which the payment is remitted.
Net cash used in investing activities of continuing operations was $96,332 for the year ended December 31, 2021 compared to $81,506 during the year ended December 31, 2020. Capital expenditures for 2021 were $39,109, which primarily related to an organic investment to expand the capacity of our national hub in Columbus, Ohio and the purchase of new trailers. Capital expenditures for 2020 were $20,268, which primarily related to the organic investment to expand the capacity of our national hub in Columbus, Ohio. Continuing investing activities for 2021 included the acquisition of Proficient Transport for $16,339, J&P for $7,669 and BarOle for $35,436 while continuing investing activities for 2020 included the acquisition of Linn Star Holdings, Inc., Linn Star Transfer, Inc. and Linn Star Logistics, LLC for $55,931 and CLW Delivery, Inc. for $5,500.
Net cash used in financing activities of continuing operations was $31,502 for the year ended December 31, 2021 compared to $39,094 for the year ended December 31, 2020. The change in the net cash used in financing activities of continuing operations was primarily due to increased contributions from a subsidiary held for sale, partially offset by increased payment of dividends and increased repurchases and retirement of common stock.
Discontinued Operation
Net cash used in discontinued operating activities was $4,635 for the year ended December 31, 2021 compared to $11,439 for the year ended December 31, 2020. The change in net cash provided by discontinued operating activities was primarily related to a decrease in discontinued net income after consideration of non-cash items.
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Net cash provided by discontinued investing activities was $8,020 for the year ended December 31, 2021 compared to net cash used in discontinued investing activities was $1,201 during the year ended December 31, 2020. The change in net cash provided by discontinued investing activities was due to the proceeds received from the sale of the Pool business in 2021.
Net cash used in discontinued financing activities was $3,385 for the year ended December 31, 2021 compared to net cash provided by discontinued financing activities was $12,640 for the year ended December 31, 2020. The change in net cash used in discontinued financing activities was due to decreased contributions from the parent.
Share Repurchase Program
During the year ended December 31, 2021 and 2020, we repurcha sed 535 and 787 shares of our common stock, respectively, for approximately $48,989 and $45,248, respectively, through open market transactions. All shares received were retired upon receipt, and the excess of the purchase price over par value per share was recorded to “Retained Earnings” in our Consolidated Balance Sheets.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk relates principally to changes in interest rates and fuel prices. Our interest expense is, in part, sensitive to the general level of interest rates. Borrowings outstanding under our senior unsecured credit facility was approximately $157,500 at December 31, 2021 and bears interest at variable rates. A hypothetical increase in our credit facility borrowing rate of 150 basis points would increase our annual interest expense by approximately $1,700 and would have decreased our annual cash flow from operations by approximately $1,700.
Our only other debt are finance lease obligations totaling $14,159. These lease obligations bear interest at a fixed rate. Accordingly, there is no exposure to market risk related to these finance lease obligations.
We are exposed to the effects of changes in the price and availability of fuel, as more fully discussed in Item 1A, “Risk Factors” - under the title “Volatility in fuel prices, shortages of fuel or the ineffectiveness of our fuel surcharge program can have a material adverse effect on our results of operations and profitability.”
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this annual report on Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance to management and the Board of Directors regarding the preparation and fair presentation of financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the framework set forth by the Committee on Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (“2013 Framework”). Based on our assessment, we have concluded, as of December 31, 2021, that our internal control over financial reporting was effective based on those criteria.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements for the year ended December 31, 2021, has issued an attestation report on the Company’s internal control over financial reporting.
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Changes in Internal Control over Financial Reporting
None.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Forward Air Corporation
Opinion on Internal Control over Financial Reporting
We have audited Forward Air Corporation’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Forward Air Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “financial statements”) and our report date d March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP
Atlanta, GA
March 1, 2022

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Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this item is incorporated herein by reference to our proxy statement for the 2022 Annual Meeting of Shareholders (the “2022 Proxy Statement”). The 2022 Proxy Statement will be filed with the SEC not later than 120 days subsequent to December 31, 2021.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the 2022 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this item is incorporated herein by reference to the 2022 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the 2022 Proxy Statement.
Item 14. Principle Accounting Fees and Services
The information required by this item is incorporated herein by reference to the 2022 Proxy Statement.
Part IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) and (2) List of Financial Statements and Financial Statement Schedules.
The response to this portion of Item 15 is submitted as a separate section of this report.
(a)(3) List of Exhibits.
The response to this portion of Item 15 is submitted as a separate section of this report.
(b) Exhibits.
The response to this portion of Item 15 is submitted as a separate section of this report.
(c) Financial Statement Schedules.
The response to this portion of Item 15 is submitted as a separate section of this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  |  |  | Forward Air Corporation
Date: | March 1, 2022 |  | By: | /s/ Rebecca J. Garbrick
|  |  |  | Rebecca J. Garbrick
|  |  |  | Chief Financial Officer and Treasurer
|  |  |  | (Principal Financial Officer and Duly Authorized Officer)

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature |  | Title |  | Date
/s/ Thomas Schmitt |  | Chairman, President and Chief Executive Officer |  | March 1, 2022
Thomas Schmitt |  | (Principal Executive Officer) |  |
/s/ Rebecca J. Garbrick |  | Chief Financial Officer and Treasurer |  | March 1, 2022
Rebecca J. Garbrick |  | (Principal Financial Officer) |  |
/s/ R. Craig Carlock |  | Lead Director |  | March 1, 2022
R. Craig Carlock |  |  |  |
/s/ Ronald W. Allen |  | Director |  | March 1, 2022
Ronald W. Allen |  |  |  |
/s/ Ana B. Amicarella |  | Director |  | March 1, 2022
Ana B. Amicarella |  |  |  |
/s/ Valerie A. Bonebrake |  | Director |  | March 1, 2022
Valerie A. Bonebrake |  |  |  |
/s/ C. Robert Campbell |  | Director |  | March 1, 2022
C. Robert Campbell |  |  |  |
/s/ George Mayes |  | Director |  | March 1, 2022
George Mayes |  |  |  |
/s/ G. Michael Lynch |  | Director |  | March 1, 2022
G. Michael Lynch |  |  |  |
/s/ Laurie A. Tucker |  | Director |  | March 1, 2022
Laurie A. Tucker |  |  |  |
/s/ Chitra Nayak |  | Director |  | March 1, 2022
Chitra Nayak |  |  |  |
/s/ Scott Niswonger |  | Director |  | March 1, 2022
Scott Niswonger |  |  |  |
/s/ Javier Polit |  | Director |  | March 1, 2022
Javier Polit |  |  |  |
/s/ Richard Roberts |  | Director |  | March 1, 2022
Richard Roberts |  |  |  |

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Annual Report on Form 10-K
Item 8, Item 15(a)(1) and (2), (a)(3), (b) and (c)
List of Financial Statements and Financial Statement Schedule
Financial Statements and Supplementary Data
Certain Exhibits
Financial Statement Schedule
Year Ended December 31, 2021
Forward Air Corporation
Greeneville, Tennessee
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Forward Air Corporation
Form 10-K — Item 8 and Item 15(a)(1) and (2)
Index to Financial Statements and Financial Statement Schedule
The following consolidated financial statements of Forward Air Corporation are included as a separate section of this report:

| Page No.
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (PCAOB ID: 42) | F-3
Consolidated Balance Sheets — December 31, 2021 and 2020 | F-5
Consolidated Statements of Comprehensive Income — Years Ended December 31, 2021, 2020 and 2019 | F-6
Consolidated Statements of Shareholders’ Equity — Years Ended December 31, 2021, 2020 and 2019 | F-7
Consolidated Statements of Cash Flows — Years Ended December 31, 2021, 2020 and 2019 | F-8
Notes to Consolidated Financial Statements — December 31, 2021 | F-9

The following financial statement schedule of Forward Air Corporation is included as a separate section of this report.

Schedule II - Valuation and Qualifying Accounts | S-1

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Forward Air Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Forward Air Corporation (the Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Self-Insurance Loss Reserves |  |  |
Description of the Matter | The liability for self-insurance loss reserves totaled $65.6 million at December 31, 2021 which includes self-insurance reserves for vehicle liability claims. The long-term portion of this liability was included in “Other long-term liabilities,” and the remainder was included in “Insurance and claims” on the Company’s Balance Sheet. As more fully described in Note 1 to the consolidated financial statements, the self-insurance reserves include estimates for both known claims and future claims development and are based on company-specific and industry data, as well as general economic information. Auditing the Company’s self-insurance reserves for vehicle liability claims was complex, highly subjective and required significant judgment due to the actuarial techniques and significant assumptions used. The Company utilizes actuarial analyses to evaluate open claims and estimate the ongoing development exposure. The most significant assumptions used in the estimation process include determining the trend in loss costs, the severity of claims, and the expected costs to settle unpaid claims. |  |  |
How We Addressed the Matter in Our Audit | We tested internal controls over management’s review of the completeness and accuracy of data inputs used in the actuarial analysis and review of the actuarial assumptions and reserve calculations. To test the self-insurance loss reserves for vehicle liability claims, our audit procedures included, among others, evaluating the methodologies used and the significant actuarial assumptions discussed above, as well as performing substantive procedures over underlying data and calculations used in the analyses. We tested claims data by agreeing the data to supporting source documentation and payment information. We evaluated whether changes to the reserves for known claims were being recognized timely based on the underlying available data and current estimates. We involved actuarial specialists to assist in our evaluation of the actuarial methodologies used as well as to independently calculate a range of reserve estimates for comparison to the recorded reserves. |  |  |

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1991
Atlanta, GA
March 1, 2022
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Table of Contents

Forward Air Corporation
Consolidated Balance Sheets
(In thousands, except share data)
| December 31, 2021 |  | December 31, 2020
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 37,316 |  |  | $ | 40,254 |
Accounts receivable, less allowance of $3,260 in 2021 and $2,273 in 2020 | 208,085 |  |  | 156,490 |
Other receivables | 8,097 |  |  | — |
Prepaid expenses | 22,283 |  |  | 21,410 |
Other current assets | 7,026 |  |  | 6,740 |
Current assets held for sale | — |  |  | 21,002 |
Total current assets | 282,807 |  |  | 245,896 |
Property and equipment, net | 219,095 |  |  | 189,867 |
Operating lease right-of-use assets | 148,198 |  |  | 123,338 |
Goodwill | 266,752 |  |  | 244,982 |
Other acquired intangibles, net of accumulated amortization of $107,337 in 2021 and $93,009 in 2020 | 154,717 |  |  | 145,032 |
Other assets | 46,254 |  |  | 45,181 |
Noncurrent assets held for sale | — |  |  | 53,097 |
Total assets | $ | 1,117,823 |  |  | $ | 1,047,393 |
Liabilities and Shareholders’ Equity |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 44,837 |  |  | $ | 38,371 |
Accrued expenses | 61,621 |  |  | 51,264 |
Other current liabilities | 4,614 |  |  | 10,580 |
Current portion of debt and finance lease obligations | 6,088 |  |  | 1,801 |
Current portion of operating lease liabilities | 47,532 |  |  | 43,680 |
Current liabilities held for sale | — |  |  | 25,924 |
Total current liabilities | 164,692 |  |  | 171,620 |
Finance lease obligations, less current portion | 9,571 |  |  | 5,010 |
Operating lease liabilities, less current portion | 101,409 |  |  | 80,346 |
Long-term debt, less current portion and debt issuance costs | 155,466 |  |  | 112,398 |
Other long-term liabilities | 49,624 |  |  | 54,129 |
Deferred income taxes | 43,407 |  |  | 41,986 |
Noncurrent liabilities held for sale | — |  |  | 34,575 |
Commitments and contingencies (Note 9) | — |  |  | — |
Shareholders’ equity: |  |  |
Preferred stock, $0.01 par value: Authorized shares - 5,000,000; no shares issued or outstanding in 2021 and 2020 | — |  |  | — |
Common stock, $0.01 par value: Authorized shares - 50,000,000; issued and outstanding shares - 26,968,788 in 2021 and 27,316,434 in 2020 | 270 |  |  | 273 |
Additional paid-in capital | 258,474 |  |  | 242,916 |
Retained earnings | 334,910 |  |  | 304,140 |
Total shareholders’ equity | 593,654 |  |  | 547,329 |
Total liabilities and shareholders’ equity | $ | 1,117,823 |  |  | $ | 1,047,393 |

The accompanying notes are an integral part of the consolidated financial statements.
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Forward Air Corporation
Consolidated Statements of Comprehensive Income
(In thousands, except per share data)
| Year ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Operating revenue | $ | 1,662,427 |  |  | $ | 1,269,573 |  |  | $ | 1,215,187 |
Operating expenses: |  |  |  |  |
Purchased transportation | 833,075 |  |  | 650,664 |  |  | 586,140 |
Salaries, wages and employee benefits | 327,814 |  |  | 270,785 |  |  | 258,001 |
Operating leases | 79,633 |  |  | 69,720 |  |  | 63,092 |
Depreciation and amortization | 39,552 |  |  | 37,125 |  |  | 36,394 |
Insurance and claims | 42,186 |  |  | 34,912 |  |  | 38,733 |
Fuel expense | 17,027 |  |  | 12,166 |  |  | 17,759 |
Other operating expenses | 163,839 |  |  | 120,277 |  |  | 102,652 |
Total operating expenses | 1,503,126 |  |  | 1,195,649 |  |  | 1,102,771 |
Income from continuing operations | 159,301 |  |  | 73,924 |  |  | 112,416 |
Other expense: |  |  |  |  |
Interest expense, net | (4,338) |  |  | (4,561) |  |  | (2,711) |
Other, net | — |  |  | (3) |  |  | (1) |
Total other expense | (4,338) |  |  | (4,564) |  |  | (2,712) |
Income before income taxes | 154,963 |  |  | 69,360 |  |  | 109,704 |
Income tax expense | 38,872 |  |  | 16,593 |  |  | 27,382 |
Net income from continuing operations | 116,091 |  |  | 52,767 |  |  | 82,322 |
(Loss) income from discontinued operation, net of tax | (10,232) |  |  | (29,034) |  |  | 4,777 |
Net income and comprehensive income | $ | 105,859 |  |  | $ | 23,733 |  |  | $ | 87,099 |
Basic net income per share: |  |  |  |  |
Continuing operations | $ | 4.25 |  |  | $ | 1.90 |  |  | $ | 2.89 |
Discontinued operation | (0.37) |  |  | (1.05) |  |  | 0.17 |
Net income per share 1 | $ | 3.87 |  |  | $ | 0.84 |  |  | $ | 3.06 |
Diluted net income per share: |  |  |  |  |
Continuing operations | $ | 4.22 |  |  | $ | 1.89 |  |  | $ | 2.87 |
Discontinued operation | (0.37) |  |  | (1.05) |  |  | 0.17 |
Net income per share | $ | 3.85 |  |  | $ | 0.84 |  |  | $ | 3.04 |
Dividends per share: | $ | 0.84 |  |  | $ | 0.75 |  |  | $ | 0.72 |

