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Hub Group, Inc. Reports Fourth Quarter and Full Year 2016 Results

Fourth Quarter Results

  • Revenue of $978.6 million increased 10%
  • Operating income totaled $30.8 million, down 13%
  • Diluted earnings per share of $0.55 declined 13%

Full Year 2016 Results

  • Revenue of $3.6 billion increased 1%
  • Operating income totaled $123.8 million, up 6%
  • Diluted earnings per share of $2.20 increased 12%

OAK BROOK, Ill., Feb. 02, 2017 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2016 net income of $18.2 million, or diluted earnings per share of $0.55 vs. fourth quarter 2015 net income of $22.4 million, or $0.63 per diluted share.

Revenue for the current quarter was $978.6 million, compared with $890.3 million for the fourth quarter 2015. The Hub segment revenue increased 13% and the Mode segment revenue increased 6%.
Operating income for the current quarter decreased to $30.8 million vs. $35.3 million for the fourth quarter 2015. The Hub segment operating income declined 14% and the Mode segment operating income decreased 6%. “The above market revenue increase is the result of our on-going focus on excellent customer service. The operating income decline was driven by our strategic investments in our people and technology. We believe these investments provide a solid foundation for the future,” said Dave Yeager, Hub’s Chairman and CEO.

Segment Information:

Hub

  • Fourth quarter 2016 Segment Revenue: $754.1 million, up 13%
  • Fourth quarter 2016 Operating Income: $24.3 million, down 14%

The fourth quarter started out slowly but gained momentum as the quarter progressed. We were successful executing our strategy of targeting specific verticals and customers and providing our customers with multimodal solutions. This resulted in growth in all of our service lines. The Hub segment’s revenue increased 13% to $754.1 million as a result of our diversified services and our customer-centric approach.

Fourth quarter intermodal revenue increased 5% to $468 million reflecting volume growth of 5%. Intermodal gross margin decreased from the prior year because of lower prices than last year and rail cost increases. Volume growth, lower dray costs and improved mix and lane balance partially offset the decline.

Truck brokerage revenue increased 46% to $130 million this quarter compared to last year. Truck brokerage handled 33% more loads while fuel, price and mix combined were up 13%. During the quarter, we saw surges in demand from retail and e-commerce customers. We are well positioned to handle surge freight. Truck brokerage gross margin increased because of an increase in new business and seasonal business.

Fourth quarter Unyson Logistics revenue increased 17% to $156 million due primarily to growth with new customers on-boarded this year. This year we had a record number of new customer on-boardings. Logistics gross margin was up due to growth with both new and existing customers.

Costs and expenses increased $8.6 million to $64.5 million in the fourth quarter of 2016 compared to $55.9 million in the fourth quarter of 2015. Salaries and benefits increased $6.4 million due to higher headcount, annual employee raises and an increase in bonus expense. General and administrative costs are $1.9 million higher because of an increase in IT costs including costs for our new transportation management system and our new human resource system and an increase in professional fees.

Operating income was $24.3 million compared to $ 28.4 million last year.

Mode

  • Fourth quarter 2016 Segment Revenue: $256.4 million, up 6%
  • Fourth quarter 2016 Operating Income: $6.5 million, down 6%

Mode managed through a competitive environment and saw revenue increase 6% to $256 million compared to fourth quarter 2015. Revenue consisted of $131 million in intermodal which was flat, $80 million in truck brokerage which was up 4% and $45 million in logistics which was up 33%. Mode has made great strides in cross selling our services.

Gross margin decreased $0.8 million year over year due primarily to a decrease in intermodal gross margin.

Mode’s costs and expenses decreased $0.4 million compared to last year primarily because of a decline in agent commissions.

Mode added 3 new IBO’s to the network during the quarter along with 23 salespeople. Mode’s pipeline remains strong for new recruits in 2017.

Operating income was $6.5 million compared to $6.9 million last year.

2017 Outlook
“We are pleased with the results for 2016 and the progress we have made on our goals and objectives. Looking to 2017, we remain committed to our strategy to increase market share by providing multimodal solutions for our customers,” said Dave Yeager. “We are optimistic about growing all our service lines as we focus on targeted growth initiatives. To support this growth, we will be increasing our fleet 10% and investing in technology to help us exceed customer expectations and improve operating efficiencies.”

