================================================================================
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, 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 August 11, 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.
================================================================================
<PAGE>
HUB GROUP, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION:
HUB GROUP, INC. - REGISTRANT
Unaudited Condensed Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations - Three Months
and Six Months Ended June 30, 2000 and 1999 4
Unaudited Condensed Consolidated Statement of Stockholders' Equity - Six
Months Ended June 30, 2000 5
Unaudited Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 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>
JUNE 30, DECEMBER 31,
----------- ------------
2000 1999
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 1,865
Accounts receivable, net 185,764 190,221
Prepaid expenses and other current assets 5,840 2,771
----------- ------------
TOTAL CURRENT ASSETS 191,604 194,857
PROPERTY AND EQUIPMENT, net 35,144 24,244
GOODWILL, net 216,778 219,648
DEFERRED TAXES 898 898
OTHER ASSETS 1,821 1,962
----------- ------------
TOTAL ASSETS $ 446,245 $ 441,609
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
Trade $ 157,574 $ 141,592
Other 11,884 11,246
Accrued expenses
Payroll 6,533 7,936
Other 7,259 6,384
Current portion of long-term debt 11,614 6,195
----------- ------------
TOTAL CURRENT LIABILITIES 194,864 173,353
LONG-TERM DEBT, EXCLUDING CURRENT PORTION 111,107 131,414
DEFERRED TAXES 6,713 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 37,700 35,719
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 133,136 131,124
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 446,245 $ 441,609
=========== ============
</TABLE>
See notes to unaudited condensed consolidatedfinancial 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,
------------------------ -------------------------
2000 1999 2000 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 344,329 $ 319,448 $ 672,897 $ 627,130
Transportation costs 299,746 280,403 588,849 548,916
------------ ----------- ------------ ------------
Net revenue 44,583 39,045 84,048 78,214
Costs and expenses:
Salaries and benefits 24,148 20,553 47,324 41,399
Selling, general and administrative 11,064 9,357 22,431 18,480
Depreciation and amortization of property and equipment 1,247 967 2,400 2,019
Amortization of goodwill 1,435 1,436 2,870 2,198
Change in estimate/impairment of property and equipment - 884 - 884
------------ ----------- ------------ ------------
Total costs and expenses 37,894 33,197 75,025 64,980
Operating income 6,689 5,848 9,023 13,234
------------ ----------- ------------ ------------
Other income (expense):
Interest expense (2,824) (2,054) (6,008) (2,576)
Interest income 168 213 340 515
Other, net 20 965 123 982
------------ ----------- ------------ ------------
Total other expense (2,636) (876) (5,545) (1,079)
Income before minority interest and provision for income taxes 4,053 4,972 3,478 12,155
------------ ----------- ------------ ------------
Minority interest 158 501 120 4,391
------------ ----------- ------------ ------------
Income before provision for income taxes 3,895 4,471 3,358 7,764
Provision for income taxes 1,597 1,833 1,377 3,183
------------ ----------- ------------ ------------
Net income $ 2,298 $ 2,638 $ 1,981 $ 4,581
============ =========== ============ ============
Basic earnings per common share $ 0.30 $ 0.34 $ 0.26 $ 0.60
============ =========== ============ ============
Diluted earnings per common share $ 0.30 $ 0.34 $ 0.26 $ 0.59
============ =========== ============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the six months ended June 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 - - - - - 1,981 1,981
Exercise of non-qualified
stock options 2,100 - 31 - - - 31
----------- --------- ----------- ------------ ------------- ----------- --------------
Balance at June 30, 2000 7,708,346 $ 77 $ 110,817 $ (25,764) $ 10,306 $ 37,700 $ 133,136
=========== ========= =========== ============ ============= =========== ==============
</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,
----------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,981 $ 4,581
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization of property and equipment 2,811 2,531
Amortization of goodwill 2,870 2,198
Change in estimate/impairment of property and equipment - 884
Deferred taxes 1,754 1,458
Minority interest 120 4,391
Loss/(Gain) on sale of assets (13) 178
Changes in working capital, net of effects of purchase transactions:
Accounts receivable, net 4,457 (20,955)
Prepaid expenses and other current assets (3,069) 1,226
Accounts payable 16,620 14,750
Accrued expenses (528) (356)
Other assets 141 (1,580)
------------- -------------
Net cash provided by operating activities 27,144 9,306
------------- -------------
Cash flows from investing activities:
Purchases of minority interest - (108,710)
Purchases of property and equipment, net (13,698) (2,495)
------------- -------------
Net cash used in investing activities (13,698) (111,205)
------------- -------------
Cash flows from financing activities:
Proceeds from sale of common stock 31 551
Distributions to minority interest (454) (9,622)
Payments on long-term debt (14,915) (46,083)
Proceeds from issuance of long-term debt 27 150,780
------------- -------------
Net cash provided by/used in financing activities (15,311) 95,626
------------- -------------
Net decrease in cash and cash equivalents (1,865) (6,273)
Cash and cash equivalents, beginning of period 1,865 15,178
------------- -------------
