UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address, including zip code, of principal executive offices)
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).
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.
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 July 26, 2024, the registrant had
HUB GROUP, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HUB GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
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June 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
(unaudited) |
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CURRENT ASSETS: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable trade, net |
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Accounts receivable other |
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Prepaid taxes |
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Prepaid expenses and other current assets |
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TOTAL CURRENT ASSETS |
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Restricted investments |
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Property and equipment, net |
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Right-of-use assets - operating leases |
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Right-of-use assets - financing leases |
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Other intangibles, net |
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Goodwill |
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Other non-current assets |
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TOTAL ASSETS |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable trade |
$ |
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$ |
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Accounts payable other |
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Accrued payroll |
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Accrued other |
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Lease liability - operating leases |
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Lease liability - financing leases |
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Current portion of long-term debt |
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TOTAL CURRENT LIABILITIES |
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Long-term debt |
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Other non-current liabilities |
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Lease liability - operating leases |
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Lease liability - financing leases |
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Deferred taxes |
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STOCKHOLDERS' EQUITY: |
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Preferred stock, $ |
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Common stock |
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Class A: $ |
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Class B: $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Treasury stock; at cost, |
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( |
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( |
) |
TOTAL STOCKHOLDERS' EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
3
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating revenue |
$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Purchased transportation and warehousing |
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Salaries and benefits |
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Depreciation and amortization |
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Insurance and claims |
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General and administrative |
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Gain on sale of assets, net |
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( |
) |
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( |
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( |
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( |
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Total operating expenses |
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Operating income |
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Other income (expense): |
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Interest expense |
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( |
) |
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( |
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( |
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( |
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Interest income |
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Other, net |
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( |
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( |
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Total other expense, net |
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( |
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( |
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( |
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( |
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Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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Other comprehensive income: |
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Foreign currency translation adjustments |
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( |
) |
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( |
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Total comprehensive income |
$ |
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$ |
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$ |
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$ |
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Basic earnings per common share |
$ |
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$ |
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$ |
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$ |
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Diluted earnings per common share |
$ |
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$ |
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$ |
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$ |
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Basic weighted average number of shares outstanding |
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Diluted weighted average number of shares outstanding |
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See notes to unaudited condensed consolidated financial statements.
4
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts)
|
Class A & B |
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Accumulated |
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Common Stock |
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Additional |
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Other |
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Shares |
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Paid-in |
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Retained |
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Comprehensive |
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Treasury Stock |
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Issued |
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Amount |
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Capital |
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Earnings |
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Income |
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Shares |
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Amount |
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Total |
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Balance March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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( |
) |
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$ |
( |
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$ |
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Stock tendered for payments of withholding taxes related to awards vested |
|
- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
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Purchase of treasury stock |
|
- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
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Issuance of restricted stock awards, net of forfeitures |
|
- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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- |
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Share-based compensation expense |
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- |
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- |
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- |
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- |
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- |
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- |
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Net income |
|
- |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation adjustment |
|
- |
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- |
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- |
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- |
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- |
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- |
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Balance June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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( |
) |
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$ |
( |
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$ |
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Balance March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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( |
) |
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$ |
( |
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$ |
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Stock tendered for payments of withholding taxes related to awards vested |
|
- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
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Purchase of treasury stock |
|
- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
) |
Federal excise tax on purchased treasury stock |
|
- |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Issuance of restricted stock awards, net of forfeitures |
|
- |
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- |
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( |
) |
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- |
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- |
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( |
) |
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- |
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Share-based compensation expense |
|
- |
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- |
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- |
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- |
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- |
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- |
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Dividends paid |
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- |
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- |
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- |
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( |
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- |
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- |
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- |
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( |
) |
Dividends accrued |
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- |
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- |
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- |
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( |
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- |
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- |
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- |
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( |
) |
Net income |
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- |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation adjustment |
|
- |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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( |
) |
Balance June 30, 2024 |
|
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$ |
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$ |
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$ |
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$ |
( |
) |
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( |
) |
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$ |
( |
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$ |
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Balance December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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( |
) |
|
$ |
( |
) |
|
$ |
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Stock tendered for payments of withholding taxes related to awards vested |
|
- |
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|
|
- |
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|
- |
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|
- |
|
|
|
- |
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|
|
( |
) |
|
|
( |
) |
|
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( |
) |
Purchase of treasury stock |
|
- |
|
|
|
- |
|
|
|
- |
|
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|
- |
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|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
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( |
) |
Issuance of restricted stock awards, net of forfeitures |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
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|
- |
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|
- |
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Share-based compensation expense |
|
- |
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|
- |
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|
- |
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|
|
- |
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|
|
- |
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|
- |
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||
Net income |
|
- |
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|
- |
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|
- |
|
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|
- |
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|
- |
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|
- |
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||
Foreign currency translation adjustment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
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|
||
Balance June 30, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
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||||||||
Balance December 31, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
Adjustment related to stock split |
|
( |
) |
|
|
( |
) |
|
|
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|
- |
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|
- |
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|
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|
- |
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|
- |
|
||
Stock tendered for payments of withholding taxes related to awards vested |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Federal excise tax on purchased treasury stock |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Issuance of restricted stock awards, net of forfeitures |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
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|
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|
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|
- |
|
||
Share-based compensation expense |
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
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- |
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|
|
|
||
Dividends paid |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Dividends accrued |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Net income |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Foreign currency translation adjustment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Balance June 30, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|||||
See notes to unaudited condensed consolidated financial statements.
