<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 0-27754
HUB GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-4007085
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
377 East Butterfield Road, Suite 700
Lombard, Illinois 60148
(Address, including zip code, of principal executive offices)
(630) 271-3600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
On August 11, 1997, the registrant had 5,264,250 outstanding shares of
Class A common stock, par value $.01 per share, and 662,296 outstanding shares
of Class B common stock, par value $.01 per share.
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<PAGE>
HUB GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. Financial Information:
Hub Group, Inc. - Registrant
Unaudited Condensed Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996 3
Unaudited Condensed Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1997 and 1996 4
Unaudited Condensed Consolidated Statement of Stockholders' Equity - Six
Months Ended June 30, 1997 5
Unaudited Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1997 and 1996 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Hub Partnerships - Predecessor
Unaudited Condensed Combined Statement of Operations for the Period
January 1, 1996 through March 17, 1996 14
Unaudited Condensed Combined Statement of Stockholders' Equity for the Period
January 1, 1996 through March 17, 1996 15
Unaudited Condensed Combined Statement of Cash Flows for the Period
January 1, 1996 through March 17, 1996 16
Notes to Unaudited Condensed Combined Financial Statements 17
PART II. Other Information 18
</TABLE>
2
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,338 $ 13,893
Accounts receivable, net 114,967 114,125
Prepaid expenses and other current assets 3,407 3,532
----------- -----------
TOTAL CURRENT ASSETS 144,712 131,550
PROPERTY AND EQUIPMENT, net 16,594 14,058
GOODWILL, net 43,288 42,255
DEFERRED TAXES 11,014 11,357
OTHER ASSETS 2,665 2,005
----------- -----------
TOTAL ASSETS $ 218,273 201,225
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
Trade $ 107,235 $ 94,884
Other 6,832 8,144
Accrued expenses
Payroll 5,923 4,988
Other 5,739 3,186
Deferred taxes 1,572 1,307
Current portion of long-term debt 18,391 3,164
----------- -----------
TOTAL CURRENT LIABILITIES 145,692 115,673
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 10,947 28,714
CONTINGENCIES AND COMMITMENTS
MINORITY INTEREST 11,302 10,714
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 59 59
Additional paid-in capital 55,096 55,083
Purchase price in excess of predecessor basis (25,764) (25,764)
Tax benefit of purchase price in excess of predecessor basis 10,306 10,306
Retained earnings 10,635 6,440
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 50,332 46,124
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 218,273 $ 201,225
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Trade $ 268,200 $ 209,236 $ 519,320 $ 254,574
Affiliates - - - 3,459
---------- --------- --------- ---------
Total revenue 268,200 209,236 519,320 258,033
TRANSPORTATION COSTS 235,740 184,112 456,646 227,524
---------- --------- --------- ---------
Net revenue 32,460 25,124 62,674 30,509
COSTS AND EXPENSES:
Salaries and benefits 16,044 12,514 31,297 15,101
Selling, general and administrative 6,996 4,947 13,080 5,945
Depreciation and amortization 1,028 820 1,989 865
---------- --------- --------- ---------
Total costs and expenses 24,068 18,281 46,366 21,911
Operating income 8,392 6,843 16,308 8,598
---------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (523) (302) (1,142) (339)
Interest income 298 274 561 305
Other, net 26 (46) 56 (38)
---------- --------- --------- ---------
Total other income (expense) (199) (74) (525) (72)
INCOME BEFORE MINORITY INTEREST AND
PROVISION FOR INCOME TAXES 8,193 6,769 15,783 8,526
---------- --------- --------- ---------
MINORITY INTEREST 4,498 3,999 8,792 4,686
---------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,695 2,770 6,991 3,840
PROVISION FOR INCOME TAXES 1,478 1,108 2,796 1,295
---------- --------- --------- ---------
NET INCOME $ 2,217 $ 1,662 $ 4,195 $ 2,545
========== ========= ========= =========
PRO FORMA PROVISION FOR ADDITIONAL INCOME TAXES - - - 241
----------- --------- --------- ---------
PRO FORMA NET INCOME $ 2,217 $ 1,662 $ 4,195 $ 2,304
========== ========= ========= =========
PRO FORMA EARNINGS PER SHARE $ 0.37 $ 0.28 $ $0.70 $ 0.56
========== ========= ========= =========
PRO FORMA WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND SHARE EQUIVALENTS OUTSTANDING 6,032 5,997 6,030 4,115
========== ========= ========= =========
See notes to unaudited condensed consolidated financial statements.
