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”~~company�� in Rule 12b-2 of the Exchange Act. (Check one):

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 ~~July 27, 2018,~~May 1, 2019, the registrant had ~~33,719,269~~34,104,447 outstanding shares of Class A common stock, par value $.01 per share, and 662,296 outstanding shares of Class B common stock, par value $.01 per share.

	June 30,			December 31,			March 31,			December 31,
	2018			2017			2019			2018
ASSETS	(unaudited)						(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	26,753		$	28,557		$	112,402		$	61,435
Accounts receivable trade, net		615,690			583,994			445,238			477,088
Accounts receivable other		3,851			5,722
Other receivables								2,608			22,021
Prepaid taxes		5,268			12,088			169			616
Prepaid expenses and other current assets		15,763			25,697			14,974			27,533
TOTAL CURRENT ASSETS		667,325			656,058			575,391			588,693

Restricted investments		24,107			24,181			21,077			19,236
Property and equipment, net		618,931			562,150			663,337			681,859
Right-of-use assets - operating leases								30,787			-
Right-of-use assets - financing leases								7,601			-
Other intangibles, net		71,501			74,348			131,333			134,788
Goodwill, net		348,106			348,661			484,496			483,584
Other assets		3,534			5,543			17,290			16,738
TOTAL ASSETS	$	1,733,504		$	1,670,941		$	1,931,312		$	1,924,898

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade	$	348,222		$	338,933		$	252,185		$	272,859
Accounts payable other		12,418			12,268			17,191			10,906
Accrued payroll		36,487			28,994			27,801			55,535
Accrued other		78,598			59,305			78,486			82,900
Current portion of capital lease		2,794			2,777
Lease liability - operating leases								8,010			-
Lease liability - financing leases								2,988			2,845
Current portion of long term debt		86,740			77,266			100,227			101,713
TOTAL CURRENT LIABILITIES		565,259			519,543			486,888			526,758

Long term debt		179,444			214,808			215,233			229,071
Non-current liabilities		39,083			37,927			33,397			29,619
Long term portion of capital lease		6,196			7,696
Lease liability - operating leases								24,469			-
Lease liability - financing leases								4,149			4,739
Deferred taxes		132,463			121,095			160,112			153,877

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2018 and 2017	-			-
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2019 and 2018							-			-
Common stock
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2018 and 2017; 33,717,169 shares outstanding in 2018 and 33,447,070 shares outstanding in 2017		412			412
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2018 and 2017		7			7
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2019 and 2018; 34,110,482 shares outstanding in 2019 and 33,793,709 shares outstanding in 2018								412			412
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2019 and 2018								7			7
Additional paid-in capital		168,614			173,011			163,340			172,220
Purchase price in excess of predecessor basis, net of tax benefit of $10,306		(15,458	)		(15,458	)		(15,458	)		(15,458	)
Retained earnings		908,934			870,716			1,096,324			1,072,456
Accumulated other comprehensive loss		(190	)		(194	)		(175	)		(182	)
Treasury stock; at cost, 7,507,623 shares in 2018 and 7,777,722 shares in 2017		(251,260	)		(258,622	)
Treasury stock; at cost, 7,114,310 shares in 2019 and 7,431,083 shares in 2018								(237,386	)		(248,621	)
TOTAL STOCKHOLDERS' EQUITY		811,059			769,872			1,007,064			980,834
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,733,504		$	1,670,941		$	1,931,312		$	1,924,898

	Three Months
	Ended March 31,
	2019			2018

Revenue	$	932,998		$	837,342
Transportation costs		805,709			746,303
Gross margin		127,289			91,039

Costs and expenses:
Salaries and benefits		62,028			52,304
General and administrative		22,918			18,437
Depreciation and amortization		6,754			3,763
Total costs and expenses		91,700			74,504

Operating income		35,589			16,535

Other income (expense):
Interest expense		(3,056	)		(2,103	)
Interest and dividend income		373			11
Other, net		(40	)		(50	)
Total other expense		(2,723	)		(2,142	)

Income from continuing operations before income taxes		32,866			14,393

Income tax expense		8,972			3,324

Income from continuing operations		23,894			11,069

Income from discontinued operations, net of income taxes		-			5,098

Net income		23,894			16,167

Other comprehensive income:
Foreign currency translation adjustments		7			29

Total comprehensive income	$	23,901		$	16,196

Earnings per share from continuing operations
Basic	$	0.71		$	0.33
Diluted	$	0.71		$	0.33

Earnings per share from discontinued operations
Basic	$	-		$	0.15
Diluted	$	-		$	0.15

Earnings per share net income
Basic	$	0.71		$	0.48
Diluted	$	0.71		$	0.48

Basic weighted average number of shares outstanding		33,569			33,375
Diluted weighted average number of shares outstanding		33,585			33,478

Three Months

Six Months

Ended June 30,

Ended June 30,

2018

2017

2018

2017

Revenue
$
1,179,093

$
923,596

$
2,275,064

$
1,816,352

Transportation costs

1,042,903

822,279

2,016,083

1,613,450

Gross margin

136,190

101,317

258,981

202,902

Costs and expenses:

Salaries and benefits

58,092

45,038

114,099

88,217

Agent fees and commissions

21,969

17,038

41,111

35,031

General and administrative

20,216

20,114

40,720

40,938

Depreciation and amortization

3,960

2,549

7,965

4,961

Total costs and expenses

104,237

84,739

203,895

169,147

Operating income

31,953

16,578

55,086

33,755

Other income (expense):

Interest expense

(2,187
)

(1,032
)

(4,291
)

(2,130
)
Interest and dividend income

22

200

44

330

Other, net

(189
)

-

(244
)

194

Total other expense

(2,354
)

(832
)

(4,491
)

(1,606
)

Income before provision for income taxes

29,599

15,746

50,595

32,149

Provision for income taxes

7,548

6,204

12,377

12,273

Net income
$
22,051

$
9,542

$
38,218

$
19,876

Other comprehensive income:

Foreign currency translation adjustments

(25
)

28

4

92

Total comprehensive income
$
22,026

$
9,570

$
38,222

$
19,968

Basic earnings per common share
$
0.66

$
0.29

$
1.14

$
0.60

Diluted earnings per common share
$
0.66

$
0.29

$
1.14

$
0.60

Basic weighted average number of shares outstanding

33,389

33,220

33,382

33,213

Diluted weighted average number of shares outstanding

33,562

33,262

33,520

33,318

								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, 2017		41,887,088	$	419	$	173,011		$	(15,458	)	$	870,716		$	(194	)		(7,777,722	)	$	(258,622	)	$	769,872
Stock tendered for payments of withholding taxes		-		-		-			-			-			-			(79,490	)		(3,894	)		(3,894	)
Issuance of restricted stock awards, net of forfeitures		-		-		(11,433	)		-			-			-			347,025			11,433			-
Share-based compensation expense		-		-		3,500			-			-			-			-			-			3,500
Net income		-		-		-			-			16,167			-			-			-			16,167
Foreign currency translation adjustment		-		-		-			-			-			29			-			-			29
Balance March 31, 2018		41,887,088	$	419	$	165,078		$	(15,458	)	$	886,883		$	(165	)		(7,510,187	)	$	(251,083	)	$	785,674


Balance December 31, 2018		41,887,088	$	419	$	172,220		$	(15,458	)	$	1,072,456		$	(182	)		(7,431,083	)	$	(248,621	)	$	980,834
Stock tendered for payments of withholding taxes		-		-		-			-			-			-			(68,908	)		(2,578	)		(2,578	)
Issuance of restricted stock awards, net of forfeitures		-		-		(13,813	)		-			-			-			385,681			13,813			-
Share-based compensation expense		-		-		4,933			-			-			-			-			-			4,933
Net income		-		-		-			-			23,894			-			-			-			23,894
Adoption of ASU 2016-02		-		-		-			-			(26	)		-			-			-			(26	)
Foreign currency translation adjustment		-		-		-			-			-			7			-			-			7
Balance March 31, 2019		41,887,088	$	419	$	163,340		$	(15,458	)	$	1,096,324		$	(175	)		(7,114,310	)	$	(237,386	)	$	1,007,064

	Six Months Ended June 30,						Three Months Ended March 31,
	2018			2017			2019			2018
Cash flows from operating activities:
Net Income	$	38,218		$	19,876
Net income							$	23,894		$	16,167
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		38,251			25,288			28,383			18,599
Deferred taxes		11,767			7,713			6,335			4,714
Compensation expense related to share-based compensation plans		6,982			4,972			4,933			3,501
Contingent consideration adjustment		(3,571	)		-
(Gain) loss on sale of assets		(90	)		307
Gain on sale of assets								(835	)		(115	)
Changes in operating assets and liabilities:
Restricted investments		74			(2,408	)		(1,841	)		916
Accounts receivable, net		(29,748	)		26,240			32,906			11,643
Prepaid taxes		6,820			(3,352	)		447			(47	)
Prepaid expenses and other current assets		9,935			4,493			12,560			6,694
Other assets		1,869			(2,653	)		(819	)		1,866
Accounts payable		9,878			307			(14,389	)		(19,465	)
Accrued expenses		4,857			(18,013	)		(30,123	)		(10,913	)
Non-current liabilities		2,382			368			1,982			(386	)
Net cash provided by operating activities		97,624			63,138			63,433			33,174

Cash flows from investing activities:
Proceeds from sale of equipment		1,234			2,356			3,799			516
Purchases of property and equipment		(69,261	)		(29,593	)		(17,057	)		(22,179	)
Net cash used in investing activities		(68,027	)		(27,237	)
Proceeds from the disposition of discontinued operations								19,439			-
Net cash provided by (used in) investing activities								6,181			(21,663	)

Cash flows from financing activities:
Proceeds from issuance of debt		58,161			16,149			10,456			16,783
Repayments of long term debt		(84,051	)		(23,118	)		(25,780	)		(34,300	)
Stock tendered for payments of withholding taxes		(4,017	)		(3,293	)		(2,578	)		(3,896	)
Capital lease payments		(1,483	)		(1,399	)
Finance lease payments								(740	)		(695	)
Net cash used in financing activities		(31,390	)		(11,661	)		(18,642	)		(22,108	)


Effect of exchange rate changes on cash and cash equivalents		(11	)		95			(5	)		(30	)

Net (decrease) increase in cash and cash equivalents		(1,804	)		24,335
Net increase (decrease) in cash and cash equivalents								50,967			(10,627	)
Cash and cash equivalents beginning of the period		28,557			127,404			61,435			28,557
Cash and cash equivalents end of the period	$	26,753		$	151,739		$	112,402		$	17,930

Supplemental disclosures of cash paid for:
Interest	$	4,182		$	2,176		$	2,749		$	2,315
Income taxes	$	752		$	10,743		$	191		$	194

Our accompanying unaudited consolidated financial statements of Hub Group, Inc. (“we”, “us”, or “our” ~~or “Company”~~) 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 ~~June 30, 2018~~March 31, 2019 and results of operations for the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 and ~~2017.~~2018. Certain amounts in prior periods have been reclassified to conform with current period presentation.

