Form 10-Q
Table of Contents

 

 

UNITED STATES

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 September 30, 2012 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

incorporation or organization)

 

(I.R.S. Employer

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

  Large Accelerated Filer    x   Accelerated Filer   ¨
  Non-Accelerated Filer    ¨   Smaller Reporting Company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act).    Yes  ¨    No  x

On October 24, 2012, the registrant had 37,105,441 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.

 

 

 


Table of Contents

HUB GROUP, INC.

INDEX

 

     Page  

PART I. Financial Information:

  

Hub Group, Inc. - Registrant

  

Consolidated Balance Sheets – September  30, 2012 (unaudited) and December 31, 2011

     3   

Unaudited Consolidated Statements of Income and Other Comprehensive Income - Three Months and Nine Months Ended September 30, 2012 and 2011

     4   

Unaudited Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2012 and 2011

     5   

Notes to Unaudited Consolidated Financial Statements

     6   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     12   

Quantitative and Qualitative Disclosures about Market Risk

     20   

Controls and Procedures

     20   

PART II. Other Information

     20   

 

2


Table of Contents

HUB GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

     September 30,
2012
    December 31,
2011
 
     (unaudited)        

ASSETS

    

CURRENT ASSETS:

    

Cash and cash equivalents

   $ 79,585      $ 49,091   

Accounts receivable trade, net

     385,821        326,537   

Accounts receivable other

     22,060        23,878   

Prepaid taxes

     139        2,392   

Deferred taxes

     4,329        4,838   

Prepaid expenses and other current assets

     10,972        9,056   
  

 

 

   

 

 

 

TOTAL CURRENT ASSETS

     502,906        415,792   

Restricted investments

     16,529        14,323   

Property and equipment, net

     151,195        124,587   

Other intangibles, net

     20,445        21,667   

Goodwill, net

     263,306        263,470   

Other assets

     2,161        2,845   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 956,542      $ 842,684   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

CURRENT LIABILITIES:

    

Accounts payable trade

   $ 237,790      $ 204,693   

Accounts payable other

     22,579        17,289   

Accrued payroll

     15,551        16,721   

Accrued other

     47,248        29,962   

Current portion of capital lease

     2,292        2,237   
  

 

 

   

 

 

 

TOTAL CURRENT LIABILITIES

     325,460        270,902   

Non-current liabilities

     19,239        17,717   

Non-current portion of capital lease

     21,684        23,436   

Deferred taxes

     98,769        91,764   

STOCKHOLDERS’ EQUITY:

    

Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2012 and 2011

     —          —     

Common stock

    

Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2012 and 2011; 37,105,441 outstanding in 2012 and 36,860,260 shares outstanding in 2011

     412        412   

Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2012 and 2011

     7        7   

Additional paid-in capital

     166,148        168,800   

Purchase price in excess of predecessor basis, net of tax benefit of $10,306

     (15,458     (15,458

Retained earnings

     450,297        401,188   

Other comprehensive income

     2        4   

Treasury stock; at cost 4,119,351 shares in 2012 and 4,364,532 shares in 2011

     (110,018     (116,088
  

 

 

   

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

     491,390        438,865   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 956,542      $ 842,684   
  

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND OTHER COMPREHENSIVE INCOME

(in thousands, except per share amounts)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  

Revenue

   $ 804,888      $ 752,179      $ 2,323,085      $ 1,988,759   

Transportation costs

     713,301        665,478        2,060,398        1,760,022   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     91,587        86,701        262,687        228,737   

Costs and expenses:

        

Salaries and benefits

     31,385        32,002        96,120        91,525   

Agent fees and commissions

     13,810        13,884        41,106        28,400   

General and administrative

     14,430        12,612        39,741        37,523   

Depreciation and amortization

     1,611        1,560        5,008        3,968   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

     61,236        60,058        181,975        161,416   

Operating income

     30,351        26,643        80,712        67,321   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

        

Interest expense

     (300     (236     (908     (319

Interest and dividend income

     37        41        104        118   

Other, net

     (17     17        (58     286   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other (expense) income

     (280     (178     (862     85   

Income before provision for income taxes

     30,071        26,465        79,850        67,406   

Provision for income taxes

     11,576        10,189        30,741        26,242   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 18,495      $ 16,276      $ 49,109      $ 41,164   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income:

        

Foreign currency translation adjustments

     —          (5     (2     (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 18,495      $ 16,271      $ 49,107      $ 41,159   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per common share

   $ 0.50      $ 0.44      $ 1.32      $ 1.12   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.50      $ 0.44      $ 1.32      $ 1.11   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic weighted average number of shares outstanding

     37,079        36,923        37,064        36,903   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average number of shares outstanding

     37,206        37,065        37,180        37,049   
  

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

4


Table of Contents

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Nine Months Ended
September 30,
 
     2012     2011  

Cash flows from operating activities:

    

Net income

   $ 49,109      $ 41,164   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     16,300        10,944   

Deferred taxes

     7,693        7,189   

Compensation expense related to share-based compensation plans

     4,826        3,675   

Loss (gain) on sale of assets

     42        (16

Excess tax benefits from share-based compensation

     (97     —     

Changes in operating assets and liabilities, net of effects of acquisition:

    