</TABLE>
4
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 1997
(in thousands, except shares)
<TABLE>
<CAPTION>
Tax Benefit
Purchase of Purchase
Price in Price
Common Stock Additional Excess of In Excess of Total
------------ Paid-in Predecessor Predecessor Retained Stockholders'
Shares Amount Capital Basis Basis Earnings Equity
---------- --------- ----------- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 5,923,546 $ 59 $ 55,083 $ (25,764) $ 10,306 $ 6,440 $ 46,124
Net income - - - - - 4,195 4,195
Sale of common stock in
initial public offering, net - - (45) - - - (45)
Exercise of non-qualified
stock options 3,000 - 58 - - - 58
---------- -------- --------- ---------- ----------- ------- -----------
Balance at June 30, 1997 5,926,546 $ 59 $ 55,096 $ (25,764) $ 10,306 $10,635 $ 50,332
========== ======== ========= ========== =========== ======= ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,195 $ 2,545
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,517 865
Deferred taxes 608 180
Minority interest 8,792 4,686
Loss/(Gain) on sale of assets (9) (1)
Changes in working capital, net of effects of purchase transactions:
Accounts receivable, net (842) (10,957)
Prepaid expenses and other current assets 125 160
Accounts payable 11,039 6,784
Accrued expenses 3,488 2,227
Other assets (660) 9
------------- -------------
Net cash provided by operations 29,253 6,498
------------- -------------
Cash flows from investing activities:
Cash used in acquisitions, net - (37,544)
Purchase of minority interest (1,575) -
Purchases of property and equipment, net (4,502) (1,283)
------------- -------------
Net cash used in investing activities (6,077) (38,827)
------------- -------------
Cash flows from financing activities:
Proceeds from sale of common stock in initial public offering, net (45) 52,981
Proceeds from sale of common stock 58 -
Distributions to stockholders - (1,767)
Distributions to minority interest (8,204) (400)
Payments on long-term debt (5,981) (662)
Proceeds from issuance of long-term debt 3,441 752
------------- -------------
Net cash provided by (used in) financing activities (10,731) 50,904
------------- -------------
Net increase in cash 12,445 18,575
Cash, beginning of period 13,893 2
------------- -------------
Cash, end of period $ 26,338 $ 18,577
============= =============
Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 157 $ 39
Income taxes 464 278
Non-cash investing and financing activities:
Notes payable issued as distributions to stockholders $ - $ 663
</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
<PAGE>
HUB GROUP, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements of
Hub Group, Inc. (the "Company") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual financial statements have been
condensed or omitted pursuant to those rules and regulations. However, the
Company believes that the disclosures contained herein are adequate to make the
information presented not misleading.
The financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to present fairly the Company's financial position and results of operations.
NOTE 2. Business Combinations
On March 18, 1996, the Company acquired a controlling interest in each of
27 operating partnerships (collectively referred to as "Hub Partnerships") for a
total purchase price of approximately $43,309,000 in cash. The purchase price of
these acquisitions was allocated to the assets acquired and liabilities assumed
based on the fair value at the date of acquisition using the purchase method of
accounting.
The portion of the difference between fair value and historical cost of
individual assets acquired and liabilities assumed attributable to interests
acquired by the Company from non-control group stockholders was recorded at fair
market value. This resulted in goodwill of approximately $17,207,000. The
remaining portion of the difference between fair value and historical cost
attributable to interests acquired from control group stockholders,
approximately $25,764,000, has been charged to equity as purchase price in
excess of predecessor basis.