1 Rounding may impact summation of amounts.
The accompanying notes are an integral part of the consolidated financial statements.
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Forward Air Corporation
Consolidated Statements of Shareholders' Equity
(In thousands)
| Common Stock |  | Additional Paid-in Capital |  | Retained Earnings |  | Total Shareholders’ Equity
| Shares |  | Amount |  |  |
Balance at December 31, 2018 | 28,535 |  |  | $ | 285 |  |  | $ | 210,296 |  |  | $ | 342,663 |  |  | $ | 553,244 |
Net income | — |  |  | — |  |  | — |  |  | 87,099 |  |  | 87,099 |
Stock options exercised | 99 |  |  | 1 |  |  | 4,049 |  |  | — |  |  | 4,050 |
Other | — |  |  | — |  |  | (1) |  |  | (1) |  |  | (2) |
Common stock issued under employee stock purchase plan | 12 |  |  | — |  |  | 614 |  |  | — |  |  | 614 |
Share-based compensation expense | — |  |  | — |  |  | 11,907 |  |  | — |  |  | 11,907 |
Payment of dividends to shareholders | — |  |  | — |  |  | 6 |  |  | (20,500) |  |  | (20,494) |
Payment of minimum tax withholdings on share-based awards | (50) |  |  | — |  |  | — |  |  | (3,032) |  |  | (3,032) |
Repurchases and retirement of common stock | (915) |  |  | (9) |  |  | — |  |  | (56,195) |  |  | (56,204) |
Issuance of share-based awards | 169 |  |  | 2 |  |  | (2) |  |  | — |  |  | — |
Balance at December 31, 2019 | 27,850 |  |  | $ | 279 |  |  | $ | 226,869 |  |  | $ | 350,034 |  |  | $ | 577,182 |
Net income | — |  |  | — |  |  | — |  |  | 23,733 |  |  | 23,733 |
Stock options exercised | 89 |  |  | 1 |  |  | 4,236 |  |  | — |  |  | 4,237 |
Common stock issued under employee stock purchase plan | 15 |  |  | — |  |  | 664 |  |  | — |  |  | 664 |
Share-based compensation expense | — |  |  | — |  |  | 11,138 |  |  | — |  |  | 11,138 |
Payment of dividends to shareholders | — |  |  | — |  |  | 10 |  |  | (20,879) |  |  | (20,869) |
Payment of minimum tax withholdings on share-based awards | (59) |  |  | — |  |  | — |  |  | (3,508) |  |  | (3,508) |
Repurchases and retirement of common stock | (787) |  |  | (8) |  |  | — |  |  | (45,240) |  |  | (45,248) |
Issuance of share-based awards | 208 |  |  | 1 |  |  | (1) |  |  | — |  |  | — |
Balance at December 31, 2020 | 27,316 |  |  | $ | 273 |  |  | $ | 242,916 |  |  | $ | 304,140 |  |  | $ | 547,329 |
Net income | — |  |  | — |  |  | — |  |  | 105,859 |  |  | 105,859 |
Stock options exercised | 69 |  |  | 1 |  |  | 3,705 |  |  | — |  |  | 3,706 |
Common stock issued under employee stock purchase plan | 12 |  |  | — |  |  | 911 |  |  | — |  |  | 911 |
Share-based compensation expense | — |  |  | — |  |  | 10,929 |  |  | — |  |  | 10,929 |
Payment of dividends to shareholders | — |  |  | — |  |  | 14 |  |  | (22,990) |  |  | (22,976) |
Payment of minimum tax withholdings on share-based awards | (39) |  |  | — |  |  | — |  |  | (3,115) |  |  | (3,115) |
Repurchases and retirement of common stock | (535) |  |  | (5) |  |  | — |  |  | (48,984) |  |  | (48,989) |
Issuance of share-based awards | 146 |  |  | 1 |  |  | (1) |  |  | — |  |  | — |
Balance at December 31, 2021 | 26,969 |  |  | $ | 270 |  |  | $ | 258,474 |  |  | $ | 334,910 |  |  | $ | 593,654 |

The accompanying notes are an integral part of the consolidated financial statements.
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Forward Air Corporation
Consolidated Statements of Cash Flows
(In thousands)
| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Operating activities: |  |  |  |  |
Net income from continuing operations | $ | 116,091 |  |  | $ | 52,767 |  |  | $ | 82,322 |
Adjustments to reconcile net income of continuing operations to net cash provided by operating activities of continuing operations: |  |  |  |  |
Depreciation and amortization | 39,552 |  |  | 37,125 |  |  | 36,394 |
Change in fair value of earn-out liability | (496) |  |  | 379 |  |  | (33) |
Share-based compensation expense | 10,913 |  |  | 11,033 |  |  | 11,715 |
Provision for revenue adjustments | 7,943 |  |  | 4,751 |  |  | 3,339 |
Deferred income tax expense | 1,421 |  |  | 772 |  |  | 7,089 |
Other | 1,076 |  |  | 587 |  |  | 1,497 |
Changes in operating assets and liabilities, net of effects from the purchase of acquired companies: |  |  |  |  |
Accounts receivable | (52,684) |  |  | (25,739) |  |  | 653 |
Other receivables | (8,097) |  |  | — |  |  | — |
Prepaid expenses, other current assets and other assets | (8,002) |  |  | (9,424) |  |  | (4,662) |
Accounts payable, accrued expenses and other long-term liabilities | 17,179 |  |  | 23,854 |  |  | 7,212 |
Net cash provided by operating activities of continuing operations | 124,896 |  |  | 96,105 |  |  | 145,526 |
Investing activities: |  |  |  |  |
Proceeds from sale of property and equipment | 2,643 |  |  | 2,413 |  |  | 2,661 |
Purchases of property and equipment | (39,109) |  |  | (20,268) |  |  | (22,007) |
Purchase of businesses, net of cash acquired | (59,866) |  |  | (63,651) |  |  | (39,000) |
Net cash used in investing activities of continuing operations | (96,332) |  |  | (81,506) |  |  | (58,346) |
Financing activities: |  |  |  |  |
Proceeds from revolving credit facility | 195,000 |  |  | 65,000 |  |  | 20,000 |
Payments on revolving credit facility | (150,000) |  |  | (20,000) |  |  | — |
Repayments of finance lease obligations | (2,423) |  |  | (1,446) |  |  | (946) |
Payment of debt issuance costs | (482) |  |  | — |  |  | — |
Proceeds from issuance of common stock upon stock option exercises | 3,706 |  |  | 4,237 |  |  | 4,050 |
Payment of earn-out liability | (6,519) |  |  | (5,284) |  |  | — |
Payments of dividends to shareholders | (22,976) |  |  | (20,869) |  |  | (20,494) |
Repurchases and retirement of common stock | (48,989) |  |  | (45,248) |  |  | (56,204) |
Proceeds from common stock issued under employee stock purchase plan | 911 |  |  | 664 |  |  | 614 |
Payment of minimum tax withholdings on share-based awards | (3,115) |  |  | (3,508) |  |  | (3,032) |
Contributions from (distributions to) subsidiary held for sale | 3,385 |  |  | (12,640) |  |  | 7,924 |
Net cash used in financing activities of continuing operations | (31,502) |  |  | (39,094) |  |  | (48,088) |
Net (decrease) increase in cash of continuing operations | (2,938) |  |  | (24,495) |  |  | 39,092 |
Cash from discontinued operation: |  |  |  |  |
Net cash (used in) provided by operating activities of discontinued operation | (4,635) |  |  | (11,439) |  |  | 13,472 |
Net cash provided by (used in) investing activities of discontinued operation | 8,020 |  |  | (1,201) |  |  | (5,548) |
Net cash (used in) provided by financing activities of discontinued operation | (3,385) |  |  | 12,640 |  |  | (7,924) |
(Decrease) increase in cash and cash equivalents | (2,938) |  |  | (24,495) |  |  | 39,092 |
Cash and cash equivalents at beginning of period of continuing operations | 40,254 |  |  | 64,749 |  |  | 25,657 |
Cash at beginning of period of discontinued operation | — |  |  | — |  |  | — |
(Decrease) increase in cash and cash equivalents | (2,938) |  |  | (24,495) |  |  | 39,092 |
Less: cash at beginning of period of discontinued operation | — |  |  | — |  |  | — |
Cash and cash equivalents at end of period of continuing operations | $ | 37,316 |  |  | $ | 40,254 |  |  | $ | 64,749 |

The accompanying notes are an integral part of the consolidated financial statements
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
(In thousands, except per share data)
1. Operations and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
Forward Air Corporation and its subsidiaries (“Forward Air” or the “Company”) is a leading asset-light freight and logistics company. The Company has two reportable segments: Expedited Freight and Intermodal. The Company conducts business in the United States and Canada.
The Expedited Freight segment provides expedited regional, inter-regional and national less-than-truckload (“LTL”), truckload and final mile 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.
The Intermodal segment provides first- and last-mile high value intermodal container drayage services both to and from seaports and railheads. Intermodal also offers dedicated contract and container freight station (“CFS”) warehouse and handling services.
The Company’s consolidated financial statements include Forward Air Corporation and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
On April 23, 2020, the Board of Directors (the “Board”) of the Company approved a strategy to divest of the Pool Distribution business (“Pool”), and the sale of Pool was completed on February 12, 2021. Pool provided high-frequency handling and distribution of time sensitive products to numerous destinations within a specific geographic region. As a result of the strategy to divest of Pool, the results of operations for Pool are presented as a discontinued operation in the Consolidated Statements of Comprehensive Income for all periods presented. In addition, assets and liabilities were reflected as “Assets and liabilities held for sale” in the Consolidated Balance Sheets for the prior period. Unless otherwise noted, amounts, percentages and discussion for all periods reflect the results of operations, financial condition and cash flows from the Company’s continuing operations. Refer to Note 2, Discontinued Operation and Held for Sale, for further discussion.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period presentation.
Cash and Cash Equivalents
Cash as of December 31, 2021 and 2020 of $22,308 and $25,246, respectively, consisted of cash on hand and bank deposits. Cash equivalents as of both December 31, 2021 and 2020 of $15,008 consisted of money market deposits. The Company considers all investments with an original maturity of three months or less to be cash and cash equivalents.
Allowance for Doubtful Accounts and Revenue Adjustments
The Company has a broad range of customers, including freight forwarders, third-party logistics (“3PL”) companies, passenger and cargo airlines, steamship lines, and retailers, located across a diverse geography. In circumstances in which the Company is aware of a specific customer’s inability to meet its financial obligations to the Company, the Company records a specific reserve in order to reduce the net recognized accounts receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes a general reserve based on a percentage of revenue to ensure accounts receivables are properly recorded at the net amount expected to be collected. The Company sets the general reserve based on historical collection experience combined with forecasts about any expected changes to the collection experience. If circumstances change, expected recoverability of amounts due to the Company may change by a material amount. Accounts are written off after all means of collection, including legal action, have been exhausted.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
The Company records an allowance for revenue adjustments as result of future billing rate changes. Adjustments arise: (a) when small rate changes (“spot quotes”) are granted to customers that differ from the standard rates in the billing system; (b) when freight requires dimensionalization or is reweighed which results in a different rate; (3) when billing errors occur; and (4) when data entry errors occur. In 2021, average revenue adjustments per month were approximately $662 on average revenue per month of approximately $138,536 (0.5% of monthly revenue). The Company estimates an allowance for revenue adjustments based on historical experience, trends and current information. The average amount of revenue adjustments per month can vary in relation to the level of revenue or as a result of other factors. Both the average monthly revenue adjustments and the average lag assumptions are continually evaluated for appropriateness.
Inventories
Inventories are valued at the lower of cost or net realizable value, using first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business. Replacement parts are expensed when placed in service, while tires are capitalized and amortized over their estimated useful life. Expenses related to the utilization of inventories are recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is provided on a straight-line basis over the estimated useful lives of 30 to 40 years for building and improvements, three to ten years for equipment, the lesser of the estimated useful life or the initial lease term for leasehold improvements and five years for computer software. Land is not depreciated and construction in progress is not depreciated until ready for service. Expenditures for maintenance and repairs are charged to expense as incurred.
For internally developed software, all costs incurred during planning and evaluation are expensed. Costs incurred during the application development stage are capitalized and included in property and equipment. Capitalized software also includes software acquired for internal use.
Property and equipment as of December 31, 2021 and 2020 consisted of the following:

| December 31, 2021 |  | December 31, 2020
Land | $ | 26,479 |  |  | $ | 26,365 |
Buildings and improvements | 67,269 |  |  | 65,923 |
Equipment | 259,030 |  |  | 246,949 |
Leasehold improvements | 13,780 |  |  | 13,747 |
Computer software | 26,333 |  |  | 23,480 |
Construction in progress | 27,071 |  |  | 4,055 |
Total property and equipment | 419,962 |  |  | 380,519 |
Less accumulated depreciation and amortization | 200,867 |  |  | 190,652 |
Total property and equipment, net | $ | 219,095 |  |  | $ | 189,867 |

