UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934~~

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~ March 31, 2023or

☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27754

HUB GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

36-4007085

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

~~2000 Clearwater Drive~~2001 Hub Group Way

Oak Brook, Illinois60523

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

~~(630)~~ (630) 271-3600

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	HUBG	NASDAQ

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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☒ 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☒ No ☐

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


Large Accelerated Filer	☒		Accelerated Filer	☐	Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company		☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive oﬃcers during the relevant recovery period pursuant to §240.10D-1(b). ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

On ~~October 26, 2017,~~April 28, 2023, the registrant had ~~33,451,445~~32,773,889 outstanding shares of Class A common stock, par value $.01 per share, and ~~662,296~~574,903 outstanding shares of Class B common stock, par value $.01 per share.

HUB GROUP, INC.

INDEX


	Page
PART I. Financial Information: Item1. Financial Statements
Consolidated Balance Sheets – ~~September 30, 2017~~March 31, 2023 (unaudited) and December 31, ~~2016~~2022	3
Unaudited Consolidated Statements of Income and Comprehensive Income – Three Months Ended March 31, 2023 and ~~Nine Months Ended September 30, 2017 and 2016~~2022	4
Unaudited Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2023 and 2022	5
Unaudited Consolidated Statements of Cash Flows – ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022	56
Notes to Unaudited Consolidated Financial Statements	67
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations	1610
Item 3.Quantitative and Qualitative Disclosures about Market Risk	2516
Item 4.Controls and Procedures	2516
PART II. Other Information	2516
Item 1. Legal Proceedings	16
Item 1A. Risk Factors	16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 6. Exhibits	17

HUB GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

September 30,

December 31,

2017

2016

ASSETS
(unaudited)

CURRENT ASSETS:

Cash and cash equivalents
$
18,558

$
127,404

Accounts receivable trade, net

532,538

473,608

Accounts receivable other

10,017

4,331

Prepaid taxes

12,134

294

Prepaid expenses and other current assets

21,216

16,653

TOTAL CURRENT ASSETS

594,463

622,290

Restricted investments

24,066

20,877

Property and equipment, net

547,881

438,594

Other intangibles, net

75,772

11,844

Goodwill, net

348,506

262,376

Other assets

9,175

4,278

TOTAL ASSETS
$
1,599,863

$
1,360,259

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable trade
$
313,511

$
266,555

Accounts payable other

30,115

21,070

Accrued payroll

25,245

36,223

Accrued other

53,609

46,013

Current portion of capital lease

2,754

2,697

Current portion of long term debt

73,052

45,163

TOTAL CURRENT LIABILITIES

498,286

417,721

Long term debt

214,032

115,529

Non-current liabilities

29,181

23,595

Long term portion of capital lease

8,418

10,576

Deferred taxes

182,464

164,659

STOCKHOLDERS' EQUITY:

Preferred stock, $.01 par value;  2,000,000 shares authorized;  no shares issued or outstanding in 2017 and 2016
-

-

Common stock

Class A:  $.01 par value;  97,337,700 shares authorized and 41,224,792 shares issued in 2017 and 2016; 33,451,445 shares outstanding in 2017 and 33,192,982 shares outstanding in 2016

412

412

Class B:  $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2017 and 2016

7

7

Additional paid-in capital

170,355

173,565

Purchase price in excess of predecessor basis, net of tax benefit of $10,306

(15,458
)

(15,458
)
Retained earnings

770,773

735,563

Accumulated other comprehensive loss

(172
)

(273
)
Treasury stock; at cost, 7,773,347 shares in 2017 and 8,031,810 shares in 2016

(258,435
)

(265,637
)
TOTAL STOCKHOLDERS' EQUITY

667,482

628,179

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
1,599,863

$
1,360,259


	March 31,			December 31,
	2023			2022
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	342,570		$	286,642
Accounts receivable trade, net		696,789			716,190
Other receivables		4,300			3,967
Prepaid taxes		9,382			16,987
Prepaid expenses and other current assets		19,297			32,914
TOTAL CURRENT ASSETS		1,072,338			1,056,700

Restricted investments		19,187			18,065
Property and equipment, net		776,656			783,683
Right-of-use assets - operating leases		174,194			102,114
Right-of-use assets - financing leases		4,357			1,194
Other intangibles, net		190,235			197,386
Goodwill		629,407			629,402
Other assets		21,608			21,537
TOTAL ASSETS	$	2,887,982		$	2,810,081

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade	$	330,260		$	344,751
Accounts payable other		12,343			15,563
Accrued payroll		28,673			66,669
Accrued other		130,909			132,324
Lease liability - operating leases		35,248			29,547
Lease liability - financing leases		2,375			1,175
Current portion of long term debt		97,899			101,741
TOTAL CURRENT LIABILITIES		637,707			691,770

Long term debt		236,160			240,724
Non-current liabilities		47,725			43,505
Lease liability - operating leases		145,612			78,557
Lease liability - financing leases		1,890			-
Deferred taxes		159,840			155,923

STOCKHOLDERS' EQUITY:
Preferred stock: $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2023 and 2022	-			-
Common stock
Class A: $.01 par value; 97,337,700 shares authorized; 41,312,185 shares issued in both 2023 and 2022; 32,760,635 shares outstanding in 2023 and 32,646,621 shares outstanding in 2022.		413			413
Class B: $.01 par value; 662,300 shares authorized; 574,903 shares issued and outstanding in both 2023 and 2022.		6			6
Additional paid-in capital		206,111			208,165
Purchase price in excess of predecessor basis, net of tax benefit of $10,306		(15,458	)		(15,458	)
Retained earnings		1,843,362			1,781,582
Accumulated other comprehensive loss		(180	)		(214	)
Treasury stock; at cost, 8,551,550 shares in 2023 and 8,665,564 shares in 2022.		(375,206	)		(374,892	)
TOTAL STOCKHOLDERS' EQUITY		1,659,048			1,599,602
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,887,982		$	2,810,081

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,						Three Months Ended
	2017			2016			2017			2016			March 31,
													2023			2022
Revenue	$	1,054,360		$	932,814		$	2,872,321		$	2,594,230
Transportation costs		937,836			821,360			2,552,895			2,259,899
Gross margin		116,524			111,454			319,426			334,331

Costs and expenses:
Operating revenue													$	1,152,265		$	1,298,123

Operating expenses:
Purchased transportation and warehousing														866,931			995,265
Salaries and benefits		49,126			42,610			137,343			130,075			137,431			128,739
Agent fees and commissions		19,072			19,072			54,103			54,334
Depreciation and amortization														35,449			31,289
Insurance and claims														12,683			9,293
General and administrative		22,403			17,641			63,341			50,368			25,541			23,222
Depreciation and amortization		4,254			2,276			9,215			6,559
Total costs and expenses		94,855			81,599			264,002			241,336
Gain on sale of assets, net														(3,975	)		(4,745	)
Total operating expenses														1,074,060			1,183,063

Operating income		21,669			29,855			55,424			92,995			78,205			115,060

Other income (expense):
Interest expense		(2,345	)		(888	)		(4,474	)		(2,655	)		(2,970	)		(1,703	)
Interest and dividend income		58			104			388			286
Interest income														1,377			4
Other, net		404			27			597			1,178			38			132
Total other expense		(1,883	)		(757	)		(3,489	)		(1,191	)
Total other expense, net														(1,555	)		(1,567	)

Income before provision for income taxes		19,786			29,098			51,935			91,804			76,650			113,493

Provision for income taxes		4,452			11,174			16,725			35,243			14,870			25,990

Net income	$	15,334		$	17,924		$	35,210		$	56,561			61,780			87,503

Other comprehensive income:
Foreign currency translation adjustments		9			(10	)		101			(63	)		34			20

Total comprehensive income	$	15,343		$	17,914		$	35,311		$	56,498		$	61,814		$	87,523

Basic earnings per common share	$	0.46		$	0.54		$	1.06		$	1.66		$	1.90		$	2.60

Diluted earnings per common share	$	0.46		$	0.54		$	1.06		$	1.66		$	1.88		$	2.58

Basic weighted average number of shares outstanding		33,227			33,212			33,217			34,098			32,549			33,644
Diluted weighted average number of shares outstanding		33,335			33,366			33,323			34,172			32,838			33,966

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(in ~~thousands)~~thousands, except per share amounts)

Nine Months Ended September 30,

2017

2016

Cash flows from operating activities:

Net income
$
35,210

$
56,561

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

43,531

32,665

Deferred taxes

19,983

13,269

Compensation expense related to share-based compensation plans

7,402

6,318

Loss (gain) on sale of assets

360

(382
)
Excess tax benefits from share based compensation

-

(524
)
Changes in operating assets and liabilities:

Restricted investments

(3,189
)

545

Accounts receivable, net

(37,448
)

(62,324
)
Prepaid taxes

(11,839
)

(1,609
)
Prepaid expenses and other current assets

(3,059
)

1,244

Other assets

(3,505
)

961

Accounts payable

51,459

37,080

Accrued expenses

(13,179
)

(6,968
)
Non-current liabilities

1,419

2,181

Net cash provided by operating activities

87,145

79,017

Cash flows from investing activities:

Proceeds from sale of equipment

3,052

1,573

Purchases of property and equipment

(39,936
)

(59,883
)
Acquisitions, net of cash acquired

(165,933
)

-

Net cash used in investing activities

(202,817
)

(58,310
)

Cash flows from financing activities:

Proceeds from issuance of debt

73,606

36,100

Repayments of long term debt

(59,921
)

(25,074
)
Stock tendered for payments of withholding taxes

(3,410
)

(2,484
)
Purchase of treasury stock

-

(100,000
)
Capital lease payments

(2,101
)

(1,965
)
Excess tax benefits from share-based compensation

-

212

Payment of debt issuance costs

(1,397
)

-

Net cash provided by (used in) financing activities

6,777

(93,211
)

Effect of exchange rate changes on cash and cash equivalents

49

(50
)

Net decrease in cash and cash equivalents

(108,846
)

(72,554
)
Cash and cash equivalents beginning of the period

127,404

207,749

Cash and cash equivalents end of the period
$
18,558

$
135,195

Supplemental disclosures of cash paid for:

Interest
$
4,033

$
2,636

Income taxes
$
12,880

$
26,826


								Purchase Price
	Class A & B							of Excess of					Accumulated
	Common Stock				Additional			Predecessor					Other			Treasury
	Shares				Paid-in			Basis, Net			Retained		Comprehensive			Stock
	Issued		Amount		Capital			of Tax			Earnings		Income			Shares			Amount			Total
Balance December 31, 2021		41,887,088	$	419	$	189,256		$	(15,458	)	$	1,424,634	$	(207	)		(7,317,058	)	$	(258,330	)	$	1,340,314
Stock tendered for payments of withholding taxes		-		-		-			-			-		-			(66,369	)		(5,585	)		(5,585	)
Issuance of restricted stock awards, net of forfeitures		-		-		(4,807	)		-			-		-			147,426			4,807			-
Share-based compensation expense		-		-		4,719			-			-		-			-			-			4,719
Net income		-		-		-			-			87,503		-			-			-			87,503
Foreign currency translation adjustment		-		-		-			-			-		20			-			-			20
Balance March 31, 2022		41,887,088	$	419	$	189,168		$	(15,458	)	$	1,512,137	$	(187	)		(7,236,001	)	$	(259,108	)	$	1,426,971


Balance December 31, 2022		41,887,088	$	419	$	208,165		$	(15,458	)	$	1,781,582	$	(214	)		(8,665,564	)	$	(374,892	)	$	1,599,602
Stock tendered for payments of withholding taxes		-		-		-			-			-		-			(95,514	)		(7,606	)		(7,606	)
Issuance of restricted stock awards, net of forfeitures		-		-		(7,292	)		-			-		-			209,528			7,292			-
Share-based compensation expense		-		-		5,238			-			-		-			-			-			5,238
Net income		-		-		-			-			61,780		-			-			-			61,780
Foreign currency translation adjustment		-		-		-			-			-		34			-			-			34
Balance March 31, 2023		41,887,088	$	419	$	206,111		$	(15,458	)	$	1,843,362	$	(180	)		(8,551,550	)	$	(375,206	)	$	1,659,048

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Months Ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	61,780		$	87,503
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,810			35,193
Deferred taxes		4,901			5,286
Compensation expense related to share-based compensation plans		5,238			4,719
Gain on sale of assets, net		(3,975	)		(4,745	)
Changes in operating assets and liabilities, net of acquisition:
Restricted investments		(1,122	)		2,759
Accounts receivable, net		18,951			(65,288	)
Prepaid taxes		7,605			535
Prepaid expenses and other current assets		13,617			3,403
Other assets		(653	)		(1,516	)
Accounts payable		(17,705	)		7,771
Accrued expenses		(40,065	)		7,130
Non-current liabilities		(5,007	)		(2,540	)
Net cash provided by operating activities		89,375			80,210

Cash flows from investing activities:
Proceeds from sale of equipment		10,172			6,444
Purchases of property and equipment		(26,845	)		(30,927	)
Acquisitions		108			-
Net cash used in investing activities		(16,565	)		(24,483	)

Cash flows from financing activities:
Repayments of long-term debt		(29,237	)		(26,024	)
Stock withheld for payments of withholding taxes		(7,606	)		(5,585	)
Finance lease payments		(888	)		(526	)
Proceeds from issuance of debt		20,831			23,512
Net cash used in financing activities		(16,900	)		(8,623	)


Effect of exchange rate changes on cash and cash equivalents		18			8

Net increase in cash and cash equivalents		55,928			47,112
Cash and cash equivalents beginning of the period		286,642			159,784
Cash and cash equivalents end of the period	$	342,570		$	206,896

Supplemental disclosures of cash paid for:
Interest	$	3,320		$	1,870
Income taxes	$	1,290		$	620

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Interim Financial Statements

~~NOTE 1.~~

~~Interim Financial Statements~~

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

The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position as of ~~September 30, 2017~~March 31, 2023 and results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022.

