Hub Group, Inc. Reports Record Second Quarter 2004 Results and Revised 2004 Guidance
DOWNERS GROVE, Ill., July 21 /PRNewswire-FirstCall/ -- Hub Group, Inc. (Nasdaq: HUBG) today reported a 162.4% increase in second quarter net income versus the second quarter of 2003. Hub Group earned net income of $4.1 million or $0.48 diluted earnings per share for the quarter ended June 30, 2004 compared to last year's second quarter net income of $1.5 million or $0.20 diluted earnings per share on 8.2% 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 7.2% to $338.5 million in the second quarter of 2004 compared to the second quarter of 2003. Second quarter intermodal revenue increased 5.7% to $242.3 million due to an increase in volume. Truckload brokerage revenue increased 7.3% to $56.8 million this quarter due primarily to an increase in revenue per load. Second quarter logistics revenue increased 17.1% to $39.4 million due primarily to an increase in volume. Hub Group Distribution Services (HGDS) revenue decreased 34.0% to $10.5 million in the second quarter 2004 from $15.9 million in the same period last year due primarily to lower installation business. Total revenue in the second quarter 2004 was $349.0 million, an increase of 5.2% compared with the $331.7 million reported for the second quarter of 2003. Second quarter gross margin increased 0.5% to $43.7 million in 2004 from $43.5 million in 2003. As a percentage of revenue, gross margin decreased to 12.5% this quarter from 13.1% in 2003. Transportation-related gross margin dollar increases were offset by decreases in gross margin at HGDS. The change in gross margin as a percentage of revenue is primarily attributable to a decrease in the higher margin business of HGDS.
Costs and expenses decreased 5.7% in the second quarter of 2004 to $35.4 million compared to $37.5 million in the second quarter of 2003, reflecting the benefits from the Company's cost reduction efforts. Other expense, which primarily includes interest expense, decreased to $1.3 million in the second quarter of 2004 compared to $1.9 million in the same period of 2003 due to lower debt levels. The Company paid down $8.0 million of debt during the second quarter of 2004.
Commenting on the results, David P. Yeager, Vice-Chairman and Chief Executive Officer of Hub Group, stated, "We are very pleased with the strong growth in our net income which produced another record quarter. Our recent organizational realignment has reinvigorated our sales effort and as a result all three main business lines are growing again. We will continue to focus on improving our operations and profitably growing our business."
PUBLIC OFFERING
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 $56.1 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 will record a 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 deferred financing costs, during the third quarter of 2004.
REVISED FULL YEAR 2004 GUIDANCE
Excluding the $4.2 million one-time after-tax charge in connection with Hub's public offering described above, (pre-payment penalty and deferred financing costs) Hub projects its full year 2004 adjusted earnings to be in the range of $1.65 to $1.71 diluted earnings per share. This guidance assumes 9.466 million diluted weighted average shares outstanding for the year.
A tabular reconciliation of the differences between the adjusted full year 2004 guidance, which excludes the $4.2 million one time charge, and projected financial results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP") is below.
Projected GAAP EPS Adjusted Projected EPS
Results EPS Adjustments Results
$1.25 to $1.31 .40 $1.65 to $1.71
The adjustment represents the pre-tax $6.8 million prepayment penalty and the pre-tax $0.5 million write off of deferred financing costs less the related tax benefit of $3.1 million divided by 10,500,000 estimated diluted weighted average shares outstanding for the quarter ended September 30, 2004.
CONFERENCE CALL: Hub Group, Inc. will hold a conference call for investors and other interested parties at 10:00am EDT on Thursday July 22, 2004. To participate, please call five minutes early by dialing 1-888-296-1938 and entering participant code 846607. International callers can dial 1-304-345-7506. For those unable to participate, a replay will be available after 1:00pm EDT on July 22, 2004. For the replay, dial 1-877-471-6581 and enter access code 726468. International callers should dial 1-402-970-2661.