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, ~~2017.~~2018. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

On ~~January 1,~~December 3, 2018, a subsidiary of Hub Group, Inc. closed on the Agreement and Plan of Merger (the “Merger Agreement”) to acquire CaseStack, Inc. (“CaseStack”). Total consideration for the transaction was $252.9 million. To facilitate the acquisition we ~~adopted~~paid $248.7 million in cash, $3.5 million was a deferred purchase consideration and $0.7 million was a working capital adjustment that was paid in cash in April 2019. The deferred purchase consideration is included in Accrued Other in our consolidated balance sheet and is being paid equally over twenty-four months.

The acquisition of CaseStack expanded our logistics service offering to include transportation and warehousing consolidation solutions for consumer packaged goods companies selling into the ~~Accounting Standards Codification (ASC) topic 606, Revenue from Contracts with Customers. Under this new standard~~North American retail channel. The acquisition also added scale to our ~~significant accounting policy for revenue is as follows:~~truck brokerage service offering, particularly in the less-than-truckload segment of the market.

~~Revenue~~:~~Revenue is recognized at~~The following table summarizes the ~~time (1) persuasive evidence of an arrangement exists, (2) services have been rendered, (3) the sales~~total purchase price ~~is fixed and determinable and (4) collectability is reasonably assured. We generally recognize revenue over time because of continuous transfer of control~~allocated to the ~~customer. Since control is transferred over time, revenue and related transportation costs~~net assets acquired (in thousands):

The initial accounting for the acquisition of CaseStack remains incomplete as we, with the support of our valuation specialist, are ~~recognized based on relative transit time, which is based on~~still in the ~~extent~~process of ~~progress towards completion~~finalizing the fair market value calculations of the ~~related performance obligation.~~ ~~We enter into contracts that can include various combinations of services, which are capable of being distinct~~acquired net assets. In addition, the Company is in the preparation and ~~accounted for as separate performance obligations. We account for a contract when it has approval and commitment from both parties, the rights~~final review process of the ~~parties are identified, payment terms are identified,~~applicable future cash flows used in determining the contract has commercial substance and collectability of consideration is probable. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected bypurchase accounting. Finally, certain post-closing activities outlined in the ~~Company from a customer, are excluded from revenue.~~ Further, in most cases, we report our revenue on a gross basis because we are the primary obligor as we are responsible for providing the service desired by the customer. Our customers view us as responsible for fulfillment including the acceptability of the service. Service requirements may include, for example, on-time delivery, handling freight loss and damage claims, setting up appointments for pick-up and delivery and tracing shipments in transit. We have discretion in setting sales prices and asmerger agreement need to be completed. As a result, the ~~amount we earn varies. In addition, we have~~amounts recorded in the ~~discretion~~consolidated financial statements related to ~~select our vendors from multiple suppliers for~~ the ~~services ordered by our customers. These factors, discretion in setting prices and discretion in selecting vendors, further support reporting revenue on a gross basis for most~~CaseStack merger are preliminary as the measurement period remains open. The following table summarizes the preliminary allocation of ~~our revenue.~~

The Company capitalizes commissions incurred in connection with obtaining a contract. The Company capitalized commissions associated with dedicated services of $0.4 million at June 30, 2018. Capitalized commission fees are amortized based on the ~~transfer of services~~total consideration to ~~which~~ the assets ~~relate~~acquired and ~~are included in selling, general and administrative expenses. In 2018,~~liabilities assumed as of the ~~amount~~date of ~~amortization was approximately $30,000.~~the acquisition (in thousands):

Costs incurred to fulfill an intermodal, truck brokerage or logistics contract are expensed as incurred according to the practical expedient that allows contract acquisition costs to be recognized immediately if the deferral period is one year or less.

The Company applied Topic 606 retrospectively using the practical expedient in paragraph 606-10-65-1(f)(3), under which the Company does not disclose the amount of consideration allocated to the remaining performance obligations or an explanation of when the Company expects to recognize that amount as revenue for all reporting periods presented before January 1, 2018. We do not generally have a remaining performance obligation due to revenue generally being recognized using relevant transit time. We only had one significant accounting policy change that is disclosed below.

T~~axes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by Hub Group from a customer~~ were previously recorded on a gross basis. Under Topic 606, these taxes are excluded from revenue. This change had an effect of $0.9 million and $1.6 million on revenue and transportation costs for the three and six months ending June 30, 2017, respectively.

The CaseStack acquisition was accounted for as a ~~wholly owned subsidiary~~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 ~~Hub Group, Inc., acquired all~~December 3, 2018 with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the CaseStack acquisition was primarily attributable to potential expansion and future development of the ~~outstanding~~acquired business.

Tax history and attributes including net operating loss carryovers and other deferred tax assets are inherited in an equity ~~interests~~purchase such as this, while goodwill is not tax deductible.

The components of ~~Estenson Logistics, LLC (“Estenson”) on July 1, 2017 (the “Estenson Acquisition”). Estenson is now our wholly owned subsidiary, operating under~~“Other intangibles” listed in the ~~name Hub Group Dedicated (“HGD”). As a result~~above table as of the ~~Estenson Acquisition, HGT acquired substantially all~~acquisition date are preliminarily estimated as follows (in thousands):

The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition for the three month period ended March 31, 2019 was $2.3 million. The intangible assets have a weighted average useful life of approximately 9 years. Amortization expense related to CaseStack for the ~~assets of Estenson, which include tractors and trailers,~~next five years is as ~~well as assumed certain liabilities, including equipment debt. HGD is included in the Hub segment.~~follows (in thousands):

The following unaudited pro forma consolidated results of operations ~~for 2017 assume that~~presents the ~~acquisition~~effects of ~~Estenson was completed~~CaseStack as though it had been acquired as of January 1, ~~2017~~2018 (in thousands, except for per share amounts):

The unaudited pro forma consolidated results for the ~~three and six month~~ periods shown were prepared using the acquisition method of accounting and are based on the historical financial information of Hub ~~Group~~ and ~~HGD.~~CaseStack. 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, ~~2017.~~

~~We report two distinct business segments.~~On August 31, 2018, Hub Group, Inc. entered into the Purchase Agreement with Mode, a direct wholly-owned subsidiary of the Company, and Mode Purchaser, Inc., an affiliate of York Capital Management (“Purchaser”) pursuant to which the Company sold all of the issued and outstanding membership interests of Mode to Purchaser (the “Disposition”). Total consideration received by the Company for the Disposition in the third quarter of 2018 was $238.5 million in cash, subject to customary purchase price adjustments. An additional $19.4 million consideration receivable was recorded in other receivables in the Consolidated Balance Sheet in the fourth quarter of 2018 due to the settlement of the net working capital and other contractual adjustments. The $19.4 million receivable was received in the first ~~segment~~quarter of 2019.

During the three months ended March 31, 2018, Mode had revenue of $13.6 million from Hub and Hub had revenue of $10.0 million from Mode. These sales were eliminated on our Consolidated Statements of Income. In connection with the Disposition, the Company and Mode have entered into a transition services agreement pursuant to which both the Company and Mode will provide certain immaterial transition services to the other party for a period of time following the closing.

The 2018 results associated with Mode are classified as income from discontinued operations, net of income taxes, in our Consolidated Statements of Income. Income from discontinued operations is comprised of the following:

Selling, general and administrative expenses recorded in discontinued operations include corporate costs incurred directly in support of Mode.

Proceeds from the sale of Mode have been presented in the Consolidated Statements of Cash Flows under investing activities for the three months ended March 31, 2019. Total operating and investing cash flows of discontinued operations for the three months ended March 31, 2018 are comprised of the following, which ~~includes~~exclude the ~~Mode Transportation, LLC (“Mode LLC”) business only.~~ effect of income taxes:

On January 1, 2018, we adopted the Accounting Standards Codification (ASC) topic 606, Revenue from Contracts with Customers.

The ~~second segment~~Company capitalizes commissions incurred in connection with obtaining a contract. Capitalized commission fees are amortized based on the transfer of services to which the assets relate and are included in selling, general and administrative expenses. In 2019 and 2018, the amount of commissions that were capitalized and the amortization were both immaterial.

Costs incurred to obtain an intermodal, truck brokerage or logistics contract are expensed as incurred according to the practical expedient that allows contract acquisition costs to be recognized immediately if the deferral period is ~~Hub, which is all business other than Mode.~~one year or less.

Hub offers comprehensive multimodal solutions including intermodal, truck brokerage, logistics and dedicated services. Our employees operate the freight through a network of operating centers and terminals 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 offices in Dallas, TX, a temperature protected services division, Temstar, located in Oak Brook, IL and a corporate office 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.

~~Our transportation services for both Hub and Mode segments can be broadly placed into the following categories:~~

Intermodal. As an intermodal provider, we arrange for the movement of our customers’ freight in containers and trailers, typically over long distances of 750 miles or more. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. Local pickup and ~~with~~delivery services between origin or destination and rail terminals (referred to as “drayage”) are provided by our HGT subsidiary and third-party local trucking companies, known as “drayage companies,” for pickup and delivery. As part of our 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.companies.

