Hub Group, Inc. Reports Second Quarter 2017 Results

Revenue of $924.5 million, up 8%
Operating income of $16.6 million, down 52%
Diluted earnings per share of $0.29, down 52%

OAK BROOK, Ill., July 26, 2017 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2017 net income of $9.5 million, or diluted earnings per share of $0.29 vs. second quarter 2016 net income of $20.7 million, or $0.61 per diluted share. Earnings for the second quarter of 2017 were negatively affected by margin declines across business lines and one-time costs of approximately $4.0 million, or $0.07 per share, for severance and expenses related to the acquisition of Estenson on July 1, 2017.

Revenue for the current quarter was $924.5 million, compared with $855.6 million for the second quarter 2016. The Hub segment revenue increased 9% and the Mode segment revenue increased 5%. Operating income for the current quarter decreased to $16.6 million vs. $34.3 million for the second quarter 2016. The Hub segment operating income declined 62% and the Mode segment operating income decreased 13%.

Sequentially, our net income in the second quarter of 2017 excluding one-time costs increased $0.7 million to $12.0 million compared to net income excluding one-time costs in the first quarter of 2017 of $11.3 million.

Segment Information:

Hub

Second quarter 2017 Segment Revenue: $705.2 million, up 9%
Second quarter 2017 Segment Operating Income: $10.4 million, down 62%

The Hub segment’s revenue increased 9% to $705 million compared to the second quarter of 2016 as a result of our success in providing multi-modal solutions to our customers.

Second quarter intermodal revenue increased 3% to $451 million reflecting volume growth of 1%, an increase in fuel revenue and more favorable mix. Declines in freight rates partially offset these increases. Intermodal gross margin decreased from the prior year because of rail transportation cost increases and lower prices.

Truck brokerage revenue increased 26% to $105 million this quarter compared to the same quarter of last year. Truck brokerage handled 14% more loads while fuel, price and mix combined were up 12%. Truck brokerage gross margin decreased primarily because of higher purchased transportation costs due to tight capacity and changes in customer mix.

Second quarter Unyson Logistics revenue increased 17% to $149 million due primarily to growth with new customers on-boarded last year and in the first half of this year. Unyson Logistics gross margin declined primarily due to startup costs related to new business on-boarded this quarter.

Costs and expenses increased $6.3 million to $62.2 million in the second quarter of 2017 compared to $55.9 million in the second quarter of 2016. Salaries and benefits increased $1.8 million due to $2.8 million of severance costs, employee raises, and higher headcount partially offset by a decrease in bonus expense. General and administrative costs are $4.1 million higher because of an increase in IT costs including costs for our transportation management system as well as a $1.2 million increase in professional fees related to the Estenson acquisition.

Operating income was $10.4 million compared to $27.2 million last year.

Mode

Second quarter 2017 Segment Revenue: $243.1 million, up 5%
Second quarter 2017 Segment Operating Income: $6.2 million, down 13%

The Mode segment’s revenue increased 5% to $243 million compared to second quarter 2016. Revenue consisted of $112 million in intermodal which was down 4%, $83 million in truck brokerage which was up 2% and $48 million in logistics which was up 43%.

Gross margin decreased $2.7 million compared to the second quarter of 2016 due primarily to a decrease in truck brokerage and intermodal margin, partially offset by an increase in logistics gross margin.

Mode’s costs and expenses decreased $1.8 million compared to last year primarily because of decreased agent commission.

Operating income was $6.2 million compared to $7.1 million last year.

2017 Outlook

We expect that our full-year 2017 diluted earnings per share will range from $1.45 to $1.55. Projected results for Estenson are included in our guidance as are the one-time costs in the first half of the year. We estimate that our 2017 capital expenditures will range from $85 million to $95 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. Our acquisition of Estenson provides Hub a strong foundation for growth in dedicated trucking. We continue to make strategic investments in our people and technology to strengthen our competitive position in the market,” said Dave Yeager, Hub’s Chairman and CEO.

Cash Flow and Capitalization:

At June 30, 2017, we had total debt outstanding of $166 million on various debt instruments compared to $174 million at December 31, 2016.

Our capital expenditures for the quarter totaled $23.0 million, primarily for containers and trailers. At June 30, 2017, we had cash and cash equivalents of $152 million.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, July 26, 2017, to discuss its second 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=UiRQszvGKbIdWq.
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 July 27, 2017, the company will make available on its website an Investor Presentation, which includes updated business information and second 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 and 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 by Hub, shipping volumes, anticipated intermodal, truck brokerage, and logistics margins, customers encountering adverse economic conditions, the amount and timing of operating expenses 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.

