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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 1
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 2, 1996
HUB GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-27754 36-4007085
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) identification No.)
377 EAST BUTTERFIELD ROAD, SUITE 700
LOMBARD, ILLINOIS 60148
(Address, including zip code, of principal executive offices)
Registrant's telephone number, including area code: 708-271-3600
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Independent Auditors' Report 3
Statements of Operations for each of the three
years ended December 29, 1995 4
Statements of Assets, Liabilities and Divisional Control
Account as of December 29, 1995 and December 30, 1994 5
Statements of Cash Flows for each of the three
years ended December 29, 1995 6
Notes to Financial Statements 7
Statements of Operations for the three months
ended April 5, 1996 and April 7, 1995 (Unaudited) 13
Statement of Assets, Liabilities and Divisional Control
as of April 5, 1996 (Unaudited) 14
Statements of Cash Flows for the three months
ended April 5, 1996 and April 7, 1995 (Unaudited) 15
Notes to Financial Statements (Unaudited) 16
(b) Pro Forma Financial Information
Hub Group, Inc. and Hub Partnerships and American
President Lines Domestic Distribution Services, a
division of APL Land Transport Services, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1995 19
Unaudited Pro Forma Consolidated Statement of Operations
for the three months ended March 31, 1996 20
Unaudited Pro Forma Consolidated Balance Sheet as of
March 31, 1996 21
Notes to Unaudited Pro Forma Consolidated Financial
Statements 22
(c) Exhibits
Consent of Independent Public Accountants 24
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To APL Limited:
We have audited the accompanying statements of assets, liabilities and
divisional control account of American President Lines Domestic Distribution
Services (a division of APL Land Transport Services, Inc., a Tennessee
corporation) as of December 29, 1995 and December 30, 1994, and the related
statements of operations and cash flows for each of the three years in the
period ended December 29, 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American President Lines
Domestic Distribution Services as of December 29, 1995 and December 30, 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 29, 1995, in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Memphis, Tennessee
June 21, 1996
3
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Statements of Operations
- ----------------------------------------------------------------------
Year Ended December 29 December 30 December 31
(In thousands) 1995 1994 1993
- ----------------------------------------------------------------------
Revenues $180,931 $223,373 $218,730
Purchased Transportation 164,891 206,548 199,823
- ----------------------------------------------------------------------
NET REVENUES 16,040 16,825 18,907
COSTS AND EXPENSES
Salaries and Benefits 6,912 9,939 19,037
General and Administrative 13,184 13,327 16,188
Depreciation 167 413 506
Restructuring Charge 10,137
- ----------------------------------------------------------------------
Total Costs and Expenses 30,400 23,679 35,731
- ----------------------------------------------------------------------
OPERATING LOSS (14,360) (6,854) (16,824)
Interest Income 1,948 286 194
- ----------------------------------------------------------------------
NET LOSS $(12,412) $ (6,568) $(16,630)
======================================================================
See notes to financial statements.
4
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Statements of Assets, Liabilities and Divisional Control Account
- --------------------------------------------------------------------------------
December 29 December 30
(In thousands) 1995 1994
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 167 $ 518
Trade and Other Receivables, Net 22,479 20,891
Prepaid Expenses and Other Current Assets 312 486
- --------------------------------------------------------------------------------
Total Current Assets 22,958 21,895
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and Equipment 3,156 3,282
Accumulated Depreciation (2,891) (2,829)
- --------------------------------------------------------------------------------
Property and Equipment, Net 265 453
- --------------------------------------------------------------------------------
NOTE RECEIVABLE 187 189
- --------------------------------------------------------------------------------
Total Assets $23,410 $22,537
================================================================================
LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
CURRENT LIABILITIES
Accounts Payable
Trade $ 7,228 $ 7,505
Affiliates 9,462 1,435
Accrued Expenses 3,511 2,020
Restructuring Charge 10,137
- --------------------------------------------------------------------------------
Total Current Liabilities 30,338 10,960
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
DIVISIONAL CONTROL ACCOUNT (6,928) 11,577
- --------------------------------------------------------------------------------
Total Liabilities and Divisional Control Account $23,410 $22,537
================================================================================
See notes to financial statements.