Truck ~~Brokerage (Highway Services).~~ Brokerage. We ~~are~~operate one of the largest truck ~~brokers in the United States,~~brokerage operations, providing customers with ~~a highway~~an over the road service option for their transportation needs. WeOur brokerage does not operate any trucks; instead we match ~~the~~ customers’ needs with carriers’ capacity to provide the most effective service and price combination. We have contracts with a substantial base of carriers allowing us to meet the varied needs of our customers. ~~As part of the truck brokerage services, we negotiate rates, track shipments in transit and handle claims for freight loss and damage on behalf of our customers.~~

Logistics ~~and Other Services~~. Hub’s logistics business operates under the ~~name of~~names Unyson ~~Logistics.~~Logistics and CaseStack. Unyson Logistics is comprised of a network of logistics professionals dedicated to developing, implementing and operating customized logistics solutions for customers. Unyson Logistics offers a wide range of transportation management services and technology solutions including shipment optimization, load consolidation, mode selection, carrier management, load planning and execution and web-based shipment visibility. Unyson Logistics operates throughout North America, providing services through its main operating location in St. Louis with additional support locations in the Boston and Chicago metro areas. In addition, certain Mode LLC agents also provide logistics services. Our multi-modal transportation capabilities ~~for both the Hub and Mode segments~~ include small parcel, heavyweight, expedited, less-than-truckload, truckload, intermodal, railcar and international shipping. Our CaseStack logistics business leverages proprietary technology along with collaborative relationships with retailers and logistics providers to deliver cost savings and performance-enhancing supply chain services to consumer-packaged goods clients. CaseStack contracts with third-party warehouse providers in seven markets across North America to which its customers ship their goods to be stored and eventually consolidated, along with goods from other CaseStack customers, into full truckload shipments destined to major North American retailers. CaseStack offers its customers shipment visibility, transportation cost savings, high service levels and compliance with retailers’ increasingly stringent supply chain requirements.

~~Dedicated:~~ Dedicated Trucking. Our dedicated ~~service line, HGD,~~operation contracts with customers who ~~wish~~seek to outsource a portion of their trucking transportation needs. We offer a dedicated fleet of equipment and drivers to each customer, as well as the management and infrastructure to operate according to the customer’s high service expectations. Contracts with customers generally include fixed and variable pricing arrangements and may include charges for early termination which serves to reduce the financial risk we bear with respect to the utilization of our equipment.

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

Three Months

Three Months

Ended June 30, 2018

Ended June 30, 2017

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Revenue
$
888,238

$
314,078

$
(23,223
)
$
1,179,093

$
704,344

$
242,998

$
(23,746
)
$
923,596

Transportation costs

788,087

278,039

(23,223
)

1,042,903

631,787

214,238

(23,746
)

822,279

Gross margin

100,151

36,039

-

136,190

72,557

28,760

-

101,317

Costs and expenses:

Salaries and benefits

53,839

4,253

-

58,092

41,569

3,469

-

45,038

Agent fees and commissions

11

21,958

-

21,969

14

17,024

-

17,038

General and administrative

17,768

2,448

-

20,216

18,331

1,783

-

20,114

Depreciation and amortization

3,719

241

-

3,960

2,249

300

-

2,549

Total costs and expenses

75,337

28,900

-

104,237

62,163

22,576

-

84,739

Operating income
$
24,814

$
7,139

$
-

$
31,953

$
10,395

$
6,184

$
-

$
16,578

Capital Expenditures
$
46,337

$
745

$
-

$
47,082

$
22,937

$
31

$
-

$
22,968

Six Months

Six Months

Ended June 30, 2018

Ended June 30, 2017

Inter-

Hub

Inter-

Hub

Segment

Group

Segment

Group

Hub

Mode

Elims

Total

Hub

Mode

Elims

Total

Revenue
$
1,719,823

$
601,977

$
(46,736
)
$
2,275,064

$
1,380,824

$
484,832

$
(49,304
)
$
1,816,352

Transportation costs

1,529,297

533,522

(46,736
)

2,016,083

1,236,462

426,292

(49,304
)

1,613,450

Gross margin

190,526

68,455

-

258,981

144,362

58,540

-

202,902

Costs and expenses:

Salaries and benefits

105,909

8,190

-

114,099

81,164

7,053

-

88,217

Agent fees and commissions

25

41,086

-

41,111

31

35,000

-

35,031

General and administrative

36,170

4,550

-

40,720

36,810

4,128

-

40,938

Depreciation and amortization

7,478

487

-

7,965

4,357

604

-

4,961

Total costs and expenses

149,582

54,313

-

203,895

122,362

46,785

-

169,147

Operating income
$
40,944

$
14,142

$
-

$
55,086

$
22,000

$
11,755

$
-

$
33,755

Capital Expenditures
$
67,874

$
1,387

$
-

$
69,261

$
29,562

$
31

$
-

$
29,593

On January 1, 2018, the Company adopted ASC Topic 606 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Segment revenues were not significantly impacted under ASC Topic 606. The tables below represent disaggregated revenue ~~from contracts with customers.~~

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

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

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

	Three Months Ended, June 30,				Six Months Ended, June 30,				Three Months Ended, March 31,
	2018		2017		2018		2017		2019		2018

Net income for basic and diluted earnings per share	$	22,051	$	9,542	$	38,218	$	19,876
Net income from continuing operations for basic and diluted earnings per share									$	23,894	$	11,069

Net income from discontinued operations for basic and diluted earnings per share									$	-	$	5,098

Net income									$	23,894	$	16,167

Weighted average shares outstanding - basic		33,389		33,220		33,382		33,213		33,569		33,375

Dilutive effect of stock options and restricted stock		173		42		138		105		16		103

Weighted average shares outstanding - diluted		33,562		33,262		33,520		33,318		33,585		33,478

Earnings per share - basic	$	0.66	$	0.29	$	1.14	$	0.60

Earnings per share - diluted	$	0.66	$	0.29	$	1.14	$	0.60
Earnings per share from continuing operations
Basic									$	0.71	$	0.33
Diluted									$	0.71	$	0.33
Earnings per share from discontinued operations
Basic									$	-	$	0.15
Diluted									$	-	$	0.15
Earnings per share net income
Basic									$	0.71	$	0.48
Diluted									$	0.71	$	0.48

The carrying value of cash and cash equivalents, accounts receivable, ~~and~~ accounts payable and debt approximated fair value as of ~~June 30, 2018~~March 31, 2019 and December 31, 2017. At June 30, 2018 and December 31, 2017 the fair value of the Company’s fixed-rate borrowings was $3.6 million and $2.4 million less than the historical carrying value of $266.2 million and $247.1 million. The fair value of the fixed-rate borrowings was estimated using an income approach based on current interest rates available to the Company for borrowings on similar terms and maturities.2018.

We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, our cash and temporary investments were with high quality financial institutions in ~~Demand Deposit Accounts~~demand deposit accounts (DDAs), savings accounts and ~~Savings Accounts.~~an interest bearing checking account.

Restricted investments, as of ~~June 30, 2018~~March 31, 2019 of ~~$24.1~~$21.1 million and December 31, ~~2017~~2018 of ~~$24.2~~$19.2 million, ~~consisted of~~included mutual funds which are reported at fair ~~value and are related to the liabilities of our nonqualified deferred compensation plan.~~value.

The fair value of the contingent consideration related to the 2017 acquisition of Estenson was $1.1 million at June 30, 2018. This valuation was based on significant inputs that are not observable in the market, which are referred to as Level 3 inputs. Key assumptions include the likelihood of the acquired business achieving target levels of EBITDA using a probability-weighted expected return method (“PWERM”). The following table sets forth a reconciliation of changes in the fair value of the contingent consideration:

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, mutual funds, accounts receivable and accounts payable are defined as “Level ~~1”, long term~~1,” while long-term debt is defined as “Level 2”~~, and the Estenson contingent consideration is defined as “Level 3”~~ of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification.

At ~~June 30, 2018,~~March 31, 2019, we ~~were~~are authorized to borrow up to $350 million under a revolving line of credit. As of June 30, 2018, we had no borrowings under our bank revolving line of credit and our unused and available borrowings were $327.0 million. As of December 31, 2017, we had $45.0 million of borrowings under our bank revolving line of credit and our unused and available borrowings were $284.9 million. We were in compliance with our debt covenants as of June 30, 2018.

We have standby letters of credit that expire at various dates in ~~2018 and~~ 2019. As of ~~June 30, 2018,~~March 31, 2019, our letters of credit were ~~$23.0 million.~~$28.5 million and we had no borrowings under our bank revolving line of credit. Our unused and available borrowings were $321.5 million as of March 31, 2019 and $323.0 million as of December 31, 2018. We were in compliance with our debt covenants as of March 31, 2019 and December 31, 2018.

We have entered into various Equipment Notes (“Notes”) for the purchase of tractors ~~trailers~~ and containers. The Notes are secured by the underlying equipment financed in the agreements.

In February 2016, the FASB issued ASC 842, Leases, (“ASC 842”) which requires lessees to recognize a right-of-use asset (“ROU”) and a lease obligation for all leases. We adopted ASC 842 as of January 1, 2019, in accordance with the standard. ASC 842 provides an option to apply the transition provisions as of the effective date. We elected this option when we adopted the new standard using a modified retrospective transition method and recognized a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. In addition, we elected to apply a package of practical expedients and as such did not reassess at the date of initial adoption (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, or (3) initial direct costs for existing leases. Lessees can also make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less which we elected.

The adoption of this standard resulted in an initial recognition of $40.0 million of ROU assets and $41.4 million of Lease liabilities on our consolidated balance sheet. The lease liabilities recognized are measured based upon the present value of minimum future payments. The ROU assets are equal to lease liabilities, adjusted for prepaid and accrued rent balances which are recorded in the Consolidated Balance Sheets as of January 1, 2019.

Hub currently does not have any variable lease payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate). Some leases have options to extend or terminate the agreement, which Management assesses in determining the estimated lease term. If any of the options to extend a lease are exercised, this change will be reflected as a remeasurement of the ROU asset and lease liability accordingly. As of March 31, 2019, the ROU asset and lease liabilities do not reflect any options to extend or terminate a lease as management is not reasonably certain it will exercise any of these options. Also, current leases do not contain any restrictions or covenants imposed by the leases or residual value guarantees.

Occasionally, Hub will sublease office space or parking spaces. The subleases do not relieve Hub of any of its primary obligations under the original agreement. Currently, Hub has subleases with an expected annual income totaling $0.5 million.

Subsequent to March 31, 2019, Hub signed new property lease contracts which have not commenced. Based on the present value of the lease payments, the estimated ROU assets and lease liabilities related to these contracts will total approximately $10.2 million.

Discount rates are not specified on the individual lease contracts at the commencement date. To determine the present value of the lease payments, Hub used its incremental borrowing rate which was determined based on Hub’s credit standing and factoring in the current 12-month LIBOR rate published at the time of the lease commencement. This incremental borrowing rate represents the rate of interest that Hub would have to pay to borrow on a collateralized basis over a similar term and amounts equal to the lease payments in a similar economic environment.

