Hub Group, Inc. Reports Record Third Quarter 2004 Results
DOWNERS GROVE, Ill., Oct. 20 /PRNewswire-FirstCall/ -- Hub Group, Inc. (Nasdaq: HUBG) today reported adjusted net income for the quarter ended September 30, 2004 of $7.8 million. This excludes $4.2 million of after-tax costs ($7.3 million pre-tax) related to the Company's early extinguishment of 9.14% debt following the successful offering of 1,800,000 shares of common stock. This represents a 170% increase in third quarter adjusted net income versus the third quarter of 2003. Hub Group's adjusted diluted earnings per share of $0.75 for the quarter ended September 30, 2004 represents an increase of 103% compared to last year's third quarter diluted earnings per share of $0.37 on 31% higher average diluted shares outstanding in the 2004 period. Hub's gross margin (net revenue) grew 10.5% to $48.0 million as compared to $43.5 million in the third quarter of 2003. As a percentage of revenue, gross margin increased to 13.3% this quarter from 12.8% in 2003 due to more effective yield management. The Company paid off $62 million in debt during the quarter and is now debt-free.
Note: A tabular reconciliation of the differences between the adjusted financial results for the three-month and nine-month periods ended September 30, 2004 and the Company's financial results determined in accordance with generally accepted accounting principles in the United States of America ("GAAP") are contained in the summary financial statements attached to this press release.
On an as-reported basis, net income for the third quarter of 2004 increased to $3.6 million from $2.9 million in the same quarter last year. As reported diluted earnings per share decreased to $0.34 compared to last year's third quarter of $0.37 on 31% higher average diluted shares outstanding in the 2004 period.
Transportation-related revenue, generated by the Company's intermodal, truckload brokerage and logistics business units, increased 5.6% to $350.1 million in the third quarter of 2004 compared to the third quarter of 2003 due primarily to price increases and fuel surcharges. Third quarter intermodal revenue increased 5.9% to $254.4 million. Truckload brokerage revenue increased 4.5% to $56.1 million this quarter. Third quarter logistics revenue increased 5.4% to $39.6 million. Hub Group Distribution Services (HGDS) revenue increased to $12.0 million in the third quarter 2004 from $8.0 million in the same period last year due to an increase in installation business offset partially by a decrease in pharmaceutical revenue which was transferred to our logistics unit. Hub's total revenue grew 6.7% to $362.1 million as compared to $339.5 million in the third quarter of 2003.
Costs and expenses decreased 6% in the third quarter of 2004 to $34.1 million compared to $36.3 million in the third quarter of 2003, reflecting the benefits from the Company's cost reduction efforts. Debt extinguishment costs were $7.3 million in the third quarter of 2004 due primarily to the $6.8 million in pre-payment penalties associated with the early extinguishment of debt. Interest expense decreased to $0.6 million compared to $1.9 million in the third quarter of 2003 due to the lower average debt balance in 2004 as compared to 2003.
Commenting on the results, David P. Yeager, Vice-Chairman and Chief Executive Officer of Hub Group stated, "We are very pleased and proud of our results in the third quarter. Despite the fact that our intermodal volume declined 2%, our top line and bottom line have improved and our balance sheet is stronger than ever. This demonstrates that our focus on yield management is delivering results."
FOURTH QUARTER EARNINGS GUIDANCE
Given the current operating environment, we are comfortable that the earnings for the fourth quarter will be within the analysts' range of $0.52 to $.55 per diluted share.
As previously announced, Hub's public offering of Class A common stock priced at $33.00 per share, before underwriting discounts and commissions, and closed on July 2, 2004. Net proceeds to the Company of $55.9 million from the sale of 1,800,000 shares were used to prepay $50.0 million of 9.14% debt and the related pre-payment penalty on July 6, 2004. As a result of the pre- payment, the Company recorded a pre-tax charge of $7.3 million (after-tax of approximately $4.2 million), consisting of $6.8 million in pre-payment penalties and a $0.5 million write-off of related deferred financing costs.
