Business Segments | NOTE 3 . Business Segments We report two distinct business segments. The first segment is Mode, which includes the Mode Transportation, LLC (“Mode LLC”) business only. The second segment is Hub, which is all business other than Mode. Hub offers comprehensive multimodal solutions including intermodal, truck brokerage, logistics and dedicated services. Our employees operate the freight through a network of operating centers located in the United States, Canada and Mexico. Each operating center is strategically located in a market with a significant concentration of shipping customers and one or more railheads. Hub has full time employees located throughout the United States, Canada and Mexico. Mode LLC has Independent Business Owners (“IBOs”) who sell and operate the business throughout North America, as well as sales only agents. Mode LLC also has a corporate office in Dallas, TX, a temperature protected services division, Temstar, located in Oak Brook, IL and 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 and with 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. Truck Brokerage (Highway Services). We are one of the largest truck brokers in the United States, providing customers with a highway service option for their transportation needs. 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 Unyson Logistics. 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, Chicago, Cleveland and Minneapolis 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. Dedicated: Our dedicated service line, HGD, contracts with customers who wish 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. The following is a summary of operating results and certain other financial data for our business segments (in thousands): Three Months Three Months Ended March 31, 2018 Ended March 31, 2017 Inter- Hub Inter- Hub Segment Group Segment Group Hub Mode Elims Total Hub Mode Elims Total Revenue $ 831,585 $ 287,899 $ (23,513 ) $ 1,095,971 $ 676,480 $ 241,834 $ (25,558 ) $ 892,756 Transportation costs 741,211 255,482 (23,513 ) 973,180 604,674 212,055 (25,558 ) 791,171 Gross margin 90,374 32,417 - 122,791 71,806 29,779 - 101,585 Costs and expenses: Salaries and benefits 52,070 3,937 - 56,007 39,596 3,583 - 43,179 Agent fees and commissions 13 19,129 - 19,142 17 17,976 - 17,993 General and administrative 18,402 2,102 - 20,504 18,479 2,345 - 20,824 Depreciation and amortization 3,760 245 - 4,005 2,109 303 - 2,412 Total costs and expenses 74,245 25,413 - 99,658 60,201 24,207 - 84,408 Operating income $ 16,129 $ 7,004 $ - $ 23,133 $ 11,605 $ 5,572 $ - $ 17,177 Capital Expenditures $ 21,537 $ 642 $ - $ 22,179 $ 6,625 $ - $ - $ 6,625 As of March 31, 2018 As of December 31, 2017 Inter- Hub Inter- Hub Segment Group Segment Group Hub Mode Elims Total Hub Mode Elims Total Total assets $ 1,444,239 $ 205,070 $ (6,039 ) $ 1,643,270 $ 1,470,792 $ 210,088 $ (9,939 ) $ 1,670,941 Goodwill 318,772 29,389 - 348,161 319,272 29,389 - 348,661 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): Three Months Three Months Ended March 31, 2018 Ended March 31, 2017 Inter- Hub Inter- Hub Segment Group Segment Group Hub Mode Elims Total Hub Mode Elims Total Intermodal $ 482,495 $ 129,773 $ (11,270 ) $ 600,998 $ 424,423 $ 122,181 $ (15,237 ) $ 531,367 Truck brokerage 120,019 100,721 (358 ) 220,382 106,185 78,161 (385 ) 183,961 Logistics 168,676 57,405 (11,870 ) 214,211 145,872 41,492 (9,936 ) 177,428 Dedicated 60,395 - (15 ) 60,380 - - - - Total revenue $ 831,585 $ 287,899 $ (23,513 ) $ 1,095,971 $ 676,480 $ 241,834 $ (25,558 ) $ 892,756 |