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CST: 17/08/2019 06:32:55   

Hub Group, Inc. Reports Record Second Quarter 2019 Results

17 Days ago

Highlights of the quarter

  • Record EPS from continuing operations of $0.87, 71% growth
  • 31% increase in gross margin
  • 60% increase in operating income
  • Operating margin improved 160 basis points to 4.4%
  • EBITDA increased 55% to $69.4 million

OAK BROOK, Ill., July 30, 2019 (GLOBE NEWSWIRE) -- Hub Group, Inc. (NASDAQ:HUBG) announced second quarter 2019 net income of $29.2 million, or diluted earnings per share of $0.87. Income from continuing operations for the second quarter 2018 was $17.2 million, or $0.51 per diluted share.   

Results of Continuing Operations

Revenue for the current quarter increased by 3% to $921.2 million compared with $894.7 million for the second quarter 2018 as a result of our success in providing multimodal solutions to our customers and the addition of the CaseStack business in December 2018.  Operating income for the current quarter increased 60% to $40.7 million versus $25.4 million for the second quarter 2018, primarily as a result of improved yield management and our intense focus on reducing costs while maintaining the highest levels of service. Operating margin expanded to 4.4% for the current quarter, as compared to 2.8% in the prior year quarter.

Second quarter intermodal revenue increased 1% to $542.9 million due primarily to a continued focus on yield management and enhanced efficiency, partially offset by a 7% decline in volume. Volume was down compared to the prior year due to a softening demand environment, increased truckload and intermodal competition, and a 2% volume decrease from lane cancellations and weather disruption. Intermodal gross margin increased compared to the second quarter of 2018 primarily due to our yield management strategy, improved efficiency and better purchasing, partially offset by decreased volumes and rail cost increases.

Truck brokerage revenue decreased 7% to $107.1 million in the second quarter of 2019 compared to the same quarter of last year.  Truck brokerage handled 18% more loads while fuel, price and mix combined were down 25% due primarily to the addition of the CaseStack LTL brokerage business.  Contractual truckload volume represented 86% of total truckload volume compared to 81% in the second quarter of 2018.   Truck brokerage gross margin increased due to a higher load count, further benefits from our new operating model and yield management strategy, as well as our new technology platform.    

Second quarter logistics revenue grew 15% to $193.5 million.  Revenue and gross margin expanded due to the addition of CaseStack, benefits from continuous improvements and cross selling to our customers and improved yield management. 

Dedicated revenue increased 5% to $77.7 million compared to the same quarter in the prior year due to improved pricing and growth with new accounts which was offset partially by lost business.  Dedicated gross margin improved compared to the second quarter of 2018 due to implementation of our yield management processes and improved operational discipline.  We ended the quarter with approximately 1,300 tractors and 5,200 trailers for Dedicated. 

Costs and expenses increased to $92.0 million in the second quarter of 2019 compared to $75.6 million in the second quarter of 2018 due primarily to costs and expenses of $12.7 million related to CaseStack (which includes $2.3 million of non-cash amortization expense), the absence of a $3.6 million Dedicated contingent earn out adjustment in the prior year, partially offset by a decrease of $1.0 million in compensation expense. Costs and expenses include a total of $3.4 million of non-cash amortization expense related to CaseStack and Hub Group Dedicated and $0.6 million of compensation expense associated with restricted stock issued to CaseStack management in connection with the acquisition.

Results of Discontinued Operations

Income from discontinued operations related to the sale of our Mode segment for the second quarter of 2018 was $4.9 million, or $0.15 per diluted share. 

Cash Flow and Capitalization

Our capital expenditures for the second quarter 2019 totaled $11.7 million, primarily for tractors and technology investments.  At June 30, 2019, we had cash and cash equivalents of $150 million.    

