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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 September 30, 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 November 13, 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 - September 30, 2000 and
December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations - Three Months
and Nine Months Ended September 30, 2000 and 1999 4
Unaudited Condensed Consolidated Statement of Stockholders' Equity - Nine
Months Ended September 30, 2000 5
Unaudited Condensed Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 2000 and 1999 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. Other Information 14
2
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
-------------- --------------
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 1,865
Accounts receivable, net 193,754 190,221
Deferred taxes 1,081 898
Prepaid expenses and other current assets 5,297 2,771
-------------- --------------
TOTAL CURRENT ASSETS 200,132 195,755
PROPERTY AND EQUIPMENT, net 39,792 24,244
GOODWILL, net 215,343 219,648
OTHER ASSETS 1,944 1,962
-------------- --------------
TOTAL ASSETS $ 457,211 $ 441,609
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
Trade $ 166,500 $ 141,592
Other 8,900 11,246
Accrued expenses
Payroll 10,623 7,936
Other 7,454 6,384
Current portion of long-term debt 11,906 6,195
-------------- --------------
TOTAL CURRENT LIABILITIES 205,383 173,353
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 109,097 131,414
DEFERRED TAXES 7,606 4,959
CONTINGENCIES AND COMMITMENTS
MINORITY INTEREST 425 759
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 39,264 35,719
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 134,700 131,124
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 457,211 $ 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 Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------------
2000 1999 2000 1999
---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue $ 354,797 $ 333,337 $ 1,027,694 $ 960,467
Transportation costs 310,574 291,844 899,423 840,760
---------- ---------- ------------- ------------
Net revenue 44,223 41,493 128,271 119,707
Costs and expenses:
Salaries and benefits 24,648 21,014 71,972 62,413
Selling, general and administrative 11,698 9,492 34,129 27,972
Depreciation and amortization of property and equipment 1,508 975 3,908 2,994
Amortization of goodwill 1,435 1,434 4,305 3,632
Change in estimate/impairment of property and equipment - - - 884
---------- ---------- ------------- ------------
Total costs and expenses 39,289 32,915 114,314 97,895
Operating income 4,934 8,578 13,957 21,812
---------- ---------- ------------- ------------
Other income (expense):
Interest expense (2,558) (3,071) (8,566) (5,647)
Interest income 228 191 568 706
Other, net 47 131 170 1,113
---------- ---------- ------------- ------------
Total other expense (2,283) (2,749) (7,828) (3,828)
Income before minority interest and provision for income taxes 2,651 5,829 6,129 17,984
---------- ---------- ------------- ------------
Minority interest - 407 120 4,798
---------- ---------- ------------- ------------
Income before provision for income taxes 2,651 5,422 6,009 13,186
Provision for income taxes 1,087 2,223 2,464 5,406
---------- ---------- ------------- ------------
Net income $ 1,564 $ 3,199 $ 3,545 $ 7,780
========== ========== ============= ============
Basic earnings per common share $ 0.20 $ 0.42 $ 0.46 $ 1.01
========== ========== ============= ============
Diluted earnings per common share $ 0.20 $ 0.41 $ 0.46 $ 1.00
========== ========== ============= ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine months ended September 30, 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 income - - - - - 3,545 3,545
Exercise of non-qualified
stock options 2,100 - 31 - - - 31
----------- --------- ------------ ------------ ------------- ----------- --------------
Balance at September 30, 2000 7,708,346 $ 77 $ 110,817 $ (25,764) $ 10,306 $ 39,264 $ 134,700
=========== ========= ============ ============ ============= =========== ==============
</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>
Nine Months Ended September 30,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,545 $ 7,780
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 4,505 3,753
Amortization of goodwill 4,305 3,632
Change in estimate/impairment of property and equipment - 884
Deferred taxes 2,464 2,479
Minority interest 120 4,798
Loss/(Gain) on sale of assets (3) 140
Changes in working capital, net of effects of purchase transactions:
Accounts receivable, net (3,533) (35,630)
Prepaid expenses and other current assets (2,526) 1,306
Accounts payable 22,562 26,167
Accrued expenses 3,757 2,795
Other assets 18 (1,510)
-------------- --------------
Net cash provided by operating activities 35,214 16,594
-------------- --------------
Cash flows from investing activities:
Purchases of minority interest - (108,710)
Purchases of property and equipment, net (20,050) (6,791)
-------------- --------------
Net cash used in investing activities (20,050) (115,501)
-------------- --------------
Cash flows from financing activities:
Proceeds from sale of common stock 31 605
Distributions to minority interest (454) (10,098)
Payments on long-term debt (16,633) (49,447)
Proceeds from issuance of long-term debt 27 150,639
-------------- --------------
Net cash provided by/(used in) financing activities (17,029) 91,699
-------------- --------------
Net decrease in cash and cash equivalents (1,865) (7,208)
Cash and cash equivalents, beginning of period 1,865 15,178
-------------- --------------
Cash and cash equivalents, end of period $ - $ 7,970
============== ==============
Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 9,377 $ 4,256
Income taxes 1,520 1,624
</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 ("SEC"). 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.
