Exhibit 99.2

 

 

 

 

 

 

 

 

ESTENSON LOGISTICS, LLC.

 

SIX MONTHS ENDED JUNE 30, 2017 AND 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ESTENSON LOGISTICS, LLC.

INDEX

 

	Page
Financial Information:
Consolidated Balance Sheets – June 30, 2017 (unaudited) and December 31, 2016	3
Unaudited Consolidated Statements of Income – Three Months and Six Months Ended June 30, 2017 and 2016	4
Consolidated Statement of Members’ Equity – June 30, 2017 (unaudited) and December 31, 2016	5
Unaudited Consolidated Statements of Cash Flows – Six Months Ended June 30, 2017 and 2016	6
Notes to Unaudited Consolidated Financial Statements	7

 

 

 

ESTENSON LOGISITICS, LLC.

CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2017				2016
ASSETS		(unaudited)
CURRENT ASSETS:
Cash and cash equivalents		$	5,144,834			$	13,841,637
Accounts receivable,  net			31,294,057				27,830,462
Other receivables			370,542				388,872
Insurance deposit			11,656,951				12,904,878
Prepaid expenses			1,641,069				3,790,803
TOTAL CURRENT ASSETS			50,107,453				58,756,652
PROPERTY AND EQUIPMENT
Freight revenue equipment			230,623,736				216,357,500
Other property and equipment			4,424,230				3,570,588
TOTAL PROPERTY AND EQUIPMENT			235,047,966				219,928,088
Less accumulated depreciation			103,600,421				93,355,304
NET PROPERTY AND EQUIPMENT			131,447,545				126,572,784
OTHER ASSETS
Refundable deposits			64,087				181,259
TOTAL ASSETS		$	181,619,085			$	185,510,695
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt		$	27,551,001			$	25,881,832
Accounts payable			4,641,977				4,984,939
Accrued expenses			5,369,196				3,442,836
Current portion of claims payable			1,550,577				1,455,720
Other current liabilities			3,326,596				5,786,670
Due to affiliate			262,915				135,070
TOTAL CURRENT LIABILITIES			42,702,262				41,687,067
LONG-TERM LIABILITIES:
Notes payable, net of current portion			85,939,433				83,216,887
Claims payable, net of current portion			7,820,792				6,406,082
TOTAL LONG-TERM LIABILITIES			93,760,225				89,622,969
TOTAL LIABILITIES			136,462,487				131,310,036
MEMBERS’ EQUITY:			45,156,598				54,200,659
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	181,619,085			$	185,510,695

 

See notes to unaudited consolidated financial statements.

 

 

 

ESTENSON LOGISITICS, LLC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

 

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2017				2016				2017				2016
Operating revenues, excluding fuel surcharge		$	60,635,981			$	56,285,088			$	116,344,290			$	107,542,663
Fuel surcharge revenues			7,842,281				6,947,582				15,573,984				12,724,234
Total operating revenues			68,478,262				63,232,670				131,918,274				120,266,897
Costs of operations:
Depreciation			7,039,531				6,304,355				14,064,905				12,371,064
Equipment rent and lease			809,511				894,378				4,041,969				4,559,419
Fuel and oil			7,071,597				6,418,899				13,828,478				11,249,096
Independent transportation providers			3,606,738				2,813,146				6,532,757				5,069,118
Insurance and employee benefits			6,173,993				3,879,534				11,833,079				7,948,860
Payroll taxes			1,860,635				1,857,255				4,358,967				4,014,176
Repairs and maintenance			4,661,273				2,783,571				8,660,643				7,625,031
Salaries and wages			27,827,156				27,290,815				52,117,935				48,659,201
Supplies and miscellaneous			448,018				493,275				899,140				710,976
Total cost of operations			59,498,452				52,735,228				116,337,873				102,206,941
Gross profit			8,979,810				10,497,442				15,580,401				18,059,956
General and administrative expenses			8,196,318				5,885,608				12,599,946				11,166,807
Income from operations			783,492				4,611,834				2,980,455				6,893,149
Other income (expenses):
Gain on disposition of equipment			148,352				332,667				211,819				542,745
Interest expense			(605,686	)			(613,264	)			(1,374,477	)			(1,271,411	)
Other income			127,901				4,892				115,985				13,730
Other expenses			-				(27,973	)			-				(312,189	)
Total other expense			(329,433	)			(303,678	)			(1,046,673	)			(1,027,125	)
Net income		$	454,059			$	4,308,156			$	1,933,782			$	5,866,024