Restricted investments

     (2,206     362   

Accounts receivable, net

     (57,417     (57,275

Prepaid taxes

     2,253        167   

Prepaid expenses and other current assets

     (1,913     (2,275

Other assets

     685        406   

Accounts payable

     38,386        29,316   

Accrued expenses

     8,917        12,881   

Non-current liabilities

     1,210        (344
  

 

 

   

 

 

 

Net cash provided by operating activities

     67,788        46,194   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Proceeds from sale of equipment

     819        316   

Purchases of property and equipment

     (34,671     (35,382

Cash used in acquisitions, net of cash acquired

     (425     (83,057
  

 

 

   

 

 

 

Net cash used in investing activities

     (34,277     (118,123
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from stock options exercised

     46        78   

Stock tendered for payments of withholding taxes

     (1,800     (1,513

Capital lease payments

     (1,697     (185

Excess tax benefits from share-based compensation

     443        1,069   
  

 

 

   

 

 

 

Net cash used in financing activities

     (3,008     (551
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (9     (12
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     30,494        (72,492

Cash and cash equivalents beginning of period

     49,091        115,144   
  

 

 

   

 

 

 

Cash and cash equivalents end of period

   $ 79,585      $ 42,652   
  

 

 

   

 

 

 

Supplemental disclosures of cash paid for:

    

Interest

   $ 917      $ 238   

Income taxes

   $ 20,286      $ 11,784   

See notes to unaudited consolidated financial statements.

 

5


Table of Contents

HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. Interim Financial Statements

Our accompanying unaudited 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 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 as of September 30, 2012 and results of operations for the three months and nine months ended September 30, 2012 and 2011.

These unaudited 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, 2011. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

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

 

NOTE 2. Acquisition

The following unaudited pro forma consolidated results of operations for 2011 assume that the acquisition of Mode was completed as of January 1, 2011 (in thousands, except for per share amounts):

 

     Nine Months
Ended
September 30,
2011
 

Revenue

   $ 2,167,037   

Net income

   $ 41,976   

Earnings per share

  

Basic

   $ 1.14   

Diluted

   $ 1.13   

The unaudited pro forma consolidated results for the nine month period was prepared using the acquisition method of accounting and are based on the historical financial information of Hub and Mode. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the consolidated results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, 2011.

 

NOTE 3. Business Segments

We report two business segments. The first segment is Mode, which includes the Mode business we acquired on April 1, 2011. The second segment is Hub, which is all business other than Mode.

Mode has independent business owners who sell and operate the business throughout North America as well as sales only agents. Mode also has a company managed operation and corporate offices in Dallas, TX, a temperature protected services division, Temstar, located in Downers Grove, IL and corporate offices in Memphis, TN.

 

6


Table of Contents

Mode markets and operates its freight transportation services, consisting of intermodal, truck brokerage and logistics, primarily through agents who enter into contractual arrangements with Mode.

Hub offers comprehensive intermodal, truck brokerage and logistics services. Our employees operate the freight through a network of operating centers located in the United States and Mexico. Each operating center is strategically located in a market with a significant concentration of shipping customers and one or more railheads. Hub has full time employees located throughout the United States and Mexico.

The following is a summary of operating results and certain other financial data for our business segments (in thousands):

 

     Three Months Ended September 30, 2012      Three Months Ended September 30, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Revenue

   $ 619,336       $ 199,903       $ (14,351   $ 804,888       $ 560,810       $ 197,761       $ (6,392   $ 752,179   

Transportation costs

     552,071         175,581         (14,351     713,301         497,204         174,666         (6,392     665,478   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross margin

     67,265         24,322         —          91,587         63,606         23,095         —          86,701   

Costs and expenses:

                     

Salaries and benefits

     27,852         3,533         —          31,385         26,884         5,118         —          32,002   

Agent fees and commissions

     401         13,409         —          13,810         660         13,224         —          13,884   

General and administrative

     12,566         1,864         —          14,430         10,141         2,471         —          12,612   

Depreciation and amortization

     1,118         493         —          1,611         1,003         557         —          1,560   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total costs and expenses

     41,937         19,299         —          61,236         38,688         21,370         —          60,058   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

   $ 25,328       $ 5,023       $ —        $ 30,351       $ 24,918       $ 1,725       $ —        $ 26,643   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Capital expenditures

   $ 11,853       $ 1,775       $ —        $ 13,628       $ 19,996       $ 105       $ —        $ 20,101   

The following tables summarize our revenue by segment and business line (in thousands):

 

     Three Months Ended September 30, 2012      Three Months Ended September 30, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Intermodal

   $ 444,760       $ 92,552       $ (13,240   $ 524,072       $ 401,759       $ 87,852       $ (5,703   $ 483,908   

Truck brokerage

     87,782         79,746         (717     166,811         83,116         81,452         (389     164,179   

Logistics

     86,794         27,605         (394     114,005         75,935         28,457         (300     104,092   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 619,336       $ 199,903       $ (14,351   $ 804,888       $ 560,810       $ 197,761       $ (6,392   $ 752,179   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

7


Table of Contents
     Nine Months Ended September 30, 2012      Nine Months Ended September 30, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Revenue

   $ 1,778,436       $ 581,378       $ (36,729   $ 2,323,085       $ 1,606,607       $ 391,009       $ (8,857   $ 1,988,759   

