What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-02-24 compared with 2022-02-25 · 104 added, 103 removed, 201 unchanged (51% of the section changed)

MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Class A Common Stock (“Class A Common Stock”) trades on the Nasdaq Global Select Market tier of the Nasdaq Stock Market under the symbol “HUBG.”

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Issuer Purchases of Equity Securities

On May 23, 2019, our Board of Directors authorized the purchase of up to $100 million of our Class A Common Stock.

In October 2022, our Board of Directors (the “Board”) authorized the purchase of up to $200 million of our Class A Common Stock pursuant to a share repurchase program (the “

2022 Program ”

Under the 2022 Program, the shares may be repurchased in the open market or in privately negotiated transactions, from time to time subject to market and other conditions.

We did not purchase any stock under this authorization during the fourth quarter of 2021.

The approved share repurchase program does not obligate us to repurchase any dollar amount or number of shares and the program may be extended, modified, suspended, or discontinued at any time.

We purchased 64,153 shares of Class A Common Stock related to employee withholding upon vesting of restricted stock in the fourth quarter of 2021.

The table below gives information on a monthly basis regarding the number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of restricted stock during the fourth quarter of 2021:

The approved share repurchase program does not obligate us to repurchase any dollar amount or number of shares, and the program may be modified, suspended or discontinued at any time.

We purchased 33,915 shares of Class A Common Stock for $2.5 million related to employee withholding upon vesting of restricted stock in the fourth quarter of 2022 and 64,153 shares for $5.1 million in the fourth quarter of 2021.

The table below provides information on a monthly basis regarding the number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of restricted stock during the fourth quarter of 2022.

These shares do not reduce the repurchase authority under the 2022 Program.

Maximum Value of

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Shares that May Yet

Shares Purchased as

Shares Purchased

Be Purchased Under

Part of Publicly

Announced Plan

as Part of the

the 2022 Program

(in 000’s)

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We believe our strategy to offer multi-modal supply chain management solutions serves to strengthen and deepen our relationships with our customers and allows us to provide a more cost effective and higher service solution.

We provide services in four lines of business.

Our intermodal line of business offers high service, nationwide door-to-door intermodal transportation, providing value, visibility and reliability in both transcontinental and local lanes by combining rail transportation with local trucking.

As part of our profit improvement initiatives, we have focused on realizing efficiencies between our drayage trucking operation (which supports our intermodal service) and our dedicated trucking operation, including through the sharing of equipment and drivers, and by leveraging a combined set of driver support services including driver recruiting, asset management and safety functions.

As a result, in 2022, we reported revenue for these operations under the “Intermodal and Transportation Solutions”

line of business.

We have recast the prior period information to conform with current year presentation.

We provide services in three lines of business.

Our intermodal and transportation solutions line of business offers high service, nationwide door-to-door intermodal transportation, providing value, visibility and reliability in both transcontinental and local lanes by combining rail transportation with local trucking.

We arrange for the movement of our customers’

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We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals.

Local pickup and delivery services between origin or destination and rail terminals are provided by our HGT subsidiary and third-parties with whom we contract.

Our logistics business offers a wide range of transportation and logistics management services and technology solutions including shipment optimization, load consolidation, mode selection, carrier management, load planning and execution, warehousing and shipment visibility.

We offer multi-modal transportation services including full truckload, less-than-truckload, intermodal, final mile, railcar, small parcel and international transportation.

All of our services are provided on a non-asset basis, as underlying transportation or warehousing services are provided by other of Hub’s business lines or by third parties.

In late 2020, we acquired NSD which provided us with a final mile delivery capacity.

Local pickup and delivery services (referred to as “drayage”) between origin or destination and rail terminals are provided by our own trucking operations and third parties with whom we contract.

As of December 31, 2022, our trucking transportation operation consisted of approximately 2,300 tractors, 3,000 employee drivers and 4,600 trailers.

We also contract for services with approximately 750 independent owner-operators.

These assets and contractual services are used to support drayage for our intermodal service offering and to serve our customers who require high service local and regional trucking transportation using equipment dedicated to their needs.

