Press Release

Hub Group, Inc. Reports Fourth Quarter and Full Year 2016 Results

Fourth Quarter Results

  • Revenue of $978.6 million increased 10%
  • Operating income totaled $30.8 million, down 13%
  • Diluted earnings per share of $0.55 declined 13%

Full Year 2016 Results

  • Revenue of $3.6 billion increased 1%
  • Operating income totaled $123.8 million, up 6%
  • Diluted earnings per share of $2.20 increased 12%

OAK BROOK, Ill., Feb. 02, 2017 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2016 net income of $18.2 million, or diluted earnings per share of $0.55 vs. fourth quarter 2015 net income of $22.4 million, or $0.63 per diluted share.

Revenue for the current quarter was $978.6 million, compared with $890.3 million for the fourth quarter 2015. The Hub segment revenue increased 13% and the Mode segment revenue increased 6%. 
Operating income for the current quarter decreased to $30.8 million vs. $35.3 million for the fourth quarter 2015. The Hub segment operating income declined 14% and the Mode segment operating income decreased 6%.  “The above market revenue increase is the result of our on-going focus on excellent customer service.  The operating income decline was driven by our strategic investments in our people and technology.  We believe these investments provide a solid foundation for the future,” said Dave Yeager, Hub’s Chairman and CEO. 

Segment Information:

Hub

  • Fourth quarter 2016 Segment Revenue:       $754.1 million, up 13%
  • Fourth quarter 2016 Operating Income:       $24.3 million, down 14%

The fourth quarter started out slowly but gained momentum as the quarter progressed.  We were successful executing our strategy of targeting specific verticals and customers and providing our customers with multimodal solutions.  This resulted in growth in all of our service lines.  The Hub segment’s revenue increased 13% to $754.1 million as a result of our diversified services and our customer-centric approach. 

Fourth quarter intermodal revenue increased 5% to $468 million reflecting volume growth of 5%.  Intermodal gross margin decreased from the prior year because of lower prices than last year and rail cost increases.  Volume growth, lower dray costs and improved mix and lane balance partially offset the decline. 

Truck brokerage revenue increased 46% to $130 million this quarter compared to last year.  Truck brokerage handled 33% more loads while fuel, price and mix combined were up 13%.  During the quarter, we saw surges in demand from retail and e-commerce customers.  We are well positioned to handle surge freight.  Truck brokerage gross margin increased because of an increase in new business and seasonal business. 

Fourth quarter Unyson Logistics revenue increased 17% to $156 million due primarily to growth with new customers on-boarded this year.  This year we had a record number of new customer on-boardings.  Logistics gross margin was up due to growth with both new and existing customers. 

Costs and expenses increased $8.6 million to $64.5 million in the fourth quarter of 2016 compared to $55.9 million in the fourth quarter of 2015.  Salaries and benefits increased $6.4 million due to higher headcount, annual employee raises and an increase in bonus expense.  General and administrative costs are $1.9 million higher because of an increase in IT costs including costs for our new transportation management system and our new human resource system and an increase in professional fees. 

Operating income was $24.3 million compared to $ 28.4 million last year. 

Mode

  • Fourth quarter 2016 Segment Revenue:       $256.4 million, up 6%
  • Fourth quarter 2016 Operating Income:       $6.5 million, down 6%

Mode managed through a competitive environment and saw revenue increase 6% to $256 million compared to fourth quarter 2015.   Revenue consisted of $131 million in intermodal which was flat, $80 million in truck brokerage which was up 4% and $45 million in logistics which was up 33%.  Mode has made great strides in cross selling our services. 

Gross margin decreased $0.8 million year over year due primarily to a decrease in intermodal gross margin.

Mode’s costs and expenses decreased $0.4 million compared to last year primarily because of a decline in agent commissions.   

Mode added 3 new IBO’s to the network during the quarter along with 23 salespeople.  Mode’s pipeline remains strong for new recruits in 2017.

Operating income was $6.5 million compared to $6.9 million last year.