 

See notes to unaudited consolidated financial statements

 

 

ESTENSON LOGISITICS, LLC.

CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY

 

		Members’ Equity
Members’ equity January 1, 2016		$	42,991,776
Net income			9,393,871
Net contributions from Members’			1,815,012
Members’ equity December 31, 2016		$	54,200,659
Net income			1,933,782
Net Distributions to Members’			(10,977,843	)
Members’ equity June 30, 2017 (unaudited)		$	45,156,598

 

See notes to unaudited consolidated financial statements.

 

 

 

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Six Months Ended June 30,
		2017				2016
Cash flows from operating activities:
Net Income		$	1,933,782			$	5,866,024
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			14,238,464				12,510,374
Loss (gain) on sale of assets			(211,819	)			(542,745	)
Changes in operating assets and liabilities:
Accounts receivable, net			(3,463,595	)			(4,563,121	)
Other receivables			18,330				246,573
Prepaid expense			2,149,734				738,097
Insurance deposit			1,247,927				3,463,203
Refundable deposits			117,172				(800	)
Accounts payable			(342,962	)			3,639,889
Accrued expenses			1,926,360				1,407,814
Claims payable			1,509,567				(1,152,000	)
Other current liabilities			(2,460,074	)			(2,344,653	)
Due to affiliate			127,845				(98,437	)
Net cash provided by operating activities			16,790,731				19,170,218
Cash flows from investing activities:
Proceeds from sale of equipment			1,033,098				665,482
Purchases of property and equipment			(1,111,638	)			(537,530	)
Net cash used in investing activities			(78,540	)			127,952
Cash flows from financing activities:
Principal long-term debt repayments			(14,431,152	)			(13,000,108	)
Distributions to members			(10,977,842	)			(3,281,636	)
Net cash used in financing activities			(25,408,994	)			(16,281,744	)
Net increase (decrease) in cash and cash equivalents			(8,696,803	)			3,016,426
Cash and cash equivalents beginning of the period			13,841,637				2,463,222
Cash and cash equivalents end of the period		$	5,144,834			$	5,479,648
Supplemental disclosures of cash paid for:
Interest		$	1,374,477			$	1,271,411
Schedule of non-cash activities
Purchase of property and equipment		$	19,923,279			$	18,504,793
Cash purchases			(1,111,638	)			(537,530	)
Property and equipment acquired through borrowings		$	18,811,641			$	17,967,263

 

See notes to unaudited consolidated financial statements.

 

 

 

HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. Summary of Significant Accounting Policies

 

Nature of Operations:

 

Estenson Logistics, LLC (a Nevada Limited Liability Company) was formed in February 1999. The Company provides freight transportation services and is a common carrier regulated by the Interstate Commerce Commission. The Company is licensed to operate in the continental United States of America.

 

Use of Estimates:

 

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 and disclosures of contingent 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.

 

NOTE 2. Insurance Claims Deposits

 

The Company self-funded for a portion of its auto liability, worker's compensation and general liability insurance. Under the terms of the agreement, the Company is to fund and maintain a deposit with the insurance company to pay insurance claim losses, including future actuarial expected losses and losses incurred but not reported. If the Company terminates the contract, after a twenty-four month period and all claims have been paid, the remaining deposit will be returned. As of June 30, 2017 and December 31, 2016, the insurance claims deposit is $11,656,951 and $12,904,878, respectively.