5
HUB GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
Six Months Ended June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net income |
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
Depreciation and amortization of intangibles and right-of-use assets |
|
|
|
|
|
||
Impairment of right-of-use asset |
|
|
|
|
|
||
Deferred taxes |
|
( |
) |
|
|
|
|
Non-cash share-based compensation expense |
|
|
|
|
|
||
Gain on sale of assets, net |
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities, net of acquisition: |
|
|
|
|
|
||
Restricted investments |
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
|
|
|
|
||
Prepaid taxes |
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
||
Other non-current assets |
|
( |
) |
|
|
( |
) |
Accounts payable |
|
( |
) |
|
|
( |
) |
Accrued expenses |
|
( |
) |
|
|
( |
) |
Non-current liabilities |
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
||
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
||
Proceeds from sale of equipment |
|
|
|
|
|
||
Purchases of property and equipment |
|
( |
) |
|
|
( |
) |
Acquisitions, net of cash acquired |
|
|
|
|
|
||
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
||
Repayments of long-term debt |
|
( |
) |
|
|
( |
) |
Purchase of treasury stock |
|
( |
) |
|
|
( |
) |
Dividends paid |
|
( |
) |
|
|
|
|
Stock withheld for payments of withholding taxes |
|
( |
) |
|
|
( |
) |
Finance lease payments |
|
( |
) |
|
|
( |
) |
Proceeds from issuance of debt |
|
|
|
|
|
||
Net cash used in financing activities |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
||
Net increase in cash and cash equivalents |
|
|
|
|
|
||
Cash and cash equivalents beginning of the period |
|
|
|
|
|
||
Cash and cash equivalents end of the period |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Supplemental disclosures of cash paid for: |
|
|
|
|
|
||
Interest paid |
$ |
|
|
$ |
|
||
Income taxes paid, net |
$ |
|
|
$ |
|
||
See notes to unaudited condensed consolidated financial statements.
6
HUB GROUP, INC.
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Interim Financial Statements
Our accompanying unaudited condensed consolidated financial statements of Hub Group, Inc. (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 June 30, 2024 and results of operations for the three and six months ended June 30, 2024 and 2023.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”). Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.
On January 4, 2024, the Company announced a two-for-one stock split of the Company’s Class A and Class B common stock. The stock split was implemented in the form of a distribution of one additional Class A share for each share outstanding. The record date for the stock split was as of the close of business on January 16, 2024. The Company distribution date of the additional shares was January 26, 2024. As a result of the stock split, the number of authorized shares remained unchanged. Additionally, the par value per share of the common stock remains unchanged. All other share amounts in our condensed consolidated balance sheets, condensed consolidated statements of income and comprehensive income, condensed consolidated statements of stockholders' equity and related footnote disclosures have been adjusted and presented as though the stock split had occurred as of the earliest period presented.
On February 22, 2024, the Board declared a quarterly cash dividend of $
In October 2023, the Board authorized the purchase of up to $
Due to presentation changes made in our condensed consolidated balance sheets and condensed consolidated statement of shareholders' equity, certain prior year amounts have been reclassified to conform with the current year presentation.
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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income for basic and diluted earnings per share |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of restricted stock |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share - basic |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share - diluted |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
7
NOTE 3. Acquisitions
Forward Air Final Mile Acquisition
On
The FAFM acquisition expanded our final mile services to include the delivery and installation of appliances. FAFM provides residential last mile delivery services through a non-asset business model, working with a network of over
The initial accounting for the acquisition of FAFM is incomplete as we, with the support of our valuation specialist, are in the process of finalizing the fair market value calculations of the acquired net assets. Based on refined inputs incorporated into the fair market value calculations during the quarter ended June 30, 2024, we have estimated that the fair value of intangible assets totals $
The following table summarizes the preliminary allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):
|
December 20, 2023 |
|
|
Accounts receivable trade |
$ |
|
|
Prepaid expenses and other current assets |
|
|
|
Property and equipment |
|
|
|
Right-of-use assets - operating leases |
|
|
|
Other intangibles |
|
|
|
Goodwill |
|
|
|
Other assets |
|
|
|
Total assets acquired |
$ |
|
|
|
|
|
|
Accounts payable trade |
$ |
|
|
Accounts payable other |
|
|
|
Accrued payroll |
|
|
|
Accrued other |
|
|
|
Lease liability - operating leases short-term |
|
|
|
Other long-term liabilities |
|
|
|
Lease liability - operating leases long-term |
|
|
|
Total liabilities assumed |
$ |
|
|
|
|
|
|
Total consideration, net |
$ |
|
|
|
|
|
|
Cash paid, net |
$ |
|
|
The FAFM acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying condensed consolidated balance sheet at their estimated fair values as of December 20, 2023 with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the FAFM acquisition was primarily attributable to potential expansion and future development of the acquired business.
Tax history and attributes are not inherited in an equity purchase of this kind, however, the goodwill and other intangibles recognized in this purchase will be fully tax deductible over a period of
8
|
|
|
|
|
|
|
|
|
Estimated |
|||
|
|
|
|
Accumulated |
|
|
Balance at |
|
Useful |
|||
|
Amount |
|
|
Amortization |
|
|
June 30, 2024 |
|
Life |
|||
Customer relationships |
$ |
|
|
$ |
|
|
$ |
|
||||
Developed technology |
$ |
|
|
$ |
|
|
$ |
|
||||
Independent service provider network |
$ |
|
|
$ |
|
|
$ |
|
||||
The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition was $
Amortization expense related to FAFM for the next five years is expected to be as follows (in thousands):
|
Total |
|
|
2024 (Remainder of year) |
$ |
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
FAFM's actual results are included in our condensed consolidated financial statements since the acquisition date of December 20, 2023.
|
Three Months Ended |
|
|
Six Months Ended |
|
||
|
June 30, 2023 |
|
|
June 30, 2023 |
|
||
Revenue |
$ |
|
|
$ |
|
||
Net income |
$ |
|
|
$ |
|
||
Earnings per share |
|
|
|
|
|
||
Basic |
$ |
|
|
$ |
|
||
Diluted |
$ |
|
|
$ |
|
||
The unaudited pro forma condensed consolidated results for the periods above were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and FAFM. 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 combined results. The unaudited pro forma condensed consolidated results are not necessarily indicative of what our condensed consolidated results of operations actually would have been had we completed the FAFM acquisition as of January 1, 2023.
NOTE 4. Segment Reporting
We have
9
Intermodal and Transportation Solutions. Our Intermodal and Transportation Solutions segment offers high service, nationwide door-to-door intermodal transportation, providing value, visibility and reliability in both transcontinental and local lanes by combining rail transportation with local trucking. This segment includes our trucking operations which provides our customers with local pickup and delivery (referred to as “drayage”) as well as high service local and regional trucking transportation using equipment dedicated to their needs. We arrange for the movement of our customers’ freight in one of our approximately
Logistics. Our Logistics segment offers a wide range of services including transportation management, freight brokerage services, shipment optimization, load consolidation, mode selection, carrier management, load planning and execution, warehousing, fulfillment, cross-docking, consolidation services and final mile delivery. These services include a full range of trucking transportation services, including dry van, expedited, less-than-truckload, refrigerated and flatbed, all of which is provided by third party carriers with whom we contract. We also leverage proprietary technology along with collaborative relationships with third party service providers to deliver cost savings and performance-enhancing supply chain services to our clients. Our transportation management offering also serves as a source of volume for our ITS segment.
The following tables summarize our financial and operating data by segment (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Operating Revenue |
June 30, |
|
|
June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Intermodal and Transportation Solutions |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Logistics |
|
|
|
|
|
|
|
|
|
|
|
||||
Inter-segment eliminations |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total operating revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Operating Income |
June 30, |
|
|
June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Intermodal and Transportation Solutions |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Logistics |
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating income |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Depreciation and Amortization |
June 30, |
|
|
June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Intermodal and Transportation Solutions |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Logistics |
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation and amortization |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Separate balance sheets are not presented by segment to our Chief Operating Decision Maker (“CODM”). Our CODM uses consolidated asset information to make capital decisions.
NOTE 5. Fair Value Measurement
The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of June 30, 2024 and December 31, 2023. As of June 30, 2024, the fair value of the Company’s fixed-rate borrowings was $
10
We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of June 30, 2024 and December 31, 2023, our cash and temporary investments were with high quality financial institutions in demand deposit accounts, savings accounts, checking accounts and money market accounts.
Restricted investments included $
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, accounts receivable, accounts payable and mutual funds and related liabilities 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.
NOTE 6. Long-Term Debt and Financing Arrangements
In February 2022, we entered into a
We have standby letters of credit that expire in both 2024 and
As of June 30, 2024 and December 31, 2023, we had
11
We have entered into various Equipment Notes (“Notes”) for the purchase of tractors, trailers, containers and refrigeration units. The Notes are secured by the underlying equipment financed in the agreements.
Our outstanding Notes are as follows (in thousands): |
June 30, |
|
|
December 31, |
|
||
|
2024 |
|
|
2023 |
|
||
Interim funding for equipment received and expected to be converted to an equipment note in a subsequent period; interest paid at a variable rate |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Secured Equipment Notes due on various dates in |
|
|
|
|
|
||
|
|
|
|
|
|
||
Secured Equipment Notes due on various dates in |
|
|
|
|
|
||
|
|
|
|
|
|
||
Secured Equipment Notes due on various dates in |
|
|
|
|
|
||
|
|
|
|
|
|
||
Secured Equipment Notes due on various dates in |
|
|
|
|
|
||
|
|
|
|
|
|
||
Secured Equipment Notes due on various dates in |
|
|
|
|
|
||
|
|
|
|
|
|
||
Secured Equipment Notes due on various dates in |
|
|
|
|
|
||
|
|
|
|
|
|
||
Total debt |
|
|
|
|
|
||
|
|
|
|
|
|
||
Less current portion of long-term debt |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Total long-term debt |
$ |
|
|
$ |
|
||
NOTE 7. Legal Matters
The Company is involved in certain claims and pending litigation arising from the normal conduct of business, including putative class-action lawsuits involving employment related claims. Based on management's present knowledge, management does not believe that any potential unrecorded 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 for settlements or losses determined to be probable and estimable. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.
NOTE 8. Subsequent Event
In June 2024, we entered into a lease agreement for nearly
12
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Statements in this section and other parts of this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements, provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that might cause the actual performance of the Company to differ materially from those expressed or implied by this discussion and, therefore, should be viewed with caution. Further information on the risks that may affect the Company’s business is included in filings it makes with the SEC from time to time, including those discussed under the “Risk Factors” section in the 2023 10-K and subsequent filings. The Company assumes no obligation to update any such forward-looking statements.
EXECUTIVE SUMMARY
We are a leading supply chain solutions provider in North America that offers comprehensive transportation and logistics management services focused on reliability, visibility and value for our customers. Our service offerings include a full range of freight transportation and logistics services, some of which are provided by assets we own and operate, and some of which are provided by third parties with whom we contract. Our services include intermodal, truckload, less-than-truckload, flatbed, temperature-controlled, dedicated and regional trucking. Other services include full outsource logistics solutions, transportation management services, freight consolidation, warehousing and fulfillment, final mile delivery, parcel and international services.
We service a large and diversified customer base in a broad range of industries, including retail, consumer products and durable goods. We believe our strategy to offer multi-modal supply chain management solutions serves to strengthen and deepen our relationships with our customers and allows us to provide a more cost effective and higher service solution.
Intermodal and Transportation Solutions. Our Intermodal and Transportation Solutions segment offers high service, nationwide door-to-door intermodal transportation, providing value, visibility and reliability in both transcontinental and local lanes by combining rail transportation with local trucking. This segment includes our trucking operations which provides our customers with local pickup and delivery as well as high service local and regional trucking transportation using equipment dedicated to their needs. In the first six months of 2024, approximately 75% of our drayage services was provided by our own fleet. We arrange for the movement of our customers’ freight in one of our approximately 50,000 containers. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. Drayage between origin or destination and rail terminals are provided by our own trucking operations and third parties with whom we contract. Our dedicated service operation offers fleets of equipment and drivers to each customer on a contract basis, as well as the management and infrastructure to operate according to the customer’s high service expectations. As of June 30, 2024, our trucking transportation operation consisted of approximately 2,200 tractors, 2,900 employee drivers and 4,300 trailers. We also contract for services with approximately 400 independent owner-operators. These assets and contractual services are used to support drayage for our intermodal service offering and to serve our customers who require high service local and regional trucking transportation using equipment dedicated to their needs. Our dedicated service operation offers fleets of equipment and drivers to each customer on a contract basis, as well as the management and infrastructure to operate according to the customer’s high service expectations.
Logistics. Our Logistics segment offers a wide range of non-asset-based services including transportation management, freight brokerage services, shipment optimization, load consolidation, mode selection, carrier management, load planning and execution, warehousing, fulfillment, cross-docking, consolidation services and final mile delivery. Logistics includes our brokerage business which consists of a full range of trucking transportation services, including dry van, expedited, less-than-truckload (“LTL”), refrigerated and flatbed, all of which is provided by third-party carriers with whom we contract. We leverage proprietary technology along with collaborative relationships with third-party service providers to deliver cost savings and performance-enhancing supply chain services to our clients. Our transportation management offering also serves as a source of volume for our ITS segment. Many of the customers for these solutions are consumer goods companies who sell into the retail channel. Our final mile delivery offering provides residential final mile delivery and installation of appliances and big and bulky goods. Final mile operates through a network of independent service providers in company, customer and third-party facilities throughout the continental United States. Our business operates or has access to approximately 10 million square feet of warehousing and cross-dock space across North America, to which our customers ship their goods to be stored and distributed to destinations including residences, retail stores and other commercial locations. These services offer our customers shipment visibility, transportation cost savings, high service and compliance with retailers’ increasingly stringent supply chain requirements.
13
On December 20, 2023, we acquired 100% of the equity interest of Forward Air Final Mile (“FAFM”). Total consideration for the transaction was $257.2 million. $260.9 million was paid in cash in December 2023 while $3.7 million was received from the seller in the second quarter of 2024 as part of the post-closing true-up of net working capital.
We are focused on several margin enhancement projects including network optimization, matching of inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, increasing our driver and asset utilization, reducing repositioning costs, providing holistic solutions and improving low profit freight. Hub’s top 50 customers represent approximately 71% of revenue for the six months ended June 30, 2024, while one customer accounted for more than 10% of our revenue in both segments for both the six months ended June 30, 2024 and 2023. We use various performance indicators to manage our business. We closely monitor operating cash flow, profit levels for our top customers, daily sales outstanding by customer account and vendor cost changes. On-time performance, customer service, cost per load and vendor service levels are also monitored closely.
The following table includes the one customer that represented 10% or more of our revenue by segment for the six months ending June 30, 2024 and 2023, respectively:
|
Six Months Ended |
||
Customer A |
Jume 30, |
||
|
2024 |
|
2023 |
ITS |
19% |
|
14% |
Logistics |
15% |
|
10% |
Total operating revenue |
18% |
|
13% |
Uncertainties and risks to our outlook include inflation, increased healthcare costs, a slowdown in consumer spending (driven by, among other factors, inflation, increases in interest rates, an economic recession and geopolitical concerns), a shift by consumers to spending on services at the expense of goods, an increase of retailers’ inventory levels, the ability of customers to pay our accounts receivable, elevated levels of transportation supply in the marketplace, aggressive pricing actions by our competitors and any inability to pass cost increases, such as transportation and warehouse costs, through to our customers, all of which could have a materially negative impact on our revenue, profitability and cash flow in 2024. Exiting of truckload capacity, retail inventory levels declining leading to restocking demand, a return of typical shipping peak season demands and a stronger used tractor market could have a materially positive impact on our revenue, profitability and cash flows in 2024.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023
The following table summarizes our operating revenue by segment (in thousands):
|
Three Months Ended |
|
|||||
Operating Revenue |
June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Intermodal and Transportation Solutions |
$ |
561,033 |
|
|
$ |
614,632 |
|
Logistics |
|
459,088 |
|
|
|
453,549 |
|
Inter-segment eliminations |
|
(33,626 |
) |
|
|
(27,719 |
) |
Total operating revenue |
$ |
986,495 |
|
|
$ |
1,040,462 |
|
The following table summarizes our operating income by segment (in thousands):
|
Three Months Ended |
|
|||||
Operating Income |
June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Intermodal and Transportation Solutions |
$ |
13,639 |
|
|
$ |
31,777 |
|
Logistics |
|
25,889 |
|
|
|
30,293 |
|
Total operating income |
$ |
39,528 |
|
|
$ |
62,070 |
|
14
Total consolidated operating revenue decreased 5% to $986 million in 2024 from $1,040 million in 2023.
Intermodal and Transportation Solutions (“ITS”) revenue decreased 9% to $561 million primarily due to lower fuel revenue, lower accessorial revenue, price declines and mix, partially offset by an 8% increase in intermodal volume and a 4% increase in dedicated revenue resulting from growth of existing customers. ITS operating income decreased to $14 million, 2.4% of revenue, as compared to $32 million, 5.2% of revenue, in the prior year due to lower customer rates and lower accessorial revenue. These headwinds were partially offset by lower equipment costs, lower drayage costs and lower accessorial costs.
Logistics revenue increased 1% to $459 million primarily due to the recent acquisition in final mile, partially offset by lower revenue in our brokerage service line and consolidation and fulfillment service lines. Brokerage revenue per load declined 13% due to lower pricing, fuel and customer mix and a 4% decline in volume. Logistics operating income decreased to $26 million, 5.6% of revenue, as compared to $30 million, 6.7% of revenue, due to lower brokerage margins, partially offset by our recent acquisition in final mile.
The following is a summary of operating results and certain items in the condensed consolidated statements of income as a percentage of revenue (in thousands):
|
Three Months Ended |
||||||||
|
June 30, |
||||||||
|
2024 |
|
|
|
2023 |
|
|
||
|
|
|
|
|
|
|
|
||
Operating revenue |
$ |
986,495 |
|
100.0% |
|
$ |
1,040,462 |
|
100.0% |
|
|
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
|
||
Purchased transportation and warehousing |
|
727,236 |
|
73.7% |
|
|
763,609 |
|
73.4% |
Salaries and benefits |
|
141,856 |
|
14.4% |
|
|
141,823 |
|
13.6% |
Depreciation and amortization |
|
37,772 |
|
3.8% |
|
|
35,386 |
|
3.4% |
Insurance and claims |
|
12,639 |
|
1.3% |
|
|
11,676 |
|
1.1% |
General and administrative |
|
27,877 |
|
2.8% |
|
|
26,757 |
|
2.6% |
Gain on sale of assets, net |
|
(413 |
) |
0.0% |
|
|
(859 |
) |
-0.1% |
Total operating expenses |
|
946,967 |
|
96.0% |
|
|
978,392 |
|
94.0% |
|
|
|
|
|
|
|
|
||
Operating income |
$ |
39,528 |
|
4.0% |
|
$ |
62,070 |
|
6.0% |
|
|
|
|
|
|
|
|
||
Other income (expense): |
|
|
|
|
|
|
|
||
Interest expense |
|
(3,689 |
) |
-0.4% |
|
|
(3,116 |
) |
-0.3% |
Interest income |
|
1,808 |
|
0.2% |
|
|
2,087 |
|
0.2% |
Other, net |
|
(66 |
) |
0.0% |
|
|
69 |
|
0.0% |
Total other expense, net |
|
(1,947 |
) |
-0.2% |
|
|
(960 |
) |
-0.1% |
|
|
|
|
|
|
|
|
||
Income before provision for income taxes |
|
37,581 |
|
3.8% |
|
|
61,110 |
|
5.9% |
|
|
|
|
|
|
|
|
||
Provision for income taxes |
|
8,566 |
|
0.9% |
|
|
14,605 |
|
1.4% |
|
|
|
|
|
|
|
|
||
Net income |
$ |
29,015 |
|
2.9% |
|
$ |
46,505 |
|
4.5% |
CONSOLIDATED OPERATING EXPENSES. OTHER EXPENSES AND INCOME TAXES
Purchased Transportation and Warehousing
Purchased transportation and warehousing costs decreased 5% to $727 million in 2024 from $764 million in 2023. As a percentage of revenue, purchased transportation and warehousing costs increased to 73.7% in 2024 from 73.4% in 2023.
Purchased transportation and warehousing costs declined as compared to prior year due to rail cost decreases, lower outside carrier costs, lower accessorial costs and lower fuel costs, partially offset by higher volumes in intermodal.
15
Salaries and Benefits
Salaries and benefits remained consistent at $142 million in 2024 and 2023. As a percentage of revenue, salaries and benefits increased to 14.4% in 2024 from 13.6% in 2023.
While an increase of $10 million was primarily due to the acquisition of FAFM on December 20, 2023, this increase was partially offset by decreases in driver costs of $7 million and office employee compensation expense of $3 million, both related to lower headcount, which excludes FAFM.
Headcount, which includes drivers, warehouse personnel and office employees, was 5,813, which includes 582 employees of FAFM, as of June 30, 2024 and 5,851 as of June 30, 2023, respectively. The decrease in headcount related primarily to drivers, partially offset by increases in office and warehouse employees due to the FAFM acquisition.
Depreciation and Amortization
Depreciation and amortization expense increased to $38 million in 2024 from $35 million in 2023. This increase was related primarily to the amortization of intangibles related to the acquisition of FAFM on December 20, 2023, as well as increased technology, container and warehouse depreciation expense. This expense, as a percentage of revenue, increased to 3.8% in 2024 from 3.4% in 2023. Depreciation expense includes transportation equipment, technology investments, leasehold improvements, warehouse equipment, office equipment and building improvements.
Insurance and Claims
Insurance and claims expense increased to $13 million in 2024 from $12 million in 2023. This increase was primarily due to increased auto liability expense related to claim costs. These expenses, as a percentage of revenue, increased to 1.3% in 2024 from 1.1% in 2023.
General and Administrative
General and administrative expenses increased to $28 million in 2024 from $27 million in 2023. These expenses, as a percentage of revenue, increased to 2.8% in 2024 from 2.6% in 2023.
This increase in general and administrative expenses was primarily due to the acquisition of FAFM on December 20, 2023, as well as increases in use tax expense and legal expense of $1 million each, partially offset by less impairment of right-of-use assets of $2 million and a decrease in bad debt expense of $1 million.
Gain on Sale of Assets, Net
Net gains on the sale of equipment decreased to $0.4 million in 2024 from $1 million in 2023. This decrease resulted from both less units sold and a lower average gain per unit sold in 2024 as compared to 2023.
Other Income (Expense)
Other expense increased to $2 million in 2024 from $1 million in 2023 primarily due to an increase in interest expense due to higher interest rates on our debt.
Provision for Income Taxes
The provision for income taxes decreased to $9 million in 2024 from $15 million in 2023 due primarily to lower pre-tax income in 2024. We provided for income taxes using an effective rate of 22.8% in 2024 and an effective rate of 23.9% in 2023. The second quarter 2024 effective tax rate of 22.8% was lower than the rate from 2023, as in 2024 we received a one-time benefit from amending state tax returns.
16
Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023
The following table summarizes our operating revenue by segment (in thousands):
|
Six Months Ended |
|
|||||
Operating Revenue |
June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Intermodal and Transportation Solutions |
$ |
1,113,066 |
|
|
$ |
1,323,881 |
|
Logistics |
|
939,312 |
|
|
|
922,690 |
|
Inter-segment eliminations |
|
(66,390 |
) |
|
|
(53,844 |
) |
Total operating revenue |
$ |
1,985,988 |
|
|
$ |
2,192,727 |
|
The following table summarizes our operating income by segment (in thousands):
|
Six Months Ended |
|
|||||
Operating Income |
June 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Intermodal and Transportation Solutions |
$ |
26,670 |
|
|
$ |
80,981 |
|
Logistics |
|
49,997 |
|
|
|
59,294 |
|
Total operating income |
$ |
76,667 |
|
|
$ |
140,275 |
|
Total consolidated operating revenue decreased 9% to $1,986 million in 2024 from $2,193 million in 2023.
Intermodal and Transportation Solutions (“ITS”) revenue decreased 16% to $1,113 million primarily due to price declines, lower fuel revenue, lower accessorial revenue, a 1% decline in intermodal volume due to lower transportation demand and mix, partially offset by a 3% increase in dedicated revenue resulting from growth of existing customers. ITS operating income decreased to $27 million, 2.4% of revenue, as compared to $81 million, 6.1% of revenue, in the prior year, due to lower customer rates, lower accessorial revenue and lower volume. These headwinds were partially offset by lower drayage costs, lower equipment costs and lower accessorial costs.
Logistics revenue increased 2% to $939 million primarily due to the recent acquisition in final mile, partially offset by lower revenue in our brokerage service line and consolidation and fulfillment service lines. Brokerage revenue per load declined 16% due to lower pricing, fuel and customer mix. Brokerage volume declined by 1%. Logistics operating income decreased to $50 million, 5.3% of revenue, as compared to $59 million, 6.4% of revenue, due to lower brokerage margins, partially offset by our recent acquisition in final mile.
17
The following is a summary of operating results and certain items in the condensed consolidated statements of income as a percentage of revenue (in thousands):
|
Six Months Ended |
||||||||
|
June 30, |
||||||||
|
2024 |
|
|
|
2023 |
|
|
||
|
|
|
|
|
|
|
|
||
Operating revenue |
$ |
1,985,988 |
|
100.0% |
|
$ |
2,192,727 |
|
100.0% |
|
|
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
|
|
||
Purchased transportation and warehousing |
|
1,467,408 |
|
73.9% |
|
|
1,630,540 |
|
74.4% |
Salaries and benefits |
|
286,352 |
|
14.4% |
|
|
279,254 |
|
12.7% |
Depreciation and amortization |
|
76,103 |
|
3.8% |
|
|
70,835 |
|
3.2% |
Insurance and claims |
|
25,257 |
|
1.3% |
|
|
24,359 |
|
1.1% |
General and administrative |
|
55,111 |
|
2.8% |
|
|
52,298 |
|
2.4% |
Gain on sale of assets, net |
|
(910 |
) |
-0.1% |
|
|
(4,834 |
) |
-0.2% |
Total operating expenses |
|
1,909,321 |
|
96.1% |
|
|
2,052,452 |
|
93.6% |
|
|
|
|
|
|
|
|
||
Operating income |
$ |
76,667 |
|
3.9% |
|
$ |
140,275 |
|
6.4% |
|
|
|
|
|
|
|
|
||
Other income (expense): |
|
|
|
|
|
|
|
||
Interest expense |
|
(7,588 |
) |
-0.4% |
|
|
(6,086 |
) |
-0.3% |
Interest income |
|
3,201 |
|
0.2% |
|
|
3,463 |
|
0.2% |
Other, net |
|
(236 |
) |
0.0% |
|
|
108 |
|
0.0% |
Total other expense, net |
|
(4,623 |
) |
-0.2% |
|
|
(2,515 |
) |
-0.1% |
|
|
|
|
|
|
|
|
||
Income before provision for income taxes |
|
72,044 |
|
3.7% |
|
|
137,760 |
|
6.3% |
|
|
|
|
|
|
|
|
||
Provision for income taxes |
|
15,976 |
|
0.8% |
|
|
29,475 |
|
1.3% |
|
|
|
|
|
|
|
|
||
Net income |
$ |
56,068 |
|
2.9% |
|
$ |
108,285 |
|
5.0% |
CONSOLIDATED OPERATING EXPENSES. OTHER EXPENSES AND INCOME TAXES
Purchased Transportation and Warehousing
Purchased transportation and warehousing costs decreased 10% to $1,467 million in 2024 from $1,631 million in 2023.
Purchased transportation and warehousing costs declined as compared to prior year due to rail cost decreases, lower outside carrier costs, lower accessorial costs, lower fuel costs and lower volumes.
Salaries and Benefits
Salaries and benefits increased to $286 million in 2024 from $279 million in 2023. As a percentage of revenue, salaries and benefits increased to 14.4% in 2024 from 12.7% in 2023.
Decreases in driver related expenses of $11 million related to lower driver headcount, lower office compensation expense of $7 million and lower restricted stock expense of $1 million were more than offset by increases primarily due to the acquisition of FAFM, as well as increases in incentive compensation expense of $5 million and payroll tax expense of $2 million.
Depreciation and Amortization
Depreciation and amortization expense increased to $76 million in 2024 from $71 million in 2023. This increase was related primarily to the amortization of intangibles related to the acquisition of FAFM, as well as increased technology, container and warehouse depreciation expense. This expense, as a percentage of revenue, increased to 3.8% in 2024 from 3.2% in 2023. Depreciation expense includes transportation equipment, technology investments, leasehold improvements, warehouse equipment, office equipment and building improvements.
18
Insurance and Claims
Insurance and claims expense increased to $25 million in 2024 from $24 million in 2023. This increase was primarily due to increased claim costs. These expenses, as a percentage of revenue, increased to 1.3% in 2024 from 1.1% in 2023.
General and Administrative
General and administrative expenses increased to $55 million in 2024 from $52 million in 2023. These expenses, as a percentage of revenue, increased to 2.8% in 2024 from 2.4% in 2023.
This increase in general and administrative expenses was primarily due to the acquisition of FAFM, as well as increases in use tax expense and property tax expense of $1 million each, partially offset by less impairment of right-of-use assets of $2 million and a decrease in bad debt expense of $1 million.
Gain on Sale of Assets, Net
Net gains on the sale of equipment decreased to $1 million in 2024 from $5 million in 2023. The decrease resulted from both less units sold and a lower average gain per unit sold in 2024 as compared to 2023.
Other Income (Expense)
Other expense increased to $5 million in 2024 from $3 million 2023 primarily due to an increase in interest expense due to higher interest rates on our debt.
Provision for Income Taxes
The provision for income taxes decreased to $16 million in 2024 from $29 million in 2023 due primarily to lower pre-tax income in 2024. We provided for income taxes using an effective rate of 22.2% in 2024 as compared to an effective rate of 21.4% in 2023. The effective tax rate was lower in 2023 as compared to 2024 as a change in state apportionment methodology made in 2023 had a larger impact on the 2023 tax rate than it did in 2024.
LIQUIDITY AND CAPITAL RESOURCES
Our financing and liquidity strategy is to fund operating cash payments through cash received from the provision of services, cash on hand, and to a lesser extent, from cash received from the sale of equipment. As of June 30, 2024, we had $220 million of cash and $21.0 million of restricted investments. We generally fund our purchases of transportation equipment through the issuance of secured, fixed rate Equipment Notes. In prior years, we have funded our business acquisitions from cash on hand. Payments for our other investing activities, such as the construction of our office buildings and our capitalized technology investments, have been funded by cash on hand or cash flows from operations. Cash used in financing activities, including the purchase of treasury stock and dividend payments have been funded by cash from operations or cash on hand. We have not historically used our Credit Facility to fund our operating, investing, or financing cash needs, though it is available to fund future cash requirements as needed. Based on past performance and current expectations, we believe cash on hand and cash received from the provision of services, along with our Credit Facility and other potential financing sources, will provide us the necessary capital to fund transactions and achieve our planned growth for the next twelve months and the foreseeable future.
Cash provided by operating activities for the six months ended June 30, 2024 was approximately $150 million, which resulted primarily from net income of $56 million plus non-cash charges of $98 million, partially offset by the changes in operating assets and liabilities of $4 million.
Cash provided by operating activities totaled $150 million in 2024 compared to $221 million in 2023. The $71 million decrease in cash flow was primarily due to a decrease in net income of $52 million, a decrease in non-cash charges of $12 million and a negative change in operating assets and liabilities of $7 million, primarily due to the change in accounts receivable.
Net cash used in investing activities for the six months ended June 30, 2024 was $22 million which resulted from capital expenditures of $31 million, partially offset by proceeds from the sale of equipment of $6 million and $4 million related to the FAFM acquisition. Capital expenditures of $31 million related primarily to tractors of $14 million, technology investments of $9 million and warehouse equipment of $6 million.
19
Capital expenditures decreased by approximately $34 million in 2024 as compared to 2023. The 2024 decrease was due to lower spend on tractors of $21 million, decreases in container purchases of $11 million, leasehold improvements of $2 million and warehouse equipment of $1 million. These decreases were partially offset by increases in the technology investments of $1 million.
In 2024, we estimate capital expenditures will range from $45 million to $65 million. Expected purchases include replacement tractors, technology projects and warehouse equipment. We plan to fund these expenditures with a combination of cash and debt.
Net cash used in financing activities for the six months ended June 30, 2024 was $96 million which includes repayments of long-term debt of $53 million, purchases of treasury stock of $33 million, dividends paid of $15 million, cash for stock tendered for payments of withholding taxes of $9 million and finance lease payments of $1 million, partially offset by proceeds from the issuance of debt of $16 million. Debt incurred in 2024 was used to fund the purchase of transportation equipment.
The $20 million decrease in cash used in financing activities for 2024 versus 2023 was primarily due to the decrease in the purchase of treasury stock of $67 million and less repayments of long-term debt of $3 million, partially offset by less proceeds from the issuance of debt of $35 million and an increase in dividends paid of $15 million.
As a result of anticipated unfavorable timing differences, primarily related to depreciation and compensation, we expect our cash paid for income taxes in 2024 to exceed our income tax expense.
See Note 6 of the condensed consolidated financial statements for details related to interest rates and commitment fees.
We have standby letters of credit that expire in 2024 and 2025. As of both June 30, 2024 and December 31, 2023, our letters of credit were $1 million.
As of both June 30, 2024, and December 31, 2023, we had no borrowings under the Credit Agreement and our unused and available borrowings were $349 million. We were in compliance with our debt covenants as of June 30, 2024 and December 31, 2023.
We are continually evaluating the possible effects of current economic conditions and reasonable and supportable economic forecasts in operational cash flows, including the risks of declines in the overall freight market and our customers’ liquidity and ability to pay. We are monitoring working capital on a daily basis and are in frequent communications with our customers.
We do not have any off-balance sheet transactions, arrangements, obligations (including contingent obligations) or liabilities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Refer to the company's 2023 10-K for a complete discussion regarding our critical accounting policies and estimates. As of June 30, 2024, there were no material changes to our critical accounting policies and estimates.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk as of June 30, 2024 from that presented in our 2023 10-K.
Item 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. As of June 30, 2024, 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 (as such term is defined in Exchange Act Rule 13a-15(e)). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024.
(b) Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) during the fiscal quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On December 20, 2023, we completed the acquisition of Forward Air Final Mile (“FAFM”). 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.
20
PART II. Other Information
Item 1. Legal Proceedings
For information regarding legal proceedings, see Note 7 “Legal Matters” to the Condensed Consolidated Financial Statements included in Part I, Item 1. “Financial Statements.”
Item 1A. Risk Factors
Investing in shares of our stock involves certain risks, including those identified and described in Part I, Item 1A of our 2023 10-K under the heading “Risk Factors.” When any one or more of these risks materialize from time to time, the Company’s business and stock price can be materially and adversely affected. There have been no material changes to the Company’s risk factors since the 2023 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In October 2023, the Board authorized the purchase of up to $250 million of our Class A Common Stock pursuant to a share repurchase program (the “2023 Program”). Under the 2023 Program, the shares may be repurchased in the open market or in privately negotiated transactions, from time to time subject to market and other conditions. The approved share repurchase program does not obligate us to repurchase any dollar amount or number of shares and the program may be modified, suspended or discontinued at any time.
During the three months ended June 30, 2024, we purchased 179,875 shares for approximately $7 million under the 2023 Program. During the six months ended June 30, 2024, we purchased 767,803 shares for approximately $33 million under the 2023 Program.
During the three months ended June 30, 2024, we purchased 4,237 shares for approximately $0.2 million related to withholding upon vesting of restricted stock. During the six months ended June 30, 2024, we purchased 190,304 shares for approximately $8.7 million related to withholding upon vesting of restricted stock.
The table below includes information on a monthly basis regarding shares purchased under the 2023 Program and the number of shares delivered to us to satisfy the mandatory tax withholding requirement upon vesting of restricted stock during the quarter ended June 30, 2024. Shares delivered to us to satisfy the mandatory tax withholding requirement upon vesting of restricted stock do not reduce the repurchase authority under the 2023 Program.
|
|
|
|
|
|
|
|
|
|
Maximum Value of |
|
||||
|
Total |
|
|
|
|
|
Total Number of |
|
|
Shares that May Yet |
|
||||
|
Number of |
|
|
Average |
|
|
Shares Purchased as |
|
|
Be Purchased Under |
|
||||
|
Shares |
|
|
Price Paid |
|
|
Part of Publicly |
|
|
the Program |
|
||||
|
Purchased |
|
|
Per Share |
|
|
Announced Plan |
|
|
(in 000’s) |
|
||||
April 2024 |
|
139,483 |
|
|
$ |
39.81 |
|
|
|
135,707 |
|
|
$ |
192,450 |
|
May 2024 |
|
44,498 |
|
|
$ |
40.39 |
|
|
|
44,168 |
|
|
$ |
190,667 |
|
June 2024 |
|
131 |
|
|
$ |
43.03 |
|
|
|
- |
|
|
$ |
190,667 |
|
Total |
|
184,112 |
|
|
$ |
39.96 |
|
|
|
179,875 |
|
|
$ |
190,667 |
|
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None of the Company’s directors or officers
21
Item 6. Exhibits INDEX TO EXHIBITS
Number |
Exhibit |
|
|
31.1 |
Rule 13a-14(a) Certification of Phillip D. Yeager, Chief Executive Officer. |
|
|
31.2 |
Rule 13a-14(a) Certification of Kevin W. Beth, Chief Financial Officer. |
|
|
32.1 |
|
101 |
Interactive data files for this Quarterly Report on Form 10-Q, formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets (unaudited); (ii) the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income; (iii) the Unaudited Condensed Consolidated Statements of Stockholders’ Equity; (iv) the Unaudited Condensed Consolidated Statements of Cash Flows (unaudited); and (v) the Notes to Unaudited Condensed Consolidated Financial Statements. XBRL Instance Document-the XBRL Instance Document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document. |
|
|
104 |
The cover page from this Quarterly Report on Form 10-Q (formatted in Inline XBRL and included in Exhibit 101). |
22
SIGNATURE
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: August 2, 2024 |
/s/ Kevin W. Beth |
|
Kevin W. Beth |
|
Executive Vice President, Chief Financial |
|
Officer and Treasurer |
|
(Principal Financial Officer) |
|
|
|
/s/ Brent M. Rhodes |
|
Brent M. Rhodes |
|
Executive Vice President, Chief |
|
Accounting Officer |
|
(Principal Accounting Officer) |
|
|
23