-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ipu7plXpN9xViANrR8dWnhbHYvQLnc7wuUiyGXElhBnZlH1T6x2Yd+iC4y1DXfv8 SiQqjWPgJRra8IYIjil6pA== 0000940942-98-000009.txt : 19980511 0000940942-98-000009.hdr.sgml : 19980511 ACCESSION NUMBER: 0000940942-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUB GROUP INC CENTRAL INDEX KEY: 0000940942 STANDARD INDUSTRIAL CLASSIFICATION: ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO [4731] IRS NUMBER: 364007085 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27754 FILM NUMBER: 98614108 BUSINESS ADDRESS: STREET 1: 377 E BUTTERFIELD RD STREET 2: STE 700 CITY: LOMBARD STATE: IL ZIP: 60148 BUSINESS PHONE: 7089645800 MAIL ADDRESS: STREET 1: 377 EAST BUTTERFIELD RD STREET 2: SUITE 700 CITY: LOMBARD STATE: IL ZIP: 60148 10-Q 1 QUARTERLY REPORT FOR HUB GROUP, INC. ================================================================================ 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, 1998 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 8, 1998, the registrant had 6,990,950 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. ================================================================================ HUB GROUP, INC. INDEX Page PART I. Financial Information: Hub Group, Inc. - Registrant Unaudited Condensed Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 3 Unaudited Condensed Consolidated Statements of Operations - Three Months Ended March 31, 1998 and 1997 4 Unaudited Condensed Consolidated Statement of Stockholders' Equity - Three Months Ended March 31, 1998 5 Unaudited Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 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 11 2 HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, ----------------------------- 1998 1997 -------------- -------------- Assets Current assets: Cash and cash equivalents $ 19,706 $ 12,056 Accounts receivable, net 120,761 127,673 Deferred taxes 615 1,222 Prepaid expenses and other current assets 2,810 1,961 -------------- -------------- Total current assets 143,892 142,912 Property and equipment, net 19,960 19,616 Goodwill, net 101,494 102,151 Deferred taxes 2,002 2,479 Other assets 565 668 -------------- -------------- Total assets $ 267,913 $ 267,826 ============== ============== Liabilities and stockholders' equity Current liabilities: Accounts payable Trade $ 108,025 $ 102,364 Other 10,126 12,639 Accrued expenses Payroll 4,457 6,013 Other 2,319 3,259 Current portion of long-term debt 3,372 3,428 -------------- -------------- Total current liabilities 128,299 127,703 Long-term debt, excluding current portion 22,160 22,873 Contingencies and commitments Minority interest 5,365 6,788 Stockholders' equity: Preferred stock - - Common stock 77 77 Additional paid-in capital 109,878 109,878 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 17,592 15,965 -------------- -------------- Total stockholders' equity 112,089 110,462 -------------- -------------- Total liabilities and stockholders' equity $ 267,913 $ 267,826 ============== ==============
See notes to unaudited condensed consolidated financial statements. 3 HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
Three Months Ended March 31, --------------------------- 1998 1997 ------------- ------------ Revenue $ 255,133 $ 251,120 Transportation costs 224,686 220,906 ------------- ------------ Net revenue 30,447 30,214 Costs and expenses: Salaries and benefits 16,888 15,253 Selling, general and administrative 7,623 6,084 Depreciation and amortization 1,502 961 ------------- ------------ Total costs and expenses 26,013 22,298 Operating income 4,434 7,916 ------------- ------------ Other income (expense): Interest expense (558) (619) Interest income 226 263 Other, net 90 30 ------------- ------------ Total other income (expense) (242) (326) Income before minority interest and provision for income taxes 4,192 7,590 ------------- ------------ Minority interest 1,481 4,294 ------------- ------------ Income before provision for income taxes 2,711 3,296 Provision for income taxes 1,084 1,318 ------------- ------------ Net income $ 1,627 $ 1,978 ============= ============ Basic earnings per common share $ 0.21 $ 0.33 ============= ============ Diluted earnings per common share $ 0.21 $ 0.33 ============= ============
See notes to unaudited condensed consolidated financial statements. 4 HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the three months ended March 31, 1998 (in thousands, except shares)
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 ----------- ---------- ------------ -------------- -------------- ----------- -------------- Balance at December 31, 1997 7,653,246 $ 77 $ 109,878 $ (25,764) $ 10,306 $ 15,965 $ 110,462 Net income - - - - - 1,627 1,627 =========== ========== ============ ============== ============== =========== ============== Balance at March 31, 1998 7,653,246 $ 77 $ 109,878 $ (25,764) $ 10,306 $ 17,592 $ 112,089 =========== ========== ============ ============== ============== =========== ==============