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, ~~2016.~~2022. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

~~NOTE 2.~~

~~Acquisition~~

Hub Group Trucking (HGT), a wholly owned subsidiary of Hub Group, Inc., acquired all of the outstanding equity interests of Estenson Logistics, LLC (“Estenson”) on July 1, 2017 (the “Estenson Acquisition”). Estenson is nowReclassifications: Due to presentation changes made in our wholly owned subsidiary, operating under the name Hub Group Dedicated (“HGD”). As a result of the Estenson Acquisition, HGT acquired substantially all of the assets of Estenson, which include tractors and trailers, as well as assumedconsolidated income statement, certain ~~liabilities, including equipment debt. HGD is included in the Hub segment.~~

~~HGD has an operating fleet of approximately 1,000 tractors and over 3,600 trailers. Dedicated services~~prior year amounts have been ~~requested by our customers and we believe HGD is an excellent service offering that we can provide~~reclassified to ~~our customers.~~

The base purchase price for Estenson was approximately $285 million, including contingent consideration related to an earn-out provision included in the Purchase Agreement, which will not exceed $6 million and is based on Estenson’s EBITDA results through June 30, 2019. In accordanceconform with the agreement, the base purchase price was adjusted by the assumed debt to arrive at the final consideration of $172 million. To facilitate the acquisition, we assumed $113 million of Estenson debt and paid $166 million in cash, including $55 million of cash, which was borrowed under our new line of credit (See Note 6).current year presentation.

~~The following table summarizes the total purchase price allocated to the net assets acquired (in thousands):~~NOTE 2. Earnings Per Share

Cash paid
$
165,945

Consideration payable

1,366

Contingent consideration, fair value

4,703

Total consideration

172,014

Equipment debt assumed

112,677

Total base purchase price
$
284,691

Pending finalization of the fair market value of assets acquired and liabilities assumed, revenue and lease contracts, and deferred taxes related to tax valuation/tax goodwill the measurement period remains open. The following table summarizes the preliminary allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):

July 1, 2017

Cash and cash equivalents
$
12

Accounts receivable trade

27,000

Accounts receivable other

165

Prepaid expenses and other current assets

1,500

Property and equipment

128,477

Other intangibles

66,400

Goodwill

86,294

Other assets

64

Total assets acquired
$
309,912

Accounts payable trade
$
4,542

Accrued payroll

5,661

Accrued other

15,018

Equipment debt

112,677

Total liabilities assumed
$
137,898

Total consideration
$
172,014

The Estenson acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their estimated fair values as of July 1, 2017 with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the Estenson acquisition was primarily attributable to potential expansion and future development of the acquired business. The fair value assigned to the customer relationships identifiable intangible was determined using an income approach based on management’s estimates and assumptions. The fair value assigned to the property and equipment was determined based on a market approach. A probability weighted expected return model was used to estimate the value of the contingent consideration. Equipment debt was valued using a discounted cash flow analysis whereby future contractual principal repayments and interest payments for each instrument were discounted to the purchase date at a risk-adjusted discount rate.

We incurred approximately $1.6 million of acquisition costs associated with this transaction prior to the closing date that are reflected in general and administrative expense in the Unaudited Consolidated Statements of Income for the nine months ended September 30, 2017.

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

Accumulated

Balance at

Estimated Useful

Amount

Amortization

September 30, 2017

Life
Customer relationships

$
66,000

$
1,100

$
64,900

15 years
Trade name

400

400

-

3 months

The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition for both the three and nine month periods ended September 30, 2017 was $1.5 million. The intangible assets have a weighted average useful life of approximately 15 years. Amortization expense related to HGD for the next five years is as follows (in thousands):

Remainder 2017

$
1,100

2018

4,400

2019

4,400

2020

4,400

2021

4,400

The following unaudited pro forma consolidated results of operations for 2017 and 2016 assume that the acquisition of Estenson was completed as of January 1, 2016 (in thousands, except for per share amounts):

Three Months

Ended

September 30, 2016

Revenue

$
988,345

Net income

$
20,249

Earnings per share

Basic

$
0.61

Diluted

$
0.61

Nine Months

Nine Months

Ended

Ended

September 30, 2017

September 30, 2016

Revenue
$
2,986,342

$
2,752,660

Net income
$
39,387

$
62,212

Earnings per share

Basic
$
1.19

$
1.82

Diluted
$
1.18

$
1.82

The unaudited pro forma consolidated results for the three and nine month periods were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and HGD. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition on January 1, 2016.

~~NOTE 3.~~

~~Business Segments~~

We report two distinct business segments. The first segment is Mode, which includes the Mode Transportation, LLC (“Mode LLC”) business we acquired on April 1, 2011. The second segment is Hub, which is all business other than Mode.

Hub offers comprehensive intermodal, truck brokerage, dedicated and logistics services. Our employees operate the freight through a network of operating centers located in the United States, Canada 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, Canada and Mexico.

Mode LLC has Independent Business Owners (“IBOs”) who sell and operate the business throughout North America, as well as sales only agents. Mode LLC also has a corporate office in Dallas, TX, a temperature protected services division, Temstar, located in Oak Brook, IL and corporate offices in Memphis, TN.

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

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

Three Months

Three Months

Ended September 30, 2017

Ended September 30, 2016

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Revenue
$
820,802

$
258,696

$
(25,138
)
$
1,054,360

$
716,699

$
251,611

$
(35,496
)
$
932,814

Transportation costs

734,747

228,227

(25,138
)

937,836

638,154

218,702

(35,496
)

821,360

Gross margin

86,055

30,469

-

116,524

78,545

32,909

-

111,454

Costs and expenses:

Salaries and benefits

45,727

3,399

-

49,126

38,775

3,835

-

42,610

Agent fees and commissions

15

19,057

-

19,072

20

19,052

-

19,072

General and administrative

20,520

1,883

-

22,403

15,969

1,672

-

17,641

Depreciation and amortization

3,962

292

-

4,254

1,959

317

-

2,276

Total costs and expenses

70,224

24,631

-

94,855

56,723

24,876

-

81,599

Operating income
$
15,831

$
5,838

$
-

$
21,669

$
21,822

$
8,033

$
-

$
29,855

Capital Expenditures
$
10,170

$
173

$
-

$
10,343

$
34,411

$
255

$
-

$
34,666

~~The following tables summarize our revenue by segment and business line (in thousands) for the quarter ended September 30:~~

Three Months

Three Months

Ended September 30, 2017

Ended September 30, 2016

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Intermodal
$
473,998

$
123,194

$
(13,665
)
$
583,527

$
466,283

$
126,052

$
(21,857
)
$
570,478

Truck brokerage

113,179

87,242

(634
)

199,787

96,906

79,627

(174
)

176,359

Logistics

175,679

48,260

(10,794
)

213,145

153,510

45,932

(13,465
)

185,977

Dedicated

57,946

-

(45
)

57,901

-

-

-

-

Total revenue
$
820,802

$
258,696

$
(25,138
)
$
1,054,360

$
716,699

$
251,611

$
(35,496
)
$
932,814

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

Nine Months

Nine Months

Ended September 30, 2017

Ended September 30, 2016

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Revenue
$
2,203,142

$
743,621

$
(74,442
)
$
2,872,321

$
1,980,450

$
692,366

$
(78,586
)
$
2,594,230

Transportation costs

1,972,725

654,612

(74,442
)

2,552,895

1,739,676

598,809

(78,586
)

2,259,899

Gross margin

230,417

89,009

-

319,426

240,774

93,557

-

334,331

Costs and expenses:

Salaries and benefits

126,891

10,452

-

137,343

118,658

11,417

-

130,075

Agent fees and commissions

46

54,057

-

54,103

47

54,287

-

54,334

General and administrative

57,330

6,011

-

63,341

44,917

5,451

-

50,368

Depreciation and amortization

8,319

896

-

9,215

5,603

956

-

6,559

Total costs and expenses

192,586

71,416

-

264,002

169,225

72,111

-

241,336

Operating income
$
37,831

$
17,593

$
-

$
55,424

$
71,549

$
21,446

$
-

$
92,995

Capital Expenditures
$
39,732

$
204

$
-

$
39,936

$
59,356

$
527

$
-

$
59,883

As of September 30, 2017

As of December 31, 2016

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Total assets
$
1,421,628

$
184,996

$
(6,761
)
$
1,599,863

$
1,178,110

$
191,374

$
(9,225
)
$
1,360,259

Goodwill

319,117

29,389

-

348,506

232,987

29,389

-

262,376

~~The following tables summarize our revenue by segment and business line (in thousands) for the nine months ended September 30:~~

Nine Months

Nine Months

Ended September 30, 2017

Ended September 30, 2016

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Intermodal
$
1,350,187

$
357,516

$
(41,768
)
$
1,665,935

$
1,318,223

$
355,379

$
(61,974
)
$
1,611,628

Truck brokerage

324,823

248,311

(1,330
)

571,804

261,456

228,350

(676
)

489,130

Logistics

470,186

137,794

(31,299
)

576,681

400,771

108,637

(15,936
)

493,472

Dedicated

57,946

-

(45
)

57,901

-

-

-

-

Total revenue
$
2,203,142

$
743,621

$
(74,442
)
$
2,872,321

$
1,980,450

$
692,366

$
(78,586
)
$
2,594,230

~~NOTE 4.~~

~~Earnings Per Share~~

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


	Three Months Ended, March 31,
	2023		2022

Net income for basic and diluted earnings per share	$	61,780	$	87,503

Weighted average shares outstanding - basic		32,549		33,644

Dilutive effect of restricted stock		289		322

Weighted average shares outstanding - diluted		32,838		33,966

Earnings per share - basic	$	1.90	$	2.60

Earnings per share - diluted	$	1.88	$	2.58

Three Months Ended, September 30,

Nine Months Ended, September 30,

2017

2016

2017

2016

Net income for basic and diluted earnings per share
$
15,334

$
17,924

$
35,210

$
56,561

Weighted average shares outstanding - basic

33,227

33,212

33,217

34,098

Dilutive effect of stock options and restricted stock

108

154

106

74

Weighted average shares outstanding - diluted

33,335

33,366

33,323

34,172

Earnings per share - basic
$
0.46

$
0.54

$
1.06

$
1.66

Earnings per share - diluted
$
0.46

$
0.54

$
1.06

$
1.66

NOTE 3. Segment Reporting

As we have continued to expand our service offerings and diversify our business, we have also made changes to the financial information that our CEO, who has been identified as our Chief Operating Decision Maker (CODM), uses to make operating and capital decisions. Beginning with the first quarter of 2023, we concluded that we had two reportable segments: Intermodal and Transportation Solutions (“ITS”) and Logistics which are based primarily on the services each segment provides. Results for the quarter ended March 31, 2022 have been recast below to conform with the current period presentation. Our ITS Segment includes our asset-light business lines: intermodal and dedicated trucking. Our Logistics Segment includes our non-asset business lines: managed transportation, truck brokerage, final mile, consolidation, warehousing and fulfillment.

Intermodal and Transportation Solutions. Our Intermodal and Transportation Solutions segment 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. This segment also includes our trucking operations which provides drayage for our intermodal service offering and serves 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. As of March 31, 2023, our trucking transportation operation consisted of approximately 2,300 tractors, 3,300 employee drivers and 4,400 trailers. We also contract for services with approximately 650 independent owner-operators. We arrange for the movement of our customers’ freight in one of our approximately 48,000 containers.

Logistics. Our Logistics segment offers a full range of trucking transportation services, including dry van, expedited, less-than-truckload, refrigerated and flatbed, all of which is provided by third party carriers with whom we contract. This segment also offers a wide range of logistics services including transportation management, shipment optimization, load consolidation, mode selection, carrier management, load planning and execution, warehousing, fulfillment, cross-docking and consolidation services. We leverage proprietary technology along with collaborative relationships with third party service providers to deliver cost savings and performance-enhancing supply chain services to our clients. Our transportation management offering also serves as a source of volume for our intermodal and transportation solutions segment.

