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

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's SEC 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
AmountRevenue AmountRevenue
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
AmountRevenue AmountRevenue
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

Source:Hub Group, Inc.