5
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Statements of Cash Flows
- -----------------------------------------------------------------------------------------------
Year Ended December 29 December 30 December 31
(In thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(12,412) $(6,568) $(16,630)
Adjustments to Reconcile Net Loss to Net
Cash Provided by (Used in) Operating Activities:
Noncash Restructuring Charge 10,137
Depreciation 167 413 506
Change in Current Assets and Liabilities:
Trade and Other Receivables (1,588) (1,301) (1,590)
Prepaid Expenses and Other Current Assets 174 (303) (15)
Accounts Payable and Accrued Expenses 9,241 1,523 (3,196)
Other 23 2 9
- -----------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Operating Activities 5,742 (6,234) (20,916)
- -----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany Funding (6,093) 6,115 20,241
- -----------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (6,093) 6,115 20,241
- -----------------------------------------------------------------------------------------------
NET DECREASE IN CASH (351) (119) (675)
- -----------------------------------------------------------------------------------------------
Cash at Beginning of Year 518 637 1,312
- -----------------------------------------------------------------------------------------------
Cash at End of Year $ 167 $ 518 $ 637
===============================================================================================
See notes to financial statements.
6
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements include the accounts of American President Lines
Domestic Distribution Services (the "company"), the domestic freight brokerage
division of APL Land Transport Services, Inc. ("APLLTS"), a Tennessee
corporation and wholly-owned subsidiary of APL Limited (previously known as
American President Companies, Ltd.) ("APL").
On May 2, 1996, Hub Group, Inc. ("Hub"), a provider of freight brokerage
services, entered into an agreement with APL and APLLTS to acquire the customer
accounts of the company for approximately $8 million in cash and notes. In
addition, APLLTS and Hub entered into a 10-year agreement whereby APLLTS will
provide stacktrain services to Hub.
Fiscal Year
The company's fiscal year ends the last Friday in December. The company's 1995
and 1994 fiscal years were 52 weeks, compared with 53 weeks for 1993.
Nature of Operations
The company provides freight brokerage services for rail and motor carrier
shipments throughout North America, including stacktrain services of APLLTS, as
well as motor carrier, rail and drayage services of other shipping companies.
Revenues comprise brokerage fees from APLLTS and third parties. The operations
of the company in any one geographic region, type of cargo or customer are not
significant in relation to the company's overall operations.
Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenues and Expenses
The company recognizes revenues on a percentage-of-completion basis and expenses
as incurred. Storage and detention revenue is recognized when cash is received.
Allowance for Doubtful Accounts
The provision for doubtful accounts, included in General and Administrative
Expenses in the accompanying Statements of Operations, for 1995, 1994 and 1993
was $0.9 million, $0.4 million and $0.4 million, respectively. At December 29,
1995 and December 30, 1994, the allowance for doubtful accounts, included in
Trade and Other Receivables in the accompanying Statements of Assets,
Liabilities and Divisional Control Account, amounted to $2.8 million and $2.4
million, respectively.
7
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and Equipment primarily comprises furniture, fixtures and office
equipment recorded at historical cost. Depreciation is computed using the
straight-line method based upon the estimated useful lives of such assets,
ranging from one to five years.
Concentration of Credit Risk
The company's customers are predominantly located within the United States. The
company routinely assesses the financial strength of its customers and, as a
consequence, believes that its trade accounts receivable credit risk is limited.
The company has no off balance sheet credit risk.
Insurance Reserves
The company is partially self-insured for damage to freight while in transit.
For claims not subrogated to third party freight carriers, the company provides
insurance reserves based on estimates using historical claims cost information
along with certain assumptions about future events.
Income Taxes
The company's operating results are included in the consolidated income tax
returns of APL. Income taxes have been provided using the separate return
method, as if the company were a separate taxpayer. Deferred income taxes
represent the future tax consequences relating to the reversal of differences in
the recognition of assets and liabilities for financial reporting and income tax
purposes.
NOTE 2 -- RESTRUCTURING CHARGE
During the fourth quarter of 1995, APL recorded a one-time charge of $48.4
million related to the accelerated completion of its reengineering program and
other organizational changes. The charge includes $36.4 million related to the
elimination of approximately 950 positions in APL's operations that are being
reorganized or reduced in size. Also included in the charge are the costs of
closing offices. The company's portion of this charge was $10.1 million.
8
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements
NOTE 3 -- INCOME TAXES
The company records income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" which requires the
company to compute deferred income taxes using the liability method, after
considering known changes in tax rates and other statutory provisions that will
be in effect in those years.
The reconciliation of the company's charge (benefit) in lieu of income taxes to
the federal statutory tax rate is as follows:
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Federal Statutory Rate (35%) (35%) (35%)
Changes in Rate Resulting from:
State Taxes, Net of Federal Benefit (4%) (4%) (4%)
Less: Valuation Allowance 39% 39% 39%
- ---------------------------------------------------------------------------------------------------------------------------
Total 0% 0% 0%
===========================================================================================================================
The following is a summary of the company's charge (benefit) in lieu of income taxes:
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
DEFERRED
Federal $(4,344) $(2,299) $(5,819)
State (496) (263) (665)
Less: Valuation Allowance 4,840 2,562 6,484
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 0 $ 0 $ 0
===========================================================================================================================
The following table shows the tax effect of the company's cumulative temporary
differences and carryforwards at December 29, 1995 and December 30, 1994, less
the valuation allowance:
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Tax-Basis Net Operating Loss Carryforwards $ 38,944 $ 38,297
Restructuring Charge Accrual 3,953
Allowance for Doubtful Accounts 1,093 846
Accrued Liabilities and Other 118 125
Less: Valuation Allowance (44,108) (39,268)
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 0 $ 0
===========================================================================================================================
A valuation allowance has been provided as the company does not believe that it
is "more likely than not" that the future tax benefits from the tax-basis net
operating loss carryforwards and other future tax deductions will be realized.