Transportation costs

     1,584,844         512,283         (36,729     2,060,398         1,423,108         345,771         (8,857     1,760,022   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Gross margin

     193,592         69,095         —          262,687         183,499         45,238         —          228,737   

Costs and expenses:

                     

Salaries and benefits

     84,523         11,597         —          96,120         81,796         9,729         —          91,525   

Agent fees and commissions

     1,526         39,580         —          41,106         2,049         26,351         —          28,400   

General and administrative

     34,004         5,737         —          39,741         32,464         5,059         —          37,523   

Depreciation and amortization

     3,338         1,670         —          5,008         2,890         1,078         —          3,968   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total costs and expenses

     123,391         58,584         —          181,975         119,199         42,217         —          161,416   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Operating income

   $ 70,201       $ 10,511       $ —        $ 80,712       $ 64,300       $ 3,021       $ —        $ 67,321   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Capital expenditures

   $ 32,175       $ 2,496       $ —        $ 34,671       $ 35,250       $ 132       $ —        $ 35,382   

The following tables summarize our revenue by segment and business line (in thousands):

 

     Nine Months Ended September 30, 2012      Nine Months Ended September 30, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Intermodal

   $ 1,280,825       $ 260,823       $ (33,414   $ 1,508,234       $ 1,134,738       $ 164,405       $ (7,795   $ 1,291,348   

Truck brokerage

     247,900         241,062         (2,259     486,703         257,566         162,546         (762     419,350   

Logistics

     249,711         79,493         (1,056     328,148         214,303         64,058         (300     278,061   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 1,778,436       $ 581,378       $ (36,729   $ 2,323,085       $ 1,606,607       $ 391,009       $ (8,857   $ 1,988,759   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

     As of September 30, 2012      As of December 31, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Total assets

   $ 797,194       $ 163,815       $ (4,467   $ 956,542       $ 684,609       $ 162,972       $ (4,897   $ 842,684   

Goodwill

   $ 233,917       $ 29,389       $ —        $ 263,306       $ 234,081       $ 29,389       $ —        $ 263,470   

 

 

8


Table of Contents
NOTE 4. Earnings Per Share

The following is a reconciliation of our earnings per share (in thousands, except for per share data):

 

     Three Months Ended,
September 30,
     Nine Months Ended,
September 30,
 
     2012      2011      2012      2011  

Net income for basic and diluted earnings per share

   $ 18,495       $ 16,276       $ 49,109       $ 41,164   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding – basic

     37,079         36,923         37,064         36,903   

Dilutive effect of stock options and restricted stock

     127         142         116         146   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding – diluted

     37,206         37,065         37,180         37,049   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share – basic

   $ 0.50       $ 0.44       $ 1.32       $ 1.12   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share – diluted

   $ 0.50       $ 0.44       $ 1.32       $ 1.11   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

NOTE 5. Restructuring Charges

Our remaining restructuring accrual as of September 30, 2012 was $0.03 million. This was a reduction from the December 31, 2011 accrual of $0.6 million due to cash payments made and changes in estimate, partially offset by restructuring expense during the first quarter.

All severance charges are included in salaries and benefits and all lease obligation and closing costs are included in general and administrative in the Consolidated Statements of Income and Other Comprehensive Income.

The following table displays the activity and balances of the restructuring reserves in the Consolidated Balance Sheets (in thousands):

 

     Hub
Headcount
Reduction
    Hub
Consolidation
of Facilities
    Hub
Total
    Mode
Headcount
Reduction
    Hub
Group
Total
 

Balance at December 31, 2011

   $ 364      $ 137      $ 501      $ 113      $ 614   

Restructuring expenses

     9        23        32        —          32   

Change in estimate

     (39     (23     (62     (2     (64

Cash payments made

     (109     (41     (150     (90     (240
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

   $ 225      $ 96      $ 321      $ 21      $ 342   

Restructuring expenses

     —          —          —          —          —     

Change in estimate

     (9     (49     (58     1        (57

Cash payments made

     (211     (23     (234     (6     (240
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

   $ 5      $ 24      $ 29      $ 16      $ 45   

Restructuring expenses

     —          —          —          —          —     

Change in estimate

     (5     —          (5     —          (5

Cash payments made

     —          (6     (6     (4     (10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2012

   $ —        $ 18      $ 18      $ 12      $ 30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

NOTE 6. Fair Value Measurement

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of September 30, 2012 and December 31, 2011 due to their short-term nature.

Cash and cash equivalents as of December 31, 2011 included $42.5 million invested in a money market fund comprised of U.S. treasury securities and repurchase agreements for these securities.

Restricted investments included $16.5 million and $14.3 million as of September 30, 2012 and December 31, 2011, respectively, of mutual funds which are reported at fair value.

 

9


Table of Contents

The fair value measurement of cash equivalents and restricted investments is based on quoted prices in active markets for identical assets which are defined as “Level 1” of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification.

 

NOTE 7. Capital Lease and Financing Arrangements

We have standby letters of credit that expire at various dates in 2012 and 2013. As of September 30, 2012, the outstanding letters of credit totaled $3.0 million.

