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

February 7, 2019 4:03 PM

Highlights of the quarter

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'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.

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
AmountRevenue AmountRevenue
Revenue $ 1,018,293100.0 % $ 909,239100.0 %
Transportation costs 879,70686.4 % 802,63388.3 %
Gross margin 138,58713.6 % 106,60611.7 %
Costs and expenses:
Salaries and benefits 59,2905.9 % 47,9255.3 %
General and administrative 25,7152.5 % 19,7902.2 %
Depreciation and amortization 5,3380.5 % 3,8240.4 %
Total costs and expenses 90,3438.9 % 71,5397.9 %
Operating income 48,2444.7 % 35,0673.9 %
Other income (expense):
Interest expense (2,909)-0.3 % (2,279)-0.2 %
Interest and dividend income 9940.1 % 160.0 %
Other, net 380.0 % 1340.0 %
Total other expense (1,877)-0.2 % (2,129)-0.2 %
Income from continuing operations before income taxes 46,3674.5 % 32,9383.7 %
Provision for income taxes 12,6931.2 % (63,144)-6.9 %
Income from continuing operations 33,6743.3 % 96,08210.6 %
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

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Source: Hub Group, Inc.

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