SEC Filing | Hub Group Inc.

================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the quarterly period ended June 30, 2000 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission file number: 0-27754 HUB GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 36-4007085 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 377 EAST BUTTERFIELD ROAD, SUITE 700 LOMBARD, ILLINOIS 60148 (Address, including zip code, of principal executive offices) (630) 271-3600 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ On August 11, 2000, the registrant had 7,046,050 outstanding shares of Class A common stock, par value $.01 per share, and 662,296 outstanding shares of Class B common stock, par value $.01 per share. ================================================================================

HUB GROUP, INC. INDEX PAGE PART I. FINANCIAL INFORMATION: HUB GROUP, INC. - REGISTRANT Unaudited Condensed Consolidated Balance Sheets - June 30, 2000 and December 31, 1999 3 Unaudited Condensed Consolidated Statements of Operations - Three Months and Six Months Ended June 30, 2000 and 1999 4 Unaudited Condensed Consolidated Statement of Stockholders' Equity - Six Months Ended June 30, 2000 5 Unaudited Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2000 and 1999 6 Notes to Unaudited Condensed Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION 14 2

HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) JUNE 30, DECEMBER 31, ----------- ------------ 2000 1999 ----------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ - $ 1,865 Accounts receivable, net 185,764 190,221 Prepaid expenses and other current assets 5,840 2,771 ----------- ------------ TOTAL CURRENT ASSETS 191,604 194,857 PROPERTY AND EQUIPMENT, net 35,144 24,244 GOODWILL, net 216,778 219,648 DEFERRED TAXES 898 898 OTHER ASSETS 1,821 1,962 ----------- ------------ TOTAL ASSETS $ 446,245 $ 441,609 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable Trade $ 157,574 $ 141,592 Other 11,884 11,246 Accrued expenses Payroll 6,533 7,936 Other 7,259 6,384 Current portion of long-term debt 11,614 6,195 ----------- ------------ TOTAL CURRENT LIABILITIES 194,864 173,353 LONG-TERM DEBT, EXCLUDING CURRENT PORTION 111,107 131,414 DEFERRED TAXES 6,713 4,959 CONTINGENCIES AND COMMITMENTS MINORITY INTEREST 425 759 STOCKHOLDERS' EQUITY: Preferred stock - - Common stock 77 77 Additional paid-in capital 110,817 110,786 Purchase price in excess of predecessor basis (25,764) (25,764) Tax benefit of purchase price in excess of predecessor basis 10,306 10,306 Retained earnings 37,700 35,719 ----------- ------------ TOTAL STOCKHOLDERS' EQUITY 133,136 131,124 ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 446,245 $ 441,609 =========== ============ See notes to unaudited condensed consolidatedfinancial statements. 3

HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------ ------------------------- 2000 1999 2000 1999 ------------ ----------- ------------ ------------ Revenue $ 344,329 $ 319,448 $ 672,897 $ 627,130 Transportation costs 299,746 280,403 588,849 548,916 ------------ ----------- ------------ ------------ Net revenue 44,583 39,045 84,048 78,214 Costs and expenses: Salaries and benefits 24,148 20,553 47,324 41,399 Selling, general and administrative 11,064 9,357 22,431 18,480 Depreciation and amortization of property and equipment 1,247 967 2,400 2,019 Amortization of goodwill 1,435 1,436 2,870 2,198 Change in estimate/impairment of property and equipment - 884 - 884 ------------ ----------- ------------ ------------ Total costs and expenses 37,894 33,197 75,025 64,980 Operating income 6,689 5,848 9,023 13,234 ------------ ----------- ------------ ------------ Other income (expense): Interest expense (2,824) (2,054) (6,008) (2,576) Interest income 168 213 340 515 Other, net 20 965 123 982 ------------ ----------- ------------ ------------ Total other expense (2,636) (876) (5,545) (1,079) Income before minority interest and provision for income taxes 4,053 4,972 3,478 12,155 ------------ ----------- ------------ ------------ Minority interest 158 501 120 4,391 ------------ ----------- ------------ ------------ Income before provision for income taxes 3,895 4,471 3,358 7,764 Provision for income taxes 1,597 1,833 1,377 3,183 ------------ ----------- ------------ ------------ Net income $ 2,298 $ 2,638 $ 1,981 $ 4,581 ============ =========== ============ ============ Basic earnings per common share $ 0.30 $ 0.34 $ 0.26 $ 0.60 ============ =========== ============ ============ Diluted earnings per common share $ 0.30 $ 0.34 $ 0.26 $ 0.59 ============ =========== ============ ============ See notes to unaudited condensed consolidated financial statements. 4

HUB GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the six months ended June 30, 2000 (in thousands, except shares) TAX BENEFIT PURCHASE OF PURCHASE PRICE IN PRICE COMMON STOCK ADDITIONAL EXCESS OF IN EXCESS OF TOTAL --------------------- PAID-IN PREDECESSOR PREDECESSOR RETAINED STOCKHOLDERS' SHARES AMOUNT CAPITAL BASIS BASIS EARNINGS EQUITY ----------- --------- ----------- ------------ ------------- ----------- -------------- Balance at December 31, 1999 7,706,246 $ 77 $ 110,786 $ (25,764) $ 10,306 $ 35,719 $ 131,124 Net income - - - - - 1,981 1,981 Exercise of non-qualified stock options 2,100 - 31 - - - 31 ----------- --------- ----------- ------------ ------------- ----------- -------------- Balance at June 30, 2000 7,708,346 $ 77 $ 110,817 $ (25,764) $ 10,306 $ 37,700 $ 133,136 =========== ========= =========== ============ ============= =========== ============== 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, ---------------------------- 2000 1999 ------------- ------------- Cash flows from operating activities: Net income $ 1,981 $ 4,581 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 2,811 2,531 Amortization of goodwill 2,870 2,198 Change in estimate/impairment of property and equipment - 884 Deferred taxes 1,754 1,458 Minority interest 120 4,391 Loss/(Gain) on sale of assets (13) 178 Changes in working capital, net of effects of purchase transactions: Accounts receivable, net 4,457 (20,955) Prepaid expenses and other current assets (3,069) 1,226 Accounts payable 16,620 14,750 Accrued expenses (528) (356) Other assets 141 (1,580) ------------- ------------- Net cash provided by operating activities 27,144 9,306 ------------- ------------- Cash flows from investing activities: Purchases of minority interest - (108,710) Purchases of property and equipment, net (13,698) (2,495) ------------- ------------- Net cash used in investing activities (13,698) (111,205) ------------- ------------- Cash flows from financing activities: Proceeds from sale of common stock 31 551 Distributions to minority interest (454) (9,622) Payments on long-term debt (14,915) (46,083) Proceeds from issuance of long-term debt 27 150,780 ------------- ------------- Net cash provided by/used in financing activities (15,311) 95,626 ------------- ------------- Net decrease in cash and cash equivalents (1,865) (6,273) Cash and cash equivalents, beginning of period 1,865 15,178 ------------- ------------- Cash and cash equivalents, end of period $ - $ 8,905 ============= ============= Supplemental disclosures of cash flow information Cash paid for: Interest $ 6,286 $ 2,621 Income taxes 1,520 656 See notes to unaudited condensed consolidated financial statements. 6

HUB GROUP, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. INTERIM FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial statements of Hub Group, Inc. (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. However, the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. The financial statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to present fairly the Company's financial position and results of operations. NOTE 2. EARNINGS PER SHARE The following is a reconciliation of the Company's Earnings per Share: THREE MONTHS ENDED THREE MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 -------------------------- -------------------------- (000'S) (000'S) --------------- --------------- Per-Share Per-Share INCOME SHARES AMOUNT INCOME SHARES AMOUNT ------ ------ --------- ------ ------ --------- BASIC EARNINGS PER SHARE Income available to common stockholders $2,298 7,708 $0.30 $2,638 7,688 $0.34 ------ ----- ----- ------ ----- ----- EFFECT OF DILUTIVE SECURITIES Stock options - - - - 88 - ------ ----- ----- ------ ----- ----- DILUTED EARNINGS PER SHARE Income available to common stockholders plus assumed exercises $2,298 7,708 $0.30 $2,638 7,776 $0.34 ------ ----- ----- ------ ----- ----- SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 --------------------------- -------------------------- (000'S) (000'S) ---------------- --------------- Per-Share Per-Share INCOME SHARES AMOUNT INCOME SHARES AMOUNT ------ ------ --------- ------ ------ --------- BASIC EARNINGS PER SHARE Income available to common stockholders $1,981 7,707 $0.26 $4,581 7,680 $0.60 ------ ----- ----- ------ ----- ----- EFFECT OF DILUTIVE SECURITIES Stock options - 17 - - 73 - ------ ----- ----- ------ ----- ----- DILUTED EARNINGS PER SHARE Income available to common stockholders plus assumed exercises $1,981 7,724 $0.26 $4,581 7,753 $0.59 ------ ----- ----- ------ ----- ----- 7

NOTE 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following: JUNE 30, DECEMBER 31, ------------ ------------- 2000 1999 ------------ ------------- (000'S) Building and improvements $ 59 $ 56 Leasehold improvements 1,924 1,526 Computer equipment and software 35,270 23,795 Furniture and equipment 7,060 6,365 Transportation equipment and automobiles 3,748 4,742 ------------ ------------- 48,061 36,484 Less: Accumulated depreciation and amortization (12,917) (12,240) ------------ ------------- PROPERTY AND EQUIPMENT, net $ 35,144 $ 24,244 ============ ============= NOTE 4. DEBT On June 30, 2000 the Company's $5.0 million bank line of credit with Cass Bank and Trust Company was terminated. NOTE 5. LETTER OF INTENT During the second quarter, the Company terminated the letter of intent to divest Hub Group Inc.'s interest in Hub Group Distribution Services. 8

HUB GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000, COMPARED TO THREE MONTHS ENDED JUNE 30, 1999 REVENUE Revenue for Hub Group, Inc. (the "Company") increased 7.8% to $344.3 million from $319.4 million in 1999. Intermodal revenue increased 4.0% over 1999. Management believes that the slower than historical growth in intermodal is due in part to the termination of a significant customer contract in November 1999. Truckload brokerage revenue increased 10.5% over 1999. Logistics revenue, which includes revenue from the Company's core logistics services and all revenue from Hub Group Distribution Services ("Hub Distribution"), increased 31.1% compared to 1999. This increase is primarily due to the growth in the Company's core logistic services. NET REVENUE Net revenue increased 14.2% to $44.6 million from $39.0 million in 1999. As a percentage of revenue, net revenue increased to 12.9% of revenue from 12.2% in 1999. This increase in percentage is primarily attributed to the recapture of some of the fuel surcharges that were expensed in the first quarter, the year-over-year increase in the number of units in and the cost-effectiveness of the Company's Premier Network Services offering, termination of a significant customer contract that had low-margin business that existed in the prior year (see "Revenue"), the strength of the Company's purchasing power with the major railroads and a significant increase in the net revenue percentage for truckload brokerage. SALARIES AND BENEFITS Salaries and benefits increased 17.5% to $24.1 million from $20.6 million in 1999. As a percentage of revenue, salaries and benefits increased to 7.0% of revenue from 6.4% in 1999. The increase in the percentage is primarily attributed to increased headcount supporting the Company's information technology initiatives, e-business initiatives and to support our growing base of service offerings operationally as well as to hire salesmen to sell these additional services. These additional services include boxcar, flat bed, and certain logistic applications. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses increased 18.2% to $11.1 million from $9.4 million in 1999. These expenses, as a percentage of revenue, increased to 3.2% from 2.9% in 1999. The increase in percentage is primarily attributed to expenditures related to equipment leases, outside services and advertising. The increase in equipment leases is primarily due to the leasing of computer hardware to support the infrastructure of the network hardware environment that is required to support both new and future software applications. The increase in outside services and advertising is due primarily to Hub Distribution's support of its e-business initiative, a national home delivery service for large items purchased via the internet. DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT Depreciation and amortization increased 29.0% to $1.2 million from $1.0 million in 1999. This expense as a percentage of revenue increased to 0.4% from 0.3% in 1999. The increase in depreciation is primarily attributed to internally developed operating systems for the point-of-purchase installation and other niche logistics services offered by Hub Distribution. 9

AMORTIZATION OF GOODWILL Amortization of goodwill remained constant at $1.4 million. The expense as a percentage of revenue remained constant at 0.4%. CHANGE IN ESTIMATE/IMPAIRMENT OF PROPERTY AND EQUIPMENT In the second quarter of 1999, a $0.9 million pretax charge was recorded due to a change in estimate and an impairment loss relating to certain operating software applications. Specifically, $0.7 million of this charge was attributable to a change in estimate of the useful life for the Visual Movement software previously used primarily for brokerage. The Visual Movement software is no longer being used to support the Company's truckload brokerage service offering and was replaced with enhancements to the Company's proprietary intermodal operating software during the second quarter of 1999. These enhancements allowed for greater network visibility of loads. The $0.2 million impairment loss related to the write-down of a logistics software program. The fair value was determined based on the estimated future cash flows attributable to the single customer who continued to use this software throughout 1999. The Company has installed a new logistics software package and is currently testing the software for its operational applications. This new software will provide enhanced functionality. OTHER INCOME (EXPENSE) Other income (expense) netted to $(2.6) million in 2000 compared to $(0.9) million in 1999. Interest expense increased to $(2.8) million in 2000 from $(2.1) million in 1999. The increase in interest expense is due primarily to the additional debt required to fund the purchase of the remaining 70% minority interests in Hub City Alabama, L.P., Hub City Atlanta, L.P., Hub City Boston, L.P., Hub City Canada, L.P., Hub City Cleveland, L.P., Hub City Detroit, L.P., Hub City Florida, L.P., Hub City Indianapolis, L.P., Hub City Kansas City, L.P., Hub City Mid-Atlantic, L.P., Hub City New York/New Jersey, L.P., Hub City New York State, L.P., Hub City Ohio, L.P., Hub City Philadelphia, L.P., Hub City Pittsburgh, L.P., Hub City Portland, L.P., and Hub City St. Louis, L.P. (collectively referred to as the "April 1999 Purchase"). The debt to fund the April 1999 Purchase was obtained on April 30, 1999. Interest income remained constant at $0.2 million in both periods. Other income decreased to $0.0 million in 2000 from $1.0 million in 1999. This decrease in other income is due to $1.0 million of non-recurring income recognized in the second quarter of 1999 upon execution of a confidential agreement with one of the company's vendors. MINORITY INTEREST Minority interest decreased 68.5% to $0.2 million from $0.5 million in 1999. The decrease in the percentage is attributed to lower income of Hub Distribution due primarily to costs incurred in the development of their e-business initiative. INCOME TAXES The provision for income taxes decreased 12.9% to $1.6 million from $1.8 million in 1999. The Company is providing for income taxes at an effective rate of 41.0% in 2000. NET INCOME Net income decreased 12.9% to $2.3 million from $2.6 million in 1999. EARNINGS PER SHARE Earnings per share decreased 11.8% to $0.30 from $0.34 in 1999. 10

SIX MONTHS ENDED JUNE 30, 2000, COMPARED TO SIX MONTHS ENDED JUNE 30, 1999 REVENUE Revenue for the Company increased 7.3% to $672.9 million from $627.1 million in 1999. Intermodal revenue increased 3.7% over 1999. Management believes that the slower than historical growth in intermodal is due in part to the termination of a significant customer contract in November 1999 and in part to the service disruption from the split-up of Conrail which began on June 1, 1999. Truckload brokerage revenue increased 10.0% over 1999. Logistics revenue, which includes revenue from the Company's core logistics services and all revenue from Hub Distribution, increased 29.1% compared to 1999. This increase is primarily due to the growth in the Company's core logistic services. NET REVENUE Net revenue increased 7.5% to $84.0 million from $78.2 million in 1999. As a percentage of revenue, net revenue was 12.5% in both periods. SALARIES AND BENEFITS Salaries and benefits increased 14.3% to $47.3 million from $41.4 million in 1999. As a percentage of revenue, salaries and benefits increased to 7.0% of revenue from 6.6% in 1999. The increase in the percentage is primarily attributed to increased headcount supporting the Company's information technology initiatives, e-business initiatives and to support our growing base of service offerings operationally as well as to hire salesmen to sell these additional services. These additional services include boxcar, flat bed, and certain logistic applications. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses increased 21.4% to $22.4 million from $18.5 million in 1999. These expenses, as a percentage of revenue, increased to 3.3% from 2.9% in 1999. The increase in the percentage is primarily attributed to expenditures related to outside services, equipment leases, and advertising. The increase in outside services and advertising is due primarily to Hub Distribution's support of its e-business initiative, a national home delivery service for large items purchased via the internet. The increase in equipment leases is primarily due to the leasing of computer hardware to support the infrastructure of the network hardware environment that is required to support both new and future software applications. DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT Depreciation and amortization increased 18.9% to $2.4 million from $2.0 million in 1999. This expense as a percentage of revenue increased to 0.4% from 0.3% in 1999. The increase in depreciation is primarily attributed to internally developed operating systems for the point-of-purchase installation and logistics services offered by Hub Distribution. AMORTIZATION OF GOODWILL Amortization of goodwill increased 30.6% to $2.9 million from $2.2 million in 1999. The expense as a percentage of revenue remained constant at 0.4%. The increase in expense is primarily attributable to the amortization of the goodwill associated with the April 1999 Purchase. 11

CHANGE IN ESTIMATE/IMPAIRMENT OF PROPERTY AND EQUIPMENT In the second quarter of 1999, a $0.9 million pretax charge was recorded due to a change in estimate and an impairment loss relating to certain operating software applications. Specifically, $0.7 million of this charge was attributable to a change in estimate of the useful life for the Visual Movement software previously used primarily for brokerage. The Visual Movement software is no longer being used to support the Company's truckload brokerage service offering and was replaced with enhancements to the Company's proprietary intermodal operating software during the second quarter of 1999. These enhancements allowed for greater network visibility of loads. The $0.2 million impairment loss related to the write-down of a logistics software program. The fair value was determined based on the estimated future cash flows attributable to the single customer who continued to use this software throughout 1999. The Company has installed a new logistics software package and is currently testing the software for its operational applications. This new software will provide enhanced functionality. OTHER INCOME (EXPENSE) Other income (expense) netted to $(5.5) million in 2000 compared to $(1.1) million in 1999. Interest expense increased to $(6.0) million in 2000 from $(2.6) million in 1999. The increase in interest expense is due primarily to the additional debt required to fund the April 1999 Purchase. Interest income decreased to $0.3 million in 2000 from $0.5 million in 1999. The primary cause of this decrease is the Company's increased concentration of its cash balances to reduce debt and minimize interest expense. Other income decreased to $0.1 million in 2000 from $1.0 million in 1999. This decrease in other income is primarily due to $1.0 million of non-recurring income recognized in second quarter of 1999 upon execution of a confidential agreement with one of the Company's vendors. MINORITY INTEREST Minority interest decreased 97.3% to $0.1 million from $4.4 million in 1999. This decrease is primarily attributed to the purchase of the remaining 70% minority interests in connection with the April 1999 Purchase. INCOME TAXES The provision for income taxes decreased 56.7% to $1.4 million from $3.2 million in 1999. The Company is providing for income taxes at an effective rate of 41.0% in 2000. NET INCOME Net income decreased 56.8% to $2.0 million from $4.6 million in 1999. EARNINGS PER SHARE Basic earnings per share decreased 56.7% to $0.26 from $0.60 in 1999. Diluted earnings per share decreased 55.9% to $0.26 from $0.59 in 1999. 12

LIQUIDITY AND CAPITAL RESOURCES The Company maintains a bank facility with Harris Trust and Savings Bank ("Harris"). The facility is comprised of $50.0 million in term debt and a $50.0 million revolving line of credit. At June 30, 2000, there was $45.0 million of outstanding term debt and $22.0 million outstanding and $28.0 million unused and available under the line of credit with Harris. Borrowings under the line of credit are unsecured and have a five-year term that began on April 30, 1999, with a floating interest rate based upon the LIBOR (London Interbank Offered Rate) or Prime Rate. The term debt has quarterly payments ranging from $1,250,000 to $2,000,000 with a balloon payment of $19.0 million due on March 31, 2004. The Company maintains $50.0 million of private placement debt (the "Notes"). These Notes are unsecured and have an eight-year average life with a coupon interest rate of 8.64% paid quarterly. These Notes mature on June 25, 2009, with annual payments of $10.0 million commencing on June 25, 2005. On June 30, 2000 the Company's $5.0 million bank line of credit with Cass Bank and Trust Company was terminated. OUTLOOK, RISKS AND UNCERTAINTIES This "Outlook, Risks and Uncertainties" section contains statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future which are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently uncertain and subject to risks. Such statements should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. The Company assumes no liability to update any such forward-looking statements. In addition to those mentioned elsewhere in this section, such risks and uncertainties include the impact of competitive pressures in the marketplace, including the entry of new, web-based competitors, the degree and rate of market growth in the intermodal, brokerage and logistics markets served by the Company, changes in rail and truck capacity, further consolidation of rail carriers, rail service conditions, changes in governmental regulation, adverse weather conditions, fuel shortages, changes in the cost of services from rail, drayage and other vendors and fluctuations in interest rates. NET REVENUE As described above, the net revenue for the three months ended June 30, 2000 as a percentage of revenue increased to 12.9% of revenue from 12.2% for the three months ended June 30, 1999. A number of factors that contributed to this higher margin are one-time in nature or not likely to continue in the future. Management expects the net revenue, as a percentage of revenue, will likely decline in future quarters from the 12.9% level to a more historical level. The net revenue for the six months ended June 30 was 12.5% for both periods 2000 and 1999 which is more consistent with the Company's historical level. BUSINESS COMBINATIONS/DIVESTITURES During the second quarter, the Company terminated the letter of intent to divest Hub Group Inc.'s interest in Hub Group Distribution Services. LIQUIDITY AND CAPITAL RESOURCES The Company believes that cash to be provided by operations, cash available under its lines of credit and the Company's ability to obtain additional credit capacity will be sufficient to meet the Company's short-term working capital and capital expenditure needs. The Company believes that the aforementioned items are sufficient to meet its anticipated long-term working capital, capital expenditure and debt repayment needs. 13

PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The 2000 Annual Meeting of Stockholders of Hub Group, Inc. was held on May 17, 2000. At this meeting, the following six directors were reelected with the following votes: Phillip C. Yeager: 19,696,209 votes for and 57,337 votes withheld; David P. Yeager: 19,696,909 votes for and 56,637 votes withheld; Thomas L. Hardin: 19,696,909 votes for and 56,637 votes withheld; Gary D. Eppen: 19,697,494 votes for and 56,052 votes withheld; Charles R. Reaves: 19,697,494 votes for and 56,052 votes withheld; Martin P. Slark: 19,697,494 votes for and 56,052 votes withheld. 14

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly authorized this report to be signed on its behalf by the undersigned thereunto duly authorized. HUB GROUP, INC. DATE: August 11, 2000 /S/ JAY E. PARKER ----------------- Jay E. Parker Vice President-Finance and Chief Financial Officer (Principal Financial Officer)

5 This schedule contains summary financial information extracted from Unaudited Condensed Consolidated Statements of Operations and Unaudited Condensed Consolidated Balance Sheets and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 JUN-30-2000 0 0 189202 3438 0 191604 48061 12917 446245 194864 0 0 0 77 133059 446245 0 344329 0 299746 37894 47 2824 3895 1597 6689 0 0 0 2298 0.30 0.30