We had $47.0 million of unused and available borrowings under our bank revolving line of credit as of September 30, 2012. We were in compliance with our debt covenants as of September 30, 2012.

Beginning August 1, 2011, we entered into an agreement to lease 3,126 chassis for a period of 10 years. We are accounting for this lease as a capital lease. Interest on this capital lease obligation is based on interest rates that approximated available interest rates at the inception of the lease.

We paid interest of $0.2 million related to this capital lease during the quarter ended September 30, 2012 and $0.7 million during the nine months ended September 30, 2012.

 

NOTE 8. Guarantees

As a recruiting tool and a benefit to our owner-operators, we are guaranteeing certain owner-operators’ lease payments for tractors. The guarantees expire at various dates beginning in 2012 through 2019.

The potential maximum exposure under these lease guarantees was approximately $44.7 million and $24.0 million as of September 30, 2012 and December 31, 2011, respectively. The potential maximum exposure represents the amount of the remaining lease payments on all outstanding guaranteed leases as of September 30, 2012 and December 31, 2011. However, upon default, we have the option to purchase the tractors. We could then sell the tractors and use the proceeds to recover all or a portion of the amounts paid under the guarantees. Alternatively, we can contract with another owner-operator who would assume the lease. There were no material defaults during the periods ended September 30, 2012 and December 31, 2011 and no potential material defaults.

We had a liability of approximately $0.9 million as of September 30, 2012 and $0.5 million as of December 31, 2011, representing the fair value for estimated defaults of the guarantees, based on a discounted cash-flow analysis which is included in current and non-current liabilities in our Consolidated Balance Sheets. We are amortizing the amounts over the remaining lives of the respective guarantees.

 

NOTE 9. Commitments and Contingencies

We have entered into equipment purchase contracts for the acquisition of 2,100 53' containers. We expect the total cost of purchasing the containers to be approximately $24.1 million. We received 1,729 containers in the third quarter and expect to take delivery of the remaining 371 containers by the middle of November 2012.

 

NOTE 10. Legal Matters

We are a party to litigation incident to our business, including bankruptcy preference claims, claims for personal injury and/or property damage, freight lost or damaged in transit, improperly shipped or improperly billed. Some of the lawsuits to which we are party are covered by insurance and are being defended by our insurance carriers. Some of the lawsuits are not covered by insurance and we defend those ourselves. We do not believe that the outcome of this litigation will have a materially adverse effect on our financial position or results of operations.

 

10


Table of Contents
NOTE 11.   New Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued an update to Topic 820 - Fair Value Measurements and Disclosures of the Accounting Standards Codification. This update provides guidance on how fair value accounting should be applied where its use is already required or permitted by other standards. The guidance does not extend the use of fair value accounting. We adopted this guidance effective January 1, 2012, as required, and the adoption did not have a significant impact to our consolidated financial statements.

In June 2011, the FASB issued an update to Topic 220 - Comprehensive Income of the Accounting Standards Codification. The update is intended to increase the prominence of other comprehensive income in the financial statements. The guidance requires that we present components of comprehensive income in either one continuous or two separate, but consecutive, financial statements and no longer permits the presentation of comprehensive income in the Consolidated Statement of Shareholders’ Equity. We adopted this new guidance effective January 1, 2012, as required. The adoption did not have a significant impact on our consolidated financial statements. We are now presenting components of comprehensive income on one statement, our unaudited Consolidated Statements of Income and Other Comprehensive Income.

In July 2012, the FASB issued an update to Topic 350 – Intangibles – Goodwill and Other of the Accounting Standards Codification. The objective of this update is to simplify how entities test indefinite lived intangibles for impairment. The amendments in the update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a the indefinite lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. We are still evaluating if we will early adopt this guidance or adopt it effective January 1, 2013 as required, and do not expect the adoption to have a significant impact to our consolidated financial statements.

 

11


Table of Contents

HUB GROUP, INC.

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “hopes,” “believes,” “intends,” “estimates,” “anticipates,” and variations of these words and similar expressions are intended to identify these forward-looking statements. 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. We assume no liability to update any such forward-looking statements contained in this quarterly report. Factors that could cause our actual results to differ materially include:

 

   

the degree and rate of market growth in the domestic intermodal, truck brokerage and logistics markets served by us;

 

   

deterioration in our relationships with existing railroads or adverse changes to the railroads’ operating rules;

 

   

changes in rail service conditions or adverse weather conditions;

 

   

further consolidation of railroads;

 

   

the impact of competitive pressures in the marketplace, including entry of new competitors, direct marketing efforts by the railroads or marketing efforts of asset-based carriers;

 

   

changes in rail, drayage and trucking company capacity;

 

   

railroads moving away from ownership of intermodal assets;

 

   

equipment shortages or equipment surplus;

 

   

changes in the cost of services from rail, drayage, truck or other vendors;

 

   

increases in costs for independent contractors due to regulatory, judicial and legal changes;

 

   

labor unrest in the rail, drayage or trucking company communities;

 

   

general economic and business conditions;

 

   

inability to successfully protect our data against cyber attacks;

 

   

significant deterioration in our customers’ financial condition, particularly in the retail, consumer products and durable goods sectors;

 

   

fuel shortages or fluctuations in fuel prices;

 

   

increases in interest rates;

 

   

changes in homeland security or terrorist activity;

 

   

difficulties in maintaining or enhancing our information technology systems;

 

   

changes to or new governmental regulations;

 

   

significant increases to health insurance costs due to the Health Care and Education Reconciliation Act of 2010;

 

   

loss of several of our largest customers and Mode agents;

 

   

inability to recruit and retain key personnel and Mode sales agents and IBOs;

 

   

inability to recruit and maintain drivers and owner-operators;

 

   

changes in insurance costs and claims expense;

 

   

changes to current laws which will aid union organizing efforts; and

 

   

inability to close and successfully integrate any future business combinations, including Mode.

