Hub Group, Inc. Reports Fourth Quarter and Full Ye

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Posted On: 02/02/2017 4:15:27 PM

Posted By: News Desk 2018

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=...BcEEofgJcl . 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's SEC 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

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