Ancora Holdings, Inc. (together with its affiliates, “Ancora” or “we”), a significant shareholder of Forward Air Corporation (“Forward Air” or the “Company”) (NASDAQ: FWRD), which together with the other participants in its solicitation beneficially owns approximately 6.3% of the Company’s outstanding shares, today issued an open letter to shareholders and announced that it has nominated a slate of four highly qualified candidates – James Chadwick, Andrew C. Clarke, Dawn Garibaldi and Scott M. Niswonger – for election to the Board of Directors (the “Board”) at the Company’s 2021 Annual Meeting of Shareholders (the “Annual Meeting”).
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Ancora believes that Forward Air has the potential to be a best-in-class asset-light transportation company given that it operates one of the largest linehaul networks in North America and has exposure to some of the most coveted segments of the transportation and logistics industry. Unfortunately, in Ancora’s view, the Company has been hampered by a Board that has provided poor operational oversight, pursued an ineffective capital allocation strategy focused on acquisitions of margin- and return-dilutive service offerings, and failed to optimize the Company’s balance sheet.
For far too long we believe the Company’s shareholders have suffered from Forward Air’s:
- Poor Capital Allocation and Declining ROIC. The Company’s leadership team has deployed nearly $1 billion on acquisitions and capital expenditures combined since 2007 while executing on a growth strategy focused largely on new service offerings which have been margin and return dilutive to the core business. As a result, ROIC has been cut in half from ~30% to ~15% during this time period. During our nominee Mr. Clarke’s previous tenure at Forward Air as CFO (2001-2006), ROIC averaged ~39%.
- Significant Margin Deterioration in Core Expedited LTL. Despite significant top-line growth, a lack of operating discipline, in our view, has resulted in the core Expedited LTL operating ratio (“OR”) deteriorating ~350 bps since 2014 (and ~675 bps since 2011) as substantial operating expense growth has driven declines in EBIT per ton/shipment over this time period.
- Lackluster Relative Operating Performance. LTL peers have seen ORs improve ~600 bps on average since 2014 compared to a ~350 bps deterioration for Forward Air’s core Expedited LTL business, representing a ~950 bps delta in operating performance over the past five years.
- Underperformance Relative to Peers. Since 2007, (i) Old Dominion’s (NASDAQ: ODFL) EBITDA has increased at ~15% CAGR with ROIC more than doubling and the stock is up ~30x, (ii) Saia’s (NASDAQ: SAIA) EBITDA has increased at ~11% CAGR with ROIC nearly doubling and the stock is up ~22x, and (iii) Forward Air’s EBITDA has increased at a ~3% CAGR with ROIC getting cut in half and the stock up only ~1.5x.
- Inadequate Execution by Management. FY 2020 results have substantially underperformed peers as core Expedited LTL OR has deteriorated ~400 bps year-over-year with EBITDA down ~35% year-over-year and diluted EPS (ex-Pool Distribution) down ~25% year-over-year. This compares to LTL peers who have driven year-over-year improvement in ORs (to record levels), EBITDA and EPS in FY 2020.
- Ineffective Board which Lacks Material Share Ownership. There has not been a single insider purchase of shares since 2009, a stark contrast to the more than $125 million worth of shares sold by Company insiders (current and former insiders) over this period. We are concerned that the lack of vested financial interest in the Company by directors coupled with Thomas Schmitt’s dual role as Chairman and CEO is hindering the Board’s ability to hold management accountable.
Over the past several months, Ancora has attempted to reach an amicable resolution with the Company regarding its concerns identified above; however, the incumbent Board and management team have refused to enact the changes that we believe are necessary to drive shareholder value, leaving us little choice but to nominate a competing slate of director candidates.
We are pleased to announce that our slate includes Forward Air’s founder, Scott M. Niswonger, and former CFO, well-respected industry executive Andrew C. Clarke, along with shareholder representative James Chadwick of Ancora and executive leadership specialist Dawn Garibaldi. If elected, our nominees will work tirelessly to streamline the Company’s portfolio of services, drive significant margin improvement through cost take-outs and productivity enhancements, improve efficiency from capital investments, and realign executive compensation and incentives.
We believe a better path forward for shareholders is available at the Annual Meeting.
Ancora Holdings, Inc. is an employee owned, Cleveland, Ohio based holding company which wholly owns four separate and distinct SEC Registered Investment Advisers and a broker dealer. Ancora Advisors LLC specializes in customized portfolio management for individual investors, high net worth investors, investment companies (mutual funds), and institutions such as pension/profit sharing plans, corporations, charitable & “Not-for Profit” organizations, and unions. Ancora Family Wealth Advisors, LLC is a leading, regional investment and wealth advisor managing assets on behalf families and high net-worth individuals. Ancora Alternatives LLC specializes in pooled investments (hedge funds/investment limited partnerships). Ancora Retirement Plan Advisors, Inc. specializes in providing non-discretionary investment guidance for small and midsize employer sponsored retirement plans. Inverness Securities, LLC is a FINRA registered Broker Dealer.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Ancora Catalyst Institutional, LP, together with the other participants named herein (collectively, "Ancora"), intends to file a preliminary proxy statement and accompanying WHITE proxy card with the Securities and Exchange Commission ("SEC") to be used to solicit votes for the election of its slate of highly-qualified director nominees at the 2021 annual meeting of shareholders of Forward Air Corporation, a Tennessee corporation (the “Company”).
ANCORA STRONGLY ADVISES ALL SHAREHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are anticipated to be Ancora Catalyst Institutional, LP (“Ancora Catalyst Institutional”), Ancora Catalyst, LP (“Ancora Catalyst”), Ancora Merlin Institutional, LP (“Ancora Merlin Institutional”), Ancora Merlin, LP (“Ancora Merlin”), Ancora Catalyst SPV I LP – Series I (“Ancora SPV I”), Ancora Catalyst SPV I LP – Series J (“Ancora SPV J”), Ancora Catalyst SPV I LP – Series K (“Ancora SPV K”), Ancora Catalyst SPV I LP – Series L (“Ancora SPV L”), Ancora Catalyst SPV I SPC Ltd. – Segregated Portfolio E (“Ancora SPC E” and together with Ancora Catalyst Institutional, Ancora Catalyst, Ancora Merlin Institutional, Ancora Merlin, Ancora SPV I, Ancora SPV J, Ancora SPV K and Ancora SPV L, the “Ancora Funds”), Ancora Advisors, LLC (“Ancora Advisors”), Ancora Alternatives LLC (“Ancora Alternatives”), Ancora Family Wealth Advisors, LLC (“Ancora Family Wealth”), The Ancora Group Inc. (“Ancora Inc.”), Inverness Holdings LLC (“Inverness Holdings”), Ancora Holdings Inc. (“Ancora Holdings”), Frederick DiSanto, James M. Chadwick, Andrew C. Clarke, Dawn Garibaldi and Scott M. Niswonger.
As of the date hereof, Ancora Catalyst Institutional directly owns 234,417 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”). As of the date hereof, Ancora Catalyst directly owns 18,004 shares of Common Stock. As of the date hereof, Ancora Merlin Institutional directly owns 230,999 shares of Common Stock. As of the date hereof, Ancora Merlin directly owns 21,450 shares of Common Stock. As of the date hereof, Ancora SPV I directly owns 165,004 shares of Common Stock. As of the date hereof, Ancora SPV J directly owns 188,345 shares of Common Stock. As of the date hereof, Ancora SPV K directly owns 190,725 shares of Common Stock. As of the date hereof, Ancora SPV L directly owns 84,541 shares of Common Stock. As of the date hereof, Ancora SPC E directly owns 483,130 shares of Common Stock. As of the date hereof, 115,884 shares of Common Stock were held in a certain managed account for which Ancora Advisors serves as the investment adviser to (the “Ancora Advisors SMA”). As of the date hereof, 1,300 shares of Common Stock were held in a certain managed account for which Ancora Family Wealth serves as the investment adviser to (the “Ancora Family Wealth SMA”). As of the date hereof, Mr. Clarke beneficially owns 2,500 shares of Common Stock held in the Andrew C. Clarke Revocable Trust, of which Mr. Clarke is the sole settlor, beneficiary and trustee. As of the date hereof, Mr. Niswonger directly owns 10,000 shares of Common Stock. Ancora Advisors, as the investment adviser to the Ancora Advisors SMA, may be deemed the beneficial owner of the 115,884 shares of Common Stock held in the Ancora Advisors SMA. Ancora Alternatives, as the investment adviser to each of the Ancora Funds and the general partner of each of the Ancora Funds other than Ancora SPC E, may be deemed the beneficial owner of an aggregate of 1,616,615 shares of Common Stock owned by the Ancora Funds. Ancora Family Wealth, as the investment adviser to the Ancora Family Wealth SMA, may be deemed the beneficial owner of the 1,300 shares of Common Stock held in the Ancora Family Wealth SMA. Ancora Inc., as the sole member of Ancora Advisors, may be deemed the beneficial owner of the 115,884 shares of Common Stock held in the Ancora Advisors SMA. Inverness Holdings, as the sole member of Ancora Family Wealth, may be deemed the beneficial owner of the 1,300 shares of Common Stock held in the Ancora Family Wealth SMA. Ancora Holdings, as the sole member of each of Ancora Alternatives and Inverness Holdings and the sole shareholder of Ancora Inc., may be deemed the beneficial owner of an aggregate of 1,733,799 shares of Common Stock owned by the Ancora Funds and held in the Ancora Advisors SMA and Ancora Family Wealth SMA. Mr. DiSanto, as the Chairman and Chief Executive Officer of Ancora Holdings, may be deemed the beneficial owner of 1,733,799 shares of Common Stock owned by the Ancora Funds and held in the Ancora Advisors SMA and Ancora Family Wealth SMA. As of the date hereof, neither Mr. Chadwick nor Ms. Garibaldi owns any shares of Common Stock.
Ancora Alternatives LLC