Press Release

Hub Group, Inc. Reports Second Quarter 2017 Results
  • Revenue of $924.5 million, up 8%
  • Operating income of $16.6 million, down 52%
  • Diluted earnings per share of $0.29, down 52%

OAK BROOK, Ill., July 26, 2017 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2017 net income of $9.5 million, or diluted earnings per share of $0.29 vs. second quarter 2016 net income of $20.7 million, or $0.61 per diluted share. Earnings for the second quarter of 2017 were negatively affected by margin declines across business lines and one-time costs of approximately $4.0 million, or $0.07 per share, for severance and expenses related to the acquisition of Estenson on July 1, 2017.

Revenue for the current quarter was $924.5 million, compared with $855.6 million for the second quarter 2016. The Hub segment revenue increased 9% and the Mode segment revenue increased 5%.  Operating income for the current quarter decreased to $16.6 million vs. $34.3 million for the second quarter 2016. The Hub segment operating income declined 62% and the Mode segment operating income decreased 13%.

Sequentially, our net income in the second quarter of 2017 excluding one-time costs increased $0.7 million to $12.0 million compared to net income excluding one-time costs in the first quarter of 2017 of $11.3 million.

Segment Information:

Hub

  • Second quarter 2017 Segment Revenue:                  $705.2 million, up 9%
  • Second quarter 2017 Segment Operating Income:   $10.4 million, down 62%

The Hub segment’s revenue increased 9% to $705 million compared to the second quarter of 2016 as a result of our success in providing multi-modal solutions to our customers.

Second quarter intermodal revenue increased 3% to $451 million reflecting volume growth of 1%, an increase in fuel revenue and more favorable mix.  Declines in freight rates partially offset these increases. Intermodal gross margin decreased from the prior year because of rail transportation cost increases and lower prices. 

Truck brokerage revenue increased 26% to $105 million this quarter compared to the same quarter of last year.  Truck brokerage handled 14% more loads while fuel, price and mix combined were up 12%.  Truck brokerage gross margin decreased primarily because of higher purchased transportation costs due to tight capacity and changes in customer mix. 

Second quarter Unyson Logistics revenue increased 17% to $149 million due primarily to growth with new customers on-boarded last year and in the first half of this year.  Unyson Logistics gross margin declined primarily due to startup costs related to new business on-boarded this quarter.  

Costs and expenses increased $6.3 million to $62.2 million in the second quarter of 2017 compared to $55.9 million in the second quarter of 2016.  Salaries and benefits increased $1.8 million due to $2.8 million of severance costs, employee raises, and higher headcount partially offset by a decrease in bonus expense. General and administrative costs are $4.1 million higher because of an increase in IT costs including costs for our transportation management system as well as a $1.2 million increase in professional fees related to the Estenson acquisition. 

Operating income was $10.4 million compared to $27.2 million last year. 

Mode

  • Second quarter 2017 Segment Revenue:                  $243.1 million, up 5%
  • Second quarter 2017 Segment Operating Income:   $6.2 million, down 13%

The Mode segment’s revenue increased 5% to $243 million compared to second quarter 2016.   Revenue consisted of $112 million in intermodal which was down 4%, $83 million in truck brokerage which was up 2% and $48 million in logistics which was up 43%. 

Gross margin decreased $2.7 million compared to the second quarter of 2016 due primarily to a decrease in truck brokerage and intermodal margin, partially offset by an increase in logistics gross margin. 

Mode’s costs and expenses decreased $1.8 million compared to last year primarily because of decreased agent commission.   

Operating income was $6.2 million compared to $7.1 million last year.

2017 Outlook

We expect that our full-year 2017 diluted earnings per share will range from $1.45 to $1.55.  Projected results for Estenson are included in our guidance as are the one-time costs in the first half of the year.  We estimate that our 2017 capital expenditures will range from $85 million to $95 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. Our acquisition of Estenson provides Hub a strong foundation for growth in dedicated trucking.  We continue to make strategic investments in our people and technology to strengthen our competitive position in the market,” said Dave Yeager, Hub’s Chairman and CEO.

Cash Flow and Capitalization:

At June 30, 2017, we had total debt outstanding of $166 million on various debt instruments compared to $174 million at December 31, 2016.

Our capital expenditures for the quarter totaled $23.0 million, primarily for containers and trailers. At June 30, 2017, we had cash and cash equivalents of $152 million.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, July 26, 2017, to discuss its second quarter 2017 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=UiRQszvGKbIdWq.
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 July 27, 2017, the company will make available on its website an Investor Presentation, which includes updated business information and second 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 and integration of any acquisitions and expenses relating thereto, the future performance of Hub’s Intermodal, Truck Brokerage, Dedicated and Unyson Logistics business lines, the future performance of Mode, the amount and timing of strategic investments by Hub, shipping volumes, anticipated intermodal, truck brokerage, and logistics 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 June 30,
          2017       2016  
            % of       % of
        Amount   Revenue   Amount   Revenue
Revenue   $   924,513     100.0 %   $   855,557     100.0 %
                     
