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Hub Group, Inc. Reports Fourth Quarter and Full Year 2017 Results

02/08/18

      Highlights of the quarter

  • 15% gross margin growth.
  • 33% increase in operating income. 
  • Solid peak season performance.
  • Strong intermodal pricing environment.
  • Excellent truck brokerage execution.
  • Robust sales pipeline at Hub Group Dedicated.

      Highlights of the year

  • Record revenue of over $4 billion.
  • Acquired Estenson Logistics, doing business as Hub Group Dedicated, on July 1st, allowing us to expand our multimodal solutions.
  • Record number of customer carrier of the year awards.
  • Continued investment in our technology transformation.

OAK BROOK, Ill., Feb. 08, 2018 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2017 net income of $100 million, or diluted earnings per share of $2.99 versus fourth quarter 2016 net income of $18.2 million, or $0.55 per diluted share. The fourth quarter includes a $75.2 million, or $2.25 per diluted share, decrease in income taxes resulting from our estimate of the change to our deferred tax liability at December 31, 2017 caused by the reduction of the federal tax rate as part of the recently enacted Tax Cuts and Jobs Act.   

Revenue for the current quarter was $1.163 billion, a record for Hub, compared with $978.6 million for the fourth quarter 2016. Hub segment revenue increased 20% and Mode segment revenue increased 11%.  Operating income for the current quarter increased to $41.1 million versus $30.8 million for the fourth quarter 2016. Hub segment operating income increased 41% and Mode segment operating income increased 3%.

Revenue for the current year was $4.0 billion, another record for Hub, compared to $3.6 billion for 2016.  Hub segment revenue increased 14% and Mode segment revenue increased 8%.  Operating income for the current year decreased to $96.6 million versus $123.8 million for 2016.  The biggest factor driving the decrease in operating income was a $29 million decline in intermodal gross margin.  During most of 2017, intermodal cost increases were much higher than customer price increases.  Hub segment operating income decreased 25% and Mode segment operating income decreased 13%.

Segment Information:

Hub  
•   Fourth quarter 2017 Segment Revenue:     $904.3 million, up 20%
•   Fourth quarter 2017 Segment Operating Income:     $34.4 million, up 41%

Hub segment revenue increased 20% to $904.3 million compared to the fourth quarter of 2016 as a result of our success in providing multi-modal solutions to our customers.  This increase includes Hub Group Dedicated revenue totaling $57.8 million.

Fourth quarter intermodal revenue increased 8% to $502.7 million reflecting a 2% increase in volume and an increase in fuel revenue and freight rates.  Intermodal gross margin increased compared to the fourth quarter of 2016 primarily due to an increase in freight rates and volume.   

Truck brokerage revenue increased 22% to $159.1 million this quarter compared to the same quarter of last year.  Truck brokerage handled 2% more loads while fuel, price and mix combined were up 20%.  Truck brokerage gross margin increased primarily because of growth with strategic customers.

Fourth quarter Unyson Logistics revenue increased 19% to $185.4 million due primarily to growth from new customers on-boarded this year.  Unyson Logistics gross margin declined primarily due to unfavorable customer mix. 

Costs and expenses increased $6.8 million to $71.3 million in the fourth quarter of 2017 compared to $64.5 million in the fourth quarter of 2016.  Salaries and benefits increased $1.2 million due primarily to the additional costs associated with the employees from the Hub Group Dedicated acquisition.  In addition, the decrease in bonus expense was partially offset by salary and medical claim increases. General and administrative costs are $3.9 million higher because of the Hub Group Dedicated acquisition and an increase in IT costs and consultant fees.  Depreciation and amortization increased $1.7 million primarily as a result of Hub Group Dedicated.

Operating income was $34.4 million compared to $24.3 million in the fourth quarter of 2016.

Mode      
•   Fourth quarter 2017 Segment Revenue:      $285.5 million, up 11%
•   Fourth quarter 2017 Segment Operating Income:     $6.7 million, up 3%

Mode segment’s revenue increased 11% to $285.5 million compared to the fourth quarter 2016.   Revenue consisted of $139.2 million in intermodal which was up 6%, $92.0 million in truck brokerage which was up 16% and $54.3 million in logistics which was up 20%. 

