hubg-10q_20200331.htm
false Q1 0000940942 --12-31 Large Accelerated Filer 0000940942 2020-01-01 2020-03-31 xbrli:shares 0000940942 us-gaap:CommonClassAMember 2020-05-01 0000940942 us-gaap:CommonClassBMember 2020-05-01 iso4217:USD 0000940942 2020-03-31 0000940942 2019-12-31 0000940942 us-gaap:CommonClassAMember 2020-03-31 0000940942 us-gaap:CommonClassAMember 2019-12-31 0000940942 us-gaap:CommonClassBMember 2020-03-31 0000940942 us-gaap:CommonClassBMember 2019-12-31 iso4217:USD xbrli:shares 0000940942 2019-01-01 2019-03-31 0000940942 us-gaap:CommonStockMember 2018-12-31 0000940942 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000940942 hubg:PurchasePriceInExcessOfPredecessorBasisNetOfTaxMember 2018-12-31 0000940942 us-gaap:RetainedEarningsMember 2018-12-31 0000940942 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000940942 us-gaap:TreasuryStockMember 2018-12-31 0000940942 2018-12-31 0000940942 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0000940942 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000940942 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000940942 us-gaap:RetainedEarningsMember us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 2019-03-31 0000940942 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 2019-03-31 0000940942 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000940942 us-gaap:CommonStockMember 2019-03-31 0000940942 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000940942 hubg:PurchasePriceInExcessOfPredecessorBasisNetOfTaxMember 2019-03-31 0000940942 us-gaap:RetainedEarningsMember 2019-03-31 0000940942 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000940942 us-gaap:TreasuryStockMember 2019-03-31 0000940942 2019-03-31 0000940942 us-gaap:CommonStockMember 2019-12-31 0000940942 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0000940942 hubg:PurchasePriceInExcessOfPredecessorBasisNetOfTaxMember 2019-12-31 0000940942 us-gaap:RetainedEarningsMember 2019-12-31 0000940942 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000940942 us-gaap:TreasuryStockMember 2019-12-31 0000940942 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0000940942 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0000940942 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0000940942 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0000940942 us-gaap:CommonStockMember 2020-03-31 0000940942 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0000940942 hubg:PurchasePriceInExcessOfPredecessorBasisNetOfTaxMember 2020-03-31 0000940942 us-gaap:RetainedEarningsMember 2020-03-31 0000940942 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0000940942 us-gaap:TreasuryStockMember 2020-03-31 0000940942 hubg:IntermodalMember 2020-01-01 2020-03-31 0000940942 hubg:IntermodalMember 2019-01-01 2019-03-31 0000940942 hubg:TruckBrokerageMember 2020-01-01 2020-03-31 0000940942 hubg:TruckBrokerageMember 2019-01-01 2019-03-31 0000940942 hubg:LogisticsMember 2020-01-01 2020-03-31 0000940942 hubg:LogisticsMember 2019-01-01 2019-03-31 0000940942 hubg:DedicatedCarrierMember 2020-01-01 2020-03-31 0000940942 hubg:DedicatedCarrierMember 2019-01-01 2019-03-31 0000940942 hubg:FixedRateBorrowingsMember 2020-01-01 2020-03-31 0000940942 hubg:FixedRateBorrowingsMember 2019-01-01 2019-12-31 0000940942 hubg:FixedRateBorrowingsMember 2020-03-31 0000940942 hubg:FixedRateBorrowingsMember 2019-12-31 0000940942 hubg:CreditAgreementMember 2017-07-01 0000940942 hubg:CreditAgreementMember 2017-06-29 2017-07-01 0000940942 hubg:CreditAgreementMember 2020-03-31 0000940942 us-gaap:StandbyLettersOfCreditMember 2020-03-31 0000940942 us-gaap:StandbyLettersOfCreditMember 2020-01-01 2020-03-31 0000940942 us-gaap:RevolvingCreditFacilityMember hubg:BankRevolvingLineOfCreditMember 2020-03-31 0000940942 us-gaap:RevolvingCreditFacilityMember hubg:BankRevolvingLineOfCreditMember 2019-12-31 0000940942 us-gaap:RevolvingCreditFacilityMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFiveMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember 2019-12-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember 2019-12-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyTwoMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyTwoMember 2019-12-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember 2019-12-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember 2019-12-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFiveMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFiveMember hubg:EquipmentNotesCommencingOnTwoThousandTwentyMember 2020-01-01 2020-03-31 xbrli:pure 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFiveMember srt:MinimumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFiveMember srt:MaximumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember hubg:EquipmentNotesCommencingOnTwoThousandEighteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember hubg:EquipmentNotesCommencingOnTwoThousandNineteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember hubg:EquipmentNotesCommencingOnTwoThousandTwentyMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember srt:MinimumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyFourMember srt:MaximumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember hubg:EquipmentNotesCommencingOnTwoThousandEighteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember hubg:EquipmentNotesCommencingOnTwoThousandNineteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember srt:MinimumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyThreeMember srt:MaximumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyTwoMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyTwoMember hubg:EquipmentNotesCommencingOnTwoThousandSeventeenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyTwoMember srt:MinimumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyTwoMember srt:MaximumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember hubg:EquipmentNotesCommencingOnTwoThousandSixteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember hubg:EquipmentNotesCommencingOnTwoThousandSeventeenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember srt:MinimumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyOneMember srt:MaximumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember hubg:EquipmentNotesCommencingOnTwoThousandSixteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember hubg:EquipmentNotesCommencingOnTwoThousandFifteenMember 2020-01-01 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember srt:MinimumMember 2020-03-31 0000940942 hubg:EquipmentNotesDueTwoThousandTwentyMember srt:MaximumMember 2020-03-31 hubg:Plaintiff 0000940942 hubg:RoblesLawsuitsMember 2015-08-04 2015-08-05 hubg:Employee 0000940942 hubg:RoblesAndAdameLawsuitsMember hubg:AccruedOtherMember 2015-08-05 0000940942 us-gaap:SubsequentEventMember 2020-04-01 2020-04-30

