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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, 2004 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.)

3050 Highland Parkway, Suite 100
Downers Grove, Illinois 60515
(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 __

         Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes No X

        On April 30, 2004, the registrant had 7,439,872 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, 2004 and		  
         December 31, 2003    3  

Unaudited Condensed Consolidated Statements of Operations - Three Months		  
         Ended March 31, 2004 and 2003    4  

Unaudited Condensed Consolidated Statement of Stockholders' Equity - Three		  
         Months Ended March 31, 2004    5  

Unaudited Condensed Consolidated Statements of Cash Flows - Three		  
         Months Ended March 31, 2004 and 2003    6  

Notes to Unaudited Condensed Consolidated Financial Statements		    7  

Management's Discussion and Analysis of Financial Condition and		  
         Results of Operations    12  

PART II. Other Information		    15  














HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

March 31,
2004
 December 31,
2003
ASSETS      
    CURRENT ASSETS: 
      Cash and cash equivalents  $          —   $          —  
      Accounts receivable 
         Trade, net  121,184   126,794  
         Other  11,616   9,472  
      Deferred taxes  4,676   4,676  
      Prepaid expenses and other current assets  4,116   4,578  
         TOTAL CURRENT ASSETS

  141,592

   145,520

  
    PROPERTY AND EQUIPMENT, net  25,422   27,855  
    GOODWILL, net  215,175   215,175  
    OTHER ASSETS  829   1,017  
         TOTAL ASSETS  $ 383,018   $ 389,567  
LIABILITIES AND STOCKHOLDERS' EQUITY 
    CURRENT LIABILITIES: 
      Accounts payable 
         Trade  $ 116,331   $ 118,830  
         Other  3,187   2,555  
      Accrued expenses 
         Payroll  10,677   14,157  
         Other  11,000   11,592  
      Current portion of long-term debt  8,012   8,017  
           TOTAL CURRENT LIABILITIES

  149,207

   155,151

  
    LONG-TERM DEBT, EXCLUDING CURRENT PORTION  62,011   67,017  
    DEFERRED TAXES  25,768   24,364  
    STOCKHOLDERS' EQUITY: 
      Preferred stock, $.01 par value, 2,000,000 shares authorized; no shares 
         issued or outstanding in 2004 and 2003  —   —  
      Common stock, 
         Class A: $.01 par value; 12,337,700 shares authorized; 7,552,977 shares 
           issued and 7,436,277 outstanding in 2004; 7,410,700 issued and 
            outstanding in 2003  74   74  
         Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued 
           and outstanding in 2004 and 2003  7   7  
      Additional paid-in capital  118,925   115,820  
      Purchase price in excess of predecessor basis, net of tax benefit of $10,306  (15,458 ) (15,458 )
      Retained earnings  50,045   47,332  
      Unearned Compensation  (4,502 ) (4,448 )
      Treasury Stock, at cost (116,700 shares in 2004 and 20,200 shares in 2003)  (3,059 ) (292 )
         TOTAL STOCKHOLDERS' EQUITY  146,032   143,035  
           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 383,018   $ 389,567  

        See notes to unaudited condensed consolidated financial statements.

HUB GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

Three Months
Ended March 31,
2004
 2003
Revenue   $328,302   $329,284  
Transportation costs  286,498   287,234    
       Gross margin  41,804   42,050    
 
Costs and expenses: 
     Salaries and benefits  22,342   23,328    
     Selling, general and administrative  10,281   11,788    
     Depreciation and amortization of property and equipment  2,884   2,561    
       Total costs and expenses  35,507   37,677    
       Operating income  6,297   4,373    
Other income (expense): 
     Interest expense  (1,713 ) (2,084 )
     Interest income  53   50    
     Other, net  41   (36 )  
       Total other expense  (1,619 ) (2,070 )
 
Income before provision for income taxes  4,678   2,303  
 
Provision for income taxes  1,965   944    
Net income   $     2,713   $  1,359  
Basic earnings per common share  $       0.35   $    0.18    
Diluted earnings per common share  $       0.33   $    0.18    
Basic weighted average number of shares outstanding  7,746   7,709    
Diluted weighted average number of shares outstanding  8,294   7,722    

See notes to unaudited condendsed consolidated financial statements


HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2004
(in thousands, except shares)

March 31,
2004
Class A and B Common Stock Shares        
  Beginning of year    8,052,796  
  Exercise of stock options    125,634  
  Issuance of restricted stock    16,643  
  Purchase of treasury shares    (96,500)  
   Ending balance    8,098,573  
Class A and B Common Stock Amount  
  Beginning of year   $ 81  
  Issuance of restricted stock and exercise of stock options     1  
  Purchase of treasury shares     (1)  
   Ending balance    81  
Additional Paid-in Capital  
  Beginning of year    115,820  
  Exercise of stock options    2,647  
  Issuance of restricted stock    458  
   Ending balance    118,925  
Purchase Price in Excess of Predecessor Basis, Net of Tax  
  Beginning of year    (15,458 )
   Ending balance    (15,458 )
Retained Earnings  
  Beginning of year    47,332  
  Net income    2,713  
   Ending balance    50,045  
Unearned Compensation  
  Beginning of year    (4,448 )
  Issuance of restricted stock    (458 )
  Compensation expense related to restricted stock    404  
   Ending balance    (4,502 )
Treasury Stock  
  Beginning of year    (292 )
  Purchase of treasury shares    (2,767 )
   Ending balance    (3,059 )
   Total stockholder's equity   $ 146,032  

See notes to unaudited condensed consolidated financial statements.

HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Three Months Ended
March 31,
2004
 2003
Cash flows from operating activities:      
    Net income   $   2,713   $   1,359  
    Adjustments to reconcile net income to net cash provided 
       by operating activities: 
         Depreciation and amortization of property and equipment  2,911   2,574  
         Deferred taxes  1,961   945  
         Compensation expense related to restricted stock  404   —  
         (Gain) Loss on sale of assets  (18 ) 8  
         Other assets  188   (208 )
         Changes in working capital: 
           Accounts receivable, net  3,466   (1,476 )
           Prepaid expenses and other current assets  462   (559 )
           Accounts payable  (1,867 ) (708 )
           Accrued expenses  (4,072 ) 566  
            Net cash provided by operating activities  6,148   2,501  
Cash flows from investing activities: 
    Purchases of property and equipment, net  (460 ) (477 )
            Net cash used in investing activities  (460 ) (477 )
Cash flows from financing activity: 
    Proceeds from stock options exercised  2,090   —  
    Purchase of treasury stock  (2,767 ) —  
    Net payments on revolver  (3,000 ) —  
    Payments on long-term debt  (2,011 ) (2,024 )
            Net cash used in financing activities  (5,688 ) (2,024 )
Net increase (decrease) in cash and cash equivalents  —   —  
Cash and cash equivalents beginning of period  —   —  
Cash and cash equivalents end of period  $        —   $      —  
Supplemental disclosures of cash flow information 
    Cash paid for: 
       Interest  $   1,357   $ 1,732  

See notes to unaudited condensed consolidated financial statements.





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 for the three months ended March 31, 2004 and 2003.

        These unaudited 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, 2003. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

        Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2.   Restructuring Charges

        In the fourth quarter of 2002, the Company recorded a $458,000 liability for the remaining lease obligation related to a closed facility. Lease payments made during 2004 were $53,000 and the lease obligation is $228,000 at March 31, 2004.

        During the quarter ended June 30, 2003 the Company recorded a liability of $180,000 for the estimated remaining lease obligation and closing costs related to a facility in Detroit. Approximately $61,000 of the lease obligation remains as of March 31, 2004 as lease and closing cost payments made during the period ended March 31, 2004 were $19,000.

        During the year ended December 31, 2003 the Company recorded a severance charge for 165 employees of $876,000. Severance payments of $75,000 were made during the period ended March 31, 2004. All of these severance payments were made as of March 31, 2004.

        During the three months ended March 31, 2004, the Company recorded a severance charge for 20 employees of $115,000. All of these severance payments were made as of March 31, 2004.

NOTE 3.   Stock Based Compensation

        Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, compensation expense for stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company grants options at fair market value and therefore recognizes no compensation expense.

        The following table illustrates the effect on the net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123, to stock-based employee compensation (in thousands, except per share data):

Three Months Ended
March 31,
2004 2003
Net income, as reported   $  2,713   $1,359  
Add: Total stock-based compensation included in reported net income, net of  
   related tax effects    234    -  
Deduct: Total stock-based employee compensation expense determined under fair  
   value based method for all awards, net of related tax effects    (401 )  (178 )
Net income, pro forma   $2,546   $1,181  
Earnings per share:  
Basic-- as reported   $   0.35   $   0.18  
Basic-- pro forma   $   0.33   $   0.15  
Diluted-- as reported   $   0.33   $   0.18  
Diluted-- pro forma   $   0.31   $   0.15  
Dividend Yield   $   0.00   $   0.00  

        The above table is based upon the valuation of option grants using the Black-Scholes pricing model for traded options in 2003 with an assumed risk-free interest rate of 3.3%, a stock price volatility factor of 40.0% and an expected life of the options of six years. Using the foregoing assumptions, the calculated weighted-average fair value of options granted in 2003 was $2.24. No options were granted in 2004. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, in management’s opinion, the model does not necessarily provide a reliable single measure of the fair value of its employee stock options.

        The pro forma disclosure is not likely to be indicative of pro forma results which may be expected in future periods because of the fact that options vest over several years, pro forma compensation expense is recognized as the options vest and additional awards may also be granted.

NOTE 4.   Earnings Per Share

        The following is a reconciliation of the Company’s earnings per share:

Three Months Ended
March 31, 2004
 Three Months Ended
March 31, 2003
(000's)
 (000's)
Income
 Shares
 Per Share
Amount
 Income
 Shares
 Per Share
Amount
Basic EPS              
      Income available to 
          common stockholders  $2,713   7,746   $0.35   $1,359   7,709   $0.18  
Effect of Dilutive Securities 
      Stock options  —   548   —   —   13   —  
Diluted EPS 
      Income available to 
          common stockholders 
          including assumed exercises of 
          stock options and restricted stock  $2,713   8,294   $0.33   $1,359   7,722   $0.18  

         Stock options that were not included in diluted weighted-average shares because they would have been antidilutive were 23,000 and 1,033,550 for the three months ending March 31, 2004 and 2003, respectively.

NOTE 5.   Property and Equipment

Property and equipment consist of the following (in thousands):

March 31, December 31,
2004 2003
Building and improvements   $        57   $        57  
Leasehold improvements  617   608  
Computer equipment and software  52,219   51,927  
Furniture and equipment  6,153   6,085  
Transportation equipment and automobiles  1,091   1,221