As of December 31, 2021 and 2020, the net book value of computer software included in property and equipment, net was $8,140 and $7,455, respectively. For the years ended December 31, 2021, 2020 and 2019, amortization expense of computer software was $2,394, $2,053 and $1,714, respectively.
Cloud Computing Costs
The Company capitalizes the costs of incurred during the implementation stage for cloud computing or hosting arrangements. Costs incurred in the preliminary project stage and post-implementation stage, which includes maintenance and training costs, are expensed as incurred. Capitalized software costs are amortized over the straight-line method over three to five years and are recorded in “Prepaid expenses” in the Consolidated Balance Sheets.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Goodwill, Intangible Assets and Other Long-Lived Assets
The Company tests goodwill for impairment, at the reporting unit level, annually and when events or circumstances indicate that fair value of a reporting unit may be below its carrying value. A reporting unit is an operating segment or one level below an operating segment, for example, a component. The Company’s reporting units are not its reportable segments.
Goodwill is evaluated annually as of June 30 for impairment using a qualitative assessment or a quantitative one-step assessment. If the Company elects to perform a qualitative assessment and determines the fair value of its reporting units more likely than not exceed the carrying value of their net assets, no further evaluation is necessary. For reporting units where the Company performs a one-step quantitative assessment, the Company compares the fair value of each reporting unit, which is determined based on a combination of an income approach using a discounted cash flow model, and a market approach, which considers comparable companies, to its respective carrying value of net assets, including goodwill. If the fair value of the reporting unit exceeds its carrying value of net assets, the goodwill is not considered impaired. If the carrying value of net assets is higher than the fair value of the reporting unit, the impairment charge is the amount by which the carrying value exceeds the reporting unit’s fair value.
The Company reviews its long-lived assets, which include intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation for recoverability is performed at a level where independent cash flows may be attributed to either an asset or asset group. If the Company determines that the carrying amount of an asset or asset group is not recoverable based on the expected undiscounted future cash flows of the asset or asset group, an impairment loss is recorded equal to the excess of the carrying amounts over the estimated fair value of the long-lived assets. Estimates of future cash flows are based on various factors, including current operating results, expected market trends and competitive influences. The Company also evaluates the amortization periods assigned to its intangible assets to determine whether events or changes in circumstances warrant revised estimates of useful lives. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value, less estimated costs to sell.
The results of the Company’s goodwill impairment analyses conducted as of June 30, 2021, 2020 and 2019 indicated that no reduction in the carrying amount of the Company’s goodwill was required.
Changes in the carrying amount of goodwill during the years ended December 31, 2021, 2020 and 2019 are summarized as follows:

| Expedited Freight |  | Intermodal |  | Consolidated
Balance as of December 31, 2019 | $ | 137,034 |  |  | $ | 78,665 |  |  | $ | 215,699 |
Acquisitions | 28,234 |  |  | 1,049 |  |  | 29,283 |
Balance as of December 31, 2020 | $ | 165,268 |  |  | $ | 79,714 |  |  | $ | 244,982 |
Acquisitions | 4,020 |  |  | 17,750 |  |  | 21,770 |
Balance as of December 31, 2021 | $ | 169,288 |  |  | $ | 97,464 |  |  | $ | 266,752 |

The Company’s accumulated goodwill impairment is $25,686 related to impairment charges the Company recorded during 2016 pertaining to its TLS reporting unit. The TLS reporting unit operates within the Expedited Freight reportable segment. As of December 31, 2021, approximately $187,608 of goodwill is deductible for tax purposes.
The Company amortizes certain acquired identifiable intangible assets on a straight-line basis over their estimated useful lives, which range from one year to 20 years. The acquired intangible assets have a weighted-average useful life as follows:
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)

Intangible Assets |  | Weighted-Average Useful Life
Customer relationships |  | 15 years
Non-compete agreements |  | 4 years
Trade names |  | 4 years

For the years ended December 31, 2021, 2020 and 2019, acquired intangible asset amortization was $14,328, $13,489 and $10,183, respectively. The Company estimates amortization of existing intangible assets will be $16,018 in 2022, $15,779 in 2023, $15,655 in 2024, $15,557 in 2025, and $15,366 in 2026.
Changes in the carrying amount of acquired intangible assets during 2021 and 2020 are summarized as follows:

|  | Gross Carrying Amount
|  | Customer Relationships 1 |  | Non-Compete Agreements |  | Trade Names |  | Total
Balance as of December 31, 2019 |  | $ | 196,225 |  |  | $ | 6,652 |  |  | $ | 1,500 |  |  | $ | 204,377 |
Acquisitions |  | 32,191 |  |  | 1,473 |  |  | — |  |  | 33,664 |
Balance as of December 31, 2020 |  | $ | 228,416 |  |  | $ | 8,125 |  |  | $ | 1,500 |  |  | $ | 238,041 |
Acquisitions |  | 22,961 |  |  | 1,051 |  |  | — |  |  | 24,012 |
Balance as of December 31, 2021 |  | $ | 251,377 |  |  | $ | 9,176 |  |  | $ | 1,500 |  |  | $ | 262,053 |

|  | Accumulated Amortization
|  | Customer Relationships 1 |  | Non-Compete Agreements |  | Trade Names |  | Total
Balance as of December 31, 2019 |  | $ | 73,868 |  |  | $ | 4,152 |  |  | $ | 1,500 |  |  | $ | 79,520 |
Amortization expense |  | 12,062 |  |  | 1,427 |  |  | — |  |  | 13,489 |
Balance as of December 31, 2020 |  | $ | 85,930 |  |  | $ | 5,579 |  |  | $ | 1,500 |  |  | $ | 93,009 |
Amortization expense |  | 13,164 |  |  | 1,164 |  |  | — |  |  | 14,328 |
Balance as of December 31, 2021 |  | $ | 99,094 |  |  | $ | 6,743 |  |  | $ | 1,500 |  |  | $ | 107,337 |

1 Carrying value as of December 31, 2021 and 2020 is inclusive of $16,501 of accumulated impairment.
Accrued Expenses
Accrued expenses as of December 31, 2021 and 2020 consisted of the following:

| December 31, 2021 |  | December 31, 2020
Accrued payroll and related items | $ | 29,364 |  |  | $ | 18,545 |
Insurance and claims accruals | 21,172 |  |  | 17,994 |
Payables to leased capacity providers | 11,085 |  |  | 14,725 |
Accrued expenses | $ | 61,621 |  |  | $ | 51,264 |

Self-Insurance Loss Reserves
The Company’s licensed motor carrier contracts with independent contractor fleets, owner-operators and other third-party transportation capacity providers for most of the transportation services. The Company’s independent contractor fleet owners and owner-operators lease their equipment to the Company’s motor carrier (“Leased Capacity Providers”) and own,
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
operate and maintain their own tractors and employ their own drivers. Under U.S. Department of Transportation (“DOT”) regulations, the Company is liable for bodily injury and property damage caused by the Leased Capacity Providers and employee drivers while they are operating equipment under the Company’s various motor carrier authorities. The potential liability associated with any accident can be severe and occurrences are unpredictable.
For vehicle liability, the Company retains a portion of the risk. Below is a summary of the Company’s risk retention on vehicle liability insurance coverage maintained by the Company through $10,000:

|  | Company Risk Retention |  | Frequency |  | Layer |  | Policy Term
Expedited Freight¹ |  |  |  |  |  |  |  |
LTL business |  | $ | 3,000 |  |  | Occurrence/Accident² |  | $0 to $3,000 |  | 10/1/2021 to 10/1/2022
Truckload business |  | $ | 2,000 |  |  | Occurrence/Accident² |  | $0 to $2,000 |  | 10/1/2021 to 10/1/2022
LTL business |  | $ | 6,000 |  |  | Policy Term Aggregate³ |  | $3,000 to $5,000 |  | 10/1/2021 to 10/1/2022
LTL, Truckload and Intermodal businesses |  | $ | 2,500 |  |  | Policy Term Aggregate³ |  | $5,000 to $10,000 |  | 10/1/2021 to 10/1/2022
Intermodal |  | $ | 1,000 |  |  | Occurrence/Accident² |  | $0 to $1,000 |  | 10/1/2021 to 10/1/2022

¹ Excluding the Final Mile business, which is primarily a brokered service.
² For each and every accident, the Company is responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.
³ During the Policy Term, the Company is responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Company Risk Retention before insurance will respond.
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. Additionally, the Company maintains workers’ compensation insurance with a self-insured retention of $500 per occurrence.
The Company provides for the estimated costs of vehicle liability and workers’ compensation claims both reported and for claims incurred but not reported. The amount of self-insurance loss reserves and loss adjustment expenses is determined based on an estimation process that uses information obtained from both Company-specific and industry data, as well as general economic information. The most significant assumptions used in the estimation process include determining the trend in loss costs, the expected consistency in the frequency and severity of claims incurred but not yet reported, changes in the timing of the reporting of losses from the loss date to the notification date, and expected costs to settle unpaid claims. The Company estimates its self-insurance loss exposure by evaluating the merits and circumstances surrounding individual known claims and through actuarial analysis to determine an estimate of probable losses on claims incurred but not reported. T he Company accrues for the costs of the uninsured portion of pending claims, based on the nature and severity of individual claims and historical claims development trends. Estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult. Failure to establish sufficient insurance reserves and adequately estimate for future insurance claims may cause unfavorable differences between actual self-insurance costs and the reserve estimates.
As of December 31, 2021 and 2020, the Company recorded insurance reserves of $65,649 and $68,647, respectively, inclusive of reserves in excess of the self-insured retention limit that are expected to be reimbursed from insurance carriers. As of December 31, 2021, $21,172 was recorded in “Insurance and claims accruals” and $44,477 w as recorded in “Other long-term liabilities” in the Consolidated Balance Sheets. As of December 31, 2020, $17,994 was recorded in “Insurance and claims accruals” and $50,653 was recorded in “Other long-term liabilities” in the Consolidated Balance Sheets.
As of December 31, 2021 and 2020, the Company recognized a receivable for insurance proceeds and a corresponding claims payable for vehicle liability and workers’ compensation claims in excess of the self-insured retention limit. As of December 31, 2021 and 2020, the Company recorded $28,667 and $35,088, respectively, in “Other assets” and “Other long-term liabilities” in the Consolidated Balance Sheets.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
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 collectibility is not probable, and defers recognition until collection is probable or payment is received.
The Company generates revenue from the delivery of a shipment and the completion of related services. Revenue for the delivery of a shipment is recorded over time to coincide with when customers simultaneously receive and consume the benefits of the delivery services. Accordingly, revenue billed to a customer for the transportation of freight are recognized over the transit period as the performance obligation to the customer is satisfied. The Company determines the transit period for a shipment based on the pick-up date and the delivery date, which may be estimated if delivery has not occurred as of a reporting period. The determination of the transit period and how much of it has been completed as of a given reporting date may require the Company to make judgments that impact the timing of revenue recognized. For delivery of shipments with a pick-up date in one reporting period and a delivery date in another reporting period, the Company recognizes revenue based on relative transit time in each reporting period. A portion of the total revenue to be billed to the customer after completion of a delivery is recognized in each reporting period based on the percentage of total transit time that has been completed at the end of the applicable reporting period. Upon delivery of a shipment or related service, customers are billed according to the applicable payment terms. Related services are a separate performance obligation and include accessorial charges such as terminal handling, storage, equipment rentals and customs brokerage.
Revenue is classified based on the line of business as the Company believes that best depicts the nature, timing and amount of revenue and cash flows. For all lines of business, the Company records revenue on a gross basis as it is the principal in the transaction as the Company has discretion to determine the amount of consideration. Additionally, the Company has the discretion to select drivers and other vendors for the services provided to customers. These factors, discretion in the amount of consideration and the selection of drivers and other vendors, support revenue recognized on a gross basis.
Leases
The Company accounts for leases under Accounting Standards Codification 842, Leases, (“ASC 842”), where lessees are required to record an asset (right-of-use asset or finance lease asset) and a lease liability. ASC 842 allows for two types of leases for recognition purposes: operating leases and finance leases. Operating leases result in the recognition of a single lease expense on a straight-line basis over the lease term, while finance leases result in an accelerated expense. The Company determines if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period. All leases greater than 12 months result in the recognition of a right-of-use asset and liability at the lease commencement date based on the present value of the lease payments over the lease term. The present value of the lease payments is calculated using the applicable weighted-average discount rate. The weighted-average discount rate is based on the discount rate implicit in the lease, or if the implicit rate is not readily determinable from the lease, then the Company estimates an applicable incremental borrowing rate. The incremental borrowing rate is estimated based on the contractual lease term and the Company’s applicable borrowing rate.
Business Combinations
Upon the acquisition of a business, the fair value of the assets acquired and liabilities assumed are estimated, which may require judgment regarding the identification of acquired assets and liabilities assumed. Once the acquired assets and assumed liabilities are identified, the fair value of the assets and liabilities are estimated using a variety of approaches that require significant judgments. For intangible assets, significant judgments include, but are not limited to, future cash flows, selection of discount rates, determination of terminal growth rates, and estimated useful life and pattern of use of the underlying intangible assets. For tangible assets, significant judgements, include, but are not limited to, current market values, physical and functional obsolescence of the assets, and remaining useful lives. Consideration is typically paid in the form of cash paid upon closing or contingent consideration paid upon satisfaction of a future obligation. If contingent consideration is included as a component of the consideration, the Company values the consideration as of the acquisition date.
Income Taxes
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Refer to Note 7, Income Taxes, for further discussion.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during each period. Restricted shares have non-forfeitable rights to dividends and as a result, are considered participating securities for purposes of computing net income (loss) per common share pursuant to the two-class method. Net income allocated to participating securities was $737 in 2021, $385 in 2020 and $945 in 2019. Diluted net income (loss) per common share assumes the exercise of outstanding stock options and the vesting of performance share awards using the treasury stock method when the effects of such assumptions are dilutive.
A reconciliation of net income (loss) attributable to Forward Air and weighted-average common shares outstanding for purposes of calculating basic and diluted net income (loss) per share during the years ended December 31, 2021, 2020 and 2019 is as follows:
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)

| 2021 |  | 2020 |  | 2019 |  |  |  |  |  |
Numerator: |  |  |  |  |  |  |  |  |  |  |
Net income and comprehensive income from continuing operations | $ | 116,091 |  |  | $ | 52,767 |  |  | $ | 82,322 |  |  |  |  |  |  |
Net (loss) income and comprehensive (loss) income from discontinued operation | (10,232) |  |  | (29,034) |  |  | 4,777 |  |  |  |  |  |  |
Net income attributable to Forward Air | $ | 105,859 |  |  | $ | 23,733 |  |  | $ | 87,099 |  |  |  |  |  |  |
Income allocated to participating securities from continuing operations | (807) |  |  | (385) |  |  | (945) |  |  |  |  |  |  |
Loss allocated to participating securities from discontinued operation | 70 |  |  | — |  |  | — |  |  |  |  |  |  |
Income allocated to participating securities | (737) |  |  | (385) |  |  | (945) |  |  |  |  |  |  |
Numerator for basic and diluted net income per share for continuing operations | $ | 115,284 |  |  | $ | 52,382 |  |  | $ | 81,377 |  |  |  |  |  |  |
Numerator for basic and diluted net (loss) income per share for discontinued operation | $ | (10,162) |  |  | $ | (29,034) |  |  | $ | 4,777 |  |  |  |  |  |  |
Denominator: |  |  |  |  |  |  |  |  |  |  |
Denominator for basic net income per share - weighted-average number of common shares outstanding | 27,155 |  |  | 27,631 |  |  | 28,195 |  |  |  |  |  |  |
Dilutive stock options and performance share awards | 137 |  |  | 66 |  |  | 113 |  |  |  |  |  |  |
Denominator for diluted net income per share - weighted-average number of common shares and common share equivalents outstanding | 27,292 |  |  | 27,697 |  |  | 28,308 |  |  |  |  |  |  |
Basic net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |
Continuing operations | $ | 4.25 |  |  | $ | 1.90 |  |  | $ | 2.89 |  |  |  |  |  |  |
Discontinued operation | (0.37) |  |  | (1.05) |  |  | 0.17 |  |  |  |  |  |  |
Net income per share 1 | $ | 3.87 |  |  | $ | 0.84 |  |  | $ | 3.06 |  |  |  |  |  |  |
Diluted net income (loss) per share: |  |  |  |  |  |  |  |  |  |  |
Continuing operations | $ | 4.22 |  |  | $ | 1.89 |  |  | $ | 2.87 |  |  |  |  |  |  |
Discontinued operation | (0.37) |  |  | (1.05) |  |  | 0.17 |  |  |  |  |  |  |
Net income per share | $ | 3.85 |  |  | $ | 0.84 |  |  | $ | 3.04 |  |  |  |  |  |  |