Gross margin increased $0.8 million compared to the fourth quarter of 2016 due primarily to an increase in logistics margin.

Operating income was $6.7 million compared to $6.5 million in the fourth quarter of 2016.

Cash Flow and Capitalization:

Our capital expenditures for the fourth quarter totaled $34.6 million, primarily for transportation equipment including tractors, containers, and trailers and technology investments. At December 31, 2017, we had cash and cash equivalents of $28.6 million. 

At December 31, 2017, we had total debt outstanding of $302.5 million on various debt instruments compared to $174.0 million at December 31, 2016.  The increase in debt is primarily a result of our acquisition of Hub Group Dedicated.

2018 and Long Term Outlook

We expect that our 2018 diluted earnings per share will range from $2.30 to $2.40.  We estimate that our 2018 capital expenditures will range from $150 million to $170 million.  We estimate our effective tax rate will be approximately 25% as a result of the Tax Cuts and Jobs Act.

“Our goal is to continue to provide innovative, value added multimodal solutions by offering reliability, visibility and value to our customers.  We will continue to invest in our people, equipment and technology to work towards this goal, while improving productivity and margins.  Our 2017 revenue of $4 billion is one significant milestone toward achieving our target of $6 billion in revenue in the next five years. We intend to achieve $6 billion in revenue through organic growth initiatives and acquisitions in both our core business and new service offerings.” said Dave Yeager, Hub’s Chief Executive Officer.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, February 8th, 2018, to discuss its fourth 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=UhUrOEEYpuYrDC. 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 8th, 2018, the company will make available on its website an Investor Presentation, which includes updated business information and 2017 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, the future performance of Mode, 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, 2016.  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,
                 2017    2016
                  % of     % of
                Amount Revenue   Amount Revenue
  Revenue       $   1,162,576   100.0 %   $   978,560   100.0 %
                         
  Transportation costs           1,024,485   88.1 %       858,106   87.7 %
    Gross margin           138,091   11.9 %       120,454   12.3 %
                         
  Costs and expenses:                
    Salaries and benefits           51,046   4.4 %       50,384   5.1 %
    Agent fees and commissions         19,979   1.7 %       18,562   1.9 %
    General and administrative           21,841   1.9 %       18,262   1.9 %
    Depreciation and amortization         4,098   0.4 %       2,407   0.2 %
      Total costs and expenses         96,964   8.4 %       89,615   9.1 %
                         
  Operating income           41,127   3.5 %       30,839   3.2 %
                         
  Other income (expense):                
    Interest expense           (2,280 ) -0.2 %       (970 ) -0.1 %
    Interest and dividend income         28   0.0 %       107   0.0 %
    Other, net            127   0.0 %       (359 ) 0.0 %
      Total other expense           (2,125 ) -0.2 %       (1,222 ) -0.1 %
                         
  Income before provision for income taxes         39,002   3.3 %       29,617   3.1 %
                         
  Income tax (benefit) expense           (60,941 ) -5.3 %       11,373   1.2 %
                         
  Net income       $   99,943   8.6 %   $   18,244   1.9 %
                         
                         
                         
  Basic earnings per common share     $   3.01       $   0.55    
                         
  Diluted earnings per common share     $   2.99       $   0.55    
                         
  Basic weighted average number of shares outstanding         33,229           33,069    
  Diluted weighted average number of shares outstanding         33,429           33,281    
                         


  HUB GROUP, INC.
  CONSOLIDATED STATEMENTS OF EARNINGS
  (in thousands, except per share amounts)
  (unaudited)
                         
                Twelve Months Ended December 31,
                 2017    2016
                  % of     % of
                Amount Revenue   Amount Revenue
  Revenue       $   4,034,897   100.0 %   $   3,572,790   100.0 %
                         
  Transportation costs           3,577,380   88.7 %       3,118,005   87.3 %
    Gross margin           457,517   11.3 %       454,785   12.7 %
                         
  Costs and expenses:                
    Salaries and benefits           188,389   4.7 %       180,459   5.1 %
    Agent fees and commissions         74,082   1.8 %       72,896   2.0 %
    General and administrative           85,182   2.1 %       68,630   1.9 %
    Depreciation and amortization         13,313   0.3 %       8,966   0.2 %
      Total costs and expenses         360,966   8.9 %       330,951   9.2 %
                         