2019 Outlook

We expect that our 2019 diluted earnings per share will range from $3.30 to $3.40. We estimate mid-single digit revenue growth for the full year. We expect gross margin as a percentage of sales to range from 13.9% to 14.3% in the second half of the year. We estimate our quarterly costs and expenses will range from $96 million to $98 million in the back half of the year.  We expect annual amortization expense associated with the CaseStack and Hub Group Dedicated acquisitions will be approximately $13.6 million and compensation expense related to restricted stock issued to CaseStack management in connection with the acquisition will be approximately $2.5 million in 2019. We project our effective tax rate for 2019 will range from 25% to 26%.  We forecast we will spend between $100 million and $110 million on capital expenditures in 2019.

Non-GAAP Financial Measure

As required by the rules of the Securities and Exchange Commission (“SEC”), we provide a reconciliation of the non-GAAP financial measure contained in this press release to the most directly comparable measure under GAAP, which is set forth in the attached table.

CONFERENCE CALL

Hub will hold a conference call at 5:00 p.m. Eastern Time on Tuesday, July 30, 2019 to discuss its second quarter 2019 results.

Hosting the conference call will be Dave Yeager, Chief Executive Officer.  Also participating on the call will be Phil Yeager, 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=1&a=USsertzOHdGtXM. 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, 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 implement and integrate critical information technology systems, cyber security incidents, 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, 2018.  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 June 30,
          2019
  2018
            % of     % of
          Amount Revenue   Amount Revenue
Revenue     $ 921,163   100.0 %   $ 894,734   100.0 %
                   
Transportation costs       788,460   85.6 %     793,743   88.7 %
  Gross margin       132,703   14.4 %     100,991   11.3 %
                   
Costs and expenses:              
  Salaries and benefits       60,859   6.6 %     54,068   6.1 %
  General and administrative       24,028   2.6 %     17,794   2.0 %
  Depreciation and amortization       7,095   0.8 %     3,723   0.4 %
    Total costs and expenses       91,982   10.0 %     75,585   8.5 %
                   
Operating income       40,721   4.4 %     25,406   2.8 %
                   
Other income (expense):              
  Interest expense       (2,690 ) -0.3 %     (2,187 ) -0.2 %
  Interest and dividend income       595   0.1 %     14   0.0 %
  Other, net       (30 ) 0.0 %     (182 ) 0.0 %
    Total other expense       (2,125 ) -0.2 %     (2,355 ) -0.2 %
                   
Income from continuing operations before income taxes       38,596   4.2 %     23,051   2.6 %
                   
Provision for income taxes       9,379   1.0 %     5,897   0.7 %
                   
Income from continuing operations       29,217   3.2 %     17,154   1.9 %
                   
Income from discontinued operations, net of income taxes     -         4,897    
                   
Net income     $ 29,217       $ 22,051    
                   
Earnings per share from continuing operations              
  Basic     $ 0.87       $ 0.51    
  Diluted     $ 0.87       $ 0.51    
                   
Earnings per share from discontinued operations              
  Basic     $ -       $ 0.15    
  Diluted     $ -       $ 0.15    
                   
Earnings per share net income              
  Basic     $ 0.87       $ 0.66    
  Diluted     $ 0.87       $ 0.66    
                   
Basic weighted average number of shares outstanding       33,552         33,389    
Diluted weighted average number of shares outstanding       33,715         33,562    
                   

 

 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
(unaudited)
                   
          Six Months Ended June 30,
          2019
  2018
            % of     % of
          Amount Revenue   Amount Revenue
Revenue     $ 1,854,161   100.0 %   $ 1,732,076   100.0 %
                   
Transportation costs       1,594,169   86.0 %     1,540,046   88.9 %
  Gross margin       259,992   14.0 %     192,030   11.1 %
                   
Costs and expenses:              
  Salaries and benefits       122,887   6.7 %     106,373   6.2 %
  General and administrative       46,946   2.5 %     36,230   2.1 %
  Depreciation and amortization       13,849   0.7 %     7,486   0.4 %
    Total costs and expenses       183,682   9.9 %     150,089   8.7 %
                   
Operating income       76,310   4.1 %     41,941   2.4 %
                   
Other income (expense):              
  Interest expense       (5,746 ) -0.3 %     (4,291 ) -0.2 %
  Interest and dividend income       968   0.1 %     25   0.0 %
  Other, net       (70 ) 0.0 %     (231 ) 0.0 %
    Total other expense       (4,848 ) -0.2 %     (4,497 ) -0.2 %
                   