Cash Flow and Capitalization:

At December 31, 2016, we had total debt outstanding of $174 million on various debt instruments compared to $149 million at December 31, 2015.

Our capital expenditures for 2016 approximated $107 million vs. $83 million in 2015. At December 31, 2016, we had cash and cash equivalents of $127 million.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, February 2, 2017, to discuss its fourth quarter and full year 2016 results and provide 2017 guidance.

Hosting the conference call will be Dave Yeager, Chairman and Chief Executive Officer. Also participating on the call will be Don Maltby, President and Chief Operating Officer, and Terri Pizzuto, Executive Vice-President and 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=UXfABcEEofgJcl. 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.

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. 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, 2015 and the report on Form 10-Q for the period ended September 30, 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 December 31
2016 2015
% of % of
AmountRevenue AmountRevenue
Revenue $ 978,560 100.0% $ 890,272 100.0%
Transportation costs 858,106 87.7% 773,498 86.9%
Gross margin 120,454 12.3% 116,774 13.1%
Costs and expenses:
Salaries and benefits 50,384 5.1% 44,268 5.0%
Agent fees and commissions 18,562 1.9% 19,350 2.1%
General and administrative 18,262 1.9% 15,720 1.8%
Depreciation and amortization 2,407 0.2% 2,095 0.2%
Total costs and expenses 89,615 9.1% 81,433 9.1%
Operating income 30,839 3.2% 35,341 4.0%
Other income (expense):
Interest expense (970)-0.1% (753)-0.1%
Interest and dividend income 107 0.0% 36 0.0%
Other, net (359)0.0% (465)-0.1%
Total other expense (1,222)-0.1% (1,182)-0.2%
Income before provision for income taxes 29,617 3.1% 34,159 3.8%
Provision for income taxes 11,373 1.2% 11,785 1.3%
Net income $ 18,244 1.9% $ 22,374 2.5%
Basic earnings per common share $ 0.55 $ 0.63
Diluted earnings per common share $ 0.55 $ 0.63
Basic weighted average number of shares outstanding 33,069 35,595
Diluted weighted average number of shares outstanding 33,281 35,726


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
Twelve Months Ended December 31
2016 2015
% of % of
AmountRevenue AmountRevenue
Revenue $ 3,572,790 100.0% $ 3,525,595 100.0%
Transportation costs 3,118,005 87.3% 3,112,900 88.3%
Gross margin 454,785 12.7% 412,695 11.7%
Costs and expenses:
Salaries and benefits 180,459 5.1% 158,938 4.5%
Agent fees and commissions 72,896 2.0% 68,724 2.0%
General and administrative 68,630 1.9% 60,015 1.7%
Depreciation and amortization 8,966 0.2% 7,988 0.2%
Total costs and expenses 330,951 9.2% 295,665 8.4%
Operating income 123,834 3.5% 117,030 3.3%
Other income (expense):
Interest expense (3,625)-0.1% (2,971)-0.1%
Interest and dividend income 393 0.0% 83 0.0%
Other, net 819 0.0% (2,560)-0.1%
Total other expense (2,413)-0.1% (5,448)-0.1%
Income before provision for income taxes 121,421 3.4% 111,582 3.2%
Provision for income taxes 46,616 1.3% 40,633 1.2%
Net income $ 74,805 2.1% $ 70,949 2.0%
Basic earnings per common share $ 2.21 $ 1.98
Diluted earnings per common share $ 2.20 $ 1.97
Basic weighted average number of shares outstanding 33,841 35,876
Diluted weighted average number of shares outstanding 33,949 35,968


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)
Three Months
Ended December 31, 2015
Hub Mode Inter-Segment Elims Hub Group Total
Revenue $ 668,865 $ 241,917 $ (20,510) $ 890,272
Transportation costs 584,569 209,439 (20,510) 773,498
Gross margin 84,296 32,478 - 116,774
Costs and expenses:
Salaries and benefits 40,128 4,140 - 44,268
Agent fees and commissions 13 19,337 - 19,350
General and administrative 13,972 1,748 - 15,720
Depreciation and amortization 1,775 320 - 2,095
Total costs and expenses 55,888 25,545 - 81,433
Operating income $ 28,408 $ 6,933 $- $ 35,341

