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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 March 31, 2000 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 May 10, 2000, the registrant had 7,046,050 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
Page
PART I. Financial Information:
Hub Group, Inc. - Registrant
Unaudited Condensed Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations - Three Months
Ended March 31, 2000 and 1999 4
Unaudited Condensed Consolidated Statement of Stockholders' Equity -
Three Months Ended March 31, 2000 5
Unaudited Condensed Consolidated Statements of Cash Flows - Three
Months Ended March 31, 2000 and 1999 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. Other Information 11
2
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ ------------
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10 $ 1,865
Accounts receivable, net 183,110 190,221
Prepaid expenses and other current assets 5,637 2,771
------------ ------------
TOTAL CURRENT ASSETS 188,757 194,857
PROPERTY AND EQUIPMENT, net 29,527 24,244
GOODWILL, net 218,213 219,648
DEFERRED TAXES 898 898
OTHER ASSETS 1,865 1,962
------------ ------------
TOTAL ASSETS $ 439,260 $ 441,609
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
Trade $ 150,884 $ 141,592
Other 8,163 11,246
Accrued expenses
Payroll 5,514 7,936
Other 6,184 6,384
Current portion of long-term debt 6,021 6,195
------------ ------------
TOTAL CURRENT LIABILITIES 176,766 173,353
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 125,116 131,414
DEFERRED TAXES 5,819 4,959
CONTINGENCIES AND COMMITMENTS
MINORITY INTEREST 721 759
STOCKHOLDERS' EQUITY:
Preferred stock - -
Common stock 77 77
Additional paid-in capital 110,817 110,786
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 35,402 35,719
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 130,838 131,124
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 439,260 $ 441,609
============ ============
</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
ENDED MARCH 31,
-------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue $ 328,568 $ 307,682
Transportation costs 289,103 268,513
------------ ------------
Net revenue 39,465 39,169
Costs and expenses:
Salaries and benefits 23,176 20,846
Selling, general and administrative 11,367 9,123
Depreciation and amortization of property and equipment 1,153 1,052
Amortization of goodwill 1,435 762
------------ ------------
Total costs and expenses 37,131 31,783
Operating income 2,334 7,386
------------ ------------
Other income (expense):
Interest expense (3,184) (522)
Interest income 172 302
Other, net 103 17
------------ ------------
Total other expense (2,909) (203)
Income (loss) before minority interest and provision for income taxes (575) 7,183
------------ ------------
Minority interest (38) 3,890
------------ ------------
Income (loss) before provision for income taxes (537) 3,293
Provision for (benefit from) income taxes (220) 1,350
------------ ------------
Net income (loss) $ (317) $ 1,943
============ ============
Basic earnings (loss) per common share $ (0.04) $ 0.25
============ ============
Diluted earnings (loss) per common share $ (0.04) $ 0.25
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2000
(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, 1999 7,706,246 $ 77 $ 110,786 $ (25,764) $ 10,306 $ 35,719 $ 131,124
Net loss - - - - - (317) (317)
Exercise of non-qualified
stock options 2,100 - 31 - - - 31
------------ ---------- ------------- --------------- -------------- ------------ ----------------
Balance at March 31, 2000 7,708,346 $ 77 $ 110,817 $ (25,764) $ 10,306 $ 35,402 $ 130,838
============ ========== ============= =============== ============== ============ ================
</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>
THREE MONTHS ENDED MARCH 31,
---------------------------------
2000 1999
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (317) $ 1,943
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 1,369 1,312
Amortization of goodwill 1,435 762
Deferred taxes 860 442
Minority interest (38) 3,890
Loss/(Gain) on sale of assets (28) 82
Changes in working capital, net of effects of purchase transactions:
Accounts receivable, net 7,111 (13,960)
Prepaid expenses and other current assets (2,866) 693
Accounts payable 6,209 8,803
Accrued expenses (2,622) (800)
Other assets 97 25
--------------- ---------------
Net cash provided by operating activities 11,210 3,192
--------------- ---------------
Cash flows from investing activities:
Purchases of property and equipment, net (6,624) (984)
--------------- ---------------
Net cash used in investing activities (6,624) (984)
--------------- ---------------
Cash flows from financing activities:
Proceeds from sale of common stock 31 -
Distributions to minority interest - (4,672)
Payments on long-term debt (6,472) (3,572)
Proceeds from issuance of long-term debt - 2,141
--------------- ---------------
Net cash used in financing activities (6,441) (6,103)
--------------- ---------------
Net decrease in cash and cash equivalents (1,855) (3,895)
Cash and cash equivalents, beginning of period 1,865 15,178
