Press Release

Hub Group, Inc. Reports Record Fourth Quarter 2018 Results From Continuing Operations

Highlights of the quarter

  • Acquired CaseStack, further diversifying our service lines
  • 12% revenue growth driven by intermodal, logistics, and dedicated
  • 30% gross margin growth
  • 38% increase in operating income

OAK BROOK, Ill., Feb. 07, 2019 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2018 net income of $48.9 million, or diluted earnings per share of $1.46. Income from continuing operations for the current quarter was $33.7 million, or $1.01 per diluted share.  Income from discontinued operations for the current quarter was $15.2 million, or $0.45 per diluted share. 

Fourth quarter 2017, adjusted net income was $24.7 million excluding the impact of tax reform, or adjusted diluted earnings per share of $0.74. Adjusted income from continuing operations for the fourth quarter 2017 was $20.9 million excluding the impact of tax reform, or adjusted $0.62 per diluted share.  The fourth quarter of 2017 included a $75.2 million, or $2.25 per diluted share, decrease in income taxes resulting from the change to our deferred tax liability at December 31, 2017 caused by the reduction of the federal tax rate as part of the Tax Cuts and Jobs Act.  Income from discontinued operations for the fourth quarter 2017 was $3.9 million, or $0.12 per diluted share.  Fourth quarter 2017 net income was $99.9 million, or diluted earnings per share of $2.99 including the impact of tax reform. 

Results of Continuing Operations

Revenue for the current quarter was $1.0 billion compared with $909.2 million for the fourth quarter 2017 as a result of our success in providing multimodal solutions to our customers.   Operating income for the current quarter increased 38% to $48.2 million versus $35.1 million for the fourth quarter 2017, primarily as a result of a favorable intermodal pricing environment, effective margin improvement initiatives, our focus on providing value added customer solutions, and continuing stringent cost control.

Fourth quarter intermodal revenue increased 18% to $598.1 million due to a 5% increase in load volume, price increases and higher fuel revenue. Transcon volume was up 7%, local west was up 8%, and local east was up 1%. Intermodal gross margin increased compared to the fourth quarter of 2017 primarily due to higher pricing, improved mix, better network balance and increased volume.  These gains were partially offset by higher rail and drayage costs and 0.8 day worse utilization than 2017 primarily due to rail service.  We ended the fourth quarter of 2018 with approximately 38,000 containers and 1,200 tractors assigned to the dray fleet.

Truck brokerage revenue decreased 12% to $140.3 million in the fourth quarter of 2018 compared to the same quarter of last year.  Truck brokerage handled 3% fewer loads while fuel, price and mix combined were down 9%.  Contractual volume represented 83% of total load volume compared to 72% in the fourth quarter of 2017. Truck brokerage gross margin decreased compared to the fourth quarter of 2017 primarily because of decreased spot business.

Fourth quarter logistics revenue increased 8% to $200.0 million due to the addition of CaseStack and growth with existing customers, partially offset by lost customers. Logistics gross margin increased compared to the fourth quarter of 2017 due to the addition of CaseStack, price increases, and growth with existing customers.

Dedicated revenue increased 40% to $80.0 million compared to the same quarter in the prior year due to growth with new customers.  Dedicated gross margin increased compared to the fourth quarter of 2017 due to decreased use of outside carriers and improved driver productivity.  We ended the fourth quarter of 2018 with approximately 1,400 tractors and 5,200 trailers in Dedicated. 

Costs and expenses increased $18.8 million to $90.3 million in the fourth quarter of 2018 compared to $71.5 million in the fourth quarter of 2017 due primarily to the addition of CaseStack, a $6.7 million increase in incentive compensation, $2.7 million of higher professional and driver recruiting fees, $1.9 million increase in salaries due to higher headcount and employee raises, and $1.6 million increase in compensation expense from restricted stock partially offset by $1.4 million of lower commissions. Professional fees include $1.0 million of advisory and other services associated with acquisitions. Costs and expenses include a total of $1.9 million of non-cash amortization expense related to CaseStack and Hub Group Dedicated and $0.2 million of compensation expense associated with restricted stock issued to CaseStack management in connection with the acquisition.

