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Hub Group, Inc. Reports Record Second Quarter 2018 Results

August 1, 2018 4:01 PM

Highlights of the quarter

OAK BROOK, Ill., Aug. 01, 2018 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ: HUBG) announced second quarter 2018 net income of $22.1 million, or diluted earnings per share of $0.66 versus second quarter 2017 net income of $9.5 million, or $0.29 per diluted share.

Revenue for the current quarter was $1.2 billion compared with $923.6 million for the second quarter 2017. Hub segment revenue increased 26% and Mode segment revenue increased 29%. Operating income for the current quarter increased to $32.0 million versus $16.6 million for the second quarter 2017. Hub segment operating income increased 139% and Mode segment operating income increased 15%.

Segment Information:

Hub
• Second quarter 2018 Segment Revenue:$888.2 million, up 26%
• Second quarter 2018 Segment Operating Income:$24.8 million, up 139%

Hub’s revenue increased 26% to $888.2 million compared to the second quarter of 2017 as a result of our success in providing multi-modal solutions to our customers. This increase includes Hub Group Dedicated revenue totaling $73.9 million in the second quarter of 2018.

Second quarter intermodal revenue increased 17% to $526.0 million reflecting a 4% increase in loads, price increases and higher fuel revenue. Intermodal gross margin increased compared to the second quarter of 2017 primarily due to improved pricing and increased volume. These gains were partially offset by higher rail and higher drayage costs.

Truck brokerage revenue increased 10% to $114.9 million in the second quarter compared to the same quarter of last year. Truck brokerage handled 5% fewer loads while fuel, price and mix combined were up 15%. Truck brokerage gross margin increased primarily because of growth with strategic customers and increased spot activity.

Second quarter Unyson Logistics revenue increased 17% to $173.4 million due primarily to growth from new customers on-boarded in 2017 and growth with existing customers.

Hub Group Dedicated revenue of $73.9 million in the second quarter of 2018 is up 22% sequentially from the first quarter of 2018 revenue of $60.4 million.

Costs and expenses increased $13.2 million to $75.3 million in the second quarter of 2018 compared to $62.1 million in the second quarter of 2017 due primarily to the addition of $12.2 million of costs and expenses for Hub Group Dedicated.

Operating income was $24.8 million compared to $10.4 million in the second quarter 2017.

Mode
• Second quarter 2018 Segment Revenue:$314.1 million, up 29%
• Second quarter 2018 Segment Operating Income:$7.1 million, up 15%

Mode’s revenue increased 29% to $314.1 million compared to the second quarter 2017. Revenue consisted of $141.2 million in intermodal which was up 26%, $103.2 million in truck brokerage which was up 24% and $69.7 million in logistics which was up 45%.

Gross margin increased $7.3 million compared to the second quarter of 2017 due to growth in all three lines of business.

Operating income was $7.1 million compared to $6.2 million in the second quarter 2017.

Hub is exploring strategic alternatives for Mode, with the intention of using the proceeds for investments in our existing business, including technology initiatives, and for acquisitions of businesses in both new and existing service lines.

Cash Flow and Capitalization:

Our capital expenditures for the second quarter totaled $47.1 million, primarily for tractors, trailers, and technology investments. At June 30, 2018, we had cash and cash equivalents of $26.8 million.

At June 30, 2018, we had total debt outstanding of $275.2 million on various debt instruments compared to $302.5 million at December 31, 2017.

2018 Outlook

We expect that our 2018 diluted earnings per share will range from $2.73 to $2.83. We estimate that our 2018 capital expenditures will range from $200 million to $220 million. We project our effective tax rate will range from 24.5% to 25.5%.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Wednesday, August 1st 2018 to discuss its second quarter 2018 results and corporate strategy.

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=UWXldILszGSOoR. 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 August 1st 2018, the company will make available on its website an Investor Presentation, which includes updated business information and second 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 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, 2017. Hub Group assumes no liability to update any such forward-looking statements.