CONFERENCE CALL: Hub Group, Inc. (Nasdaq: HUBG) will hold a conference call at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) on Thursday, October 21, 2004, to discuss its third quarter 2004 results. Hosting the conference call will be David P. Yeager, Vice-Chairman and CEO and Thomas M. White, Senior Vice-President, Chief Financial Officer and Treasurer.
This call is being webcast by Thomson/CCBN and can be accessed through the Investor Relations link at Hub Group's Web site at http://www.hubgroup.com or individual investors can access the audio webcast at http://www.fulldisclosure.com and institutional investors can access the webcast at http://www.streetevents.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 call ten minutes early by dialing (800) 510-0146. The conference call participant code is 34545895. The call will be limited to 60 minutes, including questions and answers.
An audio replay will be available through the Investor Relations link on the Company's Web site at http://www.hubgroup.com . This replay will be available for 30 days.
ABOUT HUB GROUP: Hub Group, Inc. is a leading non-asset based freight transportation management company providing comprehensive intermodal, truckload brokerage and logistics and distribution services. The Company operates through a network of over 30 offices throughout the United States, Canada and Mexico.
Certain prior year amounts have been reclassified to conform to the current year presentation.
CERTAIN FORWARD-LOOKING STATEMENTS: Statements in this press release that are not historical, including statements about Hub Group's or management's fourth quarter 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's SEC reports including, but not limited to, the annual report on Form 10-K for the year ended December 31, 2003, our report on Form 10-Q for the period ended March 31, 2004, our Prospectus dated June 28, 2004 and our report on Form 10-Q for the period ended June 30, 2004. Hub Group assumes no liability to update any such forward-looking statements.
HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Nine Months Ended September 30, Ended September 30, 2004 2003 2004 2003 Revenue $362,105 $339,484 $1,039,377 $1,000,418 Transportation costs 314,077 296,023 905,881 871,447 Gross margin 48,028 43,461 133,496 128,971 Costs and expenses: Salaries and benefits 21,995 22,508 66,570 68,689 Selling, general and administrative 9,023 11,041 29,618 34,932 Depreciation and amortization of property and equipment 3,052 2,716 8,786 7,865 Total costs and expenses 34,070 36,265 104,974 111,486 Operating income 13,958 7,196 28,522 17,485 Other income (expense): Interest expense (571) (1,885) (3,968) (5,981) Interest income 56 43 165 118 Debt extinguishment expenses (7,296) - (7,296) - Other, net 180 46 583 59 Total other expense (7,631) (1,796) (10,516) (5,804) Income before provision for income taxes 6,327 5,400 18,006 11,681 Provision for income taxes 2,775 2,514 7,682 5,889 Net Income $3,552 $2,886 $10,324 $5,792 Basic earnings per common share $0.37 $0.37 $1.22 $0.75 Diluted earnings per common share $0.34 $0.37 $1.14 $0.74 Basic weighted average number of shares outstanding 9,707 7,709 8,435 7,709 Diluted weighted average number of shares outstanding 10,324 7,897 9,029 7,814 HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) September 30, December 31, 2004 2003 ASSETS CURRENT ASSETS: Cash and cash equivalents $- $- Accounts receivable Trade, net 134,551 125,754 Other 5,948 9,472 Deferred taxes 4,676 4,676 Prepaid expenses and other current assets 4,359 4,578 TOTAL CURRENT ASSETS 149,534 144,480 PROPERTY AND EQUIPMENT, net 21,544 27,855 GOODWILL, net 215,175 215,175 OTHER ASSETS 321 1,017 TOTAL ASSETS $386,574 $388,527 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable Trade $110,709 $117,790 Other 2,905 2,555 Accrued expenses Payroll 16,305 14,157 Other 13,200 11,592 Current portion of long-term debt - 8,017 TOTAL CURRENT LIABILITIES 143,119 154,111 LONG-TERM DEBT, EXCLUDING CURRENT PORTION - 67,017 DEFERRED TAXES 30,594 24,364 STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 