The following table summarizes the lease costs for the three months ended March 31, 2019 (in thousands), which are included in general and administrative costs in the accompanying consolidated statement of income:

The table below summarizes the Company’s scheduled future minimum lease payments under operating and finance leases, recorded on the sheet, as of March 31, 2019 (in thousands):

The weighted average remaining lease term and discount rates as of March 31, 2019 (in thousands) are as follows:

~~In November 2016, we committed to acquire~~ ~~4,000~~ 53’ containers, which were received by July 31, 2018. In the second quarter of 2018, we placed an order for 3,670 containers and we expect delivery between July 2018 and November 2018. We expect to finance these units with debt.

Since January 1, 2018 we have committed to acquire 869 tractors for $107.2 million. As of June 30, 2018 we received 380 tractors, which are being financed with debt, and we expect to receive the remaining 489 tractors from July to December of 2018. We expect to finance these tractors with debt.

Since January 1, 2018 we have committed to acquire 760 trailers for $24.2 million. As of June 30, 2018 we received 217 trailers, which will be financed with debt, and we expect to receive the remaining 543 trailers from July to December of 2018. We expect to finance these trailers with debt.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing (Hosting) Arrangement That Is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendment is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period, for all entities and should be applied either retrospectively or prospectively. We early adopted the amendment in the fourth quarter of 2018 and applied prospectively to all implementation costs incurred after the date of adoption.

In accordance with this ASU, we had capitalized implementation costs of $12.0 million and $10.6 million from our hosting arrangements, net of amortizations, for various corporate software services as of March 31, 2019 and December 31, 2018, respectively. Prior to adoption, these costs were previously presented as part of Property and equipment and are included in Other assets in the consolidated balance sheet subsequent to adoption. The amount of capitalized implementation costs for the three months ended March 31, 2019 was $1.6 million. The corresponding cash flows from capitalized implementation costs incurred in our hosting arrangements is classified as a change in other assets in cash flows from operating activities. The capitalized implementation costs incurred in our hosting arrangements are amortized, once ready for intended use, over the term of the associated hosting arrangements of 3 to 10 years. The related amortization of capitalized implementation costs are classified as general and administrative expense in the same line item as the expense for fees for the associated hosting arrangement.

We are a defendant in three putative class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items. Those cases are Robert Parsons v. Estenson Logistics, LLC, et.al. (Sacramento Superior Court), a second lawsuit Robert Parsons v. Estenson Logistics, LLC (Sacramento Superior Court), and Mario Mendez v. Estenson Logistics, LLC (Los Angeles Superior Court). Because of the preliminary nature of these proceedings, the difficulty in ascertaining the applicable facts, the inconsistent treatment of claims made in the proceedings, and the difficulty of predicting the settlement value of these proceedings, we are not able to estimate an amount or range of any reasonably possible losses. Based on management's present knowledge, management does not believe that loss contingencies arising from these pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.

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 Hub Group Trucking, Inc (“HGT”). The action is brought on behalf of a class comprised of present and former California-based truck drivers for HGT who were classified as independent contractors, from January 2009 to August 2014. It alleges HGT has misclassified such drivers as independent contractors and that such drivers were employees. It asserts various violations of the California Labor Code and claims that HGT has engaged in unfair competition practices. The complaint seeks, among other things, declaratory and injunctive relief, monetary 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 and could interrupt our business operations, HGT decided to make settlement offers to individual drivers with respect to the claims alleged in this lawsuit, without admitting liability. As of ~~June~~September 30, 2018, 96% of the California drivers have accepted the settlement offers. In late 2014, HGT decided to convert its model from independent contractors to employee drivers in California (the “Conversion”). In early 2016, HGT 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. On July 2, 2018, the Court denied the Plaintiffs’ Motion for Clarification or Reconsideration and stated that the dismissal of the claims of all purported class members who signed settlement agreements was with prejudice.

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~~makes 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 move the case from state court in San Bernardino to federal court in the Central District of California. 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 because there is not complete diversity of citizenship between the parties and the amount in controversy threshold is not satisfied. The court granted Plaintiffs’ motion to remand to the state court in San Bernardino County on April 7, 2016.

On July 11, 2016, Defendants filed dismissal papers in state court, asking the court to dismiss Plaintiffs’ suit for various reasons, including that the agreement between HGT and its former California owner operators requires that this action be brought in Memphis, Tennessee, or stay the action pending the outcome of Robles. Defendants also asked the court to dismiss the individual defendants because PAGA’s language does not allow for individual liability. During a hearing on October 5, 2016, the judge issued an oral tentative ruling stating that the choice of forum provision was unenforceable. 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 Defendant’s motion to dismiss based on insufficiency of the PAGA letter notice. On October 19, 2017, Plaintiffs filed an amended complaint, dismissing the previously named individuals as Defendants. On December 4, 2017, Defendants filed an Answer to Plaintiffs’ First Amended Complaint and a Memorandum of Points and Authorities in Support of their Motion for Judgment on the Pleadings arguing that judgement should be entered for Defendants because Plaintiffs’ claims are preempted by the Federal Truth-In-Leasing regulations. On January 31, 2018, a hearing was held on the motion to dismiss, and on February 1, 2018, the motion was denied. On March 27, 2018, Defendants filed a petition for a writ of mandate with the Court of Appeals. On June 12, 2018, the Court of Appeals denied the petition. On June 21, 2018, Defendants filed a petition for review with the California Supreme Court. ~~There is no timetable for when~~On August 8, 2018, the Supreme Court ~~will decide if it will review~~of California denied the ~~petition.~~

~~For the quarter ending June 30, 2018, the provision~~petition for income taxes increased to $7.5 million from $6.2 million in 2017, while the effective tax rate decreased to 25.5% in 2018 from 39.4% in 2017. For the six months ending June 30, 2018, the provision for income taxes increased to $12.4 million from $12.3 million in 2017, while the effective tax rate decreased to 24.5% from 38.2%. The provision for income taxes increased primarily due to higher pre-tax income in 2018, while the 2018 effective tax rate was lower primarily due to the enactment of the U.S. Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, which reduced the U.S. federal corporate tax rate from 35% to 21%. We expect our effective tax rate for 2018 will range from 24.5% to 25.5%.

Due to the complexities involved in accounting for the enactment of the Act, the SEC Staff Accounting Bulletin No. 118 (“SAB No. 118”) allows for a one-year period, from the date of enactment, to complete the related income tax accounting for the Act and allows for the use of provisional amounts until that accounting is complete.

The Company recorded provisional amounts in earnings for the year ended December 31, 2017 as certain deferred tax assets and liabilities were remeasured based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts until the federal income tax return for 2017 is filed later this year.review.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. This ASU clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. This standard was adopted on January 1, 2018. Any impact would apply to future acquisitions.

In 2016, the FASB issued ~~new guidance~~ASC 326, Financial Instruments – Credit Losses, (“ASC 326”) that requires credit losses on financial ~~assets~~instruments measured at amortized cost basis to be presented at 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~~plan to adopt this standard on January 1, 2020, as required. We do not believe the ~~impact~~adoption of ~~adopting this new accounting guidance~~ASC 326 will have a material impact on our consolidated financial ~~statements.~~statements as the new guidance is consistent with our current accounting policy in determining expected credit losses on financial assets.

In ~~February 2016,~~January 2017, the FASB issued ASU No. ~~2016-02, Leases, which requires lessees to~~2017-04 Intangibles – Goodwill and other (Topic 350): simplifying the test for goodwill impairment. This ASU simplifies how all entities assess goodwill for impairment by eliminating step two from the goodwill impairment test. As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a ~~right-to-use asset~~goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The standard is effective for fiscal years beginning after December 15, 2019 and ~~a lease obligation for all leases. The new standard will become effective beginning with the first quarter of 2019, but~~ early adoption is ~~permitted.~~permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt this standard on January 1, 2020, as required. We do not believe the adoption of Topic 350 will have a material effect on our financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting. Under this new standard, companies will no longer be required to value non-employee awards differently from employee awards. This means that companies will value all equity classified awards at their grant-date and forgo revaluing the award after this date. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. This standard was adopted on January 1, 2019 ~~as required.~~ The standard also provides an additional transition method to assist entities with the implementation. Entities that elect this option would adopt the new standard using a modified retrospective transition method, but they would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than in the earliest period presented. We will elect to apply a package of practical expedients and will not reassess at the date of initial adoption (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, or (3) initial direct costs for existing leases. Lessees can also make an accounting policy election to ~~not recognize an asset and liability for leases with a term of twelve months or less.~~ ~~We will elect this short-term lease policy.~~ ~~We are currently reviewing~~had no material impact on our ~~leases and evaluating the impact the adoption of this accounting guidance will have on the~~ consolidated financial statements.

The information contained in this quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “hopes,” “believes,” “intends,” “estimates,” “anticipates,” “predicts,” “projects,” “potential,” “may,” “could,” “might,” “should,” and variations of these words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are inherently uncertain and subject to risks. Such statements should be viewed with caution. 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 inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. All forward-looking statements are based upon information available to us on the date of this report. Except as required by law, we expressly disclaim any obligations to publicly release any revisions to forward-looking statements to reflect events after the date of this report. Factors that could cause our actual results to differ materially include:

Hub Group, Inc. ~~(“we”~~(the “Company”, “Hub”, “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~~ a leading, world class ~~provider of multimodal~~supply chain management company that provides value-added multi-modal transportation and logistics ~~solutions. We offer~~solutions by offering reliability, visibility and value to our customers. Our service offerings include comprehensive intermodal, truck brokerage, dedicated trucking, managed transportation, freight consolidation, warehousing, international transportation and other logistics services. ~~We operate through~~The Company is a ~~nationwide network of operating centers and independent~~Delaware corporation that was incorporated on March 8, 1995 as successor to a business ~~owners.~~that was founded in 1971.

~~Through our network,~~As an intermodal provider, we arrange for the movement of our customers’ freight in containers and trailers, typically over long ~~distances.~~distances of 750 miles or more. We contract with railroads to provide transportation for the long-haul portion of the shipment between rail terminals. Local pickup and ~~with~~delivery services between origin or destination and rail terminals (referred to as “drayage”) are provided by our HGT subsidiary and third-party local trucking companies, known as “drayage companies,” for local pickup and delivery. As part of our intermodal services, we negotiate rail and drayage rates, electronically track shipments in transit, consolidate billing and handle claims for freight loss or damage on behalf of our customers.