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020 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.)

2000 Clearwater Drive

Oak Brook, Illinois 60523

(Address, including zip code, of principal executive offices)

(630) 271-3600

(Registrant’s telephone number, including area code)

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock

 

HUBG

 

NASDAQ

 

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      No  

Indicate by check mark whether the registrant has submitted electronically 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 such files).    Yes      No  

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

 

Large Accelerated Filer

 

Accelerated Filer

 

Non-Accelerated Filer

 

Smaller Reporting Company

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

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

On May 1, 2020, the registrant had 33,527,943 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.

 

 

1


 

 

 

 

HUB GROUP, INC.

INDEX

 

 

Page

PART I.  Financial Information:

 

Item1. Financial Statements

 

Consolidated Balance Sheets – March 31, 2020 (unaudited) and December 31, 2019

3

Unaudited Consolidated Statements of Income and Comprehensive Income – Three Months Ended March 31, 2020 and 2019

4

Unaudited Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2020 and 2019

5

Unaudited Consolidated Statements of Cash Flows – Three Months Ended March 31, 2020 and 2019

6

Notes to Unaudited Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3. Quantitative and Qualitative Disclosures about Market Risk

17

Item 4. Controls and Procedures

17

 

PART II. Other Information

17

 

Item 1. Legal Proceedings

17

Item 1A. Risk Factors

17

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

19

Item 6. Exhibits

19

 

2


 

HUB GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

ASSETS

(unaudited)

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

$

276,880

 

 

$

168,729

 

Accounts receivable trade

 

462,813

 

 

 

450,451

 

Allowance for credit losses

 

(7,795

)

 

 

(6,912

)

Other receivables

 

1,297

 

 

 

3,237

 

Prepaid taxes

 