EXECUTIVE SUMMARY

Hub Group, Inc. (“we”, “us” or “our”) reports two distinct business segments, Hub and Mode. The Mode segment includes only the business we acquired on April 1, 2011. The Hub segment includes all business other than Mode. Hub Group (as opposed to just Hub), refers to the consolidated results for the whole company, including both the Mode and Hub segments. For the segment financial results, refer to Note 3.

 

12


Table of Contents

We are the largest intermodal marketing company (“IMC”) in the United States and a full service transportation provider offering intermodal, truck brokerage and logistics services. We operate through a nationwide network of operating centers and independent business owners.

As an IMC, we arrange for the movement of our customers’ freight in containers and trailers over long distances. We contract with railroads to provide transportation for the long-haul portion of the shipment and with local trucking companies, known as “drayage companies,” for local pickup and delivery. As part of the intermodal services, we negotiate rail and drayage rates, electronically track shipments in transit, consolidate billing and handle claims for freight loss or damage on behalf of our customers.

Approximately 64% of the Hub segment’s drayage services are provided by our subsidiary, Comtrak Logistics, Inc. (“Comtrak”), which assists us in providing reliable, cost effective intermodal services to our customers. Comtrak has terminals in Atlanta, Birmingham, Charleston, Charlotte, Chattanooga, Chicago, Cleveland, Columbus (OH), Dallas, Harrisburg, Huntsville, Indianapolis, Jacksonville, Kansas City, Milwaukee, Memphis, Nashville, Newark, Los Angeles, Perry (FL), Philadelphia, Savannah, Seattle, St. Louis, Stockton, and Titusville (FL). As of September 30, 2012, Comtrak owned 260 tractors, leased or owned 448 trailers, employed 251 drivers and contracted with 2,102 owner-operators.

We also arrange for the transportation of freight by truck, providing customers with another option for their transportation needs. We match the customers’ needs with carriers’ capacity to provide the most effective service and price combinations. As part of our truck brokerage services, we negotiate rates, track shipments in transit and handle claims for freight loss or damage on behalf of our customers.

Our logistics service consists of complex transportation management services, including load consolidation, mode optimization and carrier management. These service offerings are designed to take advantage of the increasing trend for shippers to outsource all or a greater portion of their transportation needs.

Hub has full time marketing representatives throughout North America who service local, regional and national accounts. We believe that fostering long-term customer relationships is critical to our success and allows us to better understand our customers’ needs and specifically tailor our transportation services to them.

Hub’s yield management group works with pricing and operations to enhance Hub’s customer margins. We are working on margin enhancement projects including matching up inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, using Comtrak more, and reviewing and improving low margin loads, lanes and customers.

Hub’s top 50 customers represent approximately 64% of the Hub segment revenue for the nine months ended September 30, 2012. We use various performance indicators to manage our business. We closely monitor margin and gains and losses for our top 50 customers. We also evaluate on-time performance, cost per load and daily sales outstanding by customer account. Vendor cost changes and vendor service issues are also monitored closely.

Mode has approximately 93 Independent Business Owners “IBOs” who sell and operate the business throughout North America and 124 sales only agents. Mode also has a company managed operation and corporate offices in Dallas, a temperature protected services division, Temstar, located in Downers Grove, IL and corporate offices in Memphis. Mode’s top 20 customers represent approximately 38% of the Mode segment revenue for the nine months ended September 30, 2012. We closely monitor revenue and margin for these customers.

 

13


Table of Contents

RESULTS OF OPERATIONS

Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

The following table summarizes our revenue by segment and business line (in thousands) for the three months ended September 30:

 

     Three Months Ended September 30, 2012      Three Months Ended September 30, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Intermodal

   $ 444,760       $ 92,552       $ (13,240   $ 524,072       $ 401,759       $ 87,852       $ (5,703   $ 483,908   

Truck brokerage

     87,782         79,746         (717     166,811         83,116         81,452         (389     164,179   

Logistics

     86,794         27,605         (394     114,005         75,935         28,457         (300     104,092   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 619,336       $ 199,903       $ (14,351   $ 804,888       $ 560,810       $ 197,761       $ (6,392   $ 752,179   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Revenue

Hub Group’s revenue increased 7.0% to $804.9 million in 2012 from $752.2 million in 2011.

The Hub segment revenue increased 10.4% to $619.3 million. Hub intermodal revenue increased 10.7% to $444.8 million due to an 8.5% increase in loads and a 2.2% increase for fuel, price and mix. Hub truck brokerage revenue increased 5.6% to $87.8 million due primarily to a 13% increase in loads partially offset by a 7% decrease in length of haul. Hub logistics revenue increased 14.3% to $86.8 million related primarily to a combination of growth from transactional business as opposed to management fee business and existing and new customer growth.