2017 Outlook
“We are pleased with the results for 2016 and the progress we have made on our goals and objectives.  Looking to 2017, we remain committed to our strategy to increase market share by providing multimodal solutions for our customers,” said Dave Yeager.  “We are optimistic about growing all our service lines as we focus on targeted growth initiatives.  To support this growth, we will be increasing our fleet 10% and investing in technology to help us exceed customer expectations and improve operating efficiencies.”

Cash Flow and Capitalization:

At December 31, 2016, we had total debt outstanding of $174 million on various debt instruments compared to $149 million at December 31, 2015.

Our capital expenditures for 2016 approximated $107 million vs. $83 million in 2015. At December 31, 2016, we had cash and cash equivalents of $127 million.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, February 2, 2017, to discuss its fourth quarter and full year 2016 results and provide 2017 guidance. 

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=UXfABcEEofgJcl. 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.

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. 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 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, 2015 and the report on Form 10-Q for the period ended September 30, 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 December 31
                  2016       2015  
                  % of     % of
                Amount Revenue   Amount Revenue
  Revenue       $   978,560   100.0 %   $   890,272   100.0 %
                         
  Transportation costs           858,106   87.7 %       773,498   86.9 %
    Gross margin           120,454   12.3 %       116,774   13.1 %
                         
  Costs and expenses:                
    Salaries and benefits           50,384   5.1 %       44,268   5.0 %
    Agent fees and commissions         18,562   1.9 %       19,350   2.1 %
    General and administrative           18,262   1.9 %       15,720   1.8 %
    Depreciation and amortization         2,407   0.2 %       2,095   0.2 %
      Total costs and expenses         89,615   9.1 %       81,433   9.1 %
                         
  Operating income           30,839   3.2 %       35,341   4.0 %
                         
  Other income (expense):                
    Interest expense           (970 ) -0.1 %       (753 ) -0.1 %
    Interest and dividend income         107   0.0 %       36   0.0 %
    Other, net            (359 ) 0.0 %       (465 ) -0.1 %
      Total other expense           (1,222 ) -0.1 %       (1,182 ) -0.2 %
                         
  Income before provision for income taxes         29,617   3.1 %       34,159   3.8 %
                         
  Provision for income taxes           11,373   1.2 %       11,785   1.3 %
                         
  Net income       $   18,244   1.9 %   $   22,374   2.5 %
                         
                         
                         
  Basic earnings per common share     $   0.55       $   0.63    
                         
  Diluted earnings per common share     $   0.55       $   0.63    
                         
  Basic weighted average number of shares outstanding         33,069           35,595    
  Diluted weighted average number of shares outstanding         33,281           35,726    
                         


  HUB GROUP, INC.
  CONSOLIDATED STATEMENTS OF EARNINGS
  (in thousands, except per share amounts)
  (unaudited)
                         
                Twelve Months Ended December 31
                  2016       2015  
                  % of     % of
                Amount Revenue   Amount Revenue
  Revenue       $   3,572,790   100.0 %   $   3,525,595   100.0 %
                         
  Transportation costs           3,118,005   87.3 %       3,112,900   88.3 %
    Gross margin           454,785   12.7 %       412,695   11.7 %
                         
  Costs and expenses:                
    Salaries and benefits           180,459   5.1 %       158,938   4.5 %
    Agent fees and commissions         72,896   2.0 %       68,724   2.0 %
    General and administrative           68,630   1.9 %       60,015   1.7 %
    Depreciation and amortization         8,966   0.2 %       7,988   0.2 %
      Total costs and expenses         330,951   9.2 %       295,665   8.4 %
                         
  Operating income           123,834   3.5 %       117,030   3.3 %
                         
  Other income (expense):                
    Interest expense           (3,625 ) -0.1 %       (2,971 ) -0.1 %
    Interest and dividend income         393   0.0 %       83   0.0 %
    Other, net            819   0.0 %       (2,560 ) -0.1 %
      Total other expense           (2,413 ) -0.1 %       (5,448 ) -0.1 %
                         
  Income before provision for income taxes         121,421   3.4 %       111,582   3.2 %
                         
