Hub Group, Inc. Reports First Quarter 2017 Results

• Revenue of $893.4 million, up 11%
• Operating income of $17.2 million, down 40%
• Diluted earnings per share of $0.31, down 39%

OAK BROOK, Ill., April 26, 2017 (GLOBE NEWSWIRE) — Hub Group, Inc. (NASDAQ:HUBG) announced first quarter 2017 net income of $10.3 million, or diluted earnings per share of $0.31 vs. first quarter 2016 net income of $18.0 million, or $0.51 per diluted share.

Revenue for the current quarter was $893.4 million, compared with $805.9 million for the first quarter 2016. The Hub segment revenue increased 10% and the Mode segment revenue increased 16%. 
Operating income for the current quarter decreased to $17.2 million vs. $28.8 million for the first quarter 2016. The Hub segment operating income declined 48% and the Mode segment operating income decreased 12%.  Earnings for the first quarter of 2017 include one-time costs of approximately $1.5 million, or $0.03 per share, for due diligence and severance expenses.

The primary factors negatively affecting earnings in the first quarter lie within our intermodal business line.  We are experiencing a soft pricing environment due primarily to excess truck capacity and extraordinarily aggressive intermodal pricing, particularly in the West.  At the same time, our rail transportation costs continue to increase, further compressing earnings.

Segment Information:
Hub
• First quarter 2017 Segment Revenue:	$677.1 million, up 10%
• First quarter 2017 Segment Operating Income:	$11.6 million, down 48%

The Hub segment’s revenue increased 10% to $677 million as a result of our diversified services and our customer-centric approach. 

First quarter intermodal revenue increased 3% to $425 million reflecting volume growth of 1% and an increase in fuel revenue.  Declines in freight rates and changes in freight mix partially offset these increases. Intermodal gross margin decreased from the prior year because of lower prices and rail transportation cost increases. 

Truck brokerage revenue increased 31% to $107 million this quarter compared to last year.  Truck brokerage handled 19% more loads while fuel, price and mix combined were up 12%.  Truck brokerage gross margin was up due to growth with both new and existing customers. 

First quarter Unyson Logistics revenue increased 22% to $146 million due primarily to growth with new customers on-boarded last year and in the first quarter of this year.  Unyson’s pipeline is exceeding the growth levels we experienced in 2016.  Logistics gross margin increased primarily due to new customers.

Costs and expenses increased $3.6 million to $60.2 million in the first quarter of 2017 compared to $56.6 million in the first quarter of 2016.  Salaries and benefits decreased $0.5 million due to a decrease in bonus expense partially offset by higher headcount and annual employee raises.  General and administrative costs are $3.8 million higher because of an increase in IT costs including costs for our new transportation management and our human resource systems and professional fees related to due diligence for potential acquisitions. 

Operating income was $11.6 million compared to $ 22.5 million last year. 

Mode
• First quarter 2017 Segment Revenue:	$241.9 million, up 16%
• First quarter 2017 Segment Operating Income:	$5.6 million, down 12%

The Mode segment’s revenue increased 16% to $242 million compared to first quarter 2016.   Revenue consisted of $122 million in intermodal which was up 9%, $78 million in truck brokerage which was up 16% and $42 million in logistics which was up 43%. 

Gross margin increased $0.5 million year over year due primarily to an increase in logistics gross margin resulting from new business.

Mode’s costs and expenses increased $1.3 million compared to last year primarily because of increased agent commissions.   

Operating income was $5.6 million compared to $6.3 million last year.

2017 Outlook
We expect that our full-year 2017 diluted earnings per share will range from $1.60 to $1.80.  We project that our 2017 capital expenditures will range from $90 million to $100 million.

“Despite the current challenging market conditions, we remain committed to our strategy to increase market share by providing multi-modal solutions to our clients.  We are making strategic investments in our people and technology to strengthen our competitive position in the market,” said Dave Yeager, Hub’s Chairman and CEO.  “In addition, we continue to search for acquisitions that will further diversify our service offerings.”

Cash Flow and Capitalization:

At March 31, 2017, we had total debt outstanding of $161 million on various debt instruments compared to $174 million at December 31, 2016.

Our capital expenditures for the quarter totaled $6.6 million related primarily to IT projects. At March 31, 2017, we had cash and cash equivalents of $154 million.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, April 26, 2017, to discuss its first quarter 2017 results.

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=UNDNzOZtewTjkx . 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 April 27, 2017, the company will make available on its website an Investor Presentation, which includes updated business information and first quarter 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, intermodal prices (including the timing of any changes), the timing of any acquisitions and expenses relating thereto, the future performance of Hub’s Intermodal, Truck Brokerage and Unyson Logistics business lines, the future performance of Mode, the amount and timing of strategic investments by Hub, shipping volumes, anticipated intermodal margins, customers encountering adverse economic conditions, the amount and timing of operating expenses 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.

