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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, 2005 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 of 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 X No   

        On April 19, 2005, the registrant had 9,736,703 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        

Condensed Consolidated Balance Sheets - March 31, 2005 (unaudited) and		  
         December 31, 2004    3  

Unaudited Condensed Consolidated Statements of Income - Three Months		  
         Ended March 31, 2005 and 2004    4  

Unaudited Condensed Consolidated Statement of Stockholders' Equity - Three		  
         Months Ended March 31, 2005    5  

Unaudited Condensed Consolidated Statements of Cash Flows - Three		  
         Months Ended March 31, 2005 and 2004    6  

Notes to Unaudited Condensed Consolidated Financial Statements		    7  

Management's Discussion and Analysis of Financial Condition and		  
         Results of Operations    11  

Quantitative and Qualitative Disclosures related to Market Risk		    16  

Controls and Procedures		    17  

PART II. Other Information		    18  




















2

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

March 31,
2005
 December 31,
2004
ASSETS   (Unaudited)    
    CURRENT ASSETS: 
      Cash and cash equivalents  $    15,570   $    16,806  
      Restricted investments  661   —  
      Accounts receivable 
         Trade, net  139,113   141,079  
         Other  7,527   7,996  
      Deferred taxes  4,412   4,667  
      Prepaid expenses and other current assets  3,715   4,746  
         TOTAL CURRENT ASSETS

  170,998

   175,294

  
    PROPERTY AND EQUIPMENT, net  17,854   19,487  
    GOODWILL, net  215,175   215,175  
    OTHER ASSETS  371   889  
         TOTAL ASSETS  $ 404,398   $ 410,845  
LIABILITIES AND STOCKHOLDERS' EQUITY 
    CURRENT LIABILITIES: 
      Accounts payable 
         Trade  $ 115,250   $ 115,819  
         Other  2,925   1,660  
      Accrued expenses 
         Payroll  10,262   19,542  
         Other  12,031   15,100  
           TOTAL CURRENT LIABILITIES

  140,468

   152,121

  
    DEFERRED TAXES  31,545   31,788  
    STOCKHOLDERS' EQUITY: 
      Preferred stock, $.01 par value, 2,000,000 shares authorized; no shares 
         issued or outstanding in 2005 and 2004  —   —  
      Common stock 
         Class A: $.01 par value; 12,337,700 shares authorized; 9,809,476 shares 
           issued (including treasury stock in 2005) and 9,727,917 outstanding 
            in 2005; 9,635,657 issued and outstanding in 2004  98   96  
         Class B: $.01 par value; 662,300 shares authorized; 662,296 shares 
           issued and outstanding in 2005 and 2004  7   7  
      Additional paid-in capital  187,068   182,365  
      Purchase price in excess of predecessor basis, net of tax benefit of $10,306  (15,458 ) (15,458 )
      Retained earnings  69,959   64,611  
      Unearned compensation  (4,137 ) (4,685 )
      Treasury stock, at cost (81,559 shares in 2005)   (5,152 ) —  
         TOTAL STOCKHOLDERS' EQUITY  232,385   226,936  
           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 404,398   $ 410,845  

See notes to unaudited condensed consolidated financial statements

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

Three Months
Ended March 31,
2005
 2004
Revenue   $339,858   $328,302  
 
Transportation costs  296,613   286,498    
       Gross margin  43,245   41,804    
 
Costs and expenses: 
     Salaries and benefits  21,875   22,342    
     General and administrative  9,752   10,281    
     Depreciation and amortization of property and equipment  2,483   2,884    
       Total costs and expenses  34,110   35,507    
       Operating income  9,135   6,297    
Other income (expense): 
     Interest expense  (207 ) (1,713 )
     Interest income  200   53    
     Other, net  14   41    
       Total other income (expense)  7   (1,619 )
 
Income before provision for income taxes  9,142   4,678  
 
Provision for income taxes  3,794   1,965    
Net income   $     5,348   $  2,713  
Basic earnings per common share  $       0.53   $    0.35    
Diluted earnings per common share  $       0.51   $    0.33    
Basic weighted average number of shares outstanding  10,141   7,746    
Diluted weighted average number of shares outstanding  10,579   8,294    

See notes to unaudited condendsed consolidated financial statements








4

HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2005
(in thousands, except shares)