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

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended June 30,
2018 2017
% of % of
AmountRevenue AmountRevenue
Revenue$1,179,093100.0% $923,596100.0%
Transportation costs 1,042,90388.4% 822,27989.0%
Gross margin 136,19011.6% 101,31711.0%
Costs and expenses:
Salaries and benefits 58,0925.0% 45,0384.9%
Agent fees and commissions 21,9691.9% 17,0381.8%
General and administrative 20,2161.7% 20,1142.2%
Depreciation and amortization 3,9600.3% 2,5490.3%
Total costs and expenses 104,2378.9% 84,7399.2%
Operating income 31,9532.7% 16,5781.8%
Other income (expense):
Interest expense (2,187)-0.2% (1,032)-0.1%
Interest and dividend income 220.0% 2000.0%
Other, net (189)0.0% - 0.0%
Total other expense (2,354)-0.2% (832)-0.1%
Income before provision for income taxes 29,5992.5% 15,7461.7%
Income tax expense 7,5480.6% 6,2040.7%
Net income$22,0511.9% $9,5421.0%
Basic earnings per common share$0.66 $0.29
Diluted earnings per common share$0.66 $0.29
Basic weighted average number of shares outstanding 33,389 33,220
Diluted weighted average number of shares outstanding 33,562 33,262

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
Six Months Ended June 30,
2018 2017
% of % of
AmountRevenue AmountRevenue
Revenue$2,275,064100.0% $1,816,352100.0%
Transportation costs 2,016,08388.6% 1,613,45088.8%
Gross margin 258,98111.4% 202,90211.2%
Costs and expenses:
Salaries and benefits 114,0995.0% 88,2174.9%
Agent fees and commissions 41,1111.8% 35,0311.9%
General and administrative 40,7201.8% 40,9382.2%
Depreciation and amortization 7,9650.4% 4,9610.3%
Total costs and expenses 203,8959.0% 169,1479.3%
Operating income 55,0862.4% 33,7551.9%
Other income (expense):
Interest expense (4,291)-0.2% (2,130)-0.1%
Interest and dividend income 440.0% 3300.0%
Other, net (244)0.0% 1940.0%
Total other expense (4,491)-0.2% (1,606)-0.1%
Income before provision for income taxes 50,5952.2% 32,1491.8%
Income tax expense 12,3770.5% 12,2730.7%
Net income$38,2181.7% $19,8761.1%
Basic earnings per common share$1.14 $0.60
Diluted earnings per common share$1.14 $0.60
Basic weighted average number of shares outstanding 33,382 33,213
Diluted weighted average number of shares outstanding 33,520 33,318

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT
(in thousands)
(unaudited)
Three Months
Ended June 30, 2018
Hub Mode Inter-Segment Elims Hub Group Total
Revenue$888,238 $314,078 $(23,223) $1,179,093
Transportation costs 788,087 278,039 (23,223) 1,042,903
Gross margin 100,151 36,039 - 136,190
Costs and expenses:
Salaries and benefits 53,839 4,253 - 58,092
Agent fees and commissions 11 21,958 - 21,969
General and administrative 17,768 2,448 - 20,216
Depreciation and amortization 3,719 241 - 3,960
Total costs and expenses 75,337 28,900 - 104,237
Operating income $24,814 $7,139 $- $31,953
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$704,344 $242,998 $(23,746) $923,596
Transportation costs 631,787 214,238 (23,746) 822,279
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)
Six Months
Ended June 30, 2018
Hub Mode Inter-Segment Elims Hub Group Total
Revenue$1,719,823 $601,977 $(46,736) $2,275,064
Transportation costs 1,529,297 533,522 (46,736) 2,016,083
Gross margin 190,526 68,455 - 258,981
Costs and expenses:
Salaries and benefits 105,909 8,190 - 114,099
Agent fees and commissions 25 41,086 - 41,111
General and administrative 36,170 4,550 - 40,720
Depreciation and amortization 7,478 487 - 7,965
Total costs and expenses 149,582 54,313 - 203,895
Operating income$40,944 $14,142 $- $55,086
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$1,380,824 $484,832 $(49,304) $1,816,352
Transportation costs 1,236,462 426,292 (49,304) 1,613,450
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 AND BUSINESS LINE
(in thousands)
(unaudited)
Three Months
Ended June 30, 2018
Hub Mode Inter-Segment Elims Hub Group Total
Intermodal$526,028 $141,221 $(6,559) $660,690
Truck brokerage 114,936 103,168 (84) 218,020
Logistics 173,421 69,689 (16,580) 226,530
Dedicated 73,853 - - 73,853
Total Revenue$888,238 $314,078 $(23,223) $1,179,093
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
Three Months
Ended June 30, 2017
Hub Mode Inter-Segment Elims Hub Group Total
Intermodal$451,420 $112,089 $(12,866) $550,643
Truck brokerage 104,289 82,869 (310) 186,848
Logistics 148,635 48,040 (10,570) 186,105
Dedicated - - - -
Total Revenue$704,344 $242,998 $(23,746) $923,596

HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
Six Months
Ended June 30, 2018
Hub Mode Inter-Segment Elims Hub Group Total
Intermodal$1,008,522 $270,995 $(17,829) $1,261,688
Truck brokerage 234,955 203,889 (442) 438,402
Logistics 342,098 127,093 (28,450) 440,741
Dedicated 134,248 - (15) 134,233
Total Revenue$1,719,823 $601,977 $(46,736) $2,275,064
HUB GROUP, INC.
FINANCIAL INFORMATION BY SEGMENT AND BUSINESS LINE
(in thousands)
(unaudited)
Six Months
Ended June 30, 2017
Hub Mode Inter-Segment Elims Hub Group Total
Intermodal$875,843 $234,269 $(28,103) $1,082,009
Truck brokerage 210,473 161,031 (695) 370,809
Logistics 294,508 89,532 (20,506) 363,534
Dedicated - - - -
Total Revenue$1,380,824 $484,832 $(49,304) $1,816,352

HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
June 30, December 31,
2018 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$26,753 $28,557
Accounts receivable trade, net 615,690 583,994
Accounts receivable other 3,851 5,722
Prepaid taxes 5,268 12,088
Prepaid expenses and other current assets 15,763 25,697
TOTAL CURRENT ASSETS 667,325 656,058
Restricted investments 24,107 24,181
Property and equipment, net 618,931 562,150
Other intangibles, net 71,501 74,348
Goodwill, net 348,106 348,661
Other assets 3,534 5,543
TOTAL ASSETS$1,733,504 $1,670,941
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade$348,222 $338,933
Accounts payable other 12,418 12,268
Accrued payroll 36,487 28,994
Accrued other 78,598 59,305
Current portion of capital lease 2,794 2,777
Current portion of long term debt 86,740 77,266
TOTAL CURRENT LIABILITIES 565,259 519,543
Long term debt 179,444 214,808
Non-current liabilities 39,083 37,927
Long term capital lease 6,196 7,696
Deferred taxes 132,463 121,095
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; 33,717,169 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 168,614 173,011
Purchase price in excess of predecessor basis, net of tax
benefit of $10,306 (15,458) (15,458)
Retained earnings 908,934 870,716
Accumulated other comprehensive loss (190) (194)
Treasury stock; at cost, 7,507,623 shares in 2018
and 7,777,722 shares in 2017 (251,260) (258,622)
TOTAL STOCKHOLDERS' EQUITY 811,059 769,872
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$1,733,504 $1,670,941

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June 30,
2018 2017
Cash flows from operating activities:
Net income$38,218 $19,876
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 38,251 25,288
Deferred taxes 11,767 7,713
Compensation expense related to share-based compensation plans 6,982 4,972
Other (3,571) -
(Gain) loss on sale of assets (90) 307
Changes in operating assets and liabilities:
Restricted investments 74 (2,408)
Accounts receivable, net (29,748) 26,240
Prepaid taxes 6,820 (3,352)
Prepaid expenses and other current assets 9,935 4,493
Other assets 1,869 (2,653)
Accounts payable 9,878 307
Accrued expenses 4,857 (18,013)
Non-current liabilities 2,382 368
Net cash provided by operating activities 97,624 63,138
Cash flows from investing activities:
Proceeds from sale of equipment 1,234 2,356
Purchases of property and equipment (69,261) (29,593)
Net cash used in investing activities (68,027) (27,237)
Cash flows from financing activities:
Proceeds from issuance of debt 58,161 16,149
Repayments of long term debt (84,051) (23,118)
Stock tendered for payments of withholding taxes (4,017) (3,293)
Capital lease payments (1,483) (1,399)
Net cash used in financing activities (31,390) (11,661)
Effect of exchange rate changes on cash and cash equivalents (11) 95
Net (decrease) increase in cash and cash equivalents (1,804) 24,335
Cash and cash equivalents beginning of period 28,557 127,404
Cash and cash equivalents end of period$26,753 $151,739

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Source: Hub Group, Inc.

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