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 projections regarding 2004 earnings, 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 and our Prospectus dated June 28, 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 Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
Revenue $348,971 $331,651 $677,273 $660,934
Transportation costs 305,306 288,191 591,805 575,424
Gross margin 43,665 43,460 85,468 85,510
Costs and expenses:
Salaries and benefits 22,233 22,853 44,575 46,181
Selling, general and
administrative 10,315 12,105 20,596 23,891
Depreciation and
amortization of
property and equipment 2,851 2,588 5,734 5,149
Total costs and
expenses 35,399 37,546 70,905 75,221
Operating income 8,266 5,914 14,563 10,289
Other income (expense):
Interest expense (1,684) (2,010) (3,397) (4,096)
Interest income 56 25 109 75
Other, net 363 49 404 13
Total other expense (1,265) (1,936) (2,884) (4,008)
Income before provision
for income taxes 7,001 3,978 11,679 6,281
Provision for income taxes 2,942 2,431 4,907 3,375
Net Income $4,059 $1,547 $6,772 $2,906
Basic earnings per
common share $0.52 $0.20 $0.87 $0.38
Diluted earnings per
common share $0.48 $0.20 $0.81 $0.37
Basic weighted average
number of shares
outstanding 7,851 7,709 7,799 7,709
Diluted weighted average
number of shares
outstanding 8,469 7,824 8,381 7,773
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, December 31,
2004 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $- $-
Accounts receivable
Trade, net 122,572 125,754
Other 14,201 9,472
Deferred taxes 4,789 4,676
Prepaid expenses and other
current assets 4,679 4,578
TOTAL CURRENT ASSETS 146,241 144,480
PROPERTY AND EQUIPMENT, net 23,887 27,855
GOODWILL, net 215,175 215,175
OTHER ASSETS 320 1,017
TOTAL ASSETS $385,623 $388,527
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
Trade $112,228 $117,790
Other 3,303 2,555
Accrued expenses
Payroll 14,538 14,157
Other 12,878 11,592
Current portion of long-term debt 8,010 8,017
TOTAL CURRENT LIABILITIES 150,957 154,111
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 54,011 67,017
DEFERRED TAXES 27,961 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;
7,554,977 shares issued and
7,529,582 outstanding in 2004;
7,410,700 issued and 7,390,500
outstanding in 2003 75 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 118,608 115,820
Purchase price in excess of
predecessor basis, net of tax
benefit of $10,306 (15,458) (15,458)
Retained earnings 54,104 47,332
Unearned compensation (4,018) (4,448)
Treasury stock, at cost (25,395
shares in 2004 and 20,200
shares in 2003) (624) (292)
TOTAL STOCKHOLDERS' EQUITY 152,694 143,035
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $385,623 $388,527
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended June 30,
2004 2003
Cash flows from operating activities:
Net income $6,772 $2,906
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of
property and equipment 5,812 5,174
Deferred taxes 4,735 3,375
Compensation expense related to
restricted stock 1,044 -
(Gain) Loss on sale of assets (162) 8
Other assets 697 (243)
Changes in working capital:
Accounts receivable, net (1,547) 3,851
Prepaid expenses and other
current assets (101) 488
Accounts payable (4,814) (7,063)
Accrued expenses 1,667 2,933
Net cash provided by operating
activities 14,103 11,429
Cash flows from investing activities:
Purchases of property and equipment, net (1,682) (1,395)
Net cash used in investing activities (1,682) (1,395)
Cash flows from financing activities:
Proceeds from stock options exercised 3,359 -
Purchase of treasury stock (2,767) -
Net payments on revolver (6,000) (6,000)
Payments on long-term debt (7,013) (4,034)
Net cash used in financing activities (12,421) (10,034)
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 $2,360 $3,415
Income Taxes $368 $-
SOURCE Hub Group, Inc.
CONTACT: Erin Koops of Hub Group, Inc., +1-630-271-3656/
Web site: http://www.hubgroup.com