Income from continuing operations before income taxes       71,462   3.9 %     37,444   2.2 %
                   
Provision for income taxes       18,351   1.0 %     9,221   0.6 %
                   
Income from continuing operations       53,111   2.9 %     28,223   1.6 %
                   
Income from discontinued operations, net of income taxes     -         9,995    
                   
Net income     $ 53,111       $ 38,218    
                   
Earnings per share from continuing operations              
  Basic     $ 1.58       $ 0.84    
  Diluted     $ 1.58       $ 0.84    
                   
Earnings per share from discontinued operations              
  Basic     $ -       $ 0.30    
  Diluted     $ -       $ 0.30    
                   
Earnings per share net income              
  Basic     $ 1.58       $ 1.14    
  Diluted     $ 1.58       $ 1.14    
                   
Basic weighted average number of shares outstanding       33,560         33,382    
Diluted weighted average number of shares outstanding       33,650         33,520    
                   

 

 
HUB GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
                 
            June 30,   December 31,
            2019   2018
ASSETS          
  CURRENT ASSETS:        
    Cash and cash equivalents   $ 149,863     $ 61,435  
    Accounts receivable trade, net     421,139       477,088  
    Other receivables     3,282       22,021  
    Prepaid taxes     1,038       616  
    Prepaid expenses and other current assets   11,602       27,533  
        TOTAL CURRENT ASSETS     586,924       588,693  
                 
  Restricted investments     21,972       19,236  
  Property and equipment, net     651,057       681,859  
  Right-of-use assets - operating leases   32,165       -  
  Right-of-use assets - financing leases   7,021       -  
  Other intangibles, net     127,878       134,788  
  Goodwill, net     484,568       483,584  
  Other assets     18,534       16,738  
        TOTAL ASSETS   $ 1,930,119     $ 1,924,898  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY      
  CURRENT LIABILITIES:        
    Accounts payable trade   $ 233,399     $ 272,859  
    Accounts payable other     11,974       10,906  
    Accrued payroll     41,402       55,535  
    Accrued other     80,271       82,900  
    Lease liability - operating leases     8,468       -  
    Lease liability - financing leases     3,004       2,845  
    Current portion of long term debt     98,601       101,713  
        TOTAL CURRENT LIABILITIES   477,119       526,758  
                 
  Long term debt     199,194       229,071  
  Non-current liabilities     34,537       29,619  
  Lease liability - operating leases     25,351       -  
  Lease liability - financing leases     3,384       4,739  
  Deferred taxes     157,952       153,877  
                 
  STOCKHOLDERS' EQUITY:        
    Preferred stock, $.01 par value; 2,000,000 shares authorized;      
      no shares issued or outstanding in 2019 and 2018   -       -  
    Common stock        
      Class A: $.01 par value; 97,337,700 shares authorized and      
        41,224,792 shares issued in 2019 and 2018; 33,855,740 shares      
        outstanding in 2019 and 33,793,709 shares outstanding in 2018   412       412  
      Class B:  $.01 par value; 662,300 shares authorized;      
        662,296 shares issued and outstanding in 2019 and 2018   7       7  
    Additional paid-in capital     170,619       172,220  
    Purchase price in excess of predecessor basis, net of tax      
     benefit of $10,306     (15,458 )     (15,458 )
    Retained earnings     1,125,541       1,072,456  
    Accumulated other comprehensive loss   (178 )     (182 )
    Treasury stock; at cost, 7,369,052 shares in 2019      
      and 7,431,083 shares in 2018     (248,361 )     (248,621 )
      TOTAL STOCKHOLDERS' EQUITY   1,032,582       980,834  
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,930,119     $ 1,924,898  
                 

 

