UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
For the quarterly period ended March 31, 2013
or
For the transition period from to
Commission file number: 0-27754
HUB GROUP, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
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 12b-2 of the Exchange Act). Yes ¨ No x
On April 23, 2013, the registrant had 36,987,417 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.
INDEX
PART I. Financial Information:
Consolidated Balance Sheets—March 31, 2013 (unaudited) and December 31, 2012
Unaudited Consolidated Statements of Income and Other Comprehensive Income—Three Months Ended March 31, 2013 and 2012
Unaudited Consolidated Statements of Cash Flows—Three Months Ended March 31, 2013 and 2012
Notes to Unaudited Consolidated Financial Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
PART II. Other Information
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CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable trade, net
Accounts receivable other
Prepaid taxes
Deferred taxes
Prepaid expenses and other current assets
TOTAL CURRENT ASSETS
Restricted investments
Property and equipment, net
Other intangibles, net
Goodwill, net
Other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable trade
Accounts payable other
Accrued payroll
Accrued other
Current portion of capital lease
TOTAL CURRENT LIABILITIES
Non-current liabilities
Non-current portion of capital lease
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2013 and 2012
Common stock
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2013 and 2012; 36,986,810 outstanding in 2013 and 36,767,485 shares outstanding in 2012
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2013 and 2012
Additional paid-in capital
Purchase price in excess of predecessor basis, net of tax benefit of $10,306
Retained earnings
Accumulated other comprehensive income
Treasury stock; at cost, 4,237,982 shares in 2013 and 4,457,307 shares in 2012
TOTAL STOCKHOLDERS’ EQUITY
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
See notes to unaudited consolidated financial statements.
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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
AND OTHER COMPREHENSIVE INCOME
(in thousands, except per share amounts)
Revenue
Transportation costs
Gross margin
Costs and expenses:
Salaries and benefits
Agent fees and commissions
General and administrative
Depreciation and amortization
Total costs and expenses
Operating income
Other income (expense):
Interest expense
Interest and dividend income
Other, net
Total other (expense) income
Income before provision for income taxes
Provision for income taxes
Net income
Other comprehensive income:
Foreign currency translation adjustments
Total comprehensive income
Basic earnings per common share
Diluted earnings per common share
Basic weighted average number of shares outstanding
Diluted weighted average number of shares outstanding
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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Compensation expense related to share-based compensation plans
(Gain) loss on sale of assets
Excess tax benefits from share-based compensation
Changes in operating assets and liabilities:
Accounts receivable, net
Accounts payable
Accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sale of equipment
Purchases of property and equipment
Cash used in acquisitions
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from stock options exercised
Stock tendered for payments of withholding taxes
Purchase of treasury stock
Capital lease payments
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents beginning of period
Cash and cash equivalents end of period
Supplemental disclosures of cash paid for:
Interest
Income taxes
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NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Interim 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 March 31, 2013 and results of operations for the three months ended March 31, 2013 and 2012.
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, 2012. 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 immaterial prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2. Business Segments
We report two business segments. The first segment is Mode, which includes the Mode business we acquired on April 1, 2011. The second segment is Hub, which is all business other than Mode.
Mode has independent business owners who sell and operate the business throughout North America as well as sales only agents. Mode also has a company managed operation and corporate offices in Dallas, TX, a temperature protected services division, Temstar, located in Downers Grove, IL and corporate offices in Memphis, TN.
Mode markets and operates its freight transportation services, consisting of intermodal, truck brokerage and logistics, primarily through agents who enter into contractual arrangements with 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.
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The following is a summary of operating results and certain other financial data for our business segments (in thousands):
Capital expenditures
Total assets
Goodwill
The following tables summarize our revenue by segment and business line (in thousands):
Intermodal
Truck brokerage
Logistics
Total revenue
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NOTE 3. Earnings Per Share
The following is a reconciliation of our earnings per share (in thousands, except for per share data):
Net income for basic and diluted earnings per share
Weighted average shares outstanding—basic
Dilutive effect of stock options and restricted stock
Weighted average shares outstanding—diluted
Earnings per share—basic
Earnings per share—diluted
NOTE 4. Fair Value Measurement
The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value as of March 31, 2013 and December 31, 2012 due to their short-term nature.
We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of March 31, 2013 and December 31, 2012, our cash and temporary investments were with high quality financial institutions in DDAs (Demand Deposit Accounts).