Our dedicated service operation offers fleets of equipment and drivers to each customer on a contract basis, as well as the management and infrastructure to operate according to the customer’s high service expectations.

Our truck brokerage operation offers a full range of trucking transportation on a non-asset basis, as we match customers’

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Our services include dry van, expedited, less-than-truckload, refrigerated and flatbed.

We substantially increased the size of our brokerage service line, and increased our refrigerated transportation capabilities, through the acquisition of Choptank Transport, LLC in October 2021 (“Choptank”).

Approximately half of our truck brokerage volume is generated from committed pricing transactions, with the remainder consisting of loads that are priced on a transactional basis.

Our dedicated trucking business line contracts with customers who require high service transportation using equipment dedicated to their needs.

We offer a dedicated fleet of approximately 1,000 tractors and 4,600 trailers to our customers, as well as the driver staffing, management and infrastructure to operate according to the customer’s high service expectations.

Over the last several years we have begun to combine certain aspects of our dedicated and HGT operations in order to drive efficiency and reduce costs, including a shared services model for driver recruiting, asset management and safety functions, as well as sharing drivers and equipment between dedicated and HGT.

In 2021, we experienced favorable market conditions for our services.

Demand for our services continued to show strength, as North American consumer spending, particularly on the types of goods that our customers offer, remained robust.

Retail inventory levels remain near historically low levels, indicating a need by our customers to move goods as they restock their distribution centers and stores.

We offer multi-modal transportation services including full truckload, less-than-truckload, intermodal, final mile, railcar, small parcel and international transportation.

The acquisition of TAGG Logistics, LLC (“TAGG”) enhanced our presence in the consolidation and fulfillment space and added a complementary e-commerce offering to serve our customers' multimodal transportation and logistics needs.

The acquisition added scale to our logistics service line and has resulted in complementary cross-selling opportunities.

In the first half of 2022, we experienced favorable market conditions which led to strong demand for our services.

During this time period, North American consumer spending, particularly on the types of goods that our customers offer, remained robust.

The response to the COVID-19 pandemic caused many changes in consumer behavior, including a propensity for consumers to shift spending from services toward goods, and also to increase spending on household goods.

Available transportation capacity in North America continues to be constrained by high levels of demand, shortages of available drivers, and challenges with the production of new tractors and other equipment.

These factors resulted in strong demand for our transportation capacity in 2021, as well as rising prices for our services and those of our competitors.

We expect these conditions to continue in 2022.

In order to meet customer demand, we have taken several important actions.

We are increasing our capacity to handle additional volume by ordering over 6,500 new containers which we expect will be delivered in 2022.

Included in this order is a significant expansion of our refrigerated intermodal container fleet, as we believe there is a large opportunity to sell this expanded service to our existing customer base.

During 2021, we increased the level of compensation we pay to our drivers in order to increase our hiring and ability to handle additional intermodal loads and we intend to offer competitive compensation in 2022 to retain and attract drivers.

We have seen strong demand for final mile delivery services as a result of the factors noted above.

We are working on several margin enhancement projects including network optimization, matching of inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, increasing our driver and asset utilization, reducing repositioning costs, providing holistic solutions and improving low profit freight.

Toward the end of 2022, many of our customers, particularly our retailer customers, began to experience rising inventory levels which led to a reduction in their demand for shipping services.

During the first half of 2022, available transportation capacity in North America was constrained by high levels of demand, shortages of available drivers, and challenges with the production of new tractors and other equipment.

These factors, coupled with strong demand for our transportation capacity, resulted in rising prices for certain of our services and those of our competitors.

Beginning in the second quarter of 2022, pricing for certain types of transportation, including transactionally priced freight, began to decline from levels that existed earlier in 2022.

We are focused on several margin enhancement projects including network optimization, matching of inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, increasing our driver and asset utilization, reducing repositioning costs, providing holistic solutions and improving low profit freight.

Hub’s top 50 customers represent approximately 63% of revenue for fiscal 2022 while one customer accounted for more than 10% of our revenue in 2022.

We use various performance indicators to manage our business.