Cash and cash equivalents, end of period $ - $ 8,905
============= =============
Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 6,286 $ 2,621
Income taxes 1,520 656
</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 PER SHARE
The following is a reconciliation of the Company's Earnings per Share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2000 JUNE 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 $2,298 7,708 $0.30 $2,638 7,688 $0.34
------ ----- ----- ------ ----- -----
EFFECT OF DILUTIVE SECURITIES
Stock options - - - - 88 -
------ ----- ----- ------ ----- -----
DILUTED EARNINGS PER SHARE
Income available to
common stockholders
plus assumed exercises $2,298 7,708 $0.30 $2,638 7,776 $0.34
------ ----- ----- ------ ----- -----
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 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 $1,981 7,707 $0.26 $4,581 7,680 $0.60
------ ----- ----- ------ ----- -----
EFFECT OF DILUTIVE SECURITIES
Stock options - 17 - - 73 -
------ ----- ----- ------ ----- -----
DILUTED EARNINGS PER SHARE
Income available to
common stockholders
plus assumed exercises $1,981 7,724 $0.26 $4,581 7,753 $0.59
------ ----- ----- ------ ----- -----
</TABLE>
7
<PAGE>
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------ -------------
2000 1999
------------ -------------
(000'S)
<S> <C> <C>
Building and improvements $ 59 $ 56
Leasehold improvements 1,924 1,526
Computer equipment and software 35,270 23,795
Furniture and equipment 7,060 6,365
Transportation equipment and automobiles 3,748 4,742
------------ -------------
48,061 36,484
Less: Accumulated depreciation and amortization (12,917) (12,240)
------------ -------------
PROPERTY AND EQUIPMENT, net $ 35,144 $ 24,244
============ =============
</TABLE>
NOTE 4. DEBT
On June 30, 2000 the Company's $5.0 million bank line of credit with
Cass Bank and Trust Company was terminated.
NOTE 5. LETTER OF INTENT
During the second quarter, the Company terminated the letter of intent
to divest Hub Group Inc.'s interest in Hub Group Distribution Services.
8
<PAGE>
HUB GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000, COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
REVENUE
Revenue for Hub Group, Inc. (the "Company") increased 7.8% to $344.3
million from $319.4 million in 1999. Intermodal revenue increased 4.0% 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 10.5% 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
31.1% compared to 1999. This increase is primarily due to the growth in the
Company's core logistic services.
NET REVENUE
Net revenue increased 14.2% to $44.6 million from $39.0 million in
1999. As a percentage of revenue, net revenue increased to 12.9% of revenue from
12.2% in 1999. This increase in percentage is primarily attributed to the
recapture of some of the fuel surcharges that were expensed in the first
quarter, the year-over-year increase in the number of units in and the
cost-effectiveness of the Company's Premier Network Services offering,
termination of a significant customer contract that had low-margin business that
existed in the prior year (see "Revenue"), the strength of the Company's
purchasing power with the major railroads and a significant increase in the net
revenue percentage for truckload brokerage.
SALARIES AND BENEFITS
Salaries and benefits increased 17.5% to $24.1 million from $20.6
million in 1999. As a percentage of revenue, salaries and benefits increased to
7.0% of revenue from 6.4% in 1999. The increase in the percentage is primarily
attributed to increased headcount supporting the Company's information
technology initiatives, e-business initiatives and to support our growing base
of service offerings operationally as well as to hire salesmen to sell these
additional services. These additional services include boxcar, flat bed, and
certain logistic applications.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 18.2% to $11.1
million from $9.4 million in 1999. These expenses, as a percentage of revenue,
increased to 3.2% from 2.9% in 1999. The increase in percentage is primarily
attributed to expenditures related to equipment leases, outside services and
advertising. The increase in equipment leases is primarily due to the leasing of
computer hardware to support the infrastructure of the network hardware
environment that is required to support both new and future software
applications. 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 items purchased via the internet.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
Depreciation and amortization increased 29.0% to $1.2 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 in depreciation is primarily attributed to internally
developed operating systems for the point-of-purchase installation and other
niche logistics services offered by Hub Distribution.
9
<PAGE>
AMORTIZATION OF GOODWILL
Amortization of goodwill remained constant at $1.4 million. The expense
as a percentage of revenue remained constant at 0.4%.
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 $(2.6) million in 2000 compared to
$(0.9) million in 1999.
Interest expense increased to $(2.8) million in 2000 from $(2.1)
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 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"). The debt to fund the
April 1999 Purchase was obtained on April 30, 1999.
Interest income remained constant at $0.2 million in both periods.
Other income decreased to $0.0 million in 2000 from $1.0 million in
1999. This decrease in other income is due to $1.0 million of non-recurring
income recognized in the second quarter of 1999 upon execution of a confidential
agreement with one of the company's vendors.