9
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements
NOTE 4 -- ACCRUED EXPENSES
Accrued Expenses at December 29, 1995 and December 30, 1994 were as follows:
- ----------------------------------------------------------------------------
(In thousands) 1995 1994
- ----------------------------------------------------------------------------
Bank Overdraft Liability $1,695 $1,047
Insurance Claims 588 479
Storage and Detention, and Other 1,228 494
- ----------------------------------------------------------------------------
Total Accrued Expenses $3,511 $2,020
============================================================================
NOTE 5 -- RELATED PARTY TRANSACTIONS
In the ordinary course of business, the company uses the stacktrain services of
APLLTS to transport shipments for its customers. The total amount of expenses
recognized for these services in 1995, 1994 and 1993 was $62.3 million, $72.9
million and $79.0 million, respectively, and is included in Purchased
Transportation Expenses in the accompanying Statements of Operations. The
variation between years is the result of volume and unit cost changes.
Additionally, the company received fees from APLLTS related to stacktrain volume
incentives. The total amount of these fees was $2.8 million, $3.8 million and
$6.4 million in 1995, 1994 and 1993, respectively, and are included as offsets
to Purchased Transportation Expenses in the accompanying Statements of
Operations.
Also in the ordinary course of business, the company used the services of
American President Trucking Company, Ltd. ("APT"), a wholly-owned subsidiary of
APL, to transport shipments for its customers. APT's operations were
transferred to Burlington Motor Carriers, Inc. in June 1995. The total amount
of expenses recognized for these services in 1995, 1994 and 1993 was $22.8
million, $49.9 million and $50.0 million, respectively, and is included in
Purchased Transportation Expenses in the accompanying Statements of Operations.
APLLTS provides administrative and other services to the company, which include
systems support, rent and other corporate services. The company is charged a
management fee by APLLTS for these services based upon specific identification
or allocated based upon its revenues. The management fee included in General
and Administrative Expenses in the accompanying Statements of Operations for
1995, 1994 and 1993 was $9.3 million, $9.4 million and $11.1 million,
respectively. The 1995 and 1994 management fees also included allocations of
expenditures by APL on initiatives to improve financial and order cycle
processes.
APL sweeps all of the company's excess cash from operations. Interest is earned
on such intercompany advances at variable rates established monthly. Interest
income earned during 1995, 1994 and 1993 was $1.9 million, $0.3 million and $0.2
million, respectively, and is included in Interest Income in the accompanying
Statements of Operations.
10
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements
NOTE 6 -- EMPLOYEE BENEFIT PLANS
Pension Plans
There are defined benefit pension plans covering most of the employees of APL
and its majority-owned subsidiaries, which generally call for benefits to be
paid to eligible employees at retirement based on years of credited service and
average monthly compensation during the five years of employment with the
highest rate of pay. The general policy is to fund pension costs at no less
than the statutory requirement. Certain non-qualified plans are secured through
a grantor trust. The company participates in the domestic plans and represents
approximately 2% of the total wage base of APL and its majority-owned
subsidiaries. The domestic plans had total projected benefit obligations in
excess of the plan assets of $19.3 million at December 29, 1995. The total
domestic net pension cost for 1995, 1994 and 1993 was $5.4 million, $4.5 million
and $3.1 million, respectively. These costs and benefits are allocated by APL
to the company and are included in the management fee.
Postretirement Benefits Other than Pensions
APL and its majority-owned subsidiaries share the cost of its health care
benefits with the majority of its domestic shoreside retired employees. The
company participates in the postretirement plan and represents approximately 2%
of the total wage base of APL and its majority-owned subsidiaries. The plan had
a total benefit obligation of $25.9 million at December 29, 1995. The total net
postretirement cost for 1995, 1994 and 1993 was $1.6 million, $2.4 million and
$2.5 million, respectively. These costs and benefits are allocated by APL to
the company and are included in the management fee.
