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’sSEC 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
								Amount			Revenue			Amount			Revenue
	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
								Amount			Revenue			Amount			Revenue
	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

Hub Group, Inc.