	HUB GROUP, INC.
	CONSOLIDATED STATEMENTS OF EARNINGS
	(in thousands, except per share amounts)
	(unaudited)
								Three Months Ended March 31,
									2017						2016
											% of						% of
								Amount			Revenue			Amount			Revenue
	Revenue							$	893,448		100.0	%		$	805,859		100.0	%
	Transportation costs								791,863		88.6	%			697,472		86.6	%
		Gross margin							101,585		11.4	%			108,387		13.4	%
	Costs and expenses:
		Salaries and benefits							43,179		4.8	%			43,863		5.4	%
		Agent fees and commissions							17,993		2.0	%			16,901		2.1	%
		General and administrative							20,824		2.4	%			16,644		2.1	%
		Depreciation and amortization							2,412		0.3	%			2,136		0.3	%
			Total costs and expenses						84,408		9.5	%			79,544		9.9	%
	Operating income								17,177		1.9	%			28,843		3.5	%
	Other income (expense):
		Interest expense							(1,098	)	-0.1	%			(911	)	-0.1	%
		Interest and dividend income							130		0.0	%			61		0.0	%
		Other, net							194		0.0	%			936		0.1	%
			Total other (expense) income						(774	)	-0.1	%			86		0.0	%
	Income before provision for income taxes								16,403		1.8	%			28,929		3.5	%
	Provision for income taxes								6,069		0.7	%			10,964		1.3	%
	Net income							$	10,334		1.1	%		$	17,965		2.2	%
	Basic earnings per common share							$	0.31					$	0.51
	Diluted earnings per common share							$	0.31					$	0.51
	Basic weighted average number of shares outstanding								33,205						35,137
	Diluted weighted average number of shares outstanding								33,373						35,122

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
							Three Months
							Ended March 31, 2017
							Hub			Mode			Inter-Segment Elims				Hub Group Total
Revenue							$	677,132		$	241,874		$	(25,558	)		$	893,448
Transportation costs								605,326			212,095			(25,558	)			791,863
	Gross margin							71,806			29,779			–				101,585
Costs and expenses:
	Salaries and benefits							39,596			3,583			–				43,179
	Agent fees and commissions							17			17,976			–				17,993
	General and administrative							18,479			2,345			–				20,824
	Depreciation and amortization							2,109			303			–				2,412
		Total costs and expenses						60,201			24,207			–				84,408
Operating income							$	11,605		$	5,572		$	–			$	17,177

 

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
							Three Months
							Ended March 31, 2016
							Hub			Mode			Inter-Segment Elims				Hub Group Total
Revenue							$	615,227		$	208,832		$	(18,200	)		$	805,859
Transportation costs								536,073			179,599			(18,200	)			697,472
	Gross margin							79,154			29,233			–				108,387
Costs and expenses:
	Salaries and benefits							40,096			3,767			–				43,863
	Agent fees and commissions							13			16,888			–				16,901
	General and administrative							14,722			1,922			–				16,644
	Depreciation and amortization							1,815			321			–				2,136
		Total costs and expenses						56,646			22,898			–				79,544
Operating income							$	22,508		$	6,335		$	–			$	28,843

 

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
								March 31,				December 31,
								2017				2016
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents						$	154,000			$	127,404
		Accounts receivable trade, net							418,357				473,608
		Accounts receivable other							4,984				4,331
		Prepaid taxes							469				294
		Prepaid expenses and other current assets							13,863				16,653
				TOTAL CURRENT ASSETS					591,673				622,290
	Restricted investments								22,313				20,877
	Property and equipment, net								443,207				438,594
	Other intangibles, net								11,520				11,844
	Goodwill, net								262,321				262,376
	Other assets								3,905				4,278
					TOTAL ASSETS			$	1,334,939			$	1,360,259
LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade						$	249,224			$	266,555
		Accounts payable other							25,228				21,070
		Accrued payroll							12,886				36,223
		Accrued other							54,626				46,013
		Current portion of capital lease							2,708				2,697
		Current portion of long term debt							44,750				45,163
				TOTAL CURRENT LIABILITIES					389,422				417,721
	Long term debt								104,160				115,529
	Non-current liabilities								24,329				23,595
	Long term capital lease								9,838				10,576
	Deferred taxes								169,161				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; 33,474,911 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							164,560				173,565
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306							(15,458	)			(15,458	)
		Retained earnings							745,897				735,563
		Accumulated other comprehensive loss							(209	)			(273	)
		Treasury stock; at cost, 7,749,881 shares in 2017
			and 8,031,810 shares in 2016						(257,180	)			(265,637	)
			TOTAL STOCKHOLDERS’ EQUITY						638,029				628,179
				TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				$	1,334,939			$	1,360,259

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
									Three Months Ended March 31,
										2017				2016
Cash flows from operating activities:
	Net income								$	10,334			$	17,965
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization							12,522				10,639
			Deferred taxes							5,279				2,383
			Compensation expense related to share-based compensation plans							2,609				2,181
			Gain on sale of assets							(48	)			(83	)
			Excess tax benefits from share-based compensation							–				(30	)
	Changes in operating assets and liabilities:
			Restricted investments							(1,436	)			1,685
			Accounts receivable, net							54,600				21,332
			Prepaid taxes							(171	)			26
			Prepaid expenses and other current assets							2,795				1,409
			Other assets							373				400
			Accounts payable							(13,175	)			5,421
			Accrued expenses							(25,990	)			(13,517	)
			Non-current liabilities							12				481
					Net cash provided by operating activities					47,704				50,292
Cash flows from investing activities:
	Proceeds from sale of equipment									1,127				592
	Purchases of property and equipment									(6,625	)			(4,893	)
				Net cash used in investing activities						(5,498	)			(4,301	)
Cash flows from financing activities:
	Repayments of long term debt									(11,782	)			(8,132	)
	Stock tendered for payments of withholding taxes									(3,157	)			(2,208	)
	Purchase of treasury stock									–				(42,368	)
	Capital lease payments									(727	)			(643	)
	Excess tax benefits from share-based compensation									–				(134	)
				Net cash used in financing activities						(15,666	)			(53,485	)
	Effect of exchange rate changes on cash and cash equivalents									56				1
Net increase (decrease) in cash and cash equivalents										26,596				(7,493	)
Cash and cash equivalents beginning of period										127,404				207,749
Cash and cash equivalents end of period									$	154,000			$	200,256

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

Hub Group, Inc.