March 31, 2005
Class A & B Common Stock Shares Outstanding        
  Beginning of year    10,297,953  
  Exercise of non-qualified stock options    173,129  
  Issuance of restricted stock    690  
  Purchase of treasury shares    (97,850 )
  Treasury shares issued under restricted stock and stock option plans    16,291  
   Ending balance    10,390,213  
Class A & B Common Stock Amount  
  Beginning of year   $ 103  
  Issuance of restricted stock and exercise of stock options     2  
   Ending balance    105  
Additional Paid-in Capital  
  Beginning of year    182,365  
  Exercise of non-qualified stock options    1,707  
  Tax benefit of employee stock plans    2,996  
   Ending balance    187,068  
Purchase Price in Excess of Predecessor Basis, Net of Tax  
  Beginning of year    (15,458 )
   Ending balance    (15,458 )
Retained Earnings  
  Beginning of year    64,611  
  Net income    5,348  
   Ending balance    69,959  
Unearned Compensation  
  Beginning of year    (4,685 )
  Issuance of restricted stock awards, net of forfeitures    28  
  Compensation expense related to restricted stock awards    520  
   Ending balance    (4,137 )
Treasury Stock  
  Beginning of year    —  
  Purchase of treasury shares    (5,599 )
  Issuance for restricted stock and exercise of stock options    447  
   Ending balance    (5,152 )
   Total stockholder's equity   $ 232,385  

See notes to unaudited condendsed consolidated financial statements

5

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

Three Months Ended
March 31,
2005
 2004
Cash flows from operating activities:      
    Net income   $   5,348   $   2,713  
    Adjustments to reconcile net income to net cash provided 
       by operating activities: 
         Depreciation and amortization of property and equipment  2,593   2,911  
         Deferred taxes  3,008   1,961  
         Compensation expense related to restricted stock  520   404  
         Gain on sale of assets  (12 ) (18 )
         Other assets  518   188  
         Changes in working capital: 
           Restricted investments  (661 ) —  
           Accounts receivable, net  2,435   3,466  
           Prepaid expenses and other current assets  1,031   462  
           Accounts payable  696   (1,867 )
           Accrued expenses  (12,349 ) (4,072 )
            Net cash provided by operating activities  3,127   6,148  
Cash flows from investing activities: 
    Purchases of property and equipment, net  (948 ) (460 )
            Net cash used in investing activities  (948 ) (460 )
Cash flows from financing activity: 
    Proceeds from stock options exercised  2,184   2,090  
    Purchase of treasury stock  (5,599 ) (2,767 )
    Net payments on revolver  —   (3,000 )
    Payments on long-term debt  —   (2,011 )
            Net cash used in financing activities  (3,415 ) (5,688 )
Net decrease in cash and cash equivalents  (1,236 ) —  
Cash and cash equivalents beginning of period  16,806   —  
Cash and cash equivalents end of period  $      15,570   $             —  
Supplemental disclosures of cash flow information 
    Cash paid for: 
       Interest  $            —   $        1,357  
       Income taxes  $          333   $             —  


See notes to unaudited condensed consolidated financial statements





6

HUB GROUP, INC.

NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.     Interim 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 ended March 31, 2005 and 2004.

        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, 2004. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

NOTE 2.     Restructuring Charges

        During the three months ended March 31, 2005, we recorded a severance charge for 24 employees of $176,000. All severance charges are included in salaries and benefits in the statements of income. Additionally, we recorded charges of $37,000 related to the 2002 restructuring plan as a result of changes in assumptions related to the closing of a facility.

        The following table displays the activity and balances for the restructuring reserves for the three months ended March 31, 2005 (in thousands):

Headcount Consolidation
Reduction of Facilities Total
                                                                
Balance at December 31, 2004   $ –   $ 146   $ 146  
  Additional Restructuring Expenses    176    –    176  
  Cash Payments    (78 )  (79 )  (157 )
  Adjustment for previous estimate    –    37    37  
Balance at March 31, 2005   $98   $104   $202  

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. We have 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 our stock at the date of the grant over the amount an employee must pay to acquire the stock. We grant options at fair market value and therefore recognize no compensation expense.



7

        The following table illustrates the effect on the net income and net income per share if we 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,
2005 2004
     
Net income, as reported   $5,348   $  2,713      
     
Add: Total stock-based compensation included in  
   net income, net of related tax effects  304   234      
Deduct: Total stock-based employee compensation expense
   determined under fair value based method for all		 
   awards, net of related tax effects  (391 ) (401 )
Net income, pro forma  $5,261   $ 2,546         
Earnings per share: 
     
Basic-- as reported  $0.53   $0.35      
Basic-- pro forma  $0.52   $0.33      
Diluted-- as reported  $0.51   $0.33      
Diluted-- pro forma  $0.50   $0.31      

        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.

        In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123 (R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123 (R) is similar to the approach described in Statement 123. However, Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. This statement must be adopted effective January 1, 2006.

        Statement 123 (R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current literature. This requirement will reduce net operating cash flow and increase net financing cash flows in periods after adoption. We cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options).











8

NOTE 4.     Earnings Per Share

        The following is a reconciliation of our earnings per share:

Three Months Ended
March 31, 2005
 Three Months Ended
March 31, 2004
(000's)
 (000's)
Income
 Shares
 Per Share
Amount
 Income
 Shares
 Per Share
Amount
Basic EPS              
      Net Income  $5,348   10,141   $0.53