Press Release

Hub Group, Inc. Reports First Quarter 2017 Results
  • Revenue of $893.4 million, up 11%
  • Operating income of $17.2 million, down 40%
  • Diluted earnings per share of $0.31, down 39%

OAK BROOK, Ill., April 26, 2017 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced first quarter 2017 net income of $10.3 million, or diluted earnings per share of $0.31 vs. first quarter 2016 net income of $18.0 million, or $0.51 per diluted share.

Revenue for the current quarter was $893.4 million, compared with $805.9 million for the first quarter 2016. The Hub segment revenue increased 10% and the Mode segment revenue increased 16%. 
Operating income for the current quarter decreased to $17.2 million vs. $28.8 million for the first quarter 2016. The Hub segment operating income declined 48% and the Mode segment operating income decreased 12%.  Earnings for the first quarter of 2017 include one-time costs of approximately $1.5 million, or $0.03 per share, for due diligence and severance expenses.

The primary factors negatively affecting earnings in the first quarter lie within our intermodal business line.  We are experiencing a soft pricing environment due primarily to excess truck capacity and extraordinarily aggressive intermodal pricing, particularly in the West.  At the same time, our rail transportation costs continue to increase, further compressing earnings.

   
Segment Information:
   
Hub  
• First quarter 2017 Segment Revenue:  $677.1 million, up 10%
• First quarter 2017 Segment Operating Income: $11.6 million, down 48%
   

The Hub segment’s revenue increased 10% to $677 million as a result of our diversified services and our customer-centric approach. 

First quarter intermodal revenue increased 3% to $425 million reflecting volume growth of 1% and an increase in fuel revenue.  Declines in freight rates and changes in freight mix partially offset these increases. Intermodal gross margin decreased from the prior year because of lower prices and rail transportation cost increases. 

Truck brokerage revenue increased 31% to $107 million this quarter compared to last year.  Truck brokerage handled 19% more loads while fuel, price and mix combined were up 12%.  Truck brokerage gross margin was up due to growth with both new and existing customers. 

First quarter Unyson Logistics revenue increased 22% to $146 million due primarily to growth with new customers on-boarded last year and in the first quarter of this year.  Unyson’s pipeline is exceeding the growth levels we experienced in 2016.  Logistics gross margin increased primarily due to new customers.

Costs and expenses increased $3.6 million to $60.2 million in the first quarter of 2017 compared to $56.6 million in the first quarter of 2016.  Salaries and benefits decreased $0.5 million due to a decrease in bonus expense partially offset by higher headcount and annual employee raises.  General and administrative costs are $3.8 million higher because of an increase in IT costs including costs for our new transportation management and our human resource systems and professional fees related to due diligence for potential acquisitions. 

Operating income was $11.6 million compared to $ 22.5 million last year. 

   
Mode  
• First quarter 2017 Segment Revenue: $241.9 million, up 16%
• First quarter 2017 Segment Operating Income: $5.6 million, down 12%
   

The Mode segment’s revenue increased 16% to $242 million compared to first quarter 2016.   Revenue consisted of $122 million in intermodal which was up 9%, $78 million in truck brokerage which was up 16% and $42 million in logistics which was up 43%. 

Gross margin increased $0.5 million year over year due primarily to an increase in logistics gross margin resulting from new business.

Mode’s costs and expenses increased $1.3 million compared to last year primarily because of increased agent commissions.   

Operating income was $5.6 million compared to $6.3 million last year.

2017 Outlook
We expect that our full-year 2017 diluted earnings per share will range from $1.60 to $1.80.  We project that our 2017 capital expenditures will range from $90 million to $100 million.

“Despite the current challenging market conditions, we remain committed to our strategy to increase market share by providing multi-modal solutions to our clients.  We are making strategic investments in our people and technology to strengthen our competitive position in the market,” said Dave Yeager, Hub’s Chairman and CEO.  “In addition, we continue to search for acquisitions that will further diversify our service offerings.”

Cash Flow and Capitalization:

At March 31, 2017, we had total debt outstanding of $161 million on various debt instruments compared to $174 million at December 31, 2016.

Our capital expenditures for the quarter totaled $6.6 million related primarily to IT projects. At March 31, 2017, we had cash and cash equivalents of $154 million.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, April 26, 2017, to discuss its first quarter 2017 results.

Hosting the conference call will be Dave Yeager, Chairman and Chief Executive Officer.  Also participating on the call will be Don Maltby, President and Chief Operating Officer, and Terri Pizzuto, Executive Vice-President and Chief Financial Officer.

This call is being webcast and can be accessed through the Investors link on Hub Group’s Web site at www.hubgroup.com.  The webcast is listen-only.  Those interested in participating in the question and answer session should follow the telephone dial-in instructions below.