 

NOTE 3. Uninsured Deposits

 

Periodically, due to fluctuations in funds on deposit, cash in bank accounts exceed the current Federal Deposit Insurance Corporation insurance limit. Bank balances at June 30, 2017 exceeded the insured limit by $7,573,982. At December 31, 2016, bank balances exceeded the insured limit by $16,354,306.

 

NOTE 4. Income Taxes

 

Estenson Logistics, LLC is recognized as a partnership for federal and state income tax purposes. As a partnership, items of income and deductions are passed through to the members each year, and thus the Company pays no federal income tax and only pays state income tax for certain states.

 

NOTE 5. Related Party Transactions

 

The members own 90% of a company that provides managerial services in General and administration expenses, insurance administration in General and administration expenses, and freight transportation to Estenson Logistics, LLC as needed. For the six months ended June 30, 2017, the Company owed the affiliate $262,915 for managerial these services compared to $135,070 as of December 31, 2016. The Company repaid the affiliate $2,482,033 for the six months ended June 30, 2017 and $3,235,068 for the six months ended June 30, 2016which included prior year unpaid balances.

 

The Company leases office space in Mesa Arizona from an entity which is owned totally by the members of the Company. The lease is for the Corporate Office location. The amount of lease payments made for the six months ended June 30, 2017 and 2016 for the office space was $242,273 and $238,344, respectively.

 

NOTE 6. Claims Payable

 

Claims payable represent accruals for the self-insured portion of the outstanding claims at year end. The current portion reflects the amounts of claims expected to be paid in the following year. These accruals are estimated based upon actuarial analysis of the nature and severity of individual claims and an estimate of future claims based upon historical experience. The ultimate cost of a claim develops over time as additional information regarding the nature, timing and extent of damages become available. As of June 30, 2017 and December 31, 2016, claims payable is estimated at $9,371,369 and $7,861,802, respectively and is included in the current portion of claims payable and claims payable, net of current portion.

 

The actual cost to settle the self-insured claims liability can differ from reserve estimates because of legal costs, claims that have been incurred but not reported and a number of uncertainties, including the inherent difficulty in estimating the severity of the claims and the potential settlement amounts to dispose of the claims.

 

 

 

NOTE 7. Notes Payable

 

All notes payable are secured by equipment and consist of the following:

 

		Period Ended
		June 30,				December 31,
		2017				2016
		(in thousands)
Notes payable to lender, secured by equipment with original cost totaling $38,833,320, with monthly payments totaling $581,143, interest rates ranging from 2.05% to 2.48%, and maturity dates ranging from 2017 to 2022		$	28,934,536			$	24,112,026
Notes payable to lender, secured by equipment with original cost totaling $23,179,260, with monthly payments totaling $333,976, interest rates ranging from 2.24% to 2.60%, and maturity dates ranging from 2017 to 2023			20,548,757				16,972,856
Notes payable to lender, secured by equipment with original cost totaling $18,234,247, with monthly payments totaling $256,162, interest rates ranging from 2.27% to 2.67%, and maturity dates ranging from 2020 to 2022			11,894,985				13,326,497
Notes payable to lender, secured by equipment with original cost totaling $19,263,352, with monthly payments totaling $270,240, interest rates ranging from 2.21% to 2.51%, and maturity dates ranging from 2020 to 2022			11,215,384				12,873,988
Notes payable to lender, secured by equipment with original cost totaling $19,210,673, with monthly payments totaling $249,781, interest rates ranging from 2.12% to 2.78%, and maturity dates ranging from 2020 to 2023			10,146,302				11,627,609
Notes payable to lender, secured by equipment with original cost totaling $23,430,599, with monthly payments totaling $351,425, interest rates ranging from 2.13% to 2.57%, and maturity dates ranging from 2017 to 2021			9,432,894				11,194,142
Notes payable to lender, secured by equipment with original cost totaling $9,693,530, with monthly payments totaling $130,870, interest rates ranging from 2.45% to 2.85%, and maturity dates ranging from 2019 to 2023			10,061,630				8,254,435
Notes payable to lender, secured by equipment with original cost totaling $5,250,545, with monthly payments totaling $75,501, interest rates ranging from 2.16% to 2.87%, and maturity dates ranging from 2022 to 2023			6,686,435				5,001,119
Notes payable to lender, secured by equipment with original cost totaling $9,210,791, with monthly payments totaling $141,988, interest rates ranging from 2.09% to 2.74%, and maturity dates ranging from 2017 to 2019			2,634,544				3,392,557
Notes payable to lender, secured by equipment with original cost totaling $5,068,177, with monthly payments totaling $76,731, interest rates ranging from 2.35% to 2.70%, and maturity dates ranging from 2017 to 2020			1,118,463				1,403,709
Notes payable to lender, secured by equipment with original cost totaling $926,932, with monthly payments totaling $13,177, interest rates ranging from 2.46% to 2.49%, and maturity dates ranging from 2022 to 2023			803,972				881,719
Notes payable to various lenders, secured by equipment with original cost totaling $1,392,827, with monthly payments totaling $25,045, interest rates ranging from of 2.45% to 4.45% and maturity dates ranging from 2017 to 2018			12,532				58,062
			113,490,434				109,098,719
Less current portion			(27,551,001	)			(25,881,832	)
Total long-term debt		$	85,939,433			$	83,216,887

