Press Release

Hub Group, Inc. Reports Record Third Quarter 2018 Results

Highlights of the quarter

  • 13% revenue growth
  • 33% gross margin growth
  • 121% increase in operating income
  • Sold Mode Transportation, LLC for approximately $238.5 million

OAK BROOK, Ill., Oct. 25, 2018 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced third quarter 2018 net income of $114.6 million, or diluted earnings per share of $3.41 versus third quarter 2017 net income of $15.3 million, or $0.46 per diluted share. Income from continuing operations for the current quarter was $25.8 million, or $0.77 per diluted share versus third quarter 2017 income from continuing operations of $11.6 million, or $0.35 per diluted share.

On August 31, 2018, Hub Group, Inc. closed on the sale of Mode Transportation, LLC.  Mode’s temperature protected services division (“Temstar”) was not included in the sale and was retained by Hub and is reported in the intermodal line of business.  The comparative results of Mode have been reported as “discontinued operations” in the Consolidated Financial Statements. 

Results of Continuing Operations

Revenue for the current quarter was $933.2 million compared with $824.8 million for the third quarter 2017 as a result of our success in providing integrated supply chain solutions.   Operating income for the current quarter increased to $34.7 million versus $15.7 million for the third quarter 2017. Operating income increased 121%.

Third quarter intermodal revenue increased 20% to $576.5 million due to a 3% increase in load volume, price increases and higher fuel revenue. Transcon volume was up 7%, local west was up 6%, and local east was down 2%. Intermodal gross margin increased compared to the third quarter of 2017 primarily due to higher pricing, improved mix and accessorial recovery, better network balance and increased volume.  These gains were partially offset by higher rail and drayage costs and one day worse utilization than 2017.  We ended the third quarter of 2018 with approximately 36,800 containers and 1,100 tractors assigned to the dray fleet.

Truck brokerage revenue increased 8% to $122.1 million in the third quarter of 2018 compared to the same quarter of last year.  Truck brokerage handled 1% fewer loads while fuel, price and mix combined were up 9%.  Contractual volume represented 78% of total load volume compared to 82% in the third quarter of 2017. Truck brokerage gross margin increased compared to the third quarter of 2017 primarily because of growth with strategic customers and increased spot activity. 

Third quarter logistics revenue decreased 11% to $156.0 million due primarily to lost customers partially offset by growth with existing customers.  Logistics gross margin decreased compared to the third quarter of 2017 due to lost customers, changes in customer mix, and increased purchased transportation costs.

Dedicated revenue increased 36% to $78.6 million compared to the same quarter in the prior year.  Dedicated gross margin decreased compared to the third quarter of 2017 due to higher usage of outside carriers, startup costs associated with new contracts and higher driver wages.  We ended the third quarter of 2018 with approximately 1,500 tractors and 5,100 trailers in Dedicated. 

Costs and expenses increased $9.7 million to $80.3 million in the third quarter of 2018 compared to $70.6 million in the third quarter of 2017 due primarily to a $7.5 million increase in incentive compensation, $1.6 million increase in salaries due to higher headcount and employee raises, $1.4 million of higher commissions, and $1.0 million of higher professional fees partially offset by a $1.4 million increase in gain on sale of assets. Professional fees include $0.5 million for due diligence associated with potential acquisitions.

Operating income was $34.7 million compared to $15.7 million in the third quarter 2017.

Discontinued Operations

Income from discontinued operations, net of income taxes, for the third quarter 2018 was $88.8 million or diluted earnings per share of $2.64, versus third quarter 2017 net income of $3.7 million or $0.11 per diluted share.  Third quarter 2018 includes a gain on sale of Mode Transportation, LLC, net of transaction costs and income tax, of $86.3 million or diluted earnings per share of $2.57. We recorded one time incentive payments of approximately $0.6 million or approximately $0.02 per diluted share in the third quarter of 2018.

Cash Flow and Capitalization

Our capital expenditures for the third quarter 2018 totaled $69.6 million, primarily for tractors, containers, trailers and technology investments.  At September 30, 2018, we had cash and cash equivalents of $267.5 million

At September 30, 2018, we had total debt outstanding of $311.8 million on various debt instruments compared to $302.5 million at December 31, 2017. 

2018 Fourth Quarter Outlook

We expect that our fourth quarter 2018 diluted earnings per share will range from $0.85 to $0.95.  We estimate that our 2018 fourth quarter capital expenditures will range from $60 million to $80 million.  We project our effective tax rate for the fourth quarter will range from 22.0% to 22.4%.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, October 25th 2018 to discuss its third 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=ULNKzderGUmOTD. 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 October 25 2018, the company will make available on its website an Investor Presentation, which includes updated business information and third 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 Unyson 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.