1 Rounding may impact summation of amounts.
The number of shares that were not included in the calculation of net income (loss) per diluted share because to do so would have been anti-dilutive for the years ended December 31, 2021, 2020 and 2019 are as follows:

| 2021 |  | 2020 |  | 2019 |  |  |  |  |  |
Anti-dilutive stock options | — |  |  | 206 |  |  | 183 |  |  |  |  |  |  |
Anti-dilutive performance shares | — |  |  | 15 |  |  | — |  |  |  |  |  |  |
Anti-dilutive restricted shares and deferred stock units | — |  |  | 3 |  |  | — |  |  |  |  |  |  |
Total anti-dilutive shares | — |  |  | 224 |  |  | 183 |  |  |  |  |  |  |

Share-Based Compensation
The Company grants awards under the stock-based compensation plans to certain employees of the Company. The awards include stock options, restricted shares and performance shares. The fair value of the stock options is estimated on the grant date using the Black-Scholes option pricing model, and share-based compensation expense is recognized on a straight-line basis over the three-year vesting period. The fair value of the restricted shares is the quoted market value of the Company’s common stock on the grant date, and the share-based compensation expense is recognized on a straight-line basis over the vesting period. For certain performance shares, the fair value is the quoted market value of the Company’s common stock on
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
the grant date less the present value of the expected dividends not received during the relevant period. For these performance shares, the share-based compensation expense is recognized on a straight-line basis over the three-year vesting period based on the projected assessment of the level of performance that will be achieved. The fair value of other performance shares that have a financial target of the Company’s total shareholder return as compared to the total shareholder return of a selected peer group, is estimated on the grant date using a Monte Carlo simulation model. The share-based compensation expense is recognized on a straight-line basis over the three-year vesting period. All share-based compensation expense is recognized in salaries, wages and employee benefits in the Consolidated Statements of Comprehensive Income. Refer to Note 6, Stock Incentive Plan, for further discussion.
Ransomware Incident
In December 2020, the Company detected a ransomware incident impacting its operational and information technology systems, which caused service delays for many of its customers (“Ransomware Incident”). Promptly upon its detection of the incident, the Company initiated response protocols, launched an investigation and engaged the services of cybersecurity and forensics professionals. The Company has also engaged with the appropriate law enforcement authorities. The Company continued to cooperate with law enforcement in connection with the criminal investigation into those responsible for the Ransomware Incident.
For the year ended December 31, 2021 and 2020, expenses related to the Ransomware Incident were $434 and $1,560, respectively, which were recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income. Expenses include costs to investigate and remediate the Ransomware Incident and legal and other professional services related to the incident.
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard simplifies the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and improving consistent application of the principles. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this standard as of January 1, 2021. The adoption of the standard did not have a material impact on the Company’s results of operations, financial condition, or cash flows.
New Accounting Pronouncements to be Adopted
In October 2021, FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard addresses the recognition of an acquired contract liability in a business combination and the recognition and measurement of contract assets and contract liabilities from revenue contracts acquired in a business combination. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the adoption of ASU 2021-08 and the impact, if any, adoption will have on its operations, financial condition, or cash flows.
2. Discontinued Operation and Held for Sale
As previously disclosed, on April 23, 2020, the Company made a decision to divest of Pool. The Pool business met the criteria for held for sale classification. As a result, the assets and liabilities of Pool were presented separately under the captions “Current assets held for sale”, “Noncurrent assets held for sale”, “Current liabilities held for sale” and “Noncurrent liabilities held for sale” in the Consolidated Balance Sheets as of December 31, 2020. The results of Pool were reclassified to “Loss from discontinued operation, net of tax” in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019. Certain corporate overhead and other costs previously allocated to Pool for segment reporting purposes did not qualify for classification within discontinued operation and have been reallocated to continuing operations. These costs were reclassified to the eliminations column in the segment reconciliation in Note 12, Segment Reporting.
Held for Sale
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Upon meeting the criteria for held for sale classification and in each subsequent reporting period, the Company evaluated whether Pool’s estimated fair value, less costs to sell, exceeded the net carrying value. The annual goodwill impairment analysis conducted as of June 30, 2020 indicated that the fair value in excess of the carrying value related to the Pool reporting unit was approximately 5% and in the third quarter of 2020, the Company concluded the estimated fair value, less costs to sell, exceeded the net carrying value and there were no indicators of impairment for the Pool reporting unit.
However, in response to the longer than expected macroeconomic conditions caused by the COVID-19 pandemic and status of negotiations to sell the Pool business, a strategic review of the business was completed in the fourth quarter of 2020 along with revised forecasts to include updated market conditions and strategic operating decisions. The revised forecasts indicated an impairment of the entire goodwill balance of the Pool reporting unit was necessary as of December 31, 2020. A non-cash charge of approximately $5,406 was recorded as an “Impairment charge” in the summarized discontinued operation financial information for the year ended December 31, 2020. In addition, the Company recorded a valuation allowance against the net assets held for sale to write down the carrying value to the estimated fair value less costs to sell. A non-cash valuation allowance of approximately $22,978 was recorded as an “Impairment charge” in the summarized discontinued operation financial information for the year ended December 31, 2020.
The fair value was estimated based on a combination of an income approach using a discounted cash flow model, and a market approach, which considers comparable companies. Estimates of future cash flows are based on various factors, including current operating results, expected market trends and competitive influences. Refer to Note 1, Operations and Summary of Significant Accounting Policies, for further discussion about the estimation of fair value.
Sale of Pool
On February 12, 2021, the Company completed the sale of the Pool business for $8,000 in cash and up to a $12,000 earn-out based on earnings before interest, taxes, depreciation and amortization. The sale agreement for Pool included an earn-out based on the achievement of certain earnings before interest, taxes, depreciation and amortization attainment over an eleven-month period, beginning February 1, 2021. The estimated fair value of the earn-out asset on the date of sale was $6,967. The fair value was based on the estimated eleven-month period of the earnings before interest, taxes, depreciation and amortization and was calculated using a Monte Carlo simulation model.
The weighted average assumptions under the Monte Carlo simulation model were as follows:

| February 12, 2021
Counterparty credit spread | 1.2%
Earnings before interest, taxes, depreciation and amortization discount rate | 15.0%
Asset volatility | 55.0%

Subsequent to the date of sale, the Company recognized any increases in the carrying value of the earn-out asset when the change was realized and evaluated the earn-out asset for impairment at each reporting period. The financial performance of the Pool business significantly deteriorated during the third quarter of 2021. As a result, an evaluation of the earn-out asset for impairment was completed, which included a review of revised forecasts, updated strategic operating decisions and current market conditions. The revised forecasts indicated an impairment of the entire earn-out asset was necessary. A non-cash charge of $6,967 was recorded as an “Impairment charge” in the summarized discontinued operation financial information for the year ended December 31, 2021.
Transition Services Agreement
On February 12, 2021, the Company entered into a Transition Services Agreement (“TSA”) with TOG FAS Holdings LLC, the buyer of the Pool business. Under the TSA, the Company performed certain services on an interim basis in order to facilitate the orderly transition of the Pool business. The effective date of the TSA was February 12, 2021 and remained in effect until the date all services were completed, but no more than six months following the effective date. The TSA provided the right to extend the term of the TSA with no limit on the number of the mutually agreed upon extensions. In exchange for the services performed by the Company under the TSA, the Company received a monthly service charge. For the year ended December 31, 2021, the Company recognized $747, in “Other operating expenses” in the Consolidated Statements of
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Comprehensive Income, for the services performed under the TSA. The TSA ended in October 2021 when all services were completed.
Additionally, under the TSA, the Company remitted payments to outside vendors on behalf of TOG FAS Holdings LLC for expenses incurred by the Pool business up to a limit of $18,000. The Company is reimbursed by TOG FAS Holdings LLC within 60 days from the end of the month in which the payment is remitted. As of December 31, 2021, the Company recorded a receivable in the amount o f $8,097 in “Other receivables” in Consolidated Balance Sheets for the reimbursement due to the Company. The Company evaluates the collectability of the receivable at least quarterly and if the Company is aware of the inability of TOG FAS Holdings LLC to meet its financial obligations to the Company, the Company will record a specific reserve in order to reduce the receivable to the amount the Company reasonably believes will be collected. The Company believes collectibility of the receivable is probable as of December 31, 2021.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Summarized Held for Sale and Discontinued Operation Financial Information
A summary of the carrying amounts of major classes of assets and liabilities, which are included in assets and liabilities held for sale in the Consolidated Balance Sheets, is as follows:

|  | December 31, 2020
Assets |  |
Current assets: |  |
Accounts receivable, less allowance of $86 in 2020 |  | $ | 19,740 |
Other current assets |  | 1,262 |
Total current assets held for sale |  | $ | 21,002 |
Property and equipment |  | $ | 48,905 |
Less accumulated depreciation and amortization |  | 28,890 |
Net property and equipment |  | 20,015 |
Operating lease right-of-use assets |  | 46,865 |
Other acquired intangibles, net of accumulated amortization of $12,679 in 2020 |  | 2,621 |
Deferred income taxes |  | 3,253 |
Other assets |  | 3,321 |
Valuation allowance on assets held for sale |  | (22,978) |
Total noncurrent assets held for sale |  | $ | 53,097 |
Liabilities |  |
Current liabilities: |  |
Accounts payable |  | $ | 4,002 |
Accrued expenses |  | 5,070 |
Other current liabilities |  | 27 |
Current portion of operating lease liabilities |  | 16,825 |
Total current liabilities held for sale |  | $ | 25,924 |
Operating lease liabilities, less current portion |  | $ | 30,024 |
Other long-term liabilities |  | 4,551 |
Total noncurrent liabilities held for sale |  | $ | 34,575 |

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
A summary of the results of operations classified as a discontinued operation, net of tax, in the Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 is as follows:

| Year Ended |  |
| December 31, 2021 |  |  |  | December 31, 2020 |  | December 31, 2019 |  |
Operating revenue | $ | 17,776 |  |  |  |  | $ | 141,433 |  |  | $ | 195,208 |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |
Purchased transportation | 3,381 |  |  |  |  | 33,979 |  |  | 52,867 |  |  |
Salaries, wages and employee benefits | 9,458 |  |  |  |  | 65,695 |  |  | 77,162 |  |  |
Operating leases | 2,289 |  |  |  |  | 21,982 |  |  | 18,918 |  |  |
Depreciation and amortization | — |  |  |  |  | 1,657 |  |  | 5,715 |  |  |
Insurance and claims | 929 |  |  |  |  | 6,205 |  |  | 6,707 |  |  |
Fuel expense | 508 |  |  |  |  | 4,279 |  |  | 6,462 |  |  |
Other operating expenses | 1,627 |  |  |  |  | 17,587 |  |  | 20,969 |  |  |
Impairment charge | 6,967 |  |  |  |  | 28,384 |  |  | — |  |  |
Total operating expenses | 25,159 |  |  |  |  | 179,768 |  |  | 188,800 |  |  |
(Loss) income from discontinued operation | (7,383) |  |  |  |  | (38,335) |  |  | 6,408 |  |  |
Loss on sale of business | (2,860) |  |  |  |  | — |  |  | — |  |  |
(Loss) income from discontinued operation before income taxes | (10,243) |  |  |  |  | (38,335) |  |  | 6,408 |  |  |
Income tax (benefit) expense | (11) |  |  |  |  | (9,301) |  |  | 1,631 |  |  |
(Loss) income from discontinued operation, net of tax | $ | (10,232) |  |  |  |  | $ | (29,034) |  |  | $ | 4,777 |  |  |

3. Acquisitions
Expedited Freight
In April 2019, the Company acquired certain assets and liabilities of FSA Network, Inc., doing business as FSA Logistix (“FSA”), for $26,798, net of cash acquired of $202, and an earn-out of up to $15,000. FSA, with management offices in Fort Lauderdale, Florida and Southlake, Texas, specializes in last mile logistics for a wide range of American companies, including national retailers, manufacturers, eTailers and third-party logistics companies. FSA has operations in the East, Midwest, Southwest and West regions. The acquisition of FSA provides the Company with the opportunity to expand its final mile service offering into additional geographic markets, form relationships with new customers, add volumes to existing locations and generate synergies within the Company. The acquisition was financed by cash flow from operations. The results of operations of FSA has been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment.
The purchase agreement for FSA included an earn-out up to $15,000 based on the achievement of certain revenue milestones over two one-year periods, beginning May 1, 2019. The estimated fair value of the earn-out liability on the date of acquisition was $11,803. The fair value was based on the estimated two-year performance of the acquired customer revenue and was calculated using a Monte Carlo simulation model. The assumptions under the Monte Carlo simulation model were as follows for the year ended December 31, 2020 and 2019:

| December 31, 2020 |  | December 31, 2019
Risk-free rate | 1.4% |  | 2.2%
Revenue discount rate | 3.2% |  | 4.4%
Revenue volatility | 8.0% |  | 5.0%