2,000,000 shares authorized; no shares issued or outstanding in 2004 and 2003 - - Common stock Class A: $.01 par value; 12,337,700 shares authorized; 9,354,977 shares issued and 9,337,687 outstanding in 2004; 7,410,700 issued and 7,390,500 outstanding in 2003 93 74 Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2004 and 2003 7 7 Additional paid-in capital 174,449 115,820 Purchase price in excess of predecessor basis, net of tax benefit of $10,306 (15,458) (15,458) Retained earnings 57,656 47,332 Unearned compensation (3,475) (4,448) Treasury stock, at cost (17,290 shares in 2004 and 20,200 shares in 2003) (411) (292) TOTAL STOCKHOLDERS' EQUITY 212,861 143,035 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $386,574 $388,527 HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Nine Months Ended September 30, 2004 2003 Cash flows from operating activities: Net income $10,324 $5,792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 8,966 7,908 Deferred taxes 7,535 5,739 Compensation expense related to restricted stock 1,593 - (Gain) on sale of assets (248) (60) Other assets 696 (110) Changes in working capital: Accounts receivable, net (5,273) 553 Prepamd expenses and other current assets 219 (201) Accounts payable (6,731) (4,225) Accrued expenses 3,756 7,799 Net cash provided by operating activities 20,837 23,195 Cash flows from investing activities: Purchases of property and equipment, net (2,407) (3,173) Net cash used in investing activities (2,407) (3,173) Cash flows from financing activities: Proceeds from sale of stock, net 55,871 - Proceeds from stock options exercised 3,500 22 Purchase of treasury stock (2,767) - Net payments on revolver (6,000) (14,000) Payments of long term debt (69,034) (6,044) Net cash used in financing activities (18,430) (20,022) Net increase (decrease) in cash and cash equivalents - - Cash and cash equivalents beginning of period - - Cash and cash equivalents end of period $- $- Supplemental disclosures of cash flow information Cash paid for: Interest $2,995 $4,951 Income Taxes $477 $- HUB GROUP, INC. RECONCILIATION OF AS REPORTED FINANCIAL RESULTS TO AS ADJUSTED FINANCIAL RESULTS (in thousands, except per share amounts) Three Months Ended September 30, 2004 As Reported Adjustments As Adjusted Operating Income $13,958 $- $13,958 Interest (expense) (571) - (571) Interest income 56 - 56 Debt extinguishment expenses (7,296) (7,296) a - Other, net 180 - 180 Income before provision for income taxes 6,327 (7,296) 13,623 Provision for income taxes 2,775 (3,064) b 5,839 Net Income $3,552 $(4,232) $7,784 Basic earnings per common share $0.37 $(0.43) $0.80 Diluted earnings per common share $0.34 $(0.41) $0.75 Basic weighted average number of shares outstanding 9,707 9,707 9,707 Diluted weighted average number of shares outstanding 10,324 10,324 10,324 Nine Months Ended September 30, 2004 As Reported Adjustments As Adjusted Operating Income $28,522 $- $28,522 Interest (expense) (3,968) - (3,968) Interest income 165 - 165 Debt extinguishment expenses (7,296) (7,296) a - Other, net 583 - 583 Income before provision for income taxes 18,006 (7,296) 25,302 Provision for income taxes 7,682 (3,064) b 10,746 Net Income $10,324 $(4,232) $14,556 Basic earnings per common share $1.22 $(0.50) $1.72 Diluted earnings per common share $1.14 $(0.47) $1.61 Basic weighted average number of shares outstanding 8,435 8,435 8,435 Diluted weighted average number of shares outstanding 9,029 9,029 9,029 a) Fees and expenses related to our early extinguishment of 9.14% debt 1) Pre-payment penalty of $6,804 2) Write-off of related deferred financing costs of $492 b) Income taxes at 42.0% Note: The purpose of this statement is to reflect as adjusted earnings excluding the one time costs associated with prepaying our debt.
SOURCE Hub Group, Inc. -0- 10/20/2004 /CONTACT: Erin Koops of Hub Group, Inc., +1-630-271-3656/ /Web site: http://www.hubgroup.com / (HUBG) CO: Hub Group, Inc. ST: Illinois IN: TRN SU: ERN CCA ERP OFR JR-SH -- CGW062 -- 7831 10/20/2004 16:03 EDT http://www.prnewswire.com