  Operating income           96,551   2.4 %       123,834   3.5 %
                         
  Other income (expense):                
    Interest expense           (6,754 ) -0.1 %       (3,625 ) -0.1 %
    Interest and dividend income         416   0.0 %       393   0.0 %
    Other, net            724   0.0 %       819   0.0 %
      Total other expense           (5,614 ) -0.1 %       (2,413 ) -0.1 %
                         
  Income before provision for income taxes         90,937   2.3 %       121,421   3.4 %
                         
  Income tax (benefit) expense           (44,216 ) -1.1 %       46,616   1.3 %
                         
  Net income       $   135,153   3.4 %   $   74,805   2.1 %
                         
                         
                         
  Basic earnings per common share     $   4.07       $   2.21    
                         
  Diluted earnings per common share     $   4.05       $   2.20    
                         
  Basic weighted average number of shares outstanding         33,220           33,841    
  Diluted weighted average number of shares outstanding         33,350           33,949    
                         


HUB GROUP, INC.  
FINANCIAL INFORMATION BY SEGMENT  
(in thousands)  
(unaudited)  
                             
              Three Months  
              Ended December 31, 2017  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   904,252   $   285,539   $   (27,215 )   $   1,162,576  
                             
Transportation costs           798,567       253,133       (27,215 )       1,024,485  
  Gross margin           105,685       32,406       -          138,091  
                             
Costs and expenses:                      
  Salaries and benefits           47,681       3,365       -          51,046  
  Agent fees and commissions         12       19,967       -          19,979  
  General and administrative           19,755       2,086       -          21,841  
  Depreciation and amortization         3,820       278       -          4,098  
    Total costs and expenses         71,268       25,696       -          96,964  
                             
Operating income       $   34,417   $   6,710   $   -      $   41,127  
                             


HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
                             
              Three Months  
              Ended December 31, 2016  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   754,091   $   256,369   $   (31,900 )   $   978,560  
                             
Transportation costs           665,270       224,736       (31,900 )       858,106  
  Gross margin           88,821       31,633       -          120,454  
                             
Costs and expenses:                      
  Salaries and benefits           46,478       3,906       -          50,384  
  Agent fees and commissions         19       18,543       -          18,562  
  General and administrative           15,894       2,368       -          18,262  
  Depreciation and amortization         2,095       312       -          2,407  
    Total costs and expenses         64,486       25,129       -          89,615  
                             
Operating income       $   24,335   $   6,504   $   -      $   30,839  
                             


HUB GROUP, INC.  
FINANCIAL INFORMATION BY SEGMENT  
(in thousands)  
(unaudited)  
                             
              Twelve Months  
              Ended December 31, 2017  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   3,107,394   $   1,029,160   $   (101,657 )   $   4,034,897  
                             
Transportation costs           2,771,291       907,746       (101,657 )       3,577,380  
  Gross margin           336,103       121,414       -          457,517  
                             
Costs and expenses:                      
  Salaries and benefits           174,573       13,816       -          188,389  
  Agent fees and commissions         58       74,024       -          74,082  
  General and administrative           77,085       8,097       -          85,182  
  Depreciation and amortization         12,139       1,174       -          13,313  
    Total costs and expenses         263,855       97,111       -          360,966  
                             
Operating income       $   72,248   $   24,303   $   -      $   96,551  
                             


HUB GROUP, INC.  
FINANCIAL INFORMATION BY SEGMENT  
(in thousands)  
(unaudited)  
                             
              Twelve Months  
              Ended December 31, 2016  
              Hub   Mode   Inter-Segment Elims   Hub Group Total  
Revenue       $   2,734,541   $   948,735   $   (110,486 )   $   3,572,790  
                             
Transportation costs           2,404,946       823,545       (110,486 )       3,118,005  
  Gross margin           329,595       125,190       -          454,785  
                             
Costs and expenses:                      
  Salaries and benefits           165,136       15,323       -          180,459  
  Agent fees and commissions         66       72,830       -          72,896  
  General and administrative           60,811       7,819       -          68,630  
  Depreciation and amortization         7,698       1,268       -          8,966  
    Total costs and expenses         233,711       97,240       -          330,951  
                             