We closely monitor profit margins on a lane-level and customer-level basis.

We also evaluate on-time performance, customer service, cost per load and customer-level accounts receivable as a multiple of daily sales.

Vendor cost changes and vendor service performance are also monitored closely.

During 2021 we also took delivery of a large number of new tractors, and we expect to do the same in 2022.

We closely monitor profit levels for our top customers.

We also evaluate on-time performance, customer service, cost per load and daily sales outstanding by customer account.

Vendor cost changes and vendor service levels are also monitored closely.

During 2022, we took delivery of approximately 600 new tractors and we expect to take delivery of approximately 500 in 2023.

A portion of these new units represent replacements for older tractors.

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In addition, we recognized approximately $24 million of gains on the sale of older tractors in 2022 due to the strength in the market for used equipment.

We expect this strength in gains on sales of our older tractors to continue in 2022 though likely not to the same level as 2021.

We expect the market for used equipment will be significantly softer in 2023.

Uncertainties and risks to our outlook include the following:

a slowdown in consumer spending, a shift by consumers to spending on services at the expense of goods, a significant increase in transportation supply in the marketplace, aggressive pricing actions by our competitors;

inflation, a slowdown in consumer spending (driven by, among other factors, rising inflation, rapid increases in gasoline prices, recession, increases in interest rates, and geopolitical concerns), a shift by consumers to spending on services at the expense of goods, an increase of retailers' inventory levels, a significant increase in transportation supply in the marketplace, aggressive pricing actions by our competitors;

and any inability to pass cost increases, such as transportation and warehouse costs, through to our customers, all of which could have a materially negative impact on our revenue, profitability and cash flow in 2023.

Because of the change in the Chief Operating Decision Maker (“CODM”) of the Company at the beginning of 2023, we are evaluating the potential realignment of the business and reportable segment information based on the information the CODM regularly reviews to evaluate performance for operating decision-making purposes, including evaluation and allocation of resources.

We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

For a discussion of segment reporting, see Note 18 to the consolidated financial statements under “Subsequent Events,”

which discussion and note are incorporated herein by reference.

Strategic Transactions

On August 22, 2022, we acquired 100% of the equity interests of TAGG.

Total consideration for the transaction was approximately $103.5 million in cash.

On October 19, 2021, we acquired 100% of the equity interests of Choptank.

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In connection with the acquisition, we granted approximately $22 million of restricted stock to Choptank's senior management team, which is subject to certain vesting conditions.

On December 9, 2020, we acquired 100% of the equity interests of NSD.

On December 9, 2020, we acquired 100% of the equity interests of NonstopDelivery, LLC (“NSD”).

Total consideration for the transaction was $105.9 million which consisted of cash paid of $89.8 million, of which $0.1 million was paid in the second quarter of 2021 as part of the post-closing true-up, and the settlement of Hub’s accounts receivable due from NSD of $16.1 million.

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The following table summarizes our revenue by business line (in thousands):

Intermodal and transportation solutions

Truck brokerage

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Revenue increased 26% to $5.3 billion in 2022 from $4.2 billion in 2021.

Intermodal revenue increased 17.9% to $2.4 billion primarily due to a 20.6% increase in revenue per load, partially offset by a 2.2% decrease in volume.

Logistics revenue increased 15.7% to $887.4 million primarily due to growth of our consolidation solutions services and the contribution of our final mile operations, partially offset by the impact of lost customers.

Truck brokerage revenue increased 59.8% to $688.9 million primarily due to a 44.8% increase in revenue per load and a 10.3% increase in volume, which includes the contribution of Choptank since the acquisition in October 2021.

Dedicated’s revenue decreased 1.3% to $264.6 million primarily due to the impact of business we exited, partially offset by growth with new accounts.

Intermodal and Transportation Solutions (“ITS”) revenue increased 24% to $3.3 billion primarily due to a 31% increase in intermodal revenue per load.

Truck brokerage revenue increased 52% to $1.0 billion primarily due to the addition of Choptank as well as growth in the existing operations.