 

 

 

Maturities on long-term debts are as follows:

 

		Period Ended
		June 30,				December 31,
		2017				2016
		(in thousands)
One year		$	27,237,246			$	25,881,832
Two years			26,687,249				24,069,341
Three years			24,152,646				23,294,854
Four years			17,858,480				18,763,803
Five years			10,430,815				11,649,884
Thereafter			7,123,998				5,439,005
Total debt		$	113,490,431			$	109,098,719

 

NOTE 8. Concentrations of Credit Risk

 

At June 30, 2017, approximately 64% of the Company's revenues were provided by two customers and approximately 61% of the Company's accounts receivable was due from three customers. Approximately 54% of the Company's revenues were provided by two customers and approximately 64% of the Company’s accounts receivable was due from three customers at December 31, 2016.

 

NOTE 9. Revolving Lines and Letters of Credit

 

The Company maintained a line of credit with a bank at an interest rate of prime. At June 30, 2017 the Company had no line of credit in place. At December 31, 2016 the Company had no outstanding balance on the line of credit but could borrow up to $2,000,000. The credit line is secured by all of the Company's net trade receivables.

 

The Company also has letters of credit with a bank totaling $3,281,597 as of June 30, 2017, and December 31, 2016. At June 30, 2017 and December 31, 2016 there was no outstanding balance on the letters of credit. These letters of credit are used for self-insurance bonding and are secured by the unencumbered accounts and assets of the company.

 

NOTE 10. Commitments

 

Minimum annual operating lease payments, as of June 30, 2017, under non-cancelable leases, principally for tractors, trailers, and real estate, as well as other commitments are payable as follows:

 

		Operating Leases
		and Other Commitments
2017-2nd Half of year
2018		$	495,821
2019			897,114
2020			782,856
2021			560,659
2022 and thereafter			517,286
			612,886
		$	3,866,622

 

NOTE 11. Contingencies

 

The Company is party to various legal actions normally associated with the trucking industry, the aggregate effect of which, in management's and legal counsel's opinion, are not material to the financial condition or results of operations of the Company, with the exception of the actions discussed in the following paragraph.

 

The Company is defendant in multiple class action lawsuits brought by various employees alleging various wage violations. In August 2016, the parties attended mediation for three of the cases and agreed to consolidate and settle these three cases on a class-wide basis for a total of $1,980,000, contingent on approval by the court. The settlement would affect a release of all claims raised in the cases by plaintiffs, representing approximately 1,600 class members. Accordingly, the Company accrued the settlement loss in other current liabilities in the Consolidated Balance Sheet at June 30, 2017.

 

 

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