Mode revenue increased 1.1% to $199.9 million in 2012 from $197.8 million in 2011. Mode intermodal revenue increased 5% while Mode truck brokerage and logistic revenues decreased 2% and 3%, respectively.

Gross Margin

Hub Group’s gross margin increased 5.6% to $91.6 million in 2012 from $86.7 million in 2011.

The Hub segment gross margin increased 5.7% to $67.3 million. Hub’s $3.7 million margin increase is due to growth in truck brokerage and logistics. The truck brokerage increase is due to more cost effective purchasing, success in bids and the new organization executing well. Logistics benefited from yield improvement and an increase in business with both new and existing customers. Hub’s gross margin as a percentage of sales decreased to 10.9% as compared to last year’s 11.3% margin. This decrease is due to a lower intermodal yield partially offset by higher truck brokerage and logistics yields.

Mode’s gross margin increased 5.3% to $24.3 million in 2012 from $23.1 million in 2011 due to an increase in yield and a positive adjustment to the bad debt reserve of $0.7 million. Mode’s gross margin as a percentage of revenue increased to 12.2% in 2012 from 11.7% in 2011.

 

14


Table of Contents

CONSOLIDATED OPERATING EXPENSES

The following table includes certain items in the consolidated statements of income as a percentage of revenue:

 

     Three Months Ended
September 30,
 
     2012     2011  

Revenue

     100.0     100.0

Transportation costs

     88.6        88.5   
  

 

 

   

 

 

 

Gross margin

     11.4        11.5   

Costs and expenses:

    

Salaries and benefits

     3.9        4.3   

Agent fees and commissions

     1.7        1.8   

General and administrative

     1.8        1.7   

Depreciation and amortization

     0.2        0.2   
  

 

 

   

 

 

 

Total costs and expenses

     7.6        8.0   

Operating income

     3.8        3.5   

Salaries and Benefits

As a percentage of revenue, Hub Group’s salaries and benefits decreased to 3.9% in 2012 from 4.3% in 2011 due to increased revenue and lower salary and benefit costs. Hub Group’s salaries and benefits decreased to $31.4 million in 2012 from $32.0 million in 2011. Decreases in employee bonuses of $0.6 million and salaries of $0.5 million were partially offset by increases in compensation related to restricted stock awards of $0.3 million, commissions of $0.1 million and employee benefits of $0.1 million.

The Hub segment increase of $1.0 million was due to increases in salaries of $0.5 million, compensation related to restricted stock awards of $0.3 million, employee benefits of $0.3 million and commissions of $0.2 million partially offset by a decrease in employee bonuses of $0.3 million. The increase in salaries is primarily the result of merit increases and a headcount increase of 34 employees.

Mode’s salaries and benefits expense decreased to $3.5 million in 2012 from $5.1 million in 2011. The decrease was due to 49 less employees in 2012 and $0.4 million of severance costs incurred in 2011 resulting from a restructuring plan.

Hub Group’s headcount as of September 30, 2012 was 1,339, which excludes drivers, as driver costs are included in transportation costs.

Agent Fees and Commissions

Hub Group’s agent fees and commissions decreased to $13.8 million in 2012 from $13.9 million in 2011. As a percentage of revenue, these expenses decreased to 1.7% in 2012 from 1.8% in 2011 due to less Mode revenue as a percentage of Hub Group’s total revenue.

General and Administrative

Hub Group’s general and administrative expenses increased to $14.4 million in 2012 from $12.6 million in 2011. As a percentage of revenue, these expenses increased slightly to 1.8% in 2012 from 1.7% in 2011.

 

15


Table of Contents

The Hub segment increase of $2.4 million was due primarily to increases in claims expense of $1.5 million and outside consultant expenses of $0.8 million.

Mode’s general and administrative expenses decreased to $1.9 million in 2012 from $2.5 million in 2011. The decrease was primarily due to $0.4 million of integration costs in 2011 that did not reoccur in 2012 and the reduction of rent expense from the relocation of our Mode Memphis office to our Comtrak Memphis location.

Depreciation and Amortization

Hub Group’s depreciation and amortization remained consistent at $1.6 million in both 2012 and 2011.

This expense as a percentage of revenue remained constant at 0.2% in both 2012 and 2011.

Other Income (Expense)

Hub Group’s interest expense increased to $0.3 million in 2012 from $0.2 million in 2011. This increase was due primarily to interest on capital leases for chassis which started on August 1, 2011.

Provision for Income Taxes

The provision for income taxes increased to $11.6 million in 2012 from $10.2 million in 2011. This increase was entirely a result of our 2012 increase in pretax income. Our effective rate was 38.5% in both 2012 and 2011.

Net Income

Net income increased to $18.5 million in 2012 from $16.3 million in 2011 due primarily to higher gross margin at both the Hub and Mode segments.

Earnings Per Common Share

Basic earnings per share were $0.50 in 2012 and $0.44 in 2011. Basic earnings per share increased due to the increase in net income.

Diluted earnings per share were $0.50 in 2012 and $0.44 in 2011. Diluted earnings per share increased due to the increase in net income.