Logistics revenue increased 11% to $989 million due to the acquisition of TAGG and growth of our managed transportation, final mile and consolidation services, partially offset by the impact of lost customers.

Transportation Costs

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Transportation costs in 2021 consisted of purchased transportation costs of $2.9 billion and equipment and driver related costs of $687 million.

The 21.4% increase in purchased transportation costs was primarily due to increased rail costs, increased fuel costs, increased truck brokerage volume, higher third-party carrier costs and the impact of the NSD and Choptank acquisitions, partially offset by decreased repositioning costs and decreased container stacking charges.

Equipment and driver related costs increased 6.8% in 2021 primarily due to higher driver wages and increased repairs and maintenance expense, partially offset by decreased equipment depreciation expense, and decreased usage of our internal drayage resources to 50% of total drayage moves in 2021 from 56% in 2020.

The 23% increase in purchased transportation costs was primarily due to increased rail costs, increased fuel costs, higher brokerage volume, higher third-party carrier costs and increased repositioning costs.

Equipment and driver related costs increased 21% in 2022 primarily due to higher driver wages and increased equipment depreciation expense, increased repairs and maintenance expense and increased usage of our internal drayage resources to 55% of total drayage moves in 2022 from 50% in 2021.

Gross margin increased 48% to $890 million in 2022 from $600 million in 2021.

The $174.2 million gross margin increase was the result of increases in intermodal, logistics, and truck brokerage, partially offset by a decrease in dedicated.

Intermodal gross margin increased primarily due to a 20.6% increase in revenue per load, partially offset by a 2.2% decrease in volume, increased purchased transportation costs, and internal drayage costs.

Logistics gross margin increased primarily due to yield management, higher revenue, and the contribution of final mile operations, partially offset by higher warehousing and transportation costs.

Truck brokerage gross margin increased due to revenue per load growth in both committed and transactional freight, a 10.3% increase in volume, including the contribution of Choptank, partially offset by the impact of higher purchased transportation costs.

Dedicated gross margin decreased due to business we exited, partially offset with growth from new customers, lower insurance costs and lower third-party carrier costs.

As a percentage of revenue, gross margin increased to 14.2% in 2021 from 12.2% in 2020 due to the aforementioned factors.

Intermodal gross margin as a percentage of revenue increased 350 basis points.

Logistics gross margin as a percentage of revenue increased 170 basis points.

Truck brokerage gross margin as a percentage of revenue decreased 190 basis points.

Dedicated gross margin as a percentage of revenue decreased 240 basis points.

The $290 million gross margin increase was the result of increases in all lines of business lines.

As a percentage of revenue, gross margin increased to 16.7% in 2022 from 14.2% in 2021.

ITS gross margin increased compared to the prior year primarily due to a 31% increase in intermodal revenue per load, partially offset by increased purchased transportation costs.

ITS gross margin as a percentage of revenue increased 320 basis points.

Truck brokerage gross margin increased primarily due to the Choptank acquisition and growth in revenue in our existing operations, partially offset by the impact of higher purchased transportation costs.

Truck brokerage gross margin as a percentage of revenue declined 40 basis points.

Logistics gross margin increased primarily due to growth with existing customers, new business onboardings, and yield management initiatives and the TAGG acquisition, partially offset by higher warehousing and transportation costs.

Logistics gross margin as a percentage of revenue expanded by 300 basis points.

CONSOLIDATED OPERATING EXPENSES

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Salaries and benefits increased to $265 million in 2022 from $247 million in 2021.

As a percentage of revenue, salaries and benefits increased to 5.9% in 2021 from 5.4% in 2020.

The increase of $58.5 million was primarily due the addition of NSD and Choptank, increases in employee bonuses of $36.2 million, salaries of $6.5 million, payroll taxes of $4.7 million, employee benefits of $4.3 million, commissions of $3.8 million and restricted stock expense of $3.0 million.

Headcount as of December 31, 2021 and 2020 was 2,304 and 1,989, respectively, which excludes driver headcount, the costs for which are included in transportation costs.

The increase in headcount is due primarily to the addition of Choptank employees.