Restricted investments included $17.4 million and $17.2 million as of March 31, 2013 and December 31, 2012, 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.
NOTE 5. Financing Arrangements
We have standby letters of credit that expire at various dates in 2013. As of March 31, 2013, our letters of credit were $4.2 million.
Our unused and available borrowings under our bank revolving line of credit were $45.8 million as of March 31, 2013 and $46.3 million as of December 31, 2012. We were in compliance with our debt covenants as of March 31, 2013.
NOTE 6. Guarantees
As a recruiting tool for our owner-operators, we are guaranteeing certain owner-operators’ lease payments for tractors. The guarantees expire at various dates beginning in 2013 through 2020.
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The potential maximum exposure under these lease guarantees was approximately $47.2 million and $48.2 million as of March 31, 2013 and December 31, 2012, respectively. The potential maximum exposure represents the amount of the remaining lease payments on all outstanding guaranteed leases as of March 31, 2013 and December 31, 2012. 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. Alternatively, we can contract with another owner operator who would assume the lease. There were no material defaults during the quarter ended March 31, 2013 or the year ended December 31, 2012 and no potential material defaults.
We had a liability of approximately $0.9 million as of March 31, 2013 and $1.0 million as of December 31, 2012, for the guarantees representing the fair value of the guarantees based on a discounted cash-flow analysis included in liabilities in our Consolidated Balance Sheets. We are amortizing the amounts over the remaining lives of the respective guarantees.
NOTE 7. Commitments and Contingencies
On March 19, 2013, we entered into a equipment purchase contract for the acquisition of 2,529 53’ containers. We expect the total cost of purchasing the containers to be approximately $29.0 million. We expect to take delivery of the equipment between April and October 2013.
On March 18, 2013, we entered into an equipment purchase contract for the acquisition of 80 tractors. We expect the total cost of purchasing the tractors to be approximately $9.1 million. We expect to take delivery of the equipment in May 2013.
On December 12, 2012, we exercised our purchase option on approximately 4,000 containers that are currently leased. The purchases, totaling approximately $15.0 million, will occur as the leases expire throughout 2013.
NOTE 8. Legal Matters
We are a party to litigation incident to our business, including claims for personal injury and/or property damage, bankruptcy preference claims, claims regarding freight lost or damaged in transit, improperly shipped or improperly billed. Some of the lawsuits to which we are party are covered by insurance and are being defended by our insurance carriers. Some of the lawsuits are not covered by insurance and we defend those ourselves. We do not believe that the outcome of this litigation will have a material adverse effect on our financial position or results of operations.
On January 25, 2013, a complaint was filed in the U.S. District Court for the Eastern District of California (Sacramento Division) by Salvador Robles against our subsidiary, Comtrak Logistics, Inc. The action seeks class certification on behalf of a class comprised of present and former California-based truck drivers for Comtrak who were classified as independent contractors, from January 2009 to the present. The complaint alleges Comtrak has misclassified such drivers as independent contractors and that such drivers were employees. The complaint asserts various violations of the California Labor Code, and claims that Comtrak has engaged in unfair competition practices. The complaint seeks, among other things, declaratory and injunctive relief, compensatory damages and attorney’s fees. We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from this lawsuit.
NOTE 9. New Pronouncements
In July 2012, the FASB issued an update to Topic 350 – Intangibles – Goodwill and Other of the Accounting Standards Codification. The objective of this update is to simplify how entities test indefinite lived intangibles for impairment. The amendments in the update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. We adopted this guidance effective January 1, 2013 as required, and the adoption did not impact our consolidated financial statements.