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
The fair value of the earn-out liability was adjusted at each reporting period based on changes in the expected cash flows and related assumptions used in the Monte Carlo simulation model. During the year ended December 31, 2021, 2020 and 2019, the fair value of the earn-out changed by ($52), $379 and ($33), respectively, and the change in fair value was recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income. The first one-year period ended in the second quarter of 2020 and the Company paid $5,284 based on the terms of the purchase agreement. The second one-year period ended in the second quarter of 2021 and the Company paid $6,813 in the third quarter of 2021 based on the terms of the purchase agreement. As of December 31, 2020, the fair value of the earn-out liability was $6,865, which was reflected in “Other current liabilities” in the Consolidated Balance Sheets.
In January 2020, the Company acquired certain assets and liabilities of Linn Star Holdings, Inc., Linn Star Transfer, Inc. and Linn Star Logistics, LLC (collectively, “Linn Star”) for $55,931, net of cash acquired of $1,308. Linn Star, headquartered in Cedar Rapids, Iowa, specializes in last mile logistics and in-home installation services for a range of national retailers and manufacturers. Linn Star has operations primarily in the Midwest and Southwest regions. The acquisition of Linn Star supports the Company’s strategic growth plan by expanding the footprint of the Final Mile business into additional markets. The acquisition was financed by cash flows from operations. The results of operations of Linn Star have been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment.
On October 11, 2020, the Company acquired certain assets of CLW Delivery, Inc. (“CLW”) for $5,500. CLW, headquartered in Johnson City, Tennessee, specializes in last mile logistics and in-home installation services for national retailers and manufacturers. The acquisition of CLW supports the Company’s strategic growth plan by expanding the footprint of the Final Mile business into additional markets. The acquisition was financed by cash flows from operations. The results of operations of CLW have been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment.
In May 2021, the Company acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,670. J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia. The acquisition of J&P supports the Company’s strategic growth plan by expanding pickup and delivery, less-than-truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States. The acquisition was financed by cash flow from operations. The results of J&P have been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Expedited Freight reportable segment.
Intermodal
In July 2019, the Company acquired certain assets and liabilities of O.S.T. Logistics, Inc. and O.S.T. Trucking Co., Inc. (collectively, “O.S.T.”) for $12,000. O.S.T., headquartered in Baltimore, Maryland, provides intermodal drayage services. O.S.T. has locations in Florida, Georgia, South Carolina and Virginia. The acquisition of O.S.T. supports the Company’s strategic growth plan by expanding the footprint of the Intermodal business into additional markets. The acquisition was financed by cash flows from operations. The results of operations of O.S.T. have been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.
In February 2021, the Company acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc. (together “Proficient Transport”) for $16,339 and a potential earn-out up to $2,000. Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois. The acquisition of Proficient Transport supports the Company’s strategic growth plan by expanding the intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and introduces a new location in Ohio. The acquisition was financed by cash flows from operations. The results of Proficient Transport have been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.
The purchase agreement for Proficient Transport included an earn-out up to $2,000 based on the achievement of certain revenue milestones over a one-year period, beginning March 1, 2021. The estimated fair value of the earn-out liability on the date of acquisition was $829. The fair value was based on the estimated one-year performance of the acquired customer
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
revenue and was calculated using the option pricing method. The assumptions used to calculate the estimated fair value of the earn-out under the option pricing method were as follows:

| December 31, 2021 |  | February 28, 2021
Risk-free rate | 0.1% |  | 0.1%
Revenue discount rate | 9.8% |  | 8.3%
Revenue volatility | 24.2% |  | 27.3%

The fair value of the earn-out liability was adjusted at each reporting period based on changes in the expected cash flows and related assumptions used in the option pricing method. During the year ended December 31, 2021, the fair value of the earn-out changed by ($444), and the change in the fair value was recorded in “Other operating expenses” in the Consolidated Statements of Comprehensive Income. As of December 31, 2021, the fair value of the earn-out liabili ty was $385, which was reflected in “Other current liabilities” in the Consolidated Balance Sheets.
In November 2021, the Company acquired certain assets and liabilities of BarOle Trucking, Inc. (“BarOle”) for $35,436. BarOle is an intermodal drayage company headquartered in Roseville, Minnesota. The acquisition of BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area. In addition, BarOle has a larger terminal location, which allows for further expansion in the future. The acquisition was financed by cash flows from operations. The results of BarOle have been included in the Company’s consolidated financial statements as of and from the date of acquisition. The associated goodwill has been included in the Company’s Intermodal reportable segment.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Fair Value of Assets Acquired and Liabilities Assumed
Assets acquired and liabilities assumed as of the acquisition date are presented in the following table:

|  | FSA |  | O.S.T. |  | Linn Star |  | CLW |  | Proficient Transport |  | J&P |  | BarOle
|  | April 21, 2019 |  | July 14, 2019 |  | January 12, 2020 |  | October 11, 2020 |  | February 28, 2021 |  | May 30, 2021 |  | November 30, 2021
Tangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 202 |  |  | $ | — |  |  | $ | 1,308 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Accounts receivable |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,171 |  |  | 1,940 |  |  | 2,481 |
Other receivables |  | 1,491 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Prepaid expenses and other current assets |  | — |  |  | — |  |  | 1,182 |  |  | — |  |  | — |  |  | 32 |  |  | — |
Property and equipment |  | 40 |  |  | 10,371 |  |  | 605 |  |  | — |  |  | 140 |  |  | 1,567 |  |  | 5,351 |
Other assets |  | — |  |  | — |  |  | — |  |  | — |  |  | 24 |  |  | 3 |  |  | — |
Operating lease right-of-use assets |  | 3,209 |  |  | 1,672 |  |  | 10,011 |  |  | 811 |  |  | — |  |  | 1,355 |  |  | — |
Total tangible assets |  | 4,942 |  |  | 12,043 |  |  | 13,106 |  |  | 811 |  |  | 4,335 |  |  | 4,897 |  |  | 7,832 |
Intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  | 17,900 |  |  | 5,700 |  |  | 29,800 |  |  | 1,500 |  |  | 6,060 |  |  | 620 |  |  | 16,282 |
Non-compete agreements |  | 900 |  |  | 850 |  |  | 450 |  |  | 1,000 |  |  | 18 |  |  | 120 |  |  | 913 |
Goodwill |  | 19,963 |  |  | 2,050 |  |  | 25,234 |  |  | 3,000 |  |  | 6,249 |  |  | 4,020 |  |  | 10,677 |
Total intangible assets |  | 38,763 |  |  | 8,600 |  |  | 55,484 |  |  | 5,500 |  |  | 12,327 |  |  | 4,760 |  |  | 27,872 |
Total assets acquired |  | 43,705 |  |  | 20,643 |  |  | 68,590 |  |  | 6,311 |  |  | 16,662 |  |  | 9,657 |  |  | 35,704 |
Liabilities assumed: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  | 8,466 |  |  | — |  |  | 1,340 |  |  | — |  |  | 323 |  |  | 632 |  |  | 268 |
Other liabilities |  | 5,030 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Finance lease obligations |  | — |  |  | 6,971 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Operating lease liabilities |  | 3,209 |  |  | 1,672 |  |  | 10,011 |  |  | 811 |  |  | — |  |  | 1,355 |  |  | — |
Total liabilities assumed |  | 16,705 |  |  | 8,643 |  |  | 11,351 |  |  | 811 |  |  | 323 |  |  | 1,987 |  |  | 268 |
Net assets acquired |  | $ | 27,000 |  |  | $ | 12,000 |  |  | $ | 57,239 |  |  | $ | 5,500 |  |  | $ | 16,339 |  |  | $ | 7,670 |  |  | $ | 35,436 |

The preliminary purchase price for BarOle has been allocated to assets acquired and liabilities assumed based on the the Company’s best estimates and assumptions using the information available as of the acquisition date through the date of this filing. The provisional measurements of identifiable assets and liabilities, and the resulting goodwill related to these acquisitions are subject to adjustments in subsequent periods as the Company finalizes its purchase price allocation, including the third-party valuations. The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
The estimated useful life of acquired intangible assets as of the acquisition date are summarized in the following table:

|  | Estimated Useful Lives
|  | FSA |  | O.S.T. |  | Linn Star |  | CLW |  | Proficient Transport |  | J&P |  | BarOle
Customer relationships |  | 15 years |  | 10 years |  | 15 years |  | 7 years |  | 8 years |  | 12 years |  | 8 years
Non-compete agreements |  | 5 years |  | 3 years |  | 1 year |  | 5 years |  | 1 year |  | 5 years |  | 5 years

4. Indebtedness
Long-term debt consisted of the following as of December 31, 2021 and 2020:

|  | December 31, 2021 |  | December 31, 2020
Credit facility, expires 2026 |  | $ | 157,500 |  |  | $ | 112,500 |
Debt issuance costs |  | (534) |  |  | (102) |
|  | 156,966 |  |  | 112,398 |
Less: Current portion of long-term debt |  | (1,500) |  |  | — |
Total long-term debt, less current portion |  | $ | 155,466 |  |  | $ | 112,398 |

As of December 31, 2021, the aggregate scheduled maturities of long-term debt, excluding the current portion of long-term debt are as follows:

2023 |  | $ | 1,384 |
2024 |  | 3,634 |
2025 |  | 3,634 |
2026 |  | 146,814 |
|  | $ | 155,466 |

In September 2017, the Company entered into a five-year senior unsecured revolving credit facility (the “Facility”) with a maximum aggregate principal amount of $150,000, with a sublimit of $30,000 for letters of credit and a sublimit of $30,000 for swing line loans. The maturity date of the Facility was September 29, 2022. In April 2020, the Company entered into the first amendment to the Facility, which increased the maximum aggregate principal amount to $225,000. The Facility could have been increased by up to $25,000 to a maximum aggregate principal amount of $250,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. In July 2021, the Company entered into the second amendment to the Facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available under the Facility. In December 2021, the Company entered into the third amendment to the Facility, which increased the amount available for borrowing under the Facility to $450,000, consisting of a $300,000 revolving line of credit and a term loan of $150,000. In connection with the third amendment, the Company borrowed $150,000 under the term loan and simultaneously repaid $150,000 on the revolving line of credit from the borrowings received. Under the third amendment, the Facility may be increased by up to $75,000 to a maximum aggregate principal amount of $525,000 pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments. Such increases to the Facility may be in the form of additional revolving credit loans, term loans or a combination thereof, and are contingent upon there being no events of default under the Facility. As of December 31, 2021 and 2020, the Company had $272,466 and $94,174, respectively, of available borrowing capacity under the Facility.
The Facility contains covenants that, among other things, restrict the ability of the Company, without the approval of the required lenders, to engage in certain mergers, consolidations, asset sales, dividends and stock repurchases, investments, and
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
other transactions or to incur liens or indebtedness in excess of agreed thresholds, as set forth in the credit agreement. The Company also has to fulfill financial covenants with respect to a leverage ratio and an interest coverage ratio. As of December 31, 2021, the Company was in compliance with the aforementioned covenants.
Under the amended Facility, interest accrues on the amounts outstanding under the Facility at the Company’s option, at either (1) Bloomberg Short-Term Bank Yield Index rate (the “BSBY Rate”), which cannot be less than zero, plus a margin ranging from 1.25% to 1.75% based on the Company’s leverage ratio, or (2) the base rate, which cannot be less than 2.00%. The base rate is the highest of (i) the federal funds rate, which cannot be less than zero, plus 0.50%, (ii) the administrative agent’s prime rate and (iii) the BSBY Rate, which cannot be less than zero, plus 1.00%, plus a margin ranging from 0.00% to 0.50% based on the Company’s leverage ratio. Interest is payable in arrears for each loan that is based on the BSBY rate on the last day of the interest period applicable to each loan, and interest is payable in arrears on loans not based on the BSBY rate on the last day of each quarter. The interest rate on the outstanding borrowings under the revolving credit facility was 1.43% and 3.25% as of December 31, 2021 and December 31, 2020, respectively.
Previously, under the Facility, interest accrued on the amounts outstanding under the Facility, at the Company’s option, at either (1) London Interbank Offered Rate (“LIBOR”) rate, not less than 1.00%, plus a margin ranging from 2.25% to 2.75% based on the Company’s leverage ratio, or (2) base rate, which cannot be less than 3.00%. The base rate was the highest of (i) the federal funds rate, not less than zero, plus 0.50%, (ii) the administrative agent’s prime rate and (iii) the LIBOR rate, not less than 1.00%, plus 1.00%, plus a margin ranging from 0.25% to 0.75% based on the Company’s leverage ratio. Interest was payable in arrears for each loan that was based on the LIBOR rate on the last day of the interest period applicable to each loan, and interest was payable in arrears on loans not based on the LIBOR rate on the last day of each quarter.
Letters of Credit
The Company has an arrangement under the Facility to issue letters of credit, which guarantee the Company’s obligations for potential claims exposure for insurance coverage. As of December 31, 2021 and December 31, 2020, outstanding letters of credit totaled $20,034 and $18,326, respectively.
Interest Payments
Cash payments for interest were $4,198, $4,580 and $2,711 for the years ended December 31, 2021, 2020 and 2019 respectively. No interest was capitalized during the year ended December 31, 2021, 2020 and 2019.
5. Shareholders’ Equity
Preferred Stock
There are 5,000 shares of preferred stock with a par value of $0.01 authorized, but no shares have been issued to date.
Cash Dividends
During the fourth quarter of 2020 and each quarter of 2021, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.21 per common share. During the first, second and third quarters of 2020, each quarter of 2019, the Company’s Board of Directors declared and the Company has paid a quarterly cash dividend of $0.18 per common share.
On February 8, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per common share that will be paid in the first quarter of 2022.
Share Repurchase Program
On February 5, 2019, the Board of Directors 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.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
During the year ended December 31, 2021, the Company repurchased through open market transactions 535 shares of common stock for $48,989, or an average of $91.46 per share, and during the year ended December 31, 2020, the Company repurchased through open market transactions 787 shares of common stock for $45,248, or an average of $57.53 per share. All shares received were retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Retained Earnings” in the Consolidated Balance Sheets.
As of December 31, 2021, the remaining shares permitted to be repurchased under the 2019 Repurchase Plan were approximately 2,833 shares.
6. Stock Incentive Plan
Stock Incentive Plan
The Company recorded share-based compensation expense as follows for the years ended December 31, 2021, 2020 and 2019:

| Years Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Salaries, wages and employee benefits - continuing operations | $ | 9,108 |  |  | $ | 9,715 |  |  | $ | 10,595 |
Salaries, wages and employee benefits - discontinued operation | 16 |  |  | 85 |  |  | 179 |
Total share-based compensation expense | $ | 9,124 |  |  | $ | 9,800 |  |  | $ | 10,774 |

In May 2016, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) for the issuance of up to 2,000 common shares. As of December 31, 2021, approximately 801 shares remain available for grant under the Omnibus Plan.
Stock Options
Certain executives are eligible to receive grants of stock options. Employees may exercise the stock options at anytime after the grant is vested but no later than seven years after the date of grant. Stock options vest over a three-year period from the date of grant. For stock option awards, under the Plan, the exercise price is equal to the price of the Company’s common stock on the date of grant. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option-pricing model.
The weighted average grant-date fair value of the stock option awards granted under the Plan and the weighted average assumptions under the Black-Scholes option-pricing model were as follows for the years ended December 31, 2021 and 2020. The Company did not grant stock options during the year ended December 31, 2019.

| December 31, 2021 |  | December 31, 2020 |  |
Weighted average grant-date fair value | $ | 18.36 |  |  | $ | 14.79 |  |  |
Weighted average assumptions under Black-Scholes option model: |  |  |  |  |
Expected dividend yield | 1.1 | % |  | 1.1 | % |  |
Expected stock price volatility | 28.9 | % |  | 24.1 | % |  |
Risk-free interest rate | 0.6 | % |  | 1.5 | % |  |
Expected life of awards (years) | 5.8 |  | 5.9 |  |