See notes to unaudited condensed consolidated financial statements. 5 HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended March 31, ----------------------------- 1998 1997 -------------- ------------- Cash flows from operating activities: Net income $ 1,627 $ 1,978 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,779 1,222 Deferred taxes 1,084 305 Minority interest 1,481 4,294 Gain on sale of assets 37 8 Changes in working capital, net of effects of purchase transactions: Accounts receivable, net 6,912 3,974 Prepaid expenses and other current assets (849) (276) Accounts payable 3,148 7,392 Accrued expenses (2,496) (1,027) Other assets 103 (77) -------------- ------------- Net cash provided by operations 12,826 17,793 -------------- ------------- Cash flows from investing activities: Purchases of minority interest - (1,525) Purchases of property and equipment, net (1,503) (2,621) -------------- ------------- Net cash used in investing activities (1,503) (4,146) -------------- ------------- Cash flows from financing activities: Proceeds from sale of common stock in initial public offering, net - (45) Proceeds from sale of common stock - 28 Distributions to minority interest (2,904) (4,317) Payments on long-term debt (769) (798) Proceeds from issuance of long-term debt - 3,358 -------------- ------------- Net cash provided by (used in) financing activities (3,673) (1,774) -------------- ------------- Net increase/(decrease) in cash 7,650 11,873 Cash and cash equivalents, beginning of period 12,056 13,893 -------------- ------------- Cash and cash equivalents, end of period $ 19,706 $ 25,766 ============== ============= Supplemental disclosures of cash flow information Cash paid for: Interest $ 310 $ 125 Income taxes 54 54
See notes to unaudited condensed consolidated financial statements. 6 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 October 31, 1997, the Company acquired the remaining 50% interest in its international logistics joint venture, HLX Company, LLC for $300,000. The acquisition was recorded using the purchase method of accounting resulting in goodwill of $466,000. 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. The purchase price allocations presented are preliminary. NOTE 3. Earnings per Share The following is a reconciliation of the Company's Earnings per Share:
Three Months Ended Three Months Ended March 31, 1998 March 31, 1997 ----------------------------- ---------------------------- (000's) (000's) ----------------- Per-Share ----------------- Per-Share Income Shares Amount Income Shares Amount -------- ------- ---------- -------- ------- --------- Basic Earnings per Share Income available to common stockholders $ 1,627 7,653 $ 0.21 $ 1,978 5,924 $ 0.33 -------- ------- ---------- -------- ------- --------- Effect of Dilutive Securities Stock options - 105 - - 105 - -------- ------- ---------- -------- ------- --------- Diluted Earnings per Share Income available to common stockholders plus assumed exercises $ 1,627 7,758 $ 0.21 $ 1,978 6,029 $ 0.33 -------- ------- ---------- -------- ------- ---------
NOTE 4. Purchases of Minority Interest On March 1, 1997, the Company purchased an approximate 44% minority interest in Hub Group Distribution Services for approximately $1,576,000 in cash. 7 On September 17, 1997, the Company purchased the remaining 70% minority interests in Hub City Los Angeles, L.P.and Hub City Golden Gate, L.P. for approximately $59,379,000 in cash. On October 31, 1997, the Company purchased the remaining 70% minority interest in Hub City New Orleans, L.P. for one dollar. As the amount paid for each of the purchases of minority interest equaled the basis in excess of the fair market value of assets acquired and liabilities assumed, the amount paid was recorded as goodwill. NOTE 5. Property and Equipment Property and equipment consist of the following:
March 31, December 31, 1998 1997 ---------- ------------ (000's) Land $ 56 $ 56 Building and improvements 233 233 Leasehold improvements 935 886 Computer equipment and software 15,435 14,512 Furniture and equipment 4,431 4,172 Transportation equipment and automobiles 5,927 5,828 -------- -------- 27,017 25,687 Less: Accumulated depreciation and amortization (7,057) (6,071) -------- -------- PROPERTY AND EQUIPMENT, net $19,960 $19,616 ======== ========
NOTE 6. Subsequent Events On April 1, 1998, the Company acquired all the outstanding stock of Quality Intermodal Corporation ("Quality") for $4.1 million in cash and $6.3 million through the issuance of a three-year note, bearing interest at an annual rate of 5.6%. The amount of the note is subject to a downward adjustment based on the audited balance in Quality's stockholders' equity accounts at March 31, 1998. The amount of the adjustment, if any, is unknown at this time. On April 1, 1998, the Company purchased the remaining 70% minority interests in Hub City Rio Grande, L.P., Hub City Dallas, L.P. and Hub City Houston, L.P. for approximately $6.3 million in cash. As the amount paid for each of the purchases of minority interest equaled the basis in excess of the fair market value of assets acquired and liabilities assumed, the amount paid was recorded as goodwill. 