As of June 30, 2018, our subsidiary HGT accounted for 54% of Hub’s drayage needs by assisting us in providing reliable, cost effective intermodal services to our customers. As of June 30, 2018, HGT leased or owned approximately 1,000 tractors and 300 trailers, employed approximately 1,200 drivers and contracted with approximately 1,300 owner-operators. companies.

We also arrange for the transportation of freight by truck, providing customers with another option for their transportation needs. We match ~~the~~our 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 dedicated service line, Dedicated, contracts with customers looking to outsource a portion of their transportation needs. We offer a dedicated fleet of equipment and drivers, as well as the management and infrastructure to operate according to the customers’ high service expectations. As of March 31, 2019, Dedicated leased or owned approximately 1,400 tractors and 5,300 trailers and employed approximately 1,900 drivers.

Our logistics ~~service~~line of business consists of complex transportation management services, including load consolidation, mode optimization and carrier management. These service offerings are designed to take advantage of the increasing trend for shippers to outsource all or a greater portion of their transportation needs.Our acquisition of CaseStack added consolidation and warehousing services that are marketed to consumer-packaged goods companies who serve the North American retail channel.

Our dedicated service line, HGD, contracts with customers looking to outsource a portion of their transportation needs. We offer a dedicated fleet of equipment and drivers to each customer, as well as the management and infrastructure to operate according to the customer’s high service expectations. As of ~~June 30, 2018, HGD has an operating fleet~~March 31, 2019, our subsidiary HGT accounted for 53% of Hub’s drayage needs by assisting us in providing reliable, cost effective intermodal services to our customers. As of March 31, 2019, HGT leased or owned approximately ~~1,500~~1,200 tractors and ~~5,100 trailers.~~200 trailers, employed approximately 1,300 drivers and contracted with approximately 1,300 owner-operators.

Hub has full time marketing representatives throughout North America who service local, regional and national accounts. We believe that fostering long-term customer relationships is critical to our success and allows us to better understand our customers’ needs and specifically tailor our transportation services to them.

Hub’s ~~yield management~~multimodal solutions group works with pricing, account management and operations to enhance Hub’s customer ~~margins.~~margins across all lines of business. We are working on margin enhancement projects including pricing optimization, matching upof inbound and outbound loads, reducing empty miles, improving our recovery of accessorial costs, optimizing our drayage costs, reducing repositioning costs, providing holistic solutions and reviewing and improving low ~~contribution~~profit freight.

Hub’s top 50 customers represent approximately ~~68%~~67% of ~~the Hub segment~~ revenue for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. We use various performance indicators to manage our business. We closely monitor margin and gains and losses for our top 50 customers. We also evaluate on-time performance, customer service, cost per load and daily sales outstanding by customer account. Vendor cost changes and vendor service issues are also monitored closely.

On August 31, 2018, we sold the membership interests of our Mode ~~has approximately 170 agents, consisting~~Transportation, LLC (“Mode”) subsidiary to an affiliate of ~~101 sales/operating agents, known as Independent Business Owners~~York Capital Management (“~~IBOs”~~Purchaser”)~~, who sell and operate the business throughout North America and 69 sales only agents. Mode also has a corporate office in Dallas, a~~. Mode’s temperature protected ~~services~~ division ~~Temstar, located~~(“Temstar”) was not included in ~~Oak Brook, IL~~the transaction and is now included in our intermodal line of business.

Prior to the decision to sell Mode, Hub historically reported two distinct and reportable business segments. As a ~~corporate office in Memphis. Mode’s top 20 customers represent approximately 39%~~result of the decision to sell Mode, ~~segment revenue~~which was accounted for as discontinued operations in 2018, we have one reporting segment. Revenue and costs related to Hub’s business that did not comprise Mode are reported within results from continuing operations. All revenues and costs related to Mode’s business are presented in results from discontinued operations. Unless otherwise stated, the information disclosed in Management’s Discussion and Analysis refers to continuing operations. See Note 3 of the Consolidated Financial Statements for additional information regarding results from discontinued operations.

On December 3, 2018, a subsidiary of Hub Group, Inc. closed on the Agreement and Plan of Merger (the “Merger Agreement”) to acquire CaseStack, Inc. (“CaseStack”). Total consideration for the ~~six months ended June 30, 2018. We closely monitor revenue~~transaction was $252.9 million. To facilitate the acquisition we paid $248.7 million in cash, $3.5 million was a deferred purchase consideration and ~~margin for these customers.~~ $0.7 million was a working capital adjustment that was paid in cash in April 2019.

Three Months Ended ~~June 30, 2018~~March 31, 2019 Compared to the Three Months Ended ~~June 30, 2017~~March 31, 2018

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

~~Hub Group’s revenue increased 27.7% to $1,179.1 million in 2018 from $923.6 million in 2017.~~

The Hub segment revenue increased 26.1% to $888.2 million. Intermodal revenue increased 16.5% to $526.0 million due to a 4.4% increase in volume, an increase in fuel revenue and improved pricing. Truck brokerage revenue increased 10.2% to $114.9 million. Truck brokerage handled 5.4% fewer loads, while fuel, mix and price combined were up 15.6%. Logistics revenue increased 16.7% to $173.4 million due primarily to growth with existing customers. Dedicated revenue was $73.9 million.

Mode’s revenue increased 29.3% to $314.1 million in 2018 from $243.0 million in 2017. Mode’s intermodal revenue increased 26.0% to $141.2 million, truck brokerage increased 24.5% to $103.2 million, and logistics increased 45.1% to $69.7 million.

The following is a summary of operating results ~~for~~and certain items in the consolidated statements of income as a percentage of revenue:

Hub’s revenue increased 11.4% to $933.0 million in 2019 from $837.3 million in 2018. Intermodal revenue increased 8.4% to $536.0 million due to improved pricing and higher fuel revenue, partially offset by a 1.2% decrease in volume. Truck brokerage revenue decreased 2.0% to $117.6 million. Truck brokerage handled 19.5% more loads while fuel, price and mix combined were down 21.5% due primarily to the addition of CaseStack, which handles LTL freight. Logistics revenue increased 25.1% to $203.3 million due to the addition of CaseStack, benefits from continuous improvements and cross selling to our ~~business segments (in thousands):~~customers and improved yield processes partially offset by lost customers. Dedicated revenue increased 26.0% to $76.1 million primarily due to improved pricing and growth with new accounts which was partially offset by lost customers.

~~Hub Group’s~~Hub’s transportation costs increased ~~26.8%~~8.0% to ~~$1,042.9~~$805.7 million in ~~2018~~2019 from ~~$822.3~~$746.3 million in ~~2017.~~ 2018. Transportation costs in ~~2018~~2019 consisted of purchased transportation costs of ~~$888.9~~$652.8 million and equipment and driver related costs of ~~$154.0~~$152.9 million compared to ~~2017 costs~~2018, which consisted of purchased transportation costs of ~~$730.9~~$608.2 million and equipment and driver related costs of ~~$91.4~~$138.1 million.

The Hub segment transportation costs increased 24.7% to $788.1 million in 2018 from $631.8 million in 2017. Hub segment transportation costs in 2018 included $635.1 million in purchased transportation, up from $541.2 million in 2017. The 17.4%7.3% increase in purchased transportation costs was primarily due ~~primarily~~ to rail cost increases, an increase in fuel costs, higher ~~third party~~third-party carrier costs and higher ~~volumes.~~volumes primarily in truck brokerage, and the addition of CaseStack. Equipment and driver related costs increased ~~68.9% to $153.0 million~~10.7% in ~~2018 from $90.6 million in 2017~~2019 primarily due ~~primarily~~ to the equipment and driver related costs of ~~HGD, including start-up costs and an increase in driver pay.~~Dedicated.

Hub’s gross margin increased ~~29.8%~~39.8% to ~~$278.0~~$127.3 million in ~~2018~~2019 from ~~$214.2~~$91.0 in 2018. The $36.3 million gross margin increase was the result of increases in ~~2017. Mode segment transportation costs are primarily purchased transportation costs which~~all lines of business and the addition of CaseStack. Intermodal gross margin increased due to implementing our pricing strategy which improved network balance. Partially offsetting the intermodal gross margin growth were higher rail ~~costs, fuel costs, carrier~~and drayage costs and ~~increased business levels in logistics and intermodal.~~

~~Hub Group’s~~0.9 days worse utilization primarily due to rail service. Truck brokerage gross margin increased ~~34.4%~~due to ~~$136.2 million~~the implementation of our new operating and procurement processes, pricing philosophy, compensation changes, and increased alignment with the sales organization, as well as the addition of CaseStack. Logistics gross margin increased due to the addition of CaseStack, price increases and benefits from continuous improvement efforts partially offset by lost customers and changes in ~~2018~~customer mix. Dedicated gross margin improved due to the implementation of our yield management processes and improved operational discipline.

As a percentage of revenue, Hub’s gross margin increased to 13.6% in 2019 from ~~$101.3 million~~10.9% in ~~2017. Hub Group’s~~2018. Intermodal gross margin as a percentage of sales increased ~~to 11.6% as compared to last year’s 11.0% margin.~~

~~The Hub segment gross margin increased 38.0% to $100.2 million. Hub segment margin increase~~200 basis points because of ~~$27.6 million resulted from the addition of HGD and growth in intermodal and truck brokerage, partially offset by a decrease in logistics. Intermodal gross margin increased due to~~ improved pricing, and higher volume. Partially offsetting margin growth were higher rail and drayage costs. Truck brokerage margin increased as a result of more spot business. Logistics margin decreased due to changes in customer mix, higher purchased transportation costs and headwinds from the liquidation of a customer.

~~As a percentage of revenue, Hub segment gross margin increased to 11.3% in 2018 from 10.3% in 2017. Intermodal gross margin increased due to improved prices,~~ partially offset by rail and drayage transportation cost increases. Second quarter average rail transits were up 0.7 days which negatively impacted our results. All of these factors combined drove a 170 basis point improvement in intermodal gross margin as a percent of sales. Truck brokerage gross margin as a percentage of sales ~~was flat compared~~increased 250 basis points due to improved procurement processes and the ~~prior year.~~addition of CaseStack. Logistics gross margin as a percentage of sales ~~was down 160~~increased 570 basis points due to ~~higher purchased transportation costs~~the addition of CaseStack, price increases and ~~changes in customer mix.~~

~~Mode’s gross margin increased to $36.0 million in 2018 from $28.8 million in 2017 due to increases in margin in all three business lines. Mode’s~~improved yield processes. Dedicated gross margin as a percentage of ~~revenue decreased to 11.5% in 2018 from 11.8% in 2017~~sales increased 140 basis points due to ~~a 130 basis point decline in logistics yields, a 50 basis point decline in intermodal yields partially offset by a 30 basis point improvement in truck brokerage yields.~~improved pricing.