To participate in the conference call by telephone, please register at http://www.yourconferencecenter.com/r.aspx?p=1&a=UNDNzOZtewTjkx . Registrants will be issued a passcode and PIN to use when dialing into the live call which will provide quickest access to the conference.  You may register at any time, including up to and after the call start time.  On the day of the call, dial (888) 206-4064 approximately ten minutes prior to the scheduled call time; enter the participant passcode and PIN received during registration.   The call will be limited to 60 minutes, including questions and answers.

An audio replay will be available through the Investors link on the Company's Web site at www.hubgroup.com. This replay will be available for 30 days.

On April 27, 2017, the company will make available on its website an Investor Presentation, which includes updated business information and first quarter results, among other things. The presentation can be accessed by going to www.hubgroup.com, selecting the “Investors” tab, and then selecting the “Presentations” tab. The presentation will be available on the company’s website until the next regular update.

CERTAIN FORWARD-LOOKING STATEMENTS: Statements in this press release that are not historical, including statements about Hub Group's or management's earnings guidance, intentions, beliefs, expectations, representations, projections, plans or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain and subject to risks, and should be viewed with caution. Forward-looking statements may contain words such as “expects”, “expected”, “believe”, “projected”, “estimate”, or similar words, and are based on management's experience and perception of historical trends, current conditions, and anticipated future developments, as well as other factors believed to be appropriate. We believe these statements and the assumptions and estimates contained in this release are reasonable based on information that is currently available to us. Such statements should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. Factors that could cause actual results to differ materially include intermodal costs, intermodal prices (including the timing of any changes), the timing of any acquisitions and expenses relating thereto, the future performance of Hub’s Intermodal, Truck Brokerage and Unyson Logistics business lines, the future performance of Mode, the amount and timing of strategic investments by Hub, shipping volumes, anticipated intermodal margins, customers encountering adverse economic conditions, the amount and timing of operating expenses and the factors listed from time to time in Hub Group'sSEC reports including, but not limited to, the annual report on Form 10-K for the year ended December 31, 2016.  Hub Group assumes no liability to update any such forward-looking statements.

   
   
  HUB GROUP, INC.
  CONSOLIDATED STATEMENTS OF EARNINGS
  (in thousands, except per share amounts)
  (unaudited)
                         
                Three Months Ended March 31,
                  2017       2016  
                  % of     % of
                Amount Revenue   Amount Revenue
  Revenue       $ 893,448   100.0 %   $ 805,859   100.0 %
                         
  Transportation costs         791,863   88.6 %     697,472   86.6 %
    Gross margin         101,585   11.4 %     108,387   13.4 %
                         
  Costs and expenses:                
    Salaries and benefits         43,179   4.8 %     43,863   5.4 %
    Agent fees and commissions       17,993   2.0 %     16,901   2.1 %
    General and administrative         20,824   2.4 %     16,644   2.1 %
    Depreciation and amortization       2,412   0.3 %     2,136   0.3 %
      Total costs and expenses       84,408   9.5 %     79,544   9.9 %
                         
  Operating income         17,177   1.9 %     28,843   3.5 %
                         
  Other income (expense):                
    Interest expense         (1,098 ) -0.1 %     (911 ) -0.1 %
    Interest and dividend income       130   0.0 %     61   0.0 %
    Other, net         194   0.0 %     936   0.1 %
      Total other (expense) income       (774 ) -0.1 %     86   0.0 %
                         
  Income before provision for income taxes       16,403   1.8 %     28,929   3.5 %
                         
  Provision for income taxes         6,069   0.7 %     10,964   1.3 %
                         
  Net income       $ 10,334   1.1 %   $ 17,965   2.2 %
                         
                         
                         
  Basic earnings per common share     $ 0.31       $ 0.51    
                         
  Diluted earnings per common share     $ 0.31       $ 0.51    
                         
  Basic weighted average number of shares outstanding       33,205         35,137    
  Diluted weighted average number of shares outstanding       33,373         35,122    
                         


HUB GROUP, INC.  
FINANCIAL INFORMATION BY SEGMENT  
(in thousands)  
(unaudited)  
                             
              Three Months  
               Ended March 31, 2017  
        Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $ 677,132   $ 241,874   $ (25,558 )   $ 893,448  
                             
Transportation costs         605,326     212,095     (25,558 )     791,863  
  Gross margin         71,806     29,779     -       101,585  
                             
Costs and expenses:                      
  Salaries and benefits         39,596     3,583     -       43,179  
  Agent fees and commissions       17     17,976     -       17,993  
  General and administrative         18,479     2,345     -       20,824  
  Depreciation and amortization       2,109     303     -       2,412  
    Total costs and expenses       60,201     24,207     -       84,408  
                             
Operating income       $ 11,605   $ 5,572   $ -     $ 17,177  
                             

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                             
              Three Months  
              Ended March 31, 2016  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $ 615,227   $ 208,832   $ (18,200 )   $ 805,859  
                             
Transportation costs         536,073     179,599     (18,200 )     697,472  
  Gross margin         79,154     29,233     -       108,387  
                             