The expected cost of APL's postretirement benefits is assumed to increase at an
annual rate of 9.3% in 1996. This rate is assumed to decline approximately 1%
per year to 5% in the year 1999 and remain level thereafter. The health care
cost trend rate assumption has a significant impact on the amounts reported. An
increase in the rate of 1% in each year would increase the accumulated
postretirement benefit obligation at December 29, 1995 by $2.7 million and the
aggregate of the service and interest cost for 1995 by $0.5 million. The
weighted average discount rate used to determine the accumulated postretirement
benefit obligation was 7.5%. APL has not funded the liability for these
benefits.
Profit-Sharing Plans
There are defined contribution profit-sharing plans covering certain non-union
employees of APL and its majority-owned subsidiaries. Under the terms of these
plans, APL has agreed to make matching contributions equal to those made by the
participating employees up to a maximum of 6% of each employee's base salary.
The company's total contributions to the plans were approximately $0.5 million
for 1995, 1994 and 1993.
11
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements
NOTE 7 -- CONTINGENCIES
The company is a party to various legal proceedings, claims and assessments
arising in the course of its business activities. Based upon information
presently available, and in light of legal and other defenses and insurance
coverage and other potential sources of payment available to the company,
management does not expect these legal proceedings, claims and assessments,
individually or in the aggregate, to have a material adverse impact on the
company's financial position or results of operations.
12
American President Lines Domestic Distribution Services
a division of APL Land Transport Services, Inc.
Statements of Operations (Unaudited)
- --------------------------------------------------------------------
Quarter Ended April 5 April 7
(In Thousands) 1996 1995
- --------------------------------------------------------------------
Revenues $35,891 $53,233
Purchased Transportation 33,654 47,966
- --------------------------------------------------------------------
Net Revenues 2,237 5,267
Costs and Expenses
Salaries and Benefits 1,499 2,036
General and Administrative 2,124 3,238
Depreciation 25 69
- --------------------------------------------------------------------
Total Costs and Expenses 3,648 5,343
- --------------------------------------------------------------------
Operating Loss (1,411) (76)
Interest Income 879 268
- --------------------------------------------------------------------
Net Income (Loss) $ (532) $ 192
====================================================================
See notes to financial statements.
13
American President Lines Domestic Distribution Services
a division of APL Land Transport Services, Inc.
Statement of Assets, Liabilities and Divisional Control Account (Unaudited)
- --------------------------------------------------------------------
April 5
(In thousands) 1996
- --------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 14
Trade and Other Receivables, Net 19,330
Prepaid Expenses and
Other Current Assets 249
- --------------------------------------------------------------------
Total Current Assets 19,593
- --------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and Equipment 3,091
Accumulated Depreciation (2,851)
- --------------------------------------------------------------------
Property and Equipment, Net 240
- --------------------------------------------------------------------
NOTE RECEIVABLE 186
- --------------------------------------------------------------------
Total Assets $ 20,019
====================================================================
LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
CURRENT LIABILITIES
Accounts Payable
Trade $ 8,377
Affiliates 6,933
Accrued Expenses 2,767
Restructuring Charge 10,137
- --------------------------------------------------------------------
Total Current Liabilities 28,214
- --------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------
DIVISIONAL CONTROL ACCOUNT (8,195)
- --------------------------------------------------------------------
Total Liabilities and
Divisional Control Account $ 20,019
====================================================================
See notes to financial statements.
14
American President Lines Domestic Distribution Services
a division of APL Land Transport Services, Inc.
Statements of Cash Flows (Unaudited)
- --------------------------------------------------------------------------------------------
Quarter Ended April 5 April 7
(In thousands) 1996 1995
- --------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (532) 192
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by
(Used in) Operating Activities:
Depreciation 25 69
Change in Current Assets and Liabilities:
Trade and Other Receivables 3,149 (60)
Prepaid Expenses and
Other Current Assets 63 325
Accounts Payable and
Accrued Expenses (2,124) 1,371
Other 1 20
- --------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 582 1,917
- --------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany Funding (735) (2,092)
- --------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (735) (2,092)
- --------------------------------------------------------------------------------------------
NET DECREASE IN CASH (153) (175)
- --------------------------------------------------------------------------------------------
Cash at Beginning of Period 167 518
- --------------------------------------------------------------------------------------------
Cash at End of Period $ 14 $ 343
============================================================================================
See notes to financial statements.
15
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements (Unaudited)
The financial statements presented herein include the accounts of American
President Lines Domestic Distribution Services (the "company") and have been
prepared by the company, without audit. The company believes that the
disclosures are adequate to make the information presented not misleading. In
the opinion of management, the financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the company's results of operations, financial position and cash
flows. The financial statements should be read in conjunction with the
financial statements and the notes thereto included in the company's annual
financial statements for the year ended December 29, 1995.
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements include the accounts of the company, the domestic
freight brokerage division of APL Land Transport Services, Inc. ("APLLTS"), a
Tennessee corporation and wholly-owned subsidiary of APL Limited (previously
known as American President Companies, Ltd.) ("APL").