 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
                       
              Three Months Ended September 30,
              2018
  2017
                % of     % of
              Amount Revenue   Amount Revenue
Revenue       $ 933,224   100.0 %   $ 824,809   100.0 %
                       
Transportation costs         818,240   87.7 %     738,482   89.5 %
  Gross margin         114,984   12.3 %     86,327   10.5 %
                       
Costs and expenses:                
  Salaries and benefits         57,123   6.1 %     45,978   5.6 %
  General and administrative         19,327   2.1 %     20,637   2.5 %
  Depreciation and amortization       3,800   0.4 %     3,966   0.5 %
    Total costs and expenses       80,250   8.6 %     70,581   8.6 %
                       
Operating income         34,734   3.7 %     15,746   1.9 %
                       
Other income (expense):                
  Interest expense         (2,411 ) -0.2 %     (2,345 ) -0.2 %
  Interest and dividend income       340   0.0 %     42   0.0 %
  Other, net         251   0.0 %     355   0.0 %
    Total other expense         (1,820 ) -0.2 %     (1,948 ) -0.2 %
                       
Income from continuing operations before income taxes       32,914   3.5 %     13,798   1.7 %
                       
Provision for income taxes         7,150   0.7 %     2,210   0.3 %
                       
Income from continuing operations       25,764   2.8 %     11,588   1.4 %
                       
Income from discontinued operations, net of income taxes     88,846         3,746    
                       
Net income       $ 114,610       $ 15,334    
                       
Earnings per share from continuing operations              
  Basic       $ 0.77       $ 0.35    
  Diluted       $ 0.77       $ 0.35    
                       
Earnings per share from discontinued operations              
  Basic       $ 2.66       $ 0.11    
  Diluted       $ 2.64       $ 0.11    
                       
Earnings per share net income              
  Basic       $ 3.43       $ 0.46    
  Diluted       $ 3.41       $ 0.46    
                       
Basic weighted average number of shares outstanding       33,399         33,227    
Diluted weighted average number of shares outstanding       33,605         33,335    
                       


 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
                       
              Nine Months Ended September 30,
              2018
  2017
                % of     % of
              Amount Revenue   Amount Revenue
Revenue       $ 2,665,300   100.0 %   $ 2,213,824   100.0 %
                       
Transportation costs         2,358,286   88.5 %     1,982,800   89.6 %
  Gross margin         307,014   11.5 %     231,024   10.4 %
                       
Costs and expenses:                
  Salaries and benefits         163,496   6.1 %     127,643   5.7 %
  General and administrative         55,557   2.1 %     57,681   2.6 %
  Depreciation and amortization       11,286   0.4 %     8,331   0.4 %
    Total costs and expenses       230,339   8.6 %     193,655   8.7 %
                       
Operating income         76,675   2.9 %     37,369   1.7 %
                       
Other income (expense):                
  Interest expense         (6,702 ) -0.3 %     (4,474 ) -0.2 %
  Interest and dividend income       365   0.0 %     332   0.0 %
  Other, net         20   0.0 %     533   0.0 %
    Total other expense         (6,317 ) -0.3 %     (3,609 ) -0.2 %
                       
Income from continuing operations before income taxes       70,358   2.6 %     33,760   1.5 %
                       
Provision for income taxes         16,371   0.6 %     10,060   0.4 %
                       
Income from continuing operations       53,987   2.0 %     23,700   1.1 %
                       
Income from discontinued operations, net of income taxes     98,842         11,510    
                       
Net income       $ 152,829       $ 35,210    
                       
Earnings per share from continuing operations              
  Basic       $ 1.62       $ 0.71    
  Diluted       $ 1.61       $ 0.71    
                       
Earnings per share from discontinued operations              
  Basic       $ 2.96       $ 0.35    
  Diluted       $ 2.95       $ 0.35    
                       
Earnings per share net income              
  Basic       $ 4.58       $ 1.06    
  Diluted       $ 4.56       $ 1.06    
                       
Basic weighted average number of shares outstanding       33,387         33,217    
Diluted weighted average number of shares outstanding       33,548         33,323    
                       


 
HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
                       
          Three Months   Nine Months
          Ended September 30,   Ended September 30,
          2018   2017   2018   2017
Intermodal   $ 576,478   $ 478,531   $ 1,597,254   $ 1,362,564
Truck brokerage     122,062     112,653     357,016     323,128
Logistics     156,041     175,679     498,139     470,186
Dedicated     78,643     57,946     212,891     57,946
  Total Revenue   $ 933,224   $ 824,809   $ 2,665,300   $ 2,213,824
                       