673

 

 

 

630

 

Prepaid expenses and other current assets

 

14,993

 

 

 

24,086

 

TOTAL CURRENT ASSETS

 

748,861

 

 

 

640,221

 

 

 

 

 

 

 

 

 

Restricted investments

 

18,192

 

 

 

22,601

 

Property and equipment, net

 

668,398

 

 

 

663,165

 

Right-of-use assets - operating leases

 

33,332

 

 

 

35,548

 

Right-of-use assets - financing leases

 

5,298

 

 

 

5,865

 

Other intangibles, net

 

117,511

 

 

 

120,967

 

Goodwill, net

 

484,404

 

 

 

484,459

 

Other assets

 

18,611

 

 

 

18,748

 

TOTAL ASSETS

$

2,094,607

 

 

$

1,991,574

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable trade

$

270,384

 

 

$

257,247

 

Accounts payable other

 

18,085

 

 

 

11,585

 

Accrued payroll

 

23,663

 

 

 

45,540

 

Accrued other

 

84,748

 

 

 

86,686

 

Lease liability - operating leases

 

8,244

 

 

 

8,567

 

Lease liability - financing leases

 

3,064

 

 

 

3,048

 

Current portion of long term debt

 

94,620

 

 

 

94,691

 

TOTAL CURRENT LIABILITIES

 

502,808

 

 

 

507,364

 

 

 

 

 

 

 

 

 

Long term debt

 

284,076

 

 

 

186,934

 

Non-current liabilities

 

35,577

 

 

 

36,355

 

Lease liability - operating leases

 

26,564

 

 

 

28,518

 

Lease liability - financing leases

 

1,051

 

 

 

1,820

 

Deferred taxes

 

155,822

 

 

 

155,304

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

Preferred stock: $.01 par value; 2,000,000 shares authorized;  no shares issued or outstanding in 2020 and 2019

-

 

 

-

 

Common stock

 

 

 

 

 

 

 

Class A:  $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2020 and 2019; 33,544,287 shares outstanding in 2020 and 33,353,904 shares outstanding in 2019

 

412

 

 

 

412

 

Class B:  $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2020 and 2019

 

7

 

 

 

7

 

Additional paid-in capital

 

175,370

 

 

 

179,637

 

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

 

(15,458

)

 

 

(15,458

)

Retained earnings

 

1,192,837

 

 

 

1,179,601

 

Accumulated other comprehensive loss

 

(320

)

 

 

(186

)

Treasury stock; at cost, 7,680,505 shares in 2020 and 7,870,888 shares in 2019

 

(264,139

)

 

 

(268,734

)

TOTAL STOCKHOLDERS' EQUITY

 

1,088,709

 

 

 

1,075,279

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,094,607

 

 

$

1,991,574

 

See notes to unaudited consolidated financial statements.

 

 

3


 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

 

 

Three Months

 

 

Ended March 31,

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Revenue

$

838,859

 

 

$

932,998

 

Transportation costs

 

734,265

 

 

 

805,709

 

Gross margin

 

104,594

 

 

 

127,289

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Salaries and benefits

 

50,876

 

 

 

62,028

 

General and administrative

 

26,336

 

 

 

22,918

 

Depreciation and amortization

 

7,623

 

 

 

6,754

 

Total costs and expenses

 

84,835

 

 

 

91,700

 

 

 

 

 

 

 

 

 

Operating income

 

19,759

 

 

 

35,589

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

(2,455

)

 

 

(3,056

)

Interest and dividend income

 

403

 

 

 

373

 

Other expense, net

 

(222

)

 

 

(40

)

Total other expense

 

(2,274

)

 

 

(2,723

)

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

17,485

 

 

 

32,866

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

4,249

 

 

 

8,972

 

 

 

 

 

 

 

 

 

Net income

 

13,236

 

 

 

23,894

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(134

)

 

 

7

 

 

 

 

 

 

 

 

 

Total comprehensive income

$

13,102

 

 

$

23,901

 

 

 

 

 

 

 

 

 

Basic earnings per common share

$

0.40

 

 

$

0.71

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

$

0.40

 

 

$

0.71

 

 

 

 

 

 

 

 

 

Basic weighted average number of shares outstanding

 

33,159

 

 

 

33,569

 

Diluted weighted average number of shares outstanding

 

33,488

 

 

 

33,585

 

See notes to unaudited consolidated financial statements.