On May 2, 1996, Hub Group, Inc. ("Hub"), a provider of freight brokerage
services, entered into an agreement with APL and APLLTS to acquire the customer
accounts of the company for approximately $8 million in cash and notes. In
addition, APLLTS and Hub entered into a 10-year agreement whereby APLLTS will
provide stacktrain services to Hub.
Fiscal Year and Quarters
The company's fiscal year ends on the last Friday in December, resulting in a
52- or 53-week year. In a 52-week year, the first and fourth quarters are 14
weeks, and the second and third quarters are 12 weeks, which differs from a 53-
week year, in which the fourth quarter is 15 weeks. The company's 1996 and 1995
fiscal years are 52-week years.
Allowance for Doubtful Accounts
At April 5, 1996, the allowance for doubtful accounts, included in Trade and
Other Receivables in the accompanying Statements of Assets, Liabilities and
Divisional Control Account, amounted to $2.7 million.
Income Taxes
The company's operating results are included in the consolidated income tax
returns of APL. Income taxes have been provided using the separate return
method, as if the company were a separate taxpayer. Deferred income taxes
represent the future tax consequences relating to the reversal of differences in
the recognition of assets and liabilities for financial reporting and income tax
purposes. Income taxes are provided for quarterly results based on the
estimated annual taxable income or loss.
16
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements (Unaudited)
NOTE 2 -- RESTRUCTURING CHARGE
During the fourth quarter of 1995, APL recorded a one-time charge of $48.4
million related to the accelerated completion of its reengineering program and
other organizational changes. The charge includes $36.4 million related to the
elimination of approximately 950 positions in APL's operations that are being
reorganized or reduced in size. Also included in the charge are the costs of
closing offices. The company's portion of this charge was $10.1 million.
Through April 5, 1996, no costs had been applied against the restructuring
charge accrual.
NOTE 3 -- INCOME TAXES
The company incurred, or expects to incur, taxable losses from operations for
the 1996 and 1995 fiscal years. No benefit in lieu of income taxes was recorded
in the quarters ended April 5, 1996 and April 7, 1995 as the company does not
believe that it is "more likely that not" that the future tax benefits will be
realized.
NOTE 4 -- ACCRUED EXPENSES
Accrued Expenses at April 5, 1996 were as follows:
- ------------------------------------------------------------------------------
April 5
(In thousands) 1996
- ------------------------------------------------------------------------------
Bank Overdraft Liability $1,869
Insurance Claims 420
Storage and Detention and Other 478
- ------------------------------------------------------------------------------
Total Accrued Expenses $2,767
==============================================================================
NOTE 5 -- RELATED PARTY TRANSACTIONS
In the ordinary course of business, the company uses the stacktrain services of
APLLTS to transport shipments for its customers. The total amount of expenses
recognized for these services in the quarters ended April 5, 1996 and April 7,
1995 was $13.5 million and $17.8 million, respectively, and is included in
Purchased Transportation Expenses in the accompanying Statements of Operations.
The variation between years is the result of volume and unit cost changes.
Additionally, the company received fees from APLLTS related to stacktrain volume
incentives. The total amount of these fees was $0.7 million and $0.8 million
for the quarters ended April 5, 1996 and April 7, 1995, respectively, and are
included as offsets to Purchased Transportation Expenses in the accompanying
Statements of Operations.
17
American President Lines Domestic Distribution Services,
a division of APL Land Transport Services, Inc.
Notes to Financial Statements (Unaudited)
NOTE 5 -- RELATED PARTY TRANSACTIONS (CONTINUED)
Also in the ordinary course of business, the company used the services of
American President Trucking Company, Ltd. ("APT"), a wholly-owned subsidiary of
APL, to transport shipments for its customers. APT's operations were
transferred to Burlington Motor Carriers, Inc. in June 1995. The total amount
of expenses recognized for these services in the quarter ended April 7, 1995 was
$11.5 million and is included in Purchased Transportation Expenses in the
accompanying Statements of Operations.
APLLTS provides administrative and other services to the company, which include
systems support, rent and other corporate services. The company is charged a
management fee by APLLTS for these services based upon specific identification
or allocated based upon its revenues. The management fee included in General
and Administrative Expenses in the accompanying Statements of Operations for the
quarters ended April 5, 1996 and April 7, 1995 was $1.1 million and $2.5
million, respectively. The 1995 management fees also included allocations of
expenditures by APL on initiatives to improve financial and order cycle
processes.
APL sweeps all of the company's excess cash from operations. Interest is earned
on such intercompany advances at variable rates established monthly. Interest
income earned during the quarters ended April 5, 1996 and April 7, 1995 was $0.9
million and $0.3 million, respectively, and is included in Interest Income in
the accompanying Statements of Operations.