Separate balance sheets are not prepared by segment, and as a result, assets are not separately identifiable or presented by segment. Our CEO uses consolidated asset information to make capital decisions.

The following tables summarize our financial and operating data by segment (in thousands):


	Three Months Ended
Operating Revenue	March 31,
	2023			2022
Intermodal and Transportation Solutions	$	709,249		$	776,570
Logistics		469,141			540,984
Inter-segment eliminations		(26,125	)		(19,431	)
Total operating revenue	$	1,152,265		$	1,298,123


	Three Months Ended
Operating Income	March 31,
	2023		2022
Intermodal and Transportation Solutions	$	49,379	$	85,696
Logistics		28,826		29,364
Total operating income	$	78,205	$	115,060


	Three Months Ended
Depreciation and Amortization	March 31,
	2023		2022
Intermodal and Transportation Solutions	$	27,142	$	24,375
Logistics		8,307		6,914
Total depreciation and amortization	$	35,449	$	31,289

NOTE 4. Fair Value Measurement

~~NOTE 5.~~

~~Fair Value Measurement~~

The carrying value of cash and cash equivalents, accounts receivable and accounts payable ~~and long term debt~~ approximated fair value as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016 due~~2022. As of March 31, 2023, the fair value of the Company’s fixed-rate borrowings was $7.5 million less than the historical carrying value of $334.1 million. As of December 31, 2022, the fair value of the Company's fixed-rate borrowings was $11.7 million less than the historical carrying value of $342.5 million. The fair value of the fixed-rate borrowings was estimated using an income approach based on current interest rates available to ~~their short-term nature.~~the Company for borrowings on similar terms and maturities.

We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, our cash and temporary investments were with high quality financial institutions in ~~Demand Deposit Accounts (DDAs)~~demand deposit accounts, savings accounts, checking accounts and ~~Savings Accounts.~~money market accounts.

Restricted investments included $19.2 million and $18.1 million as of ~~September 30, 2017 of $24.1 million~~March 31, 2023 and December 31, ~~2016~~2022, respectively, of ~~$20.9 million, included~~ mutual funds which are reported at fair value. These investments relate to our nonqualified deferred compensation plan and insurance deposits.

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2), or unobservable inputs (Level 3). Cash and cash equivalents, accounts receivable, ~~and~~ accounts payable and mutual funds and related liabilities are defined as “Level ~~1”,~~1,” while ~~long term~~long-term debt is defined as “Level 2” of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification.

NOTE 5. Long-Term Debt and Financing Arrangements

~~NOTE 6.~~

~~Long-Term Debt and Financing Arrangements~~

~~We have standby letters of credit that expire at various dates in 2017 and 2018. As of September 30, 2017, our letters of credit were $13.5 million.~~

~~On July 1, 2017,~~In February 2022, we entered into a ~~$350~~five-year, $350 million unsecured credit agreement (the "Credit Agreement"). The Credit Agreement replaces the Amended and Restated Credit Agreement dated December 12, 2013 (“2013 Credit Agreement”). The Company used the Credit Agreement to finance, in part, the Estenson Acquisition.

Our unused and available borrowings under our new Credit Agreement were $286.5 million as of September 30, 2017. Our unused and available borrowings under the 2013 Credit Agreement were $38.2 million as of December 31, 2016. We were in compliance with our debt covenants as of September 30, 2017.

Borrowings under the Credit Agreement generally bear interest at a variable rate equal to (i) ~~LIBOR~~the secured overnight financing rate (published by the Federal Reserve Bank of New York, “SOFR”), plus a specified margin based on the term of such borrowing, plus a specified margin based upon ~~the Borrowers'~~Hub’s total net leverage ratio (as defined in the Credit Agreement) (the "Total Net Leverage Ratio"), or (ii) the base rate (which is the highest of (a) the administrative agent's prime rate, (b) the federal funds rate plus ~~0.50%~~0.50% or (c) the sum of ~~1% plus~~ 1% and one-month ~~LIBOR)~~SOFR) plus a specified margin based upon the Total Net Leverage Ratio. The specified margin for ~~Eurodollar~~SOFR loans varies from 100.0 to ~~200.0~~175.0 basis points per annum. The specified margin for base rate loans varies from 0.0 to ~~100.0~~75.0 basis points per annum. ~~The Borrowers~~Hub must also pay (1) a commitment fee ranging from 10.0 to 25.0 basis points per annum (based upon the Total Net Leverage Ratio) on the aggregate unused commitments and (2) a letter of credit fee ranging from 100.0 to ~~200.0~~175.0 basis points per annum (based upon the Total Net Leverage Ratio) on the undrawn amount of letters of credit.

~~The Credit Agreement contains various restrictions~~We have standby letters of credit that expire in 2023. As of March 31, 2023 and ~~covenants, including negative covenants that limit or restrict dividends, indebtedness~~December 31, 2022, our letters of ~~subsidiaries, mergers~~credit were $43.4 million.

As March 31, 2023 and fundamental changes, asset sales, acquisitions, liens and encumbrances, transactions with affiliates, changes in fiscal year and other matters customarily restricted in such agreements. The Company must maintain a Total Net Leverage Ratio of (a) total funded debt as of such date, minus up to $50,000,000 in unrestricted cash and cash equivalents (each as defined in the Credit Agreement) to (b) consolidated EBITDA (as defined in the credit agreement) of not more than 3.00 to 1.00; provided that as of the close of each of the four fiscal quarters occurring after the consummation of a permitted acquisition (as defined in the Credit Agreement) with an aggregate consideration of $150,000,000 or more, such ratio shall not be more than 3.25 to 1.00. The Company must maintain an interest coverage ratio of consolidated EBITDA to consolidated cash interest expense of not less than 3.00 to 1.00.

~~We incurred $1.4 million of financing costs related to~~December 31, 2022, we had no borrowings under the Credit Agreement ~~during the third quarter of 2017, which we capitalized~~ and ~~will amortize to interest expense over the term of the agreement. The unamortized balance of $1.3 million is included~~our unused and available borrowings were $306.6 million. We were in ~~Other assets in the Unaudited Consolidated Balance Sheet~~compliance with our debt covenants as of ~~September 30, 2017.~~March 31, 2023 and December 31, 2022.

~~In addition to borrowings under our new credit agreement, we~~We have entered into various Equipment Notes (“Notes”) for the purchase of tractors, trailers, containers and ~~containers.~~refrigeration units. The Notes are secured by the underlying equipment financed in the agreements.

Our outstanding Notes are as follows (in thousands):


	March 31,			December 31,
	2023			2022

Interim funding for equipment received and expected to be converted to an equipment note in subsequent year; interest paid at a variable rate	$	4,124		$	6,137

Secured Equipment Notes due on various dates in 2028 commencing on various dates in 2023; interest is paid monthly at a fixed annual rate between 5.21% and 5.57%		17,627			-

Secured Equipment Notes due on various dates in 2027 commencing on various dates in 2022 and 2023; interest is paid monthly at a fixed annual rate between 2.07% and 5.82%		173,504			177,295

Secured Equipment Notes due on various dates in 2026 commencing on various dates in 2021; interest is paid monthly at a fixed annual rate between 1.48% and 2.41%		73,257			78,359

Secured Equipment Notes due on various dates in 2025 commencing on various dates in 2020; interest is paid monthly at a fixed annual rate between 1.51% and 1.80%		40,079			43,955

Secured Equipment Notes due on various dates in 2024 commencing on various dates in 2017, 2019 and 2020; interest is paid monthly at a fixed annual rate between 2.50% and 3.59%		17,202			20,751

Secured Equipment Notes due on various dates in 2023 commencing on various dates from 2016 to 2019; interest is paid monthly at a fixed annual rate between 2.20% and 4.10%		8,266			15,968

		334,059			342,465

Less current portion		(97,899	)		(101,741	)
Total long-term debt	$	236,160		$	240,724

Period Ended

September 30,

December 31,

2017

2016

(in thousands except principal and interest payments)

Revolving line of credit
$
50,000

$
-

Secured Equipment Notes due on various dates in 2024 with monthly principal and interest payments between $403 and $83,000 commencing on various dates in 2017; interest is paid monthly at a fixed annual rate between 2.85% and 3.28%

12,388

-

Secured Equipment Notes due on various dates in 2023 with monthly principal and interest payments between $669 and $41,238 commencing on various dates in 2016 and 2017; interest is paid monthly at a fixed annual rate between 2.23% and 3.12%

11,554

-

Secured Equipment Notes due on various dates in 2022 with monthly principal and interest payments between $3,030 and $254,190 commencing on various dates from 2015 to 2017; interest is paid monthly at a fixed annual rate of between 2.16% and 2.87%

32,517

-

Secured Equipment Notes due on various dates in 2021 with monthly principal and interest payments between $1,940 and $326,333 commencing on various dates from 2014 to 2017; interest is paid monthly at a fixed annual rate between 2.04% and 2.96%

81,176

59,836

Secured Equipment Notes due on various dates in 2020 with monthly principal and interest payments between $6,175 and $398,496 commencing on various dates from 2013 to 2016; interest is paid monthly at a fixed annual rate between 1.72% and 2.78%

57,305

48,633

Secured Equipment Notes due on various dates in 2019 with monthly principal and interest payments between $1,594 and $444,000 commencing on various dates from 2013 to 2015; interest is paid monthly at a fixed annual rate between 1.87% and 2.62%

40,803

49,464

Secured Equipment Notes due in June 2018 with monthly or quarterly principal and interest payments between $542 and $480,000 commencing on various dates from 2012 to 2014; interest is paid quarterly at a fixed annual rate between 1.89% and 4.45%

1,280

2,759

Secured Equipment Notes due on various dates in 2017 with monthly principal and interest payments between $12,964 and $19,792 commencing on various dates in 2012 and 2013; interest is paid monthly at a fixed annual rate between 2.06% and 2.11%

61

-

287,084

160,692

Less current portion

(73,052
)

(45,163
)
Total long-term debt
$
214,032

$
115,529

NOTE 6. Legal Matters

~~NOTE 7.~~

~~Commitments and Contingencies~~

In November 2016, we committed to acquire 4,000 53’ containers. We expect the total purchase price of these containers to be approximately $40 million. As of October 21, 2017, we have received 2,156 containers. We anticipate receiving another 394 containers by the end of the year, with the remaining 1,450 to be delivered in 2018. We will be financing the purchase of this equipment with secured fixed rate debt.

We have entered in various agreements to purchase 154 tractors for a purchase price of approximately $18 million. The equipment is expected to be delivered from October 2017 to January 2018. We will be financing the purchase of this equipment with secured fixed rate debt.

~~NOTE 8.~~

~~Legal Matters~~

~~Robles~~

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., now known as Hub Group Trucking, Inc. Mr. Robles drove a truck for Hub Group Trucking in California, first as an independent contractor and then as an employee. The action was brought on behalf of a class comprised of present and former California-based truck drivers for Hub Group Trucking who were classified as independent contractors, from January 2009 to August 2014. The complaint alleges Hub Group Trucking 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 Hub Group Trucking has engaged in unfair competition practices. The complaint seeks, among other things, declaratory and injunctive relief, compensatory damages and attorney’s fees. In May 2013, the complaint was amended to add similar claims based on Mr. Robles’ status as an employed company driver. These additional claims are only on behalf of Mr. Robles and not a putative class.

The Company ~~believes that the California independent contractor truck drivers were properly classified as independent contractors at all times. Nevertheless, because lawsuits are expensive, time-consuming~~is involved in certain claims and could interrupt our business operations, Hub Group Trucking decided to make settlement offers to individual drivers with respect to the claims alleged in this lawsuit, without admitting liability. As of September 30, 2017, 93% of the California drivers have accepted the settlement offers which were paid in 2015 or earlier. In late 2014, Hub Group Trucking decided to convert its model from independent contractors to employee drivers in California. In early 2016, Hub Group Trucking closed its operations in Southern California.

On April 3, 2015, the Robles case was transferred to the U.S. District Court for the Western District of Tennessee (Western Division) in Memphis. In May 2015, the plaintiffs in the Robles case filed a Second Amended Complaint (“SAC”) which names 334 current and former Hub Group Trucking drivers as “interested putative class members.” In addition to reasserting their existing claims, the SAC includes claims post-conversion, added two new plaintiffs and seeks a judicial declaration that the settlement agreements are unenforceable. In June 2015, Hub Group Trucking filed a motion to dismiss the SAC and on July 19, 2016, Hub Group Trucking’s motion to dismiss was granted in part, and denied in part, by the District Court. The motion to dismiss was granted for the claims of all purported class members who have signed settlement agreements and on plaintiffs’ claims based on quantum merit and it was denied with respect to federal preemption and choice of law. On August 11, 2016, Plaintiffs filed a motion to clarify whether the Court’s dismissal of the claims of all purported class members who signed settlement agreements was with or without prejudice and, if the dismissal was with prejudice, Plaintiffs moved the Court to revise and reconsider the order. Plaintiffs’ motion to clarify is fully briefed and the parties are awaiting a decision by the Court.