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The information contained in this quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “hopes,” “believes,” “intends,” “estimates,” “anticipates,” and variations of these words and similar expressions are intended to identify these forward-looking statements. 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. We assume no liability to update any such forward-looking statements contained in this quarterly report. Factors that could cause our actual results to differ materially include:
the degree and rate of market growth in the domestic intermodal, truck brokerage and logistics markets served by us;
deterioration in our relationships with existing railroads or adverse changes to the railroads’ operating rules;
changes in rail service conditions or adverse weather conditions;
further consolidation of railroads;
the impact of competitive pressures in the marketplace, including entry of new competitors, direct marketing efforts by the railroads or marketing efforts of asset-based carriers;
changes in rail, drayage and trucking company capacity;
railroads moving away from ownership of intermodal assets;
equipment shortages or equipment surplus;
changes in the cost of services from rail, drayage, truck or other vendors;
increases in costs for independent contractors due to regulatory, judicial and legal changes;
labor unrest in the rail, drayage or trucking company communities;
general economic and business conditions;
inability to successfully protect our data against cyber attacks;
significant deterioration in our customers’ financial condition, particularly in the retail, consumer products and durable goods sectors;
fuel shortages or fluctuations in fuel prices;
increases in interest rates;
changes in homeland security or terrorist activity;
difficulties in maintaining or enhancing our information technology systems;
changes to or new governmental regulations;
significant increases to health insurance costs due to the Affordable Care Act;
loss of several of our largest customers and Mode agents;
inability to recruit and retain key personnel and Mode sales agents and IBOs;
inability to recruit and maintain drivers and owner-operators;
changes in insurance costs and claims expense;
changes to current laws which will aid union organizing efforts; and
inability to close and successfully integrate any future business combinations.
EXECUTIVE SUMMARY
Hub Group, Inc. (“we”, “us” or “our”) reports two distinct business segments, Hub and Mode. The Mode segment includes only the business we acquired on April 1, 2011. The Hub segment includes all businesses other than Mode. Hub Group (as opposed to just Hub), refers to the consolidated results for the whole company, including both the Mode and Hub segments. For the segment financial results, refer to Note 2 of the consolidated financial statements.
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We are the largest intermodal marketing company (“IMC”) in the United States and a full service transportation provider offering intermodal, truck brokerage and logistics services. We operate through a nationwide network of operating centers and independent business owners.
As an IMC, we arrange for the movement of our customers’ freight in containers and trailers over long distances. We contract with railroads to provide transportation for the long-haul portion of the shipment and with local trucking companies, known as “drayage companies,” for local pickup and delivery. As part of the intermodal services, we negotiate rail and drayage rates, electronically track shipments in transit, consolidate billing and handle claims for freight loss or damage on behalf of our customers.
As of March 31, 2013, approximately 66% of Hub’s drayage needs were met by our subsidiary, Comtrak Logistics, Inc. (“Comtrak”), which assists us in providing reliable, cost effective intermodal services to our customers. Comtrak has terminals in Atlanta, Birmingham, Charleston, Charlotte, Chattanooga, Chicago, Cleveland, Columbus (OH), Dallas, Harrisburg, Huntsville, Indianapolis, Jacksonville, Kansas City, Milwaukee, Memphis, Nashville, Newark, Los Angeles, Perry (FL), Philadelphia, Savannah, Seattle, St. Louis, Stockton, and Titusville (FL). As of March 31, 2013, Comtrak leased or owned 265 tractors, leased or owned 448 trailers, employed 358 drivers and contracted with 2,251 owner-operators.
We also arrange for the transportation of freight by truck, providing customers with another option for their transportation needs. We match the customers’ needs with carriers’ capacity to provide the most effective service and price combinations. As part of our truck brokerage services, we negotiate rates, track shipments in transit and handle claims for freight loss or damage on behalf of our customers.
Our logistics service consists of complex transportation management services, including load consolidation, mode optimization and carrier management. These service offerings are designed to take advantage of the increasing trend for shippers to outsource all or a greater portion of their transportation needs.
Hub has full time marketing representatives throughout North America who service local, regional and national accounts. We believe that fostering long-term customer relationships is critical to our success and allows us to better understand our customers’ needs and specifically tailor our transportation services to them.
Hub’s yield management group works with pricing and operations to enhance Hub’s customer margins. We are working on margin enhancement projects including matching up inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, using Comtrak more, and reviewing and improving low margin loads.
Hub’s top 50 customers represent approximately 61% of the Hub segment revenue for the quarter ended March 31, 2013. We use various performance indicators to manage our business. We closely monitor margin and gains and losses for our top 50 customers. We also evaluate on-time performance, cost per load and daily sales outstanding by customer account. Vendor cost changes and vendor service issues are also monitored closely.
Mode has approximately 228 agents, consisting of 96 sales/operating agents, known as Independent Business Owners (“IBOs”), who sell and operate the business throughout North America and 132 sales only agents. Mode also has a company managed operation and corporate offices in Dallas, a temperature protected services division, Temstar, located in Downers Grove, IL and corporate offices in Memphis. Mode’s top 20 customers represent approximately 37% of the Mode segment revenue for the quarter ended March 31, 2013. We closely monitor revenue and margin for these customers. We believe Mode brings us highly complementary service offerings, more scale and a talented sales channel that allows us to better reach small and midsize customers.
