[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, 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
| Delaware | 36-4007085 |
|---|---|
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
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 October 22, 2004, the registrant had 9,364,337 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. - Registrant | |||||
Unaudited Condensed Consolidated Balance Sheets - September 30, 2004 and | |||||
| December 31, 2003 | 3 | ||||
Unaudited Condensed Consolidated Statements of Income - Three Months and | |||||
| Nine Months Ended September 30, 2004 and 2003 | 4 | ||||
Unaudited Condensed Consolidated Statement of Stockholders' Equity - Nine | |||||
| Months Ended September 30, 2004 | 5 | ||||
Unaudited Condensed Consolidated Statements of Cash Flows - Nine | |||||
| Months Ended September 30, 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 | ||||
Quantitative and Qualitative Disclosures related to Market Risk | 22 | ||||
Controls and Procedures | 22 | ||||
PART II. Other Information | 22 | ||||
| September 30, 2004 |
December 31, 2003 | ||||
|---|---|---|---|---|---|
| ASSETS | |||||
| CURRENT ASSETS: | |||||
| Cash and cash equivalents | $ — | $ — | |||
| Accounts receivable | |||||
| Trade, net | 134,551 | 125,754 | |||
| Other | 5,948 | 9,472 | |||
| Deferred taxes | 4,676 | 4,676 | |||
| Prepaid expenses and other current assets | 4,359 | 4,578 | |||
| TOTAL CURRENT ASSETS | 149,534 |
144,480 |
|||
| PROPERTY AND EQUIPMENT, net | 21,544 | 27,855 | |||
| GOODWILL, net | 215,175 | 215,175 | |||
| OTHER ASSETS | 321 | 1,017 | |||
| TOTAL ASSETS | $ 386,574 | $ 388,527 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| CURRENT LIABILITIES: | |||||
| Accounts payable | |||||
| Trade | $ 110,709 | $ 117,790 | |||
| Other | 2,905 | 2,555 | |||
| Accrued expenses | |||||
| Payroll | 16,305 | 14,157 | |||
| Other | 13,200 | 11,592 | |||
| Current portion of long-term debt | — | 8,017 | |||
| TOTAL CURRENT LIABILITIES | 143,119 |
154,111 |
|||
| LONG-TERM DEBT, EXCLUDING CURRENT PORTION | — | 67,017 | |||
| DEFERRED TAXES | 30,594 | 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; 9,354,977 shares | |||||
| issued and 9,337,687 outstanding in 2004; 7,410,700 issued and | |||||
| 7,390,500 outstanding in 2003 | 93 | 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 | 174,449 | 115,820 | |||
| Purchase price in excess of predecessor basis, net of tax benefit of $10,306 | (15,458 | ) | (15,458 | ) | |
| Retained earnings | 57,656 | 47,332 | |||
| Unearned compensation | (3,475 | ) | (4,448 | ) | |
| Treasury stock, at cost (17,290 shares in 2004 and 20,200 shares in 2003) | (411 | ) | (292 | ) | |
| TOTAL STOCKHOLDERS' EQUITY | 212,861 | 143,035 | |||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 386,574 | $ 388,527 | |||
See notes to unaudited condensed consolidated financial statements.