Discontinued Operations

Income from discontinued operations related to the sale of our Mode segment, net of income taxes, for the fourth quarter 2018 was $15.2 million or diluted earnings per share of $0.45, versus fourth quarter 2017 net income of $3.9 million or $0.12 per diluted share.

Cash Flow and Capitalization

Our capital expenditures for the fourth quarter 2018 totaled $61.0 million, primarily for tractors, containers, trailers and technology investments.  At December 31, 2018, we had cash and cash equivalents of $61.4 million

At December 31, 2018, we had total debt outstanding of $338.4 million on various debt instruments compared to $302.5 million at December 31, 2017. 

2019 Outlook

We expect that our 2019 diluted earnings per share will range from $3.10 to $3.30. We expect amortization expense associated with the CaseStack and Hub Group Dedicated acquisitions will be approximately $13.5 million and compensation expense related to restricted stock issued to CaseStack management in connection with the acquisition will be approximately $2.4 million in 2019. We estimate that our 2019 capital expenditures will range from $90 million to $100 million. We project our effective tax rate for 2019 will range from 25.0% to 26.0%.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, February 7, 2019 to discuss its fourth quarter 2018 results.

Hosting the conference call will be Dave Yeager, Chief Executive Officer.  Also participating on the call will be Don Maltby, Chief Operating Officer, and Terri Pizzuto, 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=UuDpQkjNEPbxBF. 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 February 8, 2019, the company will make available on its website an Investor Presentation, which includes updated business information and fourth quarter 2018 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 and prices, the integration of any acquisitions and expenses relating thereto, the future performance of Hub’s Intermodal, Truck Brokerage, Dedicated and Logistics business lines, driver shortages, the amount and timing of strategic investments or divestitures by Hub, the failure to integrate critical information technology systems, retail customers encountering adverse economic conditions 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, 2017.  Hub Group assumes no liability to update any such forward-looking statements.

SOURCE:  Hub Group, Inc.


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited) 
   
                   
              Three Months Ended December 31,    
              2018       2017    
                % of         % of    
              Amount Revenue       Amount Revenue    
Revenue       $  1,018,293 100.0   %   $  909,239 100.0   %
                               
Transportation costs        879,706 86.4   %    802,633 88.3   %
  Gross margin        138,587 13.6   %    106,606 11.7   %
                               
Costs and expenses:                        
  Salaries and benefits      59,290 5.9   %    47,925 5.3   %
  General and administrative      25,715 2.5   %    19,790 2.2   %
  Depreciation and amortization      5,338 0.5   %    3,824 0.4   %
    Total costs and expenses      90,343 8.9   %    71,539 7.9   %
                               
Operating income        48,244 4.7   %    35,067 3.9   %
                               
Other income (expense):                      
  Interest expense        (2,909) -0.3   %    (2,279) -0.2  
  Interest and dividend income      994 0.1   %    16 0.0   %
  Other, net        38 0.0   %    134 0.0   %
    Total other expense      (1,877) -0.2   %    (2,129) -0.2   %
                               
Income from continuing operations before income taxes  46,367 4.5   %    32,938 3.7   %
                               
Provision for income taxes      12,693 1.2   %    (63,144) -6.9   %
                               
Income from continuing operations      33,674 3.3   %    96,082 10.6   %
                               
Income from discontinued operations, net of income taxes  15,237          3,861      
                               
Net income       $  48,911         $  99,943      
                               
Earnings per share from continuing operations                  
  Basic       $  1.01         $  2.89      
  Diluted       $  1.01         $  2.87      
                               
Earnings per share from discontinued operations                
  Basic       $  0.45         $  0.12      
  Diluted       $  0.45         $  0.12      
                               