~~Adame~~

On August 5, 2015, the Plaintiffs’ law firm in the Robles case filed a lawsuit in state court in San Bernardino County, California on behalf of 63 named Plaintiffs against Hub Group Trucking and five Company employees. The lawsuit alleges claims similar to those being made in Robles and seeks monetary penalties under the Private Attorneys General Act. Of the 63 named Plaintiffs, at least 58 of them previously accepted the settlement offers referenced above.

On October 29, 2015, Defendants filed a notice of removal to remove the case from state court in San Bernardino to federal court in the Central District of California. On November 19, 2015, Defendants filed a motion to transfer the case to federal court in Memphis, Tennessee and also filed a motion to dismiss the case pursuant to a clause in the independent contractor agreement stating that Tennessee law applies. Also on November 19, 2015, Plaintiffs filed a motion to remand the case back to state court, claiming that the federal court lacks jurisdiction over the case. The court granted Plaintiffs’ motion to remand to the state court in San Bernardino County on April 7, 2016, mooting Defendants’ motions to transfer and dismiss.

On July 11, 2016, Defendants filed several motions in state court, asking the court to dismiss and/or stay the Plaintiffs’ suit for various reasons. During a hearing on October 5, 2016, the judge issued an oral tentative ruling stating that the choice of forum provision was unenforceable. On Defendants’ motion to dismiss the individual defendants, the court allowed for supplemental briefing for additional arguments regarding individual liability under PAGA. The court did not reach a decision regarding the motion to stay pending ~~the outcome in Robles. Plaintiffs filed their supplemental brief on November 9, 2016 to which Defendants responded on December 6, 2016.~~

On February 17, 2017, with the stipulation of the parties, the Court entered an Order dismissing, without prejudice, all of the individual Defendants and accepting the parties’ agreement that jurisdiction and venue are proper in the San Bernardino Superior Court and that Defendants will not seek to remove the case to federal district court. On April 12, 2017, the Court denied Defendants’

~~motion to dismiss based on insufficiency of the PAGA letter notice. On October 5, 2017, Plaintiffs served an amended complaint, in part dismissing the previously named individuals as Defendants.~~

~~Lubinski~~

On September 12, 2014, a complaint was filed in the U.S. District Court for the Northern District of Illinois (Eastern Division) by Christian Lubinski against Hub Group Trucking. The action was brought on behalf of a class comprised of present and former owner-operators providing delivery services in Illinois for Hub Group Trucking. The complaint alleged Hub Group Trucking misclassified such drivers as independent contractors and that such drivers were employees. The complaint also alleged that Hub Group Trucking made illegal deductionslitigation arising from the drivers’ pay and failed to properly compensate the drivers for all hours worked, reimburse business expenses, pay employment taxes, and provide workers’ compensation and other employment benefits. The complaint asserted various violationsnormal conduct of the Illinois Wage Payment and Collections Act and claimed that Hub Group Trucking was unjustly enriched. The complaint sought, among other things, monetary damages for the relevant statutory period and attorneys’ fees.

On October 24, 2014, the Lubinski case was transferred to the U.S. District Court for the Western District of Tennessee (Western Division), in Memphis. On September 22, 2015, the court granted Hub Group Trucking’s motion to dismiss Lubinski’s Illinois law claims with prejudice based on the contractual choice of law provision, which provided that Tennessee law governed. The court denied as moot Hub Group Trucking’s motion to dismiss based on federal preemption. On October 2, 2015, Lubinski appealed this order to the United States Court of Appeals for the Sixth Circuit in Cincinnati.

On December 17, 2015, Lubinski filed his brief in support of his appeal of the motion to dismiss, asserting for the first time that the federal court did not have jurisdiction over the case due to a lack of diversity of citizenship. Hub Group Trucking filed its response brief on January 19, 2016, in part arguing that Lubinski had himself alleged diversity of citizenship in his complaint. Lubinski filed his reply brief on February 5, 2016. On April 1, 2016, the Sixth Circuit remanded the case to the district court—without ruling on the merits—for the district court “to consider the argument and admit the evidence necessary to determine the question of federal subject-matter jurisdiction.”

On July 11, 2016, with his federal district court case still pending, Lubinski filed an additional putative class action Complaint, with the same claims, in Illinois state court. On the same day, Hub Group Trucking filed a declaratory judgment complaint in Tennessee state court, seeking a declaration that Lubinski’s claims must be heard in Tennessee (based on the contractual choice-of-forum provision) and that the claims must be dismissed because Tennessee law controls and Lubinski’s claims are preempted by federal law.

On October 26, 2016, Lubinski filed a motion to dismiss for lack of federal subject-matter jurisdiction and a motion for leave to file an amended complaint, attempting to “clarify” the putative class definition and arguing that the Class Action Fairness Act’s exceptions to jurisdiction apply. In early 2017, Plaintiff’s counsel advised Hub Group Trucking that Lubinski would no longer challenge federal jurisdiction. On February 15, 2017, the District Court adopted the parties’ stipulation and found that there is federal subject-matter jurisdiction. On March 22, 2017, the U.S. Court of Appeals for the Sixth Circuit granted Plaintiff’s motion to recall the mandate and reinstate Lubinski’s appeal of the district court’s order dismissing the case. On June 8, 2017, the Sixth Circuit issued an Opinion affirming the District Court’s dismissal of Plantiff’s claims. On June 30, 2017, the Sixth Circuit issued the Mandate in the case, which terminates the 6^th Circuit appeal proceedings. Plaintiff had until September 6, 2017, to ask the U.S. Supreme Court to review the case. Plaintiff did not file any petition with the Supreme Court, so the case is completed.

~~We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the remaining unresolved claims in the above mentioned lawsuits.~~

~~We are a party to other litigation incident to our~~ business, including ~~claims for personal injury and/or property damage, bankruptcy preference claims, and claims regarding freight lost or damaged in transit, improperly shipped or improperly billed. Some of the~~putative class-action 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~~involving employment related claims. Based on management's present knowledge, management does not believe that ~~the outcome of this litigation will have a materially adverse effect on our financial position or results of operations.~~

~~NOTE 9.New Pronouncements~~

In May 2014, the FASB issued Update No. 2014-09—Revenue from Contracts with Customers (Topic 606). This Standard provides guidance on how to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flowsany potential unrecorded loss contingencies arising from ~~contracts with customers.~~

~~The FASB has recently issued several amendments to the standard, including clarification on the accounting for principal vs agent and identifying performance obligations.~~

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented, if material. We will elect to record sales tax on a net basis. We do not expect this electionthese pending matters are likely to have a material ~~impact on our consolidated financial statements.~~

~~Early application is permitted for annual reporting periods beginning after December 15, 2016. We plan to adopt this standard January 1, 2018, as required.~~

While we are continuing to assess all potential impacts of the standard, other than additional disclosures, we do not anticipate that this standard will have a material impact on our consolidated financial statements. We have identified and analyzed our revenue streams and continue to analyze our current and historical contracts.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. The new standard will become effective beginning with the first quarter of 2019. Early adoption of the standard is permitted. We plan to adopt this standard January 1, 2019, as required. We are currently evaluating the impacts the adoption of this accounting guidance will haveadverse effect on the ~~consolidated~~Company's overall financial ~~statements.~~

~~In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting~~, ~~which simplifies several aspects of the accounting~~position, operating results, or cash flows after taking into account any existing accruals for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The new standard became effective beginning with the first quarter of 2017. We adopted ASU 2016-09 in the first quarter of 2017 and the adoption did not have a material impact on our consolidated financial statements. We have applied the reclassification of excess tax benefits prospectively and therefore the prior period has not been adjusted.

~~In 2016, the FASB issued new guidance that requires credit~~settlements or losses ~~on financial assets measured at amortized cost basis~~determined to be ~~presented at~~probable and estimable. However, actual outcomes could be material to the ~~net amount expected to be collected, not based on incurred losses~~. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 is permitted. We are evaluating the impact of adopting this new accounting guidance on our consolidatedCompany's financial ~~statements.~~

~~In 2016, the FASB issued new guidance which clarifies the classification of certain cash receipts and cash payments in the statement of~~position, operating results, or cash flows including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination, insurance settlement proceeds, and distributions from certain equity method investees. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. We are evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.any particular period.

~~NOTE 10.Income Taxes~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. Our effective income tax rate was 22.5% and 32.2% for the three and nine months ended September 30, 2017, respectively, as compared to 38.4% for both the three and nine months ended September 30, 2016. The lower tax rates for 2017 were driven primarily by the impact of domestic production activities deductions.

~~NOTE 11.Subsequent Events~~Forward-Looking Information

In October 2017, we entered into various agreements to purchase 38 tractors and 45 trailers for a purchase price of approximately $6 million. The equipment is expected to be delivered by the end of 2017. We will be financing the purchase of this equipment with secured fixed rate debt.

~~HUB GROUP, INC.~~

I~~tem 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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,” “targets,” “estimates,” “anticipates,” “predicts,” “projects,” “potential,” “may,” “could,” “might,” “should,” and variations of these words and similar expressions are intended to identify these forward-looking statements. In particular, information appearing under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. Forward-looking statements are ~~inherently uncertain~~neither historical facts nor assurance of future performance. Instead, they are based on our beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to ~~risks.~~inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Such ~~statements should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements~~factors include, but are not limited to, uncertainties caused by adverse economic conditions, including, without limitation, as a result of ~~many factors.~~extraordinary events or circumstances such as the coronavirus (COVID-19) pandemic, and their impact on our customers’ or suppliers' businesses and workforce levels, disruptions of our business and operations, or the operations of our customers and suppliers.

Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. All forward-looking statements made by us in this report are based upon information available to us on the date of this ~~report.~~report and speak only as of the date in which they are made. Except as required by law, we expressly disclaim any obligations to publicly ~~release~~update any ~~revisions to~~ forward-looking statements, whether written or oral, that may be made from time to ~~reflect events after the date~~time, whether as a result of ~~this report. Factors~~new information, future developments or otherwise. Important factors that could cause our actual results and financial condition to differ materially ~~include:~~from those indicated in the forward-looking statements, in addition to those identified in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”) include the following as they may be affected, either individually, or in the aggregate, by the effect of the ongoing COVID-19 pandemic, including any spikes, outbreaks or variants of the virus, as well as any future government actions taken in response to the pandemic, including on our business operations, as well as its impact on general economic and financial market conditions and on our customers, counterparties, employees and third-party service providers:

•

the degree and rate of market growth in the ~~domestic intermodal, truck brokerage, dedicated~~transportation and logistics markets served by us;

•

any impacts on consumer sentiment and demand for our customers’ goods and services resulting from a recession or rising inflation rates, increasing commodities prices including gasoline, rising interest rates, and geopolitical events (and governmental responses thereto, including tariffs, tax incentives, sanctions and embargoes);

•

deterioration in our relationships, service conditions or provision of equipment with ~~existing~~ railroads or adverse changes to the railroads’ operating rules;

•

~~changes in rail service conditions~~inability to recruit and retain company drivers, warehouse employees and owner-operators;

•

inability to hire or ~~adverse weather conditions;~~

retain management and other employees who are critical to our continued success;

•

~~further consolidation of railroads;~~

the impact of competitive pressures in the marketplace, including, for example, entry of new competitors ~~aggressive pricing,~~including digital freight matching companies, direct marketing efforts by the railroads, or marketing efforts of asset-based ~~carriers;~~

carriers, or innovative new services resulting in lower emissions;

•

~~our inability to price our services at high enough rates to maintain our historical margin levels;~~

unanticipated changes in rail, drayage, warehousing and trucking company ~~capacity;~~

capacity or costs of services;

•

~~railroads moving away from ownership of intermodal assets;~~

~~equipment shortages or equipment surplus;~~

~~changes in~~ the ~~cost~~impact on costs of services, ~~from rail, drayage, trucking, owner-operator drivers or other vendors~~service and ~~market pressures on company driver compensation;~~

reliability of further consolidation of railroads;

•

increases in costs or shortages of drivers related to any reclassification or change in ~~our treatment of~~company drivers, owner-operators or ~~owner-operators~~other workers due to regulatory, legislative or judicial decisions impacting independent contractors, including owner-operators or workers directly contracted with the Company and ~~legal changes;~~those contracted to the Company’s vendors;

•

joint employer claims alleging that the Company is a co-employer of any workers providing services to a Company contractor;