 

 

 

4


 

 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A & B

 

 

 

 

 

 

of Excess of

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Predecessor

 

 

 

 

 

 

Other

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

 

 

 

 

Paid-in

 

 

Basis, Net

 

 

Retained

 

 

Comprehensive

 

 

Stock

 

 

 

 

 

 

Issued

 

 

Amount

 

 

Capital

 

 

of Tax

 

 

Earnings

 

 

Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance December 31, 2018

 

41,887,088

 

 

$

419

 

 

$

172,220

 

 

$

(15,458

)

 

$

1,072,456

 

 

$

(182

)

 

 

(7,431,083

)

 

$

(248,621

)

 

$

980,834

 

Stock withheld for payments of withholding taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(68,908

)

 

 

(2,578

)

 

 

(2,578

)

Issuance of restricted stock awards, net of forfeitures

 

-

 

 

 

-

 

 

 

(13,813

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

385,681

 

 

 

13,813

 

 

 

-

 

Share-based compensation expense

 

-

 

 

 

-

 

 

 

4,933

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,933

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,894

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

23,894

 

Adoption of ASU 2016-02

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(26

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(26

)

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

7

 

Balance March 31, 2019

 

41,887,088

 

 

$

419

 

 

$

163,340

 

 

$

(15,458

)

 

$

1,096,324

 

 

$

(175

)

 

 

(7,114,310

)

 

$

(237,386

)

 

$

1,007,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2019

 

41,887,088

 

 

$

419

 

 

$

179,637

 

 

$

(15,458

)

 

$

1,179,601

 

 

$

(186

)

 

 

(7,870,888

)

 

$

(268,734

)

 

$

1,075,279

 

Stock withheld for payments of withholding taxes

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(71,717

)

 

 

(3,769

)

 

 

(3,769

)

Issuance of restricted stock awards, net of forfeitures

 

-

 

 

 

-

 

 

 

(8,364

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

262,100

 

 

 

8,364

 

 

 

-

 

Share-based compensation expense

 

-

 

 

 

-

 

 

 

4,097

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,097

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,236

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,236

 

Foreign currency translation adjustment

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(134

)

 

 

-

 

 

 

-

 

 

 

(134

)

Balance March 31, 2020

 

41,887,088

 

 

$

419

 

 

$

175,370

 

 

$

(15,458

)

 

$

1,192,837

 

 

$

(320

)

 

 

(7,680,505

)

 

$

(264,139

)

 

$

1,088,709

 

 

 

See notes to unaudited consolidated financial statements


 

 

5


 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

    Net Income

$

13,236

 

 

$

23,894

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

30,576

 

 

 

28,383

 

Deferred taxes

 

696

 

 

 

6,335

 

Compensation expense related to share-based compensation plans

 

4,097

 

 

 

4,933

 

Loss (gain) on sale of assets

 

121

 

 

 

(835

)

Donated equipment

 

240

 

 

 

-

 

Restricted investments

 

4,409

 

 

 

(1,841

)

Accounts receivable, net

 

(9,480

)

 

 

32,906

 

Prepaid taxes

 

(50

)

 

 

447

 

Prepaid expenses and other current assets

 

9,054

 

 

 

12,560

 

Other assets

 

(477

)

 

 

(819

)

Accounts payable

 

19,657

 

 

 

(14,389

)

Accrued expenses

 

(28,551

)

 

 

(30,123

)

Non-current liabilities

 

(2,875

)

 

 

1,982

 

            Net cash provided by operating activities

 

