HUBG 10-Q Quarter ended Sept. 30, 2011

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended September 30, 2011

or

For the transition period from                  to

Commission file number: 0-27754

HUB GROUP, INC.

(Exact name of registrant as specified in its charter)

3050 Highland Parkway, Suite 100

Downers Grove, Illinois 60515

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

(630) 271-3600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

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

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

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

On October 25, 2011, the registrant had 36,858,818 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.

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HUB GROUP, INC.

I NDEX

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HUB GROUP, INC.

(in thousands, except share amounts)

See notes to unaudited consolidated financial statements.

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HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOM E

(in thousands, except per share amounts)

See notes to unaudited consolidated financial statements.

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HUB GROUP, INC.

(in thousands)

See notes to unaudited consolidated financial statements.

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HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

Our accompanying unaudited consolidated financial statements of Hub Group, Inc. (“we”, “us” or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been omitted pursuant to those rules and regulations. However, we believe that the disclosures contained herein are adequate to make the information presented not misleading.

The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position as of September 30, 2011 and results of operations for the three months and nine months ended September 30, 2011 and 2010.

These unaudited consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

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

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

On March 31, 2011, we amended our Credit Agreement which increased our maximum unsecured borrowing capacity from $10.0 million to $50.0 million and extended the term until March 2014. The interest rate under the Credit Agreement is equal to LIBOR plus 1.75%. The financial covenants require a minimum net worth of $300.0 million and a cash flow leverage ratio of not more than 2.0 to 1.0. The commitment fee charged on the unused line of credit is 0.375%.

We have standby letters of credit that expire at various dates in 2011 and 2012. As of September 30, 2011, the outstanding letters of credit totaled $2.6 million.

We had $47.4 million of unused and available borrowings under our bank revolving line of credit as of September 30, 2011. We were in compliance with our debt covenants as of September 30, 2011.

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We are a party to litigation incident to our business, including claims for freight lost or damaged in-transit, freight improperly shipped or improperly billed, property damage and personal injury. Some of the lawsuits to which we are a party are covered by insurance and are being defended by our insurance carriers. Some of the lawsuits are not covered by insurance and we are defending them. Management does not believe that the outcome of this litigation will have a material adverse effect on our financial position or results of operations.

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of September 30, 2011 and December 31, 2010 due to their short-term nature.

Cash and cash equivalents included $38.1 million and $114.6 million as of September 30, 2011 and December 31, 2010, respectively, invested in a mutual fund comprised of U.S. treasury securities and repurchase agreements for these securities.

Restricted investments included $13.2 million and $11.4 million as of September 30, 2011 and December 31, 2010, respectively, of mutual funds which are reported at fair value.

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

We are guaranteeing certain tractor lease payments. The guarantees expire at various dates beginning in 2012 through 2017.

The potential maximum exposure under these lease guarantees was approximately $16.8 million and $6.8 million as of September 30, 2011 and December 31, 2010, respectively. The potential maximum exposure represents the amount of the remaining lease payments on all outstanding guaranteed leases as of September 30, 2011 and December 31, 2010. However, upon default, we have the option to purchase the tractors. We could then sell the tractors and use the proceeds to recover all or a portion of the amounts paid under the guarantees. There were no material defaults during the quarter ended September 30, 2011.

As of September 30, 2011 and December 31, 2010, respectively, the liability was approximately $0.3 million and $0.1 million, for the guarantees representing the fair value of the guarantees based on a discounted cash-flow analysis. We are amortizing the liability over the remaining lives of the respective guarantees.

Foreign subsidiaries’ assets and liabilities are translated to United States dollars at the end of period exchange rates. Revenues and expenses are translated at average rates for the period. Translation adjustments are reported as a separate component of stockholders’ equity in accumulated other comprehensive income. Total comprehensive income was $16.3 million and $12.6 million for the quarters ended September 30, 2011 and 2010, respectively and $41.2 million and $31.0 million for the nine months ended September 30, 2011 and 2010, respectively.

