As disclosed by the Company’s FORM 10-Q for the quarterly period ended September 30, 2002, on June 7, 2002, the plaintiffs filed a consolidated amended complaint. On July 18, 2002, the Company and is officers and former officers filed a motion to dismiss the amended complaint in its entirety. The Company's former auditors also filed a motion to dismiss the amended complaint. On October 23, 2002, the federal district court granted the Company's motion to dismiss the complaint in its entirety for failing to allege facts sufficient to state a claim. The court also granted the motion of the Company's former auditors.
The original Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between April 21, 1999 and February 12, 2002, thereby artificially inflating the price of Hub Group securities. Throughout the Class Period, as alleged in the complaint, defendants issued statements regarding Hub Group's quarterly and annual financial performance and filed reports confirming such performance with the United States Securities and Exchange Commission (``SEC''). The complaint alleges that these statements were materially false and misleading because, among other things, (i) the Company's 65% owned subsidiary, Hub Group Distribution Services, which represented a material portion of the Company's revenues, was improperly recognizing revenues in violation of the Company's accounting policies and GAAP. As a result, the Company's operating results were materially misrepresented and overstated; (ii) the Company lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the Company; and (iii) based on the foregoing, defendants' statements concerning the prospects of Hub Group were lacking in a reasonable basis at all times. On February 12, 2002, after the close of the market, Hub Group shocked the market when it announced that it had discovered certain accounting irregularities at its 65% owned subsidiary, Hub Group Distribution Services. As a result of this discovery, the Company estimates that it had overstated its earnings on an after-tax, post minority interest basis by between approximately $3 million to $4 million since 1999. The Company further stated that its investigation is ongoing and once it has been completed, the Company will restate its financial results for the appropriate periods. In response to these disclosures, the price of Hub Group common stock dropped from $10.52 per share to $8.03 per share, a one-day loss of more than 31% on volume of more than 153,700 shares traded - more than ten times the average trading volume.