In connection with the purchase of the controlling interest in Hub
Partnerships, approximately $10,306,000 has been recorded as a deferred tax
benefit utilizing an assumed effective tax rate of 40% representing the tax
effect of the purchase price in excess of predecessor basis, with the
corresponding credit recorded as an increase to equity.
On May 2, 1996, the Company purchased the rights to service the customers
of American President Lines Domestic Distribution Services, a division of APL
Land Transport Services, Inc., for approximately $8,000,000. The $8,000,000 was
financed with $2,000,000 in cash and $6,000,000 in notes. The notes bear
interest at an annual rate of 6% with three equal annual principal payments due
beginning May 2, 1997. The acquisition was recorded using the purchase method of
accounting resulting in goodwill of approximately $8,090,000.
Results of operations from acquisitions recorded under the purchase method
of accounting are included in the Company's financial statements from their
respective dates of acquisition.
7
<PAGE>
The following summarizes the effects of businesses acquired and accounted
for as purchases in 1996 as if they had been acquired as of January 1, 1996:
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1996
-------------
(000's)
<S> <C>
Revenue as reported $ 258,033
Revenue of purchased business for
period prior to acquisitions,
net of eliminations 184,660
------------
Pro forma revenue $ 442,693
------------
Net income as reported $ 2,304
Net income of purchased businesses for 82
period prior to acquisitions
Adjustment for goodwill amortization (158)
------------
Pro forma net income $ 2,228
------------
Earnings per share as reported $ 0.56
Effect of purchased businesses prior to
acquisitions (0.17)
------------
Pro forma earnings per share $ 0.39
------------
</TABLE>
Business acquisitions which involved the use of cash were accounted for as
follows:
Six Months
Ended June 30,
1996
--------------
(000's)
Accounts receivable $ 75,576
Prepaid expenses and other current assets 1,585
Property and equipment 9,309
Goodwill 25,515
Deferred tax benefit, net 10,306
Other assets 701
Accounts payable (74,693)
Accrued expenses (5,190)
Long-term debt (20,921)
Minority interest (102)
Purchase price in excess of predecessor basis 25,764
Tax benefit of purchase price in excess of
predecessor basis (10,306)
--------------
Cash used in acquisitions, net $ 37,544
--------------
NOTE 3. Purchase Of Minority Interest
On March 1, 1997, the Company purchased an approximate 44% minority
interest in Hub Group Distribution Services for approximately $1,500,000 in
cash.
8
<PAGE>
NOTE 4. Property And Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
(000's)
<S> <C> <C>
Land $ 92 $ 92
Building and improvements 859 841
Leasehold improvements 942 629
Computer equipment and software 9,457 7,258
Furniture and equipment 3,895 3,419
Transportation equipment and automobiles 5,762 4,541
-------- ---------
21,007 16,780
Less: Accumulated depreciation and amortization (4,413) (2,722)
-------- --------
PROPERTY AND EQUIPMENT, net $16,594 $14,058
======== ========
</TABLE>
NOTE 5. Statement of Financial Accounting Standards (SFAS) No. 128
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 - Earnings per Share. This statement's objective is to simplify the
computation of earnings per share (EPS) to make the U.S. standard for computing
EPS more compatible with the EPS standards of other countries and with that of
the International Accounting Standards Committee. This statement is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted.
The Company does not expect the future adoption of this standard to have a
material impact, if any, on its financial statements.