40,653

 

 

 

63,433

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

   Proceeds from sale of equipment

 

497

 

 

 

3,799

 

   Purchases of property and equipment

 

(25,467

)

 

 

(17,057

)

   Proceeds from the disposition of discontinued operations

 

-

 

 

 

19,439

 

            Net cash (used in) provided by investing activities

 

(24,970

)

 

 

6,181

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

   Proceeds from issuance of debt

 

121,444

 

 

 

10,456

 

   Repayments of long-term debt

 

(24,373

)

 

 

(25,780

)

   Stock withheld for payments of withholding taxes

 

(3,769

)

 

 

(2,578

)

   Finance lease payments

 

(747

)

 

 

(740

)

            Net cash provided by (used in) financing activities

 

92,555

 

 

 

(18,642

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Effect of exchange rate changes on cash and cash equivalents

 

(87

)

 

 

(5

)

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

108,151

 

 

 

50,967

 

Cash and cash equivalents beginning of the period

 

168,729

 

 

 

61,435

 

Cash and cash equivalents end of the period

$

276,880

 

 

$

112,402

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash paid for:

 

 

 

 

 

 

 

     Interest

$

2,563

 

 

$

2,749

 

     Income taxes

$

355

 

 

$

191

 

 

See notes to unaudited consolidated financial statements.

 

 

 

6


 

HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1.  Interim Financial Statements

Our accompanying unaudited consolidated financial statements of Hub Group, Inc. (the “Company,” “Hub,” “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 March 31, 2020 and results of operations for the three months ended March 31, 2020 and 2019.

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, 2019. 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.  Earnings Per Share

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

 

 

Three Months Ended, March 31,

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Net income for basic and diluted earnings per share

$

13,236

 

 

$

23,894

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

33,159

 

 

 

33,569

 

 

 

 

 

 

 

 

 

Dilutive effect of restricted stock

 

329

 

 

 

16

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

33,488

 

 

 

33,585

 

 

 

 

 

 

 

 

 

Earnings per share - basic

$

0.40

 

 

$

0.71

 

 

 

 

 

 

 

 

 

Earnings per share - diluted

$

0.40

 

 

$

0.71

 

 

 

NOTE 3.  Revenue from Contracts with Customers

The Company capitalizes commissions incurred in connection with obtaining a Dedicated contract. In 2020 and 2019, the amount of commissions that were capitalized and the amortization related to these commissions were both immaterial. Costs incurred to obtain an intermodal, truck brokerage or logistics contract are expensed as incurred according to the practical expedient that allows contract acquisition costs to be recognized immediately if the deferral period is one year or less.  

Hub offers comprehensive multimodal solutions including intermodal, truck brokerage, logistics and dedicated services. Hub has full time employees located throughout the United States, Canada and Mexico.

Intermodal. As an intermodal provider, we arrange for the movement of our customers’ freight in containers, typically over long distances of 750 miles or more. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. Local pickup and delivery services between origin or destination and rail terminals (referred to as “drayage”) are provided by our subsidiary Hub Group Trucking, Inc. (“HGT”) and third-party local trucking companies.  

 

 

7


 

Truck Brokerage. We operate one of the largest truck brokerage operations, providing customers with an over the road service option for their transportation needs. Our brokerage service does not operate any trucks; instead we match customers’ needs with carriers’ capacity to provide the most effective service and price combination. We have contracts with a substantial base of carriers allowing us to meet the varied needs of our customers. 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.

Logistics. Hub’s logistics business offers a wide range of transportation management services and technology solutions including shipment optimization, load consolidation, mode selection, carrier management, load planning and execution and web-based shipment visibility. Our multi-modal transportation capabilities include small parcel, heavyweight, expedited, less-than-truckload, truckload, intermodal, railcar and international shipping. In 2018, we acquired CaseStack, Inc. (“CaseStack”) which leverages proprietary technology along with collaborative partnerships with retailers and logistics providers to deliver cost savings and performance-enhancing supply chain services to consumer packaged goods clients. CaseStack contracts with third-party warehouse providers in seven markets across North America to which its customers ship their goods to be stored and eventually consolidated, along with goods from other CaseStack customers, into full truckload shipments destined to major North American retailers. CaseStack offers its customers shipment visibility, transportation cost savings, high service levels and compliance with retailers’ increasingly stringent supply chain requirements.