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Stock option transactions during the year ended December 31, 2021 on a continuing operations basis were as follows:

| Number of Shares |  | Weighted Average Exercise Price
Outstanding as of January 1 | 359 |  |  | $ | 55.79 |
Granted | 39 |  |  | 75.05 |
Exercised | (56) |  |  | 53.91 |
Forfeited or Canceled | — |  |  | — |
Outstanding as of December 31 | 342 |  |  | $ | 58.44 |

As of December 31, 2021, the weighted average remaining contractual life of stock options both outstanding and exercisable was approximately three years. The total fair value of stock options vested during 2021, 2020, 2019 was $922, $1,377, and $1,887, respectively. As of December 31, 2021, the total share-based compensation expense related to unvested stock options not yet recognized was $695, and the weighted average period over which it is expected to be recognized is approximately two years.
The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives by groups of similar price on a continuing operations basis as of December 31, 2021:

|  |  |  | Stock Options Outstanding |  | Stock Options Exercisable
Range of Exercise Prices |  | Number of Shares |  | Weighted Average Remaining Contractual Life (in years) |  | Weighted Average Exercise Price |  | Exercisable as of December 31, 2021 |  | Weighted Average Exercise Price
$ | 43.67 |  | - | $ | 47.82 |  |  | 107,403 |  |  | 1.6 |  | $ | 45.87 |  |  | 107,403 |  |  | $ | 45.87 |
50.71 |  | - | 59.89 |  |  | 56,689 |  |  | 2.0 |  | 55.66 |  |  | 56,689 |  |  | 55.66 |
60.42 |  | - | 65.96 |  |  | 139,309 |  |  | 4.0 |  | 64.60 |  |  | 103,391 |  |  | 64.13 |
$ | 75.05 |  | - | $ | 75.05 |  |  | 39,139 |  |  | 6.1 |  | 75.05 |  |  | — |  |  | — |
|  |  |  | 342,540 |  |  |  |  | $ | 58.44 |  |  | 267,483 |  |  | $ | 55.01 |

As of December 31, 2021, the total intrinsic value of outstanding and exercisable stock options was $21,459 and $17,677, respectively. The total intrinsic value of stock options exercised during 2021, 2020 and 2019 was $2,137, $1,568 and $2,196, respectively.
Stock option transactions during the year ended December 31, 2021 on a discontinued operation basis were as follows:

| Number of Shares |  | Weighted Average Exercise Price
Outstanding as of January 1 | 14 |  | $ | 52.15 |
Granted | — |  | — |
Exercised | (14) |  | 52.15 |
Forfeited or Canceled | — |  | — |
Outstanding as of December 31 | — |  | $ | — |

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
The total fair value of stock options vested during 2020 and 2019 was $58, and $56, respectively. There were no stock options vested during 2021.The total intrinsic value of stock options exercised during 2021 and 2019 was $458, and $193, respectively. There were no stock options exercised during 2020.
Restricted Shares
The Company’s primary long-term incentive plan is a restricted share award plan that entitles employees to receive a share of the Company’s common stock subject to vesting requirements based on continued employment. Shares granted under the restricted share award plan are restricted from sale or transfer until vesting, and the restrictions lapse in three equal installments beginning one year after the date of grant. Dividends are paid in cash on a current basis throughout the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the requisite service period. All forfeitures are recognized as incurred.
Restricted share transactions on a continuing operations basis for the year ended December 31, 2021 were as follows:

| Number of Shares |  | Weighted Average Grant Date Fair Value
Outstanding as of January 1 | 213 |  |  | $ | 62.78 |
Granted | 109 |  |  | 75.35 |
Vested | (110) |  |  | 61.77 |
Forfeited | (21) |  |  | 69.08 |
Outstanding as of December 31 | 191 |  |  | $ | 69.84 |

The weighted average grant-date fair value of the restricted shares granted under the Plan during the years ended December 31, 2021, 2020 and 2019 were $75.35, $65.88 and $59.49, respectively. The total fair value of restricted shares that vested during 2021, 2020 and 2019 was $8,487, $9,180, and $7,684, respectively. As of December 31, 2021, the total share-based compensation expense related to restricted shares not yet recognized was $7,794, and the weighted average period over which it is expected to be recognized is approximately two years.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Restricted share transactions on a discontinued operation basis for the year ended December 31, 2021 were as follows:

| Number of Shares |  | Weighted Average Grant Date Fair Value
Outstanding as of January 1 | 8 |  |  | $ | 60.83 |
Granted | — |  |  | — |
Vested | (4) |  |  | 60.54 |
Forfeited | (4) |  |  | 63.62 |
Outstanding as of December 31 | — |  |  | $ | — |

The weighted average grant-date fair value of the restricted shares granted under the Plan during the years ended December 31, 2020 and 2019 were $63.24 and $59.07, respectively. The total fair value of restricted shares that vested during 2021, 2020 and 2019 was $364, $625, and $270, respectively.
Performance Shares
Certain executives and key employees are eligible to receive grants of performance awards. The performance share agreement provides for awards based on achieving certain financial targets, such as targets for earnings before interest, taxes, depreciation and amortization, and the Company’s total shareholder return as compared to the total shareholder return of a selected peer group, as determined by the Company’s Board of Directors. Performance targets are set at the beginning of each three-year measurement period. The share awards are earned over the vesting period, and the number of shares earned is determined based on the cumulative results for the measurement period. The performance agreement provides for employees to earn —% to 200% of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Performance shares do not receive dividends until the shares are vested. Awards earned are paid in shares of common stock of the Company at the end of the vesting period. Share-based compensation expense associated with these awards is amortized ratably over the vesting period. Depending on the financial target, share-based compensation expense is determined based on the projected assessment of the level of performance that will be achieved. All forfeitures are recognized as incurred.
The grant-date fair value of performance shares granted with a financial target based on the Company’s total shareholder return was estimated using a Monte Carlo simulation model. The weighted average grant-date fair value of performance awards granted under the Plan and the weighted average assumptions under the Monte Carlo simulation model were as follows for the years ended December 31, 2021, 2020 and 2019:

| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Weighted average grant-date fair value | $ | 87.33 |  |  | $ | 69.15 |  |  | $ | 61.42 |
Weighted average assumptions under the Monte Carlo simulation model: |  |  |  |  |
Expected stock price volatility | 34.5 | % |  | 23.5 | % |  | 23.4 | %
Weighted average risk-free interest rate | 0.2 | % |  | 1.4 | % |  | 2.5 | %

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Performance award transactions for the year ended December 31, 2021 on a continuing operations basis were as follows assuming target levels of performance:

| Number of Shares |  | Weighted Average Grant Date Fair Value
Outstanding as of January 1 | 65 |  |  | $ | 67.62 |
Granted | 36 |  |  | 87.33 |
Earned | (11) |  |  | 72.30 |
Forfeited or unearned | (11) |  |  | 70.22 |
Outstanding as of December 31 | 79 |  |  | $ | 75.61 |

As of December 31, 2021, the total share-based compensation expense related to unearned performance awards not yet recognized, assuming the Company’s current projected assessment of the level of performance will be achieved, was $3,618, and the weighted average period over which it is expected to be recognized is approximately two years.
The excess tax benefit realized for tax deductions in the United States related to the exercise of stock options, vesting of restricted stock and vesting of performance awards under the Pl an was $911, $2,340, and $2,621 for the years ended December 31, 2021, 2020 and 2019, respectively, on a continuing operations basis.
The excess tax benefit realized for tax deductions in the United States related to the exercise of stock options, vesting of restricted stock and vesting of performance awards under the Plan was $95, $75, and $95 for the years ended December 31, 2021, 2020 and 2019, respectively, on a discontinued operation basis.
Employee Stock Purchase Plan
Under the 2005 Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to a remaining 323 shares of common stock to employees. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six-month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two lump sum contributions.
Employee stock purchase plan activity and related information was as follows on a continuing operations basis:

| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Shares purchased by participants under the ESPP | 12 |  |  | 14 |  |  | 11 |
Average purchase price | $ | 75.71 |  |  | $ | 44.24 |  |  | $ | 51.50 |
Weighted average fair value of each purchase under the ESPP granted 1 | $ | 30.68 |  |  | $ | 20.99 |  |  | $ | 13.68 |
Share-based compensation expense for ESPP | $ | 369 |  |  | $ | 292 |  |  | $ | 150 |
1 Equal to the discount from the market value of the common stock at the end of each six month purchase period

Employee stock purchase plan activity and related information was as follows on a discontinued operation basis:
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)

| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Shares purchased by participants under the ESPP | — |  |  | 1 |  |  | 1 |
Average purchase price | $ | — |  |  | $ | 44.35 |  |  | $ | 51.39 |
Weighted average fair value of each purchase under the ESPP granted 1 | $ | — |  |  | $ | 18.11 |  |  | $ | 13.48 |
Share-based compensation expense for ESPP | $ | — |  |  | $ | 20 |  |  | $ | 13 |
1 Equal to the discount from the market value of the common stock at the end of each six month purchase period

Director Restricted Shares
Under the Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”), approved in May 2007 and further amended in February 2013 and January 2016, up to 360 common shares may be issued. As of December 31, 2021, approximately 75 shares remain available for grant under the Amended Plan.
Under the Amended Plan, each non-employee director receives an annual grant of restricted shares of the Company’s common stock. The restricted shares vest on the earlier of (a) the day immediately prior to the first annual shareholder meeting that occurs after the grant date or (b) one year after the grant date. Each director may elect to defer receipt of the common shares until the director departs from the Company’s Board of Directors. If a director elects to defer receipt, the Company will issue deferred stock units in which the director does not have voting rights or other incidents of ownership until the shares are issued. Each deferred stock unit is eligible for a dividend equivalent in the form of additional restricted stock units for each cash dividend paid by the Company.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Director restricted share transactions for the year ended December 31, 2021 were a s follows:

| Number of Shares |  | Weighted Average Grant Date Fair Value
Outstanding as of January 1 | 24 |  |  | $ | 42.88 |
Granted | 17 |  |  | 93.39 |
Vested | (26) |  |  | 47.12 |
Forfeited | — |  |  | — |
Outstanding as of December 31 | 15 |  |  | $ | 93.46 |

| Year Ended
| December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Share-based compensation expense for restricted shares | $ | 1,436 |  |  | $ | 1,026 |  |  | $ | 970 |
Excess tax benefit for the vesting of restricted shares | $ | 342 |  |  | $ | 253 |  |  | $ | 244 |

The total fair value of restricted shares that vested during 2021, 2020 and 2019 was $2,514, $771, and $970, respectively. As of December 31, 2021, the total share-based compensation expense related to the restricted shares not yet recognized was $527, and the weighted average period over which it is expected to be recognized is less than one year.
7. Income Taxes
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various states and Canada. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or Canadian examinations by tax authorities for years before 2014.
The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2021, 2020 and 2019 consisted of the following:

| 2021 |  | 2020 |  | 2019 |  |  |  |
Current: |  |  |  |  |  |  |  |  |
Federal | $ | 29,533 |  |  | $ | 11,914 |  |  | $ | 15,612 |  |  |  |  |
State | 7,918 |  |  | 3,907 |  |  | 4,681 |  |  |  |  |
| 37,451 |  |  | 15,821 |  |  | 20,293 |  |  |  |  |
Deferred: |  |  |  |  |  |  |  |  |
Federal | 209 |  |  | 922 |  |  | 5,766 |  |  |  |  |
State | 1,212 |  |  | (150) |  |  | 1,323 |  |  |  |  |
| 1,421 |  |  | 772 |  |  | 7,089 |  |  |  |  |
| $ | 38,872 |  |  | $ | 16,593 |  |  | $ | 27,382 |  |  |  |  |

A reconciliation of income taxes computed at the U.S. federal statutory income tax rate (21.0% for 2021, 2020 and 2019) to the provision for income taxes reflected in the Company’s Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 is as follows:
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)

| 2021 |  | 2020 |  | 2019 |  |  |  |
Tax expense at the statutory rate | $ | 32,542 |  |  | $ | 14,566 |  |  | $ | 23,038 |  |  |  |  |
State income taxes, net of federal income tax benefit | 7,448 |  |  | 2,602 |  |  | 4,594 |  |  |  |  |
Share-based compensation | (933) |  |  | (298) |  |  | (587) |  |  |  |  |
Other permanent differences | 31 |  |  | 48 |  |  | (5) |  |  |  |  |
Non-deductible compensation | 293 |  |  | 751 |  |  | 421 |  |  |  |  |
Change in income tax contingency reserves | (260) |  |  | (400) |  |  | — |  |  |  |  |
Federal income tax credits | (76) |  |  | (37) |  |  | (83) |  |  |  |  |
Other | (173) |  |  | (639) |  |  | 4 |  |  |  |  |
| $ | 38,872 |  |  | $ | 16,593 |  |  | $ | 27,382 |  |  |  |  |

The significant components of the deferred tax assets and liabilities at December 31, 2021 and 2020 were as follows:

| December 31, 2021 |  | December 31, 2020 |  |  |  |
Deferred tax assets: |  |  |  |  |  |  |
Accrued expenses | $ | 14,837 |  |  | $ | 12,095 |  |  |  |  |
Allowance for doubtful accounts | 839 |  |  | 577 |  |  |  |  |
Operating lease liabilities | 37,967 |  |  | 31,309 |  |  |  |  |
Share-based compensation | 3,769 |  |  | 3,554 |  |  |  |  |
Accruals for income tax contingencies | 154 |  |  | 166 |  |  |  |  |
Capital loss carryforwards | 4,230 |  |  | — |  |  |  |  |
Net operating loss carryforwards | 647 |  |  | 671 |  |  |  |  |
Total gross deferred tax assets | 62,443 |  |  | 48,372 |  |  |  |  |
Valuation allowance | (4,625) |  |  | (395) |  |  |  |  |
Total net deferred tax assets | 57,818 |  |  | 47,977 |  |  |  |  |
Deferred tax liabilities: |  |  |  |  |  |  |
Tax over book depreciation | 27,880 |  |  | 24,964 |  |  |  |  |
Prepaid expenses | 5,615 |  |  | 6,499 |  |  |  |  |
Operating lease right-of-use assets | 38,010 |  |  | 31,277 |  |  |  |  |
Goodwill | 20,502 |  |  | 17,368 |  |  |  |  |
Intangible assets | 9,218 |  |  | 9,855 |  |  |  |  |
Total deferred tax liabilities | 101,225 |  |  | 89,963 |  |  |  |  |
Net deferred tax liabilities | $ | (43,407) |  |  | $ | (41,986) |  |  |  |  |