9
<PAGE>
HUB GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997, Compared to Three Months Ended June 30, 1996
Revenue
Revenue totaled $268.2 million for the three months ended June 30, 1997,
representing an increase of 28.2% over the comparable period in 1996. Logistics
revenue increased 56.9% to $21.5 million for the three months ended June 30,
1997, from $13.7 in the comparable period in 1996. Hub Group, Inc. and its
subsidiaries (the "Company") defines its logistics revenue as the revenue
generated by Hub Group Logistics, a division of Hub Group, Inc., and Hub Group
Distribution Services, a 65% owned subsidiary of Hub Group, Inc. Together, these
two entities offer third-party and specialized logistic services. Brokerage
revenue, not including any brokerage activity conducted as part of logistics,
increased 51.7% to $32.0 million for the three months ended June 30, 1997, from
$21.1 million in the comparable period in 1996. Intermodal revenue, not
including any intermodal activity conducted as part of logistics, increased
23.0% to $214.7 million for the three months ended June 30, 1997, from $174.5
million in the comparable period in 1996. Excluding the intermodal revenue
relating to American President Lines Domestic Distribution Services (APLDDS),
intermodal revenue increased 17.6% in the three months ended June 30, 1997, over
the comparable period in 1996.
Net Revenue
Net revenue as a percentage of revenue increased slightly to 12.1% for the
three months ended June 30, 1997, compared to 12.0% in the same period in 1996.
Salaries and Benefits
Salaries and benefits increased to $16.0 million in the three months ended
June 30, 1997, from $12.5 million in the same period in 1996. Salaries and
benefits as a percentage of revenue remained constant at 6.0% of revenue when
comparing the three months ended June 30, 1997, to the comparable period in
1996.
Selling, General and Administrative
Selling, general and administrative expenses increased to $7.0 million in
the three months ended June 30, 1997, from $5.0 million in the same period in
1996. Selling, general and administrative expenses as a percentage of revenue
increased to 2.6% in the three months ended June 30, 1997, from 2.4% in the same
period in 1996. The increase in the percentage is principally attributed to
increased spending for technology, to enhance existing programs, conduct studies
for new uses of technology and launch a new web site.
Depreciation and Amortization
Depreciation and amortization expense increased to $1.0 million in the
three months ended June 30 1997, from $0.8 million in the comparable period in
1996. Depreciation and amortization as a percentage of revenue remained
constant at 0.4% in the three months ended June 30, 1997, compared to the same
period in 1996.
Other Income (Expense)
Other expense increased to $0.2 million for the three months ended June 30,
1997, from $0.1 million in the comparable period in 1996. The increase is
primarily attributed to an increase in interest expense due to the purchase of
the remaining 70% interest in Hub City North Central, L.P. in exchange for a
note for approximately $15.0 million in December 1996.
10
<PAGE>
Minority Interest
Minority interest increased to $4.5 million in the three months ended June
30, 1997, from $4.0 million in the comparable period in 1996. Minority interest
as a percentage of income before minority interest decreased to 54.9% in the
three months ended June 30, 1997, from 59.1% in the same period in 1996.
Acquisitions of the remaining 70% minority interest in Hub City Tennessee, L.P.
and Hub City North Central, L.P. in August and December, 1996, respectively, and
the purchase of an additional 44% interest in Hub Group Distribution Services in
March, 1997, had the effect of lowering minority interest as a percentage of
income before minority interest when comparing the three months ended June 30,
1996, to the three months ended June 30, 1997.
Income Taxes
Income taxes were $1.5 million in the three months ended June 30, 1997 and
$1.1 million in the same period in 1996. The Company is providing for income
taxes at an effective rate of 40% for all income subsequent to March 17, 1996.
Net Income
Net income increased to $2.2 million in the three months ended June 30,
1997, from $1.7 million in the same period in 1996.
Earnings Per Share
Earnings per share increased to $0.37 in the three months ended June 30,
1997, from $0.28 in the same period in 1996.
Six Months Ended June 30, 1997, Compared to Six Months Ended June 30, 1996
Revenue
Revenue totaled $519.3 million for the six months ended June 30, 1997,
representing an increase of 101.3% over the comparable period in 1996. Revenue
increased 17.3% for the six months ended June 30, 1997, over pro forma revenue
for the comparable period in 1996. The 1996 pro forma revenue was impacted
significantly by the addition of the revenue reported by American President
Lines Domestic Distribution Services (APLDDS), a division of APL Land Transport
Services, Inc. The business acquired from APLDDS on May 2, 1996, had been
experiencing significant decline during 1995 and the first quarter of 1996. This
decline had a negative influence on the pro forma revenue growth rate. Despite
the declining trend, management believes the Company has successfully
transitioned and retained greater than 90% of the APLDDS business that existed
on May 2, 1996.