  Provision for income taxes           46,616   1.3 %       40,633   1.2 %
                         
  Net income       $   74,805   2.1 %   $   70,949   2.0 %
                         
                         
                         
  Basic earnings per common share     $   2.21       $   1.98    
                         
  Diluted earnings per common share     $   2.20       $   1.97    
                         
  Basic weighted average number of shares outstanding         33,841           35,876    
  Diluted weighted average number of shares outstanding         33,949           35,968    
                         

 


HUB GROUP, INC.  
FINANCIAL INFORMATION BY SEGMENT  
(in thousands)  
(unaudited)  
                             
              Three Months  
              Ended December 31, 2016  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   754,091   $   256,369   $   (31,900 )   $   978,560  
                             
Transportation costs           665,270       224,736       (31,900 )       858,106  
  Gross margin           88,821       31,633     -         120,454  
                             
Costs and expenses:                      
  Salaries and benefits           46,478       3,906     -         50,384  
  Agent fees and commissions         19       18,543     -         18,562  
  General and administrative           15,894       2,368     -         18,262  
  Depreciation and amortization         2,095       312     -         2,407  
    Total costs and expenses         64,486       25,129     -         89,615  
                             
Operating income       $   24,335   $   6,504   $ -     $   30,839  
                             

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                             
              Three Months  
              Ended December 31, 2015  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   668,865   $   241,917   $   (20,510 )   $   890,272  
                             
Transportation costs           584,569       209,439       (20,510 )       773,498  
  Gross margin           84,296       32,478     -         116,774  
                             
Costs and expenses:                      
  Salaries and benefits           40,128       4,140     -         44,268  
  Agent fees and commissions         13       19,337     -         19,350  
  General and administrative           13,972       1,748     -         15,720  
  Depreciation and amortization         1,775       320     -         2,095  
    Total costs and expenses         55,888       25,545     -         81,433  
                             
Operating income       $   28,408   $   6,933   $ -     $   35,341  
                             

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                             
              Twelve Months  
              Ended December 31, 2016  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   2,734,541   $   948,735   $   (110,486 )   $   3,572,790  
                             
Transportation costs           2,404,946       823,545       (110,486 )       3,118,005  
  Gross margin           329,595       125,190     -         454,785  
                             
Costs and expenses:                      
  Salaries and benefits           165,136       15,323     -         180,459  
  Agent fees and commissions         66       72,830     -         72,896  
  General and administrative           60,811       7,819     -         68,630  
  Depreciation and amortization         7,698       1,268     -         8,966  
    Total costs and expenses         233,711       97,240     -         330,951  
                             
Operating income       $   95,884   $   27,950   $ -     $   123,834  
                             

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                             
              Twelve Months  
              Ended December 31, 2015  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   2,679,318   $   928,661   $   (82,384 )   $   3,525,595  
                             
Transportation costs           2,385,197       810,087       (82,384 )       3,112,900  
  Gross margin           294,121       118,574     -         412,695  
                             
Costs and expenses:                      
  Salaries and benefits           143,993       14,945     -         158,938  
  Agent fees and commissions         56       68,668     -         68,724  
  General and administrative           53,023       6,992     -         60,015  
  Depreciation and amortization         6,688       1,300     -         7,988  
    Total costs and expenses         203,760       91,905     -         295,665  
                             
Operating income       $   90,361   $   26,669   $ -     $   117,030  
                             

 

HUB GROUP, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
(unaudited)  
                       
                December 31,   December 31,  
                  2016       2015    
                       
ASSETS                
  CURRENT ASSETS:            
    Cash and cash equivalents   $   127,404     $   207,749    
    Accounts receivable trade, net       473,608         379,987    
    Accounts receivable other       4,331         10,344    
    Prepaid taxes         294         362    
    Deferred taxes       -         8,412    
    Prepaid expenses and other current assets     16,653         17,756    
        TOTAL CURRENT ASSETS       622,290         624,610    
                       