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RESULTS OF OPERATIONS
Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012
The following table summarizes our revenue by segment and business line (in thousands) for the three months ended March 31:
Hub Group’s revenue increased 3.9% to $769.0 million in 2013 from $739.9 million in 2012.
The Hub segment revenue increased 5.2% to $592.7 million. Intermodal revenue increased 5.7% to $427.3 million due to a 2.2% increase in loads and an increase of 3.5% related to price, fuel and mix. Truck brokerage revenue increased 4.4% to $83.6 million due to a 4.2% increase in volume and a 0.2% net increase in price, fuel and mix. Logistics revenue increased 3.5% to $81.8 million related primarily to growth from new customers.
Mode’s revenue increased 0.1% to $187.5 million in 2013 from $187.2 million in 2012. Mode’s logistic and intermodal revenue increased 7.1% and 5.5%, respectively, while truck brokerage revenue decreased 7.5%.
The following is a summary of operating results for our business segments (in thousands):
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Gross Margin
Hub Group’s gross margin increased 4.3% to $87.3 million in 2013 from $83.7 million in 2012. Hub Group’s gross margin as a percentage of sales increased to 11.4% as compared to last year’s 11.3% margin.
The Hub segment gross margin increased 6.0% to $65.2 million. The Hub segment margin increase of $3.7 million came primarily from logistics and intermodal. The logistics increase of $1.7 million was due primarily to yield improvement. Intermodal margin increased $1.5 million because of our volume growth and improved street operations. Container utilization was about one half day better than last year and we did 66% of our own drayage in 2013. Brokerage contributed $0.5 million to the margin increase due to increased loads and better purchasing. As a percentage of revenue, the Hub segment gross margin increased to 11.0% in 2013 from 10.9% in 2012. The biggest driver of the increase in the gross margin percent was logistics. The logistics margin percent increased due to solid execution, the mix of business and more opportunities for optimization.
Mode’s gross margin remained consistent at $22.2 million in 2013 and 2012. Mode’s gross margin as a percentage of revenue decreased to 11.8% in 2013 from 11.9% in 2012.
CONSOLIDATED OPERATING EXPENSES
The following table includes certain items in the consolidated statements of income as a percentage of revenue:
Other income:
Total other income
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Salaries and Benefits
Hub Group’s salaries and benefits increased to $34.6 million in 2013 from $33.3 million in 2012. As a percentage of revenue, Hub Group’s salaries and benefits as a percentage of revenue remained consistent at 4.5 % in both 2013 and 2012.
The Hub segment salaries and benefits increase of $1.7 million was due to increases in salaries of $0.9 million related to merit increases and increased headcount, employee bonuses of $0.3 million, employee benefits of $0.3 million, compensation related to restricted stock awards of $0.2 million and payroll taxes of $0.1 million, offset by a decrease in commissions of $0.1 million.
Mode’s salaries and benefits expense decreased to $3.8 million in 2013 from $4.2 million in 2012. The decrease was due to decreases in salaries of $0.3 million and employee benefits of $0.1 million due to a reduction in headcount.
Hub Group’s headcount as of March 31, 2013 was 1,400, which excludes drivers, as driver costs are included in transportation costs. As of March 31, 2013, Mode had 129 employees.
Agent Fees and Commissions
Hub Group’s agent fees and commissions decreased to $13.3 million in 2013 from $13.7 million in 2012. As a percentage of revenue, these expenses decreased to 1.7% in 2013 from 1.9% in 2012.
The Hub segment agent fees and commissions decrease of $0.2 million was due to a smaller Hub agent program.
The Mode segment agent fees and commissions decrease of $0.2 million was due to the achievement of higher incentives by Mode agencies in 2012 as compared to 2013.
General and Administrative
Hub Group’s general and administrative expenses increased to $13.2 million in 2013 from $12.6 million in 2012. As a percentage of revenue, these expenses increased to 1.8% in 2013 from 1.7% in 2012.
The Hub segment increase of $1.0 million was due primarily to increases in rent expense of $0.3 million, outside consultant expense and employee recruiting expense each at $0.2 million and repairs and maintenance, equipment leases, general insurance and bad debt expense each at $0.1 million. These increases partially were offset by a decrease in office expense of $0.2 million.