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

~~Hub Group’s~~Hub’s salaries and benefits increased to ~~$58.1~~$62.0 million in ~~2018~~2019 from ~~$45.0~~$52.3 million in ~~2017.~~2018. As a percentage of revenue, ~~Hub Group’s~~Hub’s salaries and benefits increased to ~~5.0%~~6.6% in ~~2018~~2019 from ~~4.9%~~6.3% in ~~2017.~~2018.

~~The Hub segment~~Hub’s salaries and benefits increase of ~~$12.3~~$9.7 million was primarily due to the addition of ~~HGD employees, higher employee bonus of $6.0~~CaseStack employees. Additional increases included $2.5 million ~~restricted stock~~for additional compensation ~~of $1.0 million, commissions sales expense of $0.6 million, payroll taxes of $0.5 million partially offset by lower severance expense of $2.4 million.~~expenses.

~~Mode’s salaries and benefits expense increased to $4.3 million in 2018 from $3.5 million in 2017 due primarily to an increase in employee bonus expense.~~

~~Hub Group’s~~Hub’s headcount as of ~~June 30,~~March 31, 2019 and 2018 was 2,247 and ~~2017 was 2,077 and 1,726~~1,897 respectively, which excludes drivers, as driver costs are included in transportation costs. The increase in Hub’s headcount is due primarily to the acquisition of ~~HGD, which has 342 employees excluding drivers at June 30, 2018. As of June 30, 2018~~CaseStack.

~~Hub Group’s agent fees and commissions~~administrative expenses increased to ~~$22.0~~$22.9 million in ~~2018~~2019 from ~~$17.0~~$18.4 million in ~~2017.~~2018. These expenses, as a percentage of revenue, increased to 2.5% in 2019 from 2.2% in 2018.

The increase of $4.5 million was due to $2.1 million of general and administrative expenses related to the acquisition of CaseStack, outside services, primarily IT consulting services, of $2.2 million and an increase in insurance expense of $0.2 million.

Hub’s depreciation and amortization increased to $6.8 million in 2019 from $3.8 million 2018. As a percentage of revenue, these expenses increased to ~~1.9%~~0.7% in ~~2018~~2019 from ~~1.8%~~0.4% in ~~2017.~~

~~The Mode segment agent fees and commissions increased $4.9 million due primarily to the increase in Mode’s gross margin.~~

Hub Group’s general and administrative expenses increased to $20.2 million in 2018 from $20.1 million in 2017. These expenses, as a percentage of revenue, decreased to 1.7% in 2018 from 2.2% in 2017.

Hub segment general and administrative expenses decreased $0.6 million. This was due primarily to the $3.6 million fair value adjustment related to the Estenson Logistics, LLC acquisition (see Note 5 “Fair Value Measurement”), decreases in travel and entertainment of $0.6 million, increase on the gain on sale of equipment of $0.4 million, and a decrease in insurance expense of $0.3 million. These declines were partially offset by the general and administrative expenses of HGD and an increase in professional services of $0.5 million.

Mode’s general and administrative expenses increased to $2.4 million 2018 from $1.8 million in 2017 due to increases in professional services of $0.6 million and increases in IT maintenance expense of $0.3 million. These increases were partially offset by decreases in gross receipt taxes of $0.3 million.

~~Hub Group’s depreciation and amortization increased to $4.0 million in 2018 from $2.5 million in 2017. This expense as a percentage of revenue remained consistent at 0.3% in both 2018 and 2017.~~

~~The Hub segment depreciation expense increased to $3.7 million in 2018 from $2.2 million in 2017.~~2018. This increase was related primarily to ~~addition~~the $2.3 million of ~~depreciation and~~ amortization ~~due to the addition of HGD.~~

~~Mode’s depreciation expense decreased to $0.2 million in 2018 from $0.3 million in 2017.~~for CaseStack customer relationships.

~~Total~~Hub’s other expense increased to ~~$2.4~~$2.7 million in 2019 from $2.1 million in 2018 ~~from $0.8 million in 2017~~ due to ~~an increase in~~the additional interest ~~expense~~costs related to our ~~tractor, trailer and container~~equipment debt, ~~including the acquisition of HGD.~~partially offset by more interest income.

Hub’s salaries and benefits increased to ~~$7.5~~$62.0 million in ~~2018~~2019 from ~~$6.2~~$52.3 million in 2017, while the effective tax rate decreased to 25.5% in 2018 from 39.4% in 2017. The provision for income taxes increased primarily due to higher pre-tax income in 2018, while the 2018 effective tax rate was lower primarily due to the enactment of the U.S. Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, which reduced the U.S. federal corporate tax rate from 35% to 21%. We expect our effective tax rate for the remainder of 2018 will range from 24.5% to 25.5%.

Net income increased to $22.1 million in 2018 from $9.5 million in 2017 due primarily to increased margin partially offset by higher operating expenses, higher interest expense, and higher income tax expense.

~~Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017~~

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

~~Hub Group’s revenue increased to $2.3 billion in 2018 from $1.8 billion in 2017.~~

~~The Hub segment revenue increased 24.6% to $1.7 billion.~~ ~~Intermodal revenue increased 15.1% to $1.0 billion primarily due to a 4.9% increase in volume, an increase in fuel revenue, and improved pricing~~. ~~Truck brokerage revenue increased 11.6% to $235.0 million.~~ ~~Truck brokerage handled 3.1% fewer loads, while fuel, mix and price combined were up 14.7%.~~ ~~Logistics revenue increased 16.2% to $342.1 million due to growth with existing customers.~~

~~Mode’s revenue increased 24.2% to $602.0 million in 2018 from $484.8 million in 2017.~~ ~~Mode’s intermodal revenue increased 15.7%, truck brokerage revenue increased 26.6% and logistics revenue increased 42.0%.~~

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

Hub Group’s transportation costs increased 25.0% to $2.0 billion in 2018 from $1.6 billion in 2017. Transportation costs in 2018 consisted of purchased transportation costs of $1.7 billion and equipment and driver related costs of $292.1 million compared to 2017 costs of purchased transportation of $1.4 billion and equipment and driver related costs of $182.2 million.

The Hub segment transportation cost increased by 23.7% to $1.5 billion in 2018 from $1.2 billion in 2017. Hub segment transportation costs in 2018 included $1.2 billion in purchased transportation, up from $1.0 billion in 2017. The 17.4% increase in purchased transportation costs was due primarily to rail cost increases, an increase in fuel costs, higher third party carrier costs, and higher volumes. Equipment and driver related costs increased 60.7% to $290.2 million in 2018 from $180.6 million in 2017 due primarily to the equipment and driver related costs of HGD, including start-up costs and an increase in driver pay.

The Mode segment transportation costs increased 25.2% to $533.5 million in 2018 from $426.3 million in 2017. Mode segment transportation costs are primarily purchased transportation costs which increased due to higher rail costs, fuel costs, carrier costs and increased business levels in logistics and intermodal.

~~Hub Group’s gross margin increased 27.6% to $259.0 million in 2018 from $202.9 million in 2017.~~

The Hub segment gross margin increased 32.0% to $190.5 million. Hub segment margin increase of $46.2 million resulted from the addition of HGD and growth in intermodal and truck brokerage, partially offset by a decrease in logistics. Intermodal gross margin increased due to improved pricing and higher volume. Partially offsetting margin growth were higher rail and drayage costs. Truck brokerage margin increased as a result of more spot business and growth with targeted customer accounts. Logistics margin decreased due to changes in customer mix, higher purchased transportation costs and headwinds from the liquidation of a customer.

2018. As a percentage of revenue, ~~Hub segment gross margin~~Hub’s salaries and benefits increased to ~~11.1%~~6.6% in ~~2018~~2019 from ~~10.5%~~6.3% in ~~2017. Intermodal gross margin increased~~2018.

Hub’s salaries and benefits increase of $9.7 million was primarily due to ~~mproved prices partially offset by rail cost~~the addition of CaseStack employees. Additional increases included $2.5 million for additional compensation expenses.

Hub’s headcount as of March 31, 2019 and ~~drayage cost increases. Average rail transits were up 0.7 days~~2018 was 2,247 and 1,897 respectively, which ~~negatively impacted our results. All of these factors combined drove a 110 basis point improvement~~excludes drivers, as driver costs are included in ~~intermodal gross margin as a percent of sales. Truck brokerage gross margin as a percentage of sales increased 20 basis points compared to the prior year~~transportation costs. The increase in Hub’s headcount is due primarily to ~~increases in spot market opportunities. Logistics gross margin as a percentage~~the acquisition of ~~sales was down 220 basis points due~~CaseStack.

Hub’s general and administrative expenses increased to ~~higher purchased transportation costs and changes in customer mix.~~

~~Mode’s gross margin increased 16.9% to $68.5~~$22.9 million in ~~2018~~2019 from ~~$58.5~~$18.4 million in ~~2017~~ ~~due to increases in margin in all three business lines. Mode’s gross margin~~2018. These expenses, as a percentage of revenue, ~~decreased~~increased to ~~11.4%~~2.5% in 2019 from 2.2% in 2018.

Hub’s depreciation and amortization increased to $6.8 million in 2019 from $3.8 million 2018. As a percentage of revenue, these expenses increased to 0.7% in 2019 from 0.4% in 2018. This increase was related primarily to the $2.3 million of amortization for CaseStack customer relationships.

Hub’s other expense increased to $2.7 million in 2019 from $2.1 million in 2018 ~~from 12.1% in 2017~~ due to ~~a 160 basis point decline in logistics yields, a 70 basis point decline in intermodal yields and a 50 basis point decline in truck brokerage yields.~~ the additional interest costs related to our equipment debt, partially offset by more interest income.

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

~~Hub Group’s~~Hub’s salaries and benefits increased to ~~$114.1~~$62.0 million in ~~2018~~2019 from ~~$88.2~~$52.3 million in ~~2017.~~2018. As a percentage of revenue, Hub’s salaries and benefits increased to ~~5.0%~~6.6% in ~~2018~~2019 from ~~4.8%~~6.3% in ~~2017~~.2018.