  Restricted investments       20,877         21,108    
  Property and equipment, net       438,594         374,847    
  Other intangibles, net         11,844         13,139    
  Goodwill, net         262,376         262,594    
  Other assets         4,278         4,848    
          TOTAL ASSETS   $   1,360,259     $   1,301,146    
                       
                       
LIABILITIES AND STOCKHOLDERS' EQUITY        
  CURRENT LIABILITIES:            
    Accounts payable trade   $   266,555     $   230,432    
    Accounts payable other       21,070         21,495    
    Accrued payroll         36,223         33,020    
    Accrued other         46,013         38,733    
    Current portion of capital lease       2,697         2,608    
    Current portion of long term debt       45,163         32,409    
        TOTAL CURRENT LIABILITIES     417,721         358,697    
                       
  Long term debt         115,529         100,895    
  Non-current liabilities         23,595         20,233    
  Long term capital lease       10,576         13,299    
  Deferred taxes         164,659         160,182    
                       
  STOCKHOLDERS' EQUITY:          
    Preferred stock, $.01 par value; 2,000,000 shares authorized;        
      no shares issued or outstanding in 2016 and 2015   -       -    
    Common stock            
      Class A: $.01 par value; 97,337,700 shares authorized and        
        41,224,792 shares issued in 2016 and 2015; 33,192,982 shares        
        outstanding in 2016 and 35,633,961 shares outstanding in 2015     412         412    
      Class B:  $.01 par value; 662,300 shares authorized;        
        662,296 shares issued and outstanding in 2016 and 2015     7         7    
    Additional paid-in capital       173,565         174,285    
    Purchase price in excess of predecessor basis, net of tax        
     benefit of $10,306         (15,458 )       (15,458 )  
    Retained earnings         735,563         660,758    
    Accumulated other comprehensive loss     (273 )       (178 )  
    Treasury stock; at cost, 8,031,810 shares in 2016        
      and 5,590,831 shares in 2015       (265,637 )       (171,986 )  
      TOTAL STOCKHOLDERS' EQUITY     628,179         647,840    
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   1,360,259     $   1,301,146    
                       

 


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                   
                  Years Ended December 31,
                    2016       2015  
                       
                       
Cash flows from operating activities:          
  Net income       $   74,805     $   70,949  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
      Depreciation and amortization          44,712         37,042  
      Deferred taxes           13,801         16,378  
      Compensation expense related to share-based compensation plans       8,479         7,833  
      Gain on sale of assets         (573 )       (129 )
      Excess tax benefits from share-based compensation       (733 )       (81 )
  Changes in operating assets and liabilities:        
      Restricted investments         231         836  
      Accounts receivable, net         (87,629 )       36,373  
      Prepaid taxes           66         14,575  
      Prepaid expenses and other current assets       1,099         (3,401 )
      Other assets           570         (805 )
      Accounts payable         35,709         (25,736 )
      Accrued expenses         9,238         20,505  
      Non-current liabilities         2,698         (2,642 )
          Net cash provided by operating activities       102,473         171,697  
                       
Cash flows from investing activities:          
  Proceeds from sale of equipment         2,061         2,309  
  Purchases of property and equipment       (107,409 )       (83,042 )
        Net cash used in investing activities       (105,348 )       (80,733 )
                       
Cash flows from financing activities:          
  Proceeds from issuance of debt         62,155         64,442  
  Repayments of long term debt         (34,767 )       (23,217 )
  Stock tendered for payments of withholding taxes       (2,489 )       (2,916 )
  Purchase of treasury stock         (100,000 )       (28,823 )
  Capital lease payments         (2,634 )       (2,534 )
  Excess tax benefits from share-based compensation       372         195  
        Net cash (used in) provided by financing activities       (77,363 )       7,147  
                       
                       
  Effect of exchange rate changes on cash and cash equivalents       (107 )       (131 )
                       
Net (decrease) increase in cash and cash equivalents       (80,345 )       97,980  
Cash and cash equivalents beginning of period       207,749         109,769  
Cash and cash equivalents end of period   $   127,404     $   207,749  
                       

 

CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

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Hub Group, Inc.