•

labor unrest or shortages in the rail, drayage, trucking, warehousing or ~~trucking company communities;~~

port sectors;

•

~~general economic and business conditions;~~

~~inability to successfully protect our data against cyber-attacks;~~

significant deterioration in our customers’ financial condition, ~~or bankruptcy,~~ particularly in the retail, consumer products and durable goods sectors;

•

inability to identify, close and successfully integrate any recent or future business combinations;

•

fuel shortages or fluctuations in fuel prices;

•

increases in interest rates;

•

acts of terrorism, ~~and~~ military action ~~and~~or geopolitical events, including events that disrupt the ~~resulting effects on security;~~

global supply chain or impact consumer spending;

•

difficulties in maintaining or enhancing ~~and transforming~~ our information technology ~~systems;~~

systems, implementing new systems or protecting against cyber-attacks;

•

increases in costs or operating challenges associated with ~~changes to~~complying with current or new governmental regulations, including lower emission regulations;

•

significant increases to employee health insurance costs;

•

loss of ~~several~~one or more of our largest customers;

•

expected awards ~~received~~ during annual customer bids not materializing;

•

~~loss of Mode LLC sales only agents or independent business owners (“IBOs”);~~

•

~~inability to recruit and retain key personnel and Mode LLC sales-only agents and IBOs;~~

~~inability to recruit and maintain company drivers and owner-operators;~~

changes in insurance costs, retention amounts and claims expense;

•

losses sustained on matters where the liability materially exceeds available insurance proceeds, if any;

•

union organizing efforts and changes to current laws, rules and regulations which ~~will~~may aid in these efforts;

•

~~inability~~the effects of pandemics, including disruptions to ~~integrate the HGD business;~~

global manufacturing and demand for transportation services resulting from government restrictions particularly related to China;

•

~~inability to identify, close and/or successfully integrate any future business combinations; and~~

imposition of new tariffs or trade barriers or withdrawal from or renegotiation of existing free trade agreements which could reduce international trade and economic ~~activity.~~

activity; and

•

disruptions due to severe weather conditions or adverse climate change.

EXECUTIVE SUMMARY

Hub Group, Inc. (“we”, “us” or “our”) reports two distinct business segments. The first segment is “Mode,” which includes the acquired Mode LLC business only. The second segment is “Hub,” which is all business 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 3 to the unaudited consolidated financial statements.

We are ~~one~~a leading supply chain solutions provider in North America that offers comprehensive transportation and logistics management services focused on reliability, visibility and value for our customers. Our service offerings include a full range of ~~the largest~~freight transportation and logistics services, some of which are provided by assets we own and operate, and some of which are provided by third parties with whom we contract. Our services include intermodal, ~~marketing companies (“IMC”) in the United States and a multi modal transportation provider offering intermodal, truck brokerage,~~truckload, less-than-truckload, flatbed, temperature-controlled, dedicated and regional trucking. Other services include full outsource logistics solutions, transportation management services, freight consolidation, warehousing and fulfillment, final mile delivery, parcel and international services.

We ~~operate through~~service a ~~nationwide network~~large and diversified customer base in a broad range of ~~operating centers~~industries, including retail, consumer products and ~~independent business owners.~~

~~As an IMC, we arrange for the movement of~~durable goods. We believe our ~~customers’ freight in containers~~strategy to offer multi-modal supply chain management solutions serves to strengthen and ~~trailers over long distances. We contract~~deepen our relationships with ~~railroads~~our customers and allows us to provide ~~transportation~~a more cost effective and higher service solution.

Beginning in first quarter 2023, we have two reportable segments - Intermodal and Transportation Solutions, and Logistics, which are based primarily on the services each segment provides. Results 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.

~~For~~ the quarter ended ~~September 30, 2017, approximately 53% of Hub’s~~March 31, 2022, have been recast to conform with the current period presentation.

Intermodal and Transportation Solutions. Our Intermodal and Transportation Solutions segment 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. This segment also includes our trucking operations which provides drayage ~~needs were met by~~for our ~~subsidiary, Hub Group Trucking, Inc., which assists us in providing reliable, cost effective~~ intermodal ~~services~~service offering and serves our customers who require high service local and regional trucking transportation using equipment dedicated to ~~our customers. As of September 30, 2017, Hub Group Trucking leased or owned 915 tractors, owned 345 trailers, employed 1,011 drivers and contracted with 1,586 owner-operators for~~ their ~~services and equipment.~~

~~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 ~~new~~ dedicated service ~~line, HGD, contracts with customers looking to outsource a portion of their transportation needs. We offer an exclusive dedicated fleet~~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 dedicated service line currently operates a fleet~~We arrange for the movement of our customers’ freight in one of our approximately 48,000 containers. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. 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 March 31, 2023, our trucking transportation operation consisted of approximately ~~986~~2,300 tractors, 3,300 employee drivers and ~~3,665 trailers at 119 locations throughout the United States. As~~4,400 trailers. We also contract for services with approximately 650 independent owner-operators.

Logistics. Our Logistics segment offers a full range of ~~September 30, 2017, HGD employed 1,269 drivers.~~

~~Our~~trucking transportation services, including dry van, expedited, less-than-truckload, refrigerated and flatbed, all of which is provided by third party carriers with whom we contract. This segment also offers a wide range of logistics ~~service consists of complex~~services including transportation management, ~~services, including~~shipment optimization, load consolidation, mode ~~optimization~~selection, carrier management, load planning and ~~carrier management. These service offerings are designed to take advantage~~execution, warehousing, fulfillment, cross-docking and consolidation services. Many of the ~~increasing trend~~customers for ~~shippers~~these solutions are consumer goods companies who sell into the retail channel. Our business operates or has access to ~~outsource all or a greater portion~~approximately 9.5 million square feet of ~~their transportation needs.~~

~~Hub has full time marketing representatives throughout~~warehousing and cross-dock space across North America, ~~who~~to which our customers ship their goods to be stored and distributed to destinations including residences, retail stores and other commercial locations. These services offer our customers shipment visibility, transportation cost savings, high service ~~local, regional~~ and ~~national accounts. We believe that fostering long-term customer relationships is critical~~compliance with retailers’ increasingly stringent supply chain requirements

In August 2022, we acquired TAGG Logistics, LLC which 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 ~~success and allows us to better understand our customers’ needs and specifically tailor our transportation services to them.~~logistics segment.

~~Hub’s yield management group works with pricing, account management and operations to enhance Hub’s customer margins.~~

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

Hub’s top 50 customers represent approximately ~~64%~~63% of ~~the Hub segment~~ revenue for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2023, while one customer accounted for more than 10% of our quarterly revenue in 2023. We use various performance indicators to manage our business. We closely monitor ~~margin and volume~~profit levels for our top 50

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 ~~issues~~levels are also monitored closely.

~~Mode has approximately 175 agents, consisting~~

Uncertainties and risks to our outlook include the following: 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 ~~102 sales/operating agents, known~~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 ~~Independent Business Owners (“IBOs”), who sell~~transportation and ~~operate the business throughout North America~~warehouse costs, through to our customers, all of which could have a materially negative impact on our revenue, profitability and ~~73 sales only agents. Mode also has a corporate offices~~cash flow in Dallas, a temperature protected services division, Temstar, located in Oak Brook, IL and corporate offices in Memphis. Mode’s top 20 customers represent approximately 39% of the Mode segment revenue for the nine months ended September 30, 2017. 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. 2023.

RESULTS OF OPERATIONS

Three Months Ended ~~September 30, 2017~~March 31, 2023 Compared to the Three Months Ended ~~September 30, 2016~~March 31, 2022

The following table summarizes our operating revenue by segment ~~and business line~~ (in thousands) ~~for the three months ended September 30:~~

~~Revenue~~:

~~Hub Group’s~~


	Three Months Ended
Operating Revenue	March 31,
	2023			2022
Intermodal and Transportation Solutions	$	709,249		$	776,570
Logistics		469,141			540,984
Inter-segment eliminations		(26,125	)		(19,431	)
Total operating revenue	$	1,152,265		$	1,298,123


	Three Months Ended
Operating Income	March 31,
	2023		2022
Intermodal and Transportation Solutions	$	49,379	$	85,696
Logistics		28,826		29,364
Total operating income	$	78,205	$	115,060

Operating Revenue

Total consolidated operating revenue ~~increased 13.0%~~decreased 11% to ~~$1,054.4~~$1,152 million in ~~2017~~2023 from ~~$932.8~~$1,298 million in ~~2016.~~2022.

~~The Hub segment~~

Intermodal and Transportation Solutions (“ITS”) revenue ~~increased 14.5%~~decreased 9% to ~~$820.8 million. Intermodal revenue increased 1.7% to $474.0~~$709 million primarily due to ~~an increase~~a 12% decrease in ~~fuel revenue and freight rates,~~intermodal volume, partially offset by a ~~slightly unfavorable mix. Truck brokerage~~3% increase in intermodal revenue ~~increased 16.8%~~per load (price, fuel, and mix) and a 5% increase in dedicated revenue resulting from growth of existing customers. ITS operating income decreased to ~~$113.2~~$49 million, 7% of revenue, as compared to $86 million, 11% of revenue, in the prior year due to ~~a 3.2% increase~~lower volume, higher equipment costs and lower surcharges. These headwinds were partially offset by lower drayage costs as we increased the portion of drayage handled on our own fleet to 74% in ~~volume, with fuel, price, and mix combined up 13.6%.~~ first quarter 2023 as compared to 58% in the prior year, as well as an improvement in profitability at our Dedicated service line.

Logistics revenue ~~increased 14.4%~~ decreased 13%to ~~$175.7~~$469 million primarily due to ~~growth with new customers on-boarded this~~lower revenue per load in our brokerage business line and lower managed transportation business line revenue, partially offset by revenue from TAGG. First quarter operating income was 6% of revenue as compared to 5% last year. ~~Dedicated’s~~Operating income was unchanged at $29 million, as lower revenue ~~for the quarter~~ was ~~$57.9 million.~~offset by lower purchased transportation costs and our yield management initiatives.

Mode’s revenue increased 2.8% to $258.7 million in 2017 from $251.6 million in 2016. Mode’s truck brokerage revenue increased 9.6% and logistics revenue increased 5.1% while intermodal revenue decreased 2.3%.

The following is a summary of operating results ~~for our business segments (in thousands):~~

~~Transportation Costs~~

~~Hub Group’s transportation costs increased 14.2% to $937.8 million in 2017 from $821.4 million in 2016. Transportation costs in 2017 consisted of purchased transportation costs of $804.0 million~~ and ~~equipment and driver related costs of $133.8 million compared to 2016 costs of purchased transportation of $728.7 million and equipment and driver related costs of $92.7 million.~~

The Hub segment transportation costs increased 15.1% to $734.7 million in 2017 from $638.2 million in 2016. Hub segment transportation costs in 2017 included $601.8 million in purchased transportation, up from $546.5 million in 2016. The 10.1% increase in purchased transportation costs was due primarily to rail cost increases, an increase in fuel costs and higher volumes. Equipment and driver related costs increased 44.9% to $132.9 million in 2017 from $91.7 million in 2016 due primarily to the equipment and driver related costs of HGD.

The Mode segment transportation costs increased 4.4% to $228.2 million in 2017 from $218.7 million in 2016. Mode segment transportation costs are primarily purchased transportation costs which increased due to growth in brokerage and logistics and rail cost increases in intermodal.

~~Gross Margin~~

Hub Group’s gross margin increased 4.5% to $116.5 million in 2017 from $111.5 million in 2016. Hub Group’s gross margin as a percentage of sales decreased to 11.1% as compared to last year’s 11.9% margin.

The Hub segment gross margin increased 9.6% to $86.1 million. The Hub segment margin increase of $7.5 million resulted from the addition of HGD and growth in truck brokerage margin partially offset by a decline in intermodal and logistics margin. Intermodal gross margin decreased primarily because of rail cost increases and higher equipment costs, resulting partially from longer rail transits, partially offset by higher prices and improvement in loaded miles. Truck brokerage gross margin increased due to changes in customer mix, higher value added business and more spot business. Logistics gross margin declined primarily due to start-up costs related to new business on boarded this quarter, tighter truck capacity that resulted in higher purchased transportation costs, and changes in customer mix.

As a percentage of revenue, the Hub segment gross margin decreased slightly to 10.5% in 2017 from 11.0% in 2016. Logistics gross margin as a percentage of sales decreased 250 basis points due to start-up costs related to new business on boarded this quarter, tighter truck capacity that resulted in higher purchased transportation costs, and changes in customer mix. Intermodal gross margin as a percentage of sales decreased 160 basis points because of rail cost increases and higher equipment costs resulting partially from longer rail transits. Truck brokerage gross margin as a percentage of sales decreased 100 basis points because of changes in customer mix and higher purchased transportation costs for contractual business. These decreases were partially offset by the addition of HGD.