Excluding the revenue relating to APLDDS prior to the acquisition on May 2,
1996, Hub City Terminals, Inc. ("Hub Chicago") and the Company's 27 operating
partnerships (collectively referred to as "Hub Partnerships"), on a combined
basis assuming Hub Chicago had acquired Hub Partnerships on January 1, 1996,
experienced a revenue increase of 30.8% in the six months ended June 30, 1997,
over the comparable period in 1996. This percentage increase is the result of
strong growth in truckload brokerage, logistics and intermodal service
offerings.
Net Revenue
Net revenue as a percentage of revenue increased to 12.1% for the six
months ended June 30, 1997, compared to 11.8% in the same period in 1996. This
increase is primarily a reflection of the higher net revenue as a percentage of
revenue that is experienced by Hub Partnerships as compared to Hub Chicago due
to Hub Chicago's larger proportion of high volume/low margin accounts.
11
<PAGE>
Salaries and Benefits
Salaries and benefits increased to $31.3 million in the six months ended
June 30, 1997, from $15.1 million in the same period in 1996. Salaries and
benefits as a percentage of revenue increased to 6.0% in the six months ended
June 30, 1997, from 5.9% in the same period in 1996. Some administrative
services for Hub Chicago were performed by Hub Partnerships for a fee. This fee
was reflected in selling, general and administrative expenses prior to March 18,
1996. After the acquisition of Hub Partnerships by Hub Chicago, this fee is
eliminated in consolidation and the costs of the aforementioned administrative
services are reported as salaries and benefits. This causes salaries and
benefits as a percentage of revenue to increase over the prior year.
Selling, General and Administrative
Selling, general and administrative expenses increased to $13.1 million in
the six months ended June 30, 1997, from $5.9 million in the same period in
1996. Selling, general and administrative expenses as a percentage of revenue
increased to 2.5% in the six months ended June 30, 1997, from 2.3% in the same
period in 1996. Despite the elimination in consolidation of the fees between Hub
Chicago and Hub Partnerships in 1997, Hub Chicago provided greater leverage on
its selling, general and administrative expenses than did the Company as a
whole. The increase in the percentage is also attributed to increased spending
for technology in 1997, to enhance existing programs, conduct studies for new
uses of technology and launch a new web site.
Depreciation and Amortization
Depreciation and amortization expense increased to $2.0 million in the
six months ended June 30, 1997, from $0.9 million in the same period in 1996.
Depreciation and amortization as a percentage of revenue increased to 0.4% in
the six months ended June 30, 1997, from 0.3% in the same period in 1996. The
percentage increase is attributable to the amortization of goodwill that was
recorded in connection with the purchase of Hub Partnerships and APLDDS, as well
as the purchase of additional minority interest in Hub City Tennessee, L.P., Hub
City North Central, L.P., and Hub Group Distribution Services..
Other Income (Expense)
Other expense increased to $0.5 million in the six months ended June 30,
1997, from $0.1 million in the same period in 1996. This increase is attributed
to an increase in interest expense relating to the issuance of an approximately
$15.0 million note payable, bearing interest at an annual rate of 7%, issued in
connection with the purchase of the remaining 70% minority interest in Hub City
North Central, L.P. in December 1996.
Minority Interest
Minority interest increased to $8.8 million in the six months ended June
30, 1997, from $ $4.7 million in the same period in 1996. Minority interest as a
percentage of income before minority interest increased to 55.7% in the six
months ended June 30, 1997, from 55.0% in the same period in 1996. The lower
percentage in 1996 was primarily the result of only having the revenue and
expense of Hub Chicago, which is wholly owned by Hub Group, Inc., in the period
prior to March 18, 1996.