Mode’s general and administrative expenses decreased to $1.5 million in 2013 from $1.8 million in 2012. The decrease was primarily due to a gain on the sale of equipment of $0.2 million and a reduction in outside consultant expense of $0.2 million, partially offset by an increase in bad debt expense of $0.1 million.
Depreciation and Amortization
Hub Group’s depreciation and amortization decreased to $1.6 million in 2013 from $1.7 million in 2012. This expense as a percentage of revenue remained constant at 0.2% in both 2013 and 2012.
The Hub segment decrease in expense was related to less intangible amortization and less depreciation related to the computer hardware and software.
Mode’s depreciation expense was consistent at $0.5 million for both 2013 and 2012.
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Other Income (Expense)
Total other income (expense) remained consistent at $0.3 million of expense.
Provision for Income Taxes
The provision for income taxes increased to $9.1 million in 2013 from $8.6 million in 2012. We provided for income taxes using an effective rate of 37.2% in 2013 and an effective rate of 38.5% in 2012. The 2013 effective tax rate was lower primarily due to 2013 federal tax legislation which reinstated the federal research credit and our settlement of a state tax audit. We expect our effective tax rate for the whole year to be 38.1%.
Net Income
Net income increased to $15.4 million in 2013 from $13.7 million in 2012 due primarily to a higher gross margin.
Earnings Per Common Share
Basic earnings per share were $0.42 in 2013 and $0.37 in 2012. Basic earnings per share increased due to the increase in net income.
Diluted earnings per share were $0.42 in 2013 and $0.37 in 2012. Diluted earnings per share increased due to the increase in net income.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2013, we funded operations, capital expenditures, purchase of treasury stock and stock buy backs related to employee withholding upon vesting of restricted stock through cash flows from operations and cash on hand. We believe that our cash, cash flow from operations and borrowings available under our Credit Agreement will be sufficient to meet our cash needs for at least the next twelve months.
Cash provided by operating activities for the quarter ended March 31, 2013 was approximately $28.0 million, which resulted primarily from income of $15.4 million adjusted for non-cash charges of $9.4 million offset by the change in operating assets and liabilities of $3.2 million.
Net cash used in investing activities for the quarter ended March 31, 2013 was $8.7 million, which includes proceeds from the sale of equipment of $0.7 million. Capital expenditures of $9.4 million related primarily to construction in progress of $5.3 million, computer related hardware and software of $2.8 million, containers and transportation equipment of $1.0 million and leasehold improvements of $0.3 million. We expect capital expenditures to be between $95 million and $105 million in 2013. Between $30 million and $32 million is for our corporate headquarters, which should be completed by the end of 2013. Another $50 million is for containers and $9 million is for tractors. The majority of the remainder is for technology related investments.
The net cash used in financing activities for the quarter ended March 31, 2013 was $3.8 million. We used $2.5 million of cash for stock tendered for payments of withholding taxes, $0.9 million to purchase treasury stock and $0.6 million for capital lease payments. These payments were offset by proceeds from stock options exercised and excess tax benefits from share-based compensation as a financing cash in-flow.
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We are exposed to market risk related to changes in interest rates on our bank line of credit which may adversely affect our results of operations and financial condition. We have no significant exposure to foreign currency exchange rate changes. No derivative financial instruments were outstanding as of March 31, 2013 and December 31, 2012. We do not use financial instruments for trading purposes.
As of March 31, 2013 and December 31, 2012, other than our outstanding letters of credit, the Company had no outstanding obligations under its bank line of credit arrangement.
As of March 31, 2013, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of March 31, 2013. There have been no changes in our internal control over financial reporting identified in connection with such evaluation that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On November 26, 2012, our Board of Directors authorized the purchase of up to $25.0 million of our Class A Common Stock. This authorization expires December 31, 2013. We purchased 26,593 shares during the three months ended March 31, 2013. We may make purchases from time to time as market conditions warrant, and any repurchased shares are expected to be held in treasury for future use.
The following table displays the number of shares purchased during the quarter and the maximum value of shares that may yet be purchased under the plan:
January 1 to March 31
Total
This table excludes 71,584 shares we purchased for $2.5 million during the three months ended March 31, 2013 related to employee withholding upon vesting of restricted stock.
The exhibits included as part of the Form 10-Q are set forth in the Exhibit Index immediately preceding such Exhibits and are incorporated herein by reference.
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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.
Terri A. Pizzuto
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
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EXHIBIT INDEX
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