Mode’s gross margin decreased to $30.5 million in 2017 from $32.9 million in 2016 due to a decrease in intermodal and truck brokerage margin, partially offset by an increase in logistics gross margin. Mode’s gross margin as a percentage of revenue decreased to 11.8% in 2017 from 13.1% in 2016 due to a 220 basis point decline in truck brokerage yields, a 130 basis point decline in intermodal yields, and a 30 basis point decline in logistics yields.

~~CONSOLIDATED OPERATING EXPENSES~~

~~The following table includes~~ certain items in the consolidated statements of income as a percentage of revenue:

Three Months Ended

September 30,

2017

2016

Revenue

100.0%

100.0%

Transportation costs

88.9

88.1

Gross margin

11.1

11.9

Costs and expenses:

     Salaries and benefits

4.7

4.6

     Agent fees and commissions

1.8

2.0

     General and administrative

2.1

1.9

     Depreciation and amortization

0.4

0.2

Total costs and expenses

9.0

8.7

Operating income

2.1

3.2


	Three Months Ended
	March 31,
	2023				2022

Operating revenue	$	1,152,265		100.0%	$	1,298,123		100.0%

Operating expenses:
Purchased transportation and warehousing		866,931		75.2%		995,265		76.7%
Salaries and benefits		137,431		11.9%		128,739		9.9%
Depreciation and amortization		35,449		3.1%		31,289		2.4%
Insurance and claims		12,683		1.1%		9,293		0.7%
General and administrative		25,541		2.2%		23,222		1.8%
Gain on sale of assets, net		(3,975	)	0.3%		(4,745	)	0.4%
Total operating expenses		1,074,060		93.2%		1,183,063		91.1%

Operating income	$	78,205		6.8%	$	115,060		8.9%

CONSOLIDATED OPERATING EXPENSES

Purchased Transportation and Warehousing

Purchased transportation and warehousing costs decreased 13% to $867 million in 2023 from $995 million in 2022.

Purchased transportation and warehousing costs declined as compared to prior year due to lower volumes, reductions in third party carrier costs per load and decreased use of third-party carriers for drayage in ITS, partially offset by higher equipment and rail costs in ITS.

Salaries and Benefits

~~Hub Group’s salaries~~Salaries and benefits ~~expense~~ increased to ~~$49.1~~$137 million in ~~2017~~2023 from ~~$42.6~~$129 million in ~~2016.~~2022. As a percentage of revenue, ~~Hub Group’s~~ salaries and benefits increased to ~~4.7%~~11.9% in ~~2017~~2023 from ~~4.6%~~ 9.9%in ~~2016.~~2022.

The ~~Hub segment~~ salaries and benefits ~~expense~~ increase of ~~$7.0~~$8 million was primarily due to ~~the acquisition~~$28 million of ~~HGD~~incremental expense related to growth of our driver and ~~an increase in salaries expense of $1.2 million,~~warehouse employee headcount, partially offset by a ~~decrease~~$19 million reduction in ~~bonus~~office employee compensation due to lower headcount and lower incentive compensation expense.

Headcount, which includes drivers, warehouse personnel and office employees, was 6,084 and 4,784 as of March 31, 2023 and 2022, respectively. The increase in headcount related primarily to drivers as we have expanded the portion of drayage coverage handled by our own fleet, as well as the acquisition of TAGG, which added 669 warehouse employees.

Depreciation and Amortization

Depreciation and amortization expense ~~of $1.9 million.~~

~~Mode’s salaries and benefits expense decreased~~increased to ~~$3.4~~$35 million in ~~2017~~2023 from ~~$3.8~~$31 million in ~~2016 due~~2022. This increase was related primarily to ~~decreases in employee bonus~~increased container and tractor depreciation expense ~~and salaries~~as well as the amortization of intangibles related to the acquisition of TAGG. This expense, ~~of $0.2 million each.~~

~~Hub Group’s headcount~~ as of September 30, 2017 and 2016 was 2,034 and 1,746, respectively, which excludes drivers, as driver costs are included in transportation costs. As of September 30, 2017 and 2016, Mode had 115 and 129 employees, respectively.

~~Agent Fees and Commissions~~

~~Hub Group’s agent fees and commissions expense remained consistent at $19.1 million in both 2017 and 2016. As~~ a percentage of revenue, ~~these expenses decreased~~increased to ~~1.8%~~3.1% in ~~2017~~2023 from ~~2.0%~~2.4% in ~~2016.~~2022. Depreciation expense includes transportation equipment, technology investments, leasehold improvements, office equipment and building improvements.

~~The Mode segment agent fees~~Insurance and ~~commissions expense remained consistent at $19.1 million in both 2017~~Claims

Insurance and ~~2016.~~

~~General and Administrative~~

~~Hub Group’s general and administrative~~claims expense increased to ~~$22.4~~$13 million in ~~2017~~2023 from ~~$17.6~~$9 million in ~~2016.~~2022. This increase was related primarily to increased workers compensation costs and auto liability expenses not covered by insurance deductibles which increased due to an increase in mileage run on our own trucking fleet. These expenses, as a percentage of revenue, increased to ~~2.1%~~1.1% in ~~2017~~2023 from ~~1.9%~~0.7% in ~~2016.~~2022.

~~The Hub segment increase in general~~General and Administrative

General and administrative ~~expense of $4.6 million was due primarily to the acquisition of HGD and increases in~~ ~~IT consulting and professional service expense of $1.2 million,~~ expenses related to a network optimization study of $0.6 million, temporary labor expense of $0.3 million and bad debt expense of $0.2 million, partially offset by a decrease in travel and entertainment expense of $0.3 million.

~~Mode’s general and administrative expense~~ increased to ~~$1.9 million 2017 from $1.7~~$26 million in ~~2016 due to increased~~ ~~IT maintenance expense,~~ ~~consulting and professional service expenses and bad debt expense.~~

~~Depreciation and Amortization~~

~~Hub Group’s depreciation and amortization expense increased to $4.3~~2023 from $23 million in ~~2017 from $2.3 million in 2016. This expense~~2022. These expenses, as a percentage of revenue, increased to 2.2% in 2023 from 1.8% in 2022.

The increase in general and administrative expenses was primarily due to an increase in rent expense, professional services expense and IT software expense partially due to the acquisition of TAGG, partially offset by lower legal expenses.

Gain on Sale of Assets, Net

Net gains on the sale of equipment decreased to $4 million in 2023 from $5 million in 2022. The decrease in net gains resulted from lower average gain per unit sold in 2023 as compared to 2022. These gains, as a percentage of revenue, decreased to 0.3% in 2023 from 0.4% in ~~2017 from 0.2%~~2022.

Other Income (Expense)

Other expense remained consistent at $2 million in ~~2016.~~

~~The Hub segment depreciation~~both 2023 and ~~amortization~~in 2022. Interest expense increased to ~~$4.0~~$3.0 million in ~~2017~~2023 from $2.0 million in ~~2016.~~2022. This increase was ~~related primarily to the amortization of the HGD~~ ~~trade name and customer relationships~~ ~~as well as depreciation of additional~~ ~~software~~.

~~Mode’s depreciation and amortization expense remained consistent at $0.3 million in both 2017 and 2016.~~

~~Other Income (Expense)~~

~~Total other expense increased to $1.9 million in 2017 from $0.8 million in 2016~~ due primarily to ~~the acquisition of HGD and an increase~~higher interest rates on our debt. Interest income increased to $1 million in 2023 due to higher interest ~~expense related to~~rates on our ~~equipment debt, partially offset by higher foreign currency translation gains in 2017.~~cash balance.

Provision for Income Taxes

The provision for income taxes decreased to ~~$4.5~~$15 million in ~~2017~~2023 from ~~$11.2~~$26 million in ~~2016.~~2022. We provided for income taxes using an effective rate of ~~22.5%~~19.4% in ~~2017~~2023 and an effective rate of ~~38.4%~~22.9% in ~~2016.~~2022. The ~~2017~~first quarter 2023 effective tax rate ~~was lower~~of 19.4% benefitted primarily due to claiming a deduction for domestic production activities incurred during the 2013, 2016, and 2017 tax years. We expect our effective tax rate for the remainder of 2017 to be between 31.5% and 32.5%.

~~Net Income~~

~~Net income decreased to $15.3 million in 2017~~ from $17.9 million in 2016 due primarily to higher operating expenses and interest expense, partially offset by increased margin and lower income tax expense in 2017. All of the above are inclusive of the HGD acquisition.

~~Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016~~

~~The following table summarizes our revenue by segment and business line (in thousands) for the nine months ended September 30:~~

~~Revenue~~

~~Hub Group’s revenue increased to $2.9 billion in 2017 from $2.6 billion 2016.~~

The Hub segment revenue increased 11.2% to $2.2 billion. Intermodal revenue increased 2.4% to $1.4 billion primarily due to higher fuel revenue and 0.7% higher volume. This increase was partially offset by a decrease in price. Truck brokerage revenue increased 24.2% to $324.8 million due to an 11.5% volume increase as well as a 12.7% increase in fuel, mix and price combined. Logistics revenue increased 17.3% to $470.2 million related primarily to growth of new customers on-boarded in late 2016 and during 2017. Dedicated’s revenue was $57.9 million.

Mode’s revenue increased 7.4% to $743.6 million in 2017 from $692.4 million in 2016. Mode’s intermodal revenue increased 0.6%, truck brokerage revenue increased 8.7% and logistics revenue increased 26.8%.

~~The following is a summary of operating results for our business segments (in thousands):~~

~~Transportation Costs~~

Hub Group’s transportation costs increased to $2.6 billion in 2017 from $2.3 billion in 2016. Transportation costs in 2017 consisted of purchased transportation costs of $2.2 billion and equipment and driver related costs of $316.0 million compared to 2016 costs of purchased transportation of $2.0 billion and equipment and driver related costs of $271.4 million.

The Hub segment transportation cost increased by 13.4% to $2.0 billion in 2017 from $1.7 billion in 2016. Hub segment transportation costs in 2017 included $1.66 billion in purchased transportation up from $1.47 billion in 2016. The 12.8% increase was due primarily to rail cost increases, an increase in fuel costs and higher volumes. Equipment and driver related costs increased 16.5% to $313.5 million in 2017 from $269.1 million in 2016 due primarily to the equipment and driver related costs of HGD.

The Mode segment transportation costs increased 9.3% to $654.6 million in 2017 from $598.8 million in 2016. Mode segment transportation costs are primarily purchased transportation costs which increased due to higher rail costs, fuel costs, and increased business levels in logistics.

~~Gross Margin~~

~~Hub Group’s gross margin decreased 4.5% to $319.4 million in 2017 from $334.3 million in 2016.~~

~~The Hub segment gross margin decreased 4.3% to $230.4 million.~~ ~~Hub’s $10.4 million gross margin decrease~~ resulted from a decrease in margin in intermodal and logistics partially offset by an increase in truck brokerage and dedicated margins. Intermodal gross margin decreased primarily because of lower customer prices than last year and rail cost increases partially offset by slightly improved volume. Logistics gross margin decreased due to changes in customer mix and start-up costs associated with new customer on-boardings. Truck brokerage gross margin increased resulting from growth with targeted customer accounts. The addition of HGD partially offset the overall gross margin decline.

~~As a percentage of Hub segment revenue,~~ gross margin decreased to 10.5% in 2017 from 12.2% in 2016. Intermodal gross margin as a percentage of sales decreased 230 basis points because of lower customer prices than last year and rail cost increases partially offset by improved volume. Truck brokerage gross margin as a percentage of sales was down 260 basis points due to lower customer contract rates, increased costs, and a change in ~~customer mix. Logistics gross margin as~~state apportionment methodology.

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 ~~percentage of sales was down 170 basis points due to changes in customer mix and start-up costs associated with new customer on-boardings. The addition of HGD partially offset these declines.~~

~~Mode’s gross margin decreased 4.9% to $89.0 million in 2017~~lesser extent, from ~~$93.6 million in 2016~~ ~~due primarily to decreases in intermodal and truck brokerage offset by an increase in logistics. Mode’s gross margin as a percentage of revenue decreased to 12.0% in 2017~~cash received from ~~13.5% in 2016.~~

~~CONSOLIDATED OPERATING EXPENSES~~

~~The following table includes certain items in the consolidated statements of income as a percentage of revenue:~~

Nine Months Ended

September 30,

2017

2016

Revenue

100.0%

100.0%

Transportation costs

88.9

87.1

Gross margin

11.1

12.9

Costs and expenses:

     Salaries and benefits

4.8

5.0

     Agent fees and commissions

1.9

2.1

     General and administrative

2.2

1.9

     Depreciation and amortization

0.3

0.3

Total costs and expenses

9.2

9.3

Operating income

1.9

3.6

~~Salaries and Benefits~~

Hub Group’s salaries and benefits expense increased to $137.3 million in 2017 from $130.1 million in 2016. As a percentage of revenue, salaries and benefits decreased to 4.8% in 2017 from 5.0% in 2016.