These expenses, as a percentage of revenue, decreased to 5.0% in 2022 from 5.9% in 2021.

The increase of $18 million was primarily due the additions of TAGG and Choptank, partially offset by decreases in salary expense of $10 million related to a reduction in headcount excluding the additions of TAGG and Choptank employees and lower restricted stock expense of $3 million.

Headcount as of December 31, 2022 and 2021 was 2,214 and 2,304, respectively, which excludes drivers and warehouse employees, the costs for which are included in transportation costs.

The reduction in headcount year over year was partially offset by the addition of TAGG employees.

General and Administrative

General and administrative expenses decreased to $76.5 million in 2021 from $99.6 million in 2020.

As a percentage of revenue, these expenses decreased to 1.8% in 2021 from 2.9% in 2020.

The decrease of $23.1 million in general and administrative expense was primarily due to gains on sales of transportation equipment of $19.2 million, which was an increase of $20.1 million compared to 2020, as well as decreases of $5.9 million related to non-reoccurring donations of refrigerated trailers in support of COVID-19 efforts made in 2020 and $2.2 million in professional services related primarily to a consulting project in 2020.

The decreases were partially offset by an increase in legal claim expense.

General and administrative expenses increased to $104 million in 2022 from $76 million in 2021.

These expenses, as a percentage of revenue, increased to 1.9% in 2022 from 1.8% in 2021.

The increase of $27 million in general and administrative expense was primarily due to the additions of TAGG and Choptank as well as increases in claims and legal expenses, higher use tax expense, the impairment write-off of leased assets, higher professional costs related to acquisitions and IT costs, partially offset by higher gains recognized from the sale of equipment in 2022.

Depreciation and Amortization

Depreciation and amortization increased to $46 million in 2022 from $37 million in 2021.

This increase related primarily to the amortization of intangibles related to the acquisitions of both NSD and Choptank as well as increases in depreciation of computer software.

This expense, as a percentage of revenue, remained consistent at 0.9% in both 2022 and 2021.

This increase was related primarily to the amortization of intangibles related to the acquisitions of TAGG and Choptank.

Other Expense, Net

Other expense decreased to $7.5 million in 2021 from $9.7 million in 2020 due to less interest expense caused by less average borrowings and lower average interest rates on existing borrowings.

Other expense decreased to $7 million in 2022 from $8 million in 2021 due to higher interest income in 2022 compared to 2021.

Provision for Income Taxes

Provision for income taxes increased to $59.4 million in 2021 from $22.5 million in 2020 due primarily to an increase in income.

Provision for income taxes increased to $111 million in 2022 from $59 million in 2021 due to significantly higher pre-tax income in 2022.

Our effective tax rate was 23.7% in 2022 and 25.7% in 2021.

See Note 7, Income Taxes, in our consolidated financial statements for a detailed reconciliation of our effective tax rate.

The increase to the tax rate in 2021 compared to 2020 is primarily related to two factors.

In 2020, state law changes prompted us to amend certain state income tax returns that provided refunds and a significant benefit to the effective tax rate.

That rate benefit did not repeat in 2021.

Additionally, our federal and state tax incentives were smaller in 2021 than in 2020.

Net income increased to $171.5 million in 2021 from $73.6 million in 2020 due primarily to increases in revenue and gross margin, partially offset by higher costs, operating expenses and income tax expense.

See Note 7, “

Income Taxes, ”

in our consolidated financial statements for a detailed reconciliation of our effective tax rate.

The lower effective tax rate in 2022 compared to 2021 was primarily related to a change in our state apportionment factors, resulting in a reduction to the tax rate and we also decreased the valuation allowance on state tax incentives due to our increase in pre-tax income.

Net income increased to $357 million in 2022 from $171 million in 2021 due primarily to an increase in gross margin, partially offset by higher operating costs and expenses and higher income tax expense.

LIQUIDITY AND CAPITAL RESOURCES

Our financing and liquidity strategy is to fund operating cash payments through cash received from the provision of services, cash on hand, and to a lesser extent, from cash received from the sale of equipment.

As of December 31, 2021, we had $159.8 million of cash and $24.3 million of restricted investments.