Income Taxes
Income taxes increased to $2.8 million in the six months ended June 30,
1997, from $1.3 million in the same period in 1996. Other than an insignificant
provision for Illinois replacement tax, the Company had no provision for income
taxes prior to March 18, 1996, as the Company was a federally non-taxable
subchapter S corporation. The Company is providing for income taxes at an
effective rate of 40% for all income subsequent to March 17, 1996.
12
<PAGE>
Pro Forma Provision For Additional Income Taxes
Additional pro forma income taxes were zero in the six months ended June
30, 1997, and $0.2 million in the same period in 1996. Additional pro forma
provision for income taxes are shown to provide an assumed effective federal and
state income tax rate of 40% of income before taxes for periods prior to March
18, 1996.
Pro Forma Net Income
Pro forma net income (pro forma only to provide for income taxes) increased
to $4.2 million in the six months ended June 30, 1997, from $2.3 million in the
same period in 1996.
Pro Forma Earnings Per Share
Pro forma earnings per share (pro forma only to provide for income taxes)
increased to $0.70 in the six months ended June 30, 1997, from $0.56 in the same
period in 1996.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 128
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 - Earnings per Share. This statement's objective is to simplify the
computation of earnings per share (EPS) to make the U.S. standard for computing
EPS more compatible with the EPS standards of other countries and with that of
the International Accounting Standards Committee. This statement is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted.
The Company does not expect the future adoption of this standard to have a
material impact, if any, on its financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a bank line of credit for $5.0 million. The interest
rate is set at the bank's discretion at a rate less than or equal to the bank's
prime rate. At June 30, 1997, the rate was 7.75%. As of June 30, 1997, the
unused and available portion of this credit line was $5.0 million. Although
there are no assurances, management believes it can obtain an additional line of
credit, if necessary.
13
<PAGE>
HUB PARTNERSHIPS
UNAUDITED CONDENSED COMBINED STATEMENT OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
January 1,
through
March 17, 1996
--------------
<S> <C>
REVENUE:
Trade $ 142,413
Affiliate 3,992
-------------
Total revenue 146,405
PURCHASED TRANSPORTATION 128,405
-------------
Net revenue 18,000
COSTS AND EXPENSES:
Salaries and benefits 9,807
Selling, general and administrative 3,393
Depreciation and amortization 553
-------------
Total costs and expenses 13,753
Operating income 4,247
-------------
OTHER INCOME (EXPENSE):
Interest expense (56)
Interest income 120
Other, net 95
--------------
Total other income 159
INCOME BEFORE INCOME TAXES 4,406
INCOME TAXES 126
-------------
NET INCOME $ 4,280
=============
</TABLE>
See notes to unaudited condensed combined financial statements.
14
<PAGE>
HUB PARTNERSHIPS
UNAUDITED CONDENSED COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
For the period January 1, 1996 through March 17, 1996
(in thousands, except shares)
<TABLE>
<CAPTION>
Common Stock Additional Total
---------------------- Paid-in Treasury Retained Stockholders'
Shares Amount Capital Stock Earnings Equity
---------- ---------- ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 105,800 $ 1,943 $ 629 $ (32) $ 9,197 $ 11,737
Net income - - - - 4,280 4,280
Distributions to stockholders - (1,730) (629) 32 (13,477) (15,804)
---------- -------- ------- ------ -------- ------------
Balance at March 17, 1996 105,800 $ 213 $ - $ - $ - $ 213
========== ======== ======= ====== ======== ============
</TABLE>
See notes to unaudited condensed combined financial statements.
