OAK BROOK, Jul 30, 2020 (GLOBE NEWSWIRE via COMTEX) -- Highlights:
-- Improving freight volumes as the quarter progressed, coupled with revenue enhancement and profit improvement initiatives, as well as strong cost performance, resulted in net income of $13.2 million or $0.39 of diluted earnings per share in the quarter; EBITDA (non-GAAP) for the quarter was $52 million; net income includes $7.0 million, or $0.21 per share, of donation, consulting and severance expenses
-- Resilient operating model resulted in Net Cash provided by Operating Activities of $71 million for the quarter, with solid liquidity at quarter end including $203 million in cash and cash equivalents after repayment of $100 million on revolving credit facility
-- Increased planned 2020 container purchases to 3,500 and recently ordered over 200 tractors to support growth in the business and refresh our fleet
-- Continued to provide world-class service levels and innovative solutions to our customers; Hub was recognized by Inbound Logistics as the #2 3PL Provider for 2020
-- Donated nearly $6 million of Hub equipment to support COVID-19 emergency responders
Hub Group, Inc. /zigman2/quotes/203754808/composite HUBG +1.89% announced second quarter 2020 net income of $13.2 million, or diluted earnings per share of $0.39. Included in net income was $7.0 million, or $0.21 per share, of donation expense ($4.2 million), consulting expense ($1.9 million) and severance expense ($0.9 million). Net income for second quarter 2019 was $29.2 million, or $0.87 per diluted share.
Update on Recent Performance
"Business conditions at the beginning of the second quarter were quite challenging, with a portion of our customer base either completely closed or significantly impacted by the COVID-19 pandemic. We were pleased to see business conditions improve throughout the quarter, with nearly all of our customers resuming their shipping activity by the end of the quarter. We anticipate continued growth in our business during the second half of 2020 and have decided to add 3,500 containers as well as purchase over 200 tractors this year to refresh our fleet and reduce our operating costs. We have continued to maintain our focus on providing a world-class customer experience while protecting the health and safety of our employees. We are honored to have received several recent industry awards, including the #2 ranking on Inbound Logistics' Top 10 3PL list for 2020. This is a testament to our team's success in delivering the industry's premiere customer-centric supply chain solutions to the marketplace," said Dave Yeager, Hub Group's Chairman and Chief Executive Officer.
"Our operating model and focus on cost control resulted in EBITDA (non-GAAP) of $52 million for the quarter. We continue to execute on our profit improvement initiatives, and we remain on track to realize $40 million of annualized savings in 2020. Finally, as we discussed last quarter, we are proud to have been able to support COVID-19 emergency responders by donating nearly $6 million of equipment during the quarter," continued Mr. Yeager.
Q2 2020 Results
Revenue for the second quarter of 2020 decreased by 15% to $779 million compared with $921 million for second quarter 2019. Operating income for the quarter was $21 million versus $41 million for second quarter 2019. Second quarter 2020 operating income included $9.6 million of expenses for donations, consulting and severance.
Second quarter intermodal revenue decreased 15% to $461 million due primarily to an 8% decline in volume. Volume was down compared to the prior year due to a soft demand environment and increased truckload and intermodal competition. Intermodal gross margin decreased compared to the prior year primarily due to the decline in volume, lower prices, unfavorable mix and rail cost increases, partially offset by the benefits from operational improvements in our trucking operation.
Second quarter logistics gross margin as a percentage of revenue expanded by 190 basis points due to our continuous improvement initiatives, higher margin new business, and growth at CaseStack. Revenue for the quarter declined 15% to $164 million as a result of the soft demand environment, partially offset by growth at CaseStack.
Truck brokerage handled 12% fewer loads in the quarter as compared to the prior year, while revenue declined 19% to $87 million. Contractual revenue represented 76% of total brokerage revenue in both second quarter 2020 and 2019. Truck brokerage gross margin as a percent of revenue increased by 100 basis points as a result of the benefits from the transformation of our operating model, an enhanced technology platform and a deeper engagement with our carrier network.
Dedicated revenue decreased 12% to $68 million compared to the prior year due to the impact of business we exited, partially offset by growth with new accounts. Dedicated gross margin as a percent of revenue increased by 200 basis points compared to the prior year due to our profit improvement initiatives.
Costs and expenses decreased to $86 million in the second quarter of 2020 compared to $92 million in the prior year due primarily to a decline in Salaries and Benefits expense, partially offset by an increase in donation expense, consulting expense, and depreciation and amortization expense related to our technology initiatives. Costs and expenses included $5.7 million related to donations of Hub equipment in support of COVID-19 emergency efforts, $2.6 million of consulting expense and $1.3 million of severance expense. The consulting engagement is now complete.
Cash Flow and Capitalization
Net cash provided by operating activities was $71 million for the quarter. Capital expenditures for the second quarter of 2020 totaled $24 million, primarily for containers, technology investments and construction of our new office building on our Oak Brook, IL campus which has now been paused. Near the end of the quarter we repaid the $100 million that we borrowed on our revolving line of credit in March 2020. At June 30, 2020, we had cash and cash equivalents of $203 million.
2020 Capital Expenditure Outlook
Capital expenditures for the remainder of fiscal year 2020 are expected to range from $65 million to $75 million, and primarily consist of investments to support growth in the business, including containers, tractors and trailers, as well as IT hardware and software. We expect to add 3,500 containers in 2020, and take delivery of over 200 tractors to refresh our fleet, which is expected to result in lower operating costs and improved utilization.