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)

			Three Months Ended June 30,
				2017					2016
						% of					% of
			Amount			Revenue		Amount			Revenue
Revenue			$	924,513		100.0	%	$	855,557		100.0	%

Transportation costs				823,196		89.0	%		741,067		86.6	%
	Gross margin			101,317		11.0	%		114,490		13.4	%

Costs and expenses:
	Salaries and benefits			45,038		4.9	%		43,602		5.1	%
	Agent fees and commissions			17,038		1.8	%		18,360		2.1	%
	General and administrative			20,114		2.2	%		16,083		1.9	%
	Depreciation and amortization			2,549		0.3	%		2,148		0.3	%
		Total costs and expenses		84,739		9.2	%		80,193		9.4	%

Operating income				16,578		1.8	%		34,297		4.0	%

Other income (expense):
	Interest expense			(1,032	)	-0.1	%		(857	)	-0.1	%
	Interest and dividend income			200		0.0	%		120		0.0	%
	Other, net			-		0.0	%		216		0.0	%
		Total other expense		(832	)	-0.1	%		(521	)	-0.1	%

Income before provision for income taxes				15,746		1.7	%		33,776		3.9	%

Provision for income taxes				6,204		0.7	%		13,105		1.5	%

Net income			$	9,542		1.0	%	$	20,671		2.4	%



Basic earnings per common share			$	0.29				$	0.61

Diluted earnings per common share			$	0.29				$	0.61

Basic weighted average number of shares outstanding				33,220					33,944
Diluted weighted average number of shares outstanding				33,262					34,027

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)


			Six Months Ended June 30,
				2017					2016
						% of					% of
			Amount			Revenue		Amount			Revenue
Revenue			$	1,817,961		100.0	%	$	1,661,416		100.0	%

Transportation costs				1,615,059		88.8	%		1,438,539		86.6	%
	Gross margin			202,902		11.2	%		222,877		13.4	%

Costs and expenses:
	Salaries and benefits			88,217		4.8	%		87,465		5.3	%
	Agent fees and commissions			35,031		1.9	%		35,262		2.1	%
	General and administrative			40,938		2.3	%		32,727		2.0	%
	Depreciation and amortization			4,961		0.3	%		4,283		0.2	%
		Total costs and expenses		169,147		9.3	%		159,737		9.6	%

Operating income				33,755		1.9	%		63,140		3.8	%

Other income (expense):
	Interest expense			(2,130	)	-0.1	%		(1,767	)	-0.1	%
	Interest and dividend income			330		0.0	%		181		0.0	%
	Other, net			194		0.0	%		1,152		0.1	%
		Total other expense		(1,606	)	-0.1	%		(434	)	0.0	%

Income before provision for income taxes				32,149		1.8	%		62,706		3.8	%

Provision for income taxes				12,273		0.7	%		24,069		1.5	%

Net income			$	19,876		1.1	%	$	38,637		2.3	%



Basic earnings per common share			$	0.60				$	1.12

Diluted earnings per common share			$	0.60				$	1.12

Basic weighted average number of shares outstanding				33,213					34,541
Diluted weighted average number of shares outstanding				33,318					34,575

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)


			Three Months
			Ended June 30, 2017
			Hub		Mode		Inter-Segment Elims			Hub Group Total

Revenue			$	705,208	$	243,051	$	(23,746	)	$	924,513

Transportation costs				632,651		214,291		(23,746	)		823,196
	Gross margin			72,557		28,760		-			101,317

Costs and expenses:
	Salaries and benefits			41,569		3,469		-			45,038
	Agent fees and commissions			14		17,024		-			17,038
	General and administrative			18,331		1,783		-			20,114
	Depreciation and amortization			2,249		300		-			2,549
		Total costs and expenses		62,163		22,576		-			84,739

Operating income			$	10,394	$	6,184	$	-		$	16,578



HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)


			Three Months
			Ended June 30, 2016
			Hub		Mode		Inter-Segment Elims			Hub Group Total

Revenue			$	648,523	$	231,924	$	(24,890	)	$	855,557

Transportation costs				565,448		200,509		(24,890	)		741,067
	Gross margin			83,075		31,415		-			114,490

Costs and expenses:
	Salaries and benefits			39,787		3,815		-			43,602
	Agent fees and commissions			13		18,347		-			18,360
	General and administrative			14,226		1,857		-			16,083
	Depreciation and amortization			1,830		318		-			2,148
		Total costs and expenses		55,856		24,337		-			80,193

Operating income			$	27,219	$	7,078	$	-		$	34,297

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)

			Six Months
			Ended June 30, 2017
				Hub		Mode		Inter-Segment Elims			Hub Group Total

Revenue				$	1,382,340	$	484,925	$	(49,304	)	$	1,817,961

Transportation costs					1,237,978		426,385		(49,304	)		1,615,059
	Gross margin				144,362		58,540		-			202,902