| Three Months Ended September 30, |
Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2004 |
2003 |
2004 |
2003 | ||||||
| Revenue | $ 362,105 | $ 339,484 | $ 1,039,377 | $ 1,000,418 | |||||
| Transportation costs | 314,077 | 296,023 | 905,881 | 871,447 | |||||
| Gross margin | 48,028 | 43,461 | 133,496 | 128,971 | |||||
| Costs and expenses: | |||||||||
| Salaries and benefits | 21,995 | 22,508 | 66,570 | 68,689 | |||||
| Selling, general and administrative | 9,023 | 11,041 | 29,618 | 34,932 | |||||
| Depreciation and amortization of property and equipment | 3,052 | 2,716 | 8,786 | 7,865 | |||||
| Total costs and expenses | 34,070 | 36,265 | 104,974 | 111,486 | |||||
| Operating income | 13,958 | 7,196 | 28,522 | 17,485 | |||||
| Other income (expense): | |||||||||
| Interest expense | (571 | ) | (1,885 | ) | (3,968 | ) | (5,981 | ) | |
| Interest income | 56 | 43 | 165 | 118 | |||||
| Debt extinguishment expenses | (7,296 | ) | — | (7,296 | ) | — | |||
| Other, net | 180 | 46 | 583 | 59 | |||||
| Total other expense | (7,631 | ) | (1,796 | ) | (10,516 | ) | (5,804 | ) | |
| Income before provision for income taxes | 6,327 | 5,400 | 18,006 | 11,681 | |||||
| Provision for income taxes | 2,775 | 2,514 | 7,682 | 5,889 | |||||
| Net income | $ 3,552 | $ 2,886 | $ 10,324 | $ 5,792 | |||||
| Basic earnings per common share | $ 0.37 | $ 0.37 | $ 1.22 | $ 0.75 | |||||
| Diluted earnings per common share | $ 0.34 | $ 0.37 | $ 1.14 | $ 0.74 | |||||
| Basic weighted average number of shares outstanding | 9,707 | 7,709 | 8,435 | 7,709 | |||||
| Diluted weighted average number of shares outstanding | 10,324 | 7,897 | 9,029 | 7,814 | |||||
See notes to unaudited condensed consolidated financial statements.
| September 30, 2004 | |||||
|---|---|---|---|---|---|
| Class A & B Common Stock Shares Outstanding | |||||
| Beginning of year | 8,052,796 | ||||
| Exercise of stock options | 127,634 | ||||
| Issuance of restricted stock | 16,643 | ||||
| Purchase of treasury shares | (96,500 | ) | |||
| Stock offering | 1,800,000 | ||||
| Treasury shares issued under restricted stock and stock option plan, net of forfeitures | 99,410 | ||||
| Ending balance | 9,999,983 | ||||
| Class A & B Common Stock Amount | |||||
| Beginning of year | $ | 81 | |||
| Issuance of restricted stock and exercise of stock options | 1 | ||||
| Stock offering | 18 | ||||
| Ending balance | 100 | ||||
| Additional Paid-in Capital | |||||
| Beginning of year | 115,820 | ||||
| Exercise of stock options | 2,282 | ||||
| Issuance of restricted stock | 494 | ||||
| Stock offering | 55,853 | ||||
| Ending balance | 174,449 | ||||
| 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 | 10,324 | ||||
| Ending balance | 57,656 | ||||
| Unearned Compensation | |||||
| Beginning of year | (4,448 | ) | |||
| Issuance of restricted stock, net of forfeitures | (620 | ) | |||
| Compensation expense related to restricted stock | 1,593 | ||||
| Ending balance | (3,475 | ) | |||
| Treasury Stock | |||||
| Beginning of year | (292 | ) | |||
| Purchase of treasury shares | (2,767 | ) | |||
| Issuance of restricted stock and exercise of stock options, net of forfeitures | 2,648 | ||||
| Ending balance | (411 | ) | |||
| Total stockholder's equity | $ | 212,861 | |||
See notes to unaudited condensed consolidated financial statements.