--------------- ---------------
Cash and cash equivalents, end of period $ 10 $ 11,283
=============== ===============
Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 3,351 $ 304
Income taxes 1,415 150
</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. EARNINGS (LOSS) PER SHARE
The following is a reconciliation of the Company's Earnings per Share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------------- ------------------------
(000'S) (000'S)
--------------- -------------
Per-Share Per-Share
LOSS SHARES AMOUNT INCOME SHARES AMOUNT
------ ------- ---------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) available to
common stockholders $(317) 7,706 $(0.04) $1,943 7,672 $0.25
------ ----- ------- ------ ----- -----
EFFECT OF DILUTIVE SECURITIES
Stock options - 34 - - 59 -
------ ----- ------- ------ ----- -----
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) available to
common stockholders
plus assumed exercises $(317) 7,740 $(0.04) $1,943 7,731 $0.25
------ ----- ------- ------ ----- -----
</TABLE>
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-----------------------------
2000 1999
-------------- -------------
(000'S)
<S> <C> <C>
Building and improvements $ 59 $ 56
Leasehold improvements 1,654 1,526
Computer equipment and software 28,608 23,795
Furniture and equipment 7,491 6,365
Transportation equipment and automobiles 4,367 4,742
-------------- -------------
42,179 36,484
Less: Accumulated depreciation and amortization (12,652) (12,240)
-------------- -------------
PROPERTY AND EQUIPMENT, net $ 29,527 $ 24,244
============== =============
</TABLE>
7
<PAGE>
HUB GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
REVENUE
Revenue for Hub Group, Inc. (the "Company") increased 6.8% to $328.6
million from $307.7 million in 1999. Intermodal revenue increased 3.4% over
1999. Management believes that the slower than historical growth in intermodal
is due in part to the termination of a significant customer contract in November
1999 and in part to the service disruption from the split-up of Conrail which
began on June 1, 1999. Truckload brokerage revenue increased 9.3% over 1999. The
Company experienced an unusually soft market in truckload brokerage. Logistics
revenue, which includes revenue from the Company's core logistics services and
all revenue from Hub Group Distribution Services ("Hub Distribution"), increased
27.1% compared to 1999. This increase is primarily due to the growth in the
Company's core logistic services.
NET REVENUE
Net revenue increased to $39.5 million from $39.2 million in 1999. As a
percentage of revenue, net revenue decreased to 12.0% of revenue from 12.7% in
1999. This decrease in percentage is primarily due to lower margins at Hub
Distribution and fuel surcharges absorbed by the Company prior to obtaining an
agreed upon pass through to customers. The decrease in Hub Distribution's margin
was primarily the result of a high margin project that was conducted in the
first quarter of 1999 which was not repeated in the first quarter of 2000.
SALARIES AND BENEFITS
Salaries and benefits increased 11.2% to $23.2 million from $20.8
million in 1999. As a percentage of revenue, salaries and benefits increased to
7.1% of revenue from 6.8% in 1999. The increase in the percentage is primarily
attributed to one-time charges of severance payments related to operational
changes at several operating units, increased headcount supporting the Company's
information technology initiatives and increased headcount in the field
supporting operational growth.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 24.6% to $11.4
million from $9.1 million in 1999. These expenses, as a percentage of revenue,
increased to 3.5% from 3.0% in 1999. The increase in percentage is primarily
attributed to expenditures related to outside services and advertising primarily
by Hub Distribution to support its e-business initiatives.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
Depreciation and amortization increased 9.6% to $1.2 million from $1.1
million in 1999. This expense as a percentage of revenue increased to 0.4% from
0.3% in 1999. The increase in depreciation is primarily attributed to internally
developed operating systems for the point of purchase installation and logistics
services offered by Hub Distribution.
8
<PAGE>
AMORTIZATION OF GOODWILL
Amortization of goodwill increased 88.3% to $1.4 million from $0.8
million in 1999. The expense as a percentage of revenue increased to 0.4% from
0.2%. The increase in expense is primarily attributable to the amortization of
the goodwill associated with the April 1999 purchase of the remaining 70%
minority interests in Hub City Alabama, L.P., Hub City Atlanta, L.P., Hub City
Boston, L.P., Hub City Canada, L.P., Hub City Cleveland, L.P., Hub City
Detroit, L.P., Hub City Florida, L.P., Hub City Indianapolis, L.P., Hub City
Kansas City, L.P., Hub City Mid-Atlantic, L.P., Hub City New York/New Jersey,
L.P., Hub City New York State, L.P., Hub City Ohio, L.P., Hub City
Philadelphia, L.P., Hub City Pittsburgh, L.P., Hub City Portland, L.P., and Hub
City St. Louis, L.P. (collectively referred to as the "April 1999 Purchase").
OTHER INCOME (EXPENSE)
Other income (expense) netted to $(2.9) million in 2000 compared to
$(0.2) million in 1999.
Interest expense increased to $3.2 million in 2000 from $0.5 million in
1999. The increase in interest expense is due primarily to the additional debt
required to fund the purchase of the remaining 70% minority interests in
connection with the April 1999 Purchase.
Interest income decreased to $0.2 million in 2000 from $0.3 million in
1999. The primary cause for this decrease is the Company's increased
concentration of its cash balances to reduce debt and minimize interest expense.
MINORITY INTEREST
Minority interest decreased 100.0% to $0.0 million from $3.9 million in
1999. The decrease in the percentage is primarily attributed to the purchase of
the remaining 70% minority interests in connection with the April 1999 Purchase.
The negative minority interest in 2000 is due to the loss incurred by Hub
Distribution due primarily to lower margins and costs incurred in the
development of their e-business initiative.
INCOME TAXES
The provision for income taxes decreased 116.3% to $(0.2) million from
$1.4 million in 1999. The Company is providing for income taxes at an effective
rate of 41% in 2000.
NET INCOME
Net income decreased 116.3% to $(0.3) million from $1.9 million in
1999. Net income is lower than the prior year due primarily to a loss of
profitability by Hub Distribution, the impact of fuel surcharges and as a result
of the items discussed above.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share decreased 116.0% to $(0.04) from $0.25 in
1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a bank facility with Harris Trust and Savings
Bank ("Harris"). The facility is comprised of $50.0 million in term debt and a
$50.0 million revolving line of credit. At March 31, 2000, there was $46.3
million of outstanding term debt and $29.0 million outstanding and $21.0 million
unused and available under the line of credit with Harris. Borrowings under the
line of credit are unsecured and have a five-year term, that began on April 30,
9
<PAGE>
1999, with a floating interest rate based upon the LIBOR (London Interbank
Offered Rate) or Prime Rate. The term debt has quarterly payments ranging from
$1,250,000 to $2,000,000 with a balloon payment of $19.0 million due on March
31, 2004.
The Company maintains $50.0 million of private placement debt (the
"Notes"). These Notes are unsecured and have an eight-year average life with a
coupon interest rate of 8.64% paid quarterly. These Notes mature on June 25,
2009, with annual payments of $10.0 million commencing on June 25, 2005.
The Company maintains a bank line of credit with Cass Bank and Trust
Company 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. The Company had no outstanding
advances on the line at March 31, 2000.
OUTLOOK, RISKS AND UNCERTAINTIES
This "Outlook, Risks and Uncertainties" section contains statements
regarding expectations, hopes, beliefs, intentions or strategies regarding the
future which 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. The Company assumes no
liability to update any such forward-looking statements. In addition to those
mentioned elsewhere in this section, such risks and uncertainties include the
impact of competitive pressures in the marketplace, including the entry of new,
web-based competitors, the degree and rate of market growth in the intermodal,
brokerage and logistics markets served by the Company, changes in rail and truck
capacity, further consolidation of rail carriers, rail service conditions,
changes in governmental regulation, adverse weather conditions, fuel shortages,
changes in the cost of services from rail, drayage and other vendors and
fluctuations in interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that cash, cash to be provided by operations, cash
available under its lines of credit and the Company's ability to obtain
additional credit capacity will be sufficient to meet the Company's short-term
working capital and capital expenditure needs. The Company believes that the
aforementioned items are sufficient to meet its anticipated long-term working
capital, capital expenditure and debt repayment needs.
10
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PART II. OTHER INFORMATION
None.
11
<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: May 10, 2000 /S/ JAY E. PARKER
-----------------
Jay E. Parker
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 186221
<ALLOWANCES> 3111
<INVENTORY> 0
<CURRENT-ASSETS> 188757
<PP&E> 42179
<DEPRECIATION> 12652
<TOTAL-ASSETS> 439260
<CURRENT-LIABILITIES> 176766
<BONDS> 0
0
0
<COMMON> 77
<OTHER-SE> 130761
<TOTAL-LIABILITY-AND-EQUITY> 439260
<SALES> 0
<TOTAL-REVENUES> 328568
<CGS> 0
<TOTAL-COSTS> 289103
<OTHER-EXPENSES> 37131
<LOSS-PROVISION> 114
<INTEREST-EXPENSE> 3184
<INCOME-PRETAX> (537)
<INCOME-TAX> (220)
<INCOME-CONTINUING> 2334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (317)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
