Hub Group, Inc. Reports Record Fourth Quarter 2018 Results From Continuing Operations

Highlights of the quarter

• Acquired CaseStack, further diversifying our service lines
• 12% revenue growth driven by intermodal, logistics, and dedicated
• 30% gross margin growth
• 38% increase in operating income

OAK BROOK, Ill., Feb. 07, 2019 (GLOBE NEWSWIRE) — Hub Group, Inc. (NASDAQ:HUBG) announced fourth quarter 2018 net income of $48.9 million, or diluted earnings per share of $1.46. Income from continuing operations for the current quarter was $33.7 million, or $1.01 per diluted share.  Income from discontinued operations for the current quarter was $15.2 million, or $0.45 per diluted share. 

Fourth quarter 2017, adjusted net income was $24.7 million excluding the impact of tax reform, or adjusted diluted earnings per share of $0.74. Adjusted income from continuing operations for the fourth quarter 2017 was $20.9 million excluding the impact of tax reform, or adjusted $0.62 per diluted share.  The fourth quarter of 2017 included a $75.2 million, or $2.25 per diluted share, decrease in income taxes resulting from the change to our deferred tax liability at December 31, 2017 caused by the reduction of the federal tax rate as part of the Tax Cuts and Jobs Act.  Income from discontinued operations for the fourth quarter 2017 was $3.9 million, or $0.12 per diluted share.  Fourth quarter 2017 net income was $99.9 million, or diluted earnings per share of $2.99 including the impact of tax reform. 

Results of Continuing Operations

Revenue for the current quarter was $1.0 billion compared with $909.2 million for the fourth quarter 2017 as a result of our success in providing multimodal solutions to our customers.   Operating income for the current quarter increased 38% to $48.2 million versus $35.1 million for the fourth quarter 2017, primarily as a result of a favorable intermodal pricing environment, effective margin improvement initiatives, our focus on providing value added customer solutions, and continuing stringent cost control.

Fourth quarter intermodal revenue increased 18% to $598.1 million due to a 5% increase in load volume, price increases and higher fuel revenue. Transcon volume was up 7%, local west was up 8%, and local east was up 1%. Intermodal gross margin increased compared to the fourth quarter of 2017 primarily due to higher pricing, improved mix, better network balance and increased volume.  These gains were partially offset by higher rail and drayage costs and 0.8 day worse utilization than 2017 primarily due to rail service.  We ended the fourth quarter of 2018 with approximately 38,000 containers and 1,200 tractors assigned to the dray fleet.

Truck brokerage revenue decreased 12% to $140.3 million in the fourth quarter of 2018 compared to the same quarter of last year.  Truck brokerage handled 3% fewer loads while fuel, price and mix combined were down 9%.  Contractual volume represented 83% of total load volume compared to 72% in the fourth quarter of 2017. Truck brokerage gross margin decreased compared to the fourth quarter of 2017 primarily because of decreased spot business.

Fourth quarter logistics revenue increased 8% to $200.0 million due to the addition of CaseStack and growth with existing customers, partially offset by lost customers. Logistics gross margin increased compared to the fourth quarter of 2017 due to the addition of CaseStack, price increases, and growth with existing customers.

Dedicated revenue increased 40% to $80.0 million compared to the same quarter in the prior year due to growth with new customers.  Dedicated gross margin increased compared to the fourth quarter of 2017 due to decreased use of outside carriers and improved driver productivity.  We ended the fourth quarter of 2018 with approximately 1,400 tractors and 5,200 trailers in Dedicated. 

Costs and expenses increased $18.8 million to $90.3 million in the fourth quarter of 2018 compared to $71.5 million in the fourth quarter of 2017 due primarily to the addition of CaseStack, a $6.7 million increase in incentive compensation, $2.7 million of higher professional and driver recruiting fees, $1.9 million increase in salaries due to higher headcount and employee raises, and $1.6 million increase in compensation expense from restricted stock partially offset by $1.4 million of lower commissions. Professional fees include $1.0 million of advisory and other services associated with acquisitions. Costs and expenses include a total of $1.9 million of non-cash amortization expense related to CaseStack and Hub Group Dedicated and $0.2 million of compensation expense associated with restricted stock issued to CaseStack management in connection with the acquisition.

Discontinued Operations

Income from discontinued operations related to the sale of our Mode segment, net of income taxes, for the fourth quarter 2018 was $15.2 million or diluted earnings per share of $0.45, versus fourth quarter 2017 net income of $3.9 million or $0.12 per diluted share.

Cash Flow and Capitalization

Our capital expenditures for the fourth quarter 2018 totaled $61.0 million, primarily for tractors, containers, trailers and technology investments.  At December 31, 2018, we had cash and cash equivalents of $61.4 million. 