NOTE 6 -- CONTINGENCIES
The company is a party to various legal proceedings, claims and assessments
arising in the course of its business activities. Based upon information
presently available, and in light of legal and other defenses and insurance
coverage and other potential sources of payment available to the company,
management does not expect these legal proceedings, claims and assessments,
individually or in the aggregate, to have a material adverse impact on the
company's financial position or results of operations.
18
HUB GROUP, INC. AND HUB PARTNERSHIPS AND AMERICAN PRESIDENT LINES DOMESTIC
DISTRIBUTION SERVICES, A DIVISION OF APL LAND TRANSPORT SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(in thousands, except per share amounts)
The following unaudited pro forma consolidated statement of operations
consolidates the statement of operations of Hub Group, Inc. for the year ended
December 31, 1995, with those of Hub Partnerships and American President Lines
Domestic Distribution Services, a division of APL Land Transport Services, Inc.
as if the purchase transactions had been consummated as of January 1, 1995. The
pro forma financial statements should be read in conjunction with the financial
statements of Hub Group, Inc. ("Hub Chicago") and Hub Partnerships previously
filed with the Securities and Exchange Commission on Form S-1 and the financial
statements of American President Lines Domestic Distribution Services, a
division of APL Land Transport Services, Inc., contained elsewhere herein.
American
President
Lines Domestic
Distribution
Services, A
Division of APL
Hub Group, Hub Land Transport Pro Forma Pro Forma
Inc. Partnerships Services, Inc. Adjustments Consolidated
---------- ------------ ------------- ------------ ------------
REVENUE $81,408 $666,514 $180,931 $ (37,102)(c) $891,751
PURCHASED TRANSPORTATION 75,142 584,840 164,891 (33,632)(c)(d) 791,241
---------- ------------ ------------- ------------ -----------
Net revenue 6,266 81,674 16,040 (3,470) 100,510
COSTS AND EXPENSES:
Salaries and benefits 2,457 41,049 6,912 50,418
Selling, general and administrative 1,242 18,505 13,351 (34)(c)(e) 33,064
Restructuring charge - - 10,137 (10,137)(f) -
----------- ------------- ------------- ------------ ------------
Total costs and expenses 3,699 59,554 30,400 (10,171) 83,482
---------- ------------ ------------- ------------ ------------
Operating income 2,567 22,120 (14,360) 6,701 17,028
INTEREST AND OTHER INCOME 71 938 1,948 (3,026)(g)(h) (69)
---------- ------------ ------------- ------------ ------------
INCOME BEFORE MINORITY
INTEREST AND PROVISION
FOR INCOME TAXES 2,638 23,058 (12,412) 3,675 16,959
MINORITY INTEREST - - - 10,921(i) 10,921
---------- ------------ ------------- ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,638 23,058 (12,412) (7,246) 6,038
PROVISION FOR INCOME TAXES 39 290 - - 329
---------- ------------ ------------- ------------ ------------
NET INCOME $ 2,599 $ 22,768 $(12,412) $ (7,246) $ 5,709
========== ============ ============= ============ ============
PRO FORMA PROVISION FOR
ADDITIONAL INCOME TAXES 1,016 - - 757(j) 1,773
---------- ------------ ------------- ------------ ------------
PRO FORMA NET INCOME $ 1,583 $ 22,768 $(12,412) $ (8,003) $ 3,936
========== ============ ============= ============ ============
PRO FORMA EARNINGS PER
SHARE $ 0.95 $ 0.74
========== ============
PRO FORMA WEIGHTED
AVERAGE NUMBER OF
SHARES OUTSTANDING 1,662 5,307
========== ============
(See Accompanying Notes)
19
HUB GROUP, INC. AND HUB PARTNERSHIPS AND AMERICAN PRESIDENT LINES DOMESTIC
DISTRIBUTION SERVICES, A DIVISION OF APL LAND TRANSPORT SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(in thousands, except per share amounts)
The following unaudited pro forma consolidated statement of operations
consolidates the statement of operations of Hub Group, Inc. for the three months
ended March 31, 1996, with those of Hub Partnerships and American President
Lines Domestic Distribution Services, a division of APL Land Transport Services,
Inc. as if the purchase transactions had been consummated as of January 1, 1996.
The pro forma financial statements should be read in conjunction with the
financial statements of Hub Group, Inc. and Hub Partnerships previously filed
with the Securities and Exchange Commission on Form 10-Q and the financial
statements of American President Lines Domestic Distribution Services, a
division of APL Land Transport Services, Inc., contained elsewhere herein.