Transportation costs       823,196     89.0 %       741,067     86.6 %
  Gross margin       101,317     11.0 %       114,490     13.4 %
                     
Costs and expenses:                
  Salaries and benefits       45,038     4.9 %       43,602     5.1 %
  Agent fees and commissions       17,038     1.8 %       18,360     2.1 %
  General and administrative       20,114     2.2 %       16,083     1.9 %
  Depreciation and amortization       2,549     0.3 %       2,148     0.3 %
    Total costs and expenses       84,739     9.2 %       80,193     9.4 %
                     
Operating income       16,578     1.8 %       34,297     4.0 %
                     
Other income (expense):                
  Interest expense       (1,032 )   -0.1 %       (857 )   -0.1 %
  Interest and dividend income       200     0.0 %       120     0.0 %
  Other, net        -      0.0 %       216     0.0 %
    Total other expense       (832 )   -0.1 %       (521 )   -0.1 %
                     
Income before provision for income taxes       15,746     1.7 %       33,776     3.9 %
                     
Provision for income taxes       6,204     0.7 %       13,105     1.5 %
                     
Net income   $   9,542     1.0 %   $   20,671     2.4 %
                     
                     
                     
Basic earnings per common share   $   0.29         $   0.61      
                     
Diluted earnings per common share   $   0.29         $   0.61      
                     
Basic weighted average number of shares outstanding       33,220             33,944      
Diluted weighted average number of shares outstanding       33,262             34,027      

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
         
                     
        Six Months Ended June 30,
          2017       2016  
            % of       % of
        Amount   Revenue   Amount   Revenue
Revenue   $   1,817,961     100.0 %   $   1,661,416     100.0 %
                     
Transportation costs       1,615,059     88.8 %       1,438,539     86.6 %
  Gross margin       202,902     11.2 %       222,877     13.4 %
                     
Costs and expenses:                
  Salaries and benefits       88,217     4.8 %       87,465     5.3 %
  Agent fees and commissions       35,031     1.9 %       35,262     2.1 %
  General and administrative       40,938     2.3 %       32,727     2.0 %
  Depreciation and amortization       4,961     0.3 %       4,283     0.2 %
    Total costs and expenses       169,147     9.3 %       159,737     9.6 %
                     
Operating income       33,755     1.9 %       63,140     3.8 %
                     
Other income (expense):                
  Interest expense       (2,130 )   -0.1 %       (1,767 )   -0.1 %
  Interest and dividend income       330     0.0 %       181     0.0 %
  Other, net        194     0.0 %       1,152     0.1 %
    Total other expense       (1,606 )   -0.1 %       (434 )   0.0 %
                     
Income before provision for income taxes       32,149     1.8 %       62,706     3.8 %
                     
Provision for income taxes       12,273     0.7 %       24,069     1.5 %
                     
Net income   $   19,876     1.1 %   $   38,637     2.3 %
                     
                     
                     
Basic earnings per common share   $   0.60         $   1.12      
                     
Diluted earnings per common share   $   0.60         $   1.12      
                     
Basic weighted average number of shares outstanding       33,213             34,541      
Diluted weighted average number of shares outstanding       33,318             34,575      
 

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                     
                 
        Three Months
        Ended June 30, 2017
        Hub   Mode   Inter-Segment
Elims
  Hub Group Total
                     
Revenue   $   705,208   $   243,051   $   (23,746 )   $   924,513
                     
Transportation costs       632,651       214,291       (23,746 )       823,196
  Gross margin       72,557       28,760       -          101,317
                     
Costs and expenses:                
  Salaries and benefits       41,569       3,469       -          45,038
  Agent fees and commissions       14       17,024       -          17,038
  General and administrative       18,331       1,783       -          20,114
  Depreciation and amortization       2,249       300       -          2,549
    Total costs and expenses       62,163       22,576       -          84,739
                     
Operating income   $   10,394   $   6,184   $   -      $   16,578
                     
               
               
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                     
                 
        Three Months
        Ended June 30, 2016
        Hub   Mode   Inter-Segment
Elims
  Hub Group Total
                     
Revenue   $   648,523   $   231,924   $   (24,890 )   $   855,557
                     
Transportation costs       565,448       200,509       (24,890 )       741,067
  Gross margin       83,075       31,415       -          114,490
                     
Costs and expenses:                
  Salaries and benefits       39,787       3,815       -          43,602
  Agent fees and commissions       13       18,347       -          18,360
  General and administrative       14,226       1,857       -          16,083
  Depreciation and amortization           1,830       318       -          2,148
    Total costs and expenses       55,856       24,337       -          80,193
                     
Operating income   $   27,219   $   7,078   $   -      $   34,297
               

 

HUB GROUP, INC.  
FINANCIAL INFORMATION BY SEGMENT  
(in thousands)  
(unaudited)  
                 
      Six Months
      Ended June 30, 2017
        Hub   Mode   Inter-Segment
Elims
  Hub Group Total
                     
Revenue   $   1,382,340   $   484,925   $   (49,304 )   $   1,817,961
                     
Transportation costs       1,237,978       426,385       (49,304 )       1,615,059
  Gross margin       144,362       58,540       -          202,902
                     