~~The Hub segment~~Hub’s salaries and benefits increase of ~~$24.7~~$9.7 million was primarily due to ~~$105.9~~the addition of CaseStack employees. Additional increases included $2.5 million for additional compensation expenses.

Hub’s headcount as of March 31, 2019 and 2018 was 2,247 and 1,897 respectively, which excludes drivers, as driver costs are included in ~~2018 from $81.2 million~~transportation costs. The increase in ~~2017 was~~Hub’s headcount is due primarily to the ~~addition~~acquisition of ~~HGD employees, increases of $9.6 million in employee bonus expense, restricted stock compensation of $1.8 million, $1.4 million related to increases in commissions~~CaseStack.

General and ~~payroll taxes of $1.2 million, partially offset by lower severance expense $2.4 million.~~Administrative

~~Mode’s salaries~~Hub’s general and ~~benefits expense increased to $8.2 million in 2018 from $7.1 million in 2017. The increase was related primarily to higher employee bonus expense.~~

~~Hub Group’s agent fees and commissions~~administrative expenses increased to ~~$41.1~~$22.9 million in ~~2018~~2019 from ~~$35.0~~$18.4 million in ~~2017.~~2018. These expenses, as a percentage of revenue, increased to 2.5% in 2019 from 2.2% in 2018.

Hub’s depreciation and amortization increased to $6.8 million in 2019 from $3.8 million 2018. As a percentage of revenue, these expenses ~~decreased to 1.8% in 2018 from 1.9% in 2017.~~

~~The Mode segment agent fees and commissions increase of $6.1 million was due primarily to the increase in Mode’s gross margin.~~

Hub Group’s general and administrative expenses decreased to $40.7 million in 2018 from $40.9 million in 2017. As a percentage of revenue, these expenses decreased to 1.8% in 2018 from 2.3% in 2017.

The Hub segment decrease in general and administrative expense to $36.2 million in 2018 from $36.8 million in 2017 was due primarily to the $3.6 million fair value adjustment related to the Estenson Logistics, LLC acquisition (see Note 5 “Fair Value Measurement”), decreases in professional services of $1.3 million, decreases in travel expenses of $1.2 million, increase on the gain on sale of equipment and insurance expense of $0.4 million each, partially offset by the general and administrative expenses of HGD.

~~Mode’s general and administrative expenses~~ increased to ~~$4.6 million~~0.7% in ~~2018~~2019 from $4.1 million in 2017. The increase was primarily due to increases in professional services of $0.8 million and increases in IT maintenance expense of $0.4 million, partially offset by a decrease in bad debt expense of $0.4 million and a decrease in gross receipt taxes of $0.3 million.

~~Hub Group’s depreciation and amortization increased to $8.0 million in 2018 from $5.0 million in 2017. This expense as a percentage of revenue increased to~~ 0.4% in ~~2018 from 0.3% in 2017.~~

~~The Hub segment’s depreciation expense increased to $7.5 million in 2018 from $4.4 million in 2017.~~2018. This increase was related primarily to ~~addition~~the $2.3 million of ~~depreciation and~~ amortization ~~due to the addition of HGD.~~

~~Mode’s depreciation decreased to $0.5 million in 2018 from $0.6 million in 2017.~~

~~Total~~Hub’s other expense increased to ~~$4.5~~$2.7 million in 2019 from $2.1 million in 2018 ~~from $1.6 million in 2017~~ due to ~~an increase in~~the additional interest ~~expense~~costs related to our ~~tractor, trailer and container~~equipment debt, ~~including the acquisition of HGD.~~partially offset by more interest income.

The provision for income taxes increased to ~~$12.4~~$9.0 million in ~~2018~~2019 from ~~$12.3~~$3.3 million in ~~2017, while the effective tax rate decreased to 24.5% from 38.2%.~~ ~~The provision~~2018. We provided for income taxes ~~increased primarily due to higher pre-tax income~~using an effective rate of 27.3% in ~~2018, while the 2018~~2019 and an effective rate of 23.0% in 2018. The 2019 effective tax rate was ~~lower~~higher primarily due to ~~the enactment of the U.S. Tax Cuts and Jobs Act (the “Act”) on December 22, 2017, which reduced the U.S. federal corporate~~a tax ~~rate from 35% to 21%.~~

shortfall related to stock-based compensation realized in the first quarter of 2019, compared to an excess tax benefit realized in the first quarter of 2018. We expect our effective tax rate for the entire year of 2019 will range from 25.0% to 26.0%.

Net income increased to ~~$38.2~~$23.9 million in ~~2018~~2019 from ~~$19.9~~$11.1 million in ~~2017~~2018 due primarily to increased margin, partially offset by ~~higher~~the increase in operating ~~expenses.~~

During the first ~~half~~three months of ~~2018,~~2019, we funded operations, capital expenditures, ~~capital~~finance leases, repayments of debt and the purchase of our stock ~~buy backs~~ related to employee withholding upon vesting of restricted stock through cash flows from operations, proceeds from the issuance of long-term debt and cash on hand. We believe that our cash, cash flows from operations and borrowings available under our Credit Agreement will be sufficient to meet our cash needs for at least the next twelve months.

Cash provided by operating activities for the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 was ~~approximately $97.6~~$63.4 million, which resulted primarily from income of ~~$38.2~~$23.9 million, ~~adjusted for~~ non-cash charges of ~~$53.3~~$38.8 million and a positive change in operating assets and liabilities of ~~$6.1~~$0.7 million.

Cash provided by operating activities increased ~~$34.5~~$30.2 million in ~~2018~~2019 versus ~~2017.~~2018. The increase was due to a $12.1 million increase in non-cash items, a $10.4 million increase in the changes of operating assets and liabilities and $7.7 higher net income in 2019 as compared to 2018.

The positive change in non-cash items was due to an increase in depreciation and amortization related to equipment purchases as well as additional amortization incurred for lease accounting of $9.8 million, an increase in deferred taxes of $1.6 million and compensation expense related to stock-based compensation plans of $1.4 million, partially offset by the increase in ~~net income~~the gain on sale of ~~$18.3 million and increases~~equipment of $0.7 million. The increase in ~~non-cash charges~~the changes of ~~$15.1 million and~~ operating assets and liabilities of ~~$1.1~~$10.4 million was caused by increases in ~~2018.~~the change of accounts receivable of $21.3 million, prepaid expenses of $5.9 million, accounts payable of $5.0 million, non-current liabilities of $2.4 million and prepaid taxes of $0.5 million. These increases were partially offset by decreases in accrued expenses of $19.2 million, restricted investments of $2.8 million and other assets of $2.7 million.

Net cash provided by investing activities for the three months ended March 31, 2019 was $6.2 million. Proceeds from the disposition of discontinued operations was $19.4 million while the increase in proceeds from the sale of equipment was $3.8 million. Capital expenditures of $17.0 million related primarily to containers of $7.1 million, technology investments of $6.6 million and tractors of $3.2 million.

Net cash used in investing activities for the ~~six months~~quarter ended ~~June 30,~~March 31, 2018 was ~~$68.0~~$21.7 million. ~~Capital~~The increase in net cash provided by investing activities of $27.8 million in 2019 versus 2018 was due primarily to higher proceeds related to the disposition of discontinued operations of $19.4 million and the increase in proceeds from the sale of equipment of $3.3 million partially offset by the decrease in capital expenditures of ~~$69.3~~$5.1 million related primarily to tractors ~~of $41.7 million, trailers of $12.3 million, other~~and transportation ~~equipment of $0.5 million, technology investments of $11.6 million, containers of $2.9 million and the remainder for leasehold improvements.~~

~~In 2018, we placed an order for 3,670 containers and we expect to receive 5,000 containers in 2018 which will be financed with debt. As of~~the date of this report, we had already received approximately 1,246 of the containers. We are also investing in technology projects including transportation management systems and an enterprise resource planning system.equipment.

We estimate our capital expenditures will range from ~~$200~~$115 million to ~~$220 million for the year.~~

~~Net cash used in investing activities for the six months ended June 30, 2017 was $27.2 million. The net cash used in investing activities increased $40.8~~$125 million in ~~2018 from 2017~~2019, primarily for tractors, containers, trailers and ~~was due primarily to tractors and trailers predominantly for our HGD business and~~a new building in Oak Brook as well as technology ~~investments, partially offset by lower container purchases in 2018.~~investments.

The net cash used in financing activities for the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 was ~~$31.4~~$18.6 million, which resulted from the repayment of long-term debt of ~~$84.1~~$25.8 million, stock tendered for payments of withholding taxes of ~~$4.0~~$2.6 million and ~~capital~~finance lease payments of ~~$1.5~~$0.7 million partially offset by proceeds from the issuance of long-term debt of ~~$58.2~~$10.5 million.

The ~~increase~~decrease in net cash used in financing activities of ~~$19.7~~$3.5 million ~~from~~in 2019 versus 2018 ~~versus 2017 is~~was primarily due to ~~the increase~~a decrease in the repayments of ~~long term~~long-term debt of ~~$60.9~~$8.5 million and stock tendered for payments of withholding taxes of ~~$0.7 million and capital lease payments of $0.1~~$1.3 million partially offset by ~~the~~a decrease of proceeds from the issuance of long-term debt of ~~$42.0~~$6.3 million.

~~In 2018,~~As a result of anticipated favorable timing differences related to depreciation, we expect our cash paid for income taxes in 2019 to be less than ~~2017 and much lower than~~ our income tax ~~expense because~~expense.

At March 31, 2019, we are authorized to borrow up to $350 million under a revolving line of ~~significant favorable timing differences related to depreciation due to the enactment of the Act on December 22, 2017.~~

credit. We have standby letters of credit that expire at various dates in ~~2018 and~~ 2019. As of ~~June 30, 2018,~~March 31, 2019, our letters of credit were ~~$23.0 million.~~

~~Our unused~~$28.5 million and ~~available~~we had no borrowings under our bank revolving line of ~~credit~~credit. Our unused and available borrowings were ~~$327.0~~$321.5 million as of ~~June 30, 2018~~March 31, 2019 and ~~$284.9 million~~$323.0 as of December 31, ~~2017.~~2018. We were in compliance with our debt covenants as of ~~June 30, 2018.~~

We are exposed to market risk related to changes in interest rates on our bank line of credit which may adversely affect our results of operations and financial condition. 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 ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. 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 67 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 ~~six months~~quarter ended ~~June 30, 2018.~~March 31, 2019.