 
HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
                     
                September 30,   December 31,
                2018   2017
                     
ASSETS              
  CURRENT ASSETS:          
    Cash and cash equivalents   $ 267,507     $ 28,557  
    Accounts receivable trade, net     457,694       424,679  
    Accounts receivable other     4,575       5,704  
    Prepaid taxes       171       12,088  
    Prepaid expenses and other current assets   25,001       25,414  
    Current assets held for sale     -       159,616  
        TOTAL CURRENT ASSETS     754,948       656,058  
                     
  Restricted investments     22,168       20,143  
  Property and equipment, net     662,755       561,214  
  Other intangibles, net       61,116       64,747  
  Goodwill, net       318,662       319,272  
  Other assets       3,552       5,491  
  Non-current assets held for sale     -       44,016  
        TOTAL ASSETS   $ 1,823,201     $ 1,670,941  
                     
                     
LIABILITIES AND STOCKHOLDERS' EQUITY      
  CURRENT LIABILITIES:          
    Accounts payable trade   $ 247,332     $ 242,316  
    Accounts payable other     13,959       13,903  
    Accrued payroll       46,443       26,674  
    Accrued other       84,559       53,507  
    Current portion of capital lease     2,820       2,777  
    Current portion of long term debt     95,946       77,267  
    Current liabilities held for sale     -       103,099  
        TOTAL CURRENT LIABILITIES   491,059       519,543  
                     
  Long term debt       207,596       214,808  
  Non-current liabilities       36,634       33,599  
  Long term capital lease     5,472       7,696  
  Deferred taxes       154,485       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; 33,612,071 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     175,442       173,011  
    Purchase price in excess of predecessor basis, net of tax      
     benefit of $10,306       (15,458 )     (15,458 )
    Retained earnings       1,023,545       870,715  
    Accumulated other comprehensive loss   (168 )     (193 )
    Treasury stock; at cost, 7,612,721 shares in 2018      
      and 7,777,722 shares in 2017     (255,825 )     (258,622 )
      TOTAL STOCKHOLDERS' EQUITY   927,955       769,872  
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,823,201     $ 1,670,941  
                     


 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                   
                  Nine Months Ended September 30,
                  2018
  2017
                       
                       
Cash flows from operating activities:          
  Net income       $ 152,829     $ 35,210  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
      Depreciation and amortization       59,184       43,531  
      Deferred taxes         33,989       19,983  
      Compensation expense related to share-based compensation plans     9,490       7,402  
      Contingent consideration adjustment     (4,703 )     -  
      (Gain) loss on sale of assets       (1,458 )     360  
      (Gain) on disposition of discontinued operations     (113,601 )     -  
  Changes in operating assets and liabilities:        
      Restricted investments       (2,454 )     (3,189 )
      Accounts receivable, net       (44,138 )     (37,448 )
      Prepaid taxes         11,918       (11,839 )
      Prepaid expenses and other current assets     438       (3,059 )
      Other assets         1,572       (3,505 )
      Accounts payable       8,070       51,459  
      Accrued expenses       30,951       (13,179 )
      Non-current liabilities       4,358       1,419  
        Net cash provided by operating activities     146,445       87,145  
                       
Cash flows from investing activities:          
  Proceeds from sale of equipment       4,035       3,052  
  Purchases of property and equipment     (138,847 )     (39,936 )
  Acquisitions, net of cash acquired       -       (165,933 )
  Proceeds from the disposition of discontinued operations     222,322       -  
        Net cash provided by (used in) investing activities     87,510       (202,817 )
                       
Cash flows from financing activities:          
  Proceeds from issuance of debt       118,809       73,606  
  Repayments of long term debt       (107,341 )     (59,921 )
  Stock tendered for payments of withholding taxes     (4,262 )     (3,410 )
  Capital lease payments       (2,181 )     (2,101 )
  Payment of debt issuance costs       -       (1,397 )
        Net cash provided by financing activities     5,025       6,777  
                       
                       
  Effect of exchange rate changes on cash and cash equivalents     (30 )     49  
                       
Net increase (decrease) in cash and cash equivalents     238,950       (108,846 )
Cash and cash equivalents beginning of period     28,557       127,404  
Cash and cash equivalents end of period   $ 267,507     $ 18,558  
                       

 

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

Hub Group.jpg

Source: Hub Group, Inc.