 

16


Table of Contents

Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

The following table summarizes our revenue by segment and business line (in thousands) for the nine months ended September 30:

 

     Nine Months Ended September 30, 2012      Nine Months Ended September 30, 2011  
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
     Hub      Mode      Inter-
Segment
Elims
    Hub
Group
Total
 

Intermodal

   $ 1,280,825       $ 260,823       $ (33,414   $ 1,508,234       $ 1,134,738       $ 164,405       $ (7,795   $ 1,291,348   

Truck brokerage

     247,900         241,062         (2,259     486,703         257,566         162,546         (762     419,350   

Logistics

     249,711         79,493         (1,056     328,148         214,303         64,058         (300     278,061   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenue

   $ 1,778,436       $ 581,378       $ (36,729   $ 2,323,085       $ 1,606,607       $ 391,009       $ (8,857   $ 1,988,759   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Revenue

Hub Group’s revenue increased 16.8% to $2.3 billion in 2012 from $2.0 billion in 2011.

The Hub segment revenue increased 10.7% to $1.8 billion. Hub intermodal revenue increased 12.9% to $1.3 billion million due to a 10.7% increase in loads and an increase for fuel and price partially offset by slightly lower mix. Hub truck brokerage revenue decreased 3.8% to $247.9 million primarily due to a 6% reduction in length of haul partially offset by a 3% increase in loads. Hub logistics revenue increased 16.5% to $249.7 million related primarily to a combination of growth from transactional business as opposed to management fee business and existing and new customer growth.

The Mode segment revenue was $581.4 million which increased from $391.0 million due to being owned by Hub Group for the full nine months in 2012 versus six months in 2011.

Gross Margin

Hub Group’s gross margin increased 14.8% to $262.7 million in 2012 from $228.7 million in 2011.

The Hub segment gross margin increased 5.5% to $193.6 million. Hub’s $10.1 million gross margin increase came primarily from Hub intermodal and logistics. Hub intermodal margin grew primarily due to 10.7% volume growth. Logistics benefited from an increase in business from both new and existing customers. As a percentage of Hub segment revenue, gross margin decreased to 10.9% in 2012 from 11.4% in 2011. This decrease is due to intermodal yield being down since our price increases and savings from operational improvements did not fully offset the cost increases from rail vendors.

The Mode segment gross margin for the period was $69.1 million, which is 11.9% as a percentage of Mode’s revenue. The increase in gross margin of $23.9 million is primarily due to Mode being owned by Hub Group for the nine months in 2012 versus six months in 2011.

 

17


Table of Contents

CONSOLIDATED OPERATING EXPENSES

The following table includes certain items in the consolidated statements of income as a percentage of revenue:

 

     Nine Months Ended
September 30,
 
     2012     2011  

Revenue

     100.0     100.0

Transportation costs

     88.7        88.5   
  

 

 

   

 

 

 

Gross margin

     11.3        11.5   

Costs and expenses:

    

Salaries and benefits

     4.1        4.6   

Agent fees and commissions

     1.8        1.4   

General and administrative

     1.7        1.9   

Depreciation and amortization

     0.2        0.2   
  

 

 

   

 

 

 

Total costs and expenses

     7.8        8.1   

Operating income

     3.5        3.4   

Salaries and Benefits

Hub Group’s salaries and benefits increased to $96.1 million in 2012 from $91.5 million in 2011. As a percentage of revenue, salaries and benefits decreased to 4.1% in 2012 from 4.6% in 2011 due to increased revenue and the inclusion of Mode for the full nine months in 2012 versus six months in 2011. Mode’s business model of using IBO’s to market and operate their freight versus Hub’s employee model lowered salaries and benefit expense as a percentage of revenue.

The Hub segment salaries and benefits increase of $2.7 million was due primarily to increases in salaries of $3.5 million, compensation related to restricted stock awards of $1.0 million and employee benefits of $0.4 million. These increases were partially offset by decreases in employee bonuses of $2.0 million and commissions of $0.2 million.

As Mode was owned by Hub Group for nine months in 2012 versus six months in 2011, Mode’s expense increased $1.9 million year over year.

Agent Fees and Commissions

Hub Group’s agent fees and commissions increased to $41.1 million in 2012 from $28.4 million in 2011. As a percentage of revenue, these expenses increased to 1.8% in 2012 from 1.4% in 2011. The increase in expense and the increase in the percentage of revenue was primarily related to the April 1, 2011 acquisition of Mode and Mode’s IBO model being included for the full nine months in 2012 versus six months in 2011.

General and Administrative

Hub Group’s general and administrative expenses increased to $39.7 million in 2012 from $37.5 million in 2011. As a percentage of revenue, these expenses decreased to 1.7% in 2012 from 1.9% in 2011.

The Hub segment increase of $1.5 million was due primarily to increases in claims expense of $1.5 million, outside consultant expenses of $1.2 million and employee training of $0.5 million. These increases were partially offset by $1.7 million of expenses associated with the Mode acquisition purchase in 2011 that did not reoccur in 2012.

The increase in expense related to Mode was approximately $0.7 million due to Mode being included for the full nine months in 2012 versus six months in 2011.

 

18


Table of Contents

Depreciation and Amortization

Hub Group’s depreciation and amortization increased to $5.0 million in 2012 from $4.0 million in 2011. This expense as a percentage of revenue remained constant at 0.2% in both 2012 and 2011.