Costs and expenses:                      
  Salaries and benefits         40,096     3,767     -       43,863  
  Agent fees and commissions       13     16,888     -       16,901  
  General and administrative         14,722     1,922     -       16,644  
  Depreciation and amortization       1,815     321     -       2,136  
    Total costs and expenses       56,646     22,898     -       79,544  
                             
Operating income       $ 22,508   $ 6,335   $ -     $ 28,843  
                             

 

HUB GROUP, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
(unaudited)  
                   
                March 31,
  December 31,
 
                 2017    2016  
                       
ASSETS                
  CURRENT ASSETS:            
    Cash and cash equivalents   $ 154,000     $ 127,404    
    Accounts receivable trade, net     418,357       473,608    
    Accounts receivable other     4,984       4,331    
    Prepaid taxes       469       294    
    Prepaid expenses and other current assets   13,863       16,653    
        TOTAL CURRENT ASSETS     591,673       622,290    
                       
  Restricted investments     22,313       20,877    
  Property and equipment, net     443,207       438,594    
  Other intangibles, net       11,520       11,844    
  Goodwill, net       262,321       262,376    
  Other assets       3,905       4,278    
          TOTAL ASSETS   $ 1,334,939     $ 1,360,259    
                       
                       
LIABILITIES AND STOCKHOLDERS' EQUITY        
  CURRENT LIABILITIES:            
    Accounts payable trade   $ 249,224     $ 266,555    
    Accounts payable other     25,228       21,070    
    Accrued payroll       12,886       36,223    
    Accrued other       54,626       46,013    
    Current portion of capital lease     2,708       2,697    
    Current portion of long term debt     44,750       45,163    
        TOTAL CURRENT LIABILITIES   389,422       417,721    
                       
  Long term debt       104,160       115,529    
  Non-current liabilities       24,329       23,595    
  Long term capital lease     9,838       10,576    
  Deferred taxes       169,161       164,659    
                       
  STOCKHOLDERS' EQUITY:          
    Preferred stock, $.01 par value; 2,000,000 shares authorized;        
      no shares issued or outstanding in 2017 and 2016   -       -    
    Common stock            
      Class A: $.01 par value; 97,337,700 shares authorized and        
        41,224,792 shares issued in 2017 and 2016; 33,474,911 shares        
        outstanding in 2017 and 33,192,982 shares outstanding in 2016   412       412    
      Class B:  $.01 par value; 662,300 shares authorized;        
        662,296 shares issued and outstanding in 2017 and 2016   7       7    
    Additional paid-in capital     164,560       173,565    
    Purchase price in excess of predecessor basis, net of tax        
    benefit of $10,306       (15,458 )     (15,458 )  
    Retained earnings       745,897       735,563    
    Accumulated other comprehensive loss   (209 )     (273 )  
    Treasury stock; at cost, 7,749,881 shares in 2017        
      and 8,031,810 shares in 2016     (257,180 )     (265,637 )  
      TOTAL STOCKHOLDERS' EQUITY   638,029       628,179    
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,334,939     $ 1,360,259    
                       

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                   
                  Three Months Ended March 31,
                    2017       2016  
                       
                       
Cash flows from operating activities:          
  Net income       $ 10,334     $ 17,965  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
      Depreciation and amortization       12,522       10,639  
      Deferred taxes         5,279       2,383  
      Compensation expense related to share-based compensation plans     2,609       2,181  
      Gain on sale of assets       (48 )     (83 )
      Excess tax benefits from share-based compensation     -       (30 )
  Changes in operating assets and liabilities:        
      Restricted investments       (1,436 )     1,685  
      Accounts receivable, net       54,600       21,332  
      Prepaid taxes         (171 )     26  
      Prepaid expenses and other current assets     2,795       1,409  
      Other assets         373       400  
      Accounts payable       (13,175 )     5,421  
      Accrued expenses       (25,990 )     (13,517 )
      Non-current liabilities       12       481  
          Net cash provided by operating activities     47,704       50,292  
                       
Cash flows from investing activities:          
  Proceeds from sale of equipment       1,127       592  
  Purchases of property and equipment     (6,625 )     (4,893 )
        Net cash used in investing activities     (5,498 )     (4,301 )
                       
Cash flows from financing activities:          
  Repayments of long term debt       (11,782 )     (8,132 )
  Stock tendered for payments of withholding taxes     (3,157 )     (2,208 )
  Purchase of treasury stock       -       (42,368 )
  Capital lease payments       (727 )     (643 )
  Excess tax benefits from share-based compensation     -       (134 )
        Net cash used in financing activities     (15,666 )     (53,485 )
                       
                       
  Effect of exchange rate changes on cash and cash equivalents     56       1  
                       
Net increase (decrease) in cash and cash equivalents     26,596       (7,493 )
Cash and cash equivalents beginning of period     127,404       207,749  
Cash and cash equivalents end of period   $ 154,000     $ 200,256  
                       
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

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Hub Group, Inc.