As of ~~June 30, 2018,~~March 31, 2019, we had no borrowings under our bank revolving line of ~~credit and our~~credit. Our unused and available borrowings were ~~$327.0 million. As~~$321.5 million and $323.0 million as of March 31, 2019 and December 31, ~~2017, we had $45.0 million of borrowings under our bank revolving line of credit and our unused and available borrowings were $284.9 million.~~2018.

As of ~~June 30, 2018,~~March 31, 2019, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of ~~June 30, 2018.~~March 31, 2019. There have been no changes in our internal control over financial reporting identified in connection with such evaluation that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

During the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, there have been no material developments from the legal proceedings disclosed in our Annual Report on Form 10-K for our fiscal year ended December 31, ~~2017,~~2018, except those disclosed in Note 810 to the unaudited consolidated financial statements under “Legal Matters,” which is incorporated herein by reference.

During the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for our year ended December 31, ~~2017, except for the following:~~2018.

~~Risks related to potential acquisitions or dispositions may adversely affect our business.~~

~~From time to time, we evaluate acquisitions and dispositions of assets, businesses and other investments. These transactions may not result in the anticipated benefits or efficiencies.~~

~~Any such acquisition or disposition involves risks and we cannot assure that:~~

If any of these risks materialize, the benefits of such acquisition or disposition may not be fully realized, if at all, and our financial condition, results of operations and cash flows could be negatively impacted.

We do not currently have a share repurchase plan in place. During the ~~second~~first quarter of ~~2018,~~2019, we purchased ~~2,775~~68,908 shares at a weighted average price of ~~$44.36~~$37.42 per share related to employee withholding upon vesting of restricted stock.

The exhibits included as part of the Form 10-Q are set forth in the Exhibit Index immediately preceding such Exhibits and are incorporated herein by reference.

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.


	Page
PART I. Financial Information:
Consolidated Balance Sheets – ~~June 30, 2018~~March 31, 2019 (unaudited) and December 31, ~~2017~~2018	3
Unaudited Consolidated Statements of Income and Comprehensive Income – Three Months Ended March 31, 2019 and ~~Six Months Ended June 30,~~ 2018 ~~and 2017~~	4
Unaudited Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2019 and 2018	5
Unaudited Consolidated Statements of Cash Flows – ~~Six~~Three Months Ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~	5
~~Notes to Unaudited Consolidated Financial Statements~~	6
Notes to Unaudited Consolidated Financial Statements	7
Management’s Discussion and Analysis of Financial Condition and Results of Operations	1416
Quantitative and Qualitative Disclosures about Market Risk	2221
Controls and Procedures	2321
PART II. Other Information	2321

Cash paid	$	248,656
Deferred purchase consideration		3,469
Working capital adjustment		733
Total consideration	$	252,858


Accounts receivable trade	$	31,917
Prepaid expenses and other current assets		694
Property and equipment		3,247
Deferred tax assets		6,433
Goodwill		165,943
Other intangibles		75,600
Other assets		120
Total assets acquired	$	283,954

Accounts payable trade	$	24,542
Accrued payroll		2,811
Accrued other		3,743
Total liabilities assumed	$	31,096

Total consideration	$	252,858

			Accumulated		Balance at		Estimated Useful
	Amount		Amortization		March 31, 2019		Life
Customer relationships - logistics services	$	65,600	$	2,187	$	63,413	10 years
Customer relationships - transportation services	$	8,700	$	580	$	8,120	5 years
Trade name	$	1,300	$	289	$	1,011	18 months

	Total
Remainder 2019	$	6,875
2020	$	8,661
2021	$	8,300
2022	$	8,300
2023	$	8,155

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017

Revenue	$	1,179,093		$	923,596		$	2,275,064		$	1,816,352
Transportation costs		1,042,903			822,279			2,016,083			1,613,450
Gross margin		136,190			101,317			258,981			202,902

Costs and expenses:
Salaries and benefits		58,092			45,038			114,099			88,217
Agent fees and commissions		21,969			17,038			41,111			35,031
General and administrative		20,216			20,114			40,720			40,938
Depreciation and amortization		3,960			2,549			7,965			4,961
Total costs and expenses		104,237			84,739			203,895			169,147

Operating income		31,953			16,578			55,086			33,755

Other income (expense):
Interest expense		(2,187	)		(1,032	)		(4,291	)		(2,130	)
Interest and dividend income		22			200			44			330
Other, net		(189	)		-			(244	)		194
Total other expense		(2,354	)		(832	)		(4,491	)		(1,606	)

Income before provision for income taxes		29,599			15,746			50,595			32,149

Provision for income taxes		7,548			6,204			12,377			12,273

Net income	$	22,051		$	9,542		$	38,218		$	19,876

Other comprehensive income:
Foreign currency translation adjustments		(25	)		28			4			92

Total comprehensive income	$	22,026		$	9,570		$	38,222		$	19,968

Basic earnings per common share	$	0.66		$	0.29		$	1.14		$	0.60

Diluted earnings per common share	$	0.66		$	0.29		$	1.14		$	0.60

Basic weighted average number of shares outstanding		33,389			33,220			33,382			33,213
Diluted weighted average number of shares outstanding		33,562			33,262			33,520			33,318

	Three Months		Six Months
	Ended		Ended		Three Months Ended
	June 30, 2017		June 30, 2017		March 31, 2018
Revenue	$	983,029	$	1,930,373	$	898,019
Net income	$	12,450	$	24,053
Earnings per share
Income from continuing operations					$	13,315
Earnings per share (1)
Basic	$	0.38	$	0.73	$	0.40
Diluted	$	0.38	$	0.72	$	0.40

	Three Months Ended
(in thousands)	March 31, 2018
Net cash provided by operating activities		10,774
Net cash used in investing activities		(641	)

	Three Months									Three Months
	Ended June 30, 2018									Ended June 30, 2017
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Revenue	$	888,238	$	314,078	$	(23,223	)	$	1,179,093	$	704,344	$	242,998	$	(23,746	)	$	923,596
Transportation costs		788,087		278,039		(23,223	)		1,042,903		631,787		214,238		(23,746	)		822,279
Gross margin		100,151		36,039		-			136,190		72,557		28,760		-			101,317

Costs and expenses:
Salaries and benefits		53,839		4,253		-			58,092		41,569		3,469		-			45,038
Agent fees and commissions		11		21,958		-			21,969		14		17,024		-			17,038
General and administrative		17,768		2,448		-			20,216		18,331		1,783		-			20,114
Depreciation and amortization		3,719		241		-			3,960		2,249		300		-			2,549
Total costs and expenses		75,337		28,900		-			104,237		62,163		22,576		-			84,739

Operating income	$	24,814	$	7,139	$	-		$	31,953	$	10,395	$	6,184	$	-		$	16,578

Capital Expenditures	$	46,337	$	745	$	-		$	47,082	$	22,937	$	31	$	-		$	22,968

	As of June 30, 2018									As of December 31, 2017
					Inter-			Hub						Inter-			Hub
					Segment			Group						Segment			Group
	Hub		Mode		Elims			Total		Hub		Mode		Elims			Total
Total assets	$	1,513,130	$	227,425	$	(7,051	)	$	1,733,504	$	1,470,792	$	210,088	$	(9,939	)	$	1,670,941
Goodwill	$	318,717	$	29,389	$	-		$	348,106	$	319,272	$	29,389	$	-		$	348,661

Balance at December 31, 2017	$	4,703
Change in fair value (1)		(3,571	)
Balance at June 30, 2018	$	1,132

	Three Months Ended
	March 31, 2019

Amortization of finance right-of-use assets	$	589
Interest on finance lease liabilities		74
Finance lease cost		663

Operating lease cost		2,606
Short-term lease cost		26
Sublease income		(158	)
Total lease cost	$	3,137

	Operating Leases		Finance Leases
Less than 1 year	$	8,974	$	3,212
1-3 years		12,991		4,258
3-5 years		7,837		6
Over 5 years		5,865		-
Minimum lease payments		35,667		7,476
Imputed interest		3,188		339
Present value of minimum lease payments		32,479		7,137
Less: current lease liabilities		8,010		2,988
Long-term lease liabilities	$	24,469	$	4,149

Other information:	Three Months Ended
	March 31, 2019
Operating cash flows from operating leases	$	2,374
Financing cash flows from finance leases		740
Operating cash flows from finance leases		74
Cash paid for a lease liabilities	$	3,188

Right-of-use assets obtained in exchange for new financing lease liabilities	$	6

Rights-of-use assets obtained in exchange for new operating lease liabilities	$	1,302

~~NOTE 7.~~	~~Commitments and Contingencies~~
Weighted average remaining lease term — finance leases	2.33 years
Weighted average remaining lease term — operating leases	5.26 years

Discount rate — finance leases		3.87%
Discount rate — operating leases		3.37%

	Six Months Ended
	June 30,
	2018		2017

Revenue	100.0%			100.0%

Transportation costs		88.6		88.8

Gross margin		11.4		11.2

Costs and expenses:
Salaries and benefits		5.0		4.8
Agent fees and commissions		1.8		1.9
General and administrative		1.8		2.3
Depreciation and amortization		0.4		0.3
Total costs and expenses		9.0		9.3

Operating income		2.4		1.9


Exhibit No.	Description

~~3.1~~10.1	~~Amended and Restated Bylaws of~~Separation Agreement dated January 3, 2019 between 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).~~

~~10.1~~	~~Amendment No. 2 to Purchase Agreement dated July 1, 2017 by and between Estenson Logistics, LLC, Truline Corporation, the equity holders named therein, and Hub Group Trucking, Inc.~~

14	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).David Marsh.

31.1	Certification of David P. Yeager, Chairman and Chief Executive Officer, Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

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

32.1	Certification of David P. Yeager and Terri A. Pizzuto, Chief Executive Officer and Chief Financial Officer, respectively, Pursuant to 18 U.S.C. Section 1350.

101	The following financial statements and footnotes from the Hub Group Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2018~~March 31, 2019 formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Unaudited Consolidated Statements of Income and Other Comprehensive Income; (iii) Unaudited Consolidated Statements of Cash Flows; and (iv) Notes to Unaudited Consolidated Financial Statements.


		HUB GROUP, INC.

DATE:	~~August 03, 2018~~May 6, 2019	/s/ Terri A. Pizzuto
		Terri A. Pizzuto
		Executive Vice President, Chief Financial
		Officer and Treasurer
		(Principal Financial Officer)