At December 31, 2018, we had total debt outstanding of $338.4 million on various debt instruments compared to $302.5 million at December 31, 2017. 

2019 Outlook

We expect that our 2019 diluted earnings per share will range from $3.10 to $3.30. We expect amortization expense associated with the CaseStack and Hub Group Dedicated acquisitions will be approximately $13.5 million and compensation expense related to restricted stock issued to CaseStack management in connection with the acquisition will be approximately $2.4 million in 2019. We estimate that our 2019 capital expenditures will range from $90 million to $100 million. We project our effective tax rate for 2019 will range from 25.0% to 26.0%.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Thursday, February 7, 2019 to discuss its fourth quarter 2018 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=UuDpQkjNEPbxBF. 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 8, 2019, the company will make available on its website an Investor Presentation, which includes updated business information and fourth quarter 2018 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 Logistics business lines, driver shortages, 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, 2017.  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,
							2018						2017
									% of						% of
							Amount		Revenue				Amount		Revenue
Revenue							$	1,018,293	100.0		%		$	909,239	100.0		%
Transportation costs							879,706		86.4		%		802,633		88.3		%
	Gross margin						138,587		13.6		%		106,606		11.7		%
Costs and expenses:
	Salaries and benefits						59,290		5.9		%		47,925		5.3		%
	General and administrative						25,715		2.5		%		19,790		2.2		%
	Depreciation and amortization						5,338		0.5		%		3,824		0.4		%
		Total costs and expenses					90,343		8.9		%		71,539		7.9		%
Operating income							48,244		4.7		%		35,067		3.9		%
Other income (expense):
	Interest expense						(2,909)		-0.3		%		(2,279)		-0.2		%
	Interest and dividend income						994		0.1		%		16		0.0		%
	Other, net						38		0.0		%		134		0.0		%
		Total other expense					(1,877)		-0.2		%		(2,129)		-0.2		%
Income from continuing operations before income taxes							46,367		4.5		%		32,938		3.7		%
Provision for income taxes							12,693		1.2		%		(63,144)		-6.9		%
Income from continuing operations							33,674		3.3		%		96,082		10.6		%
Income from discontinued operations, net of income taxes							15,237						3,861
Net income							$	48,911					$	99,943
Earnings per share from continuing operations
	Basic						$	1.01					$	2.89
	Diluted						$	1.01					$	2.87
Earnings per share from discontinued operations
	Basic						$	0.45					$	0.12
	Diluted						$	0.45					$	0.12
Earnings per share net income
	Basic						$	1.46					$	3.01
	Diluted						$	1.46					$	2.99
Basic weighted average number of shares outstanding							33,409						33,229
Diluted weighted average number of shares outstanding							33,597						33,429

HUB GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (in thousands, except per share amounts) (unaudited)
							Twelve Months Ended December 31,
							2018							2017
										% of							% of
							Amount			Revenue				Amount			Revenue
Revenue							$	3,683,593		100.0		%		$	3,123,063		100.0		%
Transportation costs							3,237,992			87.9		%		2,785,433			89.2		%
	Gross margin						445,601			12.1		%		337,630			10.8		%
Costs and expenses:
	Salaries and benefits						222,786			6.0		%		175,567			5.6		%
	General and administrative						81,272			2.2		%		77,239			2.5		%
	Depreciation and amortization						16,624			0.5		%		12,155			0.4		%
		Total costs and expenses					320,682			8.7		%		264,961			8.5		%
Operating income							124,919			3.4		%		72,669			2.3		%
Other income (expense):
	Interest expense						(9,611		)	-0.3		%		(6,754		)	-0.2		%
	Interest and dividend income						1,359			0.0		%		349			0.0		%
	Other, net						58			0.0		%		667			0.0		%
		Total other expense					(8,194		)	-0.3		%		(5,738		)	-0.2		%
Income from continuing operations before income taxes							116,725			3.1		%		66,931			2.1		%
Provision for income taxes							29,064			0.8		%			(53,083	)	-1.7		%
Income from continuing operations							87,661			2.3		%		120,014			3.8		%
Income from discontinued operations, net of income taxes							114,079							15,139
Net income							$	201,740						$	135,153
Earnings per share from continuing operations
	Basic						$	2.62						$	3.61
	Diluted						$	2.61						$	3.60
Earnings per share from discontinued operations
	Basic						$	3.42						$	0.46
	Diluted						$	3.40						$	0.45
Earnings per share net income
	Basic						$	6.04						$	4.07
	Diluted						$	6.01						$	4.05
Basic weighted average number of shares outstanding							33,393							33,220
Diluted weighted average number of shares outstanding							33,560							33,350

HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
					Three Months						Twelve Months
					Ended December 31,						Ended December 31,
					2018			2017			2018			2017
Intermodal					$	598,062		$	508,309		$	2,195,316		$	1,870,873
Truck brokerage					140,269			158,507			497,282			481,635
Logistics					199,999			185,357			698,138			655,543
Dedicated					79,963			57,066			292,857			115,012
	Total Revenue				$	1,018,293		$	909,239		$	3,683,593		$	3,123,063



HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
								December 31,				December 31,
									2018				2017
ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents						$	61,435			$	28,557
		Accounts receivable trade, net							477,088				424,679
		Accounts receivable other							22,021				5,704
		Prepaid taxes							616				12,088
		Prepaid expenses and other current assets							27,533				25,414
		Current assets held for sale							–				159,616
				TOTAL CURRENT ASSETS					588,693				656,058
	Restricted investments								19,236				20,143
	Property and equipment, net								681,859				561,214
	Other intangibles, net								134,788				64,747
	Goodwill, net								483,584				319,272
	Other assets								16,738				5,491
	Non-current assets held for sale								–				44,016
				TOTAL ASSETS				$	1,924,898			$	1,670,941
LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade						$	275,083			$	238,230
		Accounts payable other							10,906				13,903
		Accrued payroll							55,535				26,674
		Accrued other							80,676				53,508
		Current portion of capital lease							2,845				2,777
		Current portion of long term debt							101,713				77,266
		Current liabilities held for sale							–				107,185
				TOTAL CURRENT LIABILITIES					526,758				519,543
	Long term debt								229,071				214,808
	Non-current liabilities								29,619				33,599
	Long term capital lease								4,739				7,696
	Deferred taxes								153,877				121,095
	Non-current liabilities held for sale								–				4,328
	STOCKHOLDERS’ EQUITY:
		Preferred stock, $.01 par value; 2,000,000 shares authorized;
			no shares issued or outstanding in 2018 and 2017						–				–
		Common stock
			Class A: $.01 par value; 97,337,700 shares authorized and
				41,224,792 shares issued in 2018 and 2017; 33,793,709 shares
				outstanding in 2018 and 33,447,070 shares outstanding in 2017					412				412
			Class B:  $.01 par value; 662,300 shares authorized;
				662,296 shares issued and outstanding in 2018 and 2017					7				7
		Additional paid-in capital							172,220				173,011
		Purchase price in excess of predecessor basis, net of tax
		benefit of $10,306							(15,458	)			(15,458	)
		Retained earnings							1,072,456				870,716
		Accumulated other comprehensive loss							(182	)			(194	)
		Treasury stock; at cost, 7,431,083 shares in 2018
			and 7,777,722 shares in 2017						(248,621	)			(258,622	)
			TOTAL STOCKHOLDERS’ EQUITY						980,834				769,872
				TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				$	1,924,898			$	1,670,941

 

 

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
									Twelve Months Ended December 31,
									2018			2017
Cash flows from operating activities:
	Net income								$	201,740		$	135,153
	Adjustments to reconcile net income
		to net cash provided by operating activities:
			Depreciation and amortization						83,910			62,173
			Deferred taxes						39,499			(41,351)
			Compensation expense related to share-based compensation plans						13,480			9,873
			Contingent consideration adjustment						(4,703)			–
			(Gain) loss on sale of assets						(1,007)			441
			Gain on disposition of discontinued operations						(132,448)			–
			Transaction costs for the Disposition						(5,798)			–
	Changes in operating assets and liabilities:
			Restricted investments						827			(3,304)
			Accounts receivable, net						(31,475)			(84,775)
			Prepaid taxes						11,472			(11,794)
			Prepaid expenses and other current assets						(1,750)			(7,543)
			Other assets						(8,029)			56
			Accounts payable						7,745			59,037
			Accrued expenses						41,252			(2,931)
			Non-current liabilities						(3,876)			10,185
				Net cash provided by operating activities					210,839			125,220
Cash flows from investing activities:
	Proceeds from sale of equipment								10,975			5,327
	Purchases of property and equipment								(199,791)			(74,541)
	Acquisitions, net of cash acquired								(248,656)			(165,933)
	Proceeds from the disposition of discontinued operations								227,986			–
				Net cash used in investing activities					(209,486)			(235,147)
Cash flows from financing activities:
	Proceeds from issuance of debt								172,146			98,544
	Repayments of long term debt								(133,436)			(79,869)
	Stock tendered for payments of withholding taxes								(4,270)			(3,412)
	Capital lease payments								(2,889)			(2,800)
	Payment of debt issuance costs								–			(1,397)
				Net cash provided by financing activities					31,551			11,066
	Effect of exchange rate changes on cash and cash equivalents								(26)			14
Net increase (decrease) in cash and cash equivalents									32,878			(98,847)
Cash and cash equivalents beginning of period									28,557			127,404
Cash and cash equivalents end of period									$	61,435		$	28,557

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

Source: Hub Group, Inc.