8 HUB GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended March 31, 1998, Compared to Three Months Ended March 31, 1997 Revenue Revenue for Hub Group, Inc. ("Hub Group" or the "Company") increased 1.6% to $255.1 million from $251.1 million in 1997. Brokerage revenue increased 17.9% to $34.0 million from $28.8 million in 1997. Logistics revenue decreased 34.0% to $13.5 million from $20.4 million in 1997. This decrease is attributed to the Company terminating its contract to provide third-party logistics to a significant customer in January 1998. Intermodal revenue increased 2.9% to $207.6 million from $201.9 million in 1997. The well-publicized service disruptions in the intermodal industry continued into the first quarter of 1998. Although management is unable to quantify the effect, management believes these service issues have inhibited Hub Group's intermodal revenue growth rate. Net Revenue Net revenue increased to $30.4 million from $30.2 million in 1997. As a percentage of revenue, net revenue decreased to 11.9% of revenue from 12.0% in 1997. The decrease in the percentage was due to the Company incurring additional costs for purchased transportation due to alternate routing around congested rail lanes, repositioning empty equipment and detention charges related to the service disruptions in the intermodal industry. Salaries and Benefits Salaries and benefits increased 10.7% to $16.9 million from $15.3 million in 1997. As a percentage of revenue, salaries and benefits increased to 6.6% of revenue from 6.1% in 1997. The increase in the percentage is primarily attributable to two factors that caused actual expenditures to increase while revenue remained nearly flat. First, expenditures increased due to the normal year-over-year merit and cost of living increases granted to the Company's employees. Second, the rail service disruptions, which continued through the first quarter of 1998 created a significantly expanded work load required to handle our customers' intermodal transportation. Existing staff levels were maintained to ensure that the best possible service was provided during this difficult period. Selling, General and Administrative Selling, general and administrative expenses increased 25.3% to $7.6 million from $6.1 million in 1997. These expenses as a percentage of revenue increased to 3.0% from 2.4% in 1997. This increase is primarily attributed to expenditures made related to information systems, bad debts, rent and equipment leases. The Company continues to make expenditures for technology to improve operating efficiencies, accommodate customer requirements, and maintain communications links. Rent expense increased due to the expansion of some of Hub's operating facilities. Equipment lease expense continues to increase as the Company utilizes operating leases for its information systems hardware. Depreciation and Amortization Depreciation and amortization expense increased 56.3% to $1.5 million from $1.0 million in 1997. This expense as a percentage of revenue increased to 0.6% from 0.4% in 1997. The increase is primarily attributable to increased goodwill amortization related to the purchase of the 70% minority interests in Hub City Los Angeles, L.P. and Hub City Golden Gate, L.P. in September 1997. 9 Other Income (Expense) Other income (expense) netted to $(0.2) million in 1998 compared to $(0.3) million in 1997. Interest expense remained constant at $0.6 million. Interest income decreased to $0.2 million from $0.3 million in 1997. Minority Interest Minority interest decreased 65.5% to $1.5 million from $4.3 million in 1997. Minority interest as a percentage of income before minority interest decreased to 35.3% from 56.6% in 1997. The purchase of the minority interests as discussed in "Depreciation and Amortization" had the effect of lowering minority interest as a percentage of income before minority interest when comparing 1998 to 1997. Income Taxes The provision for income taxes decreased 17.8% to $1.1 million from $1.3 million in 1997. The Company is providing for income taxes at an effective rate of 40%. Net Income Net income decreased 17.7% to $1.6 million from $2.0 million in 1997. Earnings Per Share Earnings per share decreased 36.4% to $0.21 from $0.33 in 1997. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the unused and available portion of the line of credit with Cass Bank and Trust Company was $5.0 million. At March 31, 1998, there was $15.0 million outstanding and $21.0 million unused and available under the line of credit with Harris Trust and Savings Bank. Subsequent to March 31, 1998, the Company borrowed an additional $11.0 million to pay approximately $6.0 million for its purchase of the minority interests in Hub City Rio Grande, L.P., Hub City Dallas, L.P. and Hub City Houston, L.P., to pay $3.0 million of the $4.1 million cash portion of the purchase price of Quality Intermodal Corporation and to pay off the $2.0 million note to American President Lines Land Transport Services, Inc. that matured in May 1998. The Company also issued a $6.3 million three-year note bearing interest at 5.6% in connection with the acquisition of Quality Intermodal Corporation. 10 PART II. Other Information None. 11 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 8, 1998 /s/ William L. Crowder ---------------------- William L. Crowder Vice President-Finance and Chief Financial Officer (Principal Financial Officer) EX-27 2 3/31/98 FINANCIALS
5 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. 1,000 3-MOS DEC-31-1998 MAR-31-1998 19706 0 122627 1866 0 143892 27017 7057 267913 128299 0 0 0 77 112012 267913 0 255133 0 224686 26013 563 558 2711 1084 4434 0 0 0 1627 .21 .21
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