These condensed consolidated financial statements and notes thereto should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. Results of operations in interim periods are not ncecssarily
indicative of results to be expected for a full year.
NOTE 2. Earnings per Share
The following is a reconciliation of the Company's Earnings per Share:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 2000 September 30, 1999
--------------------------- --------------------------
(000's) (000's)
---------------- ----------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings per Share
Income available to
common stockholders $1,564 7,708 $0.20 $3,199 7,704 $0.42
------- -------- --------- ------- -------- ---------
Effect of Dilutive Securities
Stock options - - - - 82 -
------- -------- --------- ------- -------- ---------
Diluted Earnings per Share
Income available to
common stockholders
plus assumed exercises $1,564 7,708 $0.20 $3,199 7,786 $0.41
------- -------- --------- ------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 2000 September 30, 1999
--------------------------- ---------------------------
(000's) (000's)
---------------- ----------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------- -------- --------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings per Share
Income available to
common stockholders $3,545 7,708 $0.46 $7,780 7,688 $1.01
------- -------- --------- ------- -------- ----------
Effect of Dilutive Securities
Stock options - 11 - - 76 -
------- -------- --------- ------- -------- ----------
Diluted Earnings per Share
Income available to
common stockholders
plus assumed exercises $3,545 7,719 $0.46 $7,780 7,764 $1.00
------- -------- --------- ------- -------- ----------
</TABLE>
7
<PAGE>
NOTE 3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
------------- -------------
2000 1999
------------- -------------
(000's)
<S> <C> <C>
Building and improvements $ 59 $ 56
Leasehold improvements 1,996 1,526
Computer equipment and software 41,125 23,795
Furniture and equipment 7,378 6,365
Transportation equipment and automobiles 3,682 4,742
------------- -------------
54,240 36,484
Less: Accumulated depreciation and amortization (14,448) (12,240)
------------- -------------
PROPERTY AND EQUIPMENT, net $ 39,792 $ 24,244
============= =============
</TABLE>
NOTE 4. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("Statement 133"), "Accounting for
Derivative Instruments and Hedging Activities". This standard requires that an
entity recognize derivatives as either assets or liabilities on its balance
sheet and measure those instruments at fair value. As a result of Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of Statement No. 133",
the Company will adopt this standard in the first quarter of 2001. Based on
current circumstances, the Company does not believe that the application of
Statement 133 will have a material effect on the Company's financial condition
or results of operations.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements" as amended by SAB
101A, which provides guidance on the recognition, presentation, and disclosure
of revenue in financial statements filed with the SEC. SAB 101 outlines the
basic criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition policies. In June 2000, the SEC
issued SAB 101B which deferred the effective date of SAB 101 until the last
quarter of fiscal years beginning after December 15, 1999. The Company does not
believe that the adoption of SAB 101 will have a material impact on the
Company's financial condition or results of operations.
NOTE 5. Subsequent Event
On November 7, 2000, the Company amended its unsecured $50.0 million
term debt and the $50.0 million five-year revolving line of credit agreement.