 
HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
             
            Six Months Ended June 30,
            2019   2018
                 
                 
Cash flows from operating activities:        
  Net income   $ 53,111     $ 38,218  
  Adjustments to reconcile net income        
    to net cash provided by operating activities:        
      Depreciation and amortization     57,029       38,251  
      Deferred taxes     4,272       11,767  
      Compensation expense related to share-based compensation plans     8,687       6,982  
      Contingent consideration adjustment     -       (3,571 )
      Gain on sale of assets     (1,526 )     (90 )
  Changes in operating assets and liabilities:        
      Restricted investments     (2,736 )     74  
      Accounts receivable, net     55,089       (29,748 )
      Prepaid taxes     (422 )     6,820  
      Prepaid expenses and other current assets     15,932       9,935  
      Other assets     (2,349 )     1,869  
      Accounts payable     (38,391 )     9,878  
      Accrued expenses     (14,620 )     4,857  
      Non-current liabilities     1,187       2,382  
        Net cash provided by operating activities     135,263       97,624  
                 
Cash flows from investing activities:        
  Proceeds from sale of equipment     7,664       1,234  
  Purchases of property and equipment     (28,712 )     (69,261 )
  Proceeds from the disposition of discontinued operations     19,439       -  
  Cash used in acquisitions     (734 )     -  
        Net cash used in investing activities     (2,343 )     (68,027 )
                 
Cash flows from financing activities:        
  Purchase of treasury stock     (7,282 )     -  
  Proceeds from issuance of debt     18,335       58,161  
  Repayments of long term debt     (51,324 )     (84,051 )
  Stock tendered for payments of withholding taxes     (2,746 )     (4,017 )
  Finance lease payments     (1,465 )     (1,483 )
        Net cash used in financing activities     (44,482 )     (31,390 )
                 
                 
  Effect of exchange rate changes on cash and cash equivalents     (10 )     (11 )
                 
Net increase (decrease) in cash and cash equivalents     88,428       (1,804 )
Cash and cash equivalents beginning of period     61,435       28,557  
Cash and cash equivalents end of period   $ 149,863     $ 26,753  
                 

 

 
HUB GROUP, INC.
FINANCIAL INFORMATION BY BUSINESS LINE
(in thousands)
(unaudited)
                   
      Three Months   Six Months
      Ended June 30,   Ended June 30,
      2019   2018   2019   2018
Intermodal   $ 542,890   $ 538,123   $ 1,078,923   $ 1,032,575
Truck brokerage     107,081     114,936     224,669     234,955
Logistics     193,463     167,822     396,725     330,297
Dedicated     77,729     73,853     153,844     134,249
  Total Revenue   $ 921,163   $ 894,734   $ 1,854,161   $ 1,732,076
                   

 

 
HUB GROUP, INC.
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA
(in thousands)
(unaudited)
               
  Three Months
  Ended, June 30,
          Change   Change
  2019
  2018
  $     %
               
Net income from continuing operations $ 29,217     $ 17,154     $ 12,063     70.3 %
               
Interest expense   2,690       2,187       503     23.0 %
               
Interest and dividend income   (595 )     (14 )     (581 )   4150.0 %
               
Other income, net   30       182       (152 )   -83.5 %
               
Depreciation and amortization   28,646       19,414       9,232     47.6 %
               
Provision for income taxes   9,379       5,897       3,482     59.0 %
               
EBITDA $ 69,367     $ 44,820     $ 24,547     54.8 %
               

 

 
HUB GROUP, INC.
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA
(in thousands)
(unaudited)
               
  Six Months
  Ended, June 30,
          Change   Change
  2019
  2018
  $     %
               
Net income from continuing operations $ 53,111     $ 28,223     $ 24,888     88.2 %
               
Interest expense   5,746       4,291       1,455     33.9 %
               
Interest and dividend income   (968 )     (25 )     (943 )   3772.0 %
               
Other income, net   70       231       (161 )   -69.7 %
               
Depreciation and amortization   57,029       37,772       19,257     51.0 %
               
Provision for income taxes   18,351       9,221       9,130     99.0 %
               
EBITDA $ 133,339     $ 79,713     $ 53,626     67.3 %
               
CONTACT: Maralee Volchko of Hub Group, Inc., +1-630-271-3745

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