Costs and expenses:
	Salaries and benefits				81,164		7,053		-			88,217
	Agent fees and commissions				31		35,000		-			35,031
	General and administrative				36,810		4,128		-			40,938
	Depreciation and amortization				4,357		604		-			4,961
		Total costs and expenses			122,362		46,785		-			169,147

Operating income				$	22,000	$	11,755	$	-		$	33,755


HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)

				Six Months
				Ended June 30, 2016
				Hub		Mode		Inter-Segment Elims			Hub Group Total

Revenue				$	1,263,751	$	440,755	$	(43,090	)	$	1,661,416

Transportation costs					1,101,522		380,107		(43,090	)		1,438,539
	Gross margin				162,229		60,648		-			222,877

Costs and expenses:
	Salaries and benefits				79,883		7,582		-			87,465
	Agent fees and commissions				27		35,235		-			35,262
	General and administrative				28,948		3,779		-			32,727
	Depreciation and amortization				3,644		639		-			4,283
		Total costs and expenses			112,502		47,235		-			159,737

Operating income				$	49,727	$	13,413	$	-		$	63,140

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

			June 30,			December 31,
				2017			2016

ASSETS
	CURRENT ASSETS:
		Cash and cash equivalents	$	151,739		$	127,404
		Accounts receivable trade, net		448,916			473,608
		Accounts receivable other		2,786			4,331
		Prepaid taxes		3,648			294
		Prepaid expenses and other current assets		12,165			16,653
		TOTAL CURRENT ASSETS		619,254			622,290

	Restricted investments			23,285			20,877
	Property and equipment, net			440,838			438,594
	Other intangibles, net			11,196			11,844
	Goodwill, net			262,266			262,376
	Other assets			6,931			4,278
		TOTAL ASSETS	$	1,363,770		$	1,360,259


LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES:
		Accounts payable trade	$	262,529		$	266,555
		Accounts payable other		25,404			21,070
		Accrued payroll		20,913			36,223
		Accrued other		43,277			46,013
		Current portion of capital lease		2,733			2,697
		Current portion of long term debt		47,582			45,163
		TOTAL CURRENT LIABILITIES		402,438			417,721

	Long term debt			106,141			115,529
	Non-current liabilities			24,807			23,595
	Long term capital lease			9,141			10,576
	Deferred taxes			171,417			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; 33,433,910 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			168,443			173,565
	Purchase price in excess of predecessor basis, net of tax benefit of $10,306			(15,458	)		(15,458	)
	Retained earnings			755,439			735,563
	Accumulated other comprehensive loss			(181	)		(273	)
	Treasury stock; at cost, 7,790,882 shares in 2017 and 8,031,810 shares in 2016			(258,836	)		(265,637	)
		TOTAL STOCKHOLDERS' EQUITY		649,826			628,179
		TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,363,770		$	1,360,259

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

					Six Months Ended June 30,
						2017			2016


Cash flows from operating activities:
	Net income				$	19,876		$	38,637
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization				25,288			21,426
		Deferred taxes				7,713			7,777
		Compensation expense related to share-based compensation plans				4,972			4,245
		Loss (gain) on sale of assets				307			(255	)
		Excess tax benefits from share-based compensation				-			132
	Changes in operating assets and liabilities:
		Restricted investments				(2,408	)		1,117
		Accounts receivable, net				26,240			(12,826	)
		Prepaid taxes				(3,352	)		(2,977	)
		Prepaid expenses and other current assets				4,493			2,685
		Other assets				(2,653	)		561
		Accounts payable				307			24,740
		Accrued expenses				(18,013	)		(14,031	)
		Non-current liabilities				368			1,211
				Net cash provided by operating activities		63,138			72,442

Cash flows from investing activities:
	Proceeds from sale of equipment					2,356			1,148
	Purchases of property and equipment					(29,593	)		(25,217	)
			Net cash used in investing activities			(27,237	)		(24,069	)

Cash flows from financing activities:
	Proceeds from issuance of debt					16,149			13,274
	Repayments of long term debt					(23,118	)		(16,180	)
	Stock tendered for payments of withholding taxes					(3,293	)		(2,379	)
	Purchase of treasury stock					-			(85,000	)
	Capital lease payments					(1,399	)		(1,297	)
	Excess tax benefits from share-based compensation					-			(359	)
			Net cash used in financing activities			(11,661	)		(91,941	)


	Effect of exchange rate changes on cash and cash equivalents					95			(31	)

Net increase (decrease) in cash and cash equivalents						24,335			(43,599	)
Cash and cash equivalents beginning of period						127,404			207,749
Cash and cash equivalents end of period					$	151,739		$	164,150

Hub Group, Inc. Reports Second Quarter 2017 Results

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