Dedicated Trucking. Our dedicated operation contracts with customers who seek to outsource a portion of their trucking transportation needs. We offer a dedicated fleet of equipment and drivers to each customer, as well as the management and infrastructure to operate according to the customer’s high service expectations. Contracts with customers generally include fixed and variable pricing arrangements and may include charges for early termination which serves to reduce the financial risk we bear with respect to the utilization of our equipment.

The following table summarizes our disaggregated revenue by business line (in thousands):

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

Intermodal

$

495,324

 

 

$

536,032

 

Truck brokerage

 

98,017

 

 

 

117,587

 

Logistics

 

183,255

 

 

 

203,263

 

Dedicated

 

62,263

 

 

 

76,116

 

Total revenue

$

838,859

 

 

$

932,998

 

 

 

NOTE 4.  Fair Value Measurement

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and borrowings under our revolving line of credit approximated fair value as of March 31, 2020 and December 31, 2019. As of March 31, 2020 and December 31, 2019, respectively, the fair value of the Company’s fixed-rate borrowings was $5.6 million and $3.8 million more than the historical carrying value of $278.7 million and $281.6 million. The fair value of the fixed-rate borrowings was estimated using an income approach based on current interest rates available to the Company for borrowings on similar terms and maturities.

We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of March 31, 2020 and December 31, 2019, our cash and temporary investments were with high quality financial institutions in demand deposit accounts (DDAs), savings accounts and an interest bearing checking account.

Restricted investments included $18.2 million and $22.6 million as of March 31, 2020 and December 31, 2019, respectively, of mutual funds which are reported at fair value.  

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2), or unobservable inputs (Level 3). Cash and cash equivalents, mutual funds, accounts receivable and accounts payable are defined as “Level 1,” while long-term debt is defined as “Level 2” of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification.

 

8


 

NOTE 5.  Allowance for Credit Losses

 

On January 1, 2020, we adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326), which replaces the incurred loss methodology with an expected loss methodology that is referred to as the Current Expected Credit Loss (“CECL”). The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade receivables. Results for reporting periods beginning January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable generally accepted accounting principles. In accordance with the standard, trade receivables are reported at amortized cost net of the allowance for credit losses.

 

The allowance for credit losses is a valuation account that is deducted from the trade receivables’ amortized cost basis to present the net amount expected to be collected on the receivables. Trade receivables are charged off against the allowance when we believe the uncollectibility of a receivable balance is confirmed, and the expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

 

We pool into one category our trade receivables that we believe share similar risk characteristics and estimate the allowance balance using an aging schedule based on relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Annually, we review, in hindsight, the percentage of receivables that are collected that aged over one year, those that are less than one year old and the accounts that went into bankruptcy. We provide for credit allowances for accounts less than one year old based on specifically identified uncollectible balances and our historical collection percentages. In establishing an allowance for credit losses for certain account balances specifically identified as uncollectible, we consider the aging of the customer receivables, the specific details as to why the receivable has not yet been paid, the customer’s current and projected financial results, the customer’s ability to meet and sustain its financial commitments, the positive or negative effects of the current and projected industry outlook and general economic conditions. Adjustments to historical loss information are made for differences in current receivable-specific risk characteristics such as differences in delinquency levels or term as well as changes in environmental conditions or other relevant factors.