The amendment increases the borrowing rate ranges of both the term note and
revolving line of credit. Under the amended line of credit, the Company can
borrow at the prime rate plus 0.25% to 1.25% on a day-to-day basis or may borrow
for 30, 60, 90 or 180 day periods at LIBOR plus 1.50% to 2.75% based on the
Company's funded debt to EBITDAM (earnings before interest expense, income
taxes, depreciation, amortization and minority interest) ratio. Under the
amended term debt, the Company can borrow at the prime rate plus 0.25% to 1.50%
on a day-to-day basis or may borrow for 30, 60, 90 or 180 day periods at LIBOR
plus 1.75% to 3.00% based on the Company's funded debt to EBITDAM ratio. The
credit facility also contains certain financial covenants which were amended.
These covenants require that the Company maintain required levels of EBITDAM,
funded debt to EBITDAM and fixed charge coverage. In addition, there are
limitations on additional indebtedness as well as acquisitions and minority
interest purchases. The Company was in compliance with the amended financial
covenants as of September 30, 2000. A second amendment, which changes the
required levels related to the financial covenants for periods subsequent to
September 30, 2000, is contingent upon the Company successfully amending the
financial covenant requirements pertaining to the $50.0 million of private
placement debt (the "Notes") with an effective date on or before December 31,
2000.
8
<PAGE>
HUB GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000, Compared to Three Months Ended September
30, 1999
Revenue
Revenue for Hub Group, Inc. (the "Company") increased 6.4% to $354.8
million from $333.3 million in 1999. Intermodal revenue increased 3.7% 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. Truckload brokerage revenue increased 6.5% over 1999. Logistics revenue,
which includes revenue from the Company's core logistics services and all
revenue from Hub Group Distribution Services ("Hub Distribution"), increased
26.3% compared to 1999. This increase is primarily due to the growth in the
Company's core logistics services.
Net Revenue
Net revenue increased 6.6% to $44.2 million from $41.5 million in 1999.
As a percentage of revenue, net revenue increased to 12.5% from 12.4% in 1999.
This increase in percentage is primarily attributed to higher net revenue
percentages for both truckload brokerage and core logistics services.
Salaries and Benefits
Salaries and benefits increased 17.3% to $24.6 million from $21.0
million in 1999. As a percentage of revenue, salaries and benefits increased to
6.9% from 6.3% in 1999. The increase in the percentage is primarily attributed
to increased headcount supporting the Company's growing base of service
offerings, information technology initiatives and e-business initiatives. The
additional service offerings include the operational and sales support of
boxcar, flat bed, expedited and certain logistics applications.
Selling, General and Administrative
Selling, general and administrative expenses increased 23.2% to $11.7
million from $9.5 million in 1999. These expenses, as a percentage of revenue,
increased to 3.3% from 2.8% in 1999. The increase as a percent of revenue is
primarily attributed to expenditures related to equipment leases, outside
services and information systems. The increase in equipment leases is primarily
due to the leasing of computer hardware required to support both newly developed
and future software applications. The increase in outside services and
information services is due primarily to non-capitalizable expenses related to
the Company's information technology initiatives, data communication costs and
costs associated with the outsourced data center.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization of property and equipment increased 54.7%
to $1.5 million from $1.0 million in 1999. This expense as a percentage of
revenue increased to 0.4% from 0.3% in 1999. The increase is primarily
attributed to the amortization of internally developed operating systems for the
point-of-purchase installation and logistics services offered by Hub
Distribution.
Amortization of Goodwill
Amortization of goodwill remained constant at $1.4 million. The expense
as a percentage of revenue remained constant at 0.4%.
9
<PAGE>
Other Income (Expense)
Other income (expense) netted to an expense of $2.3 million in 2000
compared to an expense of $2.7 million in 1999.
Interest expense decreased to $2.6 million in 2000 from $3.1 million in
1999. The decrease in interest expense is primarily due to carrying a lower
average debt balance during the period.
Interest income remained constant at $0.2 million in both periods.
Other income decreased to $0.0 million in 2000 from $0.1 million in
1999.