As of December 31, 2022, we had $287 million of cash and cash equivalents and $18 million of restricted investments.

We generally fund our purchases of transportation equipment through the issuance of secured, fixed rate Equipment Notes.

Payments for our other investing activities, such as the construction of our office buildings and our capitalized technology investments, have been funded by cash on hand or cash flows from operations.

We have not historically used our Credit Facility to fund our operating or investing cash needs, though it is available to fund future cash requirements as needed.

Payments for our other investing activities, such as the construction of our office buildings, investments in warehousing improvements and our capitalized technology investments, have been funded by cash on hand or cash flows from operations.

Cash used in financing activities including the purchase of treasury stock has been funded by cash from operations or cash on hand.

We have not historically used our Credit Facility to fund our operating, investing or financing cash needs, though it is available to fund future cash requirements as needed.

In the last three years, we have funded our business acquisitions from cash on hand, though in the future we may elect to fund these activities through a combination of cash on hand, borrowings on our Credit Facility, or from issuance of secured or unsecured debt.

Cash used in financing activities has generally been funded by cash from operations or cash on hand.

Based on past performance and current expectations, we believe cash on hand and cash received from the provision of services, along with other financing sources, will provide us the necessary capital to fund transactions and achieve our planned growth for the next twelve months and the foreseeable future.

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Cash provided by operating activities totaled $458 million in 2022 compared to $253 million in 2021.

The $77.8 million increase in cash flow was primarily due to an increase in net income of $97.9 million and a sequential increase in accounts payable of $72.9 million.

These increases were partially offset by a sequential increase in accounts receivable of $68.3 million and by additional gains on the sale of equipment of $20.1 million in 2021.

Net cash used in investing activities for the year ended December 31, 2021 was $210.1 million which resulted from capital expenditures of $133.0 million and acquisition payments related to NSD and Choptank of $122.4 million partially offset by proceeds received of $45.2 million from the sale of equipment.

Capital expenditures of $133.0 million included tractor purchases of $51.9 million, container purchases of $50.8 million, technology investments of $15.6 million, construction spend for our corporate headquarters of $11.1 million, other transportation equipment purchases of $3.2 million and the remainder for leasehold improvements.

The $205 million increase in cash flow was primarily due to an increase in net income of $185 million and an increase in non-cash charges of $33 million, partially offset by decreases in the change in assets and liabilities of $13 million.

Net cash used in investing activities for the year ended December 31, 2022 was $279 million which included capital expenditures of $219 million and cash used in acquisitions of $103 million, partially offset by proceeds from the sale of equipment of $43 million.

Capital expenditures of $219 million related primarily to containers of $101 million, tractors of $68 million, technology investments of $23 million, building and furniture spend for our corporate headquarters of $19 million and other transportation equipment of $8 million.

Capital expenditures increased by approximately $86 million in 2022 as compared to 2021.

The 2021 increase was due to increases in tractor purchases of $20.0 million, container purchases of $11.5 million and technology investments of $2.2 million.

These increases were partially offset by decreased spend on our corporate headquarters of $8.8 million, less purchases of other transportation equipment of $6.7 million and less spend for leasehold improvements.

The 2022 increase was due to increases in container purchases of $50 million, tractor purchases of $16 million and technology investments of $8 million, spend on our corporate headquarters of $6 million, more purchases of other transportation equipment of $5 million and leasehold improvements of $1 million.

In 2023, we estimate capital expenditures will range from $170 million to $190 million.

We expect transportation equipment purchases to range from $210 million to $230 million and building and technology investments will range from $30 million to $40 million.

We expect transportation equipment purchases to range from $145 million to $150 million, technology investments will range from $20 million to $25 million and warehouse equipment will range from $5 million to $15 million.

We plan to fund these expenditures with a combination of cash and debt.

Net cash used in financing activities for the year ended December 31, 2021 was $7.4 million which includes repayments of long-term debt of $107.6 million, cash for stock tendered for payments of withholding taxes of $9.1 million and finance lease payments of $2.7 million partially offset by the proceeds from the issuance of debt $112.0 million.