 

We believe that this historical loss information is a reasonable basis on which to determine expected credit losses because the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit loss percentages. That is, the similar risk characteristics of our customers and our lending practices have not changed significantly over time. However, we have determined that current reasonable and supportable forecasted economic conditions, including the effects of the COVID-19 pandemic, have deteriorated as compared with the economic conditions included in the historical information. As such, the Company adjusted the historical loss rates to reflect the differences in current conditions and forecasted changes for total estimated allowance for credit losses as of March 31, 2020. The allowance for credit losses was $7.8 million and $6.9 million at March 31, 2020 and December 31, 2019, respectively.  There were no material write offs charged or increases to the allowance for credit losses during the first quarter of 2020.   

 

 

 

 

 

NOTE 6.  Long-Term Debt and Financing Arrangements

On July 1, 2017, we entered into a $350 million unsecured credit agreement (the “Credit Agreement”) that matures on July 1, 2022. In March 2020, we elected to borrow $100.0 million under the Credit Agreement as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. The $100.0 million of proceeds from the borrowing may be used for general corporate purposes. At March 31, 2020, we had standby letters of credit that expire at various dates in 2020. As of March 31, 2020, our letters of credit were $30.8 million.

Our unused and available borrowings were $219.2 million as of March 31, 2020 and $318.5 million as of December 31, 2019. We were in compliance with our debt covenants as of March 31, 2020 and December 31, 2019.

We have entered into various Equipment Notes (“Notes”) for the purchase of tractors, trailers and containers. The Notes are secured by the underlying equipment financed in the agreements.

 

9


 

 

 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Borrowings on revolving line of credit

$

100,000

 

 

$

-

 

 

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2025 commencing on various dates in 2020; interest is paid monthly at a fixed annual rate between 1.51% and 1.79%

 

21,444

 

 

 

-

 

 

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2024 commencing on various dates in 2018, 2019 and 2020; interest is paid monthly at a fixed annual rate between 2.50% and 3.59%

 

59,517

 

 

 

62,690

 

 

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2023 commencing on various dates in 2018 and 2019; interest is paid monthly at a fixed annual rate between 2.23% and 4.16%

 

143,445

 

 

 

153,350

 

 

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2022 commencing on various dates in 2017; interest is paid monthly at a fixed annual rate of between 2.20% and 2.80%

 

14,546

 

 

 

16,892

 

 

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2021 commencing on various dates in 2016 and 2017; interest is paid monthly at a fixed annual rate between 2.04% and 2.96%

 

30,142

 

 

 

35,076

 

 

 

 

 

 

 

 

 

Secured Equipment Notes due on various dates in 2020 commencing on various dates in 2015 and 2016; interest is paid monthly at a fixed annual rate between 1.84% and 2.78%

 

9,602

 

 

 

13,617

 

 

 

 

 

 

 

 

 

 

 

378,696

 

 

 

281,625

 

 

 

 

 

 

 

 

 

Less current portion

 

(94,620

)

 

 

(94,691

)

Total long-term debt

$

284,076

 

 

$

186,934

 

 

 

 

 

NOTE 7.  Legal Matters  

Robles

On January 25, 2013, a complaint was filed in the U.S. District Court for the Eastern District of California (Sacramento Division) by Salvador Robles against our subsidiary HGT. The action was brought on behalf of a class comprised of present and former California-based truck drivers for HGT who, from January 2009 to September 2014 were classified as independent contractors. It alleged that HGT misclassified these drivers as independent contractors and that such drivers were employees. It asserted various violations of the California Labor Code and claimed that HGT engaged in unfair competition practices. The complaint sought, among other things, declaratory and injunctive relief, monetary damages and attorney’s fees. In May 2013, the complaint was amended to add similar claims based on Mr. Robles’ status as an employed company driver.  These additional claims were only on behalf of Mr. Robles and not a putative class.

Although the Company believes that the California drivers were properly classified as independent contractors at all times because litigation is expensive, time-consuming and could interrupt our business operations, HGT decided to make settlement offers to individual drivers with respect to the claims alleged in this lawsuit, without admitting liability.  In late 2014, HGT converted its model from independent contractors to employee drivers in California. In early 2016, HGT closed its operations in Southern California.  