MINORITY INTEREST
Minority interest decreased 68.5% to $0.2 million from $0.5 million in
1999. The decrease in the percentage is attributed to lower income of Hub
Distribution due primarily to costs incurred in the development of their
e-business initiative.
INCOME TAXES
The provision for income taxes decreased 12.9% to $1.6 million from
$1.8 million in 1999. The Company is providing for income taxes at an effective
rate of 41.0% in 2000.
NET INCOME
Net income decreased 12.9% to $2.3 million from $2.6 million in 1999.
EARNINGS PER SHARE
Earnings per share decreased 11.8% to $0.30 from $0.34 in 1999.
10
<PAGE>
SIX MONTHS ENDED JUNE 30, 2000, COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUE
Revenue for the Company increased 7.3% to $672.9 million from $627.1
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 10.0% over 1999. Logistics revenue,
which includes revenue from the Company's core logistics services and all
revenue from Hub Distribution, increased 29.1% compared to 1999. This increase
is primarily due to the growth in the Company's core logistic services.
NET REVENUE
Net revenue increased 7.5% to $84.0 million from $78.2 million in 1999.
As a percentage of revenue, net revenue was 12.5% in both periods.
SALARIES AND BENEFITS
Salaries and benefits increased 14.3% to $47.3 million from $41.4
million in 1999. As a percentage of revenue, salaries and benefits increased to
7.0% of revenue from 6.6% in 1999. The increase in the percentage is primarily
attributed to increased headcount supporting the Company's information
technology initiatives, e-business initiatives and to support our growing base
of service offerings operationally as well as to hire salesmen to sell these
additional services. These additional services include boxcar, flat bed, and
certain logistic applications.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 21.4% to $22.4
million from $18.5 million in 1999. These expenses, as a percentage of revenue,
increased to 3.3% from 2.9% in 1999. The increase in the 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 items purchased via the internet. The increase in
equipment leases is primarily due to the leasing of computer hardware to support
the infrastructure of the network hardware environment that is required to
support both new and future software applications.
DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
Depreciation and amortization increased 18.9% to $2.4 million from $2.0
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.
AMORTIZATION OF GOODWILL
Amortization of goodwill increased 30.6% to $2.9 million from $2.2
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 April 1999 Purchase.
11
<PAGE>
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 $(5.5) million in 2000 compared to
$(1.1) million in 1999.
Interest expense increased to $(6.0) million in 2000 from $(2.6)
million in 1999. The increase in interest expense is due primarily to the
additional debt required to fund the April 1999 Purchase.
Interest income decreased to $0.3 million in 2000 from $0.5 million in
1999. The primary cause of this decrease is the Company's increased
concentration of its cash balances to reduce debt and minimize interest expense.
Other income decreased to $0.1 million in 2000 from $1.0 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 97.3% to $0.1 million from $4.4 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 56.7% to $1.4 million from
$3.2 million in 1999. The Company is providing for income taxes at an effective
rate of 41.0% in 2000.
NET INCOME
Net income decreased 56.8% to $2.0 million from $4.6 million in 1999.
EARNINGS PER SHARE
Basic earnings per share decreased 56.7% to $0.26 from $0.60 in 1999.
Diluted earnings per share decreased 55.9% to $0.26 from $0.59 in 1999.
12
<PAGE>
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 June 30, 2000, there was $45.0
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 June 30, 2000 the Company's $5.0 million bank line of credit with
Cass Bank and Trust Company was terminated.
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.
NET REVENUE
As described above, the net revenue for the three months ended June 30,
2000 as a percentage of revenue increased to 12.9% of revenue from 12.2% for the
three months ended June 30, 1999. A number of factors that contributed to this
higher margin are one-time in nature or not likely to continue in the future.
Management expects the net revenue, as a percentage of revenue, will likely
decline in future quarters from the 12.9% level to a more historical level. The
net revenue for the six months ended June 30 was 12.5% for both periods 2000 and
1999 which is more consistent with the Company's historical level.
BUSINESS COMBINATIONS/DIVESTITURES
During the second quarter, the Company terminated the letter of intent
to divest Hub Group Inc.'s interest in Hub Group Distribution Services.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that 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.
13
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 2000 Annual Meeting of Stockholders of Hub Group, Inc. was
held on May 17, 2000. At this meeting, the following six
directors were reelected with the following votes: Phillip C.
Yeager: 19,696,209 votes for and 57,337 votes withheld;
David P. Yeager: 19,696,909 votes for and 56,637 votes
withheld; Thomas L. Hardin: 19,696,909 votes for and 56,637
votes withheld; Gary D. Eppen: 19,697,494 votes for and
56,052 votes withheld; Charles R. Reaves: 19,697,494 votes
for and 56,052 votes withheld; Martin P. Slark: 19,697,494
votes for and 56,052 votes withheld.
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: August 11, 2000 /S/ JAY E. PARKER
-----------------
Jay E. Parker
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