The Company paid income taxes, net of refunds, of $35,766, $13,463 and $19,959 for the years ended December 31, 2021, 2020 and 2019, respectively.
The sale of Pool resulted in a capital loss in the amount of $4,230, which expires in 2026. The Company concluded that it was more likely than not that the capital loss carryforward will not be realized and therefore, established a valuation allowance of $4,230 to reserve against its capital loss carryforward. 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.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
As a result of the Towne acquisition, the Company had approximately $2,000 of federal net operating losses which the Company fully utilized in 2020.
As of December 31, 2021, the Company had state net operating loss carryforwards of $13,819, and as of both December 31, 2020 and 2019, the Company had state net operating loss carryforwards of $16,926, that expire between 2021 and 2032. The state net operating loss carryforwards are limited to the future taxable income of separate legal entities. The valuation allowance on the state net operating loss carryforwards stayed the same in 2021, 2020 and 2019.
A reconciliation of the beginning and ending amount of unrecognized tax benefits as of and during the years ended December 31, 2021 and 2020 is as follows:

Balance at December 31, 2019 | $ | 987 |
Reductions for settlement with state taxing authorities | (466) |
Additions for tax positions of current year | 23 |
Balance at December 31, 2020 | 544 |
Reductions for settlement with state taxing authorities | (326) |
Additions for tax positions of current year | 23 |
Balance at December 31, 2021 | $ | 241 |

The Company recognizes income tax benefits from uncertain tax positions where the realization of the ultimate benefit is uncertain. At December 31, 2021 and 2020, the Company had $241 and $544, respectively, of unrecognized income tax benefits, all of which would affect the Company’s effective tax rate if recognized. At December 31, 2021 and 2020, the Company had accrued interest and penalties related to unrecognized tax benefits of $88 and $168, respectively. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in “Interest expense, net” and “Other operating expenses”, respectively.
8. Leases
The Company leases certain land, buildings, equipment and office equipment under finance and operating leases. Equipment includes tractors, straight trucks, forklifts and trailers. Equipment under a finance lease is amortized over the shorter of the lease term or its estimated useful life.
The Company subleases certain facilities to independent third parties. Since the Company is not relieved of its obligation under these leases, a right-of-use lease asset and corresponding operating lease liability is recorded. Sublease rental income was $2,050, $1,628 and $1,634 in 2021, 2020 and 2019, respectively. In 2022, the Company expects to receive aggregate future minimum rental payments under noncancelable subleases of approximately $1,058. Noncancelable subleases expire between 2022 and 2028.
The Company does not recognize a right-of-use asset or lease liability with respect to operating leases with an initial lease term of 12 months or less, and recognizes expense on such leases on a straight-line basis over the lease term. The Company does not account for lease components separately from nonlease components. The Company has certain leases that include one or more options to renew, with renewal periods ranging from one to 25 years. The exercise of the lease renewal options is at the discretion of the Company and is included in the determination of the right-of-use asset and operating lease liability when the option is reasonably certain of being exercised. The depreciable life of right-of-use assets and leasehold improvements is limited by the expected lease term. The Company has certain lease agreements for equipment that include variable rental payments based on estimated mileage. The variable rental payments are adjusted for periodically based on actual mileage. In addition, the Company has certain lease agreements that include variable rental payments that are adjusted periodically for inflation based on the index rate as defined by the applicable government authority. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.
The Company has contracts with Leased Capacity Providers. Since the contracts explicitly identify the tractors operated by the Leased Capacity Providers, the Company determined the contracts contain an embedded lease. The compensation of Leased Capacity Providers, as specified in the contract, is variable based upon a rate per shipment and a rate
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
per mile. The variable amounts are excluded from the calculation of the right-of-use lease asset and corresponding operating lease liability and are disclosed as variable lease costs. Variable lease costs related to the embedded leases were $353,347, $325,542 and $328,282, for the years ended December 31, 2021, 2020, and 2019, respectively, and were recorded in “Purchased transportation” in the Consolidated Statements of Comprehensive Income.
Total lease assets and liabilities as of December 31, 2021 and 2020 were as follows:

Lease Assets |  | Classification |  | December 31, 2021 |  | December 31, 2020
Operating lease right-of-use assets |  | Operating lease right-of-use assets |  | $ | 148,198 |  |  | $ | 123,338 |
Finance lease assets |  | Property and equipment, net 1 |  | 13,797 |  |  | 6,642 |
| Total leased assets |  |  |  | $ | 161,995 |  |  | $ | 129,980 |
Lease Liabilities |  | Classification |  | December 31, 2021 |  | December 31, 2020
Current: |  |  |  |  |  |
Operating |  | Current portion of operating lease liabilities |  | $ | 47,532 |  |  | $ | 43,680 |
Finance |  | Current portion of debt and finance lease obligations |  | 4,588 |  |  | 1,801 |
Noncurrent: |  |  |  |  |  |
Operating |  | Operating lease liabilities, less current portion |  | 101,409 |  |  | 80,346 |
Finance |  | Finance lease obligations, less current portion |  | 9,571 |  |  | 5,010 |
| Total leased liabilities |  |  |  | $ | 163,100 |  |  | $ | 130,837 |
1 Finance lease assets are recorded net of accumulated depreciation of $4,822 and $2,256 as of December 31, 2021 and 2020, respectively.

Total lease cost for 2021 and 2020 was as follows:

|  |  |  | Year Ended |
|  | Classification |  | December 31, 2021 |  | December 31, 2020 |
Operating lease cost |  | Operating leases |  | $ | 54,561 |  |  | $ | 50,561 |  |
Short-term lease cost |  | Operating leases |  | 14,773 |  |  | 8,921 |  |
Variable lease cost |  | Purchased transportation, operating leases and other operating expenses |  | 367,779 |  |  | 339,148 |  |
Sublease income |  | Operating revenue |  | (2,050) |  |  | (1,628) |  |
Finance lease cost: |  |  |  |  |  |  |
Amortization of leased assets |  | Depreciation and amortization |  | 3,381 |  |  | 1,560 |  |
Interest on leased liabilities |  | Interest expense, net |  | 301 |  |  | 197 |  |
Total lease cost |  |  |  | $ | 438,745 |  |  | $ | 398,759 |  |

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Future minimum lease payments under noncancelable operating and finance leases with remaining terms greater than one year as of December 31, 2021 were as follows:

|  | Operating Leases |  | Finance Leases
2022 |  | $ | 52,832 |  |  | $ | 4,902 |
2023 |  | 39,558 |  |  | 4,468 |
2024 |  | 31,029 |  |  | 3,545 |
2025 |  | 20,261 |  |  | 1,331 |
2026 |  | 12,371 |  |  | 313 |
Thereafter |  | 15,745 |  |  | 449 |
Total minimum lease payments |  | 171,796 |  |  | 15,008 |
Less: imputed interest |  | (22,855) |  |  | (849) |
Present value of future minimum lease payments |  | 148,941 |  |  | 14,159 |
Less: current portion of lease obligations |  | (47,532) |  |  | (4,588) |
Long-term lease obligations |  | $ | 101,409 |  |  | $ | 9,571 |

The following table summarizes the weighted-average remaining lease term and weighted average discount rate:

| December 31, 2021 |  | December 31, 2020 |
Weighted average remaining lease term (in years): |  |  |  |
Operating leases | 4.1 |  | 3.7 |
Finance leases | 3.5 |  | 4.0 |
Weighted average discount rate: |  |  |  |
Operating leases | 2.9 | % |  | 3.2 | % |
Finance leases | 2.6 | % |  | 3.1 | % |

The following table summarizes the supplemental cash flow information for 2021 and 2020:

| Year Ended |
| December 31, 2021 |  | December 31, 2020 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases | $ | 53,981 |  |  | $ | 50,263 |  |
Operating cash flows from finance leases | 301 |  |  | 197 |  |
Financing cash flows from finance leases | 2,423 |  |  | 1,446 |  |
Right-of-use assets obtained in exchange for operating lease liabilities | $ | 74,736 |  |  | $ | 72,454 |  |
Leased assets obtained in exchange for finance lease obligations | 9,673 |  |  | 1,927 |  |

9. Commitments and Contingencies
Commitments
As of December 31, 2021, the Company had unconditional purchase obligations of $3,172 to purchase forklifts and other equipment during 2022.
Contingencies
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
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 our consolidated financial statements. Moreover, the results of complex legal proceedings are difficult to predict, and the Company’s view of these matters may change in the future as the litigation and related events unfold.
Insurance coverage provides the Company with primary and excess coverage for claims related to vehicle liability, workers’ compensation, property damage and employee medical benefits.
For vehicle liability, the Company retains a portion of the risk. Below is a summary of the Company’s risk retention on vehicle liability insurance coverage maintained by the Company through $10,000:

|  | Company Risk Retention |  | Frequency |  | Layer |  | Policy Term
Expedited Freight¹ |  |  |  |  |  |  |  |
LTL business |  | $ | 3,000 |  |  | Occurrence/Accident² |  | $0 to $3,000 |  | 10/1/2021 to 10/1/2022
Truckload business |  | $ | 2,000 |  |  | Occurrence/Accident² |  | $0 to $2,000 |  | 10/1/2021 to 10/1/2022
LTL business |  | $ | 6,000 |  |  | Policy Term Aggregate³ |  | $3,000 to $5,000 |  | 10/1/2021 to 10/1/2022
LTL, Truckload and Intermodal businesses |  | $ | 2,500 |  |  | Policy Term Aggregate³ |  | $5,000 to $10,000 |  | 10/1/2021 to 10/1/2022
Intermodal |  | $ | 1,000 |  |  | Occurrence/Accident² |  | $0 to $1,000 |  | 10/1/2021 to 10/1/2022

¹ Excluding the Final Mile business, which is primarily a brokered service.
² For each and every accident, the Company is responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.
³ During the Policy Term, the Company is responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Company Risk Retention before insurance will respond.
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. Additionally, the Company maintains workers’ compensation insurance with a self-insured retention of $500 per occurrence.
Insurance coverage in excess of the self-insured retention limit is an important part of the Company’s risk management process. The Company accrues for the costs of the uninsured portion of pending claims within the self-insured retention based on the nature and severity of individual claims and historical claims development trends. The Company believes the recorded reserves are sufficient for all incurred claims up to the self-insured retention limits, including an estimate for claims incurred but not reported. However, estimating the number and severity of claims, as well as related judgment or settlement amounts is inherently difficult, and the Company may fail to establish sufficient insurance reserves and adequately estimate for future insurance claims. Since the ultimate resolution of outstanding claims as well as claims incurred but not reported is uncertain, it is possible that the reserves recorded for these losses could change materially in the near term. Although, an estimate cannot be made of the range of additional loss that is at least reasonably possible. During the year ended December 31, 2019, the Company recorded a $7,500 reserve for a vehicular claim related to one incident.
On December 15, 2020, the Company detected a Ransomware Incident impacting the Company’s operational and information technology systems, which caused service delays for the Company’s customers. We incurred u nexpected costs and impacts from the Ransomware Incident, and may in the future, incur costs in connection with this Ransomware Incident. Any failure to comply with data privacy, security or other laws and regulations could result in claims, legal or regulatory proceedings, inquires or investigations.
10. Employee Benefit Plan
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
The Company sponsors a qualified defined contribution plan covering substantially all employees. Under the defined contribution plan, the Company contributes 25.0% of the employee’s contribution up to a maximum of 6.0% of annual compensation, subject to certain limits. The Company contributed $2,091, $1,683 and $1,554 for the years ended December 31, 2021, 2020 and 2019, respectively.
11. 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.
As previously discussed in Note 3, Acquisitions, the estimated fair value of the earn-out liability was determined using either the Monte Carlo simulation model or the option pricing method. The significant inputs used to calculate the estimated fair value are derived from a combination of observable and unobservable market data. Observable inputs used in either the Monte Carlo simulation model or the option pricing method include the risk-free rate and the revenue volatility while unobservable inputs include the revenue discount rate and the estimated revenue projections.
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020 are summarized below:

|  | As of December 31, 2021
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Earn-out liability |  | $ | — |  |  | $ | — |  |  | $ | 385 |  |  | $ | 385 |
|  | As of December 31, 2020
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Earn-out liability |  | $ | — |  |  | $ | — |  |  | $ | 6,865 |  |  | $ | 6,865 |

Cash and cash equivalents, accounts receivable, other receivables, and accounts payable are valued at their carrying amounts in the Company’s Consolidated Balance Sheets, due to the immediate or short-term maturity of these financial instruments.
The carrying amount of long-term debt under the Company’s credit facility approximates fair value based on the borrowing rates currently available to the Company for a loan with similar terms and average maturity.
As of December 31, 2021, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $14,312, compared to its carrying value of $14,159. As of December 31, 2020, the estimated fair value of the Company’s finance lease obligation, based on current borrowing rates, was $7,009, compared to its carrying value of $6,811.
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a nonrecurring basis. Assets are recorded at fair value on a nonrecurring basis as a result of an impairment charge or assets held for sale. The losses on assets measured at fair value on a nonrecurring, discontinued operation basis are summarized below:
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Table of Contents
FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)

|  | 2021 |  | 2020
Earn-out asset impairment charge 1 |  | $ | 6,967 |  |  | $ | — |
Goodwill impairment charge 1 |  | — |  |  | 5,406 |
Valuation allowance on assets held for sale 1 |  | — |  |  | 22,978 |

1 See Note 2, Discontinued Operation and Held for Sale.
12. Segment Reporting
The Company has two reportable segments: Expedited Freight and Intermodal. The Company evaluates segment performance based on income from operations. Segment results include intersegment revenues and shared costs. Costs related to the corporate headquarters, shared services and shared assets, such as trailers, are allocated to each segment based on usage. Shared assets are not allocated to each segment, but rather the shared assets, such as trailers, are allocated to the Expedited Freight 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 in Note 1, Operations and Summary of Significant Accounting Policies, except for certain self-insurance loss reserves related to vehicle liability and workers’ compensation. Each segment is allocated an insurance premium and deductible that corresponds to the self-insured retention limit for that particular segment. Any self-insurance loss exposure beyond the deductible allocated to each segment is recorded in Corporate.
For the year ended December 31, 2020, the Company recognized revenue of approximately $138,669 from one customer, which accounted for more than 10% of the Company’s consolidated revenues from continuing operations in the Consolidated Statements of Comprehensive Income and was included in the Expedited Freight reportable segment. No single customer accounted for more than 10% of the Company’s consolidated revenues from continuing operations for the years ended December 31, 2021 or December 31, 2019.
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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)
Segment results from operations for the years ended December 31, 2021, 2020 and 2019 were as follows:

Year Ended December 31, 2021 |  |  |  |  |  | Expedited Freight |  | Intermodal |  |  |  | Corporate |  | Eliminations |  | Consolidated - Continuing Operations
External revenues |  |  |  |  |  | $ | 1,373,313 |  |  | $ | 289,171 |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 1,662,484 |
Intersegment revenues |  |  |  |  |  | 957 |  |  | 43 |  |  |  |  | — |  |  | (1,057) |  |  | (57) |
Depreciation |  |  |  |  |  | 21,623 |  |  | 3,538 |  |  |  |  | 63 |  |  | — |  |  | 25,224 |
Amortization |  |  |  |  |  | 7,219 |  |  | 7,109 |  |  |  |  | — |  |  | — |  |  | 14,328 |
Income (loss) from continuing operations |  |  |  |  |  | 139,321 |  |  | 30,117 |  |  |  |  | (10,137) |  |  | — |  |  | 159,301 |
Purchases of property and equipment |  |  |  |  |  | 36,364 |  |  | 2,745 |  |  |  |  | — |  |  | — |  |  | 39,109 |

Year Ended December 31, 2020 |  |  |  |  |  | Expedited Freight |  | Intermodal |  |  |  | Corporate |  | Eliminations |  | Consolidated - Continuing Operations
External revenues |  |  |  |  |  | $ | 1,070,106 |  |  | $ | 199,567 |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 1,269,673 |
Intersegment revenues |  |  |  |  |  | 2,195 |  |  | 36 |  |  |  |  | — |  |  | (2,331) |  |  | (100) |
Depreciation |  |  |  |  |  | 19,824 |  |  | 3,693 |  |  |  |  | 120 |  |  | — |  |  | 23,637 |
Amortization |  |  |  |  |  | 7,203 |  |  | 6,285 |  |  |  |  | — |  |  | — |  |  | 13,488 |
Income (loss) from continuing operations |  |  |  |  |  | 71,266 |  |  | 16,391 |  |  |  |  | (13,733) |  |  | — |  |  | 73,924 |
Purchases of property and equipment |  |  |  |  |  | 19,820 |  |  | 448 |  |  |  |  | — |  |  | — |  |  | 20,268 |

Year Ended December 31, 2019 |  |  |  |  |  | Expedited Freight |  | Intermodal |  |  |  | Corporate |  | Eliminations |  | Consolidated - Continuing Operations
External revenues |  |  |  |  |  | $ | 997,877 |  |  | $ | 217,606 |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 1,215,483 |
Intersegment revenues |  |  |  |  |  | 3,057 |  |  | 105 |  |  |  |  | — |  |  | (3,458) |  |  | (296) |
Depreciation |  |  |  |  |  | 23,087 |  |  | 3,086 |  |  |  |  | 38 |  |  | — |  |  | 26,211 |
Amortization |  |  |  |  |  | 4,335 |  |  | 5,848 |  |  |  |  | — |  |  | — |  |  | 10,183 |
Income (loss) from continuing operations |  |  |  |  |  | 103,640 |  |  | 23,679 |  |  |  |  | (14,903) |  |  | — |  |  | 112,416 |
Purchases of property and equipment |  |  |  |  |  | 21,290 |  |  | 717 |  |  |  |  | — |  |  | — |  |  | 22,007 |
Total Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
As of December 31, 2021 |  |  |  |  |  | $ | 777,987 |  |  | $ | 249,467 |  |  |  |  | $ | 90,588 |  |  | $ | (219) |  |  | $ | 1,117,823 |
As of December 31, 2020 |  |  |  |  |  | 706,396 |  |  | 183,073 |  |  |  |  | 84,370 |  |  | (545) |  |  | 973,294 |

A reconciliation from the segment information to the consolidated balances for revenues and total assets is set forth below:

|  | Year Ended
|  | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Intersegment revenues - continuing operations |  | $ | (57) |  |  | $ | (100) |  |  | $ | (296) |
Intersegment revenues - discontinued operation |  | 57 |  |  | 100 |  |  | 296 |
Consolidated intersegment revenues |  | $ | — |  |  | $ | — |  |  | $ | — |

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FORWARD AIR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
(In thousands, except per share data)

|  | December 31, 2021 |  | December 31, 2020
Segment assets - continuing operations |  | $ | 1,117,823 |  |  | $ | 973,294 |
Current assets held for sale |  | — |  |  | 21,002 |
Noncurrent assets held for sale |  | — |  |  | 53,097 |
Consolidated total assets |  | $ | 1,117,823 |  |  | $ | 1,047,393 |

Revenue from the individual services within the Expedited Freight segment for the years ended December 31, 2021, 2020 and 2019 were as follows:

|  | Year Ended
|  | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019 |  |
Expedited Freight revenues: |  |  |  |  |  |  |  |
Network |  | $ | 840,429 |  |  | $ | 625,517 |  |  | $ | 675,312 |  |  |
Truckload |  | 223,026 |  |  | 194,058 |  |  | 196,855 |  |  |
Final Mile |  | 275,201 |  |  | 224,475 |  |  | 100,555 |  |  |
Other |  | 35,614 |  |  | 28,251 |  |  | 28,212 |  |  |
Total |  | $ | 1,374,270 |  |  | $ | 1,072,301 |  |  | $ | 1,000,934 |  |  |

F-43

Table of Contents
Forward Air Corporation
Schedule II — Valuation and Qualifying Accounts
(In thousands)

|  |  |  |  | Additions |  |  |  |
|  | Balance at Beginning of Period |  |  |  | Charged to Costs and Expenses |  | Charged to Other Operating Revenue |  | Deductions |  | Balance at End of Period
Year ended December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 1,268 |  |  |  |  | $ | 1,670 |  |  | $ | — |  |  | $ | 1,204 |  | 2 | $ | 1,734 |
Allowance for revenue adjustments 1 |  | 1,005 |  |  |  |  | — |  |  | 7,943 |  |  | 7,422 |  | 3 | 1,526 |
Deferred tax valuation allowance |  | 395 |  |  |  |  | 4,230 |  |  | — |  |  | — |  |  | 4,625 |
|  | 2,668 |  |  |  |  | 5,900 |  |  | 7,943 |  |  | 8,626 |  |  | 7,885 |
Year ended December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 1,316 |  |  |  |  | $ | 567 |  |  | $ | — |  |  | $ | 615 |  | 2 | $ | 1,268 |
Allowance for revenue adjustments 1 |  | 737 |  |  |  |  | — |  |  | 4,751 |  |  | 4,483 |  | 3 | 1,005 |
Deferred tax valuation allowance |  | 395 |  |  |  |  | — |  |  | — |  |  | — |  |  | 395 |
|  | 2,448 |  |  |  |  | 567 |  |  | 4,751 |  |  | 5,098 |  |  | 2,668 |
Year ended December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 1,290 |  |  |  |  | $ | 752 |  |  | $ | — |  |  | $ | 726 |  | 2 | $ | 1,316 |
Allowance for revenue adjustments 1 |  | 755 |  |  |  |  | — |  |  | 3,339 |  |  | 3,357 |  | 3 | 737 |
Deferred tax valuation allowance |  | 395 |  |  |  |  | — |  |  | — |  |  | — |  |  | 395 |
|  | 2,440 |  |  |  |  | 752 |  |  | 3,339 |  |  | 4,083 |  |  | 2,448 |

1 Represents an allowance for revenue adjustments resulting from future billing rate changes.
2 Represents uncollectible accounts written off, net of recoveries.
3 Represents adjustments to billed accounts receivable.
S-1

EXHIBIT INDEX
No. |  | Exhibit
3.1 |  | Restated Charter of the registrant (incorporated herein by reference to Exhibit 3 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 1999 (File No. 0-22490))
3.2 |  | Amended and Restated Bylaws of the registrant (incorporated herein by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2017 (File No. 0-22490))
4.1 |  | Form of Forward Air Corporation Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998 filed with the Securities and Exchange Commission on November 16, 1998 (File No. 0-22490))
4.2 |  | Description of Capital Stock
10.1 | * | Forward Air Corporation 2005 Employee Stock Purchase Plan (incorporated herein by reference to the registrant's Proxy Statement filed with the Securities and Exchange Commission on April 20, 2005 (File No. 0-22490))
10.2 |  | Air Carrier Certificate, effective August 28, 2003 (incorporated herein by reference to Exhibit 10.5 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed with the Securities and Exchange Commission on March 11, 2004 (File No. 0-22490))
10.3 |  | Form of Director Indemnification Agreement (incorporated herein by reference to Exhibit 10.4 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the Securities and Exchange Commission on February 23, 2018 (File No. 0-22490))
10.4 | * | Form of Non-Qualified Stock Option Agreement under the registrant's Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.16 to the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 filed with the Securities and Exchange Commission on February 24, 2011 (File No. 0-22490))
10.5 | * | Forward Air Corporation Amended and Restated Stock Option and Incentive Plan, as further amended and restated on February 7, 2013 (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 13, 2013 (File No. 0-22490))
10.6 |  | First Amendment to the Forward Air Corporation Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016, filed with the Securities and Exchange Commission on April 27, 2016 (File No. 0-22490))
10.7 | * | Form of Nonqualified Stock Option Agreement under the registrant’s Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2016 (File No. 0-22490))
10.8 | * | Form of CEO Nonqualified Stock Option Agreement under the registrant’s Amended and Restated Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 12, 2016 (File No. 0-22490))
10.9 | * | Form of Non-Employee Director Restricted Stock Units Agreement under the registrant’s Amended and Restated Non- Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2016 (File No. 0-22490))
10.10 | * | Form of Non-Employee Director Restricted Stock Agreement under the registrant’s Amended and Restated Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 10, 2016 (File No. 0-22490))
10.11 | * | Michael J. Morris Offer Letter dated as of May 24, 2016 (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2016 (File No. 0-22490))
10.12 | * | Form of Employee Restricted Share Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016 filed with the Securities and Exchange Commission on July 27, 2016))
10.13 | * | Form of CEO Nonqualified Stock Option Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2017)
10.14 | * | Form of Nonqualified Stock Option Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.44 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2017)
10.15 | * | Form of Performance Share Agreement under the registrant’s 2016 Omnibus Compensation Plan (incorporated herein by reference to Exhibit 10.45 to the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2017)
10.16 | * | Form of Notice of Grant of Performance Shares under the registrant’s 2016 Omnibus Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 27, 2017)

10.17 | * | Executive Mortgage Assistance Agreement (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 27, 2017)
10.18 | * | Forward Air Corporation 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 27, 2017 (File No. 0-22490))
10.19 | * | Amended and Restated Non-Employee Director Stock Plan (incorporated herein by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 27, 2017 (File No. 02-22490))
10.20 |  | Credit Agreement dated September 29, 2017 among Forward Air Corporation and Forward Air, Inc., as the borrowers, the subsidiaries of the borrowers identified therein as the guarantors, Bank of America, N.A., U.S. Bank National Association and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 3, 2017)
10.20A |  | First Amendment dated April 16, 2020 to Credit Agreement dated September 29, 2017 by and among Forward Air Corporation and Forward Air, Inc., as borrowers, certain subsidiaries of the borrowers as guarantors, Bank of America, N.A., as administrative agent and lender, U.S. Bank National Association, as lender, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 1, 2020)
10.20B |  | Second Amendment dated July 20, 2021 to Credit Agreement dated September 29, 2017 by and among Forward Air Corporation and Forward Air, Inc., as borrowers, certain subsidiaries of the borrowers as guarantors, Bank of America, N.A., as administrative agent and lender, U.S. Bank National Association, as lender and the other lenders part thereto (incorporated herein by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2021)
10.20C |  | Third Amendment, dated December 29, 2021, to the Credit Agreement dated September 29, 2017 by and among Forward Air Corporation and Forward Air, Inc., as borrowers, certain subsidiaries of the borrowers as guarantors, Bank of America, N.A., as administrative agent and lender, U.S. Bank National Association, as lender and the other lenders part thereto (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 202 2)
10.21 | * | Form of CEO Nonqualified Stock Option Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 26, 2018)
10.22 | * | Form of CEO Performance Share Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 26, 2018)
10.23 | * | Form of CEO Restricted Stock Agreement under the registrant’s 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 26, 2018)
10.24 | * | Employment Agreement, dated June 6, 2018, between Forward Air Corporation and Thomas Schmitt (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2018)
10.25 | * | Restrictive Covenants Agreement, dated June 6, 2018, between Forward Air Corporation and Thomas Schmitt (incorporated herein by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2018)
10.26 | * | Waiver and Acknowledgment, dated June 11, 2018 between Forward Air Corporation and Bruce Campbell (incorporated herein by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2018)
10.27 |  | Consulting Agreement effective May 7, 2019, between Forward Air Corporation and Bruce A. Campbell (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 25, 2019)
10.28 |  | Form of Performance Share Agreement (Total Shareholder Return) under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.3 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 25, 2019)
10.29 |  | Form of Performance Share Agreement (EBITDA per Share) under the registrant's 2016 Omnibus Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.4 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on April 25, 2019)
10.30 | * | Scott E. Schara Offer Letter, dated as of July 23, 2020 (incorporated herein by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 27, 2020)
10.31 | * | Amended and Restated Consulting Agreement effective July 28, 2020, between Forward Air Corporation and Matthew J. Jewell (incorporated herein by reference to Exhibit 10.2 to the registrant's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 31, 2020)
10.32 |  | Advisory Agreement effective April 5, 2021, between Forward Air Corporation and Michael J. Morris (incorporated herein by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 4, 2021)

10.33 |  | Amendment No. 1 dated October 29, 2021 to Advisory Agreement, dated October 29, 2021, between Forward Air Corporation and Michael J. Morris (incorporated herein by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 2021)
10.34 |  | Rebecca J. Garbrick Offer Letter dated as of June 21, 2021 (incorporated herein by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 25, 2021 (File No. 0-22490))
10.35 |  | Form of CEO Nonqualified Stock Option Agreement under the registrant's 2016 Omnibus Incentive Compensation Plan
10.36 |  | Form of Non-Q ualified Stock Option Agreement under the registrant's 2016 Omnibus Incentive Compensation Plan
10.37 |  | Form of Performance Share Agreement (Total Shareholder Return) under the registrant's 2016 Omnibus Incentive Compensation Plan
10.38 | * | Forward Air Corporat ion Executive Severance and Change in Control Plan Amended and Restated, effectiv e as of October 25, 2021
21.1 |  | Subsidiaries of the registrant
23.1 |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1 |  | Certification of Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a))
31.2 |  | Certification of Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) (17 CFR 240.13a-14(a))
32.1 |  | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 |  | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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104 |  | Cover Page Interactive File (formatted in Inline XBRL and contained in Exhibit 101).

*Denotes a management contract or compensatory plan or arrangement.