Adame

On August 5, 2015, a suit was filed in state court in San Bernardino County, California on behalf of 63 named plaintiffs against HGT and five Company employees. The lawsuit alleges claims similar to those being made in the Robles case and seeks monetary penalties under the Private Attorneys General Act.

 

10


 

The plaintiffs’ counsel and Hub agreed in principle to settle all claims under both the Robles and Adame matters for $4.8 million, which was recorded in the third quarter of 2019 and is included in Accrued other on the accompanying Consolidated Balance Sheet. The settlements are subject to final court approval.

We are involved in certain other claims and pending litigation arising from the normal conduct of business, including putative class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, failure to reimburse incurred business expenses and other items. Based on management's present knowledge, management does not believe that loss contingencies arising from these pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.

 

NOTE 8.  New Pronouncements

In January 2017, the FASB issued ASU No. 2017-04 Intangibles – Goodwill and other (Topic 350): simplifying the test for goodwill impairment. This ASU simplifies how all entities assess goodwill for impairment by eliminating step two from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We adopted this standard on January 1, 2020, as required. The adoption of Topic 350 did not have a material effect on our financial statements.

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. This standard is effective for public business entities in fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. This standard requires changes to the disclosure requirements for fair value measurements for certain Level 3 items and specifies that some of the changes must be applied prospectively, while others should be applied retrospectively. We adopted the standard as of January 1, 2020, but it did not have an impact on our financial statements.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. The effective date of this ASU is for fiscal years and interim periods beginning after December 15, 2020. The Company is evaluating the impact of this ASU.

NOTE 9.  Subsequent Event

 

We provided assistance and support to hospitals, food banks and other organizations across the United States by donating refrigerated trailers to be used by emergency responders in fighting the COVID-19 pandemic. In April 2020, we donated refrigerated trailers with a carrying value of approximately $5.2 million.

 

 

 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

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,” “predicts,” “projects,” “potential,” “may,” “could,” “might,” “should,” and variations of these words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are neither historical facts nor assurance of future performance. Instead, they are based on our beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Such factors include, but are not limited to, uncertainties caused by adverse economic conditions, including, without limitation, as a result of extraordinary events or circumstances such as the coronavirus (COVID-19)

 

11


 

pandemic, and their impact on our customers’ businesses and workforce levels, disruptions of our business and operations, or the operations of our customers.  

Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. All forward-looking statements made by us in this report are based upon information available to us on the date of this report and speak only as of the date in which they are made. Except as required by law, we expressly disclaim any obligations to publicly update any forward-looking statements whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements, in addition to those identified in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 10-K”) as well as in Part II, Item 1A of this Quarterly Report on Form 10-Q, include the following as they may be affected, either individually, or in the aggregate, by the ongoing effects of the COVID-19 outbreak:

 

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

 

deterioration in our relationships, service conditions or provision of equipment with existing railroads or adverse changes to the railroads’ operating rules;

 

inability to recruit and retain company drivers and owner-operators;

 

inability to hire or retain management and other key personnel that are critical to our continued success;

 

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

 

unanticipated changes in rail, drayage, warehousing and trucking company capacity or costs of services;

 

increases in costs related to any reclassification or change in our treatment of drivers, owner-operators or other workers due to regulatory, judicial and legal decisions, including workers directly contracted with the Company and those contracted to the Company’s vendors;

 

joint employer claims alleging that the Company is a co-employer of any workers providing services to a Company contractor;

 

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

 

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

 

inability to identify, close and successfully integrate any future business combinations;

 

fuel shortages or fluctuations in fuel prices;

 

increases in interest rates;

 

acts of terrorism and military action and the resulting effects on security;

 

difficulties in maintaining or enhancing our information technology systems, implementing new systems or protecting against cyber-attacks;

 

increases in costs associated with changes to or new governmental regulations;

 

significant increases to employee health insurance costs;