Costs and expenses:                
  Salaries and benefits       81,164       7,053       -          88,217
  Agent fees and commissions       31       35,000       -          35,031
  General and administrative       36,810       4,128       -          40,938
  Depreciation and amortization         4,357       604       -          4,961
    Total costs and expenses       122,362       46,785       -          169,147
                     
Operating income   $   22,000   $   11,755   $   -      $   33,755
 
 
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                 
        Six Months
        Ended June 30, 2016
        Hub   Mode   Inter-Segment
Elims
  Hub Group Total
                     
Revenue   $   1,263,751   $   440,755   $   (43,090 )   $   1,661,416
                     
Transportation costs       1,101,522       380,107       (43,090 )       1,438,539
  Gross margin       162,229       60,648       -          222,877
                     
Costs and expenses:                
  Salaries and benefits       79,883       7,582       -          87,465
  Agent fees and commissions       27       35,235       -          35,262
  General and administrative       28,948       3,779       -          32,727
  Depreciation and amortization       3,644       639       -          4,283
    Total costs and expenses       112,502       47,235       -          159,737
                     
Operating income   $   49,727   $   13,413   $   -      $   63,140
 

 

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
             
        June 30,   December 31,
          2017       2016  
             
ASSETS        
  CURRENT ASSETS:        
    Cash and cash equivalents   $   151,739     $   127,404  
    Accounts receivable trade, net       448,916         473,608  
    Accounts receivable other       2,786         4,331  
    Prepaid taxes       3,648         294  
    Prepaid expenses and other current assets       12,165         16,653  
    TOTAL CURRENT ASSETS       619,254         622,290  
             
  Restricted investments       23,285         20,877  
  Property and equipment, net       440,838         438,594  
  Other intangibles, net       11,196         11,844  
  Goodwill, net       262,266         262,376  
  Other assets       6,931         4,278  
    TOTAL ASSETS   $  1,363,770     $  1,360,259  
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY        
  CURRENT LIABILITIES:        
    Accounts payable trade   $   262,529     $   266,555  
    Accounts payable other       25,404         21,070  
    Accrued payroll       20,913         36,223  
    Accrued other       43,277         46,013  
    Current portion of capital lease       2,733         2,697  
    Current portion of long term debt       47,582         45,163  
    TOTAL CURRENT LIABILITIES       402,438         417,721  
             
  Long term debt       106,141         115,529  
  Non-current liabilities       24,807         23,595  
  Long term capital lease       9,141         10,576  
  Deferred taxes       171,417         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; 33,433,910 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       168,443         173,565  
  Purchase price in excess of predecessor basis, net of tax benefit of $10,306       (15,458 )       (15,458 )
  Retained earnings       755,439         735,563  
  Accumulated other comprehensive loss       (181 )       (273 )
  Treasury stock; at cost, 7,790,882 shares in 2017 and 8,031,810 shares in 2016       (258,836 )       (265,637 )
    TOTAL STOCKHOLDERS' EQUITY       649,826         628,179  
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $  1,363,770     $  1,360,259  
 

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
             
            Six Months Ended June 30,
              2017       2016  
                 
                 
Cash flows from operating activities:        
  Net income     $   19,876     $   38,637  
  Adjustments to reconcile net income to net cash provided by operating activities:        
    Depreciation and amortization        25,288         21,426  
    Deferred taxes       7,713         7,777  
    Compensation expense related to share-based compensation plans       4,972         4,245  
    Loss (gain) on sale of assets       307         (255 )
    Excess tax benefits from share-based compensation       -          132  
  Changes in operating assets and liabilities:        
    Restricted investments       (2,408 )       1,117  
    Accounts receivable, net       26,240         (12,826 )
    Prepaid taxes       (3,352 )       (2,977 )
    Prepaid expenses and other current assets       4,493         2,685  
    Other assets       (2,653 )       561  
    Accounts payable       307         24,740  
    Accrued expenses       (18,013 )       (14,031 )
    Non-current liabilities       368         1,211  
        Net cash provided by operating activities       63,138         72,442  
                 
Cash flows from investing activities:        
  Proceeds from sale of equipment       2,356         1,148  
  Purchases of property and equipment       (29,593 )       (25,217 )
      Net cash used in investing activities       (27,237 )       (24,069 )
                 
Cash flows from financing activities:        
  Proceeds from issuance of debt       16,149         13,274  
  Repayments of long term debt       (23,118 )       (16,180 )
  Stock tendered for payments of withholding taxes       (3,293 )       (2,379 )
  Purchase of treasury stock       -          (85,000 )
  Capital lease payments       (1,399 )       (1,297 )
  Excess tax benefits from share-based compensation       -          (359 )
      Net cash used in financing activities       (11,661 )       (91,941 )
                 
                 
  Effect of exchange rate changes on cash and cash equivalents       95         (31 )
                 
Net increase (decrease) in cash and cash equivalents       24,335         (43,599 )
Cash and cash equivalents beginning of period       127,404         207,749  
Cash and cash equivalents end of period   $   151,739     $   164,150  
 


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

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Hub Group, Inc.