American
President
Lines Domestic
Distribution
Services, A
Division of APL
Hub Group, Hub Land Transport Pro Forma Pro Forma
Inc. Partnerships Services, Inc. Adjustments Consolidated
----------- ------------ -------------- ------------ ------------
REVENUE $ 48,797 $ 146,405 $ 35,891 $ (7,451)(c) $ 223,642
PURCHASED TRANSPORTATION 43,412 128,405 33,654 (6,576)(c)(d) 198,895
----------- ------------ ------------ ------------ ------------
Net revenue 5,385 18,000 2,237 (875) 24,747
COSTS AND EXPENSES:
Salaries and benefits 2,587 9,807 1,499 13,893
Selling, general and administrative 1,043 3,946 2,149 (31)(c)(e) 7,107
----------- ------------ ------------ ------------ ------------
Total costs and expenses 3,630 13,753 3,648 (31) 21,000
----------- ------------ ------------ ------------ ------------
Operating income 1,755 4,247 (1,411) (844) 3,747
INTEREST AND OTHER INCOME 2 159 879 (1,119)(g)(h) (79)
----------- ------------ ------------ ------------ ------------
INCOME BEFORE MINORITY
INTEREST AND PROVISION
FOR INCOME TAXES 1,757 4,406 (532) (1,963) 3,668
MINORITY INTEREST 687 - - 1,427(i) 2,114
----------- ------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,070 4,406 (532) (3,390) 1,554
PROVISION FOR INCOME TAXES 187 126 - - 313
----------- ------------ ------------ ------------ ------------
NET INCOME $ 883 $ 4,280 $ (532) $ (3,390) $ 1,241
=========== ============ ============ ============ ============
PRO FORMA PROVISION FOR
ADDITIONAL INCOME TAXES 241 - - 149(j) 390
----------- ------------ ------------ ------------ ------------
PRO FORMA NET INCOME $ 642 $ 4,280 $ (532) $ (3,539) $ 851
=========== ============ ============ ============ ============
PRO FORMA EARNINGS PER
SHARE $ 0.29 $ 0.16
=========== ============
PRO FORMA WEIGHTED
AVERAGE NUMBER OF
SHARES OUTSTANDING 2,233 5,346
=========== ============
(See Accompanying Notes)
20
HUB GROUP, INC. AND AMERICAN PRESIDENT LINES DOMESTIC DISTRIBUTION SERVICES,
A DIVISION OF APL LAND TRANSPORT SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996
(in thousands)
The following unaudited pro forma consolidated balance sheet consolidates the
balance sheet of Hub Group, Inc. with that of American President Lines Domestic
Distribution Services, a division of APL Land Transport Services, Inc. as if the
purchase transaction had been consummated as of March 31, 1996. The pro forma
financial statements should be read in conjunction with the consolidated
financial statements of Hub Group, Inc. previously filed with the Securities and
Exchange Commission on Form 10-Q, and the financial statments of American
President Lines Domestic Distribution Services, a division of APL Land Transport
Services, Inc., contained elsewhere herein.
American President
Lines Domestic
Distribution Services,
A Division of APL
Hub Group Land Transport Pro Forma Pro Forma
Inc. Services, Inc. Adjustments Consolidated
---------- --------------------- ----------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 19,956 $ 14 $ (2,014)(a)(b) $ 17,956
Accounts receivable, net 82,394 19,330 (19,330)(a) 82,394
Prepaid expenses and other current assets 1,419 249 (249)(a) 1,419
---------- --------------------- ----------- ------------
TOTAL CURRENT ASSETS 103,769 19,593 (21,593) 101,769
---------- --------------------- ----------- ------------
PROPERTY AND EQUIPMENT, net 9,535 240 (240)(a) 9,535
GOODWILL, net 17,433 - 8,000 (b) 25,433
DEFERRED TAX BENEFIT 10,277 - - 10,277
OTHER ASSETS 1,057 186 (186)(a) 1,057
---------- --------------------- ----------- ------------
TOTAL ASSETS $ 142,071 $ 20,019 $ (14,019) $ 148,071
========== ===================== =========== ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable $ 82,247 $ 15,310 $ (15,310)(a) $ 82,247
Accrued expenses 5,609 2,767 (2,767)(a) 5,609
Restructuring charge - 10,137 (10,137)(a) -
Current portion of long-term debt 585 - 2,000 (b) 2,585
---------- --------------------- ----------- ------------
TOTAL CURRENT LIABILITIES 88,441 28,214 (26,214) 90,441
---------- --------------------- ----------- ------------
LONG-TERM DEBT 14,999 - 4,000 (b) 18,999
DEFERRED TAXES 11 - - 11
CONTINGENCIES AND COMMITMENTS
MINORITY INTEREST 789 - - 789
EQUITY:
Preferred stock - - - -
Common stock 59 - - 59
Additional paid-in capital 52,924 - - 52,924
Partnership capital 27 - - 27
Purchase price in excess of predecessor basis (25,764) - - (25,764)
Tax benefit 10,306 - - 10,306
Retained earnings 279 - - 279
Divisional control account - (8,195) 8,195(a) -
---------- --------------------- ----------- ------------
TOTAL EQUITY 37,831 (8,195) 8,195 37,831
---------- --------------------- ----------- ------------
TOTAL LIABILITIES AND EQUITY $ 142,071 $ 20,019 $ (14,019) $ 148,071
========== ===================== =========== ============
(See Accompanying Notes)
21
HUB GROUP, INC. AND HUB PARTNERSHIPS AND AMERICAN PRESIDENT
LINES DOMESTIC DISTRIBUTION SERVICES, A DIVISION OF
APL LAND TRANSPORT SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Hub Group, Inc. acquired Hub Partnerships on March 18, 1996 and the rights
to service the customers of American President Lines Domestic Distribution
Services, a division of APL Land Transport Services, Inc. ("APLDDS") on May 2,
1996. The unaudited pro forma consolidated statements of operations include the
amounts of Hub Group, Inc. and Hub Partnerships and APLDDS. The unaudited pro
forma consolidated balance sheet includes the accounts of Hub Group, Inc. and
APLDDS.