15
<PAGE>
HUB PARTNERSHIPS
UNAUDITED CONDENSED COMBINED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
January 1,
through
March 17, 1996
--------------
<S> <C>
Cash flows from operating activities:
Net income $ 4,280
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 553
Loss (gain) on sale of assets 3
Changes in working capital:
Accounts receivable, net 604
Prepaid expenses and other current assets 889
Accounts payable 4,783
Accrued expenses (140)
Other assets (407)
-------------
Net cash provided by operations 10,565
-------------
Cash flows from investing activities:
Purchases of property and equipment, net (775)
-------------
Cash flows from financing activities:
Distributions to stockholders (13,014)
Payments on long-term debt (361)
Proceeds from issuance of long-term debt 418
-------------
Net cash used in financing activities (12,957)
-------------
Net decrease in cash (3,167)
Cash, beginning of period 10,949
-------------
Cash, end of period $ 7,782
=============
Supplemental disclosures of cash flow information:
Cash paid for:
Interest 56
Income taxes 130
Non-cash financing activity:
Notes payable issued as distributions to stockholders $ 13,176
</TABLE>
See notes to unaudited condensed combined financial statements.
16
<PAGE>
HUB PARTNERSHIPS
NOTES TO UNAUDITED CONDENSED COMBINED
FINANCIAL STATEMENTS
NOTE 1. Interim Financial Statements
The accompanying unaudited condensed combined financial statements of 26
Subchapter S corporations and the Hub Group Distribution Services partnership
(collectively referred to as "Hub Partnerships" or the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to those rules and regulations. However, the Company believes that the
disclosures contained herein are adequate to make the information presented not
misleading.
The financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to present fairly the Company's financial position and results of operations.
NOTE 2. Basis of Financial Statement Presentation
The unaudited condensed combined financial statements of Hub Partnerships
are presented herein to reflect the financial condition and results of
operations of the Hub Partnerships for the period in which Hub Partnerships was
the predecessor to the business acquired by Hub Group, Inc. on March 18, 1996,
as necessary to disclose the financial statements of the business acquired by
Hub Group, Inc. pursuant to the rules and regulations of the Securities and
Exchange Commission.
NOTE 3. Special Distribution
Immediately prior to March 18, 1996, the Company distributed
substantially all of its equity, including retained earnings through March 17,
1996, to its shareholders in the form of cash and notes. The notes are five-
year balloon notes bearing interest at an annual rate of 5.45%. Interest is
compounded annually with all principal and interest due in March of 2001.
17
<PAGE>
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The 1997 Annual Meeting of Stockholders of Hub Group, Inc. was held on May 14,
1997. At this meeting, the following six directors were reelected with the
following votes: Phillip C. Yeager: 17,870,967 votes for and 6,800 votes
withheld; David P. Yeager: 17,870,967 votes for and 6,800 votes withheld; Thomas
L. Hardin: 17,810,967 votes for and 66,800 votes withheld; Gary D. Eppen:
17,870,967 votes for and 6,800 votes withheld; Charles R. Reaves: 17,870,967
votes for and 6,800 votes withheld; Martin P. Slark: 17,870,967 votes for and
6,800 votes withheld.
18
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly authorized this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUB GROUP, INC.
DATE: August 11, 1997 /s/ William L. Crowder
----------------------
William L. Crowder
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Unaudited Condensed Consolidated Statements of Operations and Unaudited
Condensed Consolidated Balance Sheets and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 26338
<SECURITIES> 0
<RECEIVABLES> 116265
<ALLOWANCES> 1298
<INVENTORY> 0
<CURRENT-ASSETS> 144712
<PP&E> 16780
<DEPRECIATION> 2722
<TOTAL-ASSETS> 218273
<CURRENT-LIABILITIES> 145692
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 50273
<TOTAL-LIABILITY-AND-EQUITY> 218273
<SALES> 0
<TOTAL-REVENUES> 268200
<CGS> 0
<TOTAL-COSTS> 235740
<OTHER-EXPENSES> 24068
<LOSS-PROVISION> 216
<INTEREST-EXPENSE> 523
<INCOME-PRETAX> 3695
<INCOME-TAX> 1478
<INCOME-CONTINUING> 8392
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2217
<EPS-PRIMARY> .37
<EPS-DILUTED> 0
</TABLE>