Net cash used in financing activities for the year ended December 31, 2022 was $52 million which includes repayments of long-term debt of $111 million, cash used for the purchase of treasury stock of $75 million, cash used for the purchase of treasury stock from related party of $35 million, cash used for stock tendered for payments of withholding taxes of $8 million and finance lease payments of $2 million, partially offset by proceeds from the issuance of debt of $179 million.

Debt incurred in 2022 was used to fund the purchase of transportation equipment.

The $14.9 million decrease in cash used in financing activities for 2021 versus 2020 was primarily due to the decrease in repayments of long-term debt of $91.1 million partially offset by less proceeds from the issuance of debt of $75.5 million and an increase in cash for stock related to employee withholding taxes of $1.2 million.

The $45 million increase in cash used in financing activities for 2022 versus 2021 was primarily due to the increase in the purchase of treasury stock of $75 million, the purchase of treasury stock from a related party of $35 million and cash paid for payments of long-term debt of $4 million, partially offset by the increase in proceeds from the issuance of debt of $67 million.

In 2022, cash paid for income taxes was $129 million, of which $101 million related to 2022 and $28 million related to 2021.

In 2023, we expect to pay an additional $1 million of cash for taxes related to 2022.

The 2021 income tax expense of $59.4 million is less than the amount paid for 2021 income taxes of $55.6 million and the anticipated $6.5 million to be paid in 2022 that relates to 2021.

This is due to net unfavorable book to tax differences causing 2021 taxable income to exceed 2021 financial statement income before taxes.

The $101 million of cash paid for income taxes related to 2022 is less than the 2022 income tax expense of $111 million.

This difference is a result of favorable book to tax differences, primarily those related to fixed assets, which caused 2022 taxable income to be less than 2022 financial statement income before taxes.

See Note 10 of the consolidated financial statements for details related to interest rates and commitment fees.

We have standby letters of credit that expire in 2023.

As of December 31, 2021, our letters of credit were $41.3 million.

As of December 31, 2021, we had no borrowings under our credit facility and our unused and available borrowings were $308.7 million.

Our unused and available borrowings were $312.3 million as of December 31, 2020.

We believe our line of credit is adequate to meet our cash needs.

Refer to Note 17 "Subsequent Event" for information regarding the new credit agreement.

We were in compliance with our debt covenants as of December 31, 2021.

As of December 31, 2022 and December 31, 2021, our letters of credit were $43 million and $41 million, respectively.

As of December 31, 2022 and December 31, 2021, we had no borrowings under our respective credit agreements and our unused and available borrowings were $307 million and $309 million, respectively.

We were in compliance with the financial covenants in our credit agreements as of December 31, 2022 and December 31, 2021.

CONTRACTUAL OBLIGATIONS

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As of February 15, 2023, Hub signed various operating and finance leases which had not commenced as of December 31, 2022.

Based on the present value of the lease payments, the estimated right-of-use (“ROU”) assets and lease liabilities related to these contracts will total approximately $3.0 and $2.0 million for operating and finance leases, respectively.

Based on the present value of the lease payments, the estimated right-of-use (“ROU”) assets and lease liabilities related to these contracts will total approximately $107.7 million and $1.8 million for operating and finance leases, respectively.

Deferred Compensation

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Future Payments Due:

The above future payments are fully funded by our restricted investments comprised of mutual funds as noted in Note 14.

The above future payments are fully funded by our restricted investments comprised of mutual funds and other security instruments as noted in Note 14.

CRITICAL ACCOUNTING POLICIES

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Revenue Recognition

In accordance with the Accounting Standards Codification (ASC) topic 606, Revenue from Contracts with Customers, our significant accounting policy for revenue is as follows:

In accordance with the Accounting Standards Codification (ASC) topic 606, “Revenue from Contracts with Customers,”

our significant accounting policy for revenue is as follows:

Revenue is recognized when we transfer services to our customers in an amount that reflects the consideration we expect to receive.