Minority Interest
Minority interest decreased to $0.0 million from $0.4 million in 1999.
The decrease is attributed to the lack of income for Hub Distribution in the
third quarter of 2000 which was due primarily to costs incurred in the operation
of their e-business initiative, a national home delivery system for large box
items purchased via the internet.
Income Taxes
The provision for income taxes decreased 51.1% to $1.1 million from
$2.2 million in 1999. The Company is providing for income taxes at an effective
rate of 41.0% in 2000.
Net Income
Net income decreased 51.1% to $1.6 million from $3.2 million in 1999.
Earnings Per Share
Basic earnings per share decreased 52.4% to $0.20 from $0.42 in 1999.
Diluted earnings per share decreased 51.2% to $0.20 from $0.41 in 1999.
Nine Months Ended September 30, 2000, Compared to Nine Months Ended September
30, 1999
Revenue
Revenue for the Company increased 7.0% to $1,027.7 million from $960.5
million in 1999. Intermodal revenue increased 3.7% 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 8.7% over 1999. Logistics revenue,
which includes revenue from the Company's core logistics services and all
revenue from Hub Distribution, increased 28.2% compared to 1999. This increase
is primarily due to growth in the Company's core logistics services.
Net Revenue
Net revenue increased 7.2% to $128.3 million from $119.7 million in
1999. As a percentage of revenue, net revenue was 12.5% in both periods.
Salaries and Benefits
Salaries and benefits increased 15.3% to $72.0 million from $62.4
million in 1999. As a percentage of revenue, salaries and benefits increased to
7.0% from 6.5% in 1999. The increase in the percentage is primarily attributed
10
<PAGE>
to increased headcount supporting the Company's growing base of service
offerings, information technology initiatives and e-business initiatives. The
additional service offerings include the operational and sales support of
boxcar, flat bed, expedited and certain logistics applications.
Selling, General and Administrative
Selling, general and administrative expenses increased 22.0% to $34.1
million from $28.0 million in 1999. These expenses, as a percentage of revenue,
increased to 3.3% from 2.9% in 1999. The increase in percentage is primarily
attributed to expenditures related to outside services, equipment leases, and
advertising. The increase in outside services and advertising is due primarily
to Hub Distribution's support of its e-business initiative, a national home
delivery service for large box items purchased via the internet. The increase in
equipment leases is primarily due to the leasing of computer hardware required
to support both newly developed and future software applications.
Depreciation and Amortization of Property and Equipment
Depreciation and amortization increased 30.5% to $3.9 million from $3.0
million in 1999. This expense as a percentage of revenue increased to 0.4% from
0.3% in 1999. The increase is primarily attributed to the amortization of
internally developed operating systems for the point-of-purchase installation
and logistics services offered by Hub Distribution.
Amortization of Goodwill
Amortization of goodwill increased 18.5% to $4.3 million from $3.6
million in 1999. The expense as a percentage of revenue remained constant at
0.4%. The increase in expense is primarily attributable to the amortization of
the goodwill associated with the 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").
Change in Estimate/Impairment of Property and Equipment
In the second quarter of 1999, a $0.9 million pretax charge was
recorded due to a change in estimate and an impairment loss relating to certain
operating software applications. Specifically, $0.7 million of this charge was
attributable to a change in estimate of the useful life for the Visual Movement
software previously used primarily for brokerage. The Visual Movement software
is no longer being used to support the Company's truckload brokerage service
offering and was replaced with enhancements to the Company's proprietary
intermodal operating software during the second quarter of 1999. These
enhancements allowed for greater network visibility of loads. The $0.2 million
impairment loss related to the write-down of a logistics software program. The
fair value was determined based on the estimated future cash flows attributable
to the single customer who continued to use this software throughout 1999. The
Company has installed a new logistics software package and is currently testing
the software for its operational applications. This new software will provide
enhanced functionality.
Other Income (Expense)
Other income (expense) netted to an expense of $7.8 million in 2000
compared to an expense of $3.8 million in 1999.
Interest expense increased to $8.6 million in 2000 from $5.6 million in
1999. The increase in interest expense is due primarily to the additional debt
required to fund the April 1999 Purchase.