| Nine Months Ended September 30, | |||||
|---|---|---|---|---|---|
| 2004 |
2003 | ||||
| Cash flows from operating activities: | |||||
| Net income | $ 10,324 | $ 5,792 | |||
| Adjustments to reconcile net income to net cash provided | |||||
| by operating activities: | |||||
| Depreciation and amortization of property and equipment | 8,966 | 7,908 | |||
| Deferred taxes | 7,535 | 5,739 | |||
| Compensation expense related to restricted stock | 1,593 | — | |||
| Gain on sale of assets | (248 | ) | (60 | ) | |
| Other assets | 696 | (110 | ) | ||
| Changes in working capital: | |||||
| Accounts receivable, net | (5,273 | ) | 553 | ||
| Prepaid expenses and other current assets | 219 | (201 | ) | ||
| Accounts payable | (6,731 | ) | (4,225 | ) | |
| Accrued expenses | 3,756 | 7,799 | |||
| Net cash provided by operating activities | 20,837 | 23,195 | |||
| Cash flows from investing activities: | |||||
| Purchases of property and equipment, net | (2,407 | ) | (3,173 | ) | |
| Net cash used in investing activities | (2,407 | ) | (3,173 | ) | |
| Cash flows from financing activity: | |||||
| Proceeds from stock offering, net | 55,871 | — | |||
| Proceeds from stock options exercised | 3,500 | 22 | |||
| Purchase of treasury stock | (2,767 | ) | — | ||
| Net payments on revolver | (6,000 | ) | (14,000 | ) | |
| Payments on long-term debt | (69,034 | ) | (6,044 | ) | |
| Net cash used in financing activities | (18,430 | ) | (20,022 | ) | |
| 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 | $ 2,995 | $ 4,951 | |||
| Income Taxes | $ 477 | $ — | |||
See notes to unaudited condensed consolidated financial statements.
Our accompanying unaudited condensed consolidated financial statements of Hub Group, Inc. (“we,“us” or “our”) 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, we believe that the disclosures contained herein are adequate to make the information presented not misleading.
The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position and results of operations for the three months and nine months ended September 30, 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 our 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.
During the year ended December 31, 2003 we recorded a severance charge for 165 employees of $876,000. We recorded severance charges of $115,000 for 20 employees during the quarter ended March 31, 2004 and $191,000 for 20 employees during the quarter ended June 30, 2004. An additional severance charge of $184,000 for 35 employees was recorded during the quarter ended September 30, 2004. Total severance charges recorded during the nine months ended September 30, 2004 were $490,000 for 75 employees. All severance payments were made as of September 30, 2004.
In the fourth quarter of 2002, we recorded a $458,000 liability for the remaining lease obligation related to a closed facility. During the quarter ended June 30, 2003 we recorded a liability of $180,000 for the estimated remaining lease obligation and closing costs related to a facility in Detroit. We closed two operating centers during the quarter ended September 30, 2004 and recorded a $118,000 liability for the estimated remaining lease obligations related to the closed facilities. Lease and closing cost payments made during 2004 were $182,000. Payments made in the quarters ended March 31, 2004, June 30, 2004 and September 30. 2004 were $72,000, $45,000 and $65,000, respectively. The liability related to consolidation of facilities at September 30, 2004 is $297,000.
The following table displays the activity and balances of the restructuring reserves for the year ended December 31, 2003 and the nine months ended September 30, 2004 (in thousands):
| Workforce | Consolidation | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Reduction | of Facilities | Total | |||||||||
| Balance at December 31, 2002 | $ | -- | $ | 458 | $ | 458 | |||||
| Additional Restructuring Expenses | 876 | 180 | 1,056 | ||||||||
| Cash Payments | (801 | ) | (277 | ) | (1,078 | ) | |||||
| Balance at December 31, 2003 | 75 | 361 | 436 | ||||||||
| Additional Restructuring Expenses | 115 | -- | 115 | ||||||||
| Cash Payments | (190 | ) | (72 | ) | (262 | ) | |||||
| Balance at March 31, 2004 | -- | 289 | 289 | ||||||||
| Additional Restructuring Expenses | 191 | -- | 191 | ||||||||
| Cash Payments | (191 | ) | (45 | ) | (236 | ) | |||||
| Balance at June 30, 2004 | -- | 244 | 244 | ||||||||
| Additional Restructuring Expenses | 184 | 118 | 302 | ||||||||
| Cash Payments | (184 | ) | (65 | ) | (249 | ) | |||||
| Balance at September 30. 2004 | $ | -- | $ | 297 | $ | ||||||