The Hub segment salaries and benefits expense increase of $8.2 million to $126.9 million in 2017 from $118.7 million in 2016 was due primarily to the acquisition of HGD and an increase in salaries expense of $7.9 million, which includes increased severance expense of $2.4 million, partially offset by a decrease in bonus expense of $7.5 million.

Mode’s salaries and benefits expense decreased to $10.5 million in 2017 from $11.4 million in 2016. The decrease was due primarily to decreases of $0.7 million related to employee bonus expense and $0.1 million related to both salaries expense and employee benefits expense.

~~Agent Fees and Commissions~~

~~Hub Group’s agent fees and commissions expense decreased to $54.1 million in 2017 from $54.3 million in 2016. As a percentage of revenue, these expenses decreased to 1.9% in 2017 from 2.1% in 2016.~~

~~The Mode segment agent fees and commissions expense decrease of $0.2 million was due primarily to the decrease in Mode’s gross margin.~~

~~General and Administrative~~

Hub Group’s general and administrative expense increased to $63.3 million in 2017 from $50.4 million in 2016. As a percentage of revenue, these expenses increased to 2.2% in 2017 from 1.9% in 2016.

~~The Hub segment increase in general and administrative expense to $57.3 million in 2017 from $44.9 million in 2016 was due primarily to the acquisition of HGD and increases in~~ ~~IT consulting and professional service expense of $4.0 million, expenses related to due diligence and acquisition costs of $2.1 million, increased IT maintenance expense of $1.0 million, additional losses on~~ the sale of ~~fixed assets in 2017~~equipment. As of ~~$0.6~~March 31, 2023, we had $343 million ~~expenses related to a network optimization study~~ of ~~$0.6~~cash and $19 million in 2017, increases in temporary labor expense of $0.5 million, bad debt and rent expense of $0.4 million each, meals and entertainment and equipment lease expense of $0.3 million each, partially offset by a decrease in outside sales commissions and office expense of $0.3 million each.

~~Mode’s general and administrative expense increased to $6.0 million in 2017 from $5.5 million in 2016. The increase was due primarily to an increase in IT consulting expense of $0.4 million and~~ ~~IT maintenance expense of $0.2 million, partially offset by a decrease in travel and entertainment expense of $0.1 million~~.

~~Depreciation and Amortization~~

Hub Group’s depreciation and amortization expense increased to $9.2 million in 2017 from $6.6 million in 2016. This expense as a percentage of revenue remained consistent at 0.3% in both 2017 and 2016.

~~The Hub segment’s depreciation and amortization expense increased to $8.3 million in 2017 from $5.6 million in 2016. This increase was related primarily to the amortization of the HGD~~ ~~trade name and customer relationships~~ ~~as well as depreciation of additional~~ ~~computer software~~.

~~Mode’s depreciation and amortization expense decreased to $0.9 million in 2017 from $1.0 in 2016.~~

~~Other Income (Expense)~~

Total other expense increased to $3.5 million in 2017 from $1.2 million in 2016 due primarily to the acquisition of HGD, an increase in interest expense related to our equipment debt and by less foreign currency translation gains in 2017.

~~Provision for Income Taxes~~

~~The provision for income taxes decreased to $16.7 million in 2017 from $35.2 million in 2016. Our effective rate was~~ ~~32.2% in 201~~7 ~~and~~ ~~38.4% in 201~~6. ~~The 2017 effective tax rate was lower primarily due to claiming a deduction for domestic production activities incurred during the 2013, 2016, and 2017 tax years.~~ ~~We expect our effective tax rate for the 201~~7 ~~year to be~~ ~~between 32.0% and~~ 3~~3.0~~%.

~~Net Income~~

Net income decreased to $35.2 million in 2017 from $56.6 million in 2016 due primarily to decreased margin, higher operating expenses and interest expense, partially offset by lower income tax expense in 2017. All of the above are inclusive of the HGD acquisition.

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~During the first nine months of 2017, we funded operations, capital expenditures, an acquisition, capital leases, repayments of debt and stock buy backs related to employee withholding upon vesting~~ of restricted ~~stock~~investments. We generally fund our purchases of transportation equipment through the issuance of secured, fixed rate Equipment Notes. Payments for our other investing activities, 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 ~~proceeds from the issuance of long-term debt and~~or cash on hand. We ~~believe that our cash, cash flows from operations and borrowings available under~~have not historically used our Credit ~~Agreement will be sufficient~~Facility to ~~meet~~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. 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 ~~at least~~ the next twelve ~~months.~~months and the foreseeable future.

Cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was ~~approximately $87.1~~$89 million, which resulted primarily from net income of ~~$35.2~~$62 million ~~adjusted for~~plus non-cash charges of ~~$71.3~~$52 million, ~~and a decrease~~partially offset by changes in operating assets and liabilities of ~~$19.3~~$25 million.

Cash provided by operating activities ~~increased $8.1~~totaled $89 million in ~~2017 versus 2016.~~2023 compared to $80 million in 2022. The $9 million increase in cash flow was primarily due to ~~an increase~~increases in ~~non-cash charges~~the change of ~~$20.0 million resulting primarily from increased depreciation and amortization expense and an increase in operating~~ assets and liabilities of ~~$9.5~~$23 million ~~due to the timing~~and non-cash charges of ~~customer and vendor payments in 2017 versus 2016. These increases were~~$12 million, partially offset by a decrease in net income of ~~$21.4 million in 2017.~~$26 million.

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was ~~$202.8 million. Acquisition payments related to HGD were $165.9~~$17 million which resulted from capital expenditures of $27 million, partially offset by proceeds from the sale of equipment of $10 million. Capital expenditures of ~~$39.9~~$27 million related primarily to tractors of $14 million, containers of ~~$14.6~~$6 million, technology investments of ~~$14.5 million, transportation equipment of $7.6~~$4 million and the remainder for leasehold improvements.

Capital expenditures decreased by approximately $4 million in 2023 as compared to 2022. The 2023 decrease was due to decreases in container purchases of $6 million and spend on our corporate headquarters of $4 million. These decreases were partially offset by increased tractor purchases of $3 million, leasehold improvements of $2 million and increased spend for technology investments of $1 million.

In ~~2017,~~2023, we ~~expect to purchase 2,550 containers, which will be financed with debt. As ofthe date of this report, we had already received 2,156 of the containers. We are also investing in technology projects including transportation management systems and satellite tracking.~~

We estimate ~~our~~ capital expenditures will range from ~~$80~~$140 million to ~~$85~~$150 million. This range is lower than the estimate we disclosed in our 2022 10-K of $170 million ~~for the year.~~ to $190 million, as we have reduced our planned purchase of containers in 2023. We expect transportation equipment purchases to range from $116 million to $124 million and technology and other investments will range from $24 million to $26 million. We plan to fund these expenditures with a combination of cash and debt.

Net cash used in investing activities for the nine months ended September 30, 2016 was $58.3 million. The net cash used in investing activities increased $144.5 million in 2017 from 2016 and was due primarily to the acquisition of HGD and technology investments.

~~The net cash provided by~~ financing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 was ~~$6.8~~$17 million which ~~resulted from proceeds from the issuance of debt of $73.6 million, partially offset by the repayment~~includes repayments of long-term debt of ~~$59.9~~$29 million, cash for stock tendered for payments of withholding taxes of ~~$3.4~~$8 million ~~capital~~and finance lease payments of ~~$2.1~~$1 million, ~~and payment~~partially offset by the proceeds from the issuance of debt ~~issuance costs~~ of ~~$1.4~~$21 million. Debt incurred in 2023 was used to fund the purchase of transportation equipment.

The $8 million increase in ~~net~~ cash ~~provided by~~used in financing activities ~~of $100.0 million from 2016 to 2017 is~~for 2023 versus 2022 was primarily due to the increase in repayments of long-term debt of $3 million, less proceeds from the issuance of debt of $3 million and an increase in cash paid for stock related to employee withholding taxes of $2 million.

As a ~~decrease in the purchases~~result of ~~treasury stock of $100.0 million.~~

~~In 2017,~~anticipated favorable timing differences, primarily related to depreciation and compensation, we expect our cash paid for income taxes in 2023 to be ~~significantly~~ less than ~~2016 because~~our income tax expense.

See Note 5 of ~~lower pretax income~~the consolidated financial statements for details related to interest rates and ~~large favorable timing differences between the 2017 tax depreciation and financial statement depreciation.~~commitment fees.

We have standby letters of credit that expire ~~at various dates~~ in ~~2017 and 2018.~~2023. As of ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, our letters of credit were ~~$13.5~~$43 million.

~~Our~~At March 31, 2023, and December 31, 2022, we had no borrowings under the Credit Agreement and our unused and available borrowings ~~under our new Credit Agreement~~ were ~~$286.5 million as of September 30, 2017. Our unused and available borrowings under the 2013 Credit Agreement were $38.2 million as of December 31, 2016.~~$307 million. We were in compliance with our debt covenants as of ~~September 30, 2017.~~March 31, 2023 and December 31, 2022.

I~~tem 3.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

We are ~~exposed~~continually evaluating the possible effects of current economic conditions and reasonable and supportable economic forecasts in operational cash flows, including the risks of declines in the overall freight market and our customers’ liquidity and ability to pay. We are monitoring working capital on a daily basis and are in frequent communications with our customers.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk ~~related to changes~~as of March 31, 2023 from that presented in ~~interest rates on~~ our ~~bank line of credit which may adversely affect our results of operations~~2022 10-K.

Item 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and financial condition. Although we conduct business in foreign countries, international operations are not material to our consolidated financial position, results of operations, or cash flows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the nine months ended September 30, 2017. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash flows we would receive from our foreign investment. To date, we have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates. We do not use financial instruments for trading purposes.

We have both fixed and variable rate debt as described in Note 6 to the unaudited consolidated financial statements. Any material increase in market interest rates would not have a material impact on the results of operations for the quarter ended September 30, 2017.

Procedures. As of ~~September 30, 2017, other than our outstanding letters of credit, we had $50.0 million of outstanding obligations under our bank line of credit arrangement. As of December~~March 31, ~~2016, other than our outstanding letters of credit, we had no outstanding obligations under our bank line of credit arrangement.~~

I~~tem 4.~~

~~CONTROLS AND PROCEDURES~~

~~As of September 30, 2017,~~2023, 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.~~procedures (as such term is defined in Exchange Act Rule 13a-15(e)). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that ~~these~~our disclosure controls and procedures were effective as of ~~September 30, 2017. Except as noted below, there~~March 31, 2023.

(b) Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting ~~identified~~(as such term is defined in ~~connection with such evaluation that occurred~~Exchange Act Rule 13a-15(f)) during the ~~last~~ fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On ~~July 1, 2017,~~August 22, 2022, we completed the acquisition of ~~HGD.~~TAGG. We are currently integrating processes, employees, technologies and operations. Management will continue to evaluate our internal controls over financial reporting as we complete ~~the~~our integration.

P~~ART II.~~

~~Other Information~~

PART II. Other Information

~~Item 1.~~

~~Legal Proceedings~~

~~During the nine months ended September 30, 2017, there have been no material developments from the~~Item 1. Legal Proceedings

For information regarding legal proceedings, ~~disclosed~~see Note 6 “Legal Matters” to the Consolidated Financial Statements included in Item 1. “Financial Statements.”

Item 1A. Risk Factors

Investing in shares of our ~~Annual~~stock involves certain risks, including those identified and described in Part I, Item 1A of our 2022 10-K, as well as cautionary statements contained in this Quarterly Report on Form ~~10-K for our fiscal year ended December 31, 2016, except~~10-Q, including those ~~disclosed~~under the caption “Forward-Looking Information” in ~~Note 8 to the unaudited consolidated financial statements under “Legal Matters,” which is incorporated herein by reference.~~

~~Item 1A.~~

~~Risk Factors~~

~~During the nine months ended September 30, 2017, there have been no material changes from the risk factors disclosed in our Annual~~Part I, Item 2 of this Quarterly Report on Form ~~10-K for~~10-Q and in our ~~year ended December 31, 2016.~~other filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~We do not currently have~~In October 2022, the Board authorized the purchase of up to $200 million of our Class A Common Stock pursuant to a share repurchase ~~plan~~program (the “2022 Program”). Under the 2022 Program, the shares may be repurchased in ~~place. During~~ the ~~third~~open market or in privately negotiated transactions, from time to time subject to market and other conditions. 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 95,514 shares for $7.6 million during the first quarter of ~~2017, we purchased 3,058~~2023 and 66,369 shares ~~at a weighted average price~~for $5.6 million during the first quarter of ~~$38.50 per share~~2022 related to employee withholding upon vesting of restricted stock. 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 first quarter of 2023. These shares do not reduce the repurchase authority under the 2022 Program.