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On April 1, 2011 (the “Acquisition Date”) we entered into a definitive agreement pursuant to which we acquired all of the capital stock of Exel Transportation Services, Inc. (“ETS”). ETS is now our wholly-owned subsidiary, operating independently and renamed Mode Transportation, LLC (“Mode”). The purchase price for the ETS stock was $83.4 million before post closing adjustments for working capital. Based on estimated working capital, the actual amount paid at closing was $90.1 million, net of cash acquired of $8.0 million, which we paid with cash on hand. Closing adjustments for working capital were agreed upon, resulting in a cash refund of $7.9 million, bringing the final purchase price to $82.2 million. The results of operations for Mode are included in our Unaudited Consolidated Statements of Income for the period April 1, 2011 to September 30, 2011.

Mode has approximately 300 Independent Business Owners (“IBOs”) who sell and operate the business throughout North America. Mode also has a company managed operation in Dallas, a temperature protected services division, Temstar, located in Lombard, IL and corporate offices in Dallas and Memphis. We believe this acquisition brings us highly complementary service offerings, more scale and a talented sales channel that allows us to better reach small and midsize customers.

We incurred certain due diligence costs of $1.7 million. Integration costs, including severance, incurred during the three months ended September 30, 2011 were approximately $0.8 million. Acquisition costs, which include due diligence and integration costs, were $2.8 million for the nine months ended September 30, 2011. Severance costs are included in Salaries & benefits and due diligence and integration costs are included in General and administrative in the Unaudited Consolidated Statements of Income for both the three and nine month periods ended September 30, 2011.

The Mode 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 consolidated balance sheet at their estimated fair values as of April 1, 2011 with the remaining unallocated purchase price recorded as goodwill. The fair value assigned to the agency/customer relationships identifiable intangible was determined using an income approach based on management’s estimates and assumptions. The fair value assigned to the property and equipment was determined based on a market approach.

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The following table summarizes the preliminary allocation of the total purchase price to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands), pending finalization of valuation efforts:

The total amount of tax deductible goodwill is preliminarily estimated at $25.6 million and will be amortized over 15 years. There is approximately $5.0 million of assumed liabilities which will provide additional tax deductible goodwill when paid.

The component of the “Other intangibles” listed in the above table as of the acquisition date are preliminarily estimated as follows (in thousands):

The above intangible asset will be amortized using the straight-line method. Amortization expense related to this acquisition for both the three and nine month periods ended September 30, 2011 was $0.2 million and $0.4 million, respectively. Amortization expense related to Mode for the next five years is as follows (in thousands):

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The following unaudited pro forma consolidated results of operations for 2011 and 2010 assume that the acquisition of Mode was completed as of January 1, 2010 (in thousands, except for per share amounts):

The unaudited pro forma consolidated results for the three and nine month periods were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and Mode. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, 2010.

On June 3, 2011, we purchased certain assets of Domestic Transport, Inc. (“Domestic Transport”). Domestic Transport was founded in 2005 with one truck hauling containers out of the Ports of Seattle and Tacoma. At the time of the acquisition, Domestic Transport had grown to a 22-driver operation that handles container deliveries in the state of Washington and throughout the Pacific Northwest.

The total purchase price was $0.7 million payable in installments of $0.6 million at closing and four equal installments of $0.025 million, paid quarterly starting September 3, 2011. The purchase price was allocated as follows: $0.1 million for the driver and customer relationships, $0.2 million for tractors and the remaining $0.4 million for goodwill.

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Due to the acquisition of Mode as discussed in Note 8, we now report two distinct business segments. The first segment is Mode, which includes Mode business only. The second segment is Hub, which is all business other than Mode.

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

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

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

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In the second quarter of 2011, we recorded restructuring charges of approximately $0.3 million consisting of severance charges for 31 employees. Severance payments of $0.2 million remained to be paid as of June 30, 2011.

In the third quarter of 2011, we recorded restructuring charges of approximately $0.7 million consisting of severance charges for 71 employees and lease cancellation costs of $0.1 million. We have an accrual of $0.8 million, consisting of $0.7 million of severance charges and $0.1 million of lease obligations caused by closing three facilities, remaining to be paid at September 30, 2011.

All severance charges are included in Salaries and benefits and all lease obligation and closing costs are included in General and administrative in the Unaudited Consolidated Statements of Income.

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