The increase in expense was related to Mode being owned by Hub Group for nine months in 2012 versus six months in 2011, more intangible amortization and more depreciation related to the addition of computer hardware and software, leasehold improvements and furniture and fixtures.

Other Income (Expense)

Hub Group’s interest expense increased to $0.9 million in 2012 from $0.3 million in 2011. This increase was due primarily to interest on capital leases for chassis which started on August 1, 2011.

Interest and dividend income remained consistent in 2012 and 2011 at $0.1 million.

Other income decreased to $0.1 million of expense in 2012 from $0.3 million of income in 2011. The decrease in other income was primarily due to currency translation loss for 2012 while there was a gain in 2011.

Provision for Income Taxes

The provision for income taxes increased to $30.7 million in 2012 from $26.2 million in 2011. Our 2012 increase in pretax income more than offset our lower 2012 effective tax rate. Our effective rate was 38.5% in 2012 and 38.9% in 2011. The 2011 rate was higher primarily due to the impact of 2011 acquisitions on our deferred tax liability.

Net Income

Net income increased to $49.1 million in 2012 from $41.2 million in 2011 due primarily to higher gross margin and due to Mode being included for the full nine months in 2012 versus six months in 2011.

Earnings Per Common Share

Basic earnings per share increased to $1.32 in 2012 from $1.12 in 2011. Basic earnings per share increased primarily due to the increase in net income partially offset by an increase in basic weighted average shares outstanding.

Diluted earnings per share increased to $1.32 in 2012 from $1.11 in 2011. Diluted earnings per share increased primarily due to the increase in net income partially offset by an increase in diluted weighted average shares outstanding.

LIQUIDITY AND CAPITAL RESOURCES

During the first nine months of 2012, we have funded operations, capital expenditures and stock purchases related to employee withholding upon vesting of restricted stock with cash flows from operations and cash on hand.

Cash provided by operating activities for the nine months ended September 30, 2012 was approximately $67.8 million, which resulted primarily from income of $49.1 million adjusted for non-cash charges of $28.8 million offset by the change in operating assets and liabilities of $10.1 million.

The Mode acquisition has negatively affected our operating cash flows as the Mode business model has a larger variance between days payable outstanding and days sales outstanding than the Hub segment has historically experienced.

 

19


Table of Contents

Net cash used in investing activities for the nine months ended September 30, 2012 was $34.3 million and related primarily to the purchase of containers and transportation equipment of $15.9 million, land for our new corporate headquarters of $10.0 million, computer related hardware and software of $5.7 million and leasehold improvements of $1.8 million. We expect capital expenditures to be between $55 million and $60 million in 2012. Between $15 million and $20 million is for our corporate headquarters, which is a two year project. Another $28 million is for containers and other transportation equipment and the majority of the remainder is for technology related investments.

The net cash used in financing activities for the nine months ended September 30, 2012 was $3.0 million. We used $1.8 million of cash to purchase treasury stock for payments of withholding taxes related to stock compensation, $1.7 million for capital lease payments and reported $0.5 million of excess tax benefits from share-based compensation as a financing cash in-flow.

We have standby letters of credit that expire at various dates in 2012 and 2013. As of September 30, 2012, the outstanding letters of credit totaled $3.0 million.

We had $47.0 million of unused and available borrowings under our bank revolving line of credit as of September 30, 2012. We were in compliance with our debt covenants as of September 30, 2012.

We believe that our cash, cash flow from operations and borrowings available under our Credit Agreement will be sufficient to meet our cash needs for at least the next twelve months.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk related to changes in interest rates on our bank line of credit which may adversely affect our results of operations and financial condition.

 

Item 4. CONTROLS AND PROCEDURES

As of September 30, 2012, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of September 30, 2012. Except as set forth below, there have been no changes in our internal control over financial reporting identified in connection with such evaluation that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On April 1, 2011, we completed the acquisition of Mode. We are currently integrating processes, employees, technologies and operations. Management will continue to evaluate our internal controls over financial reporting as we complete our integration.

PART II. OTHER INFORMATION

 

Item 6. EXHIBITS

The exhibits included as part of the Form 10-Q are set forth in the Exhibit Index immediately preceding such Exhibits and are incorporated herein by reference.

 

20


Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      HUB GROUP, INC.
DATE: November 1, 2012      

/s/ Terri A. Pizzuto

      Terri A. Pizzuto
      Executive Vice President, Chief Financial Officer
      and Treasurer
      (Principal Financial Officer)

 

21


Table of Contents

EXHIBIT INDEX

 

Exhibit No.    Description
31.1    Certification of David P. Yeager, Chairman and Chief Executive Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2    Certification of Terri A. Pizzuto, Executive Vice President, Chief Financial Officer and Treasurer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1    Certification of David P. Yeager and Terri A. Pizzuto, Chief Executive Officer and Chief Financial Officer, respectively, Pursuant to 18 U.S.C. Section 1350.
101    The following financial statements and footnotes from the Hub Group Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Unaudited Consolidated Statements of Income and Other Comprehensive Income; (iii) Unaudited Consolidated Statements of Cash Flows; and (iv) Notes to Unaudited Consolidated Financial Statements.

 

22