11
<PAGE>
Interest income decreased to $0.6 million in 2000 from $0.7 million in
1999. The primary cause of this decrease is the Company's increased
concentration of cash balances to reduce debt and minimize interest expense.
Other income decreased to $0.2 million in 2000 from $1.1 million in
1999. This decrease in other income is primarily due to $1.0 million of
non-recurring income recognized in second quarter of 1999 upon execution of a
confidential agreement with one of the Company's vendors.
Minority Interest
Minority interest decreased 97.5% to $0.1 million from $4.8 million in
1999. This decrease is primarily attributed to the purchase of the remaining 70%
minority interests in connection with the April 1999 Purchase.
Income Taxes
The provision for income taxes decreased 54.4% to $2.5 million from
$5.4 million in 1999. The Company is providing for income taxes at an effective
rate of 41.0% in 2000.
Net Income
Net income decreased 54.4% to $3.5 million from $7.8 million in 1999.
Earnings Per Share
Basic earnings per share decreased 54.5% to $0.46 from $1.01 in 1999.
Diluted earnings per share decreased 54.0% to $0.46 from $1.00 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 September 30, 2000, there was $43.5
million of outstanding term debt and $22.0 million outstanding and $28.0 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,
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.
On November 7, 2000, the Company amended its unsecured $50.0 million
term debt and the $50.0 million five-year revolving line of credit agreement.
The amendment increases the borrowing rate ranges of both the term note and
revolving line of credit. Under the amended line of credit, the Company can
borrow at the prime rate plus 0.25% to 1.25% on a day-to-day basis or may borrow
for 30, 60, 90 or 180 day periods at LIBOR plus 1.50% to 2.75% based on the
Company's funded debt to EBITDAM (earnings before interest expense, income
taxes, depreciation, amortization and minority interest) ratio. Under the
amended term debt, the Company can borrow at the prime rate plus 0.25% to 1.50%
on a day-to-day basis or may borrow for 30, 60, 90 or 180 day periods at LIBOR
plus 1.75% to 3.00% based on the Company's funded debt to EBITDAM ratio. The
credit facility also contains certain financial covenants which were amended.
These covenants require that the Company maintain required levels of EBITDAM,
funded debt to EBITDAM and fixed charge coverage ratios. In addition, there are
limitations on additional indebtedness as well as acquisitions and minority
interest purchases. The Company was in compliance with the amended financial
12
<PAGE>
covenants as of September 30, 2000. A second amendment, which changes the
required levels related to the financial covenants for periods subsequent to
September 30, 2000, is contingent upon the Company successfully amending the
financial covenant requirements pertaining to the Notes with an effective date
on or before December 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 surcharges,
changes in the cost of services from rail, drayage and other vendors and
fluctuations in interest rates.
Liquidity and Capital Resources
Subject to the contingent language below, the Company believes that
cash to be provided by operations and cash available under its line of credit
will be sufficient to meet the Company's short-term working capital and capital
expenditure needs. The Company believes that the aforementioned items in
addition to the Company's ability to renew its line of credit are sufficient to
meet its anticipated long-term working capital, capital expenditure and debt
repayment needs.
Should the Company be unable to successfully amend the Notes agreement
with an effective date on or before December 31, 2000, the Company would most
likely be in default of this agreement as well as its unsecured bank term debt
and line of credit agreement. Although there can be no assurances, the Company
believes it will be able to successfully amend the Notes agreement prior to a
default in the agreement.
The Company had capital expenditures of approximately $20.0 million
during the nine month period ended September 30, 2000. Capital expenditures were
principally incurred in the development of the Company's new operating system,
e-business initiatives and certain logistics applications.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits included as part of this Report is
set forth in the Exhibit Index appearing elsewhere
herein by this reference.
14
<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: November 13, 2000 /S/ JAY E. PARKER
-----------------
Jay E. Parker
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No.
10.12 Amendment to $100 million Credit Agreement among the Registrant, Hub
City Terminals, Inc. and Harris Trust and Savings Bank.