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.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
Twelve Months
Ended December 31, 2015
Hub Mode Inter-Segment Elims Hub Group Total
Revenue $ 2,679,318 $ 928,661 $ (82,384) $ 3,525,595
Transportation costs 2,385,197 810,087 (82,384) 3,112,900
Gross margin 294,121 118,574 - 412,695
Costs and expenses:
Salaries and benefits 143,993 14,945 - 158,938
Agent fees and commissions 56 68,668 - 68,724
General and administrative 53,023 6,992 - 60,015
Depreciation and amortization 6,688 1,300 - 7,988
Total costs and expenses 203,760 91,905 - 295,665
Operating income $ 90,361 $ 26,669 $- $ 117,030

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
December 31, December 31,
2016 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 127,404 $ 207,749
Accounts receivable trade, net 473,608 379,987
Accounts receivable other 4,331 10,344
Prepaid taxes 294 362
Deferred taxes - 8,412
Prepaid expenses and other current assets 16,653 17,756
TOTAL CURRENT ASSETS 622,290 624,610
Restricted investments 20,877 21,108
Property and equipment, net 438,594 374,847
Other intangibles, net 11,844 13,139
Goodwill, net 262,376 262,594
Other assets 4,278 4,848
TOTAL ASSETS $ 1,360,259 $ 1,301,146
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade $ 266,555 $ 230,432
Accounts payable other 21,070 21,495
Accrued payroll 36,223 33,020
Accrued other 46,013 38,733
Current portion of capital lease 2,697 2,608
Current portion of long term debt 45,163 32,409
TOTAL CURRENT LIABILITIES 417,721 358,697
Long term debt 115,529 100,895
Non-current liabilities 23,595 20,233
Long term capital lease 10,576 13,299
Deferred taxes 164,659 160,182
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 2,000,000 shares authorized;
no shares issued or outstanding in 2016 and 2015 - -
Common stock
Class A: $.01 par value; 97,337,700 shares authorized and
41,224,792 shares issued in 2016 and 2015; 33,192,982 shares
outstanding in 2016 and 35,633,961 shares outstanding in 2015 412 412
Class B: $.01 par value; 662,300 shares authorized;
662,296 shares issued and outstanding in 2016 and 2015 7 7
Additional paid-in capital 173,565 174,285
Purchase price in excess of predecessor basis, net of tax
benefit of $10,306 (15,458) (15,458)
Retained earnings 735,563 660,758
Accumulated other comprehensive loss (273) (178)
Treasury stock; at cost, 8,031,810 shares in 2016
and 5,590,831 shares in 2015 (265,637) (171,986)
TOTAL STOCKHOLDERS' EQUITY 628,179 647,840
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$ 1,360,259 $ 1,301,146


HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Years Ended December 31,
2016 2015
Cash flows from operating activities:
Net income $ 74,805 $ 70,949
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 44,712 37,042
Deferred taxes 13,801 16,378
Compensation expense related to share-based compensation plans 8,479 7,833
Gain on sale of assets (573) (129)
Excess tax benefits from share-based compensation (733) (81)
Changes in operating assets and liabilities:
Restricted investments 231 836
Accounts receivable, net (87,629) 36,373
Prepaid taxes 66 14,575
Prepaid expenses and other current assets 1,099 (3,401)
Other assets 570 (805)
Accounts payable 35,709 (25,736)
Accrued expenses 9,238 20,505
Non-current liabilities 2,698 (2,642)
Net cash provided by operating activities 102,473 171,697
Cash flows from investing activities:
Proceeds from sale of equipment 2,061 2,309
Purchases of property and equipment (107,409) (83,042)
Net cash used in investing activities (105,348) (80,733)
Cash flows from financing activities:
Proceeds from issuance of debt 62,155 64,442
Repayments of long term debt (34,767) (23,217)
Stock tendered for payments of withholding taxes (2,489) (2,916)
Purchase of treasury stock (100,000) (28,823)
Capital lease payments (2,634) (2,534)
Excess tax benefits from share-based compensation 372 195
Net cash (used in) provided by financing activities (77,363) 7,147
Effect of exchange rate changes on cash and cash equivalents (107) (131)
Net (decrease) increase in cash and cash equivalents (80,345) 97,980
Cash and cash equivalents beginning of period 207,749 109,769
Cash and cash equivalents end of period $ 127,404 $ 207,749

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

Source:Hub Group, Inc.