							Maximum Value of
	Total				Total Number of		Shares that May Yet
	Number of		Average		Shares Purchased as		Be Purchased Under
	Shares		Price Paid		Part of Publicly		the 2022 Program
	Purchased		Per Share		Announced Plan		(in 000’s)
January 2023		94,610	$	79.49		-	$	200,000
February 2023		904	$	93.49		-	$	200,000
March 2023		-	$	-		-	$	200,000
Total		95,514	$	79.62		-	$	200,000

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

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.~~Exhibits.

EXHIBIT INDEX


Exhibit No.	Description

~~2.2~~ 3.1	~~Amendment No. 1 to Purchase agreement dated July 1, 2017 by~~Amended and between Estenson Logistics, LLC, Truline Corporation, the equity holders named therein, and Hub Group Trucking, Inc. (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K filed with the SEC on July 6, 2017).

~~2.3~~	~~Credit Agreement dated July 1, 2017 among~~Restated By-Laws of Hub Group, Inc., ~~Hub City Terminals, the Guarantors, the Lenders and Bank~~effective as of ~~Montreal (incorporated by reference to Exhibit 10.1 to our current report on Form 8-Kfile with the SEC on July 6, 2017).~~

~~3.1~~	~~Amended and Restated Bylaws of Hub Group, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s report on Form 8-K dated February 18, 2016 and filed~~ February 23, ~~2016, File No. 000-27754)~~2023

1431.1	Hub Group, Inc. Code of Business Conduct and Ethics (incorporated by reference from Exhibit 14 to the Registrant’s report on Form 8-K dated February 17, 2017 and filed February 23, 2017, File No. 000-27754)

~~31.1~~	Certification of ~~David P.~~Phillip D. Yeager, ~~Chairman and~~ Chief Executive Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of ~~1934.~~1934 is attached hereto as Exhibit 31.1.

31.2	Certification of ~~Terri A. Pizzuto,~~Geoffrey F. DeMartino, Executive Vice President, Chief Financial Officer and Treasurer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of ~~1934.~~1934 is attached hereto as Exhibit 31.2.

32.1	Certification of ~~David P.~~Phillip D. Yeager and ~~Terri A. Pizzuto,~~Geoffrey F. DeMartino, Chief Executive Officer and Chief Financial Officer, respectively, Pursuant to 18 U.S.C. Section 1350.
101
~~101~~	~~The following financial statements and footnotes from the~~Interactive data files for Hub Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017~~March 31, 2023, formatted in Inline XBRL: (i) the Consolidated Balance ~~Sheets;~~Sheets (unaudited); (ii) the Unaudited Consolidated Statements of Income and ~~Other~~ Comprehensive Income; (iii) the Unaudited Consolidated Statements of Stockholders’ Equity; (iv) the Unaudited Consolidated Statements of Cash ~~Flows;~~Flows (unaudited); and ~~(iv)~~(v) the Notes to Unaudited Consolidated Financial ~~Statements.~~Statements. XBRL Instance Document-the XBRL Instance Document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
104
The cover page from Hub Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (formatted in Inline XBRL and included in Exhibit 101).

SIGNATURE

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.


		HUB GROUP, INC.

DATE:	~~October 31, 2017~~May 5, 2023	/s/ ~~Terri A. Pizzuto~~Geoffrey F. DeMartino
		~~Terri A. Pizzuto~~Geoffrey F. DeMartino
		Executive Vice President, Chief Financial
		Officer and Treasurer
		(Principal Financial Officer)

		/s/ Kevin W. Beth
		Kevin W. Beth
		Executive Vice President, Chief
		Accounting Officer
		(Principal Accounting Officer)

	September 30,			December 31,
	2017			2016
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	18,558		$	127,404
Accounts receivable trade, net		532,538			473,608
Accounts receivable other		10,017			4,331
Prepaid taxes		12,134			294
Prepaid expenses and other current assets		21,216			16,653
TOTAL CURRENT ASSETS		594,463			622,290

Restricted investments		24,066			20,877
Property and equipment, net		547,881			438,594
Other intangibles, net		75,772			11,844
Goodwill, net		348,506			262,376
Other assets		9,175			4,278
TOTAL ASSETS	$	1,599,863		$	1,360,259

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade	$	313,511		$	266,555
Accounts payable other		30,115			21,070
Accrued payroll		25,245			36,223
Accrued other		53,609			46,013
Current portion of capital lease		2,754			2,697
Current portion of long term debt		73,052			45,163
TOTAL CURRENT LIABILITIES		498,286			417,721

Long term debt		214,032			115,529
Non-current liabilities		29,181			23,595
Long term portion of capital lease		8,418			10,576
Deferred taxes		182,464			164,659

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2017 and 2016	-			-
Common stock
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2017 and 2016; 33,451,445 shares outstanding in 2017 and 33,192,982 shares outstanding in 2016		412			412
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2017 and 2016		7			7
Additional paid-in capital		170,355			173,565
Purchase price in excess of predecessor basis, net of tax benefit of $10,306		(15,458	)		(15,458	)
Retained earnings		770,773			735,563
Accumulated other comprehensive loss		(172	)		(273	)
Treasury stock; at cost, 7,773,347 shares in 2017 and 8,031,810 shares in 2016		(258,435	)		(265,637	)
TOTAL STOCKHOLDERS' EQUITY		667,482			628,179
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,599,863		$	1,360,259

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income	$	35,210		$	56,561
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,531			32,665
Deferred taxes		19,983			13,269
Compensation expense related to share-based compensation plans		7,402			6,318
Loss (gain) on sale of assets		360			(382	)
Excess tax benefits from share based compensation		-			(524	)
Changes in operating assets and liabilities:
Restricted investments		(3,189	)		545
Accounts receivable, net		(37,448	)		(62,324	)
Prepaid taxes		(11,839	)		(1,609	)
Prepaid expenses and other current assets		(3,059	)		1,244
Other assets		(3,505	)		961
Accounts payable		51,459			37,080
Accrued expenses		(13,179	)		(6,968	)
Non-current liabilities		1,419			2,181
Net cash provided by operating activities		87,145			79,017

Cash flows from investing activities:
Proceeds from sale of equipment		3,052			1,573
Purchases of property and equipment		(39,936	)		(59,883	)
Acquisitions, net of cash acquired		(165,933	)		-
Net cash used in investing activities		(202,817	)		(58,310	)

Cash flows from financing activities:
Proceeds from issuance of debt		73,606			36,100
Repayments of long term debt		(59,921	)		(25,074	)
Stock tendered for payments of withholding taxes		(3,410	)		(2,484	)
Purchase of treasury stock		-			(100,000	)
Capital lease payments		(2,101	)		(1,965	)
Excess tax benefits from share-based compensation		-			212
Payment of debt issuance costs		(1,397	)		-
Net cash provided by (used in) financing activities		6,777			(93,211	)


Effect of exchange rate changes on cash and cash equivalents		49			(50	)

Net decrease in cash and cash equivalents		(108,846	)		(72,554	)
Cash and cash equivalents beginning of the period		127,404			207,749
Cash and cash equivalents end of the period	$	18,558		$	135,195

Supplemental disclosures of cash paid for:
Interest	$	4,033		$	2,636
Income taxes	$	12,880		$	26,826


Cash paid	$	165,945
Consideration payable		1,366
Contingent consideration, fair value		4,703
Total consideration		172,014
Equipment debt assumed		112,677
Total base purchase price	$	284,691

	July 1, 2017
Cash and cash equivalents	$	12
Accounts receivable trade		27,000
Accounts receivable other		165
Prepaid expenses and other current assets		1,500
Property and equipment		128,477
Other intangibles		66,400
Goodwill		86,294
Other assets		64
Total assets acquired	$	309,912

Accounts payable trade	$	4,542
Accrued payroll		5,661
Accrued other		15,018
Equipment debt		112,677
Total liabilities assumed	$	137,898

Total consideration	$	172,014

			Accumulated		Balance at		Estimated Useful
	Amount		Amortization		September 30, 2017		Life
Customer relationships	$	66,000	$	1,100	$	64,900	15 years
Trade name		400		400	-		3 months

	Three Months
	Ended
	September 30, 2016
Revenue	$	988,345
Net income	$	20,249
Earnings per share
Basic	$	0.61
Diluted	$	0.61

	Three Months									Three Months
	Ended September 30, 2017									Ended September 30, 2016
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	820,802	$	258,696	$	(25,138	)	$	1,054,360	$	716,699	$	251,611	$	(35,496	)	$	932,814
Transportation costs		734,747		228,227		(25,138	)		937,836		638,154		218,702		(35,496	)		821,360
Gross margin		86,055		30,469		-			116,524		78,545		32,909		-			111,454

Costs and expenses:
Salaries and benefits		45,727		3,399		-			49,126		38,775		3,835		-			42,610
Agent fees and commissions		15		19,057		-			19,072		20		19,052		-			19,072
General and administrative		20,520		1,883		-			22,403		15,969		1,672		-			17,641
Depreciation and amortization		3,962		292		-			4,254		1,959		317		-			2,276
Total costs and expenses		70,224		24,631		-			94,855		56,723		24,876		-			81,599

Operating income	$	15,831	$	5,838	$	-		$	21,669	$	21,822	$	8,033	$	-		$	29,855

Capital Expenditures	$	10,170	$	173	$	-		$	10,343	$	34,411	$	255	$	-		$	34,666

	As of September 30, 2017									As of December 31, 2016
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Total assets	$	1,421,628	$	184,996	$	(6,761	)	$	1,599,863	$	1,178,110	$	191,374	$	(9,225	)	$	1,360,259
Goodwill		319,117		29,389		-			348,506		232,987		29,389		-			262,376

	Three Months Ended, September 30,				Nine Months Ended, September 30,
	2017		2016		2017		2016

Net income for basic and diluted earnings per share	$	15,334	$	17,924	$	35,210	$	56,561
Weighted average shares outstanding - basic		33,227		33,212		33,217		34,098
Dilutive effect of stock options and restricted stock		108		154		106		74
Weighted average shares outstanding - diluted		33,335		33,366		33,323		34,172
Earnings per share - basic	$	0.46	$	0.54	$	1.06	$	1.66
Earnings per share - diluted	$	0.46	$	0.54	$	1.06	$	1.66

	Period Ended
	September 30,			December 31,
	2017			2016
	(in thousands except principal and interest payments)


Revolving line of credit	$	50,000		$	-

Secured Equipment Notes due on various dates in 2024 with monthly principal and interest payments between $403 and $83,000 commencing on various dates in 2017; interest is paid monthly at a fixed annual rate between 2.85% and 3.28%		12,388			-

Secured Equipment Notes due on various dates in 2023 with monthly principal and interest payments between $669 and $41,238 commencing on various dates in 2016 and 2017; interest is paid monthly at a fixed annual rate between 2.23% and 3.12%		11,554			-

Secured Equipment Notes due on various dates in 2022 with monthly principal and interest payments between $3,030 and $254,190 commencing on various dates from 2015 to 2017; interest is paid monthly at a fixed annual rate of between 2.16% and 2.87%		32,517			-

Secured Equipment Notes due on various dates in 2021 with monthly principal and interest payments between $1,940 and $326,333 commencing on various dates from 2014 to 2017; interest is paid monthly at a fixed annual rate between 2.04% and 2.96%		81,176			59,836

Secured Equipment Notes due on various dates in 2020 with monthly principal and interest payments between $6,175 and $398,496 commencing on various dates from 2013 to 2016; interest is paid monthly at a fixed annual rate between 1.72% and 2.78%		57,305			48,633

Secured Equipment Notes due on various dates in 2019 with monthly principal and interest payments between $1,594 and $444,000 commencing on various dates from 2013 to 2015; interest is paid monthly at a fixed annual rate between 1.87% and 2.62%		40,803			49,464

Secured Equipment Notes due in June 2018 with monthly or quarterly principal and interest payments between $542 and $480,000 commencing on various dates from 2012 to 2014; interest is paid quarterly at a fixed annual rate between 1.89% and 4.45%		1,280			2,759

Secured Equipment Notes due on various dates in 2017 with monthly principal and interest payments between $12,964 and $19,792 commencing on various dates in 2012 and 2013; interest is paid monthly at a fixed annual rate between 2.06% and 2.11%		61			-
		287,084			160,692

Less current portion		(73,052	)		(45,163	)
Total long-term debt	$	214,032		$	115,529

	Nine Months Ended
	September 30,
	2017		2016

Revenue		100.0%		100.0%

Transportation costs		88.9		87.1

Gross margin		11.1		12.9

Costs and expenses:
Salaries and benefits		4.8		5.0
Agent fees and commissions		1.9		2.1
General and administrative		2.2		1.9
Depreciation and amortization		0.3		0.3
Total costs and expenses		9.2		9.3

Operating income		1.9		3.6