(2) The pro forma weighted average number of shares outstanding used in
computing earnings per share has been calculated by adding to the pro forma
number of shares outstanding for Hub Group, Inc. the number of shares that were
issued in Hub Group, Inc.'s initial public offering sufficient to generate net
proceeds that equal the cash used in acquiring Hub Partnerships and APLDDS.
(3) The pro forma adjustments are as follows:
(a) To eliminate the assets, liabilities and divisional control account
on the APLDDS balance sheet as Hub Group, Inc. purchased only the rights to
service the customers of APLDDS and did not purchase any of their assets or
assume any of their liabilities.
(b) To record the decrease in cash, the increase in debt and the
allocation of the $8,000,000 purchase price to goodwill as Hub Group, Inc. paid
$2,000,000 in cash and assumed debt of $6,000,000 as purchase price
consideration for APLDDS.
(c) To eliminate intercompany sales, purchased transportation and
selling, general and administrative expense of $37,102,000, $36,432,000 and
$670,000, respectively, between Hub Group, Inc. and Hub Partnerships for the
year ended December 31, 1995. To eliminate intercompany sales, purchased
transportation and selling, general and administrative expense of $7,451,000,
$7,276,000 and $175,000, respectively, between Hub Group, Inc. and Hub
Partnerships for the three months ended March 31, 1996.
(d) To eliminate volume incentives paid to APLDDS, originally recorded
as a reduction of cost of sales, which are not available to Hub Group, Inc. in
the amount of $2,800,000 and $700,000 for the year ended December 31, 1995 and
the three months ended March 31, 1996, respectively.
(e) To record the amortization of goodwill from the purchases of Hub
Partnerships and APLDDS of $636,000 and $144,000 for the year ended December 31,
1995 and the three months ended March 31, 1996, respectively.
(f) To eliminate the restructuring charge of $10,137,000 taken by APLDDS
in 1995 as it is a nonrecurring charge.
(g) To record interest expense on notes either issued in conjunction
with the acquisition of APLDDS or issued immediately prior to and subsequently
assumed in the acquisition of Hub Partnerships for $1,078,000 and $240,000 for
the year ended December 31, 1995 and the three months ended March 31, 1996,
respectively.
(h) To eliminate interest income recorded by APLDDS on funds not
acquired by Hub Group, Inc. of $1,948,000 and $879,000 for the year ended
December 31, 1995 and the three months ended march 31, 1996.
22
(i) To record the estimated minority interest on the income from Hub
Partnerships and APLDDS for $10,921,000 and $1,427,000 for the year ended
December 31, 1995 and the three months ended March 31, 1996, respectively.
(j) To record additional pro forma provision for income taxes of
$757,000 and $149,000 for the year ended December 31, 1995 and the three months
ended March 31, 1996, respectively, to provide income taxes at an effective rate
of 40%.
23
EXHIBIT
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated June 21, 1996 related to American President Lines Domestic
Distribution Services, a division of APL Land Transport Services, Inc., included
in this Form 8-K/A, into Hub Group, Inc.'s previously filed Registration
Statement on Form S-8 File No. 333-6327.
/s/ ARTHUR ANDERSEN LLP
Memphis, Tennessee
July 10, 1996
24
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.
Dated: July 12, 1996 /s/ William L. Crowder
----------------------
William L. Crowder
Vice President-Finance and
Chief Financial Officer