Earnings per share net income                      
  Basic       $  1.46         $  3.01      
  Diluted       $  1.46         $  2.99      
                               
Basic weighted average number of shares outstanding  33,409          33,229      
Diluted weighted average number of shares outstanding  33,597          33,429      
                               


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
               
               Twelve Months Ended December 31,
              2018        2017     
                  % of           % of    
              Amount   Revenue       Amount   Revenue    
Revenue       $  3,683,593   100.0   %   $  3,123,063   100.0   %
                                   
Transportation costs        3,237,992   87.9   %    2,785,433   89.2   %
  Gross margin        445,601   12.1   %    337,630   10.8   %
                                   
Costs and expenses:                            
  Salaries and benefits      222,786   6.0   %    175,567   5.6   %
  General and administrative      81,272   2.2   %    77,239   2.5   %
  Depreciation and amortization      16,624   0.5   %    12,155   0.4   %
    Total costs and expenses      320,682   8.7   %    264,961   8.5   %
                                   
Operating income        124,919   3.4   %    72,669   2.3   %
                                   
Other income (expense):                          
  Interest expense        (9,611 ) -0.3      (6,754 ) -0.2  
  Interest and dividend income      1,359   0.0   %    349   0.0   %
  Other, net        58   0.0   %    667   0.0   %
    Total other expense      (8,194 ) -0.3      (5,738 ) -0.2  
                                   
Income from continuing operations before income taxes  116,725   3.1      66,931   2.1  
                                   
Provision for income taxes      29,064   0.8        (53,083 ) -1.7  
                                   
Income from continuing operations      87,661   2.3      120,014   3.8  
                                   
Income from discontinued operations, net of income taxes  114,079            15,139        
                                   
Net income       $  201,740           $  135,153        
                                   
Earnings per share from continuing operations                    
  Basic       $  2.62           $  3.61        
  Diluted       $  2.61           $  3.60        
                                   
Earnings per share from discontinued operations                    
  Basic       $  3.42           $  0.46        
  Diluted       $  3.40           $  0.45        
                                   
Earnings per share net income                          
  Basic       $  6.04           $  4.07        
  Diluted       $  6.01           $  4.05        
                                   
Basic weighted average number of shares outstanding  33,393            33,220        
Diluted weighted average number of shares outstanding  33,560            33,350        
                                   


HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
                       
          Three Months   Twelve Months
          Ended December 31,   Ended December 31,
          2018   2017   2018   2017
Intermodal   $  598,062   $  508,309   $  2,195,316   $  1,870,873
Truck brokerage    140,269    158,507    497,282    481,635
Logistics    199,999    185,357    698,138    655,543
Dedicated    79,963    57,066    292,857    115,012
  Total Revenue   $  1,018,293   $  909,239   $  3,683,593   $  3,123,063
                       



HUB GROUP, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
(unaudited)  
                       
                December 31,   December 31,  
                  2018       2017    
                       
ASSETS                
  CURRENT ASSETS:            
    Cash and cash equivalents   $   61,435     $   28,557    
    Accounts receivable trade, net       477,088         424,679    
    Accounts receivable other       22,021         5,704    
    Prepaid taxes         616         12,088    
    Prepaid expenses and other current assets     27,533         25,414    
    Current assets held for sale       -          159,616    
        TOTAL CURRENT ASSETS       588,693         656,058    
                       
  Restricted investments       19,236         20,143    
  Property and equipment, net       681,859         561,214    
  Other intangibles, net         134,788         64,747    
  Goodwill, net         483,584         319,272    
  Other assets         16,738         5,491    
  Non-current assets held for sale       -          44,016    
        TOTAL ASSETS   $   1,924,898     $   1,670,941    
                       