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In establishing a reserve for certain account balances specifically identified as uncollectible, we consider the aging of the customer receivables, the specific details as to why the receivable has not been paid, the customer’s current and projected financial results, the customer’s ability to meet and sustain its financial commitments, the positive or negative effects of the current and projected industry outlook and the general economic conditions.

Our historical collection percentage has been over 98% for receivables that are less than one year old.

Our historical collection percentage has been over 98% on average for receivables that are less than one year old.

Changes in our historical collection percentages of receivables that are less than one year old either positively or negatively, based on our collection history, would affect our calculated allowance for uncollectible trade accounts.

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Should the rail industry experience a prolonged disruption in service, we believe our intermodal business would likely be negatively impacted.

Other factors that could negatively influence our growth rate include, but are not limited to, the elimination of fuel surcharges, lower fuel prices, the entry of new competitors, aggressive pricing by new or existing competitors, poor customer retention, inadequate drayage and intermodal service and inadequate equipment supply and the ongoing coronavirus outbreak or other health concerns.

We expect fluctuations in gross margin as a percentage of revenue from quarter-to-quarter caused by various factors including, but not limited to, competitor pricing actions, changes in our business mix, start-up costs for new business, changes in logistics services between transactional business and management fee business, changes in truck brokerage services between transaction, committed and other types of service, insurance and claim costs, driver recruiting costs, driver compensation changes, impact of regulations on drayage costs, trailer and container capacity, vendor cost increases, fuel costs, equipment depreciation and operating costs, equipment utilization, transportation industry growth, intermodal industry service levels, accessorials, competitive pricing and related changes in accounting estimates.

We expect fluctuations in gross margin as a percentage of revenue from quarter-to-quarter caused by various factors including, but not limited to, competitor pricing actions, changes in our business mix, start-up costs for new business, changes in logistics services between transactional business and management fee business, changes in truck brokerage services between transactional, committed and other types of service, insurance and claim costs, driver recruiting costs, driver compensation changes, impact of regulations on drayage costs, trailer and container capacity, vendor cost increases, fuel costs, equipment depreciation and operating costs, equipment utilization, transportation industry growth, intermodal industry service levels, accessorials, competitive pricing and related changes in accounting estimates.

Salaries and Benefits

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As customer expectations and the competitive environment require the development of new technology interfaces and the restructuring of our information systems and related platforms, we believe there could be significant expenses incurred.

Other factors that could cause general and administrative expense to fluctuate include, but are not limited to, changes in insurance premiums, technology expense related to software and services, claim expense, bad debt expense, professional services expense and costs related to acquisitions or divestitures.

Other factors that could cause general and administrative expense to fluctuate include, but are not limited to, changes in insurance premiums, technology expense related to software and services, claim expense, non income tax expense, bad debt expense, professional services expense and costs related to acquisitions or divestitures.

Additionally, the gains or losses on sales of used assets can result in fluctuating general and administrative expenses.

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We anticipate additional amortization expense due to recent and future acquisitions.

Impairment of Property and Equipment, Goodwill and Indefinite-Lived Intangibles

Impairment of Property and Equipment, Goodwill, Indefinite-Lived Intangibles and Leased Right-of-Use Assets

On an ongoing basis, we assess the realizability of our assets.

1 unchanged sentence

Other Expense

We expect interest expense to increase in 2022 because we financed our 2021 tractor and container purchases with debt and we expect to incur debt for a significant portion of our 2022 capital expenditures.

We expect interest expense to increase in 2023 because we financed our 2022 tractor and container purchases with debt at higher interest rates and we expect to incur debt for a significant portion of our 2023 capital expenditures.

Factors that could cause a change in interest expense include, but are not limited to, change in interest rates, change in investments, funding working capital needs, funding capital expenditures, funding an acquisition and purchase of treasury stock.

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Further, years may elapse before a particular matter for which we have established an accrual is audited and resolved or its statute of limitations expires.

See Note 7, Income Taxes, in our consolidated financial statements for a discussion of our current unrecognized tax benefits.

See Note 7, “Income Taxes,”

in our consolidated financial statements for a discussion of our current unrecognized tax benefits.

Realizability of Deferred Tax Assets

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity