The post-Omni Logistics merger landscape at Forward Air has been turbulent to say the least, with both firm’s CEOs exiting the combined company and an activist investor calling for a board shakeup and strategic review of the business.
Now, add layoffs to Forward Air’s laundry list as the logistics services provider aims to slash costs and get back to profitability.
Forward Air confirmed the staff reduction, which was initially reported by FreightWaves, but did not divulge the number of employees impacted by the cuts, or where the layoffs took place.
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“We have made the difficult decision to reduce our workforce as part of our previously announced efforts to improve Forward’s financial performance. It was necessary to right-size the combined companies and achieve the cost reductions discussed on our first-quarter earnings call. The actions we took last week are incremental to those cost reductions previously discussed,” a Forward Air spokesperson said in a statement. “We’re committed to supporting our affected teammates during this transition by providing severance packages, access to COBRA medical coverage, outplacement services and other resources. We want to reiterate our unwavering dedication to delivering best-in-class service to our customers and creating value for all stakeholders, as this remains a top priority for us.”
As of Dec. 31, 2023, Forward Air had 4,014 full-time employees, as well as 237 part-time workers.
In the company’s May 9 earnings call, new CEO Shawn Stewart said the company was identifying opportunities to eliminate “significant costs from our structure.” Then-chief financial officer Rebecca Garbrick, who stepped down less than two weeks after the call, said Forward Air expects to deliver full run rate cost synergies of $73 million by the end of 2025.
Garbrick noted that $18 million of these cost reductions would come from areas like network optimization and facilities consolidation—both of which are areas that typically involve reshuffling or staff reductions.
“We are focused on the levers that we can pull in terms of generating profitability for the combined entity, really focusing on revenue growth, focusing on the cost structure and being able to align that cost structure,” Garbrick said at the time.
Forward Air is also performing an accelerated portfolio review to identify potential divestitures to monetize some of its non-core assets, the execs said during the call. Earlier in the year, the logistics services provider sold off its last-mile delivery business, Forward Air Final Mile (FAFM), to intermodal transportation and logistics management solutions provider Hub Group for $262 million.
The last-mile divestment enabled the company to instead focus on core offerings like the firm’s less-than-truckload (LTL) business.
To help restructure the wider Forward Air business, the company hired Jamie Pierson as its interim chief financial officer upon Garbrick’s resignation. Pierson has experience in the restructuring arena, overseeing a debt reorganization when he was CFO of Yellow Corp from November 2011 to December 2016. In his second stint with the now-defunct trucking firm from December 2019 to November 2020, he obtained the company’s $700 million Covid-era CARES Act loan.
Forward Air incurred net losses of $88.8 million in its first quarter, on top of being saddled with a massive debt load after the controversial Omni Logistics deal to the tune of 5.5 times debt-to-adjusted EBITDA. With that deal, which was valued at $2.1 billion upon closing, Forward Air took on $1.36 billion in Omni’s net debt.
S&P Global Ratings took heavy notice of the debt burden after the merger was finalized when it downgraded the logistics company’s debt rating in February. Just four months later, the credit rating agency downgraded Forward’s score for a second time, bringing it down to a “B” rating. This is the equivalent to last month’s downgrades from Moody’s and Fitch ratings, which assigned the company with a “B2” and “B,” respectively.
“The company’s cost profile had trended higher than we had envisioned,” according to a note from the rating agency. “We now estimate weaker operating margins inclusive of the Omni acquisition (and its Final Mile sale), with Omni contributing earnings and cash flow below our previous estimates. The impact highlights a significant decline in our estimates for earnings and funds from operations (FFO) this year, and corresponding pressure on FFO to debt.”
Despite the high debt-to-EBITDA ratio, at the end of March, Forward Air said it had $512 million worth of liquidity, including a $340 million capacity on its revolver and $172 million in cash on hand.
In many ways, the merger catalyzed Forward Air’s downhill slump over the past year. The company engaged in dueling lawsuits with Omni Logistics after having buyer’s remorse in the wake of the deal, with some customers sharing concern that the former would essentially be acquiring their competitor. Stock is down nearly 80 percent since the initial merger announcement on Aug. 10, 2023.
Garbrick said in the earnings call that Forward Air is expected to provide a full-year outlook for 2024 in conjunction with its second-quarter report.