                       
LIABILITIES AND STOCKHOLDERS' EQUITY        
  CURRENT LIABILITIES:            
    Accounts payable trade   $   275,083     $   238,230    
    Accounts payable other       10,906         13,903    
    Accrued payroll         55,535         26,674    
    Accrued other         80,676         53,508    
    Current portion of capital lease       2,845         2,777    
    Current portion of long term debt       101,713         77,266    
    Current liabilities held for sale       -          107,185    
        TOTAL CURRENT LIABILITIES     526,758         519,543    
                       
  Long term debt         229,071         214,808    
  Non-current liabilities         29,619         33,599    
  Long term capital lease       4,739         7,696    
  Deferred taxes         153,877         121,095    
  Non-current liabilities held for sale       -          4,328    
                       
  STOCKHOLDERS' EQUITY:          
    Preferred stock, $.01 par value; 2,000,000 shares authorized;        
      no shares issued or outstanding in 2018 and 2017     -          -     
    Common stock            
      Class A: $.01 par value; 97,337,700 shares authorized and        
        41,224,792 shares issued in 2018 and 2017; 33,793,709 shares        
        outstanding in 2018 and 33,447,070 shares outstanding in 2017     412         412    
      Class B:  $.01 par value; 662,300 shares authorized;        
        662,296 shares issued and outstanding in 2018 and 2017     7         7    
    Additional paid-in capital       172,220         173,011    
    Purchase price in excess of predecessor basis, net of tax        
     benefit of $10,306         (15,458 )       (15,458 )  
    Retained earnings         1,072,456         870,716    
    Accumulated other comprehensive loss     (182 )       (194 )  
    Treasury stock; at cost, 7,431,083 shares in 2018        
      and 7,777,722 shares in 2017       (248,621 )       (258,622 )  
      TOTAL STOCKHOLDERS' EQUITY     980,834         769,872    
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   1,924,898     $   1,670,941    
                       

 

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                   
                  Twelve Months Ended December 31,
                  2018   2017
                       
                       
Cash flows from operating activities:        
  Net income       $  201,740   $  135,153
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
      Depreciation and amortization    83,910    62,173
      Deferred taxes        39,499    (41,351)
      Compensation expense related to share-based compensation plans    13,480    9,873
      Contingent consideration adjustment    (4,703)    - 
      (Gain) loss on sale of assets    (1,007)    441
      Gain on disposition of discontinued operations    (132,448)    - 
      Transaction costs for the Disposition    (5,798)    - 
  Changes in operating assets and liabilities:        
      Restricted investments      827    (3,304)
      Accounts receivable, net      (31,475)    (84,775)
      Prepaid taxes        11,472    (11,794)
      Prepaid expenses and other current assets    (1,750)    (7,543)
      Other assets        (8,029)    56
      Accounts payable      7,745    59,037
      Accrued expenses      41,252    (2,931)
      Non-current liabilities      (3,876)    10,185
        Net cash provided by operating activities    210,839    125,220
                       
Cash flows from investing activities:        
  Proceeds from sale of equipment    10,975    5,327
  Purchases of property and equipment    (199,791)    (74,541)
  Acquisitions, net of cash acquired    (248,656)    (165,933)
  Proceeds from the disposition of discontinued operations    227,986    - 
        Net cash used in investing activities    (209,486)    (235,147)
                       
Cash flows from financing activities:        
  Proceeds from issuance of debt    172,146    98,544
  Repayments of long term debt      (133,436)    (79,869)
  Stock tendered for payments of withholding taxes    (4,270)    (3,412)
  Capital lease payments      (2,889)    (2,800)
  Payment of debt issuance costs    -     (1,397)
        Net cash provided by financing activities    31,551    11,066
                       
                       
  Effect of exchange rate changes on cash and cash equivalents    (26)    14
                       
Net increase (decrease) in cash and cash equivalents    32,878    (98,847)
Cash and cash equivalents beginning of period    28,557    127,404
Cash and cash equivalents end of period   $  61,435   $  28,557
                       
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

Hub Group.jpg

Source: Hub Group, Inc.