Operating income       $   95,884   $   27,950   $   -      $   123,834  
                             


HUB GROUP, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
(unaudited)  
                       
                December 31,   December 31,  
                 2017     2016   
                       
ASSETS                
  CURRENT ASSETS:            
    Cash and cash equivalents   $   28,557     $   127,404    
    Accounts receivable trade, net       583,994         473,608    
    Accounts receivable other       5,722         4,331    
    Prepaid taxes         12,088         294    
    Prepaid expenses and other current assets     25,697         16,653    
        TOTAL CURRENT ASSETS       656,058         622,290    
                       
  Restricted investments       24,181         20,877    
  Property and equipment, net       562,150         438,594    
  Other intangibles, net         74,348         11,844    
  Goodwill, net         348,661         262,376    
  Other assets         5,543         4,278    
        TOTAL ASSETS   $   1,670,941     $   1,360,259    
                       
                       
LIABILITIES AND STOCKHOLDERS' EQUITY        
  CURRENT LIABILITIES:            
    Accounts payable trade   $   338,933     $   266,555    
    Accounts payable other       24,690         21,070    
    Accrued payroll         28,994         36,223    
    Accrued other         55,072         46,013    
    Current portion of capital lease       2,777         2,697    
    Current portion of long term debt       78,111         45,163    
        TOTAL CURRENT LIABILITIES     528,577         417,721    
                       
  Long term debt         213,963         115,529    
  Non-current liabilities         29,738         23,595    
  Long term capital lease       7,696         10,576    
  Deferred taxes         121,095         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; 33,447,070 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       173,011         173,565    
    Purchase price in excess of predecessor basis, net of tax        
     benefit of $10,306         (15,458 )       (15,458 )  
    Retained earnings         870,716         735,563    
    Accumulated other comprehensive loss     (194 )       (273 )  
    Treasury stock; at cost, 7,777,722 shares in 2017        
      and 8,031,810 shares in 2016       (258,622 )       (265,637 )  
      TOTAL STOCKHOLDERS' EQUITY     769,872         628,179    
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $   1,670,941     $   1,360,259    
                       


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                   
                  Twelve Months Ended December 31,
                   2017     2016 
                       
                       
Cash flows from operating activities:          
  Net income       $   135,153     $   74,805  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
      Depreciation and amortization          62,173         44,712  
      Deferred taxes           (41,351 )       13,801  
      Compensation expense related to share-based compensation plans       9,873         8,479  
      Loss (gain) on sale of assets         441         (573 )
      Excess tax benefits from share-based compensation       -          (733 )
  Changes in operating assets and liabilities:        
      Restricted investments         (3,304 )       231  
      Accounts receivable, net         (84,775 )       (87,629 )
      Prepaid taxes           (11,794 )       66  
      Prepaid expenses and other current assets       (7,543 )       1,099  
      Other assets           56         570  
      Accounts payable         71,459         35,709  
      Accrued expenses         (7,164 )       9,238  
      Non-current liabilities         1,996         2,698  
          Net cash provided by operating activities       125,220         102,473  
                       
Cash flows from investing activities:          
  Proceeds from sale of equipment         5,327         2,061  
  Purchases of property and equipment       (74,541 )       (107,409 )
  Cash used in acquisition         (165,933 )       -   
          Net cash used in investing activities           (235,147 )       (105,348 )
                       
Cash flows from financing activities:          
  Proceeds from issuance of debt         98,544         62,155  
  Repayments of long term debt         (79,869 )       (34,767 )
  Stock tendered for payments of withholding taxes       (3,412 )       (2,489 )
  Purchase of treasury stock         -          (100,000 )
  Capital lease payments         (2,800 )       (2,634 )
  Excess tax benefits from share-based compensation       -          372  
  Payment of debt issuance costs         (1,397 )       -   
          Net cash provided by (used in) financing activities           11,066         (77,363 )
                       
                       
  Effect of exchange rate changes on cash and cash equivalents       14         (107 )
                       
Net decrease in cash and cash equivalents       (98,847 )       (80,345 )
Cash and cash equivalents beginning of period       127,404         207,749  
Cash and cash equivalents end of period   $